Quaker Chemical Corporation and Global Houghton Ltd.; Analysis of Agreement Containing Consent Orders To Aid Public Comment, 36923-36926 [2019-16152]
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Federal Register / Vol. 84, No. 146 / Tuesday, July 30, 2019 / Notices
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Board of Governors of the Federal Reserve
System, July 25, 2019.
Ann Misback,
Secretary of the Board.
[FR Doc. 2019–16153 Filed 7–29–19; 8:45 am]
BILLING CODE 6210–01–P
FEDERAL TRADE COMMISSION
[File No. 171 0125]
Quaker Chemical Corporation and
Global Houghton Ltd.; Analysis of
Agreement Containing Consent Orders
To Aid Public Comment
Federal Trade Commission.
Proposed Consent Agreement;
Request for Comment.
AGENCY:
ACTION:
The consent agreement in this
matter settles alleged violations of
federal law prohibiting unfair methods
of competition. The attached Analysis of
Agreement Containing Consent Orders
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 August 29, 2019.
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SUMMARY:
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Interested parties may file
comments online or on paper, by
following the instructions in the
Request for Comment part of the
SUPPLEMENTARY INFORMATION section
below. Write: ‘‘Quaker Chemical
Corporation and Global Houghton Ltd.;
File No. 171 0125’’ on your comment,
and file your comment online at https://
www.regulations.gov by following the
instructions on the web-based form. If
you prefer to file your comment on
paper, 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.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Terry Thomas (202–326–3218), Bureau
of Competition, Federal Trade
Commission, 600 Pennsylvania Avenue
NW, Washington, DC 20580.
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 July 23, 2019), 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 August 29, 2019. Write ‘‘Quaker
Chemical Corporation and Global
Houghton Ltd.; File No. 171 0125’’ 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 https://
www.regulations.gov website.
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 through the https://
www.regulations.gov website.
SUPPLEMENTARY INFORMATION:
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If you prefer to file your comment on
paper, write ‘‘Quaker Chemical
Corporation and Global Houghton Ltd.;
File No. 171 0125’’ 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 website at
https://www.regulations.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
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the comment must include the factual
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Federal Register / Vol. 84, No. 146 / Tuesday, July 30, 2019 / Notices
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 August 29, 2019.
For information on the Commission’s
privacy policy, including routine uses
permitted by the Privacy Act, see
https://www.ftc.gov/site-information/
privacy-policy.
Analysis of Agreement Containing
Consent Orders To Aid Public Comment
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I. Introduction
The Federal Trade Commission
(‘‘Commission’’) has accepted for public
comment, subject to final approval, an
Agreement Containing Consent Orders
(‘‘Consent Agreement’’) from Quaker
Chemical Corporation (‘‘Quaker’’),
Global Houghton LTD. (‘‘Houghton’’),
Gulf Houghton Lubricants LTD., and
AMAS Holding SPF (collectively, the
‘‘Respondents’’). The Consent
Agreement would remedy the
anticompetitive effects that likely would
result from Quaker’s proposed
acquisition of Houghton
(‘‘Transaction’’).
Absent a remedy, the Transaction
would threaten to harm competition in
the manufacture and sale of: (1)
Aluminum hot rolling oils (‘‘AHRO’’)
and associated technical support in
North America; and (2) steel cold rolling
oils (‘‘SCRO’’) and associated technical
support in North America. In particular,
the Commission’s Complaint alleges
that the Transaction, if consummated,
would violate Section 7 of the Clayton
Act, as amended, 15 U.S.C. 18, and that
the asset purchase agreement constitutes
a violation of Section 5 of the Federal
Trade Commission Act, as amended, 15
U.S.C. 45, by substantially lessening
competition in the manufacture and sale
of AHRO and SCRO in an area no
greater than North America.
The Consent Agreement addresses the
Commission’s concerns by, among other
things, requiring Quaker to divest
Houghton’s North American AHRO and
SCRO product lines to Total S.A.
(‘‘Total’’), a multination oil and gas
company headquartered in France.
Quaker must also divest the intellectual
property associated with Houghton’s
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AHRO and SCRO, and adjacent
products including steel cleaners and
AHRO compatible hydraulic fluids.
The Commission has placed the
proposed Consent Agreement on the
public record for 30 days to solicit
comments from interested persons.
