FXI Holdings and Innocor; Analysis of Agreement Containing Consent Order To Aid Public Comment, 12300-12302 [2020-04182]

Download as PDF 12300 Federal Register / Vol. 85, No. 41 / Monday, March 2, 2020 / Notices transmission time for respondents to 28 calendar days, allowing additional time for reporters to prepare and transmit data. Legal authorization and confidentiality: The FR 2028 is authorized by section 11(a)(2) of the Federal Reserve Act (12 U.S.C. 248(a)(2)), which authorizes the Board to require any depository institution to make such reports of its assets and liabilities as the Board may determine to be necessary or desirable to enable the Board to discharge its responsibilities to monitor and control monetary and credit aggregates. The FR 2028 survey submissions are voluntary. Individual respondents may request that information submitted to the Board through a survey under FR 2028 be kept confidential. If a respondent requests confidential treatment, the Board will determine whether the information is entitled to confidential treatment on a case-by-case basis. The Board will consider whether information collected through these surveys may be kept confidential under exemption 4 for the Freedom of Information Act (FOIA), which protects privileged or confidential commercial or financial information (5 U.S.C. 552(b)(4)), or any other applicable FOIA exemption. Board of Governors of the Federal Reserve System, February 25, 2020. Michele Taylor Fennell, Assistant Secretary of the Board. [FR Doc. 2020–04195 Filed 2–28–20; 8:45 am] BILLING CODE 6210–01–P FEDERAL TRADE COMMISSION [File No. 191 0087] FXI Holdings and Innocor; Analysis of Agreement Containing Consent Order 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 Order 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. DATES: Comments must be received on or before April 1, 2020. ADDRESSES: Interested parties may file comments online or on paper, by following the instructions in the Request for Comment part of the khammond on DSKJM1Z7X2PROD with NOTICES SUMMARY: VerDate Sep<11>2014 18:10 Feb 28, 2020 Jkt 250001 SUPPLEMENTARY INFORMATION section below. Please write: ‘‘FXI Holdings and Innocor; File No. 191 0087’’ on your comment, and file your comment online at https://www.regulations.gov by following the instructions on the webbased form. If you prefer to file your comment on paper, please 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: Llewellyn Davis (202–326–3394), 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 of Agreement Containing Consent Order 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 website (for February 21, 2020), at this web address: https://www.ftc.gov/newsevents/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 April 1, 2020. Write ‘‘FXI Holdings and Innocor; File No. 191 0087’’ 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 ‘‘FXI Holdings and Innocor; File No. 191 0087’’ 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 PO 00000 Frm 00051 Fmt 4703 Sfmt 4703 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 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 http:// www.ftc.gov to read this Notice and the E:\FR\FM\02MRN1.SGM 02MRN1 Federal Register / Vol. 85, No. 41 / Monday, March 2, 2020 / Notices 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 April 1, 2020. 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 Order To Aid Public Comment khammond on DSKJM1Z7X2PROD with NOTICES I. Introduction The Federal Trade Commission (‘‘Commission’’) has accepted from One Rock Capital Partners II, LP (‘‘One Rock Capital’’), FXI Holdings, Inc. (‘‘FXI’’), Bain Capital Fund XI, LP (‘‘Bain’’), and Innocor Inc. (‘‘Innocor’’), subject to final approval, an Agreement Containing Consent Order (‘‘Consent Agreement’’) designed to remedy the anticompetitive effects that would likely result from FXI’s proposed acquisition of Innocor. The proposed Decision and Order (‘‘Order’’) contained in the Consent Agreement requires FXI and Innocor to divest three polyurethane foam pouring plants to Future Foam, Inc. (‘‘Future Foam’’). The proposed Consent Agreement has been placed on the public record for thirty days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After 30 days, the Commission will review the comments received and decide whether it should withdraw, modify, or make the Consent Agreement final. On March 4, 2019, FXI and Innocor signed an Agreement and Plan of Merger by which FXI’s parent company, One Rock Capital, would acquire 100% of the voting securities of Innocor for approximately $850 million (the ‘‘Acquisition’’). The proposed Acquisition would combine two leading producers of polyurethane foam in the United States. The Commission’s Complaint alleges that the proposed Acquisition, if consummated, would violate Section 7 of the Clayton act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. 