United States v. Parker-Hannifin Corporation and CLARCOR Inc.; Proposed Final Judgment and Competitive Impact Statement, 4270-4284 [2018-01741]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 83, Number 20 (Tuesday, January 30, 2018)]
[Notices]
[Pages 4270-4284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-01741]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Parker-Hannifin Corporation and CLARCOR Inc.; 
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 Delaware in United 
States v. Parker-Hannifin Corporation and CLARCOR Inc., Civil Action 
No. 1:17-cv-01354. On September 26, 2017, the United States filed a 
Complaint alleging that Parker-Hannifin Corporation's (``Parker-
Hannifin'') acquisition of CLARCOR Inc.'s (``CLARCOR'') aviation fuel 
filtration business assets violated Section 7 of the Clayton Act, 15 
U.S.C. 18. The proposed Final Judgment requires Parker-Hannifin to 
divest the Facet filtration business, which includes the aviation fuel 
filtration assets that it acquired from CLARCOR Inc. on February 28, 
2017.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection on the Antitrust 
Division's website at https://www.justice.gov/atr and at the Office of 
the Clerk of the United States District Court for the District of 
Delaware. 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 Antitrust Division's website, 
filed with the Court, and, under certain circumstances, published in 
the Federal Register. Comments should be directed to Maribeth Petrizzi, 
Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, 
Department of Justice, 450 Fifth Street NW, Suite 8700, Washington, DC 
20530, (telephone: 202-307-0924).

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Delaware

    United States of America, Plaintiff, v. Parker-Hannifin 
Corporation, and CLARCOR Inc., Defendants.

Civil Action No.: 1:17-CV-01354
Judge James E. Boasberg

[[Page 4271]]

COMPLAINT

    On February 28, 2017, Parker-Hannifin Corporation acquired its only 
U.S. competitor in aviation fuel filtration systems and filter 
elements, CLARCOR Inc. By doing so, it eliminated all head-to-head 
competition between the only two domestic manufacturers of these 
products, effectively creating a monopoly in the United States. If 
permitted to stand, this unlawful merger will harm competition in the 
development, manufacture and sale of these critical aviation fuel 
filtration systems. The results would be higher prices, reduced 
innovation, less reliable delivery times, and less favorable terms of 
service for the American businesses and military that depend on these 
critical products.
    Accordingly, the United States of America brings this civil 
antitrust action to unwind this unlawfully created monopoly by means of 
an order requiring defendant Parker-Hannifin to divest either Parker-
Hannifin's or CLARCOR's aviation fuel filtration assets. The United 
States alleges as follows:

I. INTRODUCTION

    1. More than 87,000 flights travel through U.S. airspace on any 
given day. The safety of the passengers and cargo on each of those 
flights depends on access to uncontaminated fuel. Before aviation fuel 
is considered clean enough for use by commercial or military aircraft, 
contaminants and water must be removed using specialized fuel 
filtration systems. The failure to clean aviation fuel in this manner 
can cause plane engines to stall, with potentially catastrophic 
consequences.
    2. In light of the importance of these fuel filtration products, 
the U.S. airline industry and the U.S. military have adopted standards 
to govern their use. Under these standards, U.S. airlines require their 
contracted refueling agents to use qualified aviation fuel filtration 
products to filter aviation fuel in the United States. To qualify, each 
manufacturer of aviation fuel filtration products must demonstrate that 
its products meet the Energy Institute's (``EI'') specifications by 
passing a rigorous series of tests typically conducted in the presence 
of an aviation fuel expert from the EI.\1\
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    \1\ The EI is an independent, international professional 
organization for the energy sector that publishes performance and 
testing standards for aviation fuel filtration products.
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    3. Prior to this merger, Parker-Hannifin and CLARCOR were the only 
suppliers of EI-qualified aviation fuel filtration systems and filter 
elements to U.S. customers. The only other manufacturer of such EI-
qualified aviation fuel filtration products in the world is located in 
Germany. Because that manufacturer does not have a U.S. manufacturing 
facility and it lacks a U.S. network for sales, warehousing, 
distribution, technical support and delivery, U.S. customers do not 
consider it a viable competitive alternative to the merged firms.
    4. It is also unlikely that a new entrant to the market could 
remedy the competition lost as a result of this merger. As the former 
General Manager of Parker-Hannifin's aviation fuel filters business 
explained in a sworn statement only a few years ago, securing EI-
qualification for aviation fuel filtration products is ``expensive, 
time-consuming and difficult.''
    5. Parker-Hannifin was aware that it was acquiring its only U.S. 
competitor for these important aviation fuel filtration products. Just 
weeks before its $4.3 billion merger was announced, the Vice President 
of Business Development for Parker-Hannifin's Filtration Group wrote to 
the President of the Filtration Group, identifying ``the notable area 
of overlap'' between the merging parties in ``ground aviation fuel 
filtration.'' He asked whether Parker-Hannifin should be 
``forthcoming'' about this ``aviation antitrust potential.'' Then, 
later in that same email, he stated that Parker-Hannifin was 
``preparing for the possibility that we may have to divest [CLARCOR's] 
aviation ground fuel filtration'' business.
    6. Because the transaction combines the only two sources of 
qualified aviation fuel filtration products in the United States, the 
effect of this merger would be substantially to lessen competition or 
tend to create a monopoly. Parker-Hannifin's acquisition of CLARCOR's 
aviation fuel filtration business thus violates the antitrust laws.

II. DEFENDANTS AND THE ILLEGAL TRANSACTION

    7. Parker-Hannifin is an Ohio corporation headquartered in 
Cleveland, Ohio. It is a diversified manufacturer of filtration 
systems, and motion and control technologies for the mobile, industrial 
and aerospace markets with operations worldwide. In 2016, the company 
had sales revenue of $11.4 billion.
    8. In 2012, Parker-Hannifin acquired Velcon Filters, LLC 
(``Velcon''), a manufacturer of EI-qualified aviation fuel filtration 
equipment. Velcon is a Delaware Limited Liability Company and an 
indirectly wholly-owned subsidiary of Parker-Hannifin. Parker-Hannifin 
continues to manufacture and sell aviation fuel filtration equipment 
under the Velcon brand. Parker-Hannifin has facilities in the United 
States to develop and manufacture products, and provide service and 
technical support for its U.S. aviation fuel filtration customers.
    9. Prior to its acquisition by Parker-Hannifin, defendant CLARCOR 
was a Delaware corporation headquartered in Franklin, Tennessee. 
CLARCOR was a leading provider of filtration systems for diversified 
industrial markets with net sales of approximately $1.4 billion in 
2016. CLARCOR manufactured and sold aviation fuel filtration products 
through its PECOFacet subsidiary. PECOFacet has facilities in the 
United States to develop and manufacture products, and provide service 
and technical support for its U.S. aviation fuel filtration customers.
    10. On December 1, 2016, Parker-Hannifin and CLARCOR entered into 
an Agreement and Plan of Merger whereby Parker-Hannifin, through a 
newly formed Delaware corporation and wholly-owned subsidiary of 
Parker-Hannifin (``Merger Sub''), acquired 100% of the voting stock of 
CLARCOR for $4.3 billion.
    11. On February 28, 2017, Parker-Hannifin completed its 
acquisition. Pursuant to the terms of the Merger Agreement, the Merger 
Sub merged with and into CLARCOR, with CLARCOR surviving the merger, 
and existing today as a Delaware-incorporated, wholly-owned subsidiary 
of Parker-Hannifin.

III. INDUSTRY OVERVIEW

A. Industry Standards

    12. Aviation fuel originates from the refinery processing of crude 
oil. Following manufacture, batch production and certification, 
aviation fuel is released into the distribution system or sent directly 
by pipeline to an airport. The distribution system may use a number of 
transportation methods such as pipelines, barges, railcars, ships, and 
tankers, before it is delivered to airport storage tanks and then 
pumped into the aircraft.
    13. Fuel contaminated by water, particulates or organic material 
creates unacceptable safety risks to aircraft. Because of the risks of 
such contaminants being introduced into the fuel at any point in the 
supply chain, it is critical that fuel be filtered properly at multiple 
stages in the process before being delivered into the airplane.
    14. Due to safety concerns, filtration at airports in particular is 
subject to specific industry standards. The quality of aviation fuel in 
the United States is

[[Page 4272]]

regulated by the Federal Aviation Administration, but airlines and 
their contracted refueling agents are responsible for the handling and 
filtration of aviation fuel at airports.
    15. For more than 25 years, Airlines for America \2\ (``A4A''), a 
trade association for U.S. passenger and cargo carriers, has published 
standards for aviation fuel quality control at airports, recognizing 
the ``importance of using quality jet fuel for ensuring the highest 
degree of flight safety.'' In particular, ATA Specification 103 (``ATA 
103'') sets forth specifications, standards, and procedures in the 
United States for ensuring that planes receive uncontaminated aviation 
fuel. ATA 103 is the industry standard for aviation fuel handling in 
the United States and all U.S. commercial airlines have adopted ATA 103 
into their operating manuals.
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    \2\ Airlines for America was formerly known as the Air 
Transportation Association of America (``ATA'').
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    16. A4A and the EI jointly ensure that fuel at airports remains 
safe and of the highest quality before it is loaded on an aircraft. 
Accordingly, in its fuel filtration specifications, ATA 103 requires 
that all aviation fuel be processed by filtration systems that are 
qualified to meet the latest EI standards.
    17. In addition, ATA 103 requires that all aviation fuel be 
filtered at least three times before it is consumed in an aircraft 
engine: (1) As it enters an airport storage tank; (2) as it exits the 
airport storage tank and is pumped into a hydrant system, refueling 
truck or hydrant cart; and (3) as it is pumped from a hydrant cart or 
refueling truck into an aircraft.
    18. The primary customers of EI-qualified aviation fuel filtration 
systems and filter elements include commercial airline ground fueling 
agents, fixed based operators at airports, airport fuel storage 
operators, and manufacturers of fueling equipment. These customers must 
follow ATA 103 and are therefore required to purchase and use EI-
qualified filtration systems and filter elements. EI-qualified 
filtration systems and filter elements are also used by customers 
supplying aviation fuel to U.S. airports.
    19. Aviation fuel-related performance standards for U.S. military 
jets are similar to those followed by commercial airlines. Like 
commercial airlines, the Department of Defense requires that fuel 
filtration suppliers meet EI specifications.

