United States v. Continental AG and Veyance Technologies, Inc.; Proposed Final Judgment and Competitive Impact Statement |
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Topics: Continental, Veyance
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Patricia A. Brink
Department of Justice
December 22, 2014
[Federal Register Volume 79, Number 245 (Monday, December 22, 2014)]
[Notices]
[Pages 76371-76385]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29862]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Continental AG and Veyance Technologies, Inc.;
Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Hold Separate Stipulation and Order, and Competitive Impact Statement
have been filed with the United States District Court for the District
of Columbia in United States of America v. Continental AG, and Veyance
Technologies, Inc., Civil No. 1:14-cv-02087. On December 11, 2014, the
United States filed a Complaint alleging that Continental's proposed
acquisition of Veyance would violate Section 7 of the Clayton Act, 15
U.S.C. 18. The proposed Final Judgment, filed the same time as the
Complaint, requires Continental to divest Veyance's North American
commercial vehicle air springs business, including manufacturing and
assembly facilities in San Luis Potosi, Mexico; research, development,
engineering, and administrative assets in Fairlawn, Ohio; and certain
tangible and intangible assets.
Copies of the Complaint, proposed Final Judgment and Competitive
Impact Statement are available for inspection at the Department of
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth
Street NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-2481),
on the Department of Justice's Web site at http://www.usdoj.gov/atr,
and at the Office of the Clerk of the United States District Court for
the District of Columbia. Copies of these materials may be obtained
from the Antitrust Division upon request and payment of the copying fee
set by Department of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Department of Justice,
Antitrust Division's internet Web site, filed with the Court and, under
certain circumstances, published in the Federal Register. Comments
should be directed to Maribeth Petrizzi, Chief, Litigation II Section,
Antitrust Division, Department of Justice, 450 Fifth Street NW., Suite
8700, Washington, DC 20530 (telephone: 202-307-0924).
Patricia A. Brink,
Director of Civil Enforcement.
United States District Court for the District of Columbia
United States of America, U.S. Department of Justice, Antitrust
Division, 450 Fifth Street, NW, Suite 8700, Washington, DC 20530,
Plaintiff, v. Continental AG, Vanrenwalder Strasse 9, D-30165,
Hanover, Germany, and Veyance Technologies, Inc., 703 S. Cleveland
Massillon Road, Fairlawn, Ohio 44333, Defendants.
Case: 1:14-cv--2087
Filed: 12/11/2014
Judge: Hon. Reggie B. Walton
COMPLAINT
The United States of America (``United States''), acting under the
direction of the Attorney General of the United States, brings this
civil antitrust action to enjoin the proposed acquisition by Defendant
Continental AG (``Continental'') of Defendant Veyance Technologies,
Inc. (``Veyance''). The United States alleges as follows:
I. INTRODUCTION
1. Pursuant to an Agreement and Plan of Merger dated February 10,
2014, Continental has agreed to purchase Veyance from Carlyle Partners
IV, L.P. for $1.8 billion. The merger would combine two of the three
leading suppliers of air springs used in commercial vehicles in North
America.
2. Continental has competed aggressively with Veyance for sales in
North America, which has resulted in lower prices for commercial
vehicle air springs. Elimination of the competition between Continental
and Veyance likely would result in higher prices and decreased quality
of service for customers, and would increase the likelihood that the
two remaining suppliers would substantially reduce competition through
successful coordination. As a result, the proposed acquisition likely
would substantially lessen competition in the development, manufacture,
and sale of commercial vehicle air springs in North America in
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
II. THE PARTIES TO THE PROPOSED TRANSACTION
3. Defendant Continental AG, a corporation organized under the laws
of the Federal Republic of Germany, is based in Hanover, Germany.
Continental is a leading German automotive manufacturing company,
specializing in tires, brake systems, and components, and it is one of
the world's largest producers of rubber products. Its annual sales for
2013 were approximately $40 billion. ContiTech North America, Inc., of
Montvale, New Jersey, is a part of ContiTech AG, a division of
Continental. ContiTech North America produces and sells parts,
components and systems, including commercial vehicle air springs, for
the automotive engineering industry in North America.
4. Defendant Veyance Technologies, Inc. is incorporated in Delaware
with its headquarters in Fairlawn, Ohio. Veyance manufactures
engineered rubber products for heavy-duty industrial, automotive and
military applications. Veyance produces and sells automotive and
commercial vehicle parts, including commercial vehicle air springs, in
North America. In 2013, Veyance had $2.1 billion in sales.
III. JURISDICTION AND VENUE
5. The United States brings this action pursuant to Section 15 of
the Clayton Act, 15 U.S.C. Sec. 25, as amended, to prevent and
restrain Defendants from violating Section 7 of the Clayton Act, 15
U.S.C. Sec. 18.
6. The Court has subject matter jurisdiction over this action
pursuant to Section 15 of the Clayton Act, 15 U.S.C. Sec. 25, and 28
U.S.C. Sec. Sec. 1331, 1337(a), and 1345. Defendants produce and sell
commercial vehicle air springs in a regular, continuous, and
substantial flow of interstate commerce. Defendants' activities in the
development, manufacture, and sale of commercial vehicle air springs
have had a substantial effect upon interstate commerce.
7. Defendants have consented to venue and personal jurisdiction in
this District.
8. Venue is proper in this Court under Section 12 of the Clayton
Act, 15 U.S.C. Sec. 22, and 28 U.S.C. Sec. 1391(b) and (c).
[[Page 76372]]
IV. THE RELEVANT MARKET
A. Product Description
9. Air springs are load-carrying rubber components constructed of a
hollow rubber bellow sealed to metal plates attached at the top and
bottom. Through the use of air compression, air springs dampen road
shock and vibration. Air springs keep commercial vehicles--such as
trucks, trailers and buses--at the same distance from the road
irrespective of the weight being carried and also can be used as
actuators to raise and lower objects. For example, air springs are used
in buses to automatically maintain the same vehicle level and ride
comfort, no matter how many passengers get on or off.
10. As commercial vehicle components, air springs are used in
multiple locations in a vehicle: under the driver's seat, between the
cab and underlying frame, and in suspensions between axle and frame for
truck and trailer. Air springs in suspension systems of trucks,
trailers and buses help commercial vehicles save fuel, reduce tire
wear, and provide greater reliability. Air springs between the floor of
the cabin and the seat provide for driver comfort and reduce driver
fatigue. Air springs in the commercial vehicle cabin suspension system,
between the frame and the cabin, regulate cabin movement.
11. The three types of air springs are (1) rolling lobe, which are
used for truck, bus and trailer axles; (2) convoluted, or bellows,
which serve the same function as rolling lobe but also are used as
actuators to lift axles; and (3) sleeves, which are smaller springs
generally used in cabs and seats for driver comfort. The vast majority
of air springs for commercial vehicle applications sold in North
America are rolling lobe air springs purchased by original equipment
manufacturers (``OEMs'') for truck, trailer and bus suspension systems.
12. Commercial vehicle OEMs in North America determine the type of
air spring to be used in a particular platform. They can source the air
springs directly from the air spring manufacturer or purchase a
completed, fully integrated suspension system that includes air springs
from a suspension system OEM. Suspension system OEMs source commercial
vehicle air springs directly from the air spring manufacturer.