45, by substantially lessening competition in several regional markets across the United States for low-density conventional polyurethane foam (‘‘LowDensity Foam’’). The proposed Consent Agreement would remedy the alleged violations by preserving the competition that otherwise would be lost in this VerDate Sep<11>2014 18:10 Feb 28, 2020 Jkt 250001 market as a result of the proposed Acquisition. II. The Parties Headquartered in Media, Pennsylvania, FXI is a polyurethane foam producer, providing a full range of polyurethane foam products including conventional, visco, and high resiliency foam. Polyurethane foam is used in a variety of end-uses, including home furnishing, packaging, and automotive applications. FXI operates foam-pouring facilities across the United States, including in the Pacific Northwest, the Midwest States, and Mississippi. Innocor, headquartered in Red Bank, New Jersey, also produces a full range of polyurethane foam products including conventional, visco, and high resiliency foam for home furnishing, packaging, and other end uses. Like FXI, Innocor operates foam-pouring facilities across the United States, including in the Pacific Northwest, the Midwest States, and Mississippi. III. The Relevant Product and Market Structure The relevant product market in which to assess the competitive effects of the proposed acquisition is Low-Density Foam for home furnishing uses. Polyurethane foam consists of various grades and densities with different properties and end uses. Both FXI and Innocor sell Low-Density Foam, commonly referred to as ‘‘light and white,’’ to furniture manufacturers directly or through third party fabricators. When used in home furnishing products, such as mattresses, mattress toppers, pet beds, pillows, chairs, and couches, Low-Density Foam serves as padding or cushioning. There are no reasonably interchangeable substitutes for Low-Density Foam in home furnishing applications. Regional geographic markets are appropriate to assess the competitive effects of the proposed Acquisition because of the importance of proximity to producers. Low-Density Foam is bulky, and involves shipping a large volume of air, so the cost of shipping is high relative to the value of the product. These high shipping costs limit the ability of distant producers to compete against local suppliers and result in regional competition. Foam producers like FXI and Innocor operate regional pouring facilities that service customers in the surrounding areas. In this matter, there are three relevant geographic markets for Low-Density Foam: The Pacific Northwest, the Midwest States, and Mississippi. The Pacific Northwest includes Oregon, Washington. The PO 00000 Frm 00052 Fmt 4703 Sfmt 4703 12301 Midwest States include Indiana, Michigan, and Ohio. The combination of FXI and Innocor would create the largest supplier of Low-Density Foam in the United States. The combined firm would have a market share above 50% in each of the Pacific Northwest, Midwest States, and Mississippi markets. FXI and Innocor face varying levels of competition in these regional markets. FXI and Innocor are the only firms that pour foam in the Pacific Northwest. In the Midwest States, FXI, Innocor, and Carpenter each have foam-pouring facilities, while in Mississippi FXI, Innocor, Carpenter and Elite each operate foam-pouring facilities. Future Foam does not currently pour foam in any of these markets. The proposed FXI/Innocor combination would result in highly concentrated markets for Low-Density Foam to become even more concentrated, increasing the HerfindahlHirschman Index (‘‘HHI’’) by more than 1500 in three regional markets—the Pacific Northwest, the Midwest States, and Mississippi. This increase in concentration far exceeds the thresholds set out in the Horizontal Merger Guidelines for raising a presumption that the Acquisition would create or enhance market power. IV. Effects of the Acquisition Absent a divestiture, the proposed acquisition is likely to harm customers of Low-Density Foam in the Pacific Northwest, Midwest States, and Mississippi markets. FXI and Innocor compete directly against each other for Low-Density Foam sales in each of the relevant markets, and customers have benefited from that competition. By eliminating head-to-head competition between FXI and Innocor, the proposed Acquisition likely would lead to unilateral effects in the form of higher prices and reduced innovation. The proposed acquisition is also likely to increase the likelihood of coordination and parallel accommodating conduct among the remaining competitors in the relevant markets. There is a history of alleged anticompetitive conduct within the polyurethane foam industry, raising heightened concerns about further consolidation. The industry also shows an existing vulnerability to coordination, including significant awareness of interdependence among the suppliers, actions taken in recognition of that interdependence, and sufficient transparency among the producers to support coordination. Further consolidation is likely to E:\FR\FM\02MRN1.SGM 02MRN1 12302 Federal Register / Vol. 85, No. 41 / Monday, March 2, 2020 / Notices increase the incentives and ability of the remaining firms to coordinate. khammond on DSKJM1Z7X2PROD with NOTICES V. Entry Entry into the Low-Density Foam markets would not be timely, likely, or sufficient in magnitude, character, and scope to deter or counteract the anticompetitive effects of the proposed Acquisition. A new entrant with a single pouring plant would face significant barriers to entry, such as higher procurement costs for critical inputs, including the various chemicals, which make up a substantial portion of the cost of polyurethane foam. No new polyurethane foam pouring plants have opened in the Pacific Northwest, the Midwest States or Mississippi for many years. In fact, the number of plants in these regions has steadily decreased as industry participants have consolidated and closed numerous overlapping plants. VI. The Consent Agreement The Consent Agreement eliminates the competitive concerns raised by the proposed Acquisition by requiring the merging parties to divest foam-pouring plants located in Kent, Washington; Elkhart, Indiana; and Tupelo, Mississippi to Future Foam, a privately held competitor based in Council Bluffs, Iowa. Future Foam is a leading producer of low-density conventional foam but currently has a limited presence in the Pacific