Linde AG and Praxair, Inc.; Analysis To Aid Public Comment, 55533-55540 [2018-24206]
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component of the FDIC’s efforts to
comply with a Congressional mandate
contained in section 7 of the Federal
Deposit Insurance Reform Conforming
Amendments Act of 2005 (‘‘Reform
Act’’) (Pub. L. 109–173), which calls for
the FDIC to conduct ongoing surveys
‘‘on efforts by insured depository
institutions to bring those individuals
and families who have rarely, if ever,
held a checking account, a savings
account or other type of transaction or
check cashing account at an insured
depository institution (hereafter in this
section referred to as the ‘unbanked’)
into the conventional finance system.’’
Section 7 further instructs the FDIC to
consider several factors in its conduct of
the surveys, including: (1) ‘‘What
cultural, language and identification
issues as well as transaction costs
appear to most prevent ‘unbanked’
individuals from establishing
conventional accounts’’; and (2) ‘‘what
is a fair estimate of the size and worth
of the ‘‘unbanked’’ market in the United
States.’’ The National Survey of
Unbanked and Underbanked
Households is designed to address these
factors and provide a factual basis on
the proportions of unbanked
households. Such a factual basis is
necessary to adequately assess banks’
efforts to serve these households as
required by the statutory mandate. The
National Survey of Unbanked and
Underbanked Households is the only
population-representative survey
conducted at the national level that
provides state-level estimates of the size
and characteristics of unbanked and
underbanked households for all 50
states and the District of Columbia.
The FDIC supplement collects
nationally-representative data, not
otherwise available, to measure and
track economic inclusion, and assess the
accessibility and sustainability of
banking relationships. The survey
identifies different banking status
groups, including unbanked and
underbanked consumers. In identifying
underbanked consumers, the FDIC
considers households that have bank
accounts but also substantially rely on
nonbank financial services to meet basic
financial needs such as receiving
income, paying bills, saving and storing
money, and accessing basic consumer
credit. There is an emphasis on services
that are disproportionately relied on by
the unbanked, and are provided by a
company or firm, as opposed to those
accessed informally through
individuals. The survey captures the use
of a range of bank and nonbank
products, and other data to help assess
the reasons why some households do
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not make greater use of mainstream
banking services.
To obtain this information, the FDIC
partners with the U.S. Census Bureau,
which administers the Household
Survey supplement (‘‘FDIC
Supplement’) to households that
participate in the CPS. The supplement
has been administered every other year
since January 2009. The previous survey
questionnaires and survey results can be
accessed through the following link:
https://www.economicinclusion.gov/
surveys/.
Consistent with the statutory mandate
to conduct the surveys on an ongoing
basis, the FDIC already has in place
arrangements for conducting the sixth
Household Survey as a supplement to
the June 2019 CPS.
However, prior to finalizing the next
survey questionnaire, the FDIC seeks to
solicit public comment on whether
changes to the existing instrument are
desirable and, if so, to what extent. It
should be noted that, as a supplement
of the CPS survey, the Household
Survey needs to adhere to specific
parameters that include limits in the
length and sensitivity of the questions
that can be asked of CPS respondents.
Interested members of the public may
obtain a copy of the proposed survey
questionnaire on the following web
page: https://www.fdic.gov/regulations/
laws/federal/2018/2019-drafthousehold-survey-questionnaire.pdf
Request for Comment
Comments are invited on: (a) Whether
the collection of information is
necessary for the proper performance of
the FDIC’s functions, including whether
the information has practical utility; (b)
the accuracy of the estimates of the
burden of the information collections,
including the validity of the
methodology and assumptions used; (c)
ways to enhance the quality, utility, and
clarity of the information to be
collected; and (d) ways to minimize the
burden of the collection of information
on respondents, including through the
use of automated collection techniques
or other forms of information
technology. All comments will become
a matter of public record.
Dated at Washington, DC, on November 1,
2018.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2018–24228 Filed 11–5–18; 8:45 am]
BILLING CODE 6714–01–P
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FEDERAL TRADE COMMISSION
[File No. 171 0068]
Linde AG and Praxair, Inc.; Analysis To
Aid Public Comment
Federal Trade Commission.
Proposed Consent Agreement.
AGENCY:
ACTION:
The consent agreement in this
matter settles alleged violations of
federal law prohibiting unfair methods
of competition. The attached Analysis to
Aid Public Comment describes both the
allegations in the complaint and the
terms of the consent orders—embodied
in the consent agreement—that would
settle these allegations.
DATES: Comments must be received on
or before November 21, 2018.
ADDRESSES: Interested parties may file a
comment online or on paper, by
following the instructions in the
Request for Comment part of the
SUPPLEMENTARY INFORMATION section
below. Write: ‘‘Linde AG and Praxair,
Inc.; File No. 1710068’’ on your
comment, and file your comment online
at https://ftcpublic.commentworks.com/
ftc/praxairlindedivest/ by following the
instructions on the web-based form. If
you prefer to file your comment on
paper, write ‘‘Linde AG and Praxair,
Inc.; File No. 1710068’’ on your
comment and on the envelope, and mail
your comment to the following address:
Federal Trade Commission, Office of the
Secretary, 600 Pennsylvania Avenue
NW, Suite CC–5610 (Annex D),
Washington, DC 20580, or deliver your
comment to the following address:
Federal Trade Commission, Office of the
Secretary, Constitution Center, 400 7th
Street SW, 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT:
Jordan S. Andrew (202–326–3678),
Bureau of Competition, 600
Pennsylvania Avenue NW, Washington,
DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant
to Section 6(f) of the Federal Trade
Commission Act, 15 U.S.C. 46(f), and
FTC Rule 2.34, 16 CFR 2.34, notice is
hereby given that the above-captioned
consent agreement containing a consent
order to cease and desist, having been
filed with and accepted, subject to final
approval, by the Commission, has been
placed on the public record for a period
of thirty (30) days. The following
Analysis to Aid Public Comment
describes the terms of the consent
agreement, and the allegations in the
complaint. An electronic copy of the
full text of the consent agreement
package can be obtained from the FTC
Home Page (for October 22, 2018), on
SUMMARY:
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the World Wide Web, at https://
www.ftc.gov/news-events/commissionactions.
You can file a comment online or on
paper. For the Commission to consider
your comment, we must receive it on or
before November 21, 2018. Write ‘‘Linde
AG and Praxair, Inc.; File No. 1710068’’
on your comment. Your comment—
including your name and your state—
will be placed on the public record of
this proceeding, including, to the extent
practicable, on the public Commission
website, at https://www.ftc.gov/policy/
public-comments.
Postal mail addressed to the
Commission is subject to delay due to
heightened security screening. As a
result, we encourage you to submit your
comments online. To make sure that the
Commission considers your online
comment, you must file it at https://
ftcpublic.commentworks.com/ftc/
praxairlindedivest/ by following the
instructions on the web-based form. If
this Notice appears at https://
www.regulations.gov/#!home, you also
may file a comment through that
website.
If you prefer to file your comment on
paper, write ‘‘Linde AG and Praxair,
Inc.; File No. 1710068’’ on your
comment and on the envelope, and mail
your comment to the following address:
Federal Trade Commission, Office of the
Secretary, 600 Pennsylvania Avenue
NW, Suite CC–5610 (Annex D),
Washington, DC 20580, or deliver your
comment to the following address:
Federal Trade Commission, Office of the
Secretary, Constitution Center, 400 7th
Street SW, 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024. If possible,
submit your paper comment to the
Commission by courier or overnight
service.
Because your comment will be placed
on the publicly accessible FTC website
at https://www.ftc.gov, you are solely
responsible for making sure that your
comment does not include any sensitive
or confidential information. In
particular, your comment should not
include any sensitive personal
information, such as your or anyone
else’s Social Security number; date of
birth; driver’s license number or other
state identification number, or foreign
country equivalent; passport number;
financial account number; or credit or
debit card number. You are also solely
responsible for making sure that your
comment does not include any sensitive
health information, such as medical
records or other individually
identifiable health information. In
addition, your comment should not
include any ‘‘trade secret or any
commercial or financial information
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which . . . is privileged or
confidential’’—as provided by Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and
FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)—
including in particular competitively
sensitive information such as costs,
sales statistics, inventories, formulas,
patterns, devices, manufacturing
processes, or customer names.
Comments containing material for
which confidential treatment is
requested must be filed in paper form,
must be clearly labeled ‘‘Confidential,’’
and must comply with FTC Rule 4.9(c).
In particular, the written request for
confidential treatment that accompanies
the comment must include the factual
and legal basis for the request, and must
identify the specific portions of the
comment to be withheld from the public
record. See FTC Rule 4.9(c). Your
comment will be kept confidential only
if the General Counsel grants your
request in accordance with the law and
the public interest. Once your comment
has been posted on the public FTC
website—as legally required by FTC
Rule 4.9(b)—we cannot redact or
remove your comment from the FTC
website, unless you submit a
confidentiality request that meets the
requirements for such treatment under
FTC Rule 4.9(c), and the General
Counsel grants that request.
Visit the FTC website at https://
www.ftc.gov to read this Notice and the
news release describing it. The FTC Act
and other laws that the Commission
administers permit the collection of
public comments to consider and use in
this proceeding, as appropriate. The
Commission will consider all timely
and responsive public comments that it
receives on or before November 21,
2018. For information on the
Commission’s privacy policy, including
routine uses permitted by the Privacy
Act, see https://www.ftc.gov/siteinformation/privacy-policy.
Analysis of Proposed Consent Order To
Aid Public Comment
I. Introduction
The Federal Trade Commission
(‘‘Commission’’) has accepted, subject to
final approval, an Agreement
Containing Consent Orders (‘‘Consent
Agreement’’) designed to remedy the
anticompetitive effects resulting from
the proposed merger of Praxair, Inc.
(‘‘Praxair’’) and Linde AG (‘‘Linde’’).
Pursuant to the Consent Agreement,
Linde will divest the following assets to
Messer Group GmbH (‘‘Messer’’): Thirtytwo air separation units (‘‘ASUs’’);
sixteen carbon dioxide facilities; source
contracts for nearly one billion cubic
feet of helium, twelve helium transfill
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stations, and a helium purification
facility; one liquid hydrogen production
facility, as well as equipment, contracts,
and related assets. Linde also will divest
assets related to its excimer laser gas
business to Messer.
Separately, Linde will divest five
facilities that produce hydrogen and
carbon monoxide (‘‘HyCO’’) for on-site
customers, along with Linde’s hydrogen
pipeline in the Gulf Coast and related
customer contracts, to Matheson TriGas, Inc. (‘‘Matheson’’). Lastly, Linde
will divest two additional HyCO plants
to their respective owners. Linde will
divest its HyCO plant in Clear Lake,
Texas to Celanese Corporation
(‘‘Celanese’’) and its HyCO plant in La
Porte, Texas to LyondellBasell
Industries N.V. (‘‘LyondellBasell’’).
