Potash Corporation of Saskatchewan Inc. and Agrium Inc.; Analysis To Aid Public Comment, 377-380 [2017-28336]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 83, Number 2 (Wednesday, January 3, 2018)]
[Notices]
[Pages 377-380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-28336]


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FEDERAL TRADE COMMISSION

[File No. 161 0232]


Potash Corporation of Saskatchewan Inc. and Agrium Inc.; Analysis 
To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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

DATES: Comments must be received on or before January 29, 2018.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``In the Matter of 
Potash Corporation of Saskatchewan Inc. et al., File No. 161-0232'' on 
your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/potashcorpconsent by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, write ``In the Matter of Potash Corporation of Saskatchewan 
Inc. et al., File No. 161-0232'' on your comment and on the envelope, 
and mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex 
D), Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Kristian Rogers (202-326-3210), Bureau

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of Competition, 600 Pennsylvania Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34, 
notice is hereby given that the above-captioned consent agreement 
containing a consent order to cease and desist, having been filed with 
and accepted, subject to final approval, by the Commission, has been 
placed on the public record for a period of thirty (30) days. The 
following Analysis to Aid Public Comment describes the terms of the 
consent agreement, and the allegations in the complaint. An electronic 
copy of the full text of the consent agreement package can be obtained 
from the FTC Home Page (for December 27, 2017), on the World Wide Web, 
at https://www.ftc.gov/news-events/commission-actions.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before January 29, 
2018. Write ``In the Matter of Potash Corporation of Saskatchewan Inc. 
et al., File No. 161-0232'' on your comment. Your comment--including 
your name and your state--will be placed on the public record of this 
proceeding, including, to the extent practicable, on the public 
Commission website, at https://www.ftc.gov/policy/public-comments.
    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/potashcorpconsent by following the instructions on the web-based 
form. If this Notice appears at https://www.regulations.gov/#!home, you 
also may file a comment through that website.
    If you prefer to file your comment on paper, write ``In the Matter 
of Potash Corporation of Saskatchewan Inc. et al., File No. 161-0232'' 
on your comment and on the envelope, and mail your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), Washington, DC 
20580, or deliver your comment to the following address: Federal Trade 
Commission, Office of the Secretary, Constitution Center, 400 7th 
Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC. 20024. If 
possible, submit your paper comment to the Commission by courier or 
overnight service.
    Because your comment will be placed on the publicly accessible FTC 
website at https://www.ftc.gov, you are solely responsible for making 
sure that your comment does not include any sensitive or confidential 
information. In particular, your comment should not include any 
sensitive personal information, such as your or anyone else's Social 
Security number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure that your comment does not include 
any sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 
16 CFR 4.10(a)(2)--including in particular competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted on the public FTC website--as legally required by FTC Rule 
4.9(b)--we cannot redact or remove your comment from the FTC website, 
unless you submit a confidentiality request that meets the requirements 
for such treatment under FTC Rule 4.9(c), and the General Counsel 
grants that request.
    Visit the FTC website at https://www.ftc.gov to read this Notice and 
the news release describing it. The FTC Act and other laws that the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding, as appropriate. The Commission 
will consider all timely and responsive public comments that it 
receives on or before January 29, 2018. For information on the 
Commission's privacy policy, including routine uses permitted by the 
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order (``Consent 
Agreement'') with Potash Corporation of Saskatchewan Inc. 
(``PotashCorp''), Agrium Inc. (``Agrium''), and Nutrien Ltd. 
(``Nutrien''). The proposed Consent Agreement is intended to remedy the 
anticompetitive effects that would otherwise result from the proposed 
merger of PotashCorp and Agrium. Under the Consent Agreement, the 
merging parties must divest Agrium's Conda, Idaho facility and related 
assets to Itafos or another buyer approved by the Commission and must 
divest Agrium's North Bend, Ohio facility and related assets to Trammo, 
Inc. (``Trammo'') or another buyer approved by the Commission. The 
Consent Agreement provides the acquirers with the manufacturing plants 
and other tangible and intangible assets needed to compete effectively 
in the markets for the manufacture and sale of superphosphoric acid 
(``SPA'') and 65%-67% concentration nitric acid.
    On September 11, 2016, PotashCorp and Agrium agreed to a merger 
(the ``Merger'') in which PotashCorp and Agrium shareholders will own 
52% and 48% of the combined firm, respectively. The Commission's 
Complaint alleges that the Merger, if consummated, would violate 
Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 
of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, by 
substantially lessening competition in the markets for (1) SPA in North 
America and (2) 65%-67% concentration nitric acid in the region near 
and to the east of PotashCorp's Lima, Ohio and Agrium's North Bend, 
Ohio nitric acid plants.
    The Consent Agreement has been placed on the public record for 30 
days to solicit comments from interested persons. Comments received 
during this period will become a part of the public record. After 30 
days, the Commission will again review the Consent Agreement, along 
with the comments received, and will decide whether it should withdraw 
the Consent Agreement, modify it, or make final the Decision and Order.

