United States v. Heraeus Electro-Nite Co., LLC; Proposed Final Judgment and Competitive Impact Statement, 2885-2897 [2014-00709]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 79, Number 11 (Thursday, January 16, 2014)]
[Notices]
[Pages 2885-2897]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00709]



[[Page 2885]]

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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Heraeus Electro-Nite Co., LLC; Proposed Final 
Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation and Competitive Impact Statement have been filed with the 
United States District Court for the District of Columbia in United 
States v. Heraeus Electro-Nite Co., LLC, Civil Action No. 1:14-cv-
00005. On January 2, 2014, the United States filed a Complaint alleging 
that the September 7, 2012 acquisition by Heraeus Electro-Nite Co., LLC 
(``Heraeus'') of substantially all of the assets of Midwest Instrument 
Company, Inc. (``Minco'') violated Section 7 of the Clayton Act, 15 
U.S.C. Sec.  18. The proposed Final Judgment, filed at the same time as 
the Complaint, requires Heraeus to divest a package of assets, 
including the former Minco facilities located in Hartland, Wisconsin 
and Johnson City, Tennessee, along with associated tangible and 
intangible assets. The proposed Final Judgment also requires Heraeus to 
waive any existing noncompete agreement that may bind any former 
employee of Heraeus or Minco in the United States.
    Copies of the Complaint, proposed Final Judgment and Competitive 
Impact Statement are available for inspection at the Department of 
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth 
Street NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-2481), 
on the U.S. Department of Justice's Web site at https://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court 
for the District of Columbia. Copies of these materials may be obtained 
from the Antitrust Division upon request and payment of the copying fee 
set by Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, including the name of the submitter, and 
responses thereto, will be posted on the U.S. Department of Justice, 
Antitrust Division's Internet Web site, filed with the Court and, under 
certain circumstances, published in the Federal Register. Comments 
should be directed to Maribeth Petrizzi, Chief, Litigation II Section, 
Antitrust Division, U.S. Department of Justice, 450 Fifth Street NW., 
Suite 8700, Washington, DC 20530, (telephone: 202-307-0924).

Patricia A. Brink,
Director of Operations.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA
U.S. Department of Justice
Antitrust Division
450 Fifth Street, N.W., Suite 8700
Washington, D.C. 20530

Plaintiff,

v.

HERAEUS ELECTRO-NITE CO., LLC
One Summit Square, Suite 100
Langhorne, PA 19047

Defendant.

CASE NO: 1:14-cv-00005
JUDGE: James Boasberg
FILED: 01/02/2014

COMPLAINT

    The United States of America, acting under the Attorney General 
of the United States, brings this civil antitrust action seeking 
equitable relief to remedy the actual and potential anticompetitive 
effects of the September 2012 acquisition by Defendant Heraeus 
Electro-Nite Co., LLC (``Heraeus'') of substantially all of the 
assets of Midwest Instrument Company, Inc. (``Minco''). The United 
States alleges as follows:

I. INTRODUCTION

    1. In 2012, Defendant Heraeus surveyed the U.S. market for 
single-use sensors and instruments used to measure and monitor the 
temperature and chemical composition of molten steel (``S&I'') and 
found that its once-commanding 85% market share had been reduced to 
an estimated 60%, while its closest competitor, Minco, had gained 
substantially, reaching about a 35% share. Consequently, Heraeus 
decided to restore its ``market leadership'' in the United States by 
acquiring Minco and thereby eliminating Minco's production capacity. 
The acquisition removed significant head-to-head competition between 
Minco and Heraeus on price, innovation and service, and created a 
near-monopoly in the supply of S&I in the United States. 
Accordingly, Heraeus' acquisition of Minco's assets was unlawful and 
violated Section 7 of the Clayton Act, 15 U.S.C. Sec.  18.
    2. Nearly 100 million tons of steel were produced in the United 
States in 2012. Steelmaking is a continuous process during which the 
chemistry and temperature of each batch of steel must be measured 
and monitored in order to ensure the quality, reliability, and 
consistency of the finished steel, as well as the safety and 
efficiency of the manufacturing operation. S&I products are integral 
to the steel making process; indeed, steel makers cannot produce 
steel without using the S&I that is developed, produced and sold by 
companies such as Heraeus and, previously, Minco. Steel companies 
also rely on S&I suppliers as virtual partners in the steel-making 
process.
    3. Heraeus became the dominant S&I supplier in the United States 
after it acquired its main rival, Leeds & Northrup (``L&N''), in 
1995.
    4. Until the mid-1990s, Minco was a small company that supplied 
low-end equipment to steel mill chemistry labs. Heraeus' acquisition 
of L&N left steel mill customers looking for alternatives. As a 
result, Minco made a strategic decision to enter the high-tech, 
higher-end of the market and offer customers an alternative to 
Heraeus. Over a period of years, Minco slowly gained market share by 
offering superior customer service and innovation. In 2010, as the 
steel industry recovered from the economic downturn, Minco sales 
increased significantly when it introduced user-friendly, innovative 
products, such as a combination 3-in-1 sensor and a wireless 
transmitter. By 2012, Minco's market share had increased to 35%, 
while Heraeus' market share had decreased to about 60%.
    5. Given the competitive threat presented by Minco, Heraeus' 
parent company determined in July 2012 that that the acquisition of 
Minco presented the ``[o]pportunity to improve and defend [Heraeus'] 
position in the North American market.''
    6. Accordingly, Heraeus acquired substantially all of Minco's 
assets on September 7, 2012. The transaction was not reportable 
under the filing thresholds of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976 and therefore was not subject to antitrust 
review prior to being consummated. Instead, the transaction was 
brought to the attention of the United States Department of Justice 
after the fact by customers concerned that the acquisition of Minco 
by Heraeus substantially lessened competition in the S&I market in 
the United States.

II. PARTIES TO THE TRANSACTION

    7. Defendant Heraeus, a Delaware corporation with its 
headquarters in Langhorne, Pennsylvania, is a subsidiary of Heraeus 
Electro-Nite International N.V. (``HEN''), a Belgian company, which 
itself is a subsidiary of Heraeus Holding GmbH, a privately held 
German corporation based in Hanau, Germany. HEN's U.S. subsidiary 
Heraeus had approximately $92 million in revenue in fiscal year 
2011.
    8. Prior to being acquired by Heraeus, Minco was a privately 
held company headquartered in Hartland, Wisconsin that sold S&I. In 
2011, Minco's U.S. revenues were approximately $29 million. Minco's 
manufacturing facilities were located in Hartland, Wisconsin, 
Johnson City, Tennessee and Monterrey, Mexico.
    9. On September 7, 2012, Heraeus and Minco completed a $42 
million asset sale whereby Heraeus acquired all of Minco's business 
engaged in the development, production, sale, and service of S&I in 
the United States and certain other countries, including Canada, 
Brazil and Australia.

III. JURISDICTION AND VENUE

    10. The United States brings this action against Defendant 
Heraeus under Section 15 of the Clayton Act, 15 U.S.C. Sec.  25, as 
amended, to prevent and restrain Heraeus from continuing to violate 
Section 7 of the Clayton Act, 15 U.S.C. Sec.  18.

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    11. Heraeus sells S&I in the flow of interstate commerce, and 
its development, production, sale, and service of S&I substantially 
affects interstate commerce. This Court has subject matter 
jurisdiction over this action and over Heraeus pursuant to Section 
15 of the Clayton Act, 15 U.S.C. Sec.  25, 28 U.S.C. Sec. Sec.  1331 
and 1337(a) and 1345.
    12. Heraeus has consented to personal jurisdiction and venue in 
this District.

IV. TRADE AND COMMERCE

A. Background: The Critical Role of S&I in U.S. Steel Production

    13. The temperature and chemical composition of molten steel 
must be measured and monitored throughout the steel-making process. 
Each stage of production has specific chemical concentration and 
temperature requirements. The accuracy, reproducibility and 
reliability of molten steel temperature measurements and chemical 
properties directly influence the quality of the end product, as 
well as the safety and productivity of the steel mill. As the 
finished steel product may be used in demanding applications, such 
as steel beams for a building or automotive exterior panels, steel 
mills must ensure the molten steel exactly meets the required 
specifications. Testing and sampling the molten steel to ensure that 
it meets these specifications is a critical aspect of the steel-
making process. S&I systems play a vitally important role in this 
essential aspect of the steel-making process.
    14. An S&I system consists of four basic parts: (1) The single-
use sensor; (2) the cardboard tube; (3) the pole; and (4) the 
instrument, or display. The single-use sensor, typically encased in 
heavy paper or cardboard and attached to a cardboard tube, contains 
the actual measurement device. The cardboard encasement provides 
momentary protection to allow the single-use sensor to transmit a 
reading to the instrument before the heat from the molten steel 
consumes the sensor. For standard single-use sensors, the cardboard 
tube is attached to a long, hollow metal pole that allows a steel 
mill worker safely to dip the sensor into the liquid steel to obtain 
the desired measurement. The instrument is a specialized electronic 
component or computer that interprets the signal from the single-use 
sensor and displays the temperature or chemical content measurement 
on a display screen or print-out. Unlike the single-use sensor, 
which is consumed by the molten steel, the instrument is a long-
lived component that can be used for years.
    15. S&I are used to monitor temperature, oxygen content, steel 
and slag chemistry, hydrogen concentration and the carbon content of 
molten steel and are differentiated primarily by the type of sensor 
used. A particular steel mill may utilize one type or multiple types 
of S&I during a particular batch, depending upon its proprietary 
steel-making process and the specifications of the steel's end use. 
The three main categories of S&I used by steel mills are 
thermocouples, sensors and samplers, though ``combination'' sensors 
are designed to conduct two or more tests at once.
    a. Thermocouples. Thermocouples measure the temperature of 
molten steel in the furnace and in other stages of steel processing.
    b. Sensors. Sensors measure the dissolved oxygen, carbon, 
hydrogen, or other elements present in molten steel. Oxygen and 
carbon sensors are used in most steel-making processes, while 
hydrogen sensors typically are needed to produce high-purity, high-
grade steel. Each type of sensor has a distinct design.
    c. Samplers. Samplers are used during the steel-making process 
to withdraw a sample of molten steel for analysis outside of the 
molten bath. While most samplers do not contain internal 
electronics, they can be manufactured as a combination unit that 
includes a thermocouple or a type of sensor.
    16. Although single-use sensors appear to be simple, each one 
consists of tiny platinum wires and specialized electronic controls. 
The lowest-priced single-use sensors may be one to two dollars per 
unit, while higher-end single-use sensors may be priced at ten to 
twenty dollars per unit.
    17. The high temperature and harsh environment of the furnace 
necessitates the use of S&I capable of reliable, accurate 
measurement in extreme conditions. Temperatures in the furnace can 
approach or exceed 3,000 degrees Fahrenheit, and a variation of only 
20 to 30 degrees can critically affect the quality and properties of 
the final steel product. Failure of a single-use sensor can have 
catastrophic results. For example, if the molten steel overheats, 
the steel can melt through the vessel or ``break-out,'' which is 
extremely dangerous and costly. Similarly, if the molten steel cools 
too quickly, or has the wrong chemical composition, it may slow or 
stall the production process and/or produce low-quality steel. The 
failure of a single-use sensor can thus potentially cost a steel 
mill hundreds of thousands of dollars whenever the steel fails to 
meet the desired physical characteristics and specifications.
    18. Single-use sensors are the consumable component of the S&I 
system. Because single-use sensors are used continuously in the 
steel-making process, steel mills can use hundreds of units daily 
and up to millions of units annually. S&I suppliers must therefore 
be capable of producing thousands of these high-precision, high-
reliability products daily at a very low cost.