Praxair and Linde have agreed to
divest the required facilities and assets
to the aforementioned buyers, or to
alternative Commission-approved
buyers, within 120 days after signing the
Consent Agreement. Praxair and Linde
will hold their businesses separate until
they have accomplished the divestitures
to Messer and Matheson. The
divestiture of these facilities and related
assets will preserve the competition
between Praxair and Linde that the
proposed merger would otherwise
eliminate.
The proposed Consent Agreement
will be on the public record for thirty
days, so that interested persons may
submit comments. Comments that the
Commission receives during this period
will become part of the public record.
After thirty days, the Commission will
again review the proposed Consent
Agreement and the comments received,
and will decide whether it should
withdraw from the proposed Consent
Agreement, modify it, or make final the
accompanying Decision and Order.
II. The Transaction
On June 1, 2017, Linde and Praxair
entered into an agreement and plan of
merger, in a transaction valued at
approximately $80 billion. Pursuant to
the terms of their agreement, the parties
will initiate a stock-for-stock exchange
to form a new company under the Linde
name with headquarters split between
Danbury, Connecticut and Munich,
Germany. The Commission’s Complaint
alleges that the proposed merger, if
consummated, would violate Section 7
of the Clayton Act, as amended, 15
U.S.C. 18, and Section 5 of the Federal
Trade Commission Act, as amended, 15
U.S.C. 45, by substantially lessening
competition in the United States in
markets for bulk liquid oxygen; bulk
liquid nitrogen; bulk liquid argon; bulk
liquid carbon dioxide; bulk liquid
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hydrogen; bulk refined helium; on-site
hydrogen; on-site carbon monoxide; and
excimer laser gases.
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III. The Parties
Praxair is an international industrial
gas and surface technology company
headquartered in Danbury, Connecticut.
The company primarily serves
industrial and specialty gas customers
in manufacturing, metals, and chemicals
industries. Praxair is the third-largest
industrial gas supplier globally by
revenue. In the United States, Praxair
owns forty-one ASUs and twenty-eight
carbon dioxide facilities. In 2017,
Praxair’s revenue totaled approximately
$11.4 billion, about $5 billion of which
derived from business in the United
States.
Linde, headquartered in Munich,
Germany, is a global supplier of
industrial gases, homecare respiratory
services, and engineering services to
customers in the healthcare, chemicals,
and energy industries. Linde is the
second-largest global industrial gas
supplier worldwide. In the United
States, Linde owns thirty-two ASUs and
thirty-five carbon dioxide facilities. In
2017, Linde generated approximately
$20.2 billion in total revenue. Linde’s
2017 U.S. revenue totaled
approximately $4.4 billion, of which
about $2.5 billion derived from its
LinCare home healthcare business.
IV. The Relevant Markets for Bulk
Liquid Oxygen, Bulk Liquid Nitrogen,
and Bulk Liquid Argon
Oxygen, nitrogen, and argon are
‘‘atmospheric gases,’’ present in the
Earth’s atmosphere in varying amounts.
Industrial gas suppliers like Linde and
Praxair produce atmospheric gases for a
range of customer applications and
industries, such as oil and gas,
steelmaking, health care, and food
manufacturing. Oxygen, nitrogen, and
argon are three of the most widely used
atmospheric industrial gases. Each
atmospheric gas has specific properties
that make it uniquely suited for its
respective applications. For most of
these applications, there is no substitute
for oxygen, nitrogen, or argon.
Suppliers distribute atmospheric
gases to customers in different forms
and methods, depending on the volume
of gas that the customer requires.
Customers that require extremely large
volumes receive atmospheric gases from
on-site ASUs located at their facilities,
or via pipelines connecting ASUs to
customer sites. Bulk customers require
gas volumes that are substantial, but not
large enough to justify on-site or
pipeline gas delivery. For bulk
customers, suppliers typically transport
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bulk liquid oxygen, bulk liquid
nitrogen, or bulk liquid argon in
cryogenic trailers that hold the gas in
liquid form. The liquid form is more
condensed than the gaseous form, and
therefore easier to transport and store in
large quantities. Bulk liquid gases are
then stored in tanks located at customer
sites. From there, customers can use the
product in its liquid form, or convert it
back to its gaseous form before use.
Small-volume customers purchase
nitrogen, oxygen, or argon in cylinders
containing the product in gaseous form.
Typically, smaller customers receive gas
cylinders from distributors that
purchase products from industrial gas
suppliers in bulk liquid form. It is
impractical for bulk liquid oxygen, bulk
liquid nitrogen, or bulk liquid argon
customers to switch distribution
methods, as their demand is too great to
satisfy efficiently with cylinders, but too
small to justify the expense of on-site or
pipeline delivery.
For atmospheric gases, the ratio of the
product’s value to its transportation
costs largely determines the relevant
geographic market. Due to the relatively
low sales prices of bulk liquid oxygen
and bulk liquid nitrogen and the
significant freight costs associated with
transporting them, these gases can ship,
economically, a maximum distance of
approximately 100 to 250 miles from the
ASU that produces the gas. Therefore, it
is appropriate to analyze the
competitive effects of the proposed
merger in regional geographic markets
for bulk liquid oxygen and bulk liquid
nitrogen. The relevant geographic
markets in which to analyze the effects
of the proposed merger upon bulk liquid
oxygen and bulk liquid nitrogen are the
following regions: (1) The Northeast; (2)
the Mid-Atlantic; (3) Upstate and
Western New York; (4) the Carolinas; (5)
Northern Florida and Surrounding
Areas; (6) Atlanta and Surrounding
Areas; (7) the Pacific Northwest; (8)
Northern California; (9) Southern
California; (10) Arkansas and
Surrounding Areas; (11) Northern Texas
and Surrounding Areas; (12) Southern
Texas; (13) the Central Gulf Coast; (14)
the Eastern Midwest; (15) Greater
Chicago; (16) Missouri and Surrounding
Areas; and (17) Puerto Rico. Because
bulk liquid argon is rarer and more
expensive than bulk liquid oxygen and
bulk liquid nitrogen, suppliers can
transport it economically much greater
distances. Therefore, the relevant
geographic area in which to analyze the
effects of the proposed merger on the
bulk liquid argon market is the United
States.
Each of the relevant markets for bulk
liquid oxygen and bulk liquid nitrogen
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would become significantly more
concentrated following the proposed
merger. The proposed merger would
consolidate two of the leading suppliers
of bulk liquid oxygen and bulk liquid
nitrogen in each of these areas. For bulk
liquid argon, there are five significant
suppliers in the United States. Praxair is
the second-largest domestic producer of
bulk liquid argon. The proposed merger
would eliminate one of the largest
suppliers and substantially increase
concentration in the U.S. bulk liquid
argon market, creating a highly
concentrated market.
V. The Relevant Markets for Bulk
Liquid Carbon Dioxide
Carbon dioxide is a ‘‘process gas,’’
which means that it is captured as a byproduct of other manufacturing
processes, such as ethanol, ammonia,
and hydrogen. Crude carbon dioxide
also derives from natural sources, such
as natural gas wells. Suppliers convert
and distill crude carbon dioxide into
final liquid form using a cryogenic
process at plants often located near
carbon dioxide gas sources. The most
common applications for liquid carbon
dioxide are in food and beverage
production. For example, customers
commonly use carbon dioxide in
processes to carbonate beverages and
chill or freeze food. For the majority of
its applications, liquid carbon dioxide
has no viable substitutes.
Suppliers deliver liquid carbon
dioxide to customers in bulk trailers or
rail cars. Most customers store liquid
carbon dioxide in tanks located at their
manufacturing facilities. Customers
would not switch to cylinder delivery
because bulk delivery is far cheaper,
and they would have to manage
significantly more deliveries to meet
their needs. In addition, customers
would not consider self-sourcing liquid
carbon dioxide unless the cost increased
significantly more than ten percent,
because of the costs to build necessary
infrastructure and the limited sources of
carbon dioxide available.
Due to the significant freight costs
associated with transporting liquid
carbon dioxide relative to its sales price,
suppliers can only ship liquid carbon
dioxide economically up to 250 miles
by truck. In areas with few or no carbon
dioxide sources, liquid carbon dioxide
is shipped as much as 750 miles by rail.
Therefore, it is appropriate to analyze
the competitive effects of the proposed
merger in regional geographic markets
for bulk liquid carbon dioxide. For bulk
liquid carbon dioxide, the relevant
geographic markets in which to analyze
the effects of the proposed merger
include the following regions: (1)
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Northern California; (2) Southern
California; (3) the Southeast; (4) the
Mid-Atlantic; (5) the Rocky Mountains;
(6) the Plains; (7) Southern Texas; (8)
the Eastern Midwest; and (9) Greater
Chicago.
The proposed merger would combine
the largest and third-largest suppliers of
bulk liquid carbon dioxide in the United
States. In each relevant geographic
market for bulk liquid carbon dioxide,
the merged firm would control a high
share of capacity. Further, Linde and
Praxair are the two closest suppliers for
numerous customers across multiple
relevant geographic markets, and the
merger would eliminate a close
constraint on pricing of bulk liquid
carbon dioxide.
domestically. Suppliers source helium
primarily from a few large sources, and
ship helium from those sources to
customers around the world. Therefore,
it is appropriate to analyze the
competitive effects of the proposed
merger using a worldwide market for
bulk refined helium.
The market for bulk refined helium is
highly concentrated. Linde and Praxair
are two of only five companies in the
world with access to significant
quantities of bulk refined helium. The
proposed transaction combines the
largest and third-largest bulk refined
helium suppliers in the world. Postmerger, the combined entity would
control two-fifths of the global helium
supply.
VI. The Relevant Market for Bulk
Refined Helium
Both Linde and Praxair are suppliers
of bulk refined helium. Bulk refined
helium has specific properties that make
it uniquely suited for its applications.
For example, because helium has the
lowest boiling point of any element,
liquid helium is valuable as a cooling
agent in superconductivity for medical
applications, such as magnetic
resonance imaging (‘‘MRI’’), and certain
manufacturing applications. For most
applications, there is no substitute for
bulk refined helium, and customers are
unlikely to switch to another gas or
product, even if the price of bulk refined
helium increased by five to ten percent.
Suppliers distribute refined helium to
customers in cylinder form or bulk
form, depending on the customers’
volume requirements. Customers that
require large volumes of refined helium
generally purchase the gas in bulk form.
Suppliers often package bulk refined
helium in containers called ‘‘dewars,’’
and then distribute the product in liquid
form to customers. For customers that
require helium in its gaseous state,
suppliers can convert bulk refined
helium from liquid to gaseous form.
Suppliers distribute bulk quantities of
gaseous helium in high-pressure ‘‘tube
trailers.’’ Customers obtain helium in
bulk form because it is the most costeffective way to purchase the high
volume of refined helium that they
require. Accordingly, customers would
not switch distribution methods for
their purchases of refined helium, even
if the prices of bulk refined helium
distributed by one method increased by
five to ten percent.
Helium is a rare and expensive gas
that can be, and is, transported
economically on a worldwide basis.
