Keystone Holdings, LLC and Compagnie de Saint-Gobain; Analysis of Proposed Agreement Containing Consent Order To Aid Public Comment, 555-558 [2010-33245]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 76, Number 3 (Wednesday, January 5, 2011)]
[Notices]
[Pages 555-558]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-33245]


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FEDERAL TRADE COMMISSION

[File No. 101 0175]


Keystone Holdings, LLC and Compagnie de Saint-Gobain; Analysis of 
Proposed Agreement Containing Consent Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order--embodied in the consent 
agreement--that would settle these allegations.

DATES: Comments must be received on or before February 1, 2011.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to ``Keystone, 
File No. 101 0175 to facilitate the organization of comments. Please 
note that your comment--including your name and your state--will be 
placed on the public record of this proceeding, including on the 
publicly accessible FTC Web site, at https://www.ftc.gov/os/publiccomments.shtm.
    Because comments will be made public, they should not include any 
sensitive personal information, such as

[[Page 556]]

an individual's Social Security Number; date of birth; driver's license 
number or other state identification number, or foreign country 
equivalent; passport number; financial account number; or credit or 
debit card number. Comments also should not include any sensitive 
health information, such as medical records or other individually 
identifiable health information. In addition, comments should not 
include any ``[t]rade secret or any commercial or financial information 
which is obtained from any person and which is privileged or 
confidential * * *, as provided in Section 6(f) of the FTC Act, 15 
U.S.C. 46(f), and Commission Rule 4.10(a)(2), 16 CFR 4.10(a)(2). 
Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential and must comply with FTC Rule 4.9(c), 16 CFR 4.9(c).\1\
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commissions General Counsel, consistent with 
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 
4.9(c).
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    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: https://ftcpublic.commentworks.com/ftc/keystone and following the instructions 
on the web-based form. To ensure that the Commission considers an 
electronic comment, you must file it on the web-based form at the 
Weblink: https://ftcpublic.commentworks.com/ftc/keystone. If this 
Notice appears at https://www.regulations.gov/search/index.jsp, you may 
also file an electronic comment through that website. The Commission 
will consider all comments that regulations.gov forwards to it. You may 
also visit the FTC Web site at https://www.ftc.gov/ to read the Notice 
and the news release describing it.
    A comment filed in paper form should include the ``Keystone, File 
No. 101 0175 reference both in the text and on the envelope, and should 
be mailed or delivered to the following address: Federal Trade 
Commission, Office of the Secretary, Room H-135 (Annex D), 600 
Pennsylvania Avenue, NW., Washington, DC 20580. The FTC is requesting 
that any comment filed in paper form be sent by courier or overnight 
service, if possible, because U.S. postal mail in the Washington area 
and at the Commission is subject to delay due to heightened security 
precautions.
    The Federal Trade Commission Act (``FTC Act) and other laws the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding as appropriate. The Commission will 
consider all timely and responsive public comments that it receives, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC Web site, to the extent practicable, 
at https://www.ftc.gov/os/publiccomments.shtm. As a matter of 
discretion, the Commission makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC website. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at https://www.ftc.gov/ftc/privacy.shtm.

FOR FURTHER INFORMATION CONTACT: Victoria Lippincott (202-326-2983), 
Bureau of Competition, 600 Pennsylvania Avenue, NW., Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 the 
Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that 
the above-captioned consent agreement containing a consent order to 
cease and desist, having been filed with and accepted, subject to final 
approval, by the Commission, has been placed on the public record for a 
period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for December 29, 2010), on the World Wide Web, at https://www.ftc.gov/os/actions.shtm. A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, 
DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission) has accepted for public 
comment, subject to final approval, an Agreement Containing Consent 
Order (``Consent Agreement) from Keystone Holdings LLC (``Keystone) and 
Compagnie de Saint-Gobain (``Saint-Gobain''). The purpose of the 
proposed Consent Agreement is to remedy the anticompetitive effects 
resulting from Keystone's proposed acquisition of certain Advanced 
Ceramics Business assets from Saint-Gobain (``proposed acquisition). As 
originally structured, Keystone would have acquired Saint-Gobain's 
worldwide assets and businesses relating to the manufacture and sale of 
alumina wear tiles. To resolve the competitive concerns raised by the 
proposed acquisition, Keystone and Saint-Gobain have re-structured the 
original transaction to exclude Saint-Gobain's North American alumina 
wear tile business operated out of a facility in Latrobe, Pennsylvania.
    Under the terms of the proposed Consent Agreement, Keystone is 
required for ten years to obtain prior approval from the Commission for 
the direct or indirect acquisition of Saint-Gobain's alumina wear tile 
business in Latrobe or certain other assets owned or controlled by 
Saint-Gobain relating to the research, development, marketing, and sale 
anywhere in the world of alumina wear tile produced or manufactured in 
North America. The proposed Consent Agreement also requires that Saint-
Gobain for five years provide advance written notice to the Commission 
prior to leasing or selling the Latrobe, Pennsylvania facility or 
selling, assigning, or otherwise conveying substantially all its 
interest in the Saint-Gobain alumina wear tile business. In addition, 
with limited exceptions, Saint-Gobain is obligated to provide advance 
written notice to the Commission prior to closing the Latrobe, 
Pennsylvania facility or ceasing operation or production of alumina 
wear tiles at the facility.
    The proposed Consent Agreement has been placed on the public record 
for thirty days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission will again review the proposed 
Consent Agreement and the comments received, and will decide whether it 
should withdraw from the proposed Consent Agreement, modify it, or make 
it final.