13. All air springs used by commercial vehicle OEMs must be of high
quality and durability. Commercial vehicle OEMs require that commercial
vehicle air springs meet rigid qualifications to ensure performance,
quality, and engineering design fit. The qualification process includes
not only qualification of the specific air spring to be used, via
laboratory and road tests, but also inspection of the particular
production facility where the air spring is to be produced. The
rigorous process of qualifying an air spring for commercial vehicle
OEMs can take more than two years. Once the air spring is qualified,
commercial vehicle OEMs work closely with the air spring manufacturer
to ensure that the air spring is integrated into the overall design of
the platform.
14. Air springs also are sold in the aftermarket, or the market for
replacement air springs for commercial vehicles. Commercial vehicle air
springs for the aftermarket are purchased by the end user to replace,
after time and wear, the air springs originally installed in commercial
vehicles. Commercial vehicle air springs for the aftermarket do not
have to meet the rigid qualifications that commercial vehicle OEMs
require, as replacement commercial vehicle air springs are not designed
for a specific commercial vehicle platform.
B. Relevant Product Markets
15. Rolling lobe, convoluted and sleeve commercial vehicle air
springs perform distinct functions and, in general, cannot be
substituted for each other. For instance, an air spring used in a
trailer suspension is not the same as an air spring used for a truck
seat. Accordingly, the three types of commercial vehicle air springs
are not interchangeable or substitutable for one another, and demand
for each is separate. In the event of a small but significant increase
in price for a given type of commercial vehicle air spring, customers
would not stop using that air spring in sufficient numbers so as to
defeat the price increase. Thus, the development, manufacture, and sale
of each type of commercial vehicle air spring is a separate line of
commerce and a relevant product market within the meaning of Section 7
of the Clayton Act.
16. Although narrower product markets of rolling lobe, convoluted
and sleeve air springs for commercial vehicles exist, the competitive
dynamic for each type is nearly identical. The same firms manufacture
and sell each of these products and each type of commercial vehicle air
spring is sold in similar competitive conditions. Therefore, the
products may be aggregated for analytical convenience into a single
relevant product market for the purpose of assigning market shares and
evaluating the competitive impact of the acquisition.
(1) Commercial Vehicle Air Springs for Original Equipment Manufacturers
17. Commercial vehicle OEMs require each air spring to meet rigid
qualification standards to ensure performance, quality, and engineering
design fit. Commercial vehicle air springs sold into the aftermarket
for replacement purposes are not of sufficient quality or reliability
to be used by commercial vehicle OEMs. Accordingly, commercial vehicle
air springs for OEMs are not interchangeable with or substitutable for
commercial vehicle air springs for the aftermarket, and demand for each
is separate.
18. A small but significant increase in the price of commercial
vehicle air springs for OEMs would not cause a sufficient number of
OEMs to substitute commercial vehicle air springs manufactured for the
aftermarket so as to make such a price increase unprofitable. Thus, the
development, manufacture, and sale of commercial vehicle air springs
for OEMs is a line of commerce and a relevant product market within the
meaning of Section 7 of the Clayton Act.
(2) Commercial Vehicle Air Springs for the Aftermarket
19. Commercial vehicle air springs for the aftermarket are sold for
replacement purposes. The targeted customer is the commercial vehicle
owner. Because commercial vehicle air springs for the aftermarket are
not designed for a specific commercial vehicle platform, they do not
have to meet the rigid qualifications that commercial vehicle OEMs
require. Commercial vehicle air springs for the aftermarket are of
lower quality and lesser durability than commercial vehicle air springs
made for OEMs. Accordingly, commercial vehicle air springs for the
aftermarket are not interchangeable or substitutable for commercial
vehicle air springs sold to OEMs. Demand for commercial vehicle air
springs used by OEMs is separate from demand for commercial vehicle air
springs for the aftermarket.
20. A small but significant increase in the price of commercial
vehicle air springs for the aftermarket would not cause customers to
substitute commercial vehicle air springs for OEMs in sufficient
numbers so as to make such a price increase unprofitable. Thus, the
development, manufacture, and sale of commercial vehicle air springs
for the aftermarket is a line of commerce and a relevant product market
within the meaning of Section 7 of the Clayton Act.
[[Page 76373]]
C. Relevant Geographic Market
(1) Commercial Vehicle Air Springs for OEMs
21. Commercial vehicle air springs are bulky but relatively
lightweight. Despite the light weight, the cost of transporting
commercial vehicle air springs is high compared to the value of the
product, because the manufacturers essentially have to pay to ship air.
Therefore, while shipping commercial vehicle air springs from overseas
is feasible, it adds significant cost--approximately 10 to 15 percent--
to the price of the product. Import taxes also add additional costs to
commercial vehicle air springs that are shipped from outside North
America.
22. In addition, commercial vehicle OEMs require that the air
springs production facility be qualified. The qualification process
includes inspection of the production facility by the customer. Having
to inspect and qualify a facility outside of North America adds both
time and expense to the process.
23. Further, commercial vehicle OEMs require timely delivery of air
springs, as they are an essential input into the final vehicle
platform. Procuring commercial vehicle air springs from overseas adds
significant lead time to delivery, increases the risk of shipment
delays, and makes more difficult the rapid correction of quality
shortcomings in delivered product. Thus, for commercial vehicle OEMs,
purchasing air springs from outside North America involves the
assumption of an unacceptable level of risk.
24. Therefore, to successfully sell commercial vehicle air springs
for OEM use in North America, an air spring manufacturer must have an
air spring production facility in North America.
25. OEM customers for commercial vehicle air springs in North
America would be unwilling to switch to commercial vehicle air springs
manufactured outside of North America to defeat a small but significant
price increase. Accordingly, North America is a relevant geographic
market for the development, manufacture, and sale of commercial vehicle
air springs for OEMs within the meaning of Section 7 of the Clayton
Act.
(2) Commercial Vehicle Air Springs for the Aftermarket
26. For commercial vehicle air springs sold in the aftermarket,
purchases are based on price, brand or reputation, and availability. As
with commercial vehicle air springs for OEMs, the cost of shipping
commercial vehicle air springs for the aftermarket, individually or in
small quantities, from outside North America would make them more
expensive than those sold in North America. Further, the additional
lead time to ship commercial vehicle air springs for individual demand
makes direct purchase from overseas unattractive to potential
purchasers, who want their vehicles repaired in a timely manner.
Therefore, a customer typically would not directly purchase commercial
vehicle air springs for the aftermarket from outside of North America.
27. Customers would be unwilling to switch to commercial vehicle
air springs manufactured outside of North America to defeat a small but
significant price increase. Accordingly, North America is a relevant
geographic market for the development, manufacture, and sale of
commercial vehicle air springs for the aftermarket within the meaning
of Section 7 of the Clayton Act.
D. Anticompetitive Effects
(1) Commercial Vehicle Air Springs for OEMs
28. In North America, the market for the development, manufacture,
and sale of commercial vehicle air springs for OEMs is highly
concentrated and would become substantially more concentrated as a
result of the proposed transaction. Continental and Veyance each have
approximately 30 percent of the North American market for commercial
vehicle air springs sold for OEMs. The only other competitor has
approximately 40 percent of the North American market, so the
acquisition would result in two firms holding 100 percent of the
market.