Capacity and demand for helium
produced abroad influences the capacity
and demand for helium produced
VII. The Relevant Market for Bulk
Liquid Hydrogen
Hydrogen is a non-atmospheric gas
produced as a by-product of other
processes, including natural gas
extraction and petrochemical
production. Most crude hydrogen comes
from third-party feedstocks. Industrial
gas suppliers purify and liquefy crude
hydrogen before distributing it to
customers. Customers use liquid
hydrogen for a range of applications
across several industries. For example,
liquid hydrogen has applications in
space programs as a primary rocket fuel
and as a propellant for nuclear powered
rockets and space vehicles, in
hydrogenation and clean energy storage,
and as an active ingredient in chemical
manufacturing processes.
Customers that require very large
quantities of hydrogen on a regular basis
typically receive the gas via an on-site
plant or pipeline. For customers that
require a small amount of hydrogen,
cylinders are most economical.
Customers that require more hydrogen
than can be practicably supplied with
cylinders, but not enough volume to
justify the costs of on-site or pipeline
delivery, typically receive bulk liquid
delivery. For most applications, there
are no viable economic alternatives to
bulk liquid hydrogen. Further, because
distribution methods depend on volume
requirements, customers cannot switch
to cylinders or on-site distribution if
bulk prices were to increase.
The relevant geographic market for
bulk liquid hydrogen is national. The
value of bulk liquid hydrogen relative to
the cost of transportation is the primary
factor in defining the relevant
geographic market. Liquid hydrogen’s
high value and limited production
allows suppliers to transport it over long
distances economically and more
efficiently than hydrogen in bulk
gaseous form.
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Linde and Praxair are two of just four
main suppliers of bulk liquid hydrogen
in the United States. The U.S. bulk
liquid hydrogen market is highly
concentrated, and Praxair is the largest
producer of bulk liquid hydrogen in the
United States. The proposed merger
would remove one of the few bulk
liquid hydrogen suppliers from the
market.
VIII. The Relevant Market For HyCO
HyCO is the industry term for the onsite provision of hydrogen and carbon
monoxide gas. The same chemical
process produces both gases, so one gas
is always the by-product of the other.
Plants that produce hydrogen and
carbon monoxide create a mixture
called synthesis gas (or ‘‘syngas’’),
which producers separate into its
constituent parts using a cryogenic
process.
HyCO includes separate product
markets for on-site hydrogen and carbon
monoxide, because the two gases are not
substitutes for each other. For most
applications, there are no viable
substitutes for hydrogen or carbon
monoxide. Likewise, customers cannot
substitute bulk delivery for on-site
supply of hydrogen or carbon
monoxide, and so on-site supply of
these gases is a distinct product market,
as well.
There are three main types of HyCO
plants: (1) The steam methane reformer
(‘‘SMR’’); (2) the partial oxidation plant
(‘‘POX’’); and (3) the autothermal
reformation plant (‘‘ATR’’). Each plant
type produces different proportions of
hydrogen and carbon monoxide. SMRs
produce the highest proportion of
hydrogen relative to carbon monoxide.
POX and ATR plants produce these
gases in more equal proportions. For
most on-site hydrogen customers,
suppliers build on-site SMRs; however,
for customers that need on-site carbon
monoxide, suppliers will typically
construct POX or ATR plants. On-site
HyCO customers usually conduct a
competitive bidding process several
years in advance of a plant’s opening.
This bidding process is the source of
most competition in the HyCO market.
The customer and winning bidder
typically enter into long-term contracts
that lock-in prices and other terms.
The majority of HyCO plants in the
United States are SMRs built for oil and
petrochemical companies that only
require hydrogen. Carbon monoxide
customers are few in number, but large
in size and gas needs—most are
chemical companies that produce acetic
acid, polyurethane, and other
compounds. HyCO plants are expensive,
costing from $30 million to over $400
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million, depending on size and type.
The industrial gas supplier usually
absorbs the cost of building the plant,
and then yields the return from a longterm (fifteen to twenty year) supply
contract with the customer. HyCO is a
critical input for its customers’
products, and HyCO plants often
integrate into customers’ production
sites. Accordingly, HyCO customers
require suppliers to have engineering
and operational expertise, as well as a
demonstrated history and reputation of
successfully operating HyCO plants.
Relevant geographic markets for onsite hydrogen and carbon monoxide are
national. HyCO suppliers are generally
able to serve customers in all areas of
the country. The Gulf Coast region is a
distinct submarket within the broader
national markets for on-site hydrogen
and carbon monoxide, as it has the
highest concentration of HyCO
customers anywhere in the United
States. There, hydrogen pipelines serve
multiple customers from a single HyCO
plant or serve as backup. Hydrogen
pipelines allow HyCO suppliers to offer
customers lower prices than they could
with a dedicated on-site plant at the
customer’s location. Consequently,
HyCO suppliers are only competitive in
areas of the Gulf Coast where they have
hydrogen pipeline networks.
U.S. markets for on-site hydrogen and
carbon monoxide are highly
concentrated. Praxair is a market leader,
and Linde represents one of a limited
number of viable alternative HyCO
suppliers. The proposed merger would
remove one of the few HyCO suppliers
from the market.
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IX. The Relevant Market for Excimer
Laser Gases
Excimer laser gases are a subset of
specialty gases commonly used to serve
customers in the electronics industry,
such as semiconductor or liquid crystal
display manufacturers. Excimer lasers
use gas mixtures, typically containing
multiple noble gases (e.g., neon,
krypton, or xenon) and, occasionally, a
halogen gas (e.g., fluorine or chlorine).
Suppliers of excimer laser gases
produce or source noble and halogen
gases worldwide, then purify and blend
these gases into products that they
distribute to customers in cylinders.
Neon comprises 95 to 99 percent of
most excimer laser gases, with other rare
and halogen gases making up the
remainder. Neon, krypton, and xenon
are present in the air in extremely small
amounts, and industrial gas companies
produce them only at very large ASUs
with specialized equipment to capture
these trace gases.
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The semiconductor industry is the
main customer base for excimer laser
gases in the United States. Excimer laser
gases generate ultraviolet light in
excimer lasers, a component of
photolithography machines. In addition,
excimer laser gases have applications in
annealing processes to produce display
screens and for medical ablation, a
minimally invasive process that cuts
human tissue with minimal scarring
(e.g., LASIK vision surgery).
The relevant geographic market for
excimer laser gases is at least as broad
as the United States. U.S. suppliers ship
excimer laser gases to customer sites
around the country and the world.
Suppliers source excimer laser gas
inputs, such as neon, domestically and
internationally. Although international
customers may not distinguish between
excimer laser gases produced
domestically or abroad, U.S. excimer
laser gas customers prefer suppliers that
have domestic production facilities and
sources of neon.
Before supplying excimer laser gases
to customers, suppliers must complete
qualification processes with both laser
manufacturers and individual customers
to ensure that their excimer laser gases
meet purity, quality, and other
specifications. Each qualification takes
three to eighteen months, and costs at
least $125,000. Customers cannot switch
from excimer laser gases to another
product because there is no substitute
that produces the same wavelength of
light, and switching to another supplier
often requires additional qualifications,
resources, and time.
The market for excimer laser gases in
the United States is highly concentrated.
Linde and Praxair have a combined
share of approximately 70 percent in
this market, and the proposed merger
would reduce the number of domestic
suppliers from four to three.
X. Effects of the Acquisition
The proposed merger would eliminate
direct and substantial competition
between Praxair and Linde in each of
the relevant markets, provide the
merged firm with an enhanced ability to
increase prices unilaterally, and
eliminate a competitor for gas customers
in markets where alternative sources of
supply are limited. The proposed
merger, therefore, likely would allow
the merged firm to exercise market
power unilaterally, increasing the
likelihood that purchasers of bulk liquid
oxygen, bulk liquid nitrogen, bulk
liquid argon, bulk liquid carbon
dioxide, bulk liquid hydrogen, bulk
refined helium, on-site hydrogen, onsite carbon monoxide, and excimer laser
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gases would pay higher prices in the
relevant areas.
The proposed merger would also
enhance the likelihood of collusion or
coordinated action among remaining
firms in these relevant markets, because
the merger would eliminate a significant
competitor from each market, leaving a
small number of viable competitors. In
addition, certain market conditions,
such as the relative homogeneity of
suppliers and products, and the
transparency of detailed market
information, are conducive to
coordination among competing
suppliers. These conditions also
enhance the ability of competitors
engaged in a coordinated scheme to
detect and punish deviations from the
scheme.
XI. Entry
New entry into the relevant markets
would not occur in a timely manner
sufficient to deter or counteract the
likely adverse competitive effects of the
proposed merger. Entry into the bulk
liquid oxygen, nitrogen, and argon
markets is costly, difficult, and unlikely
because of, among other things, the time
and cost required to construct the ASUs
that produce these products.
Constructing an ASU at a scale
sufficient to be viable in the market
would cost at least $30 to $100 million,
most of which are sunk costs. Moreover,
it is not economically justifiable to build
an ASU unless a significant amount of
the plant’s capacity has been pre-sold
prior to construction, either to an on-site
customer or to customers with
commitments under contract. Such presale opportunities occur infrequently
and unpredictably and can take several
years to secure.
Entry into the bulk liquid carbon
dioxide market would also not be
timely, likely, or sufficient to deter or
counteract the adverse competitive
effects of the proposed merger.
Constructing a plant capable of
producing bulk liquid carbon dioxide
would cost at least $5 to $30 million. In
addition, successful entry into the bulk
liquid carbon dioxide market requires
access to raw carbon dioxide supply
sources, which are typically unavailable
due to long-term contracts with
incumbent liquid carbon dioxide
suppliers.
New entry into the bulk liquid
hydrogen market is unlikely to be timely
or sufficient to counteract the proposed
transaction’s likely anticompetitive
effects. Liquid hydrogen production
facilities require years to construct and
considerable capital to finance. Further,
customers require liquid hydrogen
suppliers to have backup supply and be
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Federal Register / Vol. 83, No. 215 / Tuesday, November 6, 2018 / Notices
able to deliver product to their sites. A
firm is more likely to succeed if it has
a portfolio of diversified liquid
hydrogen sources, as well as a reliable
distribution network, which would
require substantial time, resources, and
investments to obtain.
Timely, sufficient entry into the bulk
refined helium market is extremely
unlikely, if not impossible. The most
significant impediment to entry is
securing a source of refined helium. A
new entrant would need to secure
multiple sources of refined helium,
acquire necessary transportation and
storage equipment, and establish a
distribution infrastructure. Market
incumbents secure all available sources
of refined helium in long-term contracts.
A new entrant would need to locate a
new source of crude helium and build
a refinery. In addition, an entrant would
need to invest tens of millions of dollars
to acquire necessary infrastructure and
distribution assets, including transfills,
cryogenic storage trailers, high-pressure
tube trailers, and liquid dewars capable
of transporting helium from the refinery
to customers. Given the substantial costs
and challenges of entering the bulk
refined helium market, new entry
sufficient to counteract the competitive
effects of the proposed merger would
not occur in a timely manner.