Northwest, Mississippi, and the Midwest States. The divestiture package consists of the following assets and rights: FXI’s Kent, Washington polyurethane foam plant, Innocor’s Elkhart, Indiana plant, and Innocor’s Tupelo, Mississippi plant, including each plant’s production facilities, warehouses, storage facilities, equipment, offices, fabricating operations, transportation assets, and all other related businesses, operations and assets; formulas, technologies and other intangible rights and property relating to the facilities; and licenses to shared intellectual property. Additionally, the Order requires that, at the request of Future Foam, FXI must provide transitional assistance for up to twelve months following the divestiture date. These services include logistical and administrative support. The Order also includes other standard terms designed to ensure the viability of the divested business. The provisions of the proposed Consent Agreement positions Future Foam to become an effective competitor in the markets for LowDensity Foam in the Pacific Northwest, the Midwest States, and Mississippi in order to maintain the competition that currently exists. VerDate Sep<11>2014 18:10 Feb 28, 2020 Jkt 250001 Under the Order, FXI is required to divest the three plants no later than 10 days from the close of its acquisition of Innocor. If the Commission determines that Future Foam is not an acceptable acquirer, or that the manner of the divestitures is not acceptable, the Order requires FXI to either unwind the sale of rights and assets to Future Foam and then divest the assets to a Commissionapproved acquirer within 120 days of the date the Order becomes final, or modify the divestiture to Future Foam in the manner the Commission determines is necessary to satisfy the requirements of the Order. The Order also requires a monitor to oversee FXI’s compliance with the obligations set forth in the Order. If FXI does not fully comply with the divestiture and other requirements of the Order, the Commission may appoint a Divestiture Trustee to divest the three facilities and perform FXI’s other obligations consistent with the Order. The Order also requires that FXI and One Rock Capital shall not, without providing advance written notification to the Commission, acquire any polyurethane foam production plant in the states of Indiana, Michigan, Mississippi, Ohio, Oregon, and Washington for a period of ten years from the date the Order is issued. The purpose of this analysis is to facilitate public comment on the Consent Agreement to aid the Commission in determining whether it should make the Consent Agreement final. This analysis is not an official interpretation of the proposed Consent Agreement and does not modify its terms in any way. By direction of the Commission. April J. Tabor, Acting Secretary. [FR Doc. 2020–04182 Filed 2–28–20; 8:45 am] BILLING CODE 6750–01–P GENERAL SERVICES ADMINISTRATION [Notice–PBS–2020–02; Docket No. 2020– 0002; Sequence No. 7] Notice of Availability of a Record of Decision for the Construction of a New U.S. Land Port of Entry in Madawaska, Maine, and a New MadawaskaEdmundston International Bridge Public Buildings Service (PBS), General Services Administration (GSA); Federal Highway Administration (FHWA); Maine Department of Transportation (MaineDOT). AGENCY: PO 00000 Frm 00053 Fmt 4703 Sfmt 4703 Notice of availability of a Record of Decision. ACTION: Pursuant to the requirements of the National Environmental Policy Act of 1969 (NEPA), the Council on Environmental Quality Regulations, GSA Order ADM 1095.1F Environmental Considerations in Decision Making, the GSA PBS NEPA Desk Guide, the FHWA Policy Guide, and FHWA’s Environmental Impact and Related Procedures, the GSA PBS, FHWA, and MaineDOT, in cooperation with the U.S. Coast Guard and in coordination with the U.S. Customs and Border Protection (CBP), announce the availability of a Record of Decision (ROD) for the proposed new U.S. land port of entry (LPOE) in Madawaska, Maine, and new International Bridge between Madawaska, Maine, and Edmundston, New Brunswick, Canada. ADDRESSES: GSA, FHWA, and MaineDOT will have copies of the ROD for review at the Town of Madawaska Town Office on 328 St. Thomas Street, Suite 101, Madawaska, Maine 04756. Further information, including an electronic copy of the ROD, may be found online on the following websites: • gsa.gov/madawaskalpoe • https://www.maine.gov/mdot/ planning/studies/meib/ FOR FURTHER INFORMATION CONTACT: Alexas Kelly, Project Manager, GSA, New England Region, 10 Causeway Street, 11th Floor, Boston, MA 02222, by phone at 617–549–8190, or by email at alexandria.kelly@gsa.gov; or Cheryl Martin, Assistant Division Administrator, FHWA, Edmund S. Muskie Federal Building, 40 Western Avenue, Room 614, Augusta, ME 04330, by phone at 207–512–4912, or by email at cheryl.martin@dot.gov. SUPPLEMENTARY INFORMATION: The purpose of the Proposed Action is to provide for the long-term safe and efficient flow of current and projected traffic volumes, including the movement of goods and people between Edmundston, New Brunswick, and Madawaska, Maine. The Proposed Action is needed because (1) the existing International Bridge is nearing the end of its useful life, and (2) the existing Madawaska LPOE is substandard, inhibiting the agencies assigned to the LPOE from adequately fulfilling their respective missions. The existing Madawaska-Edmundston International Bridge opened to traffic in 1921 and its design life has been exceeded. Notable bridge deficiencies are (1) substandard roadway width and clearance, (2) foundation susceptible to undermining, (3) piers cracked and SUMMARY: E:\FR\FM\02MRN1.SGM 02MRN1