29. As articulated in the Horizontal Merger Guidelines issued by
the Department of Justice and the Federal Trade Commission, the
Herfindahl-Hirschman Index (``HHI''), discussed in Appendix A, is a
measure of market concentration. Market concentration is often one
useful indicator of the level of competitive vigor in a market and the
likely competitive effects of a merger. The more concentrated a market,
and the more a transaction would increase concentration in a market,
the more likely it is that a transaction would result in a meaningful
reduction in competition, harming consumers. Markets in which the HHI
is between 1,500 and 2,500 points are considered to be moderately
concentrated and markets in which the HHI is in excess of 2,500 points
are considered to be highly concentrated. Transactions that increase
the HHI by more than 200 points in highly concentrated markets are
presumed likely to enhance market power.
30. In the North American market for the development, manufacture,
and sale of commercial vehicle air springs for OEMs, the pre-merger HHI
is 3,388; the post-merger HHI is 5,224, with an increase in the HHI of
1,836. Consistent with the Horizontal Merger Guidelines, this market is
highly concentrated and would become substantially more concentrated as
a result of the proposed acquisition.
31. A combined Continental and Veyance would have the ability to
increase prices of commercial vehicle air springs sold to OEMs and to
reduce the quality of service for these customers by limiting
availability or delivery options.
32. In addition, Continental's elimination of Veyance as a strong,
independent competitor in the development, manufacture, and sale of
commercial vehicle air springs for OEMs likely would facilitate
anticompetitive coordination between the remaining two suppliers. The
two suppliers would be able to estimate each other's output, capacity,
reserves, and costs, making coordinated interaction easier.
33. The transaction would substantially lessen competition in the
development, manufacture, and sale of commercial vehicle air springs
for OEMs in North America and lead to higher prices and decreased
quality of service in violation of Section 7 of the Clayton Act.
(2) Commercial Vehicle Air Springs for the Aftermarket
34. In North America, the market for the development, manufacture,
and sale of commercial vehicle air springs sold in the aftermarket is
highly concentrated and would become substantially more concentrated as
a result of the proposed transaction. Veyance has approximately 33
percent of the market, Continental has approximately 17 percent of the
market, and one other competitor has approximately 45 percent. Were the
acquisition to proceed, two firms each would have close to a 50 percent
share of the market.
35. For the North American market for the development, manufacture,
and sale of commercial vehicle air springs sold in the aftermarket, the
premerger HHI is 3,403, the post-acquisition HHI is 4,525, and the
acquisition would produce an increase of 1,122 in the HHI. Consistent
with the Horizontal Merger Guidelines, this market is highly
concentrated and would become substantially more concentrated as a
result of the proposed acquisition.
36. The proposed transaction likely would substantially lessen
competition
[[Page 76374]]
in the North American market for the development, manufacture, and sale
of commercial vehicle air springs for the aftermarket and lead to
higher prices and decreased quality of service in violation of Section
7 of the Clayton Act.
E. Difficulty of Entry
(1) Commercial Vehicle Air Springs for OEMs
37. Timely and sufficient entry by additional competitors into the
market for the development, manufacture, and sale of commercial vehicle
air springs for OEMs is unlikely, given the substantial time and cost
required to establish a qualified production facility and to establish
a recognized brand and reputation in North America.
38. Choosing an appropriate factory location, ordering the
necessary equipment and setting up the factory for production of
commercial vehicle air springs likely would take two or more years and
would require a substantial investment. Once a location is chosen and
the factory is producing, the OEM qualification process can take two or
more additional years. Qualification requires a number of steps, and
both the factory and the particular air springs to be used by the
commercial vehicle OEM must be qualified.
39. Because of the cost and difficulty of establishing a production
facility in North America and gaining requisite OEM qualification,
entry into the North American market for the development, manufacture,
and sale of commercial vehicle air springs for OEMs would not be
timely, likely or sufficient to mitigate the anticompetitive effects of
Continental's proposed acquisition of Veyance.
(2) Commercial Vehicle Air Springs for the Aftermarket
40. The impact of the acquisition in the North American market for
the development, manufacture, and sale of commercial vehicle air
springs for the aftermarket would not be remedied quickly by the
response of foreign suppliers. These suppliers lack a recognized brand
and reputation in North America, and most lack the broad product
portfolio, to supply commercial vehicle air springs that would be
accepted by most OEMs. Foreign firms are not present in the North
American market for the development, manufacture, and sale of
commercial vehicle air springs for OEMs, so they do not have
established reputations that would contribute to their acceptance in
the aftermarket. Therefore, entry would not be timely, likely, or
sufficient to mitigate the anticompetitive effects of Continental's
proposed acquisition of Veyance.
V. VIOLATIONS ALLEGED
41. Continental's proposed acquisition of Veyance likely would
substantially lessen competition in North America for (1) the
development, manufacture, and sale of commercial vehicle air springs
for OEMs, and (2) the development, manufacture, and sale of commercial
vehicle air springs for the aftermarket, in violation of Section 7 of
the Clayton Act, 15 U.S.C. 18.
42. Unless enjoined, the proposed acquisition likely would have the
following anticompetitive effects, among others:
(a) actual and potential competition between Veyance and
Continental in the relevant markets would be eliminated;
(b) competition generally in the relevant markets would be
substantially lessened; and
(c) for the relevant products, prices would increase and the
quality of service would decrease.
VI. REQUESTED RELIEF
43. The United States requests that the Court:
(a) adjudge and decree that Continental's proposed acquisition of
Veyance is unlawful and in violation of Section 7 of the Clayton Act,
15 U.S.C. 18;
(b) preliminarily and permanently enjoin and restrain defendants
and all persons acting on their behalf from consummating the proposed
acquisition of Veyance by Continental, or from entering into or
carrying out any other contract, agreement, plan, or understanding, the
effect of which would be to combine Continental with Veyance;
(c) award the United States the costs for this action; and
(d) grant the United States such other and further relief as the
Court deems just and proper.
Respectfully submitted,
DATED: December 11, 2014
FOR PLAINTIFF UNITED STATES OF AMERICA:
/s/--------------------------------------------------------------------
William J. Baer
Assistant Attorney General
/s/--------------------------------------------------------------------
David I. Gelfand
Deputy Assistant Attorney General
/s/--------------------------------------------------------------------
Patricia A. Brink
Director of Civil Enforcement
/s/--------------------------------------------------------------------
Maribeth Petrizzi (DC Bar #435204)
Chief, Litigation II Section
/s/--------------------------------------------------------------------
Dorothy B. Fountain (DC Bar #439469)
Assistant Chief, Litigation II Section
/s/--------------------------------------------------------------------
Suzanne Morris (DC Bar #450208)
Dando Cellini
Tara Shinnick (DC Bar #501462)
Angela Ting (DC Bar #449576)
Soyoung Choe
James Tucker
United States Department of Justice, Antitrust Division, Litigation
II Section, 450 Fifth Street NW., Suite 8700, Washington, DC 20530,
(202) 307-0924, (202) 514-9033 (fax), Suzanne.Morris@usdoj.gov.
APPENDIX A
The U.S. Dep't of Justice and Federal Trade Commission, Horizontal
Merger Guidelines Sec. 5.3 (2010), available at http://www.justice.gov/atr/public/guidelines/hmg-2010.html, provide the method
for calculating the HHI. The HHI is calculated by squaring the market
share of each firm competing in the market and then summing the
resulting numbers. For example, for a market consisting of four firms
with shares of 30, 30, 20, and 20 percent, the HHI is 2,600 (30\2\ +
30\2\ + 20\2\ + 20\2\ = 2,600). The HHI takes into account the relative
size distribution of the firms in a market. It approaches zero when a
market is occupied by a large number of firms of relatively equal size
and reaches its maximum of 10,000 points when a market is controlled by
a single firm. The HHI increases both as the number of firms in the
market decreases and as the disparity in size between those firms
increases.