Entry into the HyCO market requires
engineering expertise, experience in
designing and operating the various
types of HyCO plants, significant capital
resources, and a proven record of
success with HyCO customers. It would
take several years and substantial
investments for a new entrant to
develop the expertise, experience,
reputation, and credibility necessary to
compete in the HyCO market. A new
HyCO facility costs $30 to $300 million,
depending on the plant size and product
mix. Further, in the Gulf Coast, a
hydrogen pipeline is an added barrier to
enter the HyCO market. Existing
pipelines are scarce in this region, and
building a new pipeline requires
substantial time and resources that few
firms have. Finally, opportunities to
compete for new or existing HyCO
customers are limited, as HyCO supply
contracts are long-term, and customers
invariably award contracts to proven
suppliers.
New entry sufficient to deter or avert
the proposed merger’s anticompetitive
effects in the market for excimer laser
gases is unlikely to occur. The principal
barrier to new entry is sourcing neon,
which accounts for just 0.0018 percent
of the Earth’s atmosphere. Suppliers can
produce neon efficiently only at the
largest ASUs, which must have a neon
gas column. Such an ASU would take
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several years and cost hundreds of
million dollars to construct. In addition,
an entrant would have to produce or
otherwise secure other input gases, as
well as supply, logistics, and
distribution infrastructure and
employees. An entrant would also have
to construct a facility to blend excimer
laser gases. Finally, an entrant would
have to qualify its products with laser
manufacturers and customers, which
involves testing gas blends at a customer
plants. The costs of entry would be
difficult to justify, as the total U.S.
excimer laser gas market is only around
$40 million.
XII. The Consent Agreement
The proposed Consent Agreement
aims to eliminate the competitive
concerns that the proposed merger
raises in each relevant market. It
requires Linde to divest to Messer all
thirty-two of its U.S. ASUs, along with
related equipment, supply contracts,
technology, and goodwill, in the
seventeen bulk liquid oxygen and
nitrogen markets at issue in this matter.
With the divestitures, the merger will
not increase concentration in any
market for bulk liquid nitrogen, oxygen,
or argon. As part of the divestiture,
Messer will acquire all of Linde’s
customer contracts and bulk tanks
located at the customer locations.
The proposed Consent Agreement
also requires Linde to divest to Messer
sixteen carbon dioxide facilities,
including production plants and all
associated rail depots. Linde will divest
all existing contracts with customers
supplied by the respective carbon
dioxide facilities. Additionally, all
assets used to support the distribution
of bulk liquid carbon dioxide will be
part of the divestiture, including
trailers, tractors, and rail cars.
Linde must also divest to Messer its
entire bulk liquid hydrogen business,
which includes Linde’s liquid hydrogen
production facility in Magog, Quebec,
source agreements, and four hydrogen
transfills. Linde will divest all assets
related to the bulk liquid hydrogen
business including, among other things,
employee contracts and information,
customer and supply contracts, leases,
distribution trailers, and equipment
necessary to distribute bulk liquid
hydrogen.
The proposed Consent Agreement
requires Linde to divest to Messer all of
Linde’s U.S. bulk refined helium
business, as well as global helium
sourcing contracts, which, when
combined with divestitures in other
jurisdictions, are equal to Praxair’s
current worldwide helium capacity. In
addition, Linde will divest its entire
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Fmt 4703
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network of helium transfills across the
United States. All of Linde’s helium
customer contracts in the United States,
Canada, Brazil, Colombia, and Chile are
included in the divestiture. The
proposed Consent Agreement also
provides Messer with the requisite
number of dewars, tube trailers, and
helium ISO containers to serve its
helium customers worldwide.
The proposed Consent Agreement
also requires Linde to divest to
Matheson five on-site hydrogen SMRs to
Matheson, along with Linde’s hydrogen
pipeline in the Gulf Coast and all
relevant customer contracts. The
proposed divestiture includes Linde’s
SMR facilities in Anacortes,
Washington; Lemont, Illinois; Lima,
Ohio; McIntosh, Alabama; and Saraland,
Alabama. The SMR assets also include
Linde’s Remote Operating Center in La
Porte, Texas, the ‘‘control center’’ for
Linde’s on-site hydrogen business. In
addition, Linde will divest its POX
plants in Clear Lake, Texas, and La
Porte, Texas, back to their customers,
Celanese and LyondellBasell,
respectively. This divestiture will
resolve the competitive issues that these
customers would otherwise face postmerger, as they will be able operate the
facilities themselves or contract with
one of the firms with a nearby hydrogen
pipeline.
To address competitive concerns in
the market for excimer laser gases, the
proposed Consent Agreement also
requires Linde to divest to Messer all of
Linde’s customer contracts, intellectual
property, and key Linde staff to sustain
business operations and customer
relationships. Neon-producing ASUs
will also be included in the asset
package. To ensure a seamless transfer,
Linde has agreed to supply its finished
excimer laser gas products to Messer for
a period of three years (with possible
extensions of time). This supply
agreement will give Messer sufficient
time to construct or renovate a facility
and obtain OEM and customer
certification. The proposed Decision
and Order also requires Linde to
underwrite the cost of building Messer’s
new facility. If Messer does not
commence construction of the plant
within one year, then Linde must
rescind its sale of the excimer laser gas
business to Messer and divest it to a
Commission-approved acquirer.
Linde and Praxair have agreed to
divest the required facilities, together
with all related equipment, customer
and supply contracts, technology, and
goodwill, to one or more Commissionapproved buyers within four months of
consummating the proposed merger. All
acquirers of divested assets must receive
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the prior approval of the Commission.
The Commission’s goal in evaluating
possible purchasers of divested assets is
to maintain the competitive
environment that existed prior to the
acquisition.
The proposed Consent Agreement
incorporates an Order to Hold Separate
and Maintain Assets (‘‘Order to Hold
Separate’’) to ensure that Linde and
Praxair (1) continue to operate
separately until the divestitures to
Messer and Matheson have been
completed and (2) continue to maintain
all assets until the required divestitures
have been completed. The Order to
Hold Separate appoints Grant Thornton
LLP as monitor to oversee compliance
with all the obligations and
responsibilities under the proposed
Decision and Order and requires Linde
to execute an agreement conferring
upon the monitor all of the rights,
powers, and authorities necessary to
permit the monitor to ensure the
continued health and competitiveness
of the divested businesses. Further, if
the parties fail to divest the assets as
required within the time specified, the
Commission may appoint a divestiture
trustee to divest the assets in a manner
consistent with the proposed Decision
and Order and subject to Commission
approval.
The purpose of this analysis is to
facilitate public comment on the
proposed Consent Agreement, and it is
not intended to constitute an official
interpretation of the proposed Consent
Agreement or to modify its terms in any
way.
By direction of the Commission,
Commissioner Chopra dissenting.
Donald S. Clark,
Secretary.
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Statement of Commissioner Rohit
Chopra
Today, the FTC is proposing to
impose conditions on a merger between
Praxair, Inc. (NYSE: PX) and Linde AG
(FWB: LIN), the world’s second- and
third-largest industrial gas suppliers.
While these firms may not be household
names, they provide inputs to an
enormous number of industrial and
consumer products throughout our
economy. The merger would be clearly
anticompetitive in violation of the
Clayton Act, with a high likelihood of
harming manufacturers of a wide range
of industrial and consumer products.
The Commission is proposing to order
substantial divestitures across multiple
lines of businesses. Notably, Linde is
divesting the vast majority of its U.S.
industrial gas business to a joint venture
between Messer Group GmbH and CVC
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Capital Partners, a private equity firm.
Separately, Linde will also divest other
assets to Matheson Tri-Gas, Inc. While
the divestitures go a long way to address
the anticompetitive concerns, the
decision to approve this remedy was
still a close call.
The transaction, as originally
structured, does not appear to have any
significant merger-specific efficiencies
that would guarantee benefits to
customers. However, the proposed order
requires substantial divestitures that
might preserve or even increase
competition in some product markets.
But even with the proposed remedies,
this transaction is not without risks to
competition. In particular, I would have
preferred to include additional
protections for the public to safeguard
against risks often posed by the private
equity buyer interest in the divested
assets, as well as the level of debt
financing and investment horizons
involved.
Divestiture Buyer Financing
Competition enforcers, including the
FTC, should always examine whether
its merger remedies have been
successful over the long term. The FTC’s
2017 Merger Remedies study
highlighted some of the lessons learned
from past merger remedies.1
When evaluating the suitability of a
divestiture buyer, agencies must
determine whether the buyer can
meaningfully replace competitive
market forces eliminated by a merger.
For example, agencies need to be
confident that the buyer possesses the
know-how and technical capabilities to
successfully operate the divested
businesses. Among other things, the
2017 study found that the success of a
divestiture over time depends, in part,
on whether the buyer has adequate
financing to ensure success. Given
recent trends in our capital markets, we
need to carefully scrutinize buyer
financing.
In situations like the matter before us,
I approached this line of inquiry with
several questions in mind:
(1) Does the deal’s financing structure
allow the buyer to make significant
investments to maintain and grow their
business in order to vigorously
compete? Does the buyer have adequate
liquidity to be a nimble and
opportunistic competitor?
(2) What is the buyer’s level of debt
financing, compared to others in the
1 See The FTC’s Merger Remedies 2006–2012, A
Report of the Bureaus of Competition and
Economics, Federal Trade Commission, January
2017, available at: https://www.ftc.gov/reports/ftcsmerger-remedies-2006-2012-report-bureauscompetition-economics.
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industry? Have creditors protected
themselves in ways that are aligned—or
misaligned—with the goal of preserving
competition?
(3) Does the buyer’s financing and
governance structure create temptations
to make asset sales that would reduce
competition?
As noted above, in this matter one of
the divestiture buyers, MG Industries, is
a new joint venture between Messer
Group GmbH, a major industrial gas
company, and CVC Capital Partners, a
private equity firm.
In this situation, I would have
preferred terms in the proposed order
that would have required prior notice to
or approval by the Commission of any
asset sales by MG Industries. There is
past Commission precedent for doing
so. In situations where there was a risk
that the divestiture buyer may
subsequently sell assets it acquired
pursuant to a divestiture order, the
Commission has sometimes ordered the
divestiture buyer to agree to a prior
approval provision covering any sale of
the assets acquired for a defined period
of time.
For example, in the Koninklijke
Ahold and Delhaize Group matter, due
to concern that one of the divestiture
buyers (Supervalu) might later transact
acquired stores, the Commission
required Supervalu to seek prior
approval for any such transfer of the
divested stores for a period of three
years.2
In the Nestle Holdings, Inc. and
Ralston Purina Co. matter, the
Commission required the divestiture
buyer (a private equity fund) to seek
approval by the Commission prior to the
sale of certain assets held less than five
years.3 The buyer would later seek
permission from the Commission to sell
assets, reducing the likelihood of
needing to litigate an anticompetitive
transaction.
Special Considerations With Financial
Buyers
Private equity funds continue to play
a greater role in deal activity across the
globe. Notably, private equity
participation is associated with higher
levels of debt financing, which can
amplify both risk and returns on equity.
At the most basic level, heavy debt
2 In the Matter of Koninklijke Ahold and Delhaize
Group, C–4588 (Consent) (July 22, 2016), available
at: https://www.ftc.gov/enforcement/casesproceedings/151-0175/koninklijke-ahold-delhaizegroup.