Comments received during this period
will become part of the public record.
After 30 days, the Commission will
again review the proposed Consent
Agreement and any comments received,
and will decide whether it should
withdraw from the Consent Agreement,
modify it, or make it final.
II. The Respondents
Respondent Quaker, a publicly traded
company, is a global supplier of
specialty process chemicals, lubricants,
greases, and other metal processing
products. Headquartered in
Conshohocken, Pennsylvania, Quaker’s
2018 revenues were $868 million.
Respondent Houghton is a global
supplier of advanced metalworking
fluids and services. It serves the
automotive, aerospace, metals, mining,
machinery, and beverage industries.
Houghton is headquartered in Valley
Forge, Pennsylvania.
III. The Proposed Acquisition
The Commission’s Complaint alleges
that a relevant product market in which
to analyze the Transaction is the
manufacture and sale of AHRO and
associated technical support services.
AHRO is a mixture of water, oil, and
additives, custom-formulated to
lubricate each individual rolling mill.
AHRO is necessary to allow
manufacturers to operate hot rolling
mills for aluminum sheet production.
There is no substitute product for
AHRO; lubricants for rolling other
metals or for other rolling processes will
not work for aluminum hot rolling.
The associated technical support
services are appropriately included in
this product market, as AHRO suppliers
provide these services as an integral
component of the physical product.
There is no separate charge for these
services. Technical support services
begin with the formulation of the oil
and continue throughout the life of the
supply relationship, including
necessary modifications to the
formulation and contamination
monitoring in both the trial phase and
during active production. Technical
support services from the AHRO
supplier are essential to the ongoing
performance of the mill, and there is no
substitute for these services as provided
in conjunction with AHRO.
The Commission’s Complaint also
alleges that an area no greater than
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North America is a relevant geographic
market in which to analyze the effects
of the Transaction. U.S. AHRO
customers do not obtain supply from
outside North America. Rolling oil
suppliers typically supply their
customers by truck and station technical
support personnel at or near their
customers’ mills to ensure timely
supply and rapid service. At the mill,
customers blend the oil with the mill’s
own water supply to create the final
emulsion. Given the large volumes of
rolling oil required to run a mill, and
the need for timely re-supply, shipping
AHRO from outside North America
would be cost- and supply-prohibitive.
The relevant market for AHRO and
associated technical support services in
North America is highly concentrated.
Quaker and Houghton are the only two
companies that commercially supply
AHRO in North America. Thus, posttransaction, Quaker will be the
monopoly AHRO supply option for
third parties in North America.
Timely, sufficient entry is unlikely to
alleviate any potential competitive harm
in the market for AHRO and associated
technical support services. Consistent
with the Commission’s allegations in
the 2010 AEA Investors/Houghton
(‘‘Houghton/D.A. Stuart’’) complaint
(Docket No. C–4297), entry is difficult in
this market. Formulating AHRO and
providing technical support services
require specialized knowledge that is
not widely available. Even the few
AHRO customers with in-house supply
capabilities are unable to supply fully
their own mills given the shortage of
qualified scientists to develop and realtime modify rolling oil formulations and
support their use in mill operations.
Large, well-established customers of
AHRO are unaware of potential entrants
that could enter the market and supply
AHRO.
Customer acceptance is also a
significant entry barrier. Customers are
reluctant to switch AHRO suppliers
because AHRO is so critical to
aluminum sheet rolling. Aluminum
manufacturers place great weight on the
AHRO suppliers’ experience and
reputation. They likely would be
unwilling to chance a supplier that
lacks the parties’ established reputations
and decades of experience given the risk
of catastrophic effects should the
supplier’s product or support
capabilities fall short. There are
significant time commitments and costs
associated with switching to a new
AHRO supplier. Given that AHRO is a
relatively small cost component in the
production of aluminum coil, it is
unlikely that a small significant
sustained price increase would justify a
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lengthy trial process for a new entrant
without a proven track record.
The Commission’s Complaint also
alleges that a relevant product market in
which to analyze the Transaction is the
manufacture and sale of SCRO and
associated technical support. SCRO
includes sheet cold rolling oils, pickle
oils, and tin plate rolling oils (‘‘TPRO’’).