B. S&I Is a Relevant Product Market

    19. Within the broad category of S&I, each type of single-use 
sensor performs a distinct function and cannot be substituted for 
another type of sensor or a different type of measuring device. For 
example, a hydrogen sensor cannot detect temperature and a 
thermocouple does not detect hydrogen. Accordingly, single-use 
sensors are not interchangeable or substitutable for one another. 
There is separate demand for thermocouples, oxygen sensors, carbon 
sensors, hydrogen sensors, and other sensors. In the event of a 
small but significant price increase for a given type of single-use 
sensor, customers would not stop using that sensor in sufficient 
numbers so as to defeat the price increase. Thus, each type of S&I 
is a separate line of commerce and a relevant product market within 
the meaning of Section 7 of the Clayton Act.
    20. Each steel-making customer purchases a different mix of S&I 
to suit the specific needs of its steel mill, steel-making process, 
and application. Prior to the acquisition, Minco and Heraeus 
produced a full range of S&I and were, by far, the two producers 
with the largest market shares for each individual product. Minco 
and Heraeus competed across the full product line of S&I and 
typically provided customers with a mix of various single-use 
thermocouples, sensors and samplers. Although numerous narrower 
product markets also may be defined, the competitive dynamic for 
each individual single-use thermocouple, sensor and sampler is 
nearly identical. Therefore, these products can all be aggregated 
for analytical convenience into a single relevant product market for 
the purpose of assigning market shares and evaluating the 
competitive impact of the acquisition. Accordingly, the development, 
production, sale and service of S&I is a line of commerce and a 
relevant product market within the meaning of Section 7 of the 
Clayton Act.

C. The United States Is a Relevant Geographic Market

    21. The United States is a relevant geographic market because 
suppliers of S&I cannot make sales in the United States without 
having a U.S. service and sales network and U.S. manufacturing 
presence. The consumable portion of S&I consists of a single-use 
sensor and a cardboard tube. A single-use sensor is small and light 
and can be shipped economically from overseas. However, the 
cardboard tubes for S&I can be four to eight feet long and are 
mostly air. They have a low value-to-volume ratio, so they cannot be 
shipped from overseas economically. For this reason, Heraeus, Minco 
and the one other existing U.S. competitor manufacture finished S&I 
in the United States.
    22. Steel manufacturers can use up to hundreds of single-use 
sensors each day. The steel manufacturers are staffed leanly and do 
not employ in-house technicians or engineers to service S&I. A 
defective single-use sensor or malfunctioning instrument can shut 
down an entire steel line, so the steel manufacturers rely on the 
S&I suppliers to provide on-site technical service and support that 
is on call at all times. Heraeus and Minco have provided experienced 
service technicians and product engineers on-site to assist with 
inventory management, trouble-shooting, calibration, and other 
critical services. These service technicians and product engineers 
routinely visit a busy mill multiple times per week and often 
increase the number of their visits when the mill is implementing a 
new process or is having trouble with a particular S&I. These 
service technicians also make service calls in the middle of the 
night to fix a problem that has shut down a line. Service and 
technical support have been critical to the success of Heraeus and 
Minco in selling S&I in the United States.
    23. Given that (1) it is uneconomic to ship fully assembled S&I 
from overseas to the

[[Page 2887]]

United States and (2) U.S. customers require extensive on-site 
service, customers would not switch to producers outside the United 
States to defeat a small but significant price increase. 
Accordingly, the United States is a relevant geographic market for 
the development, production, sale and service of S&I within the 
meaning of Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec.  
18.

V. HERAEUS' ACQUISITION OF MINCO IS ANTICOMPETITIVE

A. The Acquisition Increased Concentration in a Highly Concentrated 
Market

    24. Heraeus' acquisition of Minco greatly increased the already 
high level of concentration in the S&I market in the United States. 
Concentration in relevant markets typically is measured by the 
Herfindahl-Hirschman Index (``HHI'') (defined and explained in 
Appendix A). The more concentrated a market, and the more a 
transaction would increase concentration in a market, the greater 
the likelihood that the transaction will result in a meaningful 
reduction in competition. Markets in which the HHI is in excess of 
2500 points are considered highly concentrated, and an increase in 
concentration by 150 points or more is considered significant. See 
Appendix A.
    25. Prior to the acquisition, Heraeus had a 60% market share, 
Minco had a 35% market share and a third firm had the remaining 5% 
market share. The pre-acquisition HHI was 4850, and the post-
acquisition HHI is 9050, an increase of 4200. The pre- and post-
acquisition market concentration measures demonstrate that Heraeus' 
acquisition of Minco is presumptively anticompetitive.

B. The Acquisition Has Eliminated Head-to-Head Competition Between 
Heraeus and Minco

    26. Prior to the acquisition, U.S. customers could turn to Minco 
as a viable alternative source of S&I, which forced Heraeus to 
compete with Minco on price, service and innovation. Customers 
benefitted from this robust competition between Heraeus and Minco.
    27. Heraeus became the dominant supplier in the United States by 
acquiring its competitor L&N in 1995. Around 2000, Heraeus owned 85% 
of the S&I market in the United States.
    28. In or about 1994, Minco decided to build its own research 
furnace to facilitate its product development. In 2000, after 
several years of development, Minco began introducing high-tech 
products in order to compete against Heraeus. Over the next several 
years, Minco began selling an oxygen sensor, a hydrogen sensor and a 
modern instrument based on the familiar Microsoft Windows software. 
Minco's ``Big 3'' product innovations helped it to gain acceptance 
with steel mill customers that produce higher grades of steel. Minco 
expressly marketed itself to customers as a service-oriented, high-
quality alternative to the dominant Heraeus and dedicated 
significant effort and resources toward meeting this standard. 
During the 2000s, Minco chipped away at Heraeus' share by competing 
on price, service and technology.
    29. After slowly gaining market share throughout the 2000s, 
Minco broke through in 2010 when it introduced two more innovations 
that significantly raised its profile and threatened what Heraeus 
called its market ``leadership.'' First, Minco introduced its 
combination 3-in-1 sensor head, which both increased plant 
efficiency and reduced the risk to steel mill workers by reducing 
the number of necessary measurements.
    30. Second, Minco introduced its wireless transmitter, which 
sends the sensor's signal from the pole to the instrument. Customers 
viewed this technology as a ``game-changer'' because it eliminated a 
cable dragging along the floor of the steel-making facility. This 
innovation enhanced worker safety by eliminating a tripping hazard, 
and it also saved customers money because the long cables need to be 
replaced frequently.
    31. Prior to the acquisition, Minco and Heraeus competed head-
to-head on price. Post-acquisition, Heraeus' steel mill customers 
are vulnerable to price increases because of the critical function 
of S&I and their small cost relative to the value of the finished 
steel product. The lowest-priced single-use sensors may be one to 
two dollars per unit, while higher-end single-use sensors can be ten 
to twenty dollars per unit. Only a few dollars worth of single-use 
sensors are used in each batch of steel, which makes numerous tons 
of steel that sell for about $600 per ton at current prices. As a 
result, the per-ton cost of single-use sensors is measured in 
fractions of a percent of the sales price of finished steel. 
Moreover, because the process of making steel costs thousands of 
dollars per minute, any interruption of the steel-making process 
caused by a defective single-use sensor can be extremely costly.
    32. Prior to the acquisition, Minco and Heraeus also competed to 
provide a high level of service to steel mills. Each company had 
service representatives that would visit the mills multiple times 
each week, sometimes daily at the largest mills, to repair 
equipment, perform routine maintenance, and train mill employees. 
Post-acquisition, Heraeus has the incentive to impose on customers 
less favorable terms of service than those that were provided before 
the acquisition. Thus, the acquisition likely has led to 
deterioration of service, longer delivery times and less certain 
delivery, which have imposed significant risks and delays on the 
U.S. steel industry. Indeed, Heraeus began cutting its marketing and 
service staff immediately after the acquisition.
    33. Prior to the acquisition, Heraeus monitored Minco's 
innovative efforts and attempted to match or exceed Minco's 
offerings. Post-acquisition, Heraeus has less incentive to continue 
its research and development efforts on new and innovative product 
offerings.
    34. The elimination of Minco as an independent and strong 
competitor likely will lead to higher prices, reduced service, and 
less innovation. Through its acquisition of the Minco assets, 
Heraeus has substantially lessened competition in the U.S. market 
for the development, production, sale and service of S&I, in 
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec.  18.

C. The Anticompetitive Effects of the Acquisition Will Not Be 
Counteracted by Entry or Expansion.

    35. Entry and/or expansion into the development, production, 
sale and service of S&I will not be timely, likely or sufficient to 
counteract the anticompetitive effects of Heraeus' acquisition of 
Minco. The development, production, sale and servicing of S&I 
requires highly specialized know-how, specialized equipment, a full-
line of S&I products, a U.S. production facility, and a U.S.-based 
sales and service network.
    36. The machinery used to manufacture S&I is highly specialized 
to meet exacting mass production requirements. For example, it took 
one S&I supplier two years of engineering time to develop a 
customized machine that could mass produce reliable and accurate 
single-use oxygen sensors. Thus, entry by producers of other types 
of measurement devices will not be likely, timely or sufficient.
    37. S&I suppliers currently outside the United States cannot 
sell into the United States because it is uneconomic to transport 
fully assembled S&I into the United States and because they do not 
have a U.S. sales and service network, which is a prerequisite to 
selling to U.S. customers. The development of a U.S. production/
assembly facility and, even more importantly, a dependable sales and 
service network often can take a significant period during which the 
potential entrant is not making sales. U.S-based customers will not 
purchase S&I from a foreign supplier that does not maintain a 
dependable sales/support network that can provide on-call service 
for its S&I products.
    38. Establishing a reputation for successful performance and 
gaining customer confidence in a specific firm's S&I are also 
significant barriers to expansion and/or entry. Establishing a 
reputation for dependable, accurate supply and service is critical 
to success in the S&I market. A track record and reputation for 
reliability must be earned over years.