B. Aviation Fuel Filtration Systems and Elements

    20. An aviation fuel filtration system is comprised of a 
pressurized vessel that houses consumable filter elements. Customers 
purchase filtration systems for new fixed installations, such as 
airport fuel storage facilities, or for mobile fueling equipment, such 
as refueling trucks or hydrant carts. While vessels can last for 
decades, the filter elements must be replaced pursuant to a schedule 
set by ATA 103--or sooner, if contaminants in the fuel affect the 
filtration system's performance.

Interoperability Standards for Aviation Fuel Filtration Systems

    21. Prior to the transaction, Parker-Hannifin and CLARCOR were the 
only two U.S. manufacturers of EI-qualified filter elements. Their 
respective filter elements are interoperable with each other's vessels. 
In fact, the parties marketed their products to U.S. customers with 
cross-references to each other's compatible part numbers. Thus, prior 
to the merger, U.S. customers could choose between Parker-Hannifin and 
CLARCOR filter elements for their vessels and benefited from 
competition between the two firms resulting in better pricing, terms, 
and service.

Types of EI-Qualified Aviation Fuel Filtration Systems

    22. There are three types of aviation fuel filtration systems that 
must be qualified to EI standards pursuant to ATA 103: (i) Microfilter 
systems; (ii) filter water separator systems; and (iii) filter monitor 
systems (collectively ``EI-qualified aviation fuel filtration 
systems''). Each type of EI-qualified aviation fuel filtration system 
uses different filter elements.
    23. A microfilter system is a filtration system comprised of a 
single vessel that houses consumable filter elements. Microfilter 
systems are sometimes referred to as pre-filters because they are 
designed to remove dirt and other particulate matter from aviation fuel 
before it reaches the next level of filtration, which is typically the 
filter water separator (``FWS'') system.
    24. A FWS system is typically comprised of a single vessel and two 
types of filter elements--coalescers and separators--that remove dirt 
and water from the aviation fuel to levels acceptable for use in modern 
aircraft. FWS are required at U.S. airports to filter aviation fuel 
before entering and after exiting airport storage facilities. They also 
may be installed on mobile fueling equipment that ultimately connects 
to the wing of the aircraft to deliver the aviation fuel.
    25. A filter monitor (``FM'') system is a filtration system that is 
comprised of a single vessel that houses one type of consumable filter 
element, a filter monitor. FM systems are used exclusively on mobile 
fueling equipment and are often the last point at which aviation fuel 
is filtered before the fuel is pumped into the plane.
    26. U.S. commercial aviation customers use microfilter systems, FWS 
systems, FM systems, and associated filter elements. Each system and 
its associated filter elements is qualified to separate EI standards. 
Filtration products come in dozens of sizes to meet a customer's own 
specific filtration requirements and design needs, and customers prefer 
a supplier to have a full line of EI-qualified products. Parker-
Hannifin, for example, offers dozens of different FWS vessels--ranging 
from smaller vessels that weigh 360 pounds and support flow rates of 50 
gallons per minute, to larger vessels that weigh 3,800 pounds and 
support flow rates of 2,500 gallons per minute. CLARCOR has a similarly 
broad product offering.
    27. The U.S. military also uses microfilter systems, FWS systems, 
and associated filter elements, qualified to EI standards.

C. Importance of Technical Service and Support

    28. Aviation fuel filtration is a specialized industry in which 
customers rely on expeditious service and technical support from the 
manufacturers of aviation fuel filtration products. Disruptions in the 
supply or performance of aviation fuel filtration systems and filter 
elements create significant risk, including grounding flights and 
potentially catastrophic accidents. And because contaminated fuel can 
imperil the safe operation of the aircraft, both the fuel service 
provider and the airline itself could incur significant liability if 
aviation fuel is improperly filtered.
    29. As a result, customers rely on manufacturers to provide a rapid 
response to technical issues. Customers rely on the manufacturer to 
provide a reliable supply of replacement filtration elements on an 
emergency basis when needed to resolve unanticipated fuel contamination 
issues. Customers also rely on manufacturers' trained scientists and 
custom laboratories to diagnose and repair problems that arise from 
malfunctioning filters. Recognizing this need, the merging parties 
provided service and technical support to U.S. customers, including on-
site testing, lab testing, analysis services, and training classes.

[[Page 4273]]

IV. THE RELEVANT MARKETS THREATENED BY THE ACQUISITION

A. Relevant Product Markets

i. EI-Qualified Aviation Fuel Filtration Systems

    30. EI-qualified aviation fuel filtration systems is a relevant 
product market and line of commerce under Section 7 of the Clayton Act. 
The filtration of aviation fuel at airports in the United States must 
be performed using aviation fuel filtration systems that are qualified 
to the latest EI standards. U.S. customers that process aviation fuel 
typically will accept no substitutes for EI-qualified aviation fuel 
filtration systems. A company that controls all EI-qualified aviation 
fuel filtration systems in the United States could profitably raise 
prices. In the event of a small but significant non-transitory increase 
in price, customers are unlikely to switch away from EI-qualified 
aviation fuel filtration systems in sufficient numbers to make that 
price increase unprofitable.
    31. The EI-qualified aviation fuel filtration systems market 
consists of microfilter systems, FWS systems, and FM systems. Each of 
these aviation fuel filtration systems comes in a variety of sizes, 
configurations and technical capabilities to fit the specific needs of 
the customer, which is unlikely to substitute between them. Each of 
these systems is offered under essentially the same competitive 
conditions by the same set of manufacturers, so all EI-certified 
aviation fuel filtration systems can be grouped together in a single 
market for purposes of analysis.

ii. EI-Qualified Aviation Fuel Filtration Elements

    32. EI-qualified fuel filtration elements is a relevant product 
market and line of commerce under Section 7 of the Clayton Act. To 
comply with U.S. industry standards, only EI-qualified aviation fuel 
filtration elements may be used for the filtration of aviation fuel 
used at airports in the United States. U.S. customers that process 
aviation fuel typically will accept no substitutes for EI-qualified 
aviation fuel filtration elements. A company that controls all EI-
qualified aviation fuel filtration elements in the United States could 
profitably raise prices. In the event of a small but significant non-
transitory increase in price, customers are unlikely to switch away 
from EI-qualified aviation fuel filtration elements in sufficient 
numbers to make that price increase unprofitable.
    33. EI-qualified aviation fuel filtration elements--microfilters, 
coalescers, separators, and monitors--consist of those replacement 
elements for EI-qualified aviation fuel filtration systems. Filter 
elements come in a variety of types and sizes, and customers typically 
need a specific type and size to fit a particular application, which 
makes customers unlikely to substitute among different types and sizes 
of filter elements. Each such element is offered by the same set of 
manufacturers and is sold under essentially the same competitive 
conditions, so all EI-certified aviation fuel filtration elements can 
be grouped together in a single market for analytical purposes.

B. Relevant Geographic Market

    34. The United States is the relevant geographic market in which to 
assess the competitive harm that is likely to arise out of this 
transaction.
    35. U.S. customers of aviation fuel filtration systems and filter 
elements rely on domestic sales and technical support, warehousing and 
distribution. Ready, available supply of filtration systems and 
elements is critical to ensuring the proper filtration of aviation 
fuel. Domestic service, including technical support and training, is 
also essential for many U.S. customers. Parker-Hannifin and CLARCOR 
recognize the need for local support and have U.S. facilities that 
provide sales, technical support and distribution to U.S. customers. 
These customers are unlikely to rely on a foreign supplier with no U.S. 
presence even in the event of a significant price increase.
    36. In addition, suppliers of aviation fuel filtration products are 
able to price differently to U.S. customers than to customers located 
outside of the United States.