Steel manufacturers use SCRO to reduce
friction and prevent metal-to-metal
contact between surfaces of the mill’s
rollers and the steel during the cold
rolling process for steel sheet of any
width or gauge, for any further
processing (e.g., tinplating or coating
with another substance, e.g., zinc,
aluminum, or paint), and for any enduse (e.g., can bodies, can ends, and
other closures for food and beverages,
household appliances, such as washers
and dryers, automobile or truck parts, or
building and construction products).
Like other rolling oils, SCRO is a
mixture of water, oil, and additives for
lubrication and corrosion protection.
SCRO producers customize the product
for each individual rolling mill, and
there are no substitutes for SCRO.
Lubricants designed for other mills,
metals, or rolling processes could
damage mill equipment and render the
processed steel unusable.
As with AHRO, SCRO suppliers
provide essential technical support
services as part of the supply of the
lubricant (i.e., without a separate
charge). The provision of these technical
services is an essential component of
the SCRO supply relationship.
As with AHRO, North America is the
relevant geographic market for SCRO.
Staff’s investigation did not reveal
evidence that any mill in the United
States received SCRO products and
services from suppliers outside North
America.
Steel manufacturers in the United
States primarily use SCRO made with
animal fat in their mills. Because animal
fat will congeal under typical tanker
truck conditions, SCRO suppliers must
deliver it via heated tanker trucks. This
heating requirement adds to
transportation costs, making imports of
animal fat-based SCRO cost-prohibitive.
The animal fat-based composition of
SCRO used in the United States also
limits customers’ choices for supply.
Steel mills in the United States typically
are older and have relatively smaller
tanks that require frequent drainage. As
a result, it is not economical for U.S.
steel mills to use vegetable oil based
(commonly referred to as synthetic oil)
that is more advanced but higher cost.
European steel mills, which are
generally newer and have larger tanks,
use this synthetic SCRO. Given the
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greater cost of synthetic SCRO and the
costs of shipping, U.S. steel
manufacturers are unlikely to turn to
overseas SCRO suppliers in response to
a small significant sustained price
increase.
As in the market for AHRO, Quaker
and Houghton are the two dominant
suppliers of SCRO and associated
technical support services in North
America. Although fringe competitors
participate in this market, to the extent
that customers need both SCRO and
related support and technical services
combined, the merger may present as an
effective merger-to-monopoly.
IV. Effects of the Transaction
The proposed transaction would be a
merger to monopoly in the market for
AHRO and associated technical support
services. Staff’s investigation has
revealed no evidence to suggest that the
likely competitive effects of this
combination are meaningfully different
from those of the Houghton/D.A. Stuart
transaction remedied by the
Commission in 2010. In addition,
customers worry that the proposed
transaction would consolidate all AHRO
technical expertise within one
company. Today, Quaker and Houghton
compete on their technical support
service capabilities, including their
availability, responsiveness, and
expertise in anticipating, preventing,
diagnosing, and addressing problems
related to their lubricants in order to
ensure smooth operations and high
quality aluminum sheet. The parties’
support service technicians must
thoroughly understand the design of
each mill, the products made there, and
the interaction between the rolling oil,
substrate, and rollers. When problems
arise today, they create an opportunity
for a competitor to challenge the
incumbent supplier as the customer
seeks a solution and/or a superior
product as quickly as possible to get
operations back on track. Post-merger,
customers will have only one support
team—Quaker’s—to turn to in the event
of operational issues, and will lose the
advantage of a possible switch to
encourage investment in
troubleshooting.
The Transaction presents similar
concerns for customers of SCRO and
associated technical support services.
Notwithstanding the presence of a few
fringe suppliers, SCRO customers fear
that the deal may result in higher prices,
lower service levels, reduced
innovation, and supply availability
challenges. Like AHRO customers,
SCRO customers face meaningful
barriers to switching suppliers,
including lengthy trial periods,
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downtime, and long waits for customer
approval.
Quaker and Houghton also compete
on the quality of their technical support
services and expertise. Customers rely
on their SCRO suppliers to troubleshoot
and address operational issues as they
arise. When the incumbent supplier
cannot resolve problems to the
customer’s satisfaction, the customer
may turn to a competing supplier to
propose an alternative solution. Postmerger, Quaker will no longer face
Houghton as a competitive threat to
keep its service levels sharp;
competition from fringe SCRO suppliers
may not be sufficient to protect
customers.