VI. VIOLATION ALLEGED

Violation of Clayton Act Section 7, 15 U.S.C. Sec.  18

    39. The United States incorporates the allegations of paragraphs 
1 through 38 above as if set forth fully herein.
    40. Heraeus' acquisition of the assets of Minco is likely to 
substantially lessen competition in interstate trade and commerce in 
violation of Section 7 of the Clayton Act.
    41. The transaction has had or will have the following effects, 
among others:
     a. Competition between Heraeus and Minco in the development, 
production, sale and service of S&I in the United States has been 
eliminated;
     b. Heraeus has significantly reduced incentives to discount 
prices, increase the quality of its services, or invest in 
innovation;
     c. Prices for S&I will likely increase above levels that would 
have prevailed absent the transaction, leading steel mills and other 
customers to pay higher prices for S&I for molten steel; and
     d. Innovation will likely decrease, delivery times likely will 
lengthen, and the

[[Page 2888]]

quality and terms of service likely will become less favorable than 
those that would have prevailed absent the transaction.

VII. REQUEST FOR RELIEF

    42. The United States requests that this Court:
     a. Adjudge and decree the acquisition by defendant Heraeus of 
the assets of Minco to violate Section 7 of the Clayton Act, 15 
U.S.C. Sec.  18;
     b. Compel Heraeus to divest all of Minco's tangible and 
intangible assets related to the development, production, sale and 
service of S&I and to take any further actions necessary to restore 
the market to the competitive position that existed prior to the 
acquisition;
     c. Award such temporary and preliminary injunctive and 
ancillary relief as may be necessary to avert the likelihood of the 
dissipation of Minco's tangible and intangible assets during the 
pendency of this action and to preserve the possibility of effective 
final relief;
     d. Award the United States the cost of this action; and
     e. Grant the United States such other further relief as the 
case requires and the Court deems just and proper.

Respectfully submitted,

DATE: January 2, 2014
FOR PLAINTIFF UNITED STATES

------/s/----------------
Renata B. Hesse (DC BAR 466107)
Acting Assistant Attorney General

------/s/----------------
Maribeth Petrizzi (DC BAR 435204)
Chief, Litigation II Section

------/s/----------------
Leslie C. Overton (DC BAR 454493)
Deputy Assistant Attorney General

------/s/----------------
Dorothy B. Fountain (DC BAR 439469)
Assistant Chief, Litigation II Section

------/s/----------------
Patricia A. Brink
Director of Civil Enforcement

------/s/----------------
Lowell R. Stern (DC BAR 440487)*
Stephen A. Harris
Suzanne A. Morris (DC BAR 450208)
Angela Ting (DC BAR 449576)
Jay D. Owen
Blake W. Rushforth
Counsel for the United States
Antitrust Division, Litigation II Section
United States Department of Justice
450 Fifth Street NW., Suite 8700
Washington D.C. 20530
(202) 514-3676
(202) 514-9033 (fax)
Lowell.Stern@usdoj.gov

*Attorney of record

APPENDIX A

HERFINDAHL-HIRSCHMAN INDEX CALCULATIONS

    ``HHI'' means the Herfindahl-Hirschman Index, a commonly 
accepted measure of market concentration. It is calculated by 
squaring the market share of each firm competing in the market and 
then summing the resulting numbers. For example, for a market 
consisting of four firms with shares of thirty, thirty, twenty, and 
twenty percent, the HHI is 2600 (30\2\ + 30\2\ + 20\2\ + 20\2\ = 
2,600). The HHI takes into account the relative size and 
distribution of the firms in a market and approaches zero when a 
market consists of a large number of firms of relatively equal size. 
The HHI increases both as the number of firms in the market 
decreases and as the disparity in size between those firms 
increases.
    Markets in which the HHI is between 1,500 and 12,500 points are 
considered to be moderately concentrated and those in which the HHI 
is in excess of 2,500 points are considered to be highly 
concentrated. See U.S. Department of Justice & FTC, Horizontal 
Merger Guidelines Sec.  5.3 (2010). Transactions that increase the 
HHI by more than 200 points in highly concentrated markets 
presumptively raise antitrust concerns under the Horizontal Merger 
Guidelines issued by the U.S. Department of Justice and the Federal 
Trade Commission. See id.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA, Plaintiff,

v.

HERAEUS ELECTRO-NITE CO., LLC,

Defendant.

CASE NO: 1:14-cv-00005
JUDGE: James Boasberg
FILED: 01/02/2014

COMPETITIVE IMPACT STATEMENT

    Plaintiff United States of America (``United States''), pursuant 
to Section 2(b) of the Antitrust Procedures and Penalties Act 
(``APPA'' or ``Tunney Act''), 15 U.S.C. Sec.  16(b)-(h), files this 
Competitive Impact Statement relating to the proposed Final Judgment 
submitted for entry in this civil antitrust proceeding.

I. NATURE AND PURPOSE OF THE PROCEEDING

    On September 7, 2012, defendant Heraeus Electro-Nite Co., LLC 
(``Heraeus'') acquired substantially all of the assets of Midwest 
Instrument Company, Inc. (``Minco''). After investigating the 
competitive impact of that acquisition, the United States filed a 
civil antitrust Complaint on January 2, 2014, seeking an order 
compelling Heraeus to divest certain assets and other relief to 
restore competition. The Complaint alleges that the acquisition 
substantially lessened competition in the U.S. market for the 
development, production, sale and service of single-use sensors and 
instruments used to measure and monitor the temperature and chemical 
composition of molten steel (``S&I''), in violation of Section 7 of 
the Clayton Act, 15 U.S.C. Sec.  18. As a result of the acquisition, 
prices for these products did or would have increased, delivery 
times would have lengthened, and terms of service would have become 
less favorable.
    Concurrent with the filing of this Competitive Impact Statement, 
the United States and Heraeus have filed an Asset Preservation 
Stipulation and Order and a proposed Final Judgment. These filings 
are designed to eliminate the anticompetitive effects of Heraeus' 
acquisition of Minco. The proposed Final Judgment, which is 
explained more fully below, requires Heraeus, among other things, to 
divest the assets that it acquired from Minco that are located in 
the United States and Mexico.
    The United States and Heraeus have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry 
of the proposed Final Judgment would terminate this action, except 
that the Court would retain jurisdiction to construe, modify, or 
enforce the provisions of the proposed Final Judgment and to punish 
violations thereof.

II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION

A. Heraeus and the Minco Acquisition

    Defendant Heraeus, a Delaware corporation with its headquarters 
in Langhorne, Pennsylvania, is a subsidiary of Heraeus Electro-Nite 
International N.V. (``HEN''), a Belgian company, which itself is a 
subsidiary of Heraeus Holding GmbH, a privately held German 
corporation based in Hanau, Germany. HEN's U.S. subsidiary, Heraeus, 
had approximately $92 million in revenue in fiscal year 2011.
    Minco was a privately held company headquartered in Hartland, 
Wisconsin that also sold S&I. In 2011, Minco's U.S. revenues were 
approximately $29 million. Minco's manufacturing facilities were 
located in Hartland, Wisconsin, Johnson City, Tennessee and 
Monterrey, Mexico.
    On September 7, 2012, Heraeus acquired substantially all of the 
assets of Minco. The transaction was not subject to the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 (``HSR Act''), which 
requires companies to notify and provide information to the 
Department of Justice and the Federal Trade Commission before 
consummating certain acquisitions. As a result, the Department of 
Justice did not learn of the transaction until after it had been 
consummated.

B. The Competitive Effects of the Acquisition on the Market for S&I

1. Industry Background

    S&I products are integral to the steel-making process. Steel 
makers cannot produce steel without using S&I such as those 
developed, produced and sold by Heraeus and, formerly, by Minco. 
Steel making is a continuous process, in which the chemistry and 
temperature of each batch of steel must be measured and monitored in 
order to ensure the quality, reliability, and consistency of the 
finished steel, as well as the safety and efficiency of the 
manufacturing operation. S&I are used to measure and monitor the 
temperature and chemical composition of the molten steel. Steel 
companies rely on S&I; moreover, they rely on S&I suppliers as 
virtual partners in the steel-making process.
    The temperature and chemical composition of molten steel must be 
measured and monitored throughout the steel-making process, and each 
stage of production has specific chemical concentration and 
temperature requirements. The accuracy, reproducibility and 
reliability of the measurement of molten steel temperature and 
chemical properties directly

[[Page 2889]]

influence the quality of the end product, as well as the safety and 
productivity of the steel mill. Because the finished steel product 
may be used in demanding applications, such as steel beams for a 
building or automotive exterior panels, steel mills must ensure the 
molten steel exactly meets the required specifications. Testing and 
sampling the molten steel to ensure that it meets these 
specifications is a critical aspect of the steel-making process.
    An S&I system consists of four basic parts: (1) The single-use 
sensor; (2) the cardboard tube; (3) the pole; and (4) the 
instrument, or display. The single-use sensor, typically encased in 
heavy paper or cardboard and attached to a cardboard tube, contains 
the actual measurement device. The cardboard encasement provides 
momentary protection to allow the single-use sensor to transmit a 
reading to the instrument before the heat from the molten steel 
consumes the sensor. For standard single-use sensors, the cardboard 
tube is attached to a long, hollow metal pole that allows a steel 
mill worker safely to dip the sensor into the liquid steel to obtain 
the desired measurement. The instrument is a specialized electronic 
component or computer that interprets the signal from the single-use 
sensor and displays the temperature or chemical content measurement 
on a display screen or print-out. Unlike the single-use sensor, 
which is consumed in molten steel, the instrument is a long-lived 
component that can be used for years. S&I are used to monitor 
temperature, oxygen content, steel and slag chemistry, hydrogen 
concentration and the carbon content of molten steel and are 
differentiated primarily by the type of sensor used. A particular 
steel mill may utilize one type or multiple types of S&I during a 
particular batch depending upon its proprietary steel-making process 
and the specifications of the steel's end use. The three main 
categories of S&I used by steel mills are thermocouples, sensors and 
samplers, though ``combination'' single-use sensors are designed to 
conduct two or more tests at once. Thermocouples measure the 
temperature of molten steel in the furnace and in other stages of 
steel processing. Sensors measure the dissolved oxygen, carbon, 
hydrogen, or other elements present in molten steel. Oxygen and 
carbon sensors are used in most steel-making processes, while 
hydrogen sensors typically are needed to produce high-purity, high-
grade steel. Each type of sensor has a distinct design. Samplers are 
used during the steel-making process to withdraw a sample of molten 
steel for analysis outside of the molten bath. While most samplers 
do not contain internal electronics, they can be manufactured as a 
combination unit that includes a thermocouple or a type of sensor.
    Although single-use sensors appear to be simple, each one 
consists of tiny platinum wires and specialized electronic controls. 
The lowest-priced single-use sensors may be one to two dollars per 
unit, while higher-end single-use sensors may be priced at ten to 
twenty dollars per unit. Because single-use sensors are used 
continuously in the steel-making process, steel mills can use 
hundreds of units daily and up to millions of units annually. S&I 
suppliers must therefore be capable of producing thousands of these 
high-precision, high-reliability products daily at a very low cost.
    The high temperature and harsh environment of the furnace 
necessitates the use of S&I capable of reliable, accurate 
measurement in extreme conditions. Temperatures in the furnace can 
approach or exceed 3,000 degrees Fahrenheit, and variation of only 
20 to 30 degrees can critically affect the quality and properties of 
the final steel product. Failure of a single-use sensor can have 
catastrophic results. For example, if the molten steel overheats, 
the steel can melt through the vessel or ``break-out,'' which is 
extremely dangerous and costly. Similarly, if the molten steel cools 
too quickly, or has the wrong chemical composition, it may slow or 
stall the production process and/or produce low-quality steel. The 
failure of a single-use sensor may cost a steel mill hundreds of 
thousands of dollars, if the steel fails to meet the desired 
physical characteristics and specifications.