3 In the Matter of Nestle Holdings, Inc., and
Ralston Purina Company, C–4028 (Consent)
(December 11, 2001), available at: https://
www.ftc.gov/enforcement/cases-proceedings/
0110083/nestle-holdings-inc-ralston-purinacompany.
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burdens can increase the likelihood of
insolvency. Private equity participation
is also associated with other firm
behavior that can reduce long-term
competition, including opportunistic
asset sales. This risk may be more acute
when funds purchase assets in unusual
and distressed situations.
Enforcers must carefully examine
investors’ unique incentives that can
drive firm behavior in ways that affect
competition. To assess these incentives,
we must always actively probe the
entire circumstances of investor
involvement in a merger transaction
under review. For example, what is the
buyer’s investment thesis and strategy?
How has the investor typically realized
gains out of past investments? Does the
buyer plan to invest more of its own
equity capital into the business or
simply further rely on debt financing?
When and how does the investor intend
to exit its investment? Given all of this,
what really is the long-term impact on
competition?
While Commission staff certainly ask
many of these questions in their review
of divestiture buyers, it will be
important to ensure that we are
conducting careful and adequate due
diligence with respect to buyers that are
heavily reliant on debt financing and
where investment firms exert significant
control.
[FR Doc. 2018–24206 Filed 11–5–18; 8:45 am]
BILLING CODE 6750–01–P
FEDERAL TRADE COMMISSION
[File No. 162 3197]
Social Finance, Inc.; Analysis To Aid
Public Comment
Federal Trade Commission.
Proposed consent agreement.
AGENCY:
ACTION:
The consent agreement in this
matter settles alleged violations of
federal law prohibiting unfair or
deceptive acts or practices. The attached
Analysis to Aid Public Comment
describes both the allegations in the
complaint and the terms of the consent
order—embodied in the consent
agreement—that would settle these
allegations.
SUMMARY:
Comments must be received on
or before November 28, 2018.
ADDRESSES: Interested parties may file a
comment online or on paper, by
following the instructions in the
Request for Comment part of the
SUPPLEMENTARY INFORMATION section
below. Write: ‘‘Social Finance, Inc.; File
No. 1623197’’ on your comment, and
file your comment online at https://
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DATES:
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ftcpublic.commentworks.com/ftc/
socialfinanceconsent by following the
instructions on the web-based form. If
you prefer to file your comment on
paper, write ‘‘Social Finance, Inc.; File
No. 1623197’’ on your comment and on
the envelope, and mail your comment to
the following address: Federal Trade
Commission, Office of the Secretary,
600 Pennsylvania Avenue NW, Suite
CC–5610 (Annex D), Washington, DC
20580; or deliver your comment to:
Federal Trade Commission, Office of the
Secretary, Constitution Center, 400 7th
Street SW, 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT:
Evan Zullow (202–326–2914), Bureau of
Consumer Protection, Federal Trade
Commission, 600 Pennsylvania Avenue
NW, Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant
to Section 6(f) of the Federal Trade
Commission Act, 15 U.S.C. 46(f), and
FTC Rule 2.34, 16 CFR 2.34, notice is
hereby given that the above-captioned
consent agreement containing a consent
order to cease and desist, having been
filed with and accepted, subject to final
approval, by the Commission, has been
placed on the public record for a period
of thirty (30) days. The following
Analysis to Aid Public Comment
describes the terms of the consent
agreement, and the allegations in the
complaint. An electronic copy of the
full text of the consent agreement
package can be obtained from the FTC
Home Page (for October 29, 2018), on
the World Wide Web, at https://
www.ftc.gov/news-events/commissionactions.
You can file a comment online or on
paper. For the Commission to consider
your comment, we must receive it on or
before November 28, 2018. Write
‘‘Social Finance, Inc.; File No. 1623197’’
on your comment. Your comment—
including your name and your state—
will be placed on the public record of
this proceeding, including, to the extent
practicable, on the public Commission
Website, at https://www.ftc.gov/policy/
public-comments.
Postal mail addressed to the
Commission is subject to delay due to
heightened security screening. As a
result, we encourage you to submit your
comments online. To make sure that the
Commission considers your online
comment, you must file it at https://
ftcpublic.commentworks.com/ftc/
socialfinanceconsent by following the
instructions on the web-based form. If
this Notice appears at https://
www.regulations.gov/#!home, you also
may file a comment through that
website.
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If you prefer to file your comment on
paper, write ‘‘Social Finance, Inc.; File
No. 1623197’’ on your comment and on
the envelope, and mail your comment to
the following address: Federal Trade
Commission, Office of the Secretary,
600 Pennsylvania Avenue NW, Suite
CC–5610 (Annex D), Washington, DC
20580; or deliver your comment to the
following address: Federal Trade
Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW,
5th Floor, Suite 5610 (Annex D),
Washington, DC 20024. If possible,
submit your paper comment to the
Commission by courier or overnight
service.
Because your comment will be placed
on the publicly accessible FTC Website
at https://www.ftc.gov, you are solely
responsible for making sure that your
comment does not include any sensitive
or confidential information. In
particular, your comment should not
include any sensitive personal
information, such as your or anyone
else’s Social Security number; date of
birth; driver’s license number or other
state identification number, or foreign
country equivalent; passport number;
financial account number; or credit or
debit card number. You are also solely
responsible for making sure that your
comment does not include any sensitive
health information, such as medical
records or other individually
identifiable health information. In
addition, your comment should not
include any ‘‘trade secret or any
commercial or financial information
which . . . is privileged or
confidential’’—as provided by Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and
FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2)—
including in particular competitively
sensitive information such as costs,
sales statistics, inventories, formulas,
patterns, devices, manufacturing
processes, or customer names.
Comments containing material for
which confidential treatment is
requested must be filed in paper form,
must be clearly labeled ‘‘Confidential,’’
and must comply with FTC Rule 4.9(c).
In particular, the written request for
confidential treatment that accompanies
the comment must include the factual
and legal basis for the request, and must
identify the specific portions of the
comment to be withheld from the public
record. See FTC Rule 4.9(c). Your
comment will be kept confidential only
if the General Counsel grants your
request in accordance with the law and
the public interest. Once your comment
has been posted on the public FTC
Website—as legally required by FTC
Rule 4.9(b)—we cannot redact or
remove your comment from the FTC
E:\FR\FM\06NON1.SGM
06NON1
]]>Agencies
[Federal Register Volume 83, Number 215 (Tuesday, November 6, 2018)]
[Notices]
[Pages 55533-55540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24206]
=======================================================================
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FEDERAL TRADE COMMISSION
[File No. 171 0068]
Linde AG and Praxair, Inc.; Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis to Aid Public Comment describes both the
allegations in the complaint and the terms of the consent orders--
embodied in the consent agreement--that would settle these allegations.
DATES: Comments must be received on or before November 21, 2018.
ADDRESSES: Interested parties may file a comment online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write: ``Linde AG and Praxair,
Inc.; File No. 1710068'' on your comment, and file your comment online
at https://ftcpublic.commentworks.com/ftc/praxairlindedivest/ by
following the instructions on the web-based form. If you prefer to file
your comment on paper, write ``Linde AG and Praxair, Inc.; File No.
1710068'' on your comment and on the envelope, and mail your comment to
the following address: Federal Trade Commission, Office of the
Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D),
Washington, DC 20580, or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Constitution Center,
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC
20024.
FOR FURTHER INFORMATION CONTACT: Jordan S. Andrew (202-326-3678),
Bureau of Competition, 600 Pennsylvania Avenue NW, Washington, DC
20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of thirty (30) days. The
following Analysis to Aid Public Comment describes the terms of the
consent agreement, and the allegations in the complaint. An electronic
copy of the full text of the consent agreement package can be obtained
from the FTC Home Page (for October 22, 2018), on
[[Page 55534]]
the World Wide Web, at https://www.ftc.gov/news-events/commission-actions.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before November 21,
2018. Write ``Linde AG and Praxair, Inc.; File No. 1710068'' on your
comment. Your comment--including your name and your state--will be
placed on the public record of this proceeding, including, to the
extent practicable, on the public Commission website, at https://www.ftc.gov/policy/public-comments.
Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/praxairlindedivest/ by following the instructions on the web-based
form. If this Notice appears at https://www.regulations.gov/#!home, you
also may file a comment through that website.
If you prefer to file your comment on paper, write ``Linde AG and
Praxair, Inc.; File No. 1710068'' on your comment and on the envelope,
and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024. If possible, submit your paper comment to the
Commission by courier or overnight service.
Because your comment will be placed on the publicly accessible FTC
website at https://www.ftc.gov, you are solely responsible for making
sure that your comment does not include any sensitive or confidential
information. In particular, your comment should not include any
sensitive personal information, such as your or anyone else's Social
Security number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. You are also
solely responsible for making sure that your comment does not include
any sensitive health information, such as medical records or other
individually identifiable health information. In addition, your comment
should not include any ``trade secret or any commercial or financial
information which . . . is privileged or confidential''--as provided by
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2),
16 CFR 4.10(a)(2)--including in particular competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular,
the written request for confidential treatment that accompanies the
comment must include the factual and legal basis for the request, and
must identify the specific portions of the comment to be withheld from
the public record. See FTC Rule 4.9(c). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted on the public FTC website--as legally required by FTC Rule
4.9(b)--we cannot redact or remove your comment from the FTC website,
unless you submit a confidentiality request that meets the requirements
for such treatment under FTC Rule 4.9(c), and the General Counsel
grants that request.
Visit the FTC website at https://www.ftc.gov to read this Notice and
the news release describing it. The FTC Act and other laws that the
Commission administers permit the collection of public comments to
consider and use in this proceeding, as appropriate. The Commission
will consider all timely and responsive public comments that it
receives on or before November 21, 2018. For information on the
Commission's privacy policy, including routine uses permitted by the
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.
Analysis of Proposed Consent Order To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') designed to remedy the anticompetitive effects resulting
from the proposed merger of Praxair, Inc. (``Praxair'') and Linde AG
(``Linde'').
Pursuant to the Consent Agreement, Linde will divest the following
assets to Messer Group GmbH (``Messer''): Thirty-two air separation
units (``ASUs''); sixteen carbon dioxide facilities; source contracts
for nearly one billion cubic feet of helium, twelve helium transfill
stations, and a helium purification facility; one liquid hydrogen
production facility, as well as equipment, contracts, and related
assets. Linde also will divest assets related to its excimer laser gas
business to Messer.
Separately, Linde will divest five facilities that produce hydrogen
and carbon monoxide (``HyCO'') for on-site customers, along with
Linde's hydrogen pipeline in the Gulf Coast and related customer
contracts, to Matheson Tri-Gas, Inc. (``Matheson''). Lastly, Linde will
divest two additional HyCO plants to their respective owners. Linde
will divest its HyCO plant in Clear Lake, Texas to Celanese Corporation
(``Celanese'') and its HyCO plant in La Porte, Texas to LyondellBasell
Industries N.V. (``LyondellBasell'').