Customers have also raised concerns
that the proposed merger would
eliminate their only SCRO alternative in
the event of supply challenges or
emergencies. If a supply disruption
occurs, SCRO customers must either
turn to an alternative supplier or idle
their mills at great expense. Steel
manufacturers take comfort in the
availability of multiple potential SCRO
suppliers to ensure that they can access
this essential input in times of
shortages. The proposed transaction
would eliminate the most promising
alternative supply option for SCRO
customers, and may deprive them of any
viable alternative at all.
A prospective entrant into the SCRO
market faces similar barriers to those
that render entry unlikely for AHRO,
including technical expertise and
reputational hurdles. Entry is difficult
even for a supplier that operates in other
fluid-based markets.
V. The Proposed Consent Agreement
The proposed order requires a
divestiture to Total. Total’s business
includes oil and gas exploration,
refining, and marketing as well as
chemical manufacturing. Total had
annual revenues in 2018 of
approximately $210 billion. The
divestiture to Total would replicate
Houghton’s competitive presence in the
AHRO and SCRO markets in North
America by creating a viable, effective,
and independent competitor. The order
requires Quaker to divest certain
products, transfer key employees, and
provide transition services and toll
manufacturing. The term of the
proposed order is ten years. The order
also requires Quaker to supply the
divested products to Total for a
transitional period while transferring
the manufacturing technology to Total.
To remedy harm in the market for
AHRO, Quaker will divest to Total: (1)
Houghton’s formulations, intellectual
property, including patent for non-oleic
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acid formula, trade secrets, including
know-how for its AHRO; (2) customer
contracts for North America; (3) key
Houghton employees that are
responsible for the commercial and
technical aspects of the AHRO business;
and (4) adjacent products including fire
resistant hydraulic fluids.
To remedy harm in the market for
SCRO, which includes sheet cold rolling
oil, TPRO, and pickle oil, Quaker will
divest to Total: (1) Houghton’s
formulations, trade secrets and
intellectual property, including knowhow for sheet cold rolling oils, TPRO,
and pickle oil; (2) customer contracts for
North America; (3) key Houghton
employees that are responsible for the
commercial and technical aspects of the
SCRO business; and (4) SCRO and
TPRO cleaners.
By direction of the Commission.
April J. Tabor,
Acting Secretary.
[FR Doc. 2019–16152 Filed 7–29–19; 8:45 am]
BILLING CODE 6750–01–P
GENERAL SERVICES
ADMINISTRATION
[Notice–PBS–2019–08; Docket No. 2019–
0002; Sequence No. 20]
Notice of Intent To Prepare an
Environmental Assessment for the
Appraisers Building and U.S. Customs
House, San Francisco, CA
Public Buildings Service (PBS),
General Services Administration (GSA).
ACTION: Notice.
AGENCY:
Pursuant to the requirements
of the National Environmental Policy
Act of 1969 (NEPA), the Council on
Environmental Quality Regulations, and
the GSA PBS NEPA Desk Guide, GSA is
issuing this notice to advise the public
that an Environmental Assessment (EA)
will be prepared for the Appraisers
Building and U.S. Customs House
Modernization Project, San Francisco,
CA (Project).
DATES: Agencies and the public are
encouraged to provide written
comments regarding the scope of the
EA. Comments must be received by
August 26, 2019.
ADDRESSES: Please submit written
comments by either of the following
methods:
• Email: osmahn.kadri@gsa.gov.
• Postal Mail/Commercial Delivery:
ATTN: Mr. Osmahn Kadri, 50 United
Nations Plaza, Room 3345, Mailbox 9,
San Francisco, CA 94102.
FOR FURTHER INFORMATION CONTACT: Mr.
Osmahn A. Kadri, Regional
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SUMMARY:
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Environmental Quality Advisor/NEPA
Project Manager, General Services
Administration, Pacific Rim Region, at
415–522–3617 or email osmahn.kadri@
gsa.gov.
SUPPLEMENTARY INFORMATION:
Background
GSA intends to prepare an EA to
analyze the potential impacts resulting
from proposed renovations associated
with the Appraisers Building and U.S.
Customs House Renovations Project.