2. Product Market

    Within the broad category of S&I, each type of single-use sensor 
performs a distinct function and cannot be substituted for another 
type of sensor or a different type of measuring device. For example, 
a hydrogen sensor cannot detect temperature and a thermocouple does 
not detect hydrogen. Accordingly, they are not interchangeable or 
substitutable for one another. There is separate demand for 
thermocouples, oxygen sensors, carbon sensors, hydrogen sensors, and 
other sensors. In the event of a small but significant price 
increase for a given type of single-use sensor, customers would not 
stop using that sensor in sufficient numbers so as to defeat the 
price increase. Thus, each type of S&I is a separate line of 
commerce and a relevant product market within the meaning of Section 
7 of the Clayton Act.
    Each steel-making customer purchases a different mix of S&I to 
suit the needs of the customer's steel mill, steel-making process, 
and application. Prior to the acquisition, Minco and Heraeus 
produced a full range of S&I and were, by far, the two producers 
with the largest market shares for each individual product. Minco 
and Heraeus competed across the full product line of S&I and 
typically provided customers with a mix of various single-use 
thermocouples, sensors and samplers. Although numerous narrower 
product markets also may be defined, the competitive dynamic for 
each individual single-use thermocouple, sensor and sampler is 
nearly identical. Therefore, they all may be aggregated for 
analytical convenience into a single relevant product market for the 
purpose of assigning market shares and evaluating the competitive 
impact of the acquisition. Accordingly, the development, production, 
sale and service of S&I is a line of commerce and a relevant product 
market within the meaning of Section 7 of the Clayton Act.

3. Geographic Market

    The United States is a relevant geographic market because 
suppliers of S&I cannot make sales in the United States without 
having a U.S. service and sales network and U.S. manufacturing 
presence. The consumable portion of S&I consists of a single-use 
sensor and a cardboard tube. A single-use sensor is small and light 
and can be shipped economically from overseas. However, the 
cardboard tubes for S&I can be four to eight feet long and are 
mostly air. They have a low value-to-volume ratio, so they cannot be 
shipped from overseas economically. For this reason, Heraeus and 
Minco both manufactured finished S&I in the United States.
    Steel manufacturers can use up to hundreds of single-use sensors 
each day. The steel manufacturers are staffed leanly and do not 
employ in-house technicians or engineers to service S&I. A defective 
single-use sensor or malfunctioning instrument can shut down an 
entire steel line, so the steel manufacturers rely on the S&I 
suppliers to provide on-site technical service and support that is 
on call at all times. Heraeus and Minco have provided experienced 
service technicians and product engineers on-site to assist with 
inventory management, trouble-shooting, calibration, and other 
critical services. These service technicians and product engineers 
may visit a busy mill once or twice a week or more on a routine 
basis, and more frequently if the mill is implementing a new 
process, or is having trouble with a particular S&I. They also make 
service calls in the middle of the night to fix a problem that has 
shut down a line. Service and technical support have been critical 
to the success of Heraeus and Minco in selling S&I in the United 
States.
    Because it is uneconomic to ship fully assembled S&I from 
overseas to the United States and U.S. customers require extensive 
on-site service, customers would not switch to producers outside the 
United States to defeat a small but significant price increase. 
Accordingly, the United States is a relevant geographic market for 
the development, production, sale and service of S&I within the 
meaning of Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec.  
18.

4. Anticompetitive Effects

    Heraeus' acquisition of Minco has increased concentration in a 
highly concentrated market. Concentration in relevant markets 
typically is measured by the Herfindahl-Hirschman Index (``HHI''), 
which is defined and explained in Appendix A to the Complaint. The 
more concentrated a market, and the more a transaction would 
increase concentration in a market, the more likely it is that a 
transaction would result in a meaningful reduction in competition. 
Markets in which the HHI is in excess of 2500 points are considered 
highly concentrated, and an increase in concentration by 150 points 
or more is considered significant.
    Prior to the acquisition, Heraeus had a 60% market share, Minco 
had a 35% market share and a small third firm had the remaining five 
percent. Thus, the pre-acquisition HHI was 4850, and the post-
acquisition HHI is 9050, an increase of 4200. Based on the pre- and 
post-acquisition market concentration measures, the acquisition is 
presumptively anticompetitive.
    Prior to the acquisition, Minco was the best alternative source 
to Heraeus for S&I, and

[[Page 2890]]

customers benefited from robust competition between the firms on 
price, service and innovation. By 2000, Heraeus owned 85% of the 
market. At the same time, after several years of development, Minco 
began introducing high-tech products in order to compete against 
Heraeus. Minco expressly marketed itself to customers as a service-
oriented, high-quality alternative to the dominant Heraeus and 
dedicated significant effort and resources toward meeting this 
standard. During the 2000s, Minco chipped away at Heraeus' share and 
customers benefited from the head-to-head competition between 
Heraeus and Minco on price, service, technology, and innovation. 
Through its acquisition of the Minco assets, Heraeus has 
substantially lessened competition in the U.S. market for the 
development, production, sale and service of S&I for molten steel, 
in violation of Section 7 of the Clayton Act, 15 U.S.C. Sec.  18.
    Entry and/or expansion into the development, production, sale 
and service of S&I will not be timely, likely or sufficient to 
counteract the anticompetitive effects of Heraeus' acquisition of 
Minco. The development, production, sale and servicing of S&I 
requires highly specialized know-how, specialized equipment, a full-
line of S&I products, a U.S. production facility, and a U.S.-based 
sales and service network. S&I suppliers currently outside the 
United States cannot sell into the United States because it is 
uneconomic to transport fully assembled S&I into the United States 
and they do not have a U.S. sales and service network, which is a 
prerequisite to selling to U.S. customers. Development of a U.S. 
production/assembly facility, and even more importantly, development 
of a dependable sales and service network can take a long time, 
during which the potential entrant is not making sales. U.S.-based 
customers will not purchase S&I from a foreign supplier that does 
not maintain a dependable sales and support network that can provide 
on-call service for its S&I products.
    Establishing a reputation for successful performance and gaining 
customer confidence in a specific firm's S&I are also significant 
barriers to expansion. Establishing a reputation for dependable, 
accurate supply and service is critical to success in the market. A 
track record and reputation for reliability must be earned over 
years. Entry in the development, production, sale, and service of 
S&I in the United States would not be timely, likely, or sufficient 
to counteract the anticompetitive effects of Heraeus' acquisition of 
Minco.

III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT

A. Divestiture Assets

    The United States opened its investigation of the transaction in 
December 2012, three months after the transaction was consummated. 
Heraeus had by then integrated the former Minco assets into Heraeus' 
S&I business, including terminating certain supply contracts and 
closing foreign production facilities. The United States therefore 
designed the partial divestiture required by the proposed Final 
Judgment to facilitate entry of a new firm or expansion of an 
existing competitor in the S&I industry by providing that firm with 
market-specific assets needed for successful competition.
    The proposed Final Judgment directs Heraeus to sell a package of 
assets in the United States and Mexico, including the former Minco 
facilities located in Hartland, Wisconsin and Johnson City, 
Tennessee, along with tangible and intangible assets associated with 
those facilities (the ``Divestiture Assets''). Heraeus is required 
to sell the Divestiture Assets to a qualified Acquirer that has the 
intention and ability to compete in the development, production, 
sale, and service of S&I in the United States. Thus, the divestiture 
provisions of the proposed Final Judgment are designed to make 
available to an Acquirer all of the remaining Minco assets acquired 
by Heraeus for the purpose of remedying the competitive harm from 
the acquisition. Under the proposed Final Judgment, however, the 
Acquirer, at its option, and with the consent of the United States, 
may elect to acquire less than the entire package of assets.

B. Identification of an Upfront Buyer

    The goal of the proposed Final Judgment is to restore the 
competition in the development, production, sale, and service of S&I 
that was lost as a result of the transaction. The United States 
favors the divestiture of an existing business unit that has the 
necessary experience to compete in the relevant market. In this 
case, however, the divestiture of an existing, intact business is 
impossible because of the integration of assets undertaken by 
Heraeus. Under these circumstances, the United States may consider 
the divestiture of less than an existing business and may identify 
and approve an Acquirer at the outset to ensure that the sale of the 
assets will create a viable entity that will restore effective 
competition.\1\
---------------------------------------------------------------------------

    \1\ U.S. Department of Justice Antitrust Division Policy Guide 
to Merger Remedies (June 2011), available at https://www.justice.gov/atr/public/guidelines/27350.pdf (Identifying an upfront buyer 
provides greater assurance that the divestiture package contains the 
assets needed to create a viable entity that will preserve 
competition.)
---------------------------------------------------------------------------

    In the proposed Final Judgment, the designated Acquirer of the 
Divestiture Assets is a new entrant, Keystone Sensors LLC, 
(``Keystone''), which was formed in May 2013 for the purpose of 
entering the U.S. market for S&I to provide an alternative to 
Heraeus. The founders have significant experience in the S&I 
industry and bring together experience in the U.S. market, as well 
as an innovative technology concept. Initially, Keystone had 
intended to enter the market with a limited portfolio of high-
technology products and build sales incrementally. Through the 
purchase of the Divestiture Assets, Keystone will be able to enter 
the market more rapidly and compete more effectively with Heraeus 
and the other U.S. supplier. After its investigation, the United 
States has concluded that Keystone has the intention and ability to 
compete in the development, production, sale and service of S&I in 
the United States.

C. Procedure

    The proposed Final Judgment requires Heraeus to divest the 
Divestiture Assets to Keystone within sixty (60) calendar days after 
the Court signs the Asset Preservation Stipulation and Order in this 
matter. The Divestiture Assets must be divested in such a way as to 
satisfy the United States, in its sole discretion, that the 
Divestiture Assets can and will be used by the Acquirer to compete 
effectively in the relevant market. Heraeus must take all reasonable 
steps necessary to accomplish the divestiture quickly and must 
cooperate with the Acquirer.
    In the unlikely event that the sale to Keystone does not occur 
as anticipated, the proposed Final Judgment provides that a trustee 
would be appointed to effect the sale of the Divestiture Assets. In 
that event, the alternative Acquirer similarly would be able to 
determine which portion of the Divestiture Assets it would need to 
compete in the development, production, sale, and service of S&I in 
the United States.