Praxair and Linde have agreed to divest the required facilities and
assets to the aforementioned buyers, or to alternative Commission-
approved buyers, within 120 days after signing the Consent Agreement.
Praxair and Linde will hold their businesses separate until they have
accomplished the divestitures to Messer and Matheson. The divestiture
of these facilities and related assets will preserve the competition
between Praxair and Linde that the proposed merger would otherwise
eliminate.
The proposed Consent Agreement will be on the public record for
thirty days, so that interested persons may submit comments. Comments
that the Commission receives during this period will become part of the
public record. After thirty days, the Commission will again review the
proposed Consent Agreement and the comments received, and will decide
whether it should withdraw from the proposed Consent Agreement, modify
it, or make final the accompanying Decision and Order.
II. The Transaction
On June 1, 2017, Linde and Praxair entered into an agreement and
plan of merger, in a transaction valued at approximately $80 billion.
Pursuant to the terms of their agreement, the parties will initiate a
stock-for-stock exchange to form a new company under the Linde name
with headquarters split between Danbury, Connecticut and Munich,
Germany. The Commission's Complaint alleges that the proposed merger,
if consummated, would violate Section 7 of the Clayton Act, as amended,
15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as
amended, 15 U.S.C. 45, by substantially lessening competition in the
United States in markets for bulk liquid oxygen; bulk liquid nitrogen;
bulk liquid argon; bulk liquid carbon dioxide; bulk liquid
[[Page 55535]]
hydrogen; bulk refined helium; on-site hydrogen; on-site carbon
monoxide; and excimer laser gases.
III. The Parties
Praxair is an international industrial gas and surface technology
company headquartered in Danbury, Connecticut. The company primarily
serves industrial and specialty gas customers in manufacturing, metals,
and chemicals industries. Praxair is the third-largest industrial gas
supplier globally by revenue. In the United States, Praxair owns forty-
one ASUs and twenty-eight carbon dioxide facilities. In 2017, Praxair's
revenue totaled approximately $11.4 billion, about $5 billion of which
derived from business in the United States.
Linde, headquartered in Munich, Germany, is a global supplier of
industrial gases, homecare respiratory services, and engineering
services to customers in the healthcare, chemicals, and energy
industries. Linde is the second-largest global industrial gas supplier
worldwide. In the United States, Linde owns thirty-two ASUs and thirty-
five carbon dioxide facilities. In 2017, Linde generated approximately
$20.2 billion in total revenue. Linde's 2017 U.S. revenue totaled
approximately $4.4 billion, of which about $2.5 billion derived from
its LinCare home healthcare business.
IV. The Relevant Markets for Bulk Liquid Oxygen, Bulk Liquid Nitrogen,
and Bulk Liquid Argon
Oxygen, nitrogen, and argon are ``atmospheric gases,'' present in
the Earth's atmosphere in varying amounts. Industrial gas suppliers
like Linde and Praxair produce atmospheric gases for a range of
customer applications and industries, such as oil and gas, steelmaking,
health care, and food manufacturing. Oxygen, nitrogen, and argon are
three of the most widely used atmospheric industrial gases. Each
atmospheric gas has specific properties that make it uniquely suited
for its respective applications. For most of these applications, there
is no substitute for oxygen, nitrogen, or argon.
Suppliers distribute atmospheric gases to customers in different
forms and methods, depending on the volume of gas that the customer
requires. Customers that require extremely large volumes receive
atmospheric gases from on-site ASUs located at their facilities, or via
pipelines connecting ASUs to customer sites. Bulk customers require gas
volumes that are substantial, but not large enough to justify on-site
or pipeline gas delivery. For bulk customers, suppliers typically
transport bulk liquid oxygen, bulk liquid nitrogen, or bulk liquid
argon in cryogenic trailers that hold the gas in liquid form. The
liquid form is more condensed than the gaseous form, and therefore
easier to transport and store in large quantities. Bulk liquid gases
are then stored in tanks located at customer sites. From there,
customers can use the product in its liquid form, or convert it back to
its gaseous form before use. Small-volume customers purchase nitrogen,
oxygen, or argon in cylinders containing the product in gaseous form.
Typically, smaller customers receive gas cylinders from distributors
that purchase products from industrial gas suppliers in bulk liquid
form. It is impractical for bulk liquid oxygen, bulk liquid nitrogen,
or bulk liquid argon customers to switch distribution methods, as their
demand is too great to satisfy efficiently with cylinders, but too
small to justify the expense of on-site or pipeline delivery.
For atmospheric gases, the ratio of the product's value to its
transportation costs largely determines the relevant geographic market.
Due to the relatively low sales prices of bulk liquid oxygen and bulk
liquid nitrogen and the significant freight costs associated with
transporting them, these gases can ship, economically, a maximum
distance of approximately 100 to 250 miles from the ASU that produces
the gas. Therefore, it is appropriate to analyze the competitive
effects of the proposed merger in regional geographic markets for bulk
liquid oxygen and bulk liquid nitrogen. The relevant geographic markets
in which to analyze the effects of the proposed merger upon bulk liquid
oxygen and bulk liquid nitrogen are the following regions: (1) The
Northeast; (2) the Mid-Atlantic; (3) Upstate and Western New York; (4)
the Carolinas; (5) Northern Florida and Surrounding Areas; (6) Atlanta
and Surrounding Areas; (7) the Pacific Northwest; (8) Northern
California; (9) Southern California; (10) Arkansas and Surrounding
Areas; (11) Northern Texas and Surrounding Areas; (12) Southern Texas;
(13) the Central Gulf Coast; (14) the Eastern Midwest; (15) Greater
Chicago; (16) Missouri and Surrounding Areas; and (17) Puerto Rico.
Because bulk liquid argon is rarer and more expensive than bulk liquid
oxygen and bulk liquid nitrogen, suppliers can transport it
economically much greater distances. Therefore, the relevant geographic
area in which to analyze the effects of the proposed merger on the bulk
liquid argon market is the United States.
Each of the relevant markets for bulk liquid oxygen and bulk liquid
nitrogen would become significantly more concentrated following the
proposed merger. The proposed merger would consolidate two of the
leading suppliers of bulk liquid oxygen and bulk liquid nitrogen in
each of these areas. For bulk liquid argon, there are five significant
suppliers in the United States. Praxair is the second-largest domestic
producer of bulk liquid argon. The proposed merger would eliminate one
of the largest suppliers and substantially increase concentration in
the U.S. bulk liquid argon market, creating a highly concentrated
market.
V. The Relevant Markets for Bulk Liquid Carbon Dioxide
Carbon dioxide is a ``process gas,'' which means that it is
captured as a by-product of other manufacturing processes, such as
ethanol, ammonia, and hydrogen. Crude carbon dioxide also derives from
natural sources, such as natural gas wells. Suppliers convert and
distill crude carbon dioxide into final liquid form using a cryogenic
process at plants often located near carbon dioxide gas sources. The
most common applications for liquid carbon dioxide are in food and
beverage production. For example, customers commonly use carbon dioxide
in processes to carbonate beverages and chill or freeze food. For the
majority of its applications, liquid carbon dioxide has no viable
substitutes.
Suppliers deliver liquid carbon dioxide to customers in bulk
trailers or rail cars. Most customers store liquid carbon dioxide in
tanks located at their manufacturing facilities. Customers would not
switch to cylinder delivery because bulk delivery is far cheaper, and
they would have to manage significantly more deliveries to meet their
needs. In addition, customers would not consider self-sourcing liquid
carbon dioxide unless the cost increased significantly more than ten
percent, because of the costs to build necessary infrastructure and the
limited sources of carbon dioxide available.
Due to the significant freight costs associated with transporting
liquid carbon dioxide relative to its sales price, suppliers can only
ship liquid carbon dioxide economically up to 250 miles by truck. In
areas with few or no carbon dioxide sources, liquid carbon dioxide is
shipped as much as 750 miles by rail. Therefore, it is appropriate to
analyze the competitive effects of the proposed merger in regional
geographic markets for bulk liquid carbon dioxide. For bulk liquid
carbon dioxide, the relevant geographic markets in which to analyze the
effects of the proposed merger include the following regions: (1)
[[Page 55536]]
Northern California; (2) Southern California; (3) the Southeast; (4)
the Mid-Atlantic; (5) the Rocky Mountains; (6) the Plains; (7) Southern
Texas; (8) the Eastern Midwest; and (9) Greater Chicago.
The proposed merger would combine the largest and third-largest
suppliers of bulk liquid carbon dioxide in the United States. In each
relevant geographic market for bulk liquid carbon dioxide, the merged
firm would control a high share of capacity. Further, Linde and Praxair
are the two closest suppliers for numerous customers across multiple
relevant geographic markets, and the merger would eliminate a close
constraint on pricing of bulk liquid carbon dioxide.
VI. The Relevant Market for Bulk Refined Helium
Both Linde and Praxair are suppliers of bulk refined helium. Bulk
refined helium has specific properties that make it uniquely suited for
its applications. For example, because helium has the lowest boiling
point of any element, liquid helium is valuable as a cooling agent in
superconductivity for medical applications, such as magnetic resonance
imaging (``MRI''), and certain manufacturing applications. For most
applications, there is no substitute for bulk refined helium, and
customers are unlikely to switch to another gas or product, even if the
price of bulk refined helium increased by five to ten percent.
Suppliers distribute refined helium to customers in cylinder form
or bulk form, depending on the customers' volume requirements.
Customers that require large volumes of refined helium generally
purchase the gas in bulk form. Suppliers often package bulk refined
helium in containers called ``dewars,'' and then distribute the product
in liquid form to customers. For customers that require helium in its
gaseous state, suppliers can convert bulk refined helium from liquid to
gaseous form. Suppliers distribute bulk quantities of gaseous helium in
high-pressure ``tube trailers.'' Customers obtain helium in bulk form
because it is the most cost-effective way to purchase the high volume
of refined helium that they require. Accordingly, customers would not
switch distribution methods for their purchases of refined helium, even
if the prices of bulk refined helium distributed by one method
increased by five to ten percent.
Helium is a rare and expensive gas that can be, and is, transported
economically on a worldwide basis. Capacity and demand for helium
produced abroad influences the capacity and demand for helium produced
domestically. Suppliers source helium primarily from a few large
sources, and ship helium from those sources to customers around the
world. Therefore, it is appropriate to analyze the competitive effects
of the proposed merger using a worldwide market for bulk refined
helium.
The market for bulk refined helium is highly concentrated. Linde
and Praxair are two of only five companies in the world with access to
significant quantities of bulk refined helium. The proposed transaction
combines the largest and third-largest bulk refined helium suppliers in
the world. Post-merger, the combined entity would control two-fifths of
the global helium supply.
VII. The Relevant Market for Bulk Liquid Hydrogen
Hydrogen is a non-atmospheric gas produced as a by-product of other
processes, including natural gas extraction and petrochemical
production. Most crude hydrogen comes from third-party feedstocks.
Industrial gas suppliers purify and liquefy crude hydrogen before
distributing it to customers. Customers use liquid hydrogen for a range
of applications across several industries. For example, liquid hydrogen
has applications in space programs as a primary rocket fuel and as a
propellant for nuclear powered rockets and space vehicles, in
hydrogenation and clean energy storage, and as an active ingredient in
chemical manufacturing processes.