V. ANTICOMPETITIVE EFFECTS OF THE ACQUISITION

    37. Prior to the acquisition, Parker-Hannifin and CLARCOR were 
engaged in head-to-head competition in each of the relevant markets. 
That competition enabled customers of the relevant products to 
negotiate better pricing, service and terms and to receive innovative 
product developments from Parker-Hannifin and CLARCOR. The acquisition 
eliminates this head-to-head competition in each of the relevant 
markets. This elimination of head-to-head competition will provide 
Parker-Hannifin with the power to raise prices without fear of losing a 
significant amount of sales.
    38. The merger also reduces non-price competition and innovation. 
Prior to the acquisition, CLARCOR's PECOFacet brand had distinguished 
itself as the leading provider of services and non-price benefits, 
e.g., innovative product improvements, training programs, customer 
service, and strong on-time delivery, while customers viewed Parker-
Hannifin as weaker on customer service and less willing to provide 
additional non-price benefits. For instance, customers benefited from 
CLARCOR's free and timely training programs, favorable credit terms, 
free shipping, and re-stocking programs. Following the merger, Parker-
Hannifin's need to compete with these CLARCOR programs and services is 
eliminated, to the detriment of customers.
    39. Timely delivery of filter elements is important to customers. 
Parker-Hannifin, however, already has plans to shut down the CLARCOR 
facility used to manufacture the relevant products and consolidate it 
with Parker-Hannifin's existing facility. Such consolidation will 
result in reduced inventory and less timely deliveries during 
unanticipated future emergencies.
    40. The only other firm that manufactures EI-qualified aviation 
fuel filtration systems and EI-qualified aviation fuel filtration 
elements is located in Germany. This company lacks a U.S. manufacturing 
facility and a U.S. network for sales, warehousing, distribution, 
technical support and delivery. Without that infrastructure, effective 
near-term expansion by that firm into the United States is unlikely.
    41. Even if such expansion were to occur, however, such expansion 
likely would not be timely or sufficient to restore competition and 
restrain the anticompetitive effects resulting of the transaction. 
Customer acceptance is a high barrier to expansion. Parker-Hannifin's 
Velcon brand and CLARCOR's PECOFacet brand are the only two brands that 
most U.S. aviation fuel filtration customers have used. Given the 
critical public safety function that aviation fuel filtration products 
perform--and the legal liability to the operator should something go 
wrong--U.S. customers are reluctant to switch to a foreign company with 
which they are unfamiliar.

VI. ABSENCE OF COUNTERVAILING FACTORS

    42. Barriers to entry for the relevant market are significant. They 
include the high costs and long time frames needed to design, develop, 
and manufacture the products, as well as the testing needed to obtain 
EI-qualification. Further, customers are unlikely to accept a new 
supplier in sufficient numbers to make entry effective if that supplier 
does not have a network for sales, warehousing, distribution, technical 
support and delivery. Accordingly, new entry or

[[Page 4274]]

expansion in the relevant market is unlikely to occur in a manner that 
would counteract the harm to competition arising from this merger. 
Indeed, there has been no effective entry in the United States in the 
manufacture and sale of EI-qualified aviation fuel filtration systems 
and elements in decades.
    43. Parker-Hannifin recognizes and admits to these entry barriers. 
In 2013, Parker-Hannifin and Velcon initiated litigation against 
Velcon's former owners for alleged violations of their non-compete 
agreements and for misappropriation of trade secrets. In this 
litigation, Parker-Hannifin submitted a sworn affidavit from Velcon's 
General Manager who attested that the process for obtaining EI-
qualifications for aviation fuel filtration products was ``expensive, 
time-consuming and difficult.''
    44. In addition, Parker-Hannifin averred that the technical 
information related to its products, including product designs and 
drawings were protected trade secrets, which ``[o]thers would have to 
expend significant time and money to acquire and duplicate.''

VII. JURISDICTION AND VENUE

    45. The United States brings this civil antitrust action against 
defendants Parker-Hannifin and CLARCOR under Section 15 of the Clayton 
Act, 15 U.S.C. 25, as amended, to prevent and restrain defendants from 
continuing to violate Section 7 of the Clayton Act, 15 U.S.C. 18.
    46. Parker-Hannifin develops, manufactures and sells EI-qualified 
aviation fuel filtration systems and filter elements in the flow of 
interstate commerce. Parker-Hannifin's activities in developing, 
manufacturing and selling these products substantially affect 
interstate commerce.
    47. CLARCOR is a Delaware corporation and a wholly-owned subsidiary 
of Parker-Hannifin. The aviation fuel filtration assets that are the 
subject of this lawsuit are held by the surviving corporation, CLARCOR. 
This Court has subject matter jurisdiction over this action and over 
each defendant pursuant to Section 15 of the Clayton Act, 15 U.S.C. 25, 
and 28 U.S.C. 1331, 1337(a) and 1345.
    48. Venue is proper in this District pursuant to Section 12 of the 
Clayton Act, 15 U.S.C. 22, and under 28 U.S.C. 1391(b) and (c).
    49. This Court has personal jurisdiction over Parker-Hannifin and 
CLARCOR. CLARCOR is incorporated in the State of Delaware and resides 
in this District. Further, under the Merger Agreement, Parker-Hannifin 
``irrevocably'' submitted itself ``to the personal jurisdiction of each 
state or federal court sitting in the State of Delaware . . . in any 
suit, action or proceeding arising out of or relating to this [Merger] 
Agreement . . .'' and agreed that ``it shall not attempt to deny or 
defeat such personal jurisdiction by motion or other request for leave 
from such court.'' Parker-Hannifin's acquisition of CLARCOR will have 
effects throughout the United States, including in this District.

VIII. VIOLATIONS ALLEGED

Violation of Section 7 of the Clayton Act

    50. The effect of Parker-Hannifin's acquisition of CLARCOR likely 
will be to substantially lessen competition in interstate trade and 
commerce in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
    51. The transaction has or will have the following effects, among 
others:
    a. Eliminating the head-to-head competition between Parker-Hannifin 
and CLARCOR in the development, manufacture and sale of EI-qualified 
aviation fuel filtration systems and EI-qualified aviation fuel 
filtration elements; and
    b. Raising prices of the relevant products, lengthening delivery 
times, making terms of service less favorable and reducing innovation.

IX. REQUESTED RELIEF

    52. The United States requests that this Court:
    a. Adjudge and decree the acquisition of the assets of CLARCOR by 
defendant Parker-Hannifin to violate Section 7 of the Clayton Act, 15 
U.S.C. 18;
    b. Order Parker-Hannifin to divest tangible and intangible assets, 
whether possessed originally by CLARCOR, Parker-Hannifin, or both, 
sufficient to create a separate, distinct, and viable competing 
business that can replace CLARCOR's competitive significance in the 
marketplace, and to take any further actions necessary to restore the 
markets 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 dissipation of CLARCOR's 
tangible and intangible assets during the pendency of this action and 
to preserve the possibility of effective permanent relief;
    d. Award the United States the cost of this action; and
    e. Grant the United States such other and further relief as the 
Court deems just and proper.

Respectfully submitted,

September 26, 2017.

FOR PLAINTIFF UNITED STATES OF AMERICA
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Andrew C. Finch,
Acting Assistant Attorney General.

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Bernard A. Nigro, Jr.,
Deputy Assistant Attorney General.

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Donald G. Kempf, Jr.,
Deputy Assistant Attorney General.

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Patricia A. Brink,
Director of Civil Enforcement.

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Maribeth Petrizzi,
Chief, Litigation II Section.

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Stephanie A. Fleming,
Assistant Chief, Litigation II Section.

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Samer M. Musallam,
Dan Monahan,
Soyoung Choe,
Blake W. Rushforth,
Lowell R. Stern,
Doha G. Mekki,

Trial Attorneys, Antitrust Division, United States Department of 
Justice, 450 Fifth Street NW, Washington, DC 20530, Telephone: (202) 
598-2990, Facsimile: (202) 514-9033, Email: 
[email protected].

David C. Weiss,
Acting United States Attorney.

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Jennifer Hall (#5122),
Laura Hatcher (#5098),
Assistant United States Attorney, United States Attorney's Office, 
1007 Orange Street, Suite 700, Wilmington, DE 19801, (302) 573-6277, 
[email protected].

In the United States District Court for the District of Delaware

    United States of America, Plaintiff, v. Parker-Hannifin 
Corporation, and CLARCOR Inc., Defendants.