Agencies

[Federal Register Volume 85, Number 41 (Monday, March 2, 2020)]
[Notices]
[Pages 12300-12302]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04182]


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FEDERAL TRADE COMMISSION

[File No. 191 0087]


FXI Holdings and Innocor; Analysis of Agreement Containing 
Consent Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement; request for comment.

-----------------------------------------------------------------------

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 Order 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.

DATES: Comments must be received on or before April 1, 2020.

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. Please write: ``FXI Holdings 
and Innocor; File No. 191 0087'' 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, please 
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: Llewellyn Davis (202-326-3394), 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 of Agreement Containing Consent Order 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 website (for 
February 21, 2020), at this web address: 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 April 1, 2020. 
Write ``FXI Holdings and Innocor; File No. 191 0087'' 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 ``FXI Holdings 
and Innocor; File No. 191 0087'' 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 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 http://www.ftc.gov to read this Notice and 
the

[[Page 12301]]

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 April 1, 2020. 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 Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted from One 
Rock Capital Partners II, LP (``One Rock Capital''), FXI Holdings, Inc. 
(``FXI''), Bain Capital Fund XI, LP (``Bain''), and Innocor Inc. 
(``Innocor''), subject to final approval, an Agreement Containing 
Consent Order (``Consent Agreement'') designed to remedy the 
anticompetitive effects that would likely result from FXI's proposed 
acquisition of Innocor. The proposed Decision and Order (``Order'') 
contained in the Consent Agreement requires FXI and Innocor to divest 
three polyurethane foam pouring plants to Future Foam, Inc. (``Future 
Foam'').
    The proposed Consent Agreement has been placed on the public record 
for thirty days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After 30 days, the Commission will review the comments received and 
decide whether it should withdraw, modify, or make the Consent 
Agreement final.
    On March 4, 2019, FXI and Innocor signed an Agreement and Plan of 
Merger by which FXI's parent company, One Rock Capital, would acquire 
100% of the voting securities of Innocor for approximately $850 million 
(the ``Acquisition''). The proposed Acquisition would combine two 
leading producers of polyurethane foam in the United States. The 
Commission's Complaint alleges that the proposed Acquisition, if 
consummated, would violate Section 7 of the Clayton act, as amended, 15 
U.S.C. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. 45, by 
substantially lessening competition in several regional markets across 
the United States for low-density conventional polyurethane foam 
(``Low-Density Foam''). The proposed Consent Agreement would remedy the 
alleged violations by preserving the competition that otherwise would 
be lost in this market as a result of the proposed Acquisition.