D. Waiver of Noncompete Provisions

    To be an effective S&I supplier, a firm must employ a network of 
dedicated sales and service representatives that can provide on-call 
service to steel mill customers. A robust sales and service 
organization is critical to establishing the firm's reputation to 
provide accurate and reliable service. Following the transaction, 
Heraeus terminated several experienced sales and service employees 
of Minco and/or Heraeus, and imposed, as a condition of the 
employees' severance agreements, a two-year ban on employment in the 
S&I industry. The United States has concluded that, under the facts 
and circumstances of this case, these noncompete provisions are 
overbroad and have impeded the expansion and/or entry of other S&I 
firms. Accordingly, the proposed Final Judgment requires Heraeus to 
waive any existing noncompete agreement or other restrictive 
covenant that may bind any former employee of either Heraeus or 
Minco in the United States, without imposing any financial penalty 
on any such former employee. Heraeus also shall not enter into any 
noncompete or other restrictive covenant with any former, current, 
or future employee of Heraeus or Minco during the two years 
following the filing of the Complaint. The United States has 
determined that the availability of experienced personnel may help 
facilitate the entry and/or expansion of other S&I firms in the 
United States.

E. Notice of Future Acquisitions

    Because the transaction was not reportable under the HSR Act, 
the Division did not learn of the transaction until after it was 
consummated and Heraeus had undertaken significant integration of 
the former Minco assets. The proposed Final Judgment requires 
Heraeus to provide the United States with notice (similar to HSR Act 
notice) of any future acquisition by Heraeus of any firm that 
provides S&I in the United States. This provision will ensure that 
the United States has the opportunity to review any future 
transaction before the assets are integrated.

F. Other Provisions

    The proposed Final Judgment provides that, at the Acquirer's 
option, Heraeus shall enter into an agreement to provide training

[[Page 2891]]

and technical support regarding the operation of any purchased 
Divestiture Asset to the personnel of the Acquirer. The proposed 
Final Judgment also requires Heraeus to provide the Acquirer with 
information relating to Heraeus and former Minco personnel in the 
United States to enable the Acquirer to make offers of employment, 
and prevents Heraeus from interfering with any negotiations to 
employ any current or former Heraeus or Minco employee.
    Moreover, because the customer qualification process can be a 
high barrier to entry, the proposed Final Judgment provides that 
Heraeus shall allow customers to use Heraeus products and equipment 
in the testing and/or qualification of any S&I, and that Heraeus 
must waive any contractual restrictions that otherwise would 
preclude such usage.

IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS

    Section 4 of the Clayton Act, 15 U.S.C. Sec.  15, provides that 
any person who has been injured as a result of conduct prohibited by 
the antitrust laws may bring suit in federal court to recover three 
times the damages the person has suffered, as well as costs and 
reasonable attorneys' fees. Entry of the proposed Final Judgment 
will neither impair nor assist the bringing of any private antitrust 
damage action. Under the provisions of Section 5(a) of the Clayton 
Act, 15 U.S.C. Sec.  16(a), the proposed Final Judgment has no prima 
facie effect in any subsequent private lawsuit that may be brought 
against Heraeus.

V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT

    The United States and Heraeus have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the proposed Final Judgment within which any 
person may submit to the United States written comments regarding 
the proposed Final Judgment. Any person who wishes to comment should 
do so within sixty (60) days of the date of publication of this 
Competitive Impact Statement in the Federal Register, or the last 
date of publication in a newspaper of the summary of this 
Competitive Impact Statement, whichever is later. All comments 
received during this period will be considered by the United States 
Department of Justice, which remains free to withdraw its consent to 
the proposed Final Judgment at any time prior to the Court's entry 
of judgment. The comments and the response of the United States will 
be filed with the Court. In addition, comments will be posted on the 
U.S. Department of Justice, Antitrust Division's internet Web site 
and, under certain circumstances, published in the Federal Register.
    Written comments should be submitted to:

Maribeth Petrizzi
Chief, Litigation II Section
Antitrust Division
United States Department of Justice
450 Fifth Street NW., Suite 8700
Washington, DC 20530

    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the 
Court for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Heraeus. The 
United States could have continued the litigation and sought 
divestiture of the Minco assets. The United States is satisfied, 
however, that the divestiture of assets described in the proposed 
Final Judgment will preserve competition for the provision of S&I in 
the relevant market identified by the United States. Thus, the 
proposed Final Judgment would achieve all or substantially all of 
the relief the United States would have obtained through litigation, 
and avoids the time, expense, and uncertainty of a full trial on the 
merits of the Complaint.

VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty-day comment period, after which the court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. Sec.  16(e)(1). In making that 
determination, the court, in accordance with the statute as amended 
in 2004, is required to consider:

     (A) the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
     (B) the impact of entry of such judgment upon competition in 
the relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

15 U.S.C. Sec.  16(e)(1)(A) & (B). In considering these statutory 
factors, the court's inquiry is necessarily a limited one as the 
government is entitled to ``broad discretion to settle with the 
defendant within the reaches of the public interest.'' United States 
v. Microsoft Corp., 56 F.3d 1448, 1461 (DC Cir. 1995); see generally 
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) 
(assessing public interest standard under the Tunney Act); United 
States v. InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ] 76,736, 2009 
U.S. Dist. LEXIS 84787, No. 08-1965 (JR), at *3, (D.D.C. Aug. 11, 
2009) (noting that the court's review of a consent judgment is 
limited and only inquires ``into whether the government's 
determination that the proposed remedies will cure the antitrust 
violations alleged in the complaint was reasonable, and whether the 
mechanism to enforce the final judgment are clear and 
manageable.'').\2\
---------------------------------------------------------------------------

    \2\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
Sec.  16(e) (2004), with 15 U.S.C. Sec.  16(e)(1) (2006); see also 
SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004 
amendments ``effected minimal changes'' to Tunney Act review).

    As the United States Court of Appeals for the District of 
Columbia Circuit has held, under the APPA a court considers, among 
other things, the relationship between the remedy secured and the 
specific allegations set forth in the government's complaint, 
whether the decree is sufficiently clear, whether enforcement 
mechanisms are sufficient, and whether the decree may positively 
harm third parties. See Microsoft, 56 F.3d at 1458-62. With respect 
to the adequacy of the relief secured by the decree, a court may not 
``engage in an unrestricted evaluation of what relief would best 
serve the public.'' United States v. BNS, Inc., 858 F.2d 456, 462 
(9th Cir. 1988) (citing United States v. Bechtel Corp., 648 F.2d 
660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62; 
United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); 
---------------------------------------------------------------------------
InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have held that:

[t]he balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\3\ In 
determining whether a proposed settlement is in the public interest, 
a district court ``must accord deference to the government's 
predictions about the efficacy of its remedies, and may not require 
that the remedies perfectly match

[[Page 2892]]

the alleged violations.'' SBC Commc'ns, 489 F. Supp. 2d at 17; see 
also Microsoft, 56 F.3d at 1461 (noting the need for courts to be 
``deferential to the government's predictions as to the effect of 
the proposed remedies''); United States v. Archer-Daniels-Midland 
Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court 
should grant due respect to the United States' prediction as to the 
effect of proposed remedies, its perception of the market structure, 
and its views of the nature of the case).
---------------------------------------------------------------------------

    \3\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass''). See generally Microsoft, 56 F.3d at 1461 
(discussing whether ``the remedies [obtained in the decree are] so 
inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest' '').

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[A] proposed decree must be 
approved even if it falls short of the remedy the court would impose 
on its own, as long as it falls within the range of acceptability or 
is `within the reaches of public interest.' '' United States v. Am. 
Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982) (citations 
omitted) (quoting United States v. Gillette Co., 406 F. Supp. 713, 
716 (D. Mass. 1975)), aff'd sub nom. Maryland v. United States, 460 
U.S. 1001 (1983); see also United States v. Alcan Aluminum Ltd., 605 
F. Supp. 619, 622 (W.D. Ky. 1985) (approving the consent decree even 
though the court would have imposed a greater remedy). To meet this 
standard, the United States ``need only provide a factual basis for 
concluding that the settlements are reasonably adequate remedies for 
the alleged harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17.
    Moreover, the court's role under the APPA is limited to 
reviewing the remedy in relationship to the violations that the 
United States has alleged in its Complaint, and does not authorize 
the court to ``construct [its] own hypothetical case and then 
evaluate the decree against that case.'' Microsoft, 56 F.3d at 1459; 
see also InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the `public 
interest' is not to be measured by comparing the violations alleged 
in the complaint against those the court believes could have, or 
even should have, been alleged''). Because the ``court's authority 
to review the decree depends entirely on the government's exercising 
its prosecutorial discretion by bringing a case in the first 
place,'' it follows that ``the court is only authorized to review 
the decree itself,'' and not to ``effectively redraft the 
complaint'' to inquire into other matters that the United States did 
not pursue. Microsoft, 56 F.3d at 1459-60. As this Court recently 
confirmed in SBC Communications, courts ``cannot look beyond the 
complaint in making the public interest determination unless the 
complaint is drafted so narrowly as to make a mockery of judicial 
power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
    In its 2004 amendments, Congress made clear its intent to 
preserve the practical benefits of utilizing consent decrees in 
antitrust enforcement, adding the unambiguous instruction that 
``[n]othing in this section shall be construed to require the court 
to conduct an evidentiary hearing or to require the court to permit 
anyone to intervene.'' 15 U.S.C. Sec.  16(e)(2). The language wrote 
into the statute what Congress intended when it enacted the Tunney 
Act in 1974, as Senator Tunney explained: ``[t]he court is nowhere 
compelled to go to trial or to engage in extended proceedings which 
might have the effect of vitiating the benefits of prompt and less 
costly settlement through the consent decree process.'' 119 Cong. 
Rec. 24,598 (1973) (statement of Senator Tunney). Rather, the 
procedure for the public interest determination is left to the 
discretion of the court, with the recognition that the court's 
``scope of review remains sharply proscribed by precedent and the 
nature of Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at 
11.\4\
---------------------------------------------------------------------------

    \4\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ] 
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt 
failure of the government to discharge its duty, the Court, in 
making its public interest finding, should . . . carefully consider 
the explanations of the government in the competitive impact 
statement and its responses to comments in order to determine 
whether those explanations are reasonable under the 
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 
(1973) (``Where the public interest can be meaningfully evaluated 
simply on the basis of briefs and oral arguments, that is the 
approach that should be utilized.'').
---------------------------------------------------------------------------

VIII. DETERMINATIVE DOCUMENTS

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Dated: January 2, 2014

Respectfully submitted,

----/--s/----------------
Lowell R. Stern* (DC BAR 440487)
U.S. Department of Justice
Antitrust Division, Litigation II Section
Liberty Square Building
450 5th Street NW., Suite 8700
Washington, DC 20530
Tel.: (202) 514-3676
Email: lowell.stern@usdoj.gov

*Attorney of Record

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,
v.

HERAEUS ELECTRO-NITE CO., LLC,

Defendant.