II. The Parties

    PotashCorp, headquartered in Saskatoon, Saskatchewan, Canada, and

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Agrium, headquartered in Calgary, Alberta, Canada, are both large 
producers of crop nutrients, including potash, phosphate, and nitrogen 
products. PotashCorp and Agrium are two of only three firms in North 
America that manufacturer SPA, a key input for liquid phosphate 
fertilizers. PotashCorp and Agrium are also two of a small number of 
firms that make 65%-67% concentration nitric acid, a nitrogen product 
sold for industrial uses, in North America, and both PotashCorp and 
Agrium own nitric acid plants in Ohio.

III. The Relevant Markets

A. Superphosphoric Acid
    Phosphate is an essential plant nutrient that farmers apply to 
crops on a seasonal basis. SPA, a highly concentrated form of 
phosphoric acid, is used to produce the liquid phosphate fertilizer 
known as ammonium polyphosphate (``APP''). SPA is purchased by 
agricultural wholesalers and retailers, who convert it to APP and sell 
APP to farmers.
    The relevant product market does not include dry phosphate 
fertilizers such as monoammonium phosphate (``MAP'') or diammonium 
phosphate (``DAP''). Many farmers perceive advantages, including higher 
crop yield and quality, to using liquid rather than dry phosphate 
fertilizer, particularly in the early stages of crop development. In 
addition, liquid phosphates can be applied more directly to the seed 
than dry phosphates and can easily be combined with other nutrients. 
Consistent with these perceived advantages, SPA typically garners a 
premium price over dry phosphates. This premium has at times expanded 
significantly without prompting customers to shift their purchases 
substantially from liquid to dry phosphate fertilizers.
    The relevant geographic market in which to analyze the effects of 
the Merger for SPA is no broader than North America. SPA is caustic, 
requires special handling and equipment, and is perishable outside 
certain temperature ranges. As a result, importing offshore SPA is 
logistically challenging and expensive, and imports of SPA are rare and 
do not constrain the prices of SPA produced in North America.
    Currently, three firms--PotashCorp, Agrium, and J.R. Simplot 
Company (``Simplot'')--manufacture all the SPA produced in North 
America. PotashCorp has two SPA plants, located in Aurora, North 
Carolina and White Springs, Florida. Agrium's sole SPA plant is located 
in Conda, Idaho. Simplot has SPA plants in Rock Springs, Wyoming and 
Pocatello, Idaho. Absent the proposed remedy, the Merger would result 
in the merged entity controlling more than 75% of SPA production 
capacity in North America.
B. 65%-67% Concentration Nitric Acid
    Nitric acid is a chemical compound produced through the interaction 
of ammonia, water, and a catalyzing agent. Nitric acid is used as a 
feedstock for nitrogen-based fertilizers and explosives and is also 
sold for a variety of industrial uses, including the production of 
stainless steel, metal-based specialty chemicals, and water-treatment 
and cleaning products. Nitric acid is produced at different 
concentration levels, which reflect the amount of water present 
together with the pure nitric acid. Both PotashCorp's plant in Lima, 
Ohio and Agrium's plant in North Bend, Ohio produce nitric acid at 65%-
67% concentration, which is the preferred concentration for most 
industrial uses.
    Customers could not quickly or easily switch from 65%-67% 
concentration nitric acid to other nitric acid concentrations or other 
chemical products. For most customers, there are no chemical 
substitutes that are functionally equivalent to nitric acid. Purchasing 
lower-concentration nitric acid and increasing its concentration is not 
an economical alternative because customers would need to invest in 
constructing an evaporation tower, which few if any nitric acid 
customers have today. Additionally, buying lower-concentration nitric 
acid requires customers to pay to ship and store more water to receive 
the same amount of acid. Purchasing 98% concentration nitric acid and 
diluting it down is also not an economical alternative due to the 
significant environmental and safety hazards associated with 
transporting and storing highly concentrated nitric acid. The relevant 
product market is therefore limited to 65%-67% concentration nitric 
acid.
    The relevant geographic market in which to analyze the effects of 
the Merger with respect to 65%-67% concentration nitric acid 
encompasses customer locations near and to the east of PotashCorp's and 
Agrium's nitric acid plants in Lima, Ohio and North Bend, Ohio, 
respectively. The relevant geographic market includes customer 
locations in Ohio, Kentucky, Pennsylvania, Maryland, West Virginia, and 
New Jersey. These customers are vulnerable to a price increase on 
nitric acid sold by the merged entity for several reasons. Nitric acid 
is a corrosive chemical requiring special care in handling and storage. 
As a result, the costs of transporting nitric acid are high, making the 
relative locations of suppliers and customers critical to the total 
delivered costs. Most nitric acid customers rely on truck delivery, 
which further limits their ability to buy from more remote suppliers. 
Other sellers of 65%-67% concentration nitric acid are far more distant 
from customers in the relevant geographic market than North Bend and 
Lima, and therefore these sellers are not viable alternative sources of 
supply. Finally, the merging parties have the ability to price 
discriminate on sales of nitric acid by customer location.
    PotashCorp and Agrium are the primary suppliers of 65%-67% 
concentration nitric acid to customer locations near and to the east of 
PotashCorp's Lima, Ohio and Agrium's North Bend, Ohio nitric acid 
plants. Other producers of 65%-67% concentration nitric acid, such as 
Dyno Nobel, Inc. and LSB Industries Inc., have minimal sales into this 
region. Absent the proposed remedy, the Merger would result in the 
merged entity having more than 90% of sales of 65%-67% concentration 
nitric acid into the relevant geographic market.