Civil Action No.: 1:17-CV-01354

Judge: James E. Boasberg

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. 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 February 28, 2017, defendant Parker-Hannifin Corporation 
(``Parker-Hannifin'') acquired 100% of the voting stock of CLARCOR Inc. 
(``Clarcor'') for $4.3 billion (the ``Transaction''). Following 
customer complaints and an

[[Page 4275]]

investigation into the competitive impact of that acquisition, the 
United States filed a civil antitrust Complaint on September 26, 2017 
seeking an order compelling Parker-Hannifin to divest tangible and 
intangible assets, whether possessed originally by Clarcor, Parker-
Hannifin, or both, sufficient to create a separate, distinct, and 
viable competing business that could replace Clarcor's competitive 
significance in the marketplace that existed prior to the Transaction. 
The Complaint alleges that the Transaction resulted in an effective 
monopoly in the United States between the only two domestic 
manufacturers of industry-qualified aviation fuel filtration systems 
and filter elements, thereby significantly lessening competition in 
violation of Section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint 
further alleges that, if permitted to stand, the merger will harm 
competition in the development, manufacture, and sale of these critical 
aviation fuel filtration systems. The results would be higher prices, 
reduced innovation, less reliable delivery times, and less favorable 
terms of service.
    Concurrent with the filing of this Competitive Impact Statement, 
the United States and Parker-Hannifin have filed a [Proposed] Order 
Stipulating to Modification of Order to Preserve and Maintain Assets 
(``Stipulation and [Proposed] Preservation Order'') and a proposed 
Final Judgment.\3\ The proposed Final Judgment, which is explained more 
fully below, requires Parker-Hannifin to divest the Facet Filtration 
Business, which includes the assets of Parker-Hannifin used in the 
design, development, manufacturing, testing, marketing, sale, 
distribution or service of aviation fuel filtration products used in 
aviation ground fuel filtration and sold under the Facet or PECOFacet 
brand (the ``Divestiture Assets'').\4\ The Divestiture Assets encompass 
the systems and elements that include and comprise all microfilters, 
filter water separators, and filter monitor components used in aviation 
ground fuel filtration and sold to customers under the Facet or 
PECOFacet brands. These aviation fuel filtration products were sold by 
Clarcor prior to the Transaction and the divestiture of these assets 
thereby restores the competition that was lost as a result of the 
acquisition.
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    \3\ The Stipulation and [Proposed] Preservation Order seeks to 
modify the Stipulation and Order to Preserve and Maintain Assets 
(D.I. 20) entered on October 16, 2017 to ensure the preservation of 
the divestiture assets and their economic and competitive viability 
until entry of the proposed Final Judgment.
    \4\ As set forth in the proposed Final Judgment, the Facet 
Filtration Business also includes (1) clay filter systems and 
elements used in aviation ground fuel filtration; (2) sewage water 
treatment systems, fuel/water separator and filter component systems 
and elements, and bilge water separators, that, in each instance are 
used in commercial marine, offshore drilling and military marine 
filtration, and sold to customers under the PECOFacet brand; and (3) 
oil/water filtration and separation systems and sewage treatment 
systems, that, in each instance are used in environmental water 
filtration, and sold to customers under the PECOFacet brand.
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    The United States and defendants Parker-Hannifin and Clarcor have 
stipulated that the defendants are bound by the terms of the proposed 
Final Judgment and 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. Parker-Hannifin and the Clarcor Acquisition
    Parker-Hannifin is an Ohio corporation headquartered in Cleveland, 
Ohio. It is a diversified manufacturer of filtration systems, and 
motion and control technologies for the mobile, industrial, and 
aerospace markets with operations worldwide. In 2016, the company had 
sales revenues of $11.4 billion, and $12.0 billion in 2017. Parker-
Hannifin manufactures and sells aviation fuel filtration products under 
the Velcon brand.
    Prior to its acquisition by Parker-Hannifin, defendant Clarcor was 
a Delaware corporation headquartered in Franklin, Tennessee. Clarcor 
was a leading provider of filtration systems for diversified industrial 
markets with net sales of approximately $1.4 billion in 2016. Clarcor 
manufactured and sold aviation fuel filtration products through its 
PECOFacet subsidiary, which has facilities in the United States to 
develop and manufacture products, and provide service and technical 
support for its U.S. aviation fuel filtration customers.
    On December 1, 2016, Parker-Hannifin and Clarcor entered into an 
Agreement and Plan of Merger whereby Parker-Hannifin, through a newly 
formed Delaware corporation and wholly-owned subsidiary of Parker-
Hannifin (``Merger-Sub''), acquired 100% of the voting stock of 
Clarcor. On February 28, 2017, Parker-Hannifin completed its 
acquisition. Pursuant to the terms of the Merger Agreement, the Merger 
Sub merged with and into Clarcor, with Clarcor surviving the merger, 
and existing today as a Delaware-incorporated, wholly-owned subsidiary 
of Parker-Hannifin.
B. The Competitive Effects of the Transaction
1. Industry Background
    Aviation fuel originates from the refinery processing of crude oil. 
Following manufacture, batch production and certification, aviation 
fuel is released into the distribution system or sent directly by 
pipeline to an airport. The distribution system may use a number of 
transportation methods such as pipelines, barges, railcars, ships, and 
tankers, before it is delivered to airport storage tanks and then 
pumped into the aircraft.
    Fuel contaminated by water, particulates or organic material 
creates unacceptable safety risks to aircraft. Because of the risks of 
such contaminants being introduced into the fuel at any point in the 
supply chain, it is critical that fuel be filtered properly at multiple 
stages in the process before being delivered into the airplane. Due to 
safety concerns, filtration at airports is subject to specific industry 
standards. The quality of aviation fuel in the United States is 
regulated by the Federal Aviation Administration, but airlines and 
their contracted refueling agents are responsible for the handling and 
filtration of aviation fuel at airports.
    For more than 25 years, Airlines for America (formerly known as the 
Air Transportation Association), a trade association for U.S. passenger 
and cargo carriers, has published standards for aviation fuel quality 
control at airports, recognizing the ``importance of using quality jet 
fuel for ensuring the highest degree of flight safety.'' In particular, 
ATA Specification 103 (``ATA 103'') sets forth specifications, 
standards, and procedures in the United States for ensuring that planes 
receive uncontaminated aviation fuel. ATA 103 is the industry standard 
for aviation fuel handling in the United States and all U.S. commercial 
airlines have adopted ATA 103 into their operating manuals. 
Specifically, ATA 103 requires the use of aviation fuel filtration 
systems and filter elements that are qualified to meet the latest 
standards set by the Energy Institute (``EI'')--an independent, 
international professional organization for the energy sector. In 
addition, ATA 103 requires that all aviation fuel be filtered at least 
three times before it is consumed in an aircraft engine: (1) as it 
enters an airport storage tank; (2) as it exits the airport storage 
tank and is pumped into a hydrant system,

[[Page 4276]]

refueling truck or hydrant cart; and (3) as it is pumped from a hydrant 
cart or refueling truck into an aircraft.
    The primary customers of EI-qualified aviation fuel filtration 
systems and filter elements include commercial airline ground fueling 
agents, fixed based operators at airports, airport fuel storage 
operators, and manufacturers of fueling equipment. These customers must 
follow ATA 103 and are therefore required to purchase and use EI-
qualified filtration systems and filter elements. EI-qualified 
filtration systems and filter elements are also used by customers 
supplying aviation fuel to U.S. airports. Like commercial airlines, the 
Department of Defense also requires that aviation fuel filtration 
suppliers meet EI specifications.
2. Relevant Markets
    An aviation fuel filtration system is made up of a pressurized 
vessel that houses consumable filter elements. While vessels can last 
for decades, the filter elements must be replaced pursuant to a 
schedule set by ATA 103--or sooner, if contaminants in the fuel affect 
the filtration system's performance.
    There are three types of aviation fuel filtration systems that must 
be qualified to EI standards pursuant to ATA 103: (i) Microfilter 
systems; (ii) filter water separator systems; and (iii) filter monitor 
systems (collectively ``EI-qualified aviation fuel filtration 
systems''). Each type of EI-qualified aviation fuel filtration system 
uses different filter elements--microfilters, coalescers, separators, 
and monitors--which must also meet EI standards (collectively ``EI-
qualified aviation fuel filtration elements''). Each system and its 
associated filter elements is qualified to separate EI standards.
    EI-qualified aviation fuel filtration systems and EI-qualified 
aviation fuel filtration elements are separate relevant product markets 
and lines of commerce under Section 7 of the Clayton Act. The 
filtration of aviation fuel at airports in the United States must be 
performed using aviation fuel filtration systems that are qualified to 
the latest EI standards. Similarly, to comply with U.S. industry 
standards, only EI-qualified aviation fuel filtration elements may be 
used for the filtration of aviation fuel used at airports in the United 
States. U.S. customers that process aviation fuel typically will accept 
no substitutes for (i) EI-qualified aviation fuel filtration systems, 
or (ii) EI-qualified aviation fuel filtration elements. A company that 
controls all EI-qualified aviation fuel filtration systems or all EI-
qualified aviation fuel filtration elements in the United States could 
profitably raise prices. In the event of a small but significant non-
transitory increase in price, customers are unlikely to switch away 
from EI-qualified aviation fuel filtration systems or EI-qualified 
filtration elements in sufficient numbers to make that price increase 
unprofitable.
    Further, as alleged in the Complaint, the relevant geographic 
market for the development, manufacture, and sale of EI-qualified 
aviation fuel filtration systems and filter elements is the United 
States. U.S. customers of aviation fuel filtration systems and filter 
elements rely on domestic sales and technical support, warehousing and 
distribution. Ready, available supply of filtration systems and 
elements is critical to ensuring the proper filtration of aviation 
fuel. Domestic service, including technical support and training, is 
also essential for many U.S. customers. Parker-Hannifin and Clarcor 
recognize the need for local support and have U.S. facilities that 
provide sales, technical support and distribution to U.S. customers. 
These customers are unlikely to switch to a foreign supplier with no 
U.S. presence in the event of a significant price increase.
3. Competitive Effects
    Prior to the acquisition, Parker-Hannifin and Clarcor were the only 
two U.S. manufacturers of EI-qualified aviation fuel filtration systems 
and EI-qualified aviation fuel filtration elements and were engaged in 
head-to-head competition in each of the relevant markets. That 
competition enabled customers of the relevant products to negotiate 
better pricing, service and terms and to receive innovative product 
developments from Parker-Hannifin and Clarcor. The Transaction 
eliminates this head-to-head competition in each of the relevant 
markets. This elimination of head-to-head competition will provide 
Parker-Hannifin with the power to raise prices without fear of losing a 
significant amount of sales.
    As discussed in the Complaint, the merger also reduces non-price 
competition. Prior to the acquisition, Clarcor's PECOFacet (or Facet) 
brand had distinguished itself as the leading provider of services and 
non-price benefits, e.g., innovative product improvements, training 
programs, customer service, and strong on-time delivery. Following the 
merger, Parker-Hannifin's need to compete with these Clarcor programs 
and services is eliminated, to the detriment of customers.
1. Entry and Expansion
    The only other firm that manufactures EI-qualified aviation fuel 
filtration systems and EI-qualified filter elements is located in 
Germany. This company lacks a U.S. manufacturing facility and a U.S. 
network for sales, warehousing, distribution, technical support and 
delivery. Without that infrastructure, effective near-term expansion by 
that firm into the United States is unlikely. Even if such expansion 
were to occur, however, such expansion likely would not be timely or 
sufficient to restore competition and restrain the anticompetitive 
effects resulting from the Transaction.
    Timely and sufficient de novo entry is also unlikely. Barriers to 
entry for the relevant market are significant. They include the high 
costs and long time frames needed to design, develop, and manufacture 
the products, as well as the testing needed to obtain EI-qualification. 
Indeed, there has been no effective entry in the United States in the 
development, manufacture, or sale of EI-qualified aviation fuel 
filtration systems and filter elements in decades.