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Continental AG and
Veyance Technologies, Inc. Defendants.
Case No.: 1:14-cv-02087
Judge: Hon. Reggie B. Walton
COMPETITIVE IMPACT STATEMENT
Plaintiff, United States of America (``United States''), pursuant
to Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA''
or ``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding.
NATURE AND PURPOSE OF THE PROCEEDING
Pursuant to an Agreement and Plan of Merger dated February 10,
2014, Continental AG (``Continental'') has agreed to purchase Veyance
Technologies, Inc. (``Veyance'') from
[[Page 76375]]
Carlyle Partners IV, L.P. for $1.8 billion. The merger would combine
two of the three leading suppliers of air springs used in commercial
vehicles in North America.
The United States filed a civil antitrust Complaint on December 11,
2014, seeking to enjoin the proposed acquisition. The Complaint alleges
that the acquisition likely would substantially lessen competition in
North America in the development, manufacture and sale of commercial
vehicle air springs, in violation of Section 7 of the Clayton Act, 15
U.S.C. 18. That loss of competition likely would result in higher
prices and decreased quality of service for customers in the North
American market for commercial vehicle air springs.
At the same time the Complaint was filed, the United States filed a
Hold Separate Stipulation and Order and a proposed Final Judgment,
which are designed to eliminate the anticompetitive effects of the
acquisition. Under the proposed Final Judgment, which is explained more
fully below, the defendants are required to divest the Veyance North
America Air Springs Business, which includes Veyance's manufacturing
and assembly facilities in San Luis Potosi, Mexico, research and
development, engineering and testing operations, and administration
assets in Fairlawn, Ohio, and all of the tangible and intangible assets
primarily used in or for the business. Under the terms of the Hold
Separate Stipulation and Order, defendants will take certain steps to
ensure that the Veyance North America Air Springs Business is operated
as a competitively independent, economically viable, and ongoing
business concern; that it will remain independent and uninfluenced by
the consummation of the acquisition; and that competition is maintained
during the pendency of the ordered divestiture.
The United States and defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. DESCRIPTION OF THE EVENTS GIVING RISE TO THE ALLEGED VIOLATION
A. The Defendants
Defendant Continental AG, a corporation organized under the laws of
the Federal Republic of Germany, is based in Hanover, Germany.
Continental is a leading German automotive manufacturing company,
specializing in tires, brake systems, and components, and it is one of
the world's largest producers of rubber products. Its annual sales for
2013 were approximately $40 billion. ContiTech North America, Inc., of
Montvale, New Jersey, is a part of ContiTech AG, a division of
Continental. ContiTech North America produces and sells parts,
components and systems, including commercial vehicle air springs, for
the automotive engineering industry in North America.
Defendant Veyance Technologies, Inc. is incorporated in Delaware
with its headquarters in Fairlawn, Ohio. Veyance manufactures
engineered rubber products for heavy-duty industrial, automotive and
military applications. Veyance produces and sells automotive and
commercial vehicle parts, including commercial vehicle air springs, in
North America. In 2013, Veyance had $2.1 billion in sales.
B. The Markets
1. Commercial Vehicle Air Springs
Air springs are load-carrying rubber components constructed of a
hollow rubber bellow sealed to metal plates attached at the top and
bottom. Through the use of air compression, air springs dampen road
shock and vibration. Air springs keep commercial vehicles-such as
trucks, trailers and buses-at the same distance from the road
irrespective of the weight being carried and also can be used as
actuators to raise and lower objects. As commercial vehicle components,
air springs are used in multiple locations in a vehicle: under the
driver's seat, between the cab and underlying frame, and in suspensions
between axle and frame for truck and trailer. Air springs in suspension
systems of trucks, trailers and buses help commercial vehicles save
fuel, reduce tire wear, and provide greater reliability. Air springs
between the floor of the cabin and the seat provide for driver comfort
and reduce driver fatigue. Air springs in the commercial vehicle cabin
suspension system, between the frame and the cabin, regulate cabin
movement.
The three types of air springs are (1) rolling lobe, which are used
for truck, bus and trailer axles; (2) convoluted, or bellows, which
serve the same function as rolling lobe, but also are used as actuators
to lift axles; and (3) sleeves, which are smaller springs generally
used in cabs and seats for driver comfort. The vast majority of air
springs for commercial vehicle applications sold in North America are
rolling lobe air springs purchased by original equipment manufacturers
(``OEMs'') for truck, trailer and bus suspension systems.
Commercial vehicle OEMs in North America determine the type of air
spring to be used in a particular platform. They can source the air
springs directly from the air spring manufacturer or purchase a
completed, fully integrated suspension system that includes air springs
from a suspension system OEM. Suspension system OEMs source commercial
vehicle air springs directly from the air spring manufacturer. All air
springs used by commercial vehicle OEMs must be of high quality and
durability. Commercial vehicle OEMs require that commercial vehicle air
springs meet rigid qualifications to ensure performance, quality, and
engineering design fit. The qualification process includes not only
qualification of the specific air spring to be used, via laboratory and
road tests, but also inspection of the particular production facility
where the air spring is to be produced. The rigorous process of
qualifying an air spring for commercial vehicle OEMs can take more than
two years. Once the air spring is qualified, commercial vehicle OEMs
work closely with the air spring manufacturer to ensure that the air
spring is integrated into the overall design of the platform.
Air springs also are sold in the aftermarket, or the market for
replacement air springs for commercial vehicles. Commercial vehicle air
springs for the aftermarket are purchased by the end user to replace,
after time and wear, the air springs originally installed in commercial
vehicles. Commercial vehicle air springs for the aftermarket do not
have to meet the rigid qualifications that commercial vehicle OEMs
require, as replacement commercial vehicle air springs are not designed
for a specific commercial vehicle platform.
2. The North American Market for Commercial Vehicle Air Springs for
Original Equipment Manufacturers
Rolling lobe, convoluted and sleeve commercial vehicle air springs
perform distinct functions and, in general, cannot be substituted for
each other. For instance, an air spring used in a trailer suspension is
not the same as an air spring used for a truck seat. Accordingly, the
three types of commercial vehicle air springs are not
[[Page 76376]]
interchangeable or substitutable for one another, and demand for each
is separate. In the event of a small but significant increase in price
for a given type of commercial vehicle air spring, customers would not
stop using that air spring in sufficient numbers to defeat the price
increase. Thus, the development, manufacture, and sale of each type of
commercial vehicle air spring is a separate line of commerce and a
relevant product market within the meaning of Section 7 of the Clayton
Act.
Although narrower product markets of rolling lobe, convoluted and
sleeve air springs for commercial vehicles exist, the competitive
dynamic for each type is nearly identical. The same firms manufacture
and sell each of these products and each type of commercial vehicle air
spring is sold in similar competitive conditions. Therefore, the
products may be aggregated for analytical convenience into a single
relevant product market for the purpose of assigning market shares and
evaluating the competitive impact of the acquisition.
Commercial vehicle OEMs require each air spring to meet rigid
qualification standards to ensure performance, quality and engineering
design fit. Commercial vehicle air springs sold into the aftermarket
for replacement purposes are not of sufficient quality or reliability
to be used by commercial vehicle OEMs. Accordingly, commercial vehicle
air springs for OEMs are not interchangeable with or substitutable for
aftermarket commercial vehicle air springs, and demand for each is
separate.