II. The Parties

    Headquartered in Media, Pennsylvania, FXI is a polyurethane foam 
producer, providing a full range of polyurethane foam products 
including conventional, visco, and high resiliency foam. Polyurethane 
foam is used in a variety of end-uses, including home furnishing, 
packaging, and automotive applications. FXI operates foam-pouring 
facilities across the United States, including in the Pacific 
Northwest, the Midwest States, and Mississippi.
    Innocor, headquartered in Red Bank, New Jersey, also produces a 
full range of polyurethane foam products including conventional, visco, 
and high resiliency foam for home furnishing, packaging, and other end 
uses. Like FXI, Innocor operates foam-pouring facilities across the 
United States, including in the Pacific Northwest, the Midwest States, 
and Mississippi.

III. The Relevant Product and Market Structure

    The relevant product market in which to assess the competitive 
effects of the proposed acquisition is Low-Density Foam for home 
furnishing uses. Polyurethane foam consists of various grades and 
densities with different properties and end uses. Both FXI and Innocor 
sell Low-Density Foam, commonly referred to as ``light and white,'' to 
furniture manufacturers directly or through third party fabricators. 
When used in home furnishing products, such as mattresses, mattress 
toppers, pet beds, pillows, chairs, and couches, Low-Density Foam 
serves as padding or cushioning. There are no reasonably 
interchangeable substitutes for Low-Density Foam in home furnishing 
applications.
    Regional geographic markets are appropriate to assess the 
competitive effects of the proposed Acquisition because of the 
importance of proximity to producers. Low-Density Foam is bulky, and 
involves shipping a large volume of air, so the cost of shipping is 
high relative to the value of the product. These high shipping costs 
limit the ability of distant producers to compete against local 
suppliers and result in regional competition. Foam producers like FXI 
and Innocor operate regional pouring facilities that service customers 
in the surrounding areas. In this matter, there are three relevant 
geographic markets for Low-Density Foam: The Pacific Northwest, the 
Midwest States, and Mississippi. The Pacific Northwest includes Oregon, 
Washington. The Midwest States include Indiana, Michigan, and Ohio.
    The combination of FXI and Innocor would create the largest 
supplier of Low-Density Foam in the United States. The combined firm 
would have a market share above 50% in each of the Pacific Northwest, 
Midwest States, and Mississippi markets. FXI and Innocor face varying 
levels of competition in these regional markets. FXI and Innocor are 
the only firms that pour foam in the Pacific Northwest. In the Midwest 
States, FXI, Innocor, and Carpenter each have foam-pouring facilities, 
while in Mississippi FXI, Innocor, Carpenter and Elite each operate 
foam-pouring facilities. Future Foam does not currently pour foam in 
any of these markets.
    The proposed FXI/Innocor combination would result in highly 
concentrated markets for Low-Density Foam to become even more 
concentrated, increasing the Herfindahl-Hirschman Index (``HHI'') by 
more than 1500 in three regional markets--the Pacific Northwest, the 
Midwest States, and Mississippi. This increase in concentration far 
exceeds the thresholds set out in the Horizontal Merger Guidelines for 
raising a presumption that the Acquisition would create or enhance 
market power.