The Project is located at 630 Sansome
Street (Appraisers Building) and 555
Battery Street (U.S. Customs House),
San Francisco, California. The Project is
proposed in order to bring these
buildings up to current building code,
safety standards and serviceable
condition and to prolong their useful
life.
The Appraisers Building is a Class-B
office building on a .86-acre site in the
central business district of San
Francisco. The original structure was
constructed in 1944, and is nineteen
stories above-ground, which includes
the penthouse, loft, two levels of
mechanical space, and three tiered-roof
levels. This building is adjacent to the
U.S. Customs House.
The U.S. Customs House is on a .86acre site located on the northern edge of
the city’s financial district, occupying
one-half of the block bounded by
Sansome, Jackson, Battery and
Washington Streets. The Class B
structure was constructed in 1911 and is
composed of two interconnected
structures.
Alternatives Under Consideration
The EA will consider one Action
Alternative (the Proposed Action) and
the No Action Alternative. The Action
Alternative would consist of
modernization work to repair, modify or
replace certain building improvements
and systems. The buildings would not
be expanded in size and there would be
no change in personnel staffing levels at
each building. Construction is likely to
impact parking access and traffic flow
during construction.
Under the No Action Alternative,
modernization enhancements to the
existing buildings would not occur.
Scoping Process
Scoping will be accomplished
through public notifications in the San
Francisco Chronicle, social media
announcements, and direct mail
correspondence to appropriate federal,
state, and local agencies; surrounding
property owners; and private
organizations and citizens who have
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previously expressed or are known to
have an interest in the Project.
The primary purpose of the scoping
process is for the public to assist GSA
in determining the scope and content of
the environmental analysis.
Dated: July 24, 2019.
Jared Bradley,
Director, Portfolio Management Division,
Pacific Rim Region, Public Buildings Service.
[FR Doc. 2019–16133 Filed 7–29–19; 8:45 am]
BILLING CODE 6820–YF–P
DEPARTMENT OF DEFENSE
GENERAL SERVICES
ADMINISTRATION
NATIONAL AERONAUTICS AND
SPACE ADMINISTRATION
[OMB Control No. 9000–0083; Docket No.
2019–0003; Sequence No. 3]
Submission for OMB Review;
Qualification Requirements
Department of Defense (DOD),
General Services Administration (GSA),
and National Aeronautics and Space
Administration (NASA).
ACTION: Notice.
AGENCY:
Under the provisions of the
Paperwork Reduction Act, the
Regulatory Secretariat Division will be
submitting to the Office of Management
and Budget (OMB) a request to review
and approve a revision and renewal of
a previously approved information
collection requirement concerning
qualification requirements.
DATES: Submit comments on or before
August 29, 2019.
ADDRESSES: Submit comments regarding
this burden estimate or any other aspect
of this collection of information,
including suggestions for reducing this
burden to: Office of Information and
Regulatory Affairs of OMB, Attention:
Desk Officer for GSA, Room 10236,
NEOB, Washington, DC 20503.
Additionally submit a copy to GSA by
any of the following methods:
• Federal eRulemaking Portal: This
website provides the ability to type
short comments directly into the
comment field or attach a file for
lengthier comments. Go to https://
www.regulations.gov and follow the
instructions on the site.
• Mail: General Services
Administration, Regulatory Secretariat
Division (MVCB), 1800 F Street NW,
Washington, DC 20405. ATTN: Ms.
Mandell/IC 9000–0083, Qualification
Requirements.
Instructions: All items submitted
must cite Information Collection 9000–
SUMMARY:
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[Federal Register Volume 84, Number 146 (Tuesday, July 30, 2019)]
[Notices]
[Pages 36923-36926]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16152]
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FEDERAL TRADE COMMISSION
[File No. 171 0125]
Quaker Chemical Corporation and Global Houghton Ltd.; Analysis of
Agreement Containing Consent Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement; Request for Comment.
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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 of Agreement Containing Consent Orders 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 August 29, 2019.
ADDRESSES: Interested parties may file comments online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write: ``Quaker Chemical
Corporation and Global Houghton Ltd.; File No. 171 0125'' on your
comment, and file your comment online at https://www.regulations.gov by
following the instructions on the web-based form. If you prefer to file
your comment on paper, 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: Terry Thomas (202-326-3218), Bureau of
Competition, 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 July 23, 2019), on the World Wide Web, at
https://www.ftc.gov/news-events/commission-actions.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before August 29, 2019.