A small but significant increase in the price of commercial vehicle
air springs for commercial vehicle OEMs would not cause a sufficient
number of OEMs to substitute commercial vehicle air springs
manufactured for the aftermarket so as to make such a price increase
unprofitable. Thus, the development, manufacture, and sale of
commercial vehicle air springs for OEMs is a line of commerce and a
relevant product market within the meaning of Section 7 of the Clayton
Act.
Commercial vehicle air springs are bulky but relatively
lightweight. Despite the light weight, the cost of transporting
commercial vehicle air springs is high compared to the value of the
product, because the manufacturers essentially have to pay to ship air.
Therefore, while shipping commercial vehicle air springs from overseas
is feasible, it adds significant cost--approximately 10 to 15 percent--
to the price of the product. Import taxes also add additional costs to
commercial vehicle air springs that are shipped from outside North
America.
In addition, commercial vehicle OEMs require that the air springs
production facility be qualified. The qualification process includes
inspection of the production facility by the customer. Having to
inspect and qualify a facility outside of North America adds both time
and expense to the process.
Further, commercial vehicle OEMs require timely delivery of air
springs, as they are an essential input into the final vehicle
platform. Procuring commercial vehicle air springs from overseas adds
significant lead time to delivery, increases the risk of shipment
delays, and makes more difficult the rapid correction of quality
shortcomings in delivered product. Thus, for commercial vehicle OEMs,
purchasing air springs from outside North America involves the
assumption of an unacceptable level of risk.
Therefore, to successfully sell commercial vehicle air springs for
OEM use in North America, an air spring manufacturer must have an air
spring production facility in North America. OEM customers for
commercial vehicle air springs in North America would be unwilling to
switch to commercial vehicle air springs manufactured outside of North
America to defeat a small but significant price increase. Accordingly,
North America is a relevant geographic market for the development,
manufacture, and sale of commercial vehicle air springs for OEMs within
the meaning of Section 7 of the Clayton Act.
3. The North American Market for Commercial Vehicle Air Springs for the
Aftermarket
Commercial vehicle air springs for the aftermarket are sold for
replacement purposes. The targeted customer is the commercial vehicle
owner. Because commercial vehicle air springs for the aftermarket are
not designed for a specific commercial vehicle platform, they do not
have to meet the rigid qualifications that commercial vehicle OEMs
require. Commercial vehicle air springs for the aftermarket are of
lower quality and lesser durability than commercial vehicle air springs
made for OEMs. Accordingly, commercial vehicle air springs for the
aftermarket are not interchangeable or substitutable for commercial
vehicle air springs sold to OEMs. Demand for commercial vehicle air
springs used by OEMs is separate from demand for commercial vehicle air
springs for the aftermarket.
A small but significant increase in the price of commercial vehicle
air springs for the aftermarket would not cause customers to substitute
commercial vehicle air springs for OEMs in sufficient numbers so as to
make such a price increase unprofitable. Thus, the development,
manufacture, and sale of commercial vehicle air springs for the
aftermarket is a line of commerce and a relevant product market within
the meaning of Section 7 of the Clayton Act.
For commercial vehicle air springs sold in the aftermarket,
purchases are based on price, brand or reputation, and availability. As
with commercial vehicle air springs for OEMs, the cost of shipping
commercial vehicle air springs for the aftermarket, individually or in
small quantities, from outside North America would make them more
expensive than those sold in North America. Further, the additional
lead time to ship commercial vehicle air springs for individual demand
makes direct purchase from overseas unattractive to potential
purchasers, who want their vehicles repaired in a timely manner.
Therefore, a customer typically would not directly purchase commercial
vehicle air springs for the aftermarket from outside of North America.
Customers would be unwilling to switch to commercial vehicle air
springs manufactured outside of North America to defeat a small but
significant price increase. Accordingly, North America is a relevant
geographic market for the development, manufacture, and sale of
commercial vehicle air springs for the aftermarket within the meaning
of Section 7 of the Clayton Act.
4. Anticompetitive Effects
a. Commercial Vehicle Air Springs for OEMs
In North America, the market for the development, manufacture, and
sale of commercial vehicle air springs for OEMs is highly concentrated
and would become substantially more concentrated as a result of the
proposed transaction. Continental and Veyance each have approximately
30 percent of the North American market for commercial vehicle air
springs sold for OEMs. The only other competitor has approximately 40
percent of the North American market, so the acquisition would result
in two firms holding 100 percent of the market.
As articulated in the Horizontal Merger Guidelines issued by the
Department of Justice and the Federal Trade Commission, and discussed
in Appendix A of the Complaint, the Herfindahl-Hirschman Index
(``HHI'') is a measure of market concentration. Market concentration is
often one useful
[[Page 76377]]
indicator of the level of competitive vigor in a market and the likely
competitive effects of a merger. The more concentrated a market, and
the more a transaction would increase concentration in a market, the
more likely it is that a transaction would result in a meaningful
reduction in competition, harming consumers. Markets in which the HHI
is between 1,500 and 2,500 points are considered to be moderately
concentrated and markets in which the HHI is in excess of 2,500 points
are considered to be highly concentrated. Transactions that increase
the HHI by more than 200 points in highly concentrated markets are
presumed likely to enhance market power.
In the North American market for the development, manufacture, and
sale of commercial vehicle air springs for OEMs, the pre-merger HHI is
3,388; the post-merger HHI is 5,224, with an increase in the HHI of
1,836. Consistent with the Horizontal Merger Guidelines, this market is
highly concentrated and would become substantially more concentrated as
a result of the proposed acquisition.
A combined Continental and Veyance would have the ability to
increase prices of commercial vehicle air springs sold to OEMs and to
reduce the quality of service for these customers by limiting
availability or delivery options. In addition, Continental's
elimination of Veyance as a strong, independent competitor in the
development, manufacture, and sale of commercial vehicle air springs
for OEMs likely would facilitate anticompetitive coordination between
the remaining two suppliers. The two suppliers would be able to
estimate each other's output, capacity, reserves, and costs, making
coordinated interaction easier. The transaction would substantially
lessen competition in the development, manufacture, and sale of
commercial vehicle air springs for OEMs in North America and lead to
higher prices and decreased quality of service in violation of Section
7 of the Clayton Act.
b. Commercial Vehicle Air Springs for the Aftermarket
In North America, the market for the development, manufacture, and
sale of commercial vehicle air springs sold in the aftermarket is
highly concentrated and would become substantially more concentrated as
a result of the proposed transaction. Veyance has approximately 33
percent of the market, Continental has approximately 17 percent of the
market, and one other competitor has approximately 45 percent. Were the
acquisition to proceed, the two firms each would have close to a 50
percent share of the market.
For the North American market for the development, manufacture, and
sale of commercial vehicle air springs sold in the aftermarket, the
premerger HHI is 3,403, the post-acquisition HHI is 4,525, and the
acquisition would produce an increase of 1,122 in the HHI. Consistent
with the Horizontal Merger Guidelines, this market is highly
concentrated and would become substantially more concentrated as a
result of the proposed acquisition. The proposed transaction likely
would substantially lessen competition in the North American market for
the development, manufacture, and sale of commercial vehicle air
springs for the aftermarket and lead to higher prices and decreased
quality of service in violation of Section 7 of the Clayton Act.