EXPLANATION OF THE PROPOSED FINAL JUDGMENT

    The divestiture required by the proposed Final Judgment will create 
an independent and economically viable competitor in the markets for 
EI-qualified aviation fuel filtration systems and EI-qualified aviation 
fuel filtration elements sold to U.S. customers.
C. The Divestiture
    The proposed Final Judgment requires Parker-Hannifin and Clarcor to 
divest the Facet Filtration Business as a viable, ongoing business. The 
Facet Filtration Business includes and comprises the microfilters, 
filter water separators, and filter monitor components that are used in 
aviation ground fuel filtration and sold to customers under the Facet 
or PECOFacet brands. As defined in Paragraph II(G) of the proposed 
Final Judgment, the Facet Filtration Business includes facilities 
located in (i) Stillwell, Oklahoma, (ii) Tulsa, Oklahoma, (iii) La 
Coru[ntilde]a, Spain, (iv) Paris, France, (v) Torino, Italy, (vi) 
Cardiff, United Kingdom, and (vii) Almere, The Netherlands. It also 
includes the aviation fuel filtration testing lab in Greensboro, North 
Carolina, and the tangible and intangible assets used in connection 
with the Facet Filtration Business worldwide.
    Due to the large number of assets located outside of the United 
States, the consummated nature of the transaction,

[[Page 4277]]

and the administrative complexities involved in a divestiture of this 
nature, Paragraph IV(A) of the proposed Final Judgment provides that 
the defendants must divest the Divestiture Assets to an Acquirer 
acceptable to the United States within the later of: (1) One hundred 
thirty-five (135) days after filing of the Stipulation and [Proposed] 
Preservation Order; (2) five (5) calendar days after notice of entry of 
the Final Judgment by the Court; or (3) fifteen (15) calendar days 
after the Required Regulatory Approvals have been received. The 
Divestiture Assets must be divested in such a way as to satisfy the 
United States, in its sole discretion, that the operations can and will 
be operated by the purchaser as a viable, ongoing business that can 
compete effectively in the relevant markets. Defendants must take all 
reasonable steps necessary to accomplish the divestiture quickly and 
shall cooperate with prospective purchasers.
    The proposed Final Judgment also contains provisions to prevent 
against accidental customer confusion by transitioning away from the 
use of the ``PECOFacet'' brand on products that are not part of the 
assets being divested. Under Paragraph II(G)(4), the definition of the 
Facet Filtration Business excludes from the Divestiture Assets any 
trademark, trade name, service mark, or service name containing the 
names ``Clarcor,'' ``PECO,'' or ``PECOFacet,'' except to the extent the 
Acquirer is required under existing U.S. military contracts with 
respect to Aviation Fuel Filtration Products qualified to EI standards 
to use the name ``PECOFacet.'' However, in no event shall such use 
extend beyond one (1) year following the entry of the Final Judgment. 
Such a provision ensures that the Acquirer can comply with registration 
and invoicing requirements for existing U.S. military contracts 
requiring the use of the ``PECOFacet'' trade name or brand, while 
transitioning away from the ``PECOFacet'' brand. Similarly, under 
Paragraph IV(I), Parker-Hannifin is required within two (2) years 
following the notice of entry of the Final Judgment, or as soon as is 
practicable under existing contracts or laws, to use reasonable best 
efforts to transition retained (i.e., non-divested) products sold under 
the ``PECOFacet'' brand to a brand that does not include the ``Facet'' 
name. The longer term for which Parker-Hannifin may continue to use the 
``PECOFacet'' brand reflects the reality that the ``PECOFacet'' brand 
is attached to many more PECOFacet contracts globally (in the oil and 
gas industry) with private and state-owned companies. Because of the 
volume of these contracts, Parker-Hannifin is likely to expend more 
time than the Acquirer to move all of these contracts to a new brand.
D. Transition Services Agreement
    In order to facilitate the Acquirer's immediate use of the 
Divestiture Assets, Paragraph IV(J) provides the Acquirer with the 
option to enter into a transition services agreement with Parker-
Hannifin to obtain back office and information technology services and 
support for the Facet Filtration Business for a period of up to twelve 
(12) months. The United States, in its sole discretion, may approve one 
or more extensions of this agreement for a total of up to an additional 
twelve (12) months.
E. Employee Retention Provisions
    The proposed Final Judgment also contains provisions intended to 
facilitate the Acquirer's efforts to hire the employees involved in the 
Facet Filtration Business. Paragraph IV(C) of the proposed Final 
Judgment requires defendants to provide the Acquirer with organization 
charts and information relating to these employees and make them 
available for interviews, and provides that defendants will not 
interfere with any negotiations by the Acquirer to hire them. In 
addition, Paragraph IV(D) provides that for employees who elect 
employment with the Acquirer, defendants, subject to limited 
exceptions, shall waive all non-compete and non-disclosure agreements, 
vest all unvested pension in accordance with the plan, and provide all 
benefits to which the employees would generally be provided if 
transferred to a buyer of an ongoing business. The paragraph further 
provides, that for a period of 12 months from the filing of the 
Stipulation and [Proposed] Preservation Order, defendants may not 
solicit to hire, or hire, any such person who was hired by the 
Acquirer, unless (1) such individual is terminated or laid off by the 
Acquirer or (2) the Acquirer agrees in writing that defendants may 
solicit or hire that individual.
F. Divestiture Trustee
    In the event that the defendants do not accomplish the divestiture 
within the periods prescribed in the proposed Final Judgment, Section V 
of the proposed Final Judgment provides that the Court will appoint a 
trustee selected by the United States to effect the divestiture. If a 
trustee is appointed, the proposed Final Judgment provides that the 
defendants will pay all costs and expenses of the trustee. The 
trustee's commission will be structured so as to provide an incentive 
for the trustee based on the price obtained and the speed with which 
the divestiture is accomplished. After his or her appointment becomes 
effective, the trustee will file monthly reports with the Court and the 
United States setting forth his or her efforts to accomplish the 
divestiture. At the end of six months, if the divestiture has not been 
accomplished, the trustee and the United States will make 
recommendations to the Court, which shall enter such orders as 
appropriate, in order to carry out the purpose of the trust, including 
extending the trust of the term of the trustee's appointment.
G. Prohibition on Reacquisition
    Section XI of the proposed Final Judgment prohibits Parker-Hannifin 
or Clarcor from reacquiring any part of the Divestiture Assets that is 
primarily related to aviation fuel filtration products qualified to EI 
standards during the term of the Final Judgment.
H. Stipulation and Preservation Order Provisions
    Defendants have entered into the Stipulation and [Proposed] 
Preservation Order, which was filed simultaneously with the Court, to 
ensure that, pending the completion of the divestiture, the Divestiture 
Assets are maintained as an ongoing, economically viable, and active 
business. The Stipulation and [Proposed] Preservation Order ensures 
that the Divestiture Assets are preserved and maintained in a condition 
that allows the divestiture to be effective.
    In addition, the defendants are required to implement and maintain 
procedures to prevent the sharing by personnel of the Facet Filtration 
Business of competitively sensitive information with personnel with 
responsibilities relating to Parker-Hannifin's Velcon Filtration 
Business. Such procedures must be detailed in a document submitted to 
the United States within thirty (30) calendar days of the Court's entry 
of the Stipulation and [Proposed] Preservation Order. The United States 
and Parker-Hannifin will attempt to resolve objections regarding the 
procedures as promptly as possible, and in the event that the 
objections cannot be mutually resolved, either party may request for 
the Court to rule on the procedures.
    As set forth in Section VIII of the proposed Final Judgment, until 
the divestiture required by the Final Judgment has been accomplished, 
defendants are required to take all steps necessary to comply with the 
Stipulation and [Proposed] Preservation