Write ``Quaker Chemical Corporation and Global Houghton Ltd.; File No.
171 0125'' 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 https://www.regulations.gov website.
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 through the https://www.regulations.gov website.
If you prefer to file your comment on paper, write ``Quaker
Chemical Corporation and Global Houghton Ltd.; File No. 171 0125'' 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
website at https://www.regulations.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
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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 August 29, 2019. For information on the
Commission's privacy policy, including routine uses permitted by the
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted for
public comment, subject to final approval, an Agreement Containing
Consent Orders (``Consent Agreement'') from Quaker Chemical Corporation
(``Quaker''), Global Houghton LTD. (``Houghton''), Gulf Houghton
Lubricants LTD., and AMAS Holding SPF (collectively, the
``Respondents''). The Consent Agreement would remedy the
anticompetitive effects that likely would result from Quaker's proposed
acquisition of Houghton (``Transaction'').
Absent a remedy, the Transaction would threaten to harm competition
in the manufacture and sale of: (1) Aluminum hot rolling oils
(``AHRO'') and associated technical support in North America; and (2)
steel cold rolling oils (``SCRO'') and associated technical support in
North America. In particular, the Commission's Complaint alleges that
the Transaction, if consummated, would violate Section 7 of the Clayton
Act, as amended, 15 U.S.C. 18, and that the asset purchase agreement
constitutes a violation of Section 5 of the Federal Trade Commission
Act, as amended, 15 U.S.C. 45, by substantially lessening competition
in the manufacture and sale of AHRO and SCRO in an area no greater than
North America.
The Consent Agreement addresses the Commission's concerns by, among
other things, requiring Quaker to divest Houghton's North American AHRO
and SCRO product lines to Total S.A. (``Total''), a multination oil and
gas company headquartered in France. Quaker must also divest the
intellectual property associated with Houghton's AHRO and SCRO, and
adjacent products including steel cleaners and AHRO compatible
hydraulic fluids.
The Commission has placed the proposed Consent Agreement on the
public record for 30 days to solicit comments from interested persons.
Comments received during this period will become part of the public
record. After 30 days, the Commission will again review the proposed
Consent Agreement and any comments received, and will decide whether it
should withdraw from the Consent Agreement, modify it, or make it
final.
II. The Respondents
Respondent Quaker, a publicly traded company, is a global supplier
of specialty process chemicals, lubricants, greases, and other metal
processing products. Headquartered in Conshohocken, Pennsylvania,
Quaker's 2018 revenues were $868 million.
Respondent Houghton is a global supplier of advanced metalworking
fluids and services. It serves the automotive, aerospace, metals,
mining, machinery, and beverage industries. Houghton is headquartered
in Valley Forge, Pennsylvania.
III. The Proposed Acquisition
The Commission's Complaint alleges that a relevant product market
in which to analyze the Transaction is the manufacture and sale of AHRO
and associated technical support services. AHRO is a mixture of water,
oil, and additives, custom-formulated to lubricate each individual
rolling mill. AHRO is necessary to allow manufacturers to operate hot
rolling mills for aluminum sheet production. There is no substitute
product for AHRO; lubricants for rolling other metals or for other
rolling processes will not work for aluminum hot rolling.
The associated technical support services are appropriately
included in this product market, as AHRO suppliers provide these
services as an integral component of the physical product. There is no
separate charge for these services. Technical support services begin
with the formulation of the oil and continue throughout the life of the
supply relationship, including necessary modifications to the
formulation and contamination monitoring in both the trial phase and
during active production. Technical support services from the AHRO
supplier are essential to the ongoing performance of the mill, and
there is no substitute for these services as provided in conjunction
with AHRO.
The Commission's Complaint also alleges that an area no greater
than North America is a relevant geographic market in which to analyze
the effects of the Transaction. U.S. AHRO customers do not obtain
supply from outside North America. Rolling oil suppliers typically
supply their customers by truck and station technical support personnel
at or near their customers' mills to ensure timely supply and rapid
service. At the mill, customers blend the oil with the mill's own water
supply to create the final emulsion. Given the large volumes of rolling
oil required to run a mill, and the need for timely re-supply, shipping
AHRO from outside North America would be cost- and supply-prohibitive.