5. Difficulty of Entry
a. Commercial Vehicle Air Springs for OEMs
Choosing an appropriate factory location, ordering the necessary
equipment and setting up the factory for production of commercial
vehicle air springs likely would take two or more years and would
require a substantial investment. Once a location is chosen and the
factory is producing, the OEM qualification process can take two or
more additional years. Qualification requires a number of steps, and
both the factory and the particular air springs to be used by the
commercial vehicle OEM must be qualified.
Because of the cost and difficulty of establishing a production
facility in North America and gaining requisite OEM qualification,
entry into the North American market for the development, manufacture,
and sale of commercial vehicle air springs for OEMs would not be
timely, likely or sufficient to mitigate the anticompetitive effects of
Continental's proposed acquisition of Veyance.
b. Commercial Vehicle Air Springs for the Aftermarket
The impact of the acquisition in the North American market for the
development, manufacture, and sale of commercial vehicle air springs
for the aftermarket would not be remedied quickly by the response of
foreign suppliers. These suppliers lack a recognized brand and
reputation in North America, and most lack the broad product portfolio,
to supply commercial vehicle air springs that would be accepted by most
OEMs. Foreign firms are not present in the North American market for
the development, manufacture, and sale of commercial vehicle air
springs for OEMs, so they do not have established reputations that
would contribute to their acceptance in the aftermarket. Therefore,
entry would not be timely, likely, or sufficient to mitigate the
anticompetitive effects of Continental's proposed acquisition of
Veyance.
III. EXPLANATION OF THE PROPOSED FINAL JUDGMENT
The divestiture required by the proposed Final Judgment will
eliminate the anticompetitive effects of the acquisition in the North
American market for commercial vehicle air springs by establishing a
new, independent, and economically viable competitor. Paragraph IV.A of
the proposed Final Judgment requires defendants, within ninety (90)
days after the filing of the Complaint, or five days after notice of
the entry of the Final Judgment by the Court, whichever is later, to
divest the Veyance North America Air Springs Business. The assets must
be divested in such a way as to satisfy the United States in its sole
discretion that the Veyance North America Air Springs Business can and
will be operated by the purchaser as a viable, ongoing business that
can compete effectively in the development, manufacture, and sale of
commercial vehicle air springs. Defendants must take all reasonable
steps necessary to accomplish the divestiture quickly and shall
cooperate with prospective purchasers.
The Divestiture Assets include the Veyance North America Air
Springs Business, including its manufacturing facility and its assembly
facility, both located in San Luis Potosi, Mexico, and its research and
development, engineering and testing operations, and administration
assets located in Fairlawn, Ohio (``Fairlawn Facility''). The Veyance
North America Air Springs Business produces commercial vehicle air
springs sold to customers in North America. It is an established, high-
quality manufacturer with product offerings that have been qualified by
its customers and sufficient capacity to meet current and future demand
for its product.
The proposed Final Judgment requires the divestiture of all
tangible and intangible assets primarily used in or for the Veyance
North America Air Springs Business. These assets will provide the
Acquirer not only with physical assets, but also with intellectual
property and rights, specifically including all U.S. patents and other
intellectual property used by the Veyance North America Air Springs
Business in the development,
[[Page 76378]]
manufacture and sale of air springs, and a non-exclusive, perpetual,
worldwide, royalty-free license for all non-U.S. patents and pending
patent applications for use in the design, development, manufacture,
marketing, servicing and/or sale of air springs produced for customers
located outside of North America.
Paragraph IV.C of the proposed Final Judgment prohibits defendants
from interfering with the Acquirer's ability to hire defendants'
employees whose primary responsibility is the development, manufacture
and sale of air springs. The proposed Final Judgment explicitly
includes in this provision four categories of employees critical to the
Veyance North America Air Springs Business: (1) Head of Air Springs
Business, (2) Head of Sales and Marketing, (3) a Chief Chemist for Air
Springs, and (4) aftermarket sales personnel. The proposed Final
Judgment proscribes defendants' interference with negotiations by the
Acquirer to hire these employees.
The Veyance North America Air Springs Business currently sources
critical inputs--compounds and calendered materials--from a Veyance
facility that is not being divested. The Acquirer initially may require
a ready supply of such inputs for the manufacture of air springs.
Therefore, Paragraph IV.G of the proposed Final Judgment provides that,
at the option of the Acquirer, Continental shall enter into a supply
contract for compounds and calendered materials sufficient to meet all
or part of the Acquirer's needs for a period of up to one (1) year. The
United States, in its sole discretion, may approve an extension of the
term for a period totaling not more than one (1) additional year. The
Acquirer also may require a transition services agreement for back
office and technical support to ensure the continuity of the operations
of the Veyance North America Air Springs Business. The proposed Final
Judgment, in Paragraph IV.H, provides the Acquirer with the option for
a transition services agreement for six (6) months, with a possible
extension of the term for another six (6) months.
The research and development, engineering and testing operations,
and administration assets included in the Divestiture Assets are housed
on the first and third floors of the Fairlawn Facility, which is also
Veyance's world headquarters. The proposed Final Judgment, in Paragraph
IV.J, provides that, at the option of the Acquirer, defendants shall
enter into a sublease for the first and third floors of the Fairlawn
Facility for a period of six (6) months. The United States, in its sole
discretion, may approve one or more extensions for a total of up to an
additional six (6) months. Should the Acquirer exercise its option to
sublease space in the Fairlawn Facility, the proposed Final Judgment,
in Paragraph IV.K, requires defendants to create physical barriers that
segregate the air spring operations from the portions of the Fairlawn
Facility that will remain occupied by defendants.
Veyance has a lab and testing equipment located on the second floor
of the Fairlawn Facility that supports various Veyance businesses,
including its air springs business. In Paragraph IV.L, the proposed
Final Judgment provides that, at the option of the Acquirer, defendants
will provide the Acquirer with complete and sole access to the
laboratory and all the equipment located on the second floor of the
Fairlawn Facility for a continuous pre-scheduled, 48-hour period each
week. To maintain the confidentiality of the Acquirer's operations,
Paragraph IV.M of the proposed Final Judgment, requires defendants to
program the equipment on the second floor of the Fairlawn Facility to
ensure that no results related to air springs testing are stored on the
equipment and that such results instead will be routed only to a server
designated by the Acquirer.
Veyance utilizes for its various businesses, including its air
springs business, three warehouses located, respectively, in San Luis
Potosi, Mexico; Moberly, Missouri; and Mississauga, Ontario, Canada.
Paragraph IV.N of the proposed Final Judgment provides that, at the
option of the Acquirer, defendants shall enter into a sublease with the
Acquirer for space at any or all of the warehouses. Should the Acquirer
exercise this option, the proposed Final Judgment, in Paragraph IV.O,
requires defendants to create physical barriers segregating the air
springs areas at each of the warehouses from the portions of each
warehouse that will remain occupied by defendants.
By providing for the possibility of a supply contract for compounds
and calendered materials, a transition services agreement, and the
physical segregation of the Fairlawn Facility and the warehouses, the
proposed Final Judgment contemplates an ongoing relationship between
defendants and the Acquirer for a period of time. Should the United
States conclude that it would benefit from the assistance of a
Monitoring Trustee to oversee the negotiation of the agreements and the
segregation of the shared facilities, Section X of the proposed Final
Judgment provides for the appointment of a Monitoring Trustee with the
power and authority to investigate and report on the parties'
compliance with the terms of the Final Judgment and the Hold Separate
Stipulation and Order during the pendency of the divestiture, including
the terms of the supply agreement, the transition services agreement,
and the physical segregation of the shared facilities. The Monitoring
Trustee would not have any responsibility or obligation for the
operation of the parties' businesses. The Monitoring Trustee would
serve at defendants' expense, on such terms and conditions as the
United States approves, and defendants must assist the trustee in
fulfilling its obligations. The Monitoring Trustee would file monthly
reports and would serve until the divestiture of the Divestiture Assets
is finalized pursuant to either Section IV or Section V of the proposed
Final Judgment and the expiration of any transition services agreement
between defendants and the Acquirer.