[[Page 557]]

    On June 28, 2010, Keystone and Saint-Gobain entered into a merger 
agreement under which Keystone proposed to acquire Saint-Gobain's 
Advanced Ceramics Business, including facilities in Europe, North 
America, South America, and Asia for a purchase price of $245 million. 
As originally structured, the assets acquired by Keystone would have 
included the Latrobe facility and other assets relating to the 
manufacture and sale of alumina wear tiles. On December 2, 2010, 
however, in an effort to resolve competitive concerns relating to the 
original transaction, Keystone and Saint-Gobain amended their agreement 
to exclude from the sale Saint-Gobain's North American alumina wear 
tile business.
    The Commission's complaint alleges that the initial proposed 
acquisition, if consummated, would violate Section 7 of the Clayton 
Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal Trade 
Commission Act, as amended, 15 U.S.C. 45, by lessening competition in 
the manufacture and sale of standard and pre-engineered alumina wear 
tile in North America. Although Saint-Gobain now proposes to retain its 
North American alumina wear tile business, a credible risk exists that 
the parties could re-negotiate the sale of Saint-Gobain's alumina wear 
tile business in the future, or that Saint-Gobain could sell the 
business upon terms that would reduce competition in the North American 
alumina wear tile markets. Therefore, the proposed Consent Agreement 
requires that Keystone obtain the Commission's prior approval in 
advance of any acquisition of Saint-Gobain's alumina wear tile business 
or related assets, and requires that Saint-Gobain provide written 
notice to the Commission prior to selling or ceasing its alumina wear 
tile business or selling or leasing its Latrobe, Pennsylvania facility. 
This remedy preserves competition in the North American markets for the 
manufacture and sale of alumina wear tile.

II. Parties

    Keystone is the holding company of CoorsTek, Inc. (``CoorsTek), 
which is a leading technical ceramics manufacturer, supplying ceramics 
based products for use in defense, medical, automotive, semiconductor, 
and power generation applications, among others. Keystone is 
headquartered in Golden, Colorado with facilities in North America, 
Europe and Asia. Keystone manufactures and sells alumina wear tile for 
use in high wear applications at its facilities in Golden, Colorado.
    Saint-Gobain is a highly diversified, multinational company, 
headquartered in Courbevoie, France. The Advanced Ceramics Business 
includes ceramic components such as hot surface igniters, electro-
ceramic parts for household appliances, ceramic balls for high-
performance bearings, automobile water pump seals, special components 
for the semiconductor industry, agricultural spray nozzles, and other 
dense alumina components, such as alumina wear tile. Saint-Gobain 
manufactures and sells alumina wear tile out of its Latrobe, 
Pennsylvania facility. In 2009, Saint-Gobain's Advanced Ceramics 
Business achieved sales of 135 million euros.

III. The Products and Structure of the Alumina Wear Tile Markets

    The Commission's complaint alleges that Keystone's acquisition of 
Saint-Gobain's North American alumina wear tile assets poses 
substantial antitrust concerns in both the pre-engineered and standard 
alumina wear tile markets, or alternatively, an all alumina wear tile 
market in North America. Alumina wear tile is used to line material-
handling equipment to protect against abrasion and premature wear 
caused by the materials that pass through the equipment, extending the 
life of the equipment for years. Although other materials could be used 
as a wear solution these materials are not viable substitutes for 
alumina wear tile, as they do not have the unique price and wear 
attributes that are required in applications where alumina wear tile is 
commonly used.
    The Commission's complaint alleges that the relevant markets within 
which to analyze the transaction are standard and pre-engineered 
alumina wear tile, or alternatively, all alumina wear tile. Standard 
alumina wear tile comes in a variety of predetermined sizes and shapes 
whereas pre-engineered alumina wear tile is custom made-to-order to fit 
complex shapes that standard tile sizes cannot accommodate.
    The Commission's complaint alleges that the relevant geographic 
market in which to assess the impact of the proposed acquisition is 
North America. Successful participation in the market requires an 
established North American presence, most notably North American sales 
support and facilities from which to inventory and distribute alumina 
wear tile. Alumina wear tile companies that do not have an established 
presence in North America do not effectively compete for the business 
of U.S. alumina wear tile purchasers.
    Keystone and Saint-Gobain are two of three significant suppliers of 
pre-engineered alumina wear tile and two of four significant suppliers 
of standard alumina wear tile in North America. In an all alumina wear 
tile market, Keystone and Saint-Gobain are two of four significant 
suppliers in North America. The acquisition would increase 
concentration levels substantially in markets that already are highly 
concentrated.