The relevant market for AHRO and associated technical support
services in North America is highly concentrated. Quaker and Houghton
are the only two companies that commercially supply AHRO in North
America. Thus, post-transaction, Quaker will be the monopoly AHRO
supply option for third parties in North America.
Timely, sufficient entry is unlikely to alleviate any potential
competitive harm in the market for AHRO and associated technical
support services. Consistent with the Commission's allegations in the
2010 AEA Investors/Houghton (``Houghton/D.A. Stuart'') complaint
(Docket No. C-4297), entry is difficult in this market. Formulating
AHRO and providing technical support services require specialized
knowledge that is not widely available. Even the few AHRO customers
with in-house supply capabilities are unable to supply fully their own
mills given the shortage of qualified scientists to develop and real-
time modify rolling oil formulations and support their use in mill
operations. Large, well-established customers of AHRO are unaware of
potential entrants that could enter the market and supply AHRO.
Customer acceptance is also a significant entry barrier. Customers
are reluctant to switch AHRO suppliers because AHRO is so critical to
aluminum sheet rolling. Aluminum manufacturers place great weight on
the AHRO suppliers' experience and reputation. They likely would be
unwilling to chance a supplier that lacks the parties' established
reputations and decades of experience given the risk of catastrophic
effects should the supplier's product or support capabilities fall
short. There are significant time commitments and costs associated with
switching to a new AHRO supplier. Given that AHRO is a relatively small
cost component in the production of aluminum coil, it is unlikely that
a small significant sustained price increase would justify a
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lengthy trial process for a new entrant without a proven track record.
The Commission's Complaint also alleges that a relevant product
market in which to analyze the Transaction is the manufacture and sale
of SCRO and associated technical support. SCRO includes sheet cold
rolling oils, pickle oils, and tin plate rolling oils (``TPRO''). Steel
manufacturers use SCRO to reduce friction and prevent metal-to-metal
contact between surfaces of the mill's rollers and the steel during the
cold rolling process for steel sheet of any width or gauge, for any
further processing (e.g., tinplating or coating with another substance,
e.g., zinc, aluminum, or paint), and for any end-use (e.g., can bodies,
can ends, and other closures for food and beverages, household
appliances, such as washers and dryers, automobile or truck parts, or
building and construction products). Like other rolling oils, SCRO is a
mixture of water, oil, and additives for lubrication and corrosion
protection. SCRO producers customize the product for each individual
rolling mill, and there are no substitutes for SCRO. Lubricants
designed for other mills, metals, or rolling processes could damage
mill equipment and render the processed steel unusable.
As with AHRO, SCRO suppliers provide essential technical support
services as part of the supply of the lubricant (i.e., without a
separate charge). The provision of these technical services is an
essential component of the SCRO supply relationship.
As with AHRO, North America is the relevant geographic market for
SCRO. Staff's investigation did not reveal evidence that any mill in
the United States received SCRO products and services from suppliers
outside North America.
Steel manufacturers in the United States primarily use SCRO made
with animal fat in their mills. Because animal fat will congeal under
typical tanker truck conditions, SCRO suppliers must deliver it via
heated tanker trucks. This heating requirement adds to transportation
costs, making imports of animal fat-based SCRO cost-prohibitive.
The animal fat-based composition of SCRO used in the United States
also limits customers' choices for supply. Steel mills in the United
States typically are older and have relatively smaller tanks that
require frequent drainage. As a result, it is not economical for U.S.
steel mills to use vegetable oil based (commonly referred to as
synthetic oil) that is more advanced but higher cost. European steel
mills, which are generally newer and have larger tanks, use this
synthetic SCRO. Given the greater cost of synthetic SCRO and the costs
of shipping, U.S. steel manufacturers are unlikely to turn to overseas
SCRO suppliers in response to a small significant sustained price
increase.
As in the market for AHRO, Quaker and Houghton are the two dominant
suppliers of SCRO and associated technical support services in North
America. Although fringe competitors participate in this market, to the
extent that customers need both SCRO and related support and technical
services combined, the merger may present as an effective merger-to-
monopoly.