Customers that require very large quantities of hydrogen on a
regular basis typically receive the gas via an on-site plant or
pipeline. For customers that require a small amount of hydrogen,
cylinders are most economical. Customers that require more hydrogen
than can be practicably supplied with cylinders, but not enough volume
to justify the costs of on-site or pipeline delivery, typically receive
bulk liquid delivery. For most applications, there are no viable
economic alternatives to bulk liquid hydrogen. Further, because
distribution methods depend on volume requirements, customers cannot
switch to cylinders or on-site distribution if bulk prices were to
increase.
The relevant geographic market for bulk liquid hydrogen is
national. The value of bulk liquid hydrogen relative to the cost of
transportation is the primary factor in defining the relevant
geographic market. Liquid hydrogen's high value and limited production
allows suppliers to transport it over long distances economically and
more efficiently than hydrogen in bulk gaseous form.
Linde and Praxair are two of just four main suppliers of bulk
liquid hydrogen in the United States. The U.S. bulk liquid hydrogen
market is highly concentrated, and Praxair is the largest producer of
bulk liquid hydrogen in the United States. The proposed merger would
remove one of the few bulk liquid hydrogen suppliers from the market.
VIII. The Relevant Market For HyCO
HyCO is the industry term for the on-site provision of hydrogen and
carbon monoxide gas. The same chemical process produces both gases, so
one gas is always the by-product of the other. Plants that produce
hydrogen and carbon monoxide create a mixture called synthesis gas (or
``syngas''), which producers separate into its constituent parts using
a cryogenic process.
HyCO includes separate product markets for on-site hydrogen and
carbon monoxide, because the two gases are not substitutes for each
other. For most applications, there are no viable substitutes for
hydrogen or carbon monoxide. Likewise, customers cannot substitute bulk
delivery for on-site supply of hydrogen or carbon monoxide, and so on-
site supply of these gases is a distinct product market, as well.
There are three main types of HyCO plants: (1) The steam methane
reformer (``SMR''); (2) the partial oxidation plant (``POX''); and (3)
the autothermal reformation plant (``ATR''). Each plant type produces
different proportions of hydrogen and carbon monoxide. SMRs produce the
highest proportion of hydrogen relative to carbon monoxide. POX and ATR
plants produce these gases in more equal proportions. For most on-site
hydrogen customers, suppliers build on-site SMRs; however, for
customers that need on-site carbon monoxide, suppliers will typically
construct POX or ATR plants. On-site HyCO customers usually conduct a
competitive bidding process several years in advance of a plant's
opening. This bidding process is the source of most competition in the
HyCO market. The customer and winning bidder typically enter into long-
term contracts that lock-in prices and other terms.
The majority of HyCO plants in the United States are SMRs built for
oil and petrochemical companies that only require hydrogen. Carbon
monoxide customers are few in number, but large in size and gas needs--
most are chemical companies that produce acetic acid, polyurethane, and
other compounds. HyCO plants are expensive, costing from $30 million to
over $400
[[Page 55537]]
million, depending on size and type. The industrial gas supplier
usually absorbs the cost of building the plant, and then yields the
return from a long-term (fifteen to twenty year) supply contract with
the customer. HyCO is a critical input for its customers' products, and
HyCO plants often integrate into customers' production sites.
Accordingly, HyCO customers require suppliers to have engineering and
operational expertise, as well as a demonstrated history and reputation
of successfully operating HyCO plants.
Relevant geographic markets for on-site hydrogen and carbon
monoxide are national. HyCO suppliers are generally able to serve
customers in all areas of the country. The Gulf Coast region is a
distinct submarket within the broader national markets for on-site
hydrogen and carbon monoxide, as it has the highest concentration of
HyCO customers anywhere in the United States. There, hydrogen pipelines
serve multiple customers from a single HyCO plant or serve as backup.
Hydrogen pipelines allow HyCO suppliers to offer customers lower prices
than they could with a dedicated on-site plant at the customer's
location. Consequently, HyCO suppliers are only competitive in areas of
the Gulf Coast where they have hydrogen pipeline networks.
U.S. markets for on-site hydrogen and carbon monoxide are highly
concentrated. Praxair is a market leader, and Linde represents one of a
limited number of viable alternative HyCO suppliers. The proposed
merger would remove one of the few HyCO suppliers from the market.
IX. The Relevant Market for Excimer Laser Gases
Excimer laser gases are a subset of specialty gases commonly used
to serve customers in the electronics industry, such as semiconductor
or liquid crystal display manufacturers. Excimer lasers use gas
mixtures, typically containing multiple noble gases (e.g., neon,
krypton, or xenon) and, occasionally, a halogen gas (e.g., fluorine or
chlorine). Suppliers of excimer laser gases produce or source noble and
halogen gases worldwide, then purify and blend these gases into
products that they distribute to customers in cylinders. Neon comprises
95 to 99 percent of most excimer laser gases, with other rare and
halogen gases making up the remainder. Neon, krypton, and xenon are
present in the air in extremely small amounts, and industrial gas
companies produce them only at very large ASUs with specialized
equipment to capture these trace gases.
The semiconductor industry is the main customer base for excimer
laser gases in the United States. Excimer laser gases generate
ultraviolet light in excimer lasers, a component of photolithography
machines. In addition, excimer laser gases have applications in
annealing processes to produce display screens and for medical
ablation, a minimally invasive process that cuts human tissue with
minimal scarring (e.g., LASIK vision surgery).
The relevant geographic market for excimer laser gases is at least
as broad as the United States. U.S. suppliers ship excimer laser gases
to customer sites around the country and the world. Suppliers source
excimer laser gas inputs, such as neon, domestically and
internationally. Although international customers may not distinguish
between excimer laser gases produced domestically or abroad, U.S.
excimer laser gas customers prefer suppliers that have domestic
production facilities and sources of neon.
Before supplying excimer laser gases to customers, suppliers must
complete qualification processes with both laser manufacturers and
individual customers to ensure that their excimer laser gases meet
purity, quality, and other specifications. Each qualification takes
three to eighteen months, and costs at least $125,000. Customers cannot
switch from excimer laser gases to another product because there is no
substitute that produces the same wavelength of light, and switching to
another supplier often requires additional qualifications, resources,
and time.
The market for excimer laser gases in the United States is highly
concentrated. Linde and Praxair have a combined share of approximately
70 percent in this market, and the proposed merger would reduce the
number of domestic suppliers from four to three.
X. Effects of the Acquisition
The proposed merger would eliminate direct and substantial
competition between Praxair and Linde in each of the relevant markets,
provide the merged firm with an enhanced ability to increase prices
unilaterally, and eliminate a competitor for gas customers in markets
where alternative sources of supply are limited. The proposed merger,
therefore, likely would allow the merged firm to exercise market power
unilaterally, increasing the likelihood that purchasers of bulk liquid
oxygen, bulk liquid nitrogen, bulk liquid argon, bulk liquid carbon
dioxide, bulk liquid hydrogen, bulk refined helium, on-site hydrogen,
on-site carbon monoxide, and excimer laser gases would pay higher
prices in the relevant areas.
The proposed merger would also enhance the likelihood of collusion
or coordinated action among remaining firms in these relevant markets,
because the merger would eliminate a significant competitor from each
market, leaving a small number of viable competitors. In addition,
certain market conditions, such as the relative homogeneity of
suppliers and products, and the transparency of detailed market
information, are conducive to coordination among competing suppliers.
These conditions also enhance the ability of competitors engaged in a
coordinated scheme to detect and punish deviations from the scheme.
XI. Entry
New entry into the relevant markets would not occur in a timely
manner sufficient to deter or counteract the likely adverse competitive
effects of the proposed merger. Entry into the bulk liquid oxygen,
nitrogen, and argon markets is costly, difficult, and unlikely because
of, among other things, the time and cost required to construct the
ASUs that produce these products. Constructing an ASU at a scale
sufficient to be viable in the market would cost at least $30 to $100
million, most of which are sunk costs. Moreover, it is not economically
justifiable to build an ASU unless a significant amount of the plant's
capacity has been pre-sold prior to construction, either to an on-site
customer or to customers with commitments under contract. Such pre-sale
opportunities occur infrequently and unpredictably and can take several
years to secure.
Entry into the bulk liquid carbon dioxide market would also not be
timely, likely, or sufficient to deter or counteract the adverse
competitive effects of the proposed merger. Constructing a plant
capable of producing bulk liquid carbon dioxide would cost at least $5
to $30 million. In addition, successful entry into the bulk liquid
carbon dioxide market requires access to raw carbon dioxide supply
sources, which are typically unavailable due to long-term contracts
with incumbent liquid carbon dioxide suppliers.
New entry into the bulk liquid hydrogen market is unlikely to be
timely or sufficient to counteract the proposed transaction's likely
anticompetitive effects. Liquid hydrogen production facilities require
years to construct and considerable capital to finance. Further,
customers require liquid hydrogen suppliers to have backup supply and
be
[[Page 55538]]
able to deliver product to their sites. A firm is more likely to
succeed if it has a portfolio of diversified liquid hydrogen sources,
as well as a reliable distribution network, which would require
substantial time, resources, and investments to obtain.
Timely, sufficient entry into the bulk refined helium market is
extremely unlikely, if not impossible. The most significant impediment
to entry is securing a source of refined helium. A new entrant would
need to secure multiple sources of refined helium, acquire necessary
transportation and storage equipment, and establish a distribution
infrastructure. Market incumbents secure all available sources of
refined helium in long-term contracts. A new entrant would need to
locate a new source of crude helium and build a refinery. In addition,
an entrant would need to invest tens of millions of dollars to acquire
necessary infrastructure and distribution assets, including transfills,
cryogenic storage trailers, high-pressure tube trailers, and liquid
dewars capable of transporting helium from the refinery to customers.
Given the substantial costs and challenges of entering the bulk refined
helium market, new entry sufficient to counteract the competitive
effects of the proposed merger would not occur in a timely manner.
Entry into the HyCO market requires engineering expertise,
experience in designing and operating the various types of HyCO plants,
significant capital resources, and a proven record of success with HyCO
customers. It would take several years and substantial investments for
a new entrant to develop the expertise, experience, reputation, and
credibility necessary to compete in the HyCO market. A new HyCO
facility costs $30 to $300 million, depending on the plant size and
product mix. Further, in the Gulf Coast, a hydrogen pipeline is an
added barrier to enter the HyCO market. Existing pipelines are scarce
in this region, and building a new pipeline requires substantial time
and resources that few firms have. Finally, opportunities to compete
for new or existing HyCO customers are limited, as HyCO supply
contracts are long-term, and customers invariably award contracts to
proven suppliers.
New entry sufficient to deter or avert the proposed merger's
anticompetitive effects in the market for excimer laser gases is
unlikely to occur. The principal barrier to new entry is sourcing neon,
which accounts for just 0.0018 percent of the Earth's atmosphere.