[[Page 4278]]

Order filed simultaneously with the Court and are prohibited from 
taking any action that would jeopardize the divestiture.
I. Enforcement and Expiration of the Final Judgment
    The proposed Final Judgment contains provisions designed to promote 
compliance and make the enforcement of Division consent decrees as 
effective as possible. Paragraph XIII(A) provides that the United 
States retains and reserves all rights to enforce the provisions of the 
proposed Final Judgment, including its rights to seek an order of 
contempt from the Court. Under the terms of this paragraph, Parker-
Hannifin has agreed that in any civil contempt action, any motion to 
show cause, or any similar action brought by the United States 
regarding an alleged violation of the Final Judgment, the United States 
may establish the violation and the appropriateness of any remedy by a 
preponderance of the evidence and that Parker-Hannifin has waived any 
argument that a different standard of proof should apply. This 
provision aligns the standard for compliance obligations with the 
standard of proof that applies to the underlying offense that the 
compliance commitments address.
    Paragraph XIII(B) of the proposed Final Judgment further provides 
that should the Court find in an enforcement proceeding that Parker-
Hannifin has violated the Final Judgment, the United States may apply 
to the Court for a one-time extension of the Final Judgment, together 
with such other relief as may be appropriate. In addition, in order to 
compensate American taxpayers for any costs associated with the 
investigation and enforcement of violations of the proposed Final 
Judgment, Paragraph XIII(B) requires Parker-Hannifin to reimburse the 
United States for attorneys' fees, experts' fees, or costs incurred in 
connection with any enforcement effort.
    Finally, Section XIV of the proposed Final Judgment provides that 
the Final Judgment shall expire ten (10) years from the date of its 
entry, except that after five (5) years from the date of its entry, the 
Final Judgment may be terminated upon notice by the United States to 
the Court and Parker-Hannifin that the divestiture has been completed 
and that the continuation of the Final Judgment is no longer necessary 
or in the public interest.
III. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS
    Section 4 of the Clayton Act, 15 U.S.C. 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. 
16(a), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against defendants.
IV. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL 
JUDGMENT
    The United States and defendants 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 website and, under certain circumstances, 
published in the Federal Register.
    Written comments should be submitted to: Maribeth Petrizzi, Chief, 
Defense, Industrials, and Aerospace Section, Antitrust Division. United 
States Department of Justice, 450 5th 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.
V. 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 Parker-Hannifin and 
Clarcor. The United States could have continued the litigation and 
sought divestiture of either Parker-Hannifin's or Clarcor's aviation 
fuel filtration assets. The United States is satisfied, however, that 
the divestiture of the assets in the manner prescribed in the proposed 
Final Judgment will restore competition in the markets for EI-qualified 
aviation fuel filtration systems and filter elements in the United 
States. The proposed Final Judgement would achieve all of the relief 
the United States would have obtained through litigation, but avoids 
the time, expense and uncertainty of a full trial on the merits of the 
Complaint.
VI. 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. 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. 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 (D.C. 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

[[Page 4279]]

Tunney Act); United States v. U.S. Airways Group, Inc., 38 F. Supp. 3d 
69, 75 (D.D.C. 2014) (noting the court has broad discretion of the 
adequacy of the relief at issue); United States v. InBev N.V./S.A., No. 
08-1965 (JR), 2009-2 Trade Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 
84787, 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.'').\5\
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    \5\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for the courts 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. 
16(e) (2004) with 15 U.S.C. 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) (quoting 
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).\6\ 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 the alleged violations.'' SBC Commc'ns, 489 F. 
Supp. 2d at 17; see also U.S. Airways, 38 F. Supp. 3d at 75 (noting 
that a court should not reject the proposed remedies because it 
believes others are preferable); 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).
---------------------------------------------------------------------------

    \6\ 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 U.S. 
Airways, 38 F. Supp. 3d at 74 (noting that room must be made for the 
government to grant concessions in the negotiation process for 
settlements (citing Microsoft, 56 F.3d at 1461)); 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 U.S. Airways, 
38 F. Supp. 3d at 74 (noting that the court must simply determine 
whether there is a factual foundation for the government's decisions 
such that its conclusions regarding the proposed settlements are 
reasonable); 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 the United States District Court for the District 
of Columbia 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. 16(e)(2); see also U.S. Airways, 38 F. Supp. 3d 
at 75 (indicating that a court is not required to hold an evidentiary 
hearing or to permit intervenors as part of its review under the Tunney 
Act). 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 Sen. 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.

[[Page 4280]]

Supp. 2d at 11.\7\ A court can make its public interest determination 
based on the competitive impact statement and response to public 
comments alone. U.S. Airways, 38 F. Supp. 3d at 75.
---------------------------------------------------------------------------

    \7\ 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., No. 73-CV-681-W-1, 1977-1 
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (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, 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.'').
---------------------------------------------------------------------------

VII. 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: December 18, 2017

Respectfully submitted,

/s/Samer Musallam------------------------------------------------------
Samer M. Musallam
Soyoung Choe
Trial Attorneys, United States Department of Justice, Antitrust 
Division, Defense, Industrials, and Aerospace Section, 450 Fifth 
Street NW, Suite 8700, Washington, DC 20530, Tel: (202) 598-2990, 
Fax: (202) 514-9033, Email: [email protected].

Jennifer Hall (#5122)
Laura Hatcher (#5098)
Assistant United States Attorneys, United States Attorney's Office, 
1007 Orange Street, Suite 700, Wilmington, DE 19801, (302) 573-6277, 
Email: [email protected].

Attorneys for Plaintiff United States of America

In the United States District Court for the District of Delaware

    United States of America, Plaintiff, v. Parker-Hannifin 
Corporation and Clarcor Inc, Defendants.

Civil Action No.: 1:17-CV-01354
Judge: James E. Boasberg

[PROPOSED] FINAL JUDGMENT

    WHEREAS, Plaintiff, United States of America, filed its Complaint 
on September 26, 2017, the United States and defendants, Parker-
Hannifin Corporation and CLARCOR Inc., 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, defendants agree 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 defendants to assure 
that competition is not substantially lessened;
    AND WHEREAS, the United States requires defendants to make a 
certain divestiture for the purpose of remedying the loss of 
competition alleged in the Complaint;
    AND WHEREAS, defendants have represented to the United States that 
the divestiture required below can and will be made and that defendants 
will later raise no claim of hardship or difficulty as grounds for 
asking the Court to modify any of the divestiture 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 defendants under Section 7 of the Clayton 
Act, as amended (15 U.S.C. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``Acquirer'' means the entity to whom defendants divest the 
Divestiture Assets.
    B. ``Aviation Fuel Filtration Products'' means the systems and 
elements that include and comprise microfilters, filter water 
separators and filter monitor components that are used in aviation 
ground fuel filtration and sold to customers under the Facet or 
PECOFacet brands.
    C. ``Parker-Hannifin'' means defendant Parker-Hannifin Corporation, 
an Ohio corporation with its headquarters in Cleveland, Ohio, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    D. ``Clarcor'' means defendant CLARCOR Inc., a Delaware 
corporation, its successors and assigns, and its subsidiaries, 
divisions, groups, affiliates, partnerships, and joint ventures, and 
their directors, officers, managers, agents, and employees.
    E. ``Divestiture Assets'' means the Facet Filtration Business.
    F. ``Divestiture Products'' means: (1) Aviation Fuel Filtration 
Products, including clay filter systems and elements used in aviation 
ground fuel filtration; (2) sewage water treatment systems, fuel/water 
separator and filter components systems and elements, and bilge water 
separators, that, in each instance are used in commercial marine, 
offshore drilling, and military marine filtration applications, and 
sold to customers under the PECOFacet brand; and (3) oil/water 
filtration and separation systems and sewage treatment systems, that, 
in each instance are used in environmental water filtration 
applications, and sold to customers under the PECOFacet brand.
    G. ``Facet Filtration Business'' means all assets of Parker-
Hannifin used in the design, development, manufacturing, testing, 
marketing, sale, distribution or service of Divestiture Products, 
including:
    1. The facilities, to the extent leased or owned, located at:
    a. 470555 E 868 Road, Stilwell, OK 74960;
    b. 5935 S 129th E Ave, Suite A, Tulsa, OK 74134;
    c. Avenida da Ponte, 16, 15142, Arteixo, La Coru[ntilde]a, Spain;
    d. 22, Avenue des Nations, ZI Paris Nord II, BP 69055, 95972 Roissy 
CDG Cedex, France;
    e. C. so IV Novembre n. 58, 10070 Cafasse (Torino), Italy;
    f. Units 4.3 and 4.4, Treforest Industrial Estate, Pontypridd, Mid 
Glamorgan, CF37 5FB, United Kingdom; and
    g. Damsluisweg 40A 1332 ED, Almere, The Netherlands;
    2. The 2,080 sq. ft. aviation fuel filtration testing lab building 
located at 8439 Triad Drive, Greensboro, NC 27409, including rights to 
reasonably access the facility;
    3. All tangible assets used by the Facet Filtration Business, 
including all manufacturing equipment, tooling and fixed assets, 
personal property, inventory, office furniture, materials, supplies, 
and other tangible property; all licenses, permits, and authorizations 
issued by any governmental organization; all contracts, teaming 
arrangements, agreements, leases, commitments, certifications, and 
understandings, including supply agreements; all customer lists, 
contracts, accounts, and credit records; all repair and performance 
records and all other records, but excluding: (i) PECOFacet Quick 
Response Centers and all assets therein, (ii) Parker-Hannifin offices 
located in Australia, Brazil, Canada,