IV. Effects of the Transaction
The proposed transaction would be a merger to monopoly in the
market for AHRO and associated technical support services. Staff's
investigation has revealed no evidence to suggest that the likely
competitive effects of this combination are meaningfully different from
those of the Houghton/D.A. Stuart transaction remedied by the
Commission in 2010. In addition, customers worry that the proposed
transaction would consolidate all AHRO technical expertise within one
company. Today, Quaker and Houghton compete on their technical support
service capabilities, including their availability, responsiveness, and
expertise in anticipating, preventing, diagnosing, and addressing
problems related to their lubricants in order to ensure smooth
operations and high quality aluminum sheet. The parties' support
service technicians must thoroughly understand the design of each mill,
the products made there, and the interaction between the rolling oil,
substrate, and rollers. When problems arise today, they create an
opportunity for a competitor to challenge the incumbent supplier as the
customer seeks a solution and/or a superior product as quickly as
possible to get operations back on track. Post-merger, customers will
have only one support team--Quaker's--to turn to in the event of
operational issues, and will lose the advantage of a possible switch to
encourage investment in troubleshooting.
The Transaction presents similar concerns for customers of SCRO and
associated technical support services. Notwithstanding the presence of
a few fringe suppliers, SCRO customers fear that the deal may result in
higher prices, lower service levels, reduced innovation, and supply
availability challenges. Like AHRO customers, SCRO customers face
meaningful barriers to switching suppliers, including lengthy trial
periods, downtime, and long waits for customer approval.
Quaker and Houghton also compete on the quality of their technical
support services and expertise. Customers rely on their SCRO suppliers
to troubleshoot and address operational issues as they arise. When the
incumbent supplier cannot resolve problems to the customer's
satisfaction, the customer may turn to a competing supplier to propose
an alternative solution. Post-merger, Quaker will no longer face
Houghton as a competitive threat to keep its service levels sharp;
competition from fringe SCRO suppliers may not be sufficient to protect
customers.
Customers have also raised concerns that the proposed merger would
eliminate their only SCRO alternative in the event of supply challenges
or emergencies. If a supply disruption occurs, SCRO customers must
either turn to an alternative supplier or idle their mills at great
expense. Steel manufacturers take comfort in the availability of
multiple potential SCRO suppliers to ensure that they can access this
essential input in times of shortages. The proposed transaction would
eliminate the most promising alternative supply option for SCRO
customers, and may deprive them of any viable alternative at all.
A prospective entrant into the SCRO market faces similar barriers
to those that render entry unlikely for AHRO, including technical
expertise and reputational hurdles. Entry is difficult even for a
supplier that operates in other fluid-based markets.
V. The Proposed Consent Agreement
The proposed order requires a divestiture to Total. Total's
business includes oil and gas exploration, refining, and marketing as
well as chemical manufacturing. Total had annual revenues in 2018 of
approximately $210 billion. The divestiture to Total would replicate
Houghton's competitive presence in the AHRO and SCRO markets in North
America by creating a viable, effective, and independent competitor.
The order requires Quaker to divest certain products, transfer key
employees, and provide transition services and toll manufacturing. The
term of the proposed order is ten years. The order also requires Quaker
to supply the divested products to Total for a transitional period
while transferring the manufacturing technology to Total.
To remedy harm in the market for AHRO, Quaker will divest to Total:
(1) Houghton's formulations, intellectual property, including patent
for non-oleic
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acid formula, trade secrets, including know-how for its AHRO; (2)
customer contracts for North America; (3) key Houghton employees that
are responsible for the commercial and technical aspects of the AHRO
business; and (4) adjacent products including fire resistant hydraulic
fluids.
To remedy harm in the market for SCRO, which includes sheet cold
rolling oil, TPRO, and pickle oil, Quaker will divest to Total: (1)
Houghton's formulations, trade secrets and intellectual property,
including know-how for sheet cold rolling oils, TPRO, and pickle oil;
(2) customer contracts for North America; (3) key Houghton employees
that are responsible for the commercial and technical aspects of the
SCRO business; and (4) SCRO and TPRO cleaners.
By direction of the Commission.
April J. Tabor,
Acting Secretary.
[FR Doc. 2019-16152 Filed 7-29-19; 8:45 am]
BILLING CODE 6750-01-P