Suppliers can produce neon efficiently only at the largest ASUs, which
must have a neon gas column. Such an ASU would take several years and
cost hundreds of million dollars to construct. In addition, an entrant
would have to produce or otherwise secure other input gases, as well as
supply, logistics, and distribution infrastructure and employees. An
entrant would also have to construct a facility to blend excimer laser
gases. Finally, an entrant would have to qualify its products with
laser manufacturers and customers, which involves testing gas blends at
a customer plants. The costs of entry would be difficult to justify, as
the total U.S. excimer laser gas market is only around $40 million.
XII. The Consent Agreement
The proposed Consent Agreement aims to eliminate the competitive
concerns that the proposed merger raises in each relevant market. It
requires Linde to divest to Messer all thirty-two of its U.S. ASUs,
along with related equipment, supply contracts, technology, and
goodwill, in the seventeen bulk liquid oxygen and nitrogen markets at
issue in this matter. With the divestitures, the merger will not
increase concentration in any market for bulk liquid nitrogen, oxygen,
or argon. As part of the divestiture, Messer will acquire all of
Linde's customer contracts and bulk tanks located at the customer
locations.
The proposed Consent Agreement also requires Linde to divest to
Messer sixteen carbon dioxide facilities, including production plants
and all associated rail depots. Linde will divest all existing
contracts with customers supplied by the respective carbon dioxide
facilities. Additionally, all assets used to support the distribution
of bulk liquid carbon dioxide will be part of the divestiture,
including trailers, tractors, and rail cars.
Linde must also divest to Messer its entire bulk liquid hydrogen
business, which includes Linde's liquid hydrogen production facility in
Magog, Quebec, source agreements, and four hydrogen transfills. Linde
will divest all assets related to the bulk liquid hydrogen business
including, among other things, employee contracts and information,
customer and supply contracts, leases, distribution trailers, and
equipment necessary to distribute bulk liquid hydrogen.
The proposed Consent Agreement requires Linde to divest to Messer
all of Linde's U.S. bulk refined helium business, as well as global
helium sourcing contracts, which, when combined with divestitures in
other jurisdictions, are equal to Praxair's current worldwide helium
capacity. In addition, Linde will divest its entire network of helium
transfills across the United States. All of Linde's helium customer
contracts in the United States, Canada, Brazil, Colombia, and Chile are
included in the divestiture. The proposed Consent Agreement also
provides Messer with the requisite number of dewars, tube trailers, and
helium ISO containers to serve its helium customers worldwide.
The proposed Consent Agreement also requires Linde to divest to
Matheson five on-site hydrogen SMRs to Matheson, along with Linde's
hydrogen pipeline in the Gulf Coast and all relevant customer
contracts. The proposed divestiture includes Linde's SMR facilities in
Anacortes, Washington; Lemont, Illinois; Lima, Ohio; McIntosh, Alabama;
and Saraland, Alabama. The SMR assets also include Linde's Remote
Operating Center in La Porte, Texas, the ``control center'' for Linde's
on-site hydrogen business. In addition, Linde will divest its POX
plants in Clear Lake, Texas, and La Porte, Texas, back to their
customers, Celanese and LyondellBasell, respectively. This divestiture
will resolve the competitive issues that these customers would
otherwise face post-merger, as they will be able operate the facilities
themselves or contract with one of the firms with a nearby hydrogen
pipeline.
To address competitive concerns in the market for excimer laser
gases, the proposed Consent Agreement also requires Linde to divest to
Messer all of Linde's customer contracts, intellectual property, and
key Linde staff to sustain business operations and customer
relationships. Neon-producing ASUs will also be included in the asset
package. To ensure a seamless transfer, Linde has agreed to supply its
finished excimer laser gas products to Messer for a period of three
years (with possible extensions of time). This supply agreement will
give Messer sufficient time to construct or renovate a facility and
obtain OEM and customer certification. The proposed Decision and Order
also requires Linde to underwrite the cost of building Messer's new
facility. If Messer does not commence construction of the plant within
one year, then Linde must rescind its sale of the excimer laser gas
business to Messer and divest it to a Commission-approved acquirer.
Linde and Praxair have agreed to divest the required facilities,
together with all related equipment, customer and supply contracts,
technology, and goodwill, to one or more Commission-approved buyers
within four months of consummating the proposed merger. All acquirers
of divested assets must receive
[[Page 55539]]
the prior approval of the Commission. The Commission's goal in
evaluating possible purchasers of divested assets is to maintain the
competitive environment that existed prior to the acquisition.
The proposed Consent Agreement incorporates an Order to Hold
Separate and Maintain Assets (``Order to Hold Separate'') to ensure
that Linde and Praxair (1) continue to operate separately until the
divestitures to Messer and Matheson have been completed and (2)
continue to maintain all assets until the required divestitures have
been completed. The Order to Hold Separate appoints Grant Thornton LLP
as monitor to oversee compliance with all the obligations and
responsibilities under the proposed Decision and Order and requires
Linde to execute an agreement conferring upon the monitor all of the
rights, powers, and authorities necessary to permit the monitor to
ensure the continued health and competitiveness of the divested
businesses. Further, if the parties fail to divest the assets as
required within the time specified, the Commission may appoint a
divestiture trustee to divest the assets in a manner consistent with
the proposed Decision and Order and subject to Commission approval.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official interpretation of the proposed Consent Agreement or to modify
its terms in any way.
By direction of the Commission, Commissioner Chopra dissenting.
Donald S. Clark,
Secretary.
Statement of Commissioner Rohit Chopra
Today, the FTC is proposing to impose conditions on a merger
between Praxair, Inc. (NYSE: PX) and Linde AG (FWB: LIN), the world's
second- and third-largest industrial gas suppliers. While these firms
may not be household names, they provide inputs to an enormous number
of industrial and consumer products throughout our economy. The merger
would be clearly anticompetitive in violation of the Clayton Act, with
a high likelihood of harming manufacturers of a wide range of
industrial and consumer products.
The Commission is proposing to order substantial divestitures
across multiple lines of businesses. Notably, Linde is divesting the
vast majority of its U.S. industrial gas business to a joint venture
between Messer Group GmbH and CVC Capital Partners, a private equity
firm. Separately, Linde will also divest other assets to Matheson Tri-
Gas, Inc. While the divestitures go a long way to address the
anticompetitive concerns, the decision to approve this remedy was still
a close call.
The transaction, as originally structured, does not appear to have
any significant merger-specific efficiencies that would guarantee
benefits to customers. However, the proposed order requires substantial
divestitures that might preserve or even increase competition in some
product markets. But even with the proposed remedies, this transaction
is not without risks to competition. In particular, I would have
preferred to include additional protections for the public to safeguard
against risks often posed by the private equity buyer interest in the
divested assets, as well as the level of debt financing and investment
horizons involved.
Divestiture Buyer Financing
Competition enforcers, including the FTC, should always examine
whether its merger remedies have been successful over the long term.
The FTC's 2017 Merger Remedies study highlighted some of the lessons
learned from past merger remedies.\1\
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\1\ See The FTC's Merger Remedies 2006-2012, A Report of the
Bureaus of Competition and Economics, Federal Trade Commission,
January 2017, available at: https://www.ftc.gov/reports/ftcs-merger-remedies-2006-2012-report-bureaus-competition-economics.
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When evaluating the suitability of a divestiture buyer, agencies
must determine whether the buyer can meaningfully replace competitive
market forces eliminated by a merger. For example, agencies need to be
confident that the buyer possesses the know-how and technical
capabilities to successfully operate the divested businesses. Among
other things, the 2017 study found that the success of a divestiture
over time depends, in part, on whether the buyer has adequate financing
to ensure success. Given recent trends in our capital markets, we need
to carefully scrutinize buyer financing.
In situations like the matter before us, I approached this line of
inquiry with several questions in mind:
(1) Does the deal's financing structure allow the buyer to make
significant investments to maintain and grow their business in order to
vigorously compete? Does the buyer have adequate liquidity to be a
nimble and opportunistic competitor?
(2) What is the buyer's level of debt financing, compared to others
in the industry? Have creditors protected themselves in ways that are
aligned--or misaligned--with the goal of preserving competition?
(3) Does the buyer's financing and governance structure create
temptations to make asset sales that would reduce competition?
As noted above, in this matter one of the divestiture buyers, MG
Industries, is a new joint venture between Messer Group GmbH, a major
industrial gas company, and CVC Capital Partners, a private equity
firm.
In this situation, I would have preferred terms in the proposed
order that would have required prior notice to or approval by the
Commission of any asset sales by MG Industries. There is past
Commission precedent for doing so. In situations where there was a risk
that the divestiture buyer may subsequently sell assets it acquired
pursuant to a divestiture order, the Commission has sometimes ordered
the divestiture buyer to agree to a prior approval provision covering
any sale of the assets acquired for a defined period of time.
For example, in the Koninklijke Ahold and Delhaize Group matter,
due to concern that one of the divestiture buyers (Supervalu) might
later transact acquired stores, the Commission required Supervalu to
seek prior approval for any such transfer of the divested stores for a
period of three years.\2\
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\2\ In the Matter of Koninklijke Ahold and Delhaize Group, C-
4588 (Consent) (July 22, 2016), available at: https://www.ftc.gov/enforcement/cases-proceedings/151-0175/koninklijke-ahold-delhaize-group.
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In the Nestle Holdings, Inc. and Ralston Purina Co. matter, the
Commission required the divestiture buyer (a private equity fund) to
seek approval by the Commission prior to the sale of certain assets
held less than five years.\3\ The buyer would later seek permission
from the Commission to sell assets, reducing the likelihood of needing
to litigate an anticompetitive transaction.
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\3\ In the Matter of Nestle Holdings, Inc., and Ralston Purina
Company, C-4028 (Consent) (December 11, 2001), available at: https://www.ftc.gov/enforcement/cases-proceedings/0110083/nestle-holdings-inc-ralston-purina-company.
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Special Considerations With Financial Buyers
Private equity funds continue to play a greater role in deal
activity across the globe. Notably, private equity participation is
associated with higher levels of debt financing, which can amplify both
risk and returns on equity. At the most basic level, heavy debt
[[Page 55540]]
burdens can increase the likelihood of insolvency. Private equity
participation is also associated with other firm behavior that can
reduce long-term competition, including opportunistic asset sales. This
risk may be more acute when funds purchase assets in unusual and
distressed situations.
Enforcers must carefully examine investors' unique incentives that
can drive firm behavior in ways that affect competition. To assess
these incentives, we must always actively probe the entire
circumstances of investor involvement in a merger transaction under
review. For example, what is the buyer's investment thesis and
strategy? How has the investor typically realized gains out of past
investments? Does the buyer plan to invest more of its own equity
capital into the business or simply further rely on debt financing?
When and how does the investor intend to exit its investment? Given all
of this, what really is the long-term impact on competition?
While Commission staff certainly ask many of these questions in
their review of divestiture buyers, it will be important to ensure that
we are conducting careful and adequate due diligence with respect to
buyers that are heavily reliant on debt financing and where investment
firms exert significant control.
[FR Doc. 2018-24206 Filed 11-5-18; 8:45 am]
BILLING CODE 6750-01-P