[[Page 4281]]

China, Germany, Malaysia, Mexico, and Morocco, and all assets therein, 
and (iii) Clarcor-owned distributors that sell Divestiture Products;
    4. All intangible assets owned, licensed, controlled, or used 
primarily by the Facet Filtration Business, including, but not limited 
to, all patents, licenses and sublicenses, intellectual property, 
copyrights, trademarks, trade names, service marks, service names 
(excluding any trademark, trade name or service mark, or service name 
containing the names ``Clarcor,'' ``PECO,'' or ``PECOFacet,'' except to 
the extent the Acquirer is required under existing U.S. military 
contracts for EI-qualified Aviation Fuel Filtration Products to use the 
name ``PECOFacet,'' but in no event shall such use extend beyond one 
year following the entry of this Final Judgment), 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, manuals and technical information defendants provide to 
their own employees, customers, suppliers, agents, or licensees, and 
research data concerning historic and current research and development 
efforts, including, but not limited to, designs of experiments, and the 
results of successful and unsuccessful designs and experiments.
    H. ``Relevant Employees'' means all personnel primarily involved in 
the design, development, manufacturing, testing, marketing, sale, 
distribution or service of Divestiture Products.
    I. ``Required Regulatory Approvals'' means clearance pursuant to 
any Committee on Foreign Investment in the United States (``CFIUS'') 
filing or similar foreign investment filing, if any, made by the 
defendants and/or Acquirer and any approvals or clearances required 
under antitrust or competition laws.
    J. ``Transaction'' means Parker-Hannifin Corporation's acquisition 
of CLARCOR Inc. pursuant to the Agreement and Plan of Merger dated as 
of December 1, 2016.

III. Applicability

    A. This Final Judgment applies to Parker-Hannifin and Clarcor, as 
defined above, and all other persons in active concert or participation 
with any of them who receive actual notice of this Final Judgment by 
personal service or otherwise.
    B. If, prior to complying with Section IV and Section V of this 
Final Judgment, defendants sell or otherwise dispose of all or 
substantially all of their assets or of lesser business units that 
include the Divestiture Assets, they shall require the purchaser to be 
bound by the provisions of this Final Judgment. Defendants need not 
obtain such an agreement from the Acquirer of the assets divested 
pursuant to this Final Judgment.

IV. Divestiture

    A. Defendants are ordered and directed, within the later of: (1) 
One hundred thirty-five (135) calendar days after filing of the 
[Proposed] Order Stipulating to Modification of Order to Preserve and 
Maintain Assets, (2) five (5) calendar days after notice of entry of 
this Final Judgment by the Court, or (3) fifteen (15) calendar days 
after Required Regulatory Approvals have been received, 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 one or more 
extensions of this time period not to exceed thirty (30) calendar days 
in total, and shall notify the Court in such circumstances. Defendants 
agree to use their best efforts to divest the Divestiture Assets as 
expeditiously as possible.
    B. In accomplishing the divestiture ordered by this Final Judgment, 
defendants promptly shall make known, by usual and customary means, the 
availability of the Divestiture Assets. Defendants shall inform any 
person making an inquiry regarding a possible purchase of the 
Divestiture Assets that they are being divested pursuant to this Final 
Judgment and provide that person with a copy of this Final Judgment. 
Defendants shall offer to furnish to prospective Acquirers, 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 privileges or work-product doctrine. Defendants shall 
make available such information to the United States at the same time 
that such information is made available to any other person.
    C. Defendants shall provide the Acquirer and the United States with 
organization charts and information relating to Relevant Employees, 
including name, job title, past experience relating to the Facet 
Filtration Business, responsibilities, training and educational 
history, relevant certifications, and to the extent permissible by law, 
job performance evaluations, and current salary and benefits 
information, to enable the Acquirer to make offers of employment. Upon 
request, defendants shall make Relevant Employees available for 
interviews with the Acquirer during normal business hours at a mutually 
agreeable location and will not interfere with any negotiations by the 
Acquirer to employ any Relevant Employee. Interference with respect to 
this paragraph includes, but is not limited to, offering to increase 
the salary or benefits of Relevant Employees other than as a part of a 
company-wide increase in salary or benefits granted in the ordinary 
course of business.
    D. For any Relevant Employees who elect employment with the 
Acquirer, defendants shall waive all noncompete and nondisclosure 
agreements, vest all unvested pension rights in accordance with the 
plan, and provide all benefits to which the Relevant Employees would 
generally be provided if transferred to a buyer of an ongoing business. 
For a period of twelve (12) months from the filing of the [Proposed] 
Order Stipulating to Modification of Order to Preserve and Maintain 
Assets in this matter, defendants may not solicit to hire, or hire, any 
such person who was hired by the Acquirer, unless (1) such individual 
is terminated or laid off by the Acquirer or (2) the Acquirer agrees in 
writing that defendants may solicit or hire that individual. Nothing in 
Paragraphs IV(C) and (D) shall prohibit defendants from maintaining any 
reasonable restrictions on the disclosure by any employee who accepts 
an offer of employment with the Acquirer of the defendant's proprietary 
non-public information that is (1) not otherwise required to be 
disclosed by this Final Judgment, (2) related solely to defendants' 
businesses and clients, and (3) unrelated to the Divestiture Assets.
    E. Defendants shall permit prospective Acquirers of the Divestiture 
Assets to have reasonable access to personnel and to make inspections 
of the physical facilities of the Facet Filtration Business; 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. Defendants shall warrant to the Acquirer that each tangible 
asset will be operational on the date of sale subject to ordinary 
course maintenance and wear and tear.
    G. Defendants shall not take any action that will knowingly impede 
in any material way the permitting, operation, or divestiture of the 
Divestiture Assets.

[[Page 4282]]

    H. Defendants shall warrant to the Acquirer that, except as may be 
expressly disclosed, there are no material defects in the 
environmental, zoning, or other permits pertaining to the operation of 
each tangible asset, and that following the sale of the Divestiture 
Assets, defendants will not undertake, directly or indirectly, any 
challenges to the environmental, zoning, or other permits relating to 
the operation of the Divestiture Assets, except as related to the asset 
identified in Paragraph II(G)(2) to the extent that the Acquirer's 
operation of the asset is inconsistent with past practice and 
materially impacts the operation of Parker-Hannifin's retained 
operations at the same location.
    I. Within two years following the notice of entry of this Final 
Judgment, or as soon as is practicable under existing contracts or 
laws, defendants will use reasonable best efforts to transition 
retained products sold under the ``PECOFacet'' brand to a brand that 
does not include the ``Facet'' name.
    J. At the option of the Acquirer, Parker-Hannifin shall enter a 
transition services agreement to provide back office and information 
technology services and support for the Facet Filtration Business for a 
period of up to twelve (12) months. The United States, in its sole 
discretion, may approve one or more extensions of this agreement for a 
total of up to an additional twelve (12) months. If the Acquirer seeks 
an extension of the term of this transition services agreement, it 
shall so notify the United States in writing at least three (3) months 
prior to the date the transition services contract expires. If the 
United States approves such an extension, it shall so notify the 
Acquirer in writing at least two (2) months prior to the date the 
transition services contract expires. The terms and conditions of any 
contractual arrangement intended to satisfy this provision must be 
reasonably related to the market value of the expertise of the 
personnel providing any needed assistance. The Parker-Hannifin 
employee(s) tasked with providing these transition services may not 
share any competitively sensitive information of the Acquirer with any 
other Parker-Hannifin employee.
    K. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section IV, or by Divestiture 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, design, manufacture, testing, 
marketing, sale, or distribution of Aviation Fuel Filtration Products 
qualified to Energy Institute standards and sold to customers in the 
United States. Divestiture of the Divestiture Assets, 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 development, 
manufacture, and sale of Aviation Fuel Filtration Products qualified 
to Energy Institute standards that are sold to customers in the 
United States; 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 
an Acquirer and defendants give defendants 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 Divestiture Trustee