IV. Effects of the Acquisition

    Absent a divestiture, the proposed acquisition is likely to harm 
customers of Low-Density Foam in the Pacific Northwest, Midwest States, 
and Mississippi markets. FXI and Innocor compete directly against each 
other for Low-Density Foam sales in each of the relevant markets, and 
customers have benefited from that competition. By eliminating head-to-
head competition between FXI and Innocor, the proposed Acquisition 
likely would lead to unilateral effects in the form of higher prices 
and reduced innovation.
    The proposed acquisition is also likely to increase the likelihood 
of coordination and parallel accommodating conduct among the remaining 
competitors in the relevant markets. There is a history of alleged 
anticompetitive conduct within the polyurethane foam industry, raising 
heightened concerns about further consolidation. The industry also 
shows an existing vulnerability to coordination, including significant 
awareness of interdependence among the suppliers, actions taken in 
recognition of that interdependence, and sufficient transparency among 
the producers to support coordination. Further consolidation is likely 
to

[[Page 12302]]

increase the incentives and ability of the remaining firms to 
coordinate.

V. Entry

    Entry into the Low-Density Foam markets would not be timely, 
likely, or sufficient in magnitude, character, and scope to deter or 
counteract the anticompetitive effects of the proposed Acquisition. A 
new entrant with a single pouring plant would face significant barriers 
to entry, such as higher procurement costs for critical inputs, 
including the various chemicals, which make up a substantial portion of 
the cost of polyurethane foam. No new polyurethane foam pouring plants 
have opened in the Pacific Northwest, the Midwest States or Mississippi 
for many years. In fact, the number of plants in these regions has 
steadily decreased as industry participants have consolidated and 
closed numerous overlapping plants.

VI. The Consent Agreement

    The Consent Agreement eliminates the competitive concerns raised by 
the proposed Acquisition by requiring the merging parties to divest 
foam-pouring plants located in Kent, Washington; Elkhart, Indiana; and 
Tupelo, Mississippi to Future Foam, a privately held competitor based 
in Council Bluffs, Iowa. Future Foam is a leading producer of low-
density conventional foam but currently has a limited presence in the 
Pacific Northwest, Mississippi, and the Midwest States. The divestiture 
package consists of the following assets and rights: FXI's Kent, 
Washington polyurethane foam plant, Innocor's Elkhart, Indiana plant, 
and Innocor's Tupelo, Mississippi plant, including each plant's 
production facilities, warehouses, storage facilities, equipment, 
offices, fabricating operations, transportation assets, and all other 
related businesses, operations and assets; formulas, technologies and 
other intangible rights and property relating to the facilities; and 
licenses to shared intellectual property. Additionally, the Order 
requires that, at the request of Future Foam, FXI must provide 
transitional assistance for up to twelve months following the 
divestiture date. These services include logistical and administrative 
support. The Order also includes other standard terms designed to 
ensure the viability of the divested business. The provisions of the 
proposed Consent Agreement positions Future Foam to become an effective 
competitor in the markets for Low-Density Foam in the Pacific 
Northwest, the Midwest States, and Mississippi in order to maintain the 
competition that currently exists.
    Under the Order, FXI is required to divest the three plants no 
later than 10 days from the close of its acquisition of Innocor. If the 
Commission determines that Future Foam is not an acceptable acquirer, 
or that the manner of the divestitures is not acceptable, the Order 
requires FXI to either unwind the sale of rights and assets to Future 
Foam and then divest the assets to a Commission-approved acquirer 
within 120 days of the date the Order becomes final, or modify the 
divestiture to Future Foam in the manner the Commission determines is 
necessary to satisfy the requirements of the Order.
    The Order also requires a monitor to oversee FXI's compliance with 
the obligations set forth in the Order. If FXI does not fully comply 
with the divestiture and other requirements of the Order, the 
Commission may appoint a Divestiture Trustee to divest the three 
facilities and perform FXI's other obligations consistent with the 
Order. The Order also requires that FXI and One Rock Capital shall not, 
without providing advance written notification to the Commission, 
acquire any polyurethane foam production plant in the states of 
Indiana, Michigan, Mississippi, Ohio, Oregon, and Washington for a 
period of ten years from the date the Order is issued.
    The purpose of this analysis is to facilitate public comment on the 
Consent Agreement to aid the Commission in determining whether it 
should make the Consent Agreement final. This analysis is not an 
official interpretation of the proposed Consent Agreement and does not 
modify its terms in any way.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.
[FR Doc. 2020-04182 Filed 2-28-20; 8:45 am]
 BILLING CODE 6750-01-P