CASE NO: 1:14-cv-00005
JUDGE: James Boasberg
FILED: 01/02/2014

ASSET PRESERVATION STIPULATION AND ORDER

    It is hereby stipulated and agreed by and between the 
undersigned parties, subject to approval and entry by the Court, 
that:

I. DEFINITIONS

    As used in this Asset Preservation Stipulation and Order:
    A. ``Heraeus'' means defendant Heraeus Electro-Nite Co., LLC, a 
Delaware corporation with its headquarters in Langhorne, 
Pennsylvania, its successors and assigns, and its subsidiaries, 
divisions, groups, affiliates, partnerships and joint ventures, and 
their directors, officers, managers, agents, and employees.
    B. ``Minco'' means Midwest Instrument Company, Inc., a Wisconsin 
corporation with its headquarters in Hartland, Wisconsin, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    C. ``S&I'' means single-use sensors and instruments used to 
measure and monitor the temperature and chemical composition of 
molten steel.
    D. ``Acquirer'' means Keystone Sensors, LLC or another entity to 
which Heraeus divests the Divestiture Assets.
    E. ``Keystone'' means Keystone Sensors, LLC, a Delaware 
corporation headquartered in Cranberry Township, Pennsylvania, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents, and employees.
    F. ``Divestiture Assets'' means all assets of Heraeus that (1) 
were acquired from Minco pursuant to the Asset Purchase Agreement 
between the companies dated August 29, 2012 (and subject to the 
conditions and limitations specified in that agreement), and (2) are 
located in the United States or Mexico, including, but not limited 
to:
    1. The former Minco facilities located at 541 Industrial Drive, 
Hartland, Wisconsin and at 2735 E. Oakland Avenue, Johnson City, 
Tennessee;
    2. All remaining assets from the former Minco facility, located 
at Avenida Letra D No. 1005, Monterrey, Mexico;
    3. All remaining tangible assets, including, but not limited to, 
all manufacturing equipment, tooling and fixed assets, personal 
property, remaining finished or partially finished inventory, office 
furniture, materials, supplies, other tangible property, and all 
other assets, used in connection with the Divestiture Assets; all 
licenses, permits and authorizations issued by any governmental 
organization relating to the Divestiture Assets; all teaming 
arrangements, agreements, leases, commitments, certifications, and 
understandings, relating to the Divestiture Assets, including supply 
agreements; all customer lists, accounts, and credit records; all 
repair and performance records and all other records relating to the 
Divestiture Assets; and
     4. All intangible assets, including, but not limited to, all 
intellectual property, including, but not limited to, patents, 
licenses and sublicenses, copyrights, trademarks, trade names, 
service marks, service names, technical information, computer 
software and related documentation, know-how, trade secrets, 
drawings, blueprints, designs, design protocols, specifications for 
materials, specifications for parts and devices, safety procedures 
for the handling of materials and substances, quality assurance and 
control procedures, design tools and simulation capability, all 
manuals and technical information Heraeus provides to its own 
employees, customers, suppliers, agents or licensees, and all 
research data concerning historic and current research and

[[Page 2893]]

development efforts relating to S&I, including, but not limited to, 
designs of experiments and the results of successful and 
unsuccessful designs and experiments.

II. OBJECTIVES

    The proposed Final Judgment filed in this case is meant to 
ensure Heraeus' prompt divestiture of the Divestiture Assets for the 
purpose of remedying the loss of competition alleged in the 
Complaint. This Asset Preservation Stipulation and Order ensures 
that, until such divestiture required by the Proposed Final Judgment 
has been accomplished, the Divestiture Assets will remain as 
economically viable, competitive, and saleable assets.

III. JURISDICTION AND VENUE

    The Court has jurisdiction over the subject matter of this 
action and over each of the parties hereto, and venue of this action 
is proper in the United States District Court for the District of 
Columbia.

IV. COMPLIANCE WITH AND ENTRY OF PROPOSED FINAL JUDGMENT

    A. The parties stipulate that a Final Judgment in the form 
attached hereto as Exhibit A may be filed with and entered by the 
Court, upon the motion of any party or upon the Court's own motion, 
at any time after compliance with the requirements of the Antitrust 
Procedures and Penalties Act (``APPA''), 15 U.S.C. Sec.  16, and 
without further notice to any party or other proceedings, provided 
that the United States has not withdrawn its consent, which it may 
do at any time before the entry of the proposed Final Judgment by 
serving notice thereof on Heraeus and by filing that notice with the 
Court. Heraeus agrees to arrange, at its expense, publication as 
quickly as possible of the newspaper notice required by the APPA, 
which shall be drafted by the United States, in its sole discretion. 
The publication shall be arranged no later than three business days 
after Heraeus' receipt from the United States of the text of the 
notice and the identity of the newspaper within which the 
publication shall be made. Heraeus shall promptly send to the United 
States (1) confirmation that publication of the newspaper notice has 
been arranged, and (2) the certification of the publication prepared 
by the newspaper within which the notice was published.
    B. Heraeus shall abide by and comply with the provisions of the 
proposed Final Judgment, pending the proposed Final Judgment's entry 
by the Court, or until expiration of time for all appeals of any 
Court ruling declining entry of the proposed Final Judgment, and 
shall, from the date of the signing of this Asset Preservation 
Stipulation and Order by the parties, comply with all the terms and 
provisions of the proposed Final Judgment. The United States shall 
have the full rights and enforcement powers in the proposed Final 
Judgment as though the same were in full force and effect as an 
order of the Court.
    C. This Asset Preservation Stipulation and Order shall apply 
with equal force and effect to any amended proposed Final Judgment 
agreed upon in writing by the parties and submitted to the Court.
    D. In the event (1) the United States has withdrawn its consent, 
as provided in Section IV(A) above, or (2) the proposed Final 
Judgment is not entered pursuant to this Asset Preservation 
Stipulation and Order, the time has expired for all appeals of any 
court ruling declining entry of the proposed Final Judgment, and the 
Court has not otherwise ordered continued compliance with the terms 
and provisions of the proposed Final Judgment, then Heraeus is 
released from all further obligations under this Asset Preservation 
Stipulation and Order, and the making of this Asset Preservation 
Stipulation and Order shall be without prejudice to any party in 
this or any other proceeding.
    E. Heraeus represents that the divestiture ordered in the 
proposed Final Judgment can and will be made, and that Heraeus will 
later raise no claim of mistake, hardship or difficulty of 
compliance as grounds for asking the Court to modify any of the 
provisions contained therein.

V. ASSET PRESERVATION PROVISIONS

    Until the divestiture required by the proposed Final Judgment 
have been accomplished:
    A. Heraeus will not destroy, sell, lease, assign, transfer, 
pledge, or otherwise dispose of any of the Divestiture Assets, even 
if those assets are no longer used by Heraeus, except that Heraeus 
may continue to use, sell or dispose of inventory formerly owned by 
Minco in the normal course of business. Within twenty (20) days 
after the entry of the Asset Preservation Stipulation and Order, 
Heraeus will inform the United States of the steps it has taken to 
comply with this Asset Preservation Stipulation and Order.
    B. Heraeus will preserve all corporate and commercial books and 
records formerly belonging to Minco that are currently in Heraeus' 
possession.
    C. Heraeus will not terminate (except for cause) any United 
States-based full-time employee formerly employed by Minco. Heraeus' 
employees with primary responsibility for the productive use of the 
Divestiture Assets shall not be transferred or reassigned to other 
areas within the company except for transfer bids initiated by 
employees pursuant to defendant's regular, established job posting 
policy. Heraeus shall provide the United States with ten (10) 
calendar days' notice of such transfer.
    D. Heraeus will preserve the tooling, equipment, product and 
process drawing and specifications, and other items necessary to 
manufacture products formerly manufactured by Minco.
    E. Heraeus shall take no action that would jeopardize, delay, or 
impede the sale of the Divestiture Assets.
    F. Heraeus shall take no action that would interfere with the 
ability of any trustee appointed pursuant to the Final Judgment to 
complete the divestitures pursuant to the Final Judgment to an 
Acquirer acceptable to the United States.
    G. Subject to the approval of the United States, Heraeus shall 
appoint a person or persons to oversee the Divestiture Assets, and 
who will be responsible for Heraeus' compliance with this section. 
This person shall have complete managerial responsibility for the 
Divestiture Assets, subject to the provisions of this Final 
Judgment. In the event such person is unable to perform his duties, 
Heraeus shall appoint, subject to the approval of the United States, 
a replacement within ten (10) working days. Should Heraeus fail to 
appoint a replacement acceptable to the United States within this 
time period, the United States shall appoint a replacement.

VI. DURATION OF ASSET PRESERVATION OBLIGATIONS

    Heraeus' obligations under Section V of this Asset Preservation 
Stipulation and Order shall remain in effect until (1) consummation 
of the divestitures required by the proposed Final Judgment or (2) 
until further order of the Court. If the United States voluntarily 
dismisses the Complaint in this matter, Heraeus is released from all 
further obligations under this Asset Preservation Stipulation and 
Order.

Dated: January 2, 2014

Respectfully submitted,

FOR PLAINTIFF
UNITED STATES OF AMERICA

------/s/----------------
Lowell R. Stern * (D.C. BAR 440487)
United States Department of Justice
Antitrust Division
Litigation II Section
450 Fifth Street NW, Suite 8700
Washington, DC 20530
    Tel: (202) 514-3676

*Attorney of Record

FOR DEFENDANT
HERAEUS ELECTRO-NITE CO., LLC

------/s/----------------
Paul M. Honigberg, Esq. (D.C. Bar 342576)
Blank Rome LLP
Watergate
600 New Hampshire Avenue NW.
Washington, D.C. 20037
(202) 772-5800
------/s/----------------
Jeremy A. Rist, Esq.
Blank Rome LLP
One Logan Square
130 North 18th Street
Philadelphia, PA 19103-6998
Phone: (215) 569-5361

ORDER

IT IS SO ORDERED by the Court, this ---- day of ----------, 2014.

-----------------------------------------------------------------------
United States District Judge

CERTIFICATE OF SERVICE

I, Lowell R. Stern, hereby certify that on January 2, 2014, I caused 
a copy of the foregoing Competitive Impact Statement, as well as the 
Complaint, Asset Preservation Stipulation and Order, proposed Final 
Judgment, and Explanation of Consent Decree Procedures, to be served 
upon defendant Heraeus Electro-Nite Co., LLC, by mailing the 
documents electronically to its duly authorized legal representative 
as follows:

Counsel for Defendant Heraeus Electro-Nite Co., LLC:

Paul M. Honigberg, Esq. (D.C. Bar 342576)

[[Page 2894]]

Blank Rome LLP
Watergate
600 New Hampshire Avenue, NW.
Washington, DC 20037
(202) 772-5800

Jeremy A. Rist, Esquire
Blank Rome LLP
One Logan Square
130 North 18th Street
Philadelphia, PA 19103-6998
Phone: (215) 569-5361

------/s/----------
Lowell R. Stern, Esquire
D.C. BAR 440487
United States Department of Justice Antitrust Division, Litigation 
II Section
450 Fifth Street, NW., Suite 8700
Washington, DC 20530
Tel.: (202) 514-3676
Fax: (202) 514-9033
Email: Lowell.Stern@usdoj.gov

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,
v.