    A. If defendants have not divested the Divestiture Assets within 
the time period specified in Paragraph IV(A), defendants shall notify 
the United States of that fact in writing. Upon application of the 
United States, the Court shall appoint a Divestiture 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 Divestiture Trustee becomes 
effective, only the Divestiture Trustee shall have the right to sell 
the Divestiture Assets. The Divestiture 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 Divestiture 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 Paragraph V(D) of this Final Judgment, the Divestiture Trustee may 
hire at the cost and expense of defendants any investment bankers, 
attorneys, or other agents, who shall be solely accountable to the 
Divestiture Trustee, reasonably necessary in the Divestiture Trustee's 
judgment to assist in the divestiture. Any such investment bankers, 
attorneys, or other agents shall serve on such terms and conditions as 
the United States approves, including confidentiality requirements and 
conflict of interest certifications.
    C. Defendants shall not object to a sale by the Divestiture Trustee 
on any ground other than the Divestiture Trustee's malfeasance. Any 
such objections by defendants must be conveyed in writing to the United 
States and the Divestiture Trustee within ten (10) calendar days after 
the Divestiture Trustee has provided the notice required under Section 
VI.
    D. The Divestiture Trustee shall serve at the cost and expense of 
defendants pursuant to a written agreement, on such terms and 
conditions as the United States approves, including confidentiality 
requirements and conflict of interest certifications. The Divestiture 
Trustee shall account for all monies derived from the sale of the 
assets sold by the Divestiture Trustee and all costs and expenses so 
incurred. After approval by the Court of the Divestiture Trustee's 
accounting, including fees for its services yet unpaid and those of any 
professionals and agents retained by the Divestiture Trustee, all 
remaining money shall be paid to defendants and the trust shall then be 
terminated. The compensation of the Divestiture Trustee and any 
professionals and agents retained by the Divestiture Trustee shall be 
reasonable in light of the value of the Divestiture Assets and based on 
a fee arrangement providing the Divestiture 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. If the 
Divestiture Trustee and defendants are unable to reach agreement on the 
Divestiture Trustee's or any agents' or consultants' compensation or 
other terms and conditions of engagement within 14 calendar days of 
appointment of the Divestiture Trustee, the United States may, in its 
sole discretion, take appropriate action, including making a 
recommendation to the Court. The Divestiture Trustee shall, within 
three (3) business days of hiring any other professionals or agents, 
provide written notice of such hiring and the rate of compensation to 
defendants and the United States.
    E. Defendants shall use their best efforts to assist the 
Divestiture Trustee in accomplishing the required divestiture. The 
Divestiture Trustee and any consultants, accountants, attorneys, and 
other agents retained by the Divestiture Trustee shall have full and 
complete access to the personnel, books, records, and facilities of the 
business to be divested, and defendants shall develop financial and 
other information relevant to such business as the Divestiture Trustee 
may reasonably request, subject to reasonable protection for trade 
secret or other confidential research, development, or commercial 
information or any applicable privileges. Defendants shall take no

[[Page 4283]]

action to interfere with or to impede the Divestiture Trustee's 
accomplishment of the divestiture.
    F. After its appointment, the Divestiture Trustee shall file 
monthly reports with the United States and, as appropriate, the Court 
setting forth the Divestiture Trustee's efforts to accomplish the 
divestiture ordered under this Final Judgment. To the extent such 
reports contain information that the Divestiture 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 Divestiture Trustee shall maintain 
full records of all efforts made to divest the Divestiture Assets.
    G. If the Divestiture Trustee has not accomplished the divestiture 
ordered under this Final Judgment within six months after its 
appointment, the Divestiture Trustee shall promptly file with the Court 
a report setting forth (1) the Divestiture Trustee's efforts to 
accomplish the required divestiture, (2) the reasons, in the 
Divestiture Trustee's judgment, why the required divestiture has not 
been accomplished, and (3) the Divestiture Trustee's recommendations. 
To the extent such report contains information that the Divestiture 
Trustee deems confidential, such report shall not be filed in the 
public docket of the Court. The Divestiture 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 
Divestiture Trustee's appointment by a period requested by the United 
States.
    H. If the United States determines that the Divestiture Trustee has 
ceased to act or failed to act diligently or in a reasonably cost-
effective manner, it may recommend the Court appoint a substitute 
Divestiture Trustee.

VI. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, defendants or the Divestiture 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 Section V of this Final Judgment. If the Divestiture 
Trustee is responsible, it shall similarly notify defendants. 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 defendants, 
the proposed Acquirer, any other third party, or the Divestiture 
Trustee, if applicable, additional information concerning the proposed 
divestiture, the proposed Acquirer, and any other potential Acquirer. 
Defendants and the Divestiture Trustee shall furnish any additional 
information requested within fifteen (15) calendar days of the receipt 
of the 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 defendants, the 
proposed Acquirer, any third party, and the Divestiture Trustee, 
whichever is later, the United States shall provide written notice to 
defendants and the Divestiture 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 defendants' limited right to object 
to the sale under Paragraph V(C) of this Final Judgment. Absent written 
notice that the United States does not object to the proposed Acquirer 
or upon objection by the United States, a divestiture proposed under 
Section IV or Section V shall not be consummated. Upon objection by 
defendants under Paragraph V(C), a divestiture proposed under Section V 
shall not be consummated unless approved by the Court.

VII. Financing

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

VIII. Asset Preservation

    Until the divestiture required by this Final Judgment has been 
accomplished, defendants shall take all steps necessary to comply with 
the [Proposed] Order Stipulating to Modification of Order to Preserve 
and Maintain Assets, which is intended to supersede the Stipulation and 
Order to Preserve and Maintain Assets (D.I. 20) entered by this Court 
on October 16, 2017. Defendants shall take no action that would 
jeopardize the divestiture ordered by this Court.

IX. Affidavits

    A. Within twenty (20) calendar days of the filing of the proposed 
Order Stipulating to Modification of Order to Preserve and Maintain 
Assets in this matter, and every thirty (30) calendar days thereafter 
until the divestiture has been completed under Section IV or Section V, 
defendants shall deliver to the United States an affidavit, signed by 
each defendant's Chief Financial Officer and General Counsel which 
shall describe the fact and manner of defendants' compliance with 
Section IV or Section 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 defendants have taken 
to solicit buyers for the Divestiture Assets, and to provide required 
information to 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 defendants, 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 proposed 
Order Stipulating to Modification of Order to Preserve and Maintain 
Assets in this matter, defendants shall deliver to the United States an 
affidavit that describes in reasonable detail all actions defendants 
have taken and all steps defendants have implemented on an ongoing 
basis to comply with Section VIII of this Final Judgment. Defendants 
shall deliver to the United States an affidavit describing any changes 
to the efforts and actions outlined in defendants' earlier affidavits 
filed pursuant to this section within fifteen (15) calendar days after 
the change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year

[[Page 4284]]

after such divestiture has been completed.

X. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of any related orders such as the [Proposed] Order 
Stipulating to Modification of Order to Preserve and Maintain Assets, 
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 defendants, be permitted:

    (1) access during defendants' office hours to inspect and copy, 
or at the option of the United States, to require defendants to 
provide hard copy or electronic copies of, all books, ledgers, 
accounts, records, data, and documents in the possession, custody, 
or control of defendants, relating to any matters contained in this 
Final Judgment; and
    (2) to interview, either informally or on the record, 
defendants' 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 defendants.

    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
defendants 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. Pursuant to the Joint Stipulated Protective Order entered on 
November 29, 2017 and all applicable rules and regulations, 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 
defendants to the United States, defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(1)(G) of the 
Federal Rules of Civil Procedure, and defendants mark each pertinent 
page of such material, ``Subject to claim of protection under Rule 
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United 
States shall give defendants ten (10) calendar days notice prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding).

XI. No Reacquisition

    Defendants may not reacquire any part of the Divestiture Assets 
that is primarily related to Aviation Fuel Filtration Products during 
the term of this Final Judgment.

XII. 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.

XIII. Enforcement of Final Judgment

    A. The United States retains and reserves all rights to enforce the 
provisions of this Final Judgment, including its right to seek an order 
of contempt from this Court. Defendants agree that in any civil 
contempt action, any motion to show cause, or any similar action 
brought by the United States regarding an alleged violation of this 
Final Judgment, the United States may establish a violation of the 
decree and the appropriateness of any remedy therefor by a 
preponderance of the evidence, and they waive any argument that a 
different standard of proof should apply.
    B. In any enforcement proceeding in which the Court finds that the 
defendants have violated this Final Judgment, the United States may 
apply to the Court for a one-time extension of this Final Judgment, 
together with such other relief as may be appropriate. Defendants agree 
to reimburse the United States for any attorneys' fees, experts' fees, 
and costs incurred in connection with any effort to enforce this Final 
Judgment.

XIV. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry, except that after 
five (5) years from the date of its entry, this Final Judgment may be 
terminated upon notice by the United States to the Court and defendants 
that the divestitures have been completed and that the continuation of 
the Final Judgment no longer is necessary or in the public interest.

XV. 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. 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 responses to comments filed with 
the Court, entry of this Final Judgment is in the public interest.
    Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.

IT IS SO ORDERED.

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Date

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Judge John E. Jones III

[FR Doc. 2018-01741 Filed 1-29-18; 8:45 am]
 BILLING CODE P