In the event that defendants do not accomplish the divestiture
within the prescribed period, Section V of the proposed Final Judgment
provides that the Court will appoint a trustee selected by the United
States to effect the divestiture. If a trustee is appointed, the
proposed Final Judgment provides that Defendants will pay all costs and
expenses of the trustee. The trustee's commission will be structured so
as to provide an incentive for the trustee based on the price obtained
and the speed with which the divestiture is accomplished. After his or
her appointment becomes effective, the trustee will file monthly
reports with the Court and the United States setting forth his or her
efforts to accomplish the divestiture. At the end of six (6) months, if
the divestiture has not been accomplished, the trustee and the United
States will make recommendations to the Court, which shall enter such
orders as appropriate, in order to carry out the purpose of the trust,
including extending the trust or the term of the trustee's appointment.
The divestiture provisions of the proposed Final Judgment will
eliminate the anticompetitive effects that likely would result if
Continental acquired Veyance because the Acquirer will have the ability
to develop, manufacture and sell commercial vehicle air springs to
customers in North America in competition with Continental.
IV. REMEDIES AVAILABLE TO POTENTIAL PRIVATE LITIGANTS
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws
[[Page 76379]]
may bring suit in federal court to recover three times the damages the
person has suffered, as well as costs and reasonable attorneys' fees.
Entry of the proposed Final Judgment will neither impair nor assist the
bringing of any private antitrust damage action. Under the provisions
of Section 5(a) of the Clayton Act, 15 U.S.C. Sec. 16(a), the proposed
Final Judgment has no prima facie effect in any subsequent private
lawsuit that may be brought against Defendants.
V. PROCEDURES AVAILABLE FOR MODIFICATION OF THE PROPOSED FINAL JUDGMENT
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this Competitive
Impact Statement in the Federal Register, or the last date of
publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States Department of Justice, which
remains free to withdraw its consent to the proposed Final Judgment at
any time prior to the Court's entry of judgment. The comments and the
response of the United States will be filed with the Court. In
addition, comments will be posted on the U.S. Department of Justice,
Antitrust Division's internet Web site and, under certain
circumstances, published in the Federal Register.
Written comments should be submitted to: Maribeth Petrizzi, Chief,
Litigation II Section, Antitrust Division, United States Department of
Justice, 450 Fifth Street, NW., Suite 8700, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. ALTERNATIVES TO THE PROPOSED FINAL JUDGMENT
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against Defendants. The
United States could have continued the litigation and sought
preliminary and permanent injunctions against Continental's acquisition
of Veyance. The United States is satisfied, however, that the
divestiture of assets described in the proposed Final Judgment will
preserve competition for the development, manufacture and sale of
commercial vehicle air springs in North America. Thus, the proposed
Final Judgment would achieve all or substantially all of the relief the
United States would have obtained through litigation, but avoids the
time, expense, and uncertainty of a full trial on the merits of the
Complaint.
VII. STANDARD OF REVIEW UNDER THE APPA FOR THE PROPOSED FINAL JUDGMENT
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a sixty-day comment period, after which the court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. Sec. 16(e)(1). In making that
determination, the court, in accordance with the statute as amended in
2004, is required to consider:
(A) the competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous, and any other
competitive considerations bearing upon the adequacy of such judgment
that the court deems necessary to a determination of whether the
consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and individuals
alleging specific injury from the violations set forth in the complaint
including consideration of the public benefit, if any, to be derived
from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory
factors, the court's inquiry is necessarily a limited one as the
government is entitled to ``broad discretion to settle with the
defendant within the reaches of the public interest.'' United States v.
Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see generally
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007)
(assessing public interest standard under the Tunney Act); United
States v. U.S. Airways Group, Inc., No. 13-cv-1236 (CKK), 2014-1 Trade
Cas. (CCH) ] 78, 748, 2014 U.S. Dist. LEXIS 57801, at *7 (D.D.C. Apr.
25, 2014) (noting the court has broad discretion of the adequacy of the
relief at issue); United States v. InBev N.V./S.A., No. 08-1965 (JR),
2009-2 Trade Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, at *3,
(D.D.C. Aug. 11, 2009) (noting that the court's review of a consent
judgment is limited and only inquires ``into whether the government's
determination that the proposed remedies will cure the antitrust
violations alleged in the complaint was reasonable, and whether the
mechanism to enforce the final judgment are clear and
manageable.'').\1\
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\1\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns,
489 F. Supp. 2d at 11 (concluding that the 2004 amendments
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------
As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other things,
the relationship between the remedy secured and the specific
allegations set forth in the government's complaint, whether the decree
is sufficiently clear, whether enforcement mechanisms are sufficient,
and whether the decree may positively harm third parties. See
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the
relief secured by the decree, a court may not ``engage in an
unrestricted evaluation of what relief would best serve the public.''
United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (quoting
United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see
also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152
F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787,
at *3. Courts have held that:
[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
[[Page 76380]]
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\2\ In
determining whether a proposed settlement is in the public interest, a
district court ``must accord deference to the government's predictions
about the efficacy of its remedies, and may not require that the
remedies perfectly match the alleged violations.'' SBC Commc'ns, 489 F.
Supp. 2d at 17; see also U.S. Airways, 2014 U.S. Dist. LEXIS 57801, at
*16 (noting that a court should not reject the proposed remedies
because it believes others are preferable); Microsoft, 56 F.3d at 1461
(noting the need for courts to be ``deferential to the government's
predictions as to the effect of the proposed remedies''); United States
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003)
(noting that the court should grant due respect to the United States'
prediction as to the effect of proposed remedies, its perception of the
market structure, and its views of the nature of the case).
---------------------------------------------------------------------------
\2\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''). See generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest''').
---------------------------------------------------------------------------
Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be approved
even if it falls short of the remedy the court would impose on its own,
as long as it falls within the range of acceptability or is `within the
reaches of public interest.''' United States v. Am. Tel. & Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also U.S.
Airways, 2014 U.S. Dist. LEXIS 57801, at *8 (noting that room must be
made for the government to grant concessions in the negotiation process
for settlements (citing Microsoft, 56 F.3d at 1461); United States v.
Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) (approving
the consent decree even though the court would have imposed a greater
remedy). To meet this standard, the United States ``need only provide a
factual basis for concluding that the settlements are reasonably
adequate remedies for the alleged harms.'' SBC Commc'ns, 489 F. Supp.
2d at 17.
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways,
2014 U.S. Dist. LEXIS 57801, at *9 (noting that the court must simply
determine whether there is a factual foundation for the government's
decisions such that its conclusions regarding the proposed settlements
are reasonable; InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the
`public interest' is not to be measured by comparing the violations
alleged in the complaint against those the court believes could have,
or even should have, been alleged''). Because the ``court's authority
to review the decree depends entirely on the government's exercising
its prosecutorial discretion by bringing a case in the first place,''
it follows that ``the court is only authorized to review the decree
itself,'' and not to ``effectively redraft the complaint'' to inquire
into other matters that the United States did not pursue. Microsoft, 56
F.3d at 1459-60. As this Court confirmed in SBC Communications, courts
``cannot look beyond the complaint in making the public interest
determination unless the complaint is drafted so narrowly as to make a
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[n]othing in
this section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2); see also U.S. Airways, 2014 U.S. Dist.