HERAEUS ELECTRO-NITE CO., LLC,

Defendant.

CASE NO: 1:14-cv-00005
JUDGE: James Boasberg
FILED: 01/02/2014

PROPOSED FINAL JUDGMENT

    WHEREAS, Plaintiff, United States of America, filed its 
Complaint on January 2, 2014, the United States and Defendant 
Heraeus Electro-Nite Co., LLC (``Heraeus''), by their respective 
attorneys, have consented to the entry of this Final Judgment 
without trial or adjudication of any issue of fact or law, and 
without this Final Judgment constituting any evidence against or 
admission by any party regarding any issue of fact or law;
    AND WHEREAS, Heraeus agrees to be bound by the provisions of 
this Final Judgment pending its approval by the Court;
    AND WHEREAS, the essence of this Final Judgment is the prompt 
and certain divestiture of certain rights or assets by Heraeus to 
assure that competition is substantially restored;
    AND WHEREAS, the United States requires Heraeus to divest 
certain assets and take certain other actions for the purpose of 
remedying the loss of competition alleged in the Complaint;
    AND WHEREAS, Heraeus has represented to the United States that 
the divestiture required below can and will be made and that Heraeus 
will later raise no claim of hardship or difficulty as grounds for 
asking the Court to modify any of the provisions contained below;
    NOW THEREFORE, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is ORDERED, ADJUDGED AND DECREED:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each 
of the parties to this action. The Complaint states a claim upon 
which relief may be granted against Heraeus under Section 7 of the 
Clayton Act, as amended (15 U.S.C. Sec.  18).

II. Definitions

    As used in this Final Judgment:
    A. ``Heraeus'' means defendant Heraeus Electro-Nite Co., LLC, a 
Delaware corporation with its headquarters in Langhorne, 
Pennsylvania, its successors and assigns, and its subsidiaries, 
divisions, groups, affiliates, partnerships and joint ventures, and 
their directors, officers, managers, agents, and employees.
    B. ``Minco'' means Midwest Instrument Company, Inc., a Wisconsin 
corporation with its headquarters in Hartland, Wisconsin, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    C. ``S&I'' means single-use sensors and instruments used to 
measure and monitor the temperature and chemical composition of 
molten steel.
    D. ``Acquirer'' means Keystone Sensors, LLC or another entity to 
which Heraeus divests the Divestiture Assets.
    E. ``Keystone'' means Keystone Sensors, LLC, a Delaware 
corporation headquartered in Cranberry Township, Pennsylvania, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents, and employees.
    F. ``Divestiture Assets'' means all assets of Heraeus that (1) 
were acquired from Minco pursuant to the Asset Purchase Agreement 
between the companies dated August 29, 2012 (and subject to the 
conditions and limitations specified in that agreement), and (2) are 
located in the United States or Mexico, including, but not limited 
to:
     1. The former Minco facilities located at 541 Industrial Drive, 
Hartland, Wisconsin and at 2735 E. Oakland Avenue, Johnson City, 
Tennessee;
     2. All remaining assets from the former Minco facility, located 
at Avenida Letra D No. 1005, Monterrey, Mexico;
     3. All remaining tangible assets, including, but not limited 
to, all manufacturing equipment, tooling and fixed assets, personal 
property, remaining finished or partially finished inventory, office 
furniture, materials, supplies, other tangible property, and all 
other assets, used in connection with the Divestiture Assets; all 
licenses, permits and authorizations issued by any governmental 
organization relating to the Divestiture Assets; all teaming 
arrangements, agreements, leases, commitments, certifications, and 
understandings, relating to the Divestiture Assets, including supply 
agreements; all customer lists, accounts, and credit records; all 
repair and performance records and all other records relating to the 
Divestiture Assets; and
     4. All intangible assets, including, but not limited to, all 
intellectual property, including, but not limited to, patents, 
licenses and sublicenses, copyrights, trademarks, trade names, 
service marks, service names, technical information, computer 
software and related documentation, know-how, trade secrets, 
drawings, blueprints, designs, design protocols, specifications for 
materials, specifications for parts and devices, safety procedures 
for the handling of materials and substances, quality assurance and 
control procedures, design tools and simulation capability, all 
manuals and technical information Heraeus provides to its own 
employees, customers, suppliers, agents or licensees, and all 
research data concerning historic and current research and 
development efforts relating to S&I, including, but not limited to, 
designs of experiments and the results of successful and 
unsuccessful designs and experiments.

III. Applicability

    This Final Judgment applies to Heraeus, as defined above, and 
all other persons in active concert or participation with Heraeus 
who receive actual notice of this Final Judgment by personal service 
or otherwise.

IV. Divestiture

    A. Heraeus is ordered and directed, within sixty (60) calendar 
days after the signing of the Asset Preservation Stipulation and 
Order in this matter, to divest the Divestiture Assets in a manner 
consistent with this Final Judgment to an Acquirer acceptable to the 
United States, in its sole discretion. The United States, in its 
sole discretion, may agree to an extension of this time period not 
to exceed thirty (30) calendar days, and shall notify the Court in 
such circumstances. Heraeus agrees to use its best efforts to divest 
the Divestiture Assets as expeditiously as possible.
    B. Notwithstanding the provisions of Paragraph IV.A, upon 
written request from Heraeus, the United States, in its sole 
discretion, may agree to exclude from the Divestiture Assets any 
portion thereof that the Acquirer, at its option, elects not to 
acquire.
    C. Heraeus shall offer to furnish to the Acquirer, subject to 
customary confidentiality assurances, all information and documents 
relating to the Divestiture Assets customarily provided in a due 
diligence process except such information or documents subject to 
the attorney-client privilege or work-product doctrine. Heraeus 
shall make available such information to the United States at the 
same time that such information is made available to any other 
person.
    D. Heraeus shall provide the Acquirer and the United States with 
the name, job title and other contact information relating to all 
Heraeus personnel in the United States who were formerly employed by 
Minco, excluding shareholders and former shareholders of Minco, to 
enable the Acquirer to make offers of employment. Heraeus shall also 
provide the Acquirer and the United States with the name, last job 
title, and last known address and other contact information for 
former employees of Minco or Heraeus in the United States whose 
employment ended on or after January 1, 2012, to enable the Acquirer 
to make offers of employment to such persons. Heraeus shall not 
interfere with any negotiations by the Acquirer to employ any such 
current or former Heraeus or Minco employee described in this 
section.

[[Page 2895]]

    E. Heraeus shall permit the Acquirer to have reasonable access 
to personnel and to make inspections of the physical facilities 
included in the Divestiture Assets; access to any and all 
environmental, zoning, and other permit documents and information; 
and access to any and all financial, operational, or other documents 
and information customarily provided as part of a due diligence 
process.
    F. Should the Acquirer elect to acquire the Johnson City, 
Tennessee and/or Hartland, Wisconsin facilities that Heraeus 
acquired from Minco, Heraeus shall assign the lease(s) to these 
facilities to the Acquirer, subject to the landlord(s) permission, 
and shall not interfere with any negotiations between the Acquirer 
and the landlord(s) concerning assignment of the lease(s).
    G. At the option of the Acquirer, Heraeus shall enter into an 
agreement to provide training and technical support regarding the 
operation of any purchased Divestiture Asset to the personnel of the 
Acquirer.
    H. Heraeus shall warrant to the Acquirer that each asset that is 
currently operational will be operational on the date of sale.
    I. Heraeus shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.
    J. Heraeus shall warrant to the Acquirer that there are no 
material defects in the environmental, zoning or other permits 
pertaining to the operation of each asset, and that following the 
sale of the Divestiture Assets, Heraeus will not undertake, directly 
or indirectly, any challenge to the environmental, zoning, or other 
permits relating to the operation of the Divestiture Assets.
    K. At the option of Heraeus, the Acquirer shall provide Heraeus 
with a non-exclusive, non-transferable license for the intangible 
assets described in II(F)(4), above, that prior to the filing of the 
Complaint in this matter were used in connection with the design, 
development, production, marketing, servicing, distribution, and/or 
sale of S&I.
    L. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section IV, or by trustee appointed pursuant 
to Section V, of this Final Judgment, shall include the entire 
Divestiture Assets, and shall be accomplished in such a way as to 
satisfy the United States, in its sole discretion, that the 
Divestiture Assets can and will be used by the Acquirer as part of a 
viable, ongoing business of the development, production, sale and 
service of S&I in the United States. The divestiture shall be 
accomplished in such a way so as to satisfy the United States, in 
its sole discretion, that the Divestiture Assets will remain viable 
and the divestiture of such assets will remedy the competitive harm 
alleged in the Complaint. The divestiture, whether pursuant to 
Section IV or Section V of this Final Judgment,

     (1) shall be made to an Acquirer that, in the United States' 
sole judgment, has the intent and capability (including the 
necessary managerial, operational, technical and financial 
capability) of competing effectively in the business of the 
development, production, sale and service of S&I; and
     (2) shall be accomplished so as to satisfy the United States, 
in its sole discretion, that none of the terms of any agreement 
between the Acquirer and Heraeus gives Heraeus the ability 
unreasonably to raise the Acquirer's costs, to lower the Acquirer's 
efficiency, or otherwise to interfere in the ability of the Acquirer 
to compete effectively.