IV. Effects of the Acquisition

    The Commission's complaint charges that the proposed acquisition 
would enhance the likelihood of collusion or coordinated interaction 
among the remaining firms in the market. Certain market conditions, 
including product homogeneity and the availability of detailed market 
information about customers and transactions are conducive to the firms 
reaching terms of coordination and detecting deviations from those 
terms.
    The Commission's complaint also charges that Keystone's acquisition 
of Saint-Gobain's North American alumina wear tile assets would 
eliminate actual, direct, and substantial competition between CoorsTek 
and Saint-Gobain. By increasing CoorsTek's market share substantially, 
while at the same time eliminating the most significant competitor in 
the market, an acquisition of Saint-Gobain's North American alumina 
tile assets likely would allow CoorsTek to unilaterally charge higher 
prices for alumina wear tile.
    The Commission's complaint alleges that significant impediments to 
entry, expansion or repositioning in the alumina wear tile markets make 
entry unlikely, untimely and likely unprofitable. The size of the 
investment and the time needed to enter the relevant markets relative 
to the size of the overall market is substantial. Entry is made more 
difficult due to reputational hurdles, and there is uncertainty that an 
entrant could secure the sales to make the investment profitable. As a 
result, new entry, expansion, or repositioning by other firms 
sufficient to achieve a significant market impact is unlikely to 
ameliorate the harms posed by the proposed transaction.

V. The Proposed Consent Agreement

    The proposed Consent Agreement addresses the competitive risks of a 
future sale of Saint-Gobain's North American alumina tile business to 
Keystone or others. By imposing certain prior approval and prior notice 
conditions on Keystone and Saint-Gobain, the remedy serves to ensure 
that the assets of Saint-Gobain's North American alumina wear tile 
business will remain, and continue to compete,

[[Page 558]]

in the North American alumina wear tile markets.
    Pursuant to the proposed Consent Agreement, for a period of ten 
years Keystone must obtain Commission approval prior to acquiring, 
directly or indirectly, Saint-Gobain's alumina wear tile assets. These 
assets primarily include the Latrobe facility, but also include assets 
of Saint-Gobain's alumina wear tile business or any interest in assets 
owned or controlled by Saint-Gobain relating to the research, 
development, marketing, and sale anywhere in the world of alumina wear 
tile produced and manufactured in North America.
    Pursuant to the proposed Consent Agreement, for a period of five 
years Saint-Gobain must provide advance written notification to the 
Commission before selling all or substantially all of its North 
American alumina wear tile business to any person other than an 
affiliate. Saint-Gobain also must provide prior notice to the 
Commission before closing or ceasing operations at the Latrobe 
facility, subject to certain exceptions for maintenance, construction 
of improvements, and the like, and for involuntary closures due to 
force majeure, health and safety emergencies, and other such events.
    As part of ensuring the continued viability of Saint-Gobain's 
alumina wear tile business, Keystone, pursuant to the proposed Consent 
Agreement, must comply with all terms of alumina wear tile business 
agreements between Keystone and Saint-Gobain. One of these agreements 
is a supply agreement for certain types of standard alumina tile 
produced at the Vinhedo, Brazil facility (``Vinhedo tile) that Keystone 
will acquire from Saint-Gobain. This supply agreement gives Saint-
Gobain access to the alumina wear tile from the Vinhedo facility for a 
limited interim period, by which time Saint-Gobain will be required to 
find another source for the Vinhedo tile or produce it internally.

VI. Opportunity for Public Comment

    The proposed Consent Agreement has been placed on the public record 
for thirty days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission will review the comments received, 
and decide whether to withdraw from the proposed Consent Agreement, 
modify it, or make it final. By accepting the proposed Consent 
Agreement subject to final approval, the Commission anticipates that 
the competitive problems alleged in the complaint will be resolved. The 
purpose of this analysis is to inform and invite public comment on the 
proposed Consent Agreement, including the proposed remedy, and to aid 
the Commission in its determination of whether to make the proposed 
Consent Agreement final. This analysis is not intended to constitute an 
official interpretation of the proposed Consent Agreement, nor to 
modify the terms of the proposed Consent Agreement in any way.

    By direction of the Commission.
Richard C. Donohue,
Acting Secretary.
[FR Doc. 2010-33245 Filed 1-4-11; 8:45 am]
BILLING CODE 6750-01-P