LEXIS 57801, at *9 (indicating that a court is not required to hold an
evidentiary hearing or to permit intervenors as part of its review
under the Tunney Act). The language wrote into the statute what
Congress intended when it enacted the Tunney Act in 1974, as Senator
Tunney explained: ``[t]he court is nowhere compelled to go to trial or
to engage in extended proceedings which might have the effect of
vitiating the benefits of prompt and less costly settlement through the
consent decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of
Sen. Tunney). Rather, the procedure for the public interest
determination is left to the discretion of the court, with the
recognition that the court's ``scope of review remains sharply
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC
Commc'ns, 489 F. Supp. 2d at 11.\3\ A court can make its public
interest determination based on the competitive impact statement and
response to public comments alone. U.S. Airways, 2014 U.S. Dist. LEXIS
57801, at *9.
---------------------------------------------------------------------------
\3\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., No. 73-CV-681-W-1, 1977-1
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (W.D. Mo. 1977) (``Absent
a showing of corrupt failure of the government to discharge its
duty, the Court, in making its public interest finding, should . . .
carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298, at 6 (1973) (``Where the
public interest can be meaningfully evaluated simply on the basis of
briefs and oral arguments, that is the approach that should be
utilized.'').
---------------------------------------------------------------------------
VIII. DETERMINATIVE DOCUMENTS
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: December 11, 2014
Respectfully submitted,
/s/--------------------------------------------------------------------
Suzanne Morris
U.S. Department of Justice, Antitrust Division, Litigation II
Section, Liberty Square Building, 450 Fifth Street NW., Suite 8700,
Washington, DC 20530, Tel.: (202) 307-1188 Email:
suzanne.morris@usdoj.gov
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Continental AG and
Veyance Technologies, Inc. Defendants.
CASE NO.: 1:14-cv-02087
JUDGE: Hon. Reggie B. Walton
PROPOSED FINAL JUDGMENT
WHEREAS, Plaintiff, United States of America, filed its Complaint
on December 11, 2014, the United States and defendants, Continental AG
(``Continental'') and Veyance Technologies, Inc. (``Veyance''), by
their respective attorneys, have consented to the entry of this Final
Judgment without trial or adjudication of any issue of fact or law, and
without this Final Judgment constituting any evidence against or
admission by any party regarding any issue of fact or law;
AND WHEREAS, defendants agree to be bound by the provisions of this
Final Judgment pending its approval by the Court;
[[Page 76381]]
AND WHEREAS, the essence of this Final Judgment is the prompt and
certain divestiture of certain rights or assets by the defendants to
assure that competition is not substantially lessened;
AND WHEREAS, the United States requires defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
AND WHEREAS, defendants have represented to the United States that
the divestitures required below can and will be made and that
defendants will later raise no claim of hardship or difficulty as
grounds for asking the Court to modify any of the divestiture
provisions contained below;
NOW THEREFORE, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is ORDERED, ADJUDGED AND DECREED:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against defendants under Section 7 of the Clayton
Act, as amended (15 U.S.C. 18).
II. Definitions
As used in this Final Judgment:
A. ``Continental'' means defendant Continental AG, a German
corporation with its headquarters in Hanover, Germany, its successors,
assigns, subsidiaries, divisions, groups, affiliates, partnerships and
joint ventures, and their directors, officers, managers, agents, and
employees.
B. ``Veyance'' means defendant Veyance Technologies, Inc., a
Delaware corporation with its headquarters in Fairlawn, Ohio, its
successors, assigns, subsidiaries, divisions, groups, affiliates,
partnerships and joint ventures, and their directors, officers,
managers, agents, and employees.
C. ``Acquirer'' means the entity to which defendants divest the
Divestiture Assets.
D. ``Air Springs'' means rolling lobe, bellow, sleeve and other air
springs used as original equipment or replacement parts in commercial
vehicle, passenger car, and industrial applications.
E. ``Veyance North America Air Springs Business'' means Veyance's
North American operations for the development, manufacture and sale of
Air Springs and includes Veyance's subsidiary, Veyance Productos
Industriales, S. de R.L. de C.V., a Mexican corporation with its
principal place of business in San Luis Potosi, Mexico.
F. ``Divestiture Assets'' means the Veyance North America Air
Springs Business, including, but not limited to:
1. The manufacturing facility located at Eje Central Sahop No 215,
Manzana 53, Zona Industrial 1A. Seccion Land A, San Luis Potosi, SLP,
CP 78395;
2. The assembly facility located at Eje 128 No.140 interior C y D,
Zona industrial del Potosi, SLP, CP 78395;
3. The Air Springs research and development, engineering and
testing operations, and administration assets used for the Veyance
North America Air Springs Business located at 703 South Cleveland
Massillon Road, Fairlawn, Ohio 44333 (``Fairlawn Facility'');
4.a. All tangible assets used primarily in or for the Veyance North
America Air Springs Business, including, but not limited to, all real
property and improvements, manufacturing equipment, product inventory,
tooling and fixed assets, personal property, input inventory, office
furniture, materials, supplies, and other tangible property and assets;
b. All tangible assets used primarily in or for the research and
development, product and material design, and testing of any Air Spring
product for the Veyance North America Air Springs Business, including,
but not limited to, equipment, records, materials, supplies, and other
property (except for the testing machines located on the second floor
of the Fairlawn Facility); and
c. All records and documents relating to the Veyance North America
Air Springs Business, including, but not limited to, all licenses,
permits and authorizations issued by any governmental organization; all
contracts, teaming arrangements, agreements, leases, commitments,
certifications, and understandings, including supply agreements; all
customer lists, contracts, purchase orders, accounts, and credit
records; and all repair and performance records and all other records
relating to the Veyance North America Air Springs Business.
5.a. All intangible assets used by the Veyance North America Air
Springs Business in the development, manufacture, and sale of Air
Springs, including, but not limited to, all U.S. patents, licenses and
sublicenses, intellectual property, copyrights, trademarks, trade
names, service marks, service names, technical information, computer
software and related documentation, know-how (including, but not
limited to, recipes, formulas, and machine settings), trade secrets,
drawings, blueprints, designs, design protocols, specifications for
materials, specifications for parts and devices, safety procedures for
the handling of materials and substances, quality assurance and control
procedures, all research data concerning historic and current research
and development relating to the Veyance North America Air Springs
Business, quality assurance and control procedures, design tools and
simulation capability, all manuals and technical information defendants
provide to their own employees, customers, suppliers, agents or
licensees, and all research data concerning historic and current
research and development efforts relating to the Veyance North America
Air Springs Business (including, but not limited to, product testing,
designs of experiments, and the results of successful and unsuccessful
designs and experiments);
b. The trade names ``SUPER-CUSHION'' and ``SPRINGRIDE'', or any
derivation thereof; and
c. A non-exclusive, perpetual, worldwide, royalty-free license for
all non-U.S. patents and pending patent applications for use in the
design, development, manufacture, marketing, servicing, and/or sale of
Air Springs produced for locations outside of North America, which
shall be transferable only to any future purchaser of all or
substantially all of the Veyance North America Air Springs Business.
Any improvements or modifications