IV. Effects of the Acquisition

    Absent the proposed remedy, the Merger would pose a significant 
risk of harm to competition in the relevant markets. The Merger would 
eliminate head-to-head competition between PotashCorp and Agrium on SPA 
sales and would enhance the merged firm's ability and incentive to 
raise market prices by reducing SPA output. The Merger would also 
increase the likelihood of coordination in a market that is already 
vulnerable to coordination, given that SPA is a commodity and SPA 
pricing and output information is often disseminated through customers 
and industry publications. For sales of 65%-67% concentration nitric 
acid to customers in the relevant geographic market the Merger would 
also eliminate the vigorous competition on pricing and service that 
exists today between PotashCorp and Agrium.

V. Entry

    Entry into the relevant markets would not be timely, likely, or 
sufficient to deter or counteract the expected anticompetitive effects 
of the Merger. New entry into SPA production, even of modest capacity, 
would likely take years and cost at least $100 million. No entry has 
occurred into North American SPA production in the past five years, nor 
is any in progress or anticipated. Although

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two new nitric acid facilities have been constructed in recent years, 
those facilities are outside the relevant geographic market and make 
nitric acid for their internal use at a lower concentration. Existing 
suppliers of 65%-67% concentration nitric acid are unlikely to expand 
their sales footprint enough to defeat a price increase by the merged 
entity in the relevant geographic market.

VI. The Consent Agreement

    The proposed Consent Agreement remedies the competitive concerns 
raised by the Merger by requiring the merging parties to divest 
Agrium's Conda, Idaho facility to Itafos and Agrium's North Bend, Ohio 
facility to Trammo. These divestitures will preserve the competition 
that currently exists in the relevant markets.
    Under the proposed Consent Agreement, Agrium's phosphate operations 
at Conda, Idaho, as well as related phosphate mines, customer and 
supplier contracts, and intellectual property, will be sold to Itafos. 
Itafos is an integrated producer of phosphate-based fertilizers with a 
phosphate mining and manufacturing operation located in Brazil. Itafos 
also owns other phosphate mining properties, including a mine in Paris 
Hills, Idaho, located 35 miles from Conda. Paris Hills is expected to 
become operational in 2019 and will serve as a source of high-grade 
phosphate ore for the Conda operations. As a new entrant into the sale 
of SPA in North America, Itafos is well positioned to preserve the SPA 
competition that would otherwise be lost through the Merger.
    The proposed Consent Agreement further provides that Agrium's 
nitric acid plant and related operations at North Bend, Ohio, as well 
as customer and supplier contracts and intellectual property, will be 
sold to Trammo. Trammo is a global trader, distributor, and transporter 
of commodity chemicals, including anhydrous ammonia, the primary 
feedstock for nitric acid production. Trammo owns three ammonia 
terminals in Illinois as well as specialized refrigerated barges for 
ammonia distribution. Through its trading and storage activities, 
Trammo expects to realize efficiencies in the supply of anhydrous 
ammonia to North Bend. Trammo will be a new entrant in the sale of 65%-
67% concentration nitric acid and will replace Agrium's position in the 
market today.
    The merged entity must complete the divestiture within ten days of 
closing the Merger. If the Commission determines that Itafos or Trammo 
is not an acceptable acquirer, the Decision and Order requires the 
parties to unwind the sale and accomplish the divestiture to another 
Commission-approved acquirer within 120 days of the date the Decision 
and Order becomes final. If the merging parties fail to carry out the 
divestiture in the manner prescribed by the Decision and Order, the 
Commission may appoint a divestiture trustee to accomplish the 
divestiture.
    The Commission will appoint an interim monitor to ensure the 
merging parties' compliance with the Decision and Order and to keep the 
Commission informed about the status of the divestiture. The purpose of 
this analysis is to facilitate public comment on the proposed Consent 
Agreement, and it is not intended to constitute an official 
interpretation of the proposed Decision and Order or to modify its 
terms in any way.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.
[FR Doc. 2017-28336 Filed 1-2-18; 8:45 am]
 BILLING CODE 6750-01-P