V. Appointment of Trustee

    A. If Heraeus has not divested the Divestiture Assets within the 
time period specified in Section IV(A), Heraeus shall notify the 
United States of that fact in writing. Upon application of the 
United States, the Court shall appoint a trustee selected by the 
United States and approved by the Court to effect the divestiture of 
the Divestiture Assets.
    B. After the appointment of a trustee becomes effective, only 
the trustee shall have the right to sell the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestiture to an Acquirer acceptable to the United States at such 
price and on such terms as are then obtainable upon reasonable 
effort by the trustee, subject to the provisions of Sections IV, V, 
and VI of this Final Judgment, and shall have such other powers as 
this Court deems appropriate. Subject to Section V(D) of this Final 
Judgment, the trustee may hire at the cost and expense of Heraeus 
any investment bankers, attorneys, or other agents, who shall be 
solely accountable to the trustee, reasonably necessary in the 
trustee's judgment to assist in the divestiture.
    C. Heraeus shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
Heraeus must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VI.
    D. The trustee shall serve at the cost and expense of Heraeus, 
on such terms and conditions as the United States approves, and 
shall account for all monies derived from the sale of the assets 
sold by the trustee and all costs and expenses so incurred. After 
approval by the Court of the trustee's accounting, including fees 
for its services and those of any professionals and agents retained 
by the trustee, all remaining money shall be paid to Heraeus and the 
trust shall then be terminated. The compensation of the trustee and 
any professionals and agents retained by the trustee shall be 
reasonable in light of the value of the Divestiture Assets and based 
on a fee arrangement providing the trustee with an incentive based 
on the price and terms of the divestiture and the speed with which 
it is accomplished, but timeliness is paramount.
    E. Heraeus shall use its best efforts to assist the trustee in 
accomplishing the required divestiture. The trustee and any 
consultants, accountants, attorneys, and other persons retained by 
the trustee shall have full and complete access to the personnel, 
books, records, and facilities of the business to be divested, and 
Heraeus shall develop financial and other information relevant to 
such business as the trustee may reasonably request, subject to 
reasonable protection for trade secret or other confidential 
research, development, or commercial information. Heraeus shall take 
no action to interfere with or to impede the trustee's 
accomplishment of the divestiture.
    F. After its appointment, the trustee shall file monthly reports 
with the United States and the Court setting forth the trustee's 
efforts to accomplish the divestiture ordered under this Final 
Judgment. To the extent such reports contain information that the 
trustee deems confidential, such reports shall not be filed in the 
public docket of the Court. Such reports shall include the name, 
address, and telephone number of each person who, during the 
preceding month, made an offer to acquire, expressed an interest in 
acquiring, entered into negotiations to acquire, or was contacted or 
made an inquiry about acquiring, any interest in the Divestiture 
Assets, and shall describe in detail each contact with any such 
person. The trustee shall maintain full records of all efforts made 
to divest the Divestiture Assets.
    G. If the trustee has not accomplished the divestiture ordered 
under this Final Judgment within six months after its appointment, 
the trustee shall promptly file with the Court a report setting 
forth (1) the trustee's efforts to accomplish the required 
divestiture, (2) the reasons, in the trustee's judgment, why the 
required divestiture has not been accomplished, and (3) the 
trustee's recommendations. To the extent such reports contain 
information that the trustee deems confidential, such reports shall 
not be filed in the public docket of the Court. The trustee shall at 
the same time furnish such report to the United States which shall 
have the right to make additional recommendations consistent with 
the purpose of the trust. The Court thereafter shall enter such 
orders as it shall deem appropriate to carry out the purpose of the 
Final Judgment, which may, if necessary, include extending the trust 
and the term of the trustee's appointment by a period requested by 
the United States.

VI. Notice of Proposed Divestiture

    A. Unless the Acquirer is Keystone, within two (2) business days 
following execution of a definitive divestiture agreement, Heraeus 
or the trustee, whichever is then responsible for effecting the 
divestiture required herein, shall notify the United States of any 
proposed divestiture required by Section IV or V of this Final 
Judgment. If the trustee is responsible, it shall similarly notify 
Heraeus. The notice shall set forth the details of the proposed 
divestiture and list the name, address, and telephone number of each 
person not previously identified who offered or expressed an 
interest in or desire to acquire any ownership interest in the 
Divestiture Assets, together with full details of the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from Heraeus, 
the proposed Acquirer, any other third party, or the trustee, if 
applicable, additional information concerning the proposed 
divestiture, the proposed Acquirer, and any other potential Acquirer 
of the Divestiture Assets. Heraeus and the trustee shall furnish any 
additional information requested within fifteen (15) calendar days 
of the receipt of the

[[Page 2896]]

request, unless the parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice 
or within twenty (20) calendar days after the United States has been 
provided the additional information requested from Heraeus, the 
Acquirer, any third party, and the trustee, whichever is later, the 
United States shall provide written notice to Heraeus and the 
trustee, if there is one, stating whether or not it objects to the 
proposed divestiture. If the United States provides written notice 
that it does not object, the divestiture may be consummated, subject 
only to Heraeus' limited right to object to the sale under Section 
V(C) of this Final Judgment. Absent written notice that the United 
States does not object to the Acquirer or upon objection by the 
United States, a divestiture proposed under Section IV or Section V 
shall not be consummated. Upon objection by Heraeus under Section 
V(C), a divestiture proposed under Section V shall not be 
consummated unless approved by the Court.

VII. Financing

    Heraeus shall not finance all or any part of any purchase made 
pursuant to Section IV or V of this Final Judgment.

VIII. Preserving and Maintaining Divestiture Assets

    Until the divestiture required by this Final Judgment has been 
accomplished, Heraeus shall take all steps necessary to comply with 
the Asset Preservation Order entered by this Court. Heraeus shall 
take no action that would jeopardize the divestiture ordered by this 
Court.

IX. Waiver of Noncompete Agreements

    A. Heraeus shall waive any existing noncompete agreement or 
other restrictive covenant that may bind any former employee of 
either Heraeus or Minco in the United States, without imposing any 
financial penalty on any such employee. Heraeus shall, no later than 
twenty-one (21) calendar days after the filing of the Complaint in 
this matter, provide each such former employee with written notice 
of the waiver and provide copies of each such waiver to the United 
States.
    B. For a period of two years following Heraeus' agreement to the 
terms of this Final Judgment, Heraeus shall not require any employee 
in the United States to agree to a noncompete restriction or other 
restrictive covenant as a condition of severance or any other 
agreement relating to an employee's termination of employment.
    C. This provision shall not apply to any current or former 
shareholder of Minco.

X. Use of Equipment

    Heraeus shall allow customers, and shall so notify them, to use 
without consequence Heraeus products and equipment in the testing 
and/or qualification of any S&I, including waiving any contractual 
restrictions or the imposition of any warranty- or usage-related 
defenses to claims that may arise.

XI. Affidavits

    A. Within twenty (20) calendar days of the filing of the 
Complaint in this matter, and every thirty (30) calendar days 
thereafter until the divestiture has been completed under Section IV 
or V, Heraeus shall deliver to the United States an affidavit as to 
the fact and manner of its compliance with Section IV or V of this 
Final Judgment. Each such affidavit shall include the name, address, 
and telephone number of each person who, during the preceding thirty 
(30) calendar days, made an offer to acquire, expressed an interest 
in acquiring, entered into negotiations to acquire, or was contacted 
or made an inquiry about acquiring, any interest in the Divestiture 
Assets, and shall describe in detail each contact with any such 
person during that period. Each such affidavit shall also include a 
description of the efforts Heraeus has taken to solicit buyers for 
the Divestiture Assets, and to provide required information to the 
prospective Acquirers, including the limitations, if any, on such 
information. Assuming the information set forth in the affidavit is 
true and complete, any objection by the United States to information 
provided by Heraeus, including limitation on information, shall be 
made within fourteen (14) calendar days of receipt of such 
affidavit.
    B. Within twenty (20) calendar days of the filing of the 
Complaint in this matter, Heraeus shall deliver to the United States 
an affidavit that describes in reasonable detail all actions Heraeus 
has taken and all steps Heraeus has implemented on an ongoing basis 
to comply with Section VIII of this Final Judgment. Heraeus shall 
deliver to the United States an affidavit describing any changes to 
the efforts and actions outlined in Heraeus' earlier affidavits 
filed pursuant to this section within fifteen (15) calendar days 
after the change is implemented.
    C. Heraeus shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year after such 
divestiture has been completed.

XII. Compliance Inspection

    A. For the purposes of determining or securing compliance with 
this Final Judgment, the Asset Preservation Order, or any related 
orders, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized 
privilege, from time to time authorized representatives of the 
United States Department of Justice, including consultants and other 
persons retained by the United States, shall, upon written request 
of an authorized representative of the Assistant Attorney General in 
charge of the Antitrust Division, and on reasonable notice to 
Heraeus, be permitted:
    (1) access during Heraeus' office hours to inspect and copy, or 
at the option of the United States, to require Heraeus to provide 
hard copy or electronic copies of, all books, ledgers, accounts, 
records, data, and documents in the possession, custody, or control 
of Heraeus, relating to any matters contained in this Final 
Judgment; and
    (2) to interview, either informally or on the record, Heraeus' 
officers, employees, or agents, who may have their individual 
counsel present, regarding such matters. The interviews shall be 
subject to the reasonable convenience of the interviewee and without 
restraint or interference by Heraeus.
    B. Upon the written request of an authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, 
Heraeus shall submit written reports or response to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
this section shall be divulged by the United States to any person 
other than an authorized representative of the executive branch of 
the United States, except in the course of legal proceedings to 
which the United States is a party (including grand jury 
proceedings), or for the purpose of securing compliance with this 
Final Judgment, or as otherwise required by law.
    D. If at the time information or documents are furnished by 
Heraeus to the United States, Heraeus represents and identifies in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the 
Federal Rules of Civil Procedure, and Heraeus marks each pertinent 
page of such material, ``Subject to claim of protection under Rule 
26(c)(7) of the Federal Rules of Civil Procedure,'' then the United 
States shall give Heraeus ten (10) calendar days notice prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding).

XIII. Notification

    Unless such transaction is otherwise subject to the reporting 
and waiting period requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, 15 U.S.C. Sec.  18a (the ``HSR 
Act''), Heraeus, without providing advance notification to the 
Antitrust Division, shall not directly or indirectly acquire any 
assets of or any interest, including any financial, security, loan, 
equity or management interest, in any entity engaged in the 
development, production, sale or service of S&I in the United States 
during the term of this Final Judgment.
    Such notification shall be provided to the Antitrust Division in 
the same format as, and per the instructions relating to the 
Notification and Report Form set forth in the Appendix to Part 803 
of Title 16 of the Code of Federal Regulations as amended, except 
that the information requested in Items 5 through 9 of the 
instructions must be provided only about the development, 
production, sale and service of S&I. Notification shall be provided 
at least thirty (30) calendar days prior to acquiring any such 
interest, and shall include, beyond what may be required by the 
applicable instructions, the names of the principal representatives 
of the parties to the agreement who negotiated the agreement, and 
any management or strategic plans discussing the proposed 
transaction. If within the 30-day period after notification, 
representatives of the Antitrust Division make a written request for 
additional

[[Page 2897]]

information, Heraeus shall not consummate the proposed transaction 
or agreement until thirty (30) calendar days after submitting all 
such additional information. Early termination of the waiting 
periods in this paragraph may be requested and, where appropriate, 
granted in the same manner as is applicable under the requirements 
and provisions of the HSR Act and rules promulgated thereunder. This 
Section shall be broadly construed and any ambiguity or uncertainty 
regarding the filing of notice under this Section shall be resolved 
in favor of filing notice.

XIV. No Reacquisition

    During the term of this Final Judgment, Heraeus may not 
reacquire any part of the Divestiture Assets purchased by the 
Acquirer.

XV. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this 
Final Judgment to apply to this Court at any time for further orders 
and directions as may be necessary or appropriate to carry out or 
construe this Final Judgment, to modify any of its provisions, to 
enforce compliance, and to punish violations of its provisions.

XVI. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry.

XVII. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The 
parties have complied with the requirements of the Antitrust 
Procedures and Penalties Act, 15 U.S.C. Sec.  16, including making 
copies available to the public of this Final Judgment, the 
Competitive Impact Statement, and any comments thereon and the 
United States' responses to comments. Based upon the record before 
the Court, which includes the Competitive Impact Statement and any 
comments and response to comments filed with the Court, entry of 
this Final Judgment is in the public interest.

Date:------------------------------------------------------------------

Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16

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United States District Judge

[FR Doc. 2014-00709 Filed 1-15-14; 8:45 am]
BILLING CODE 4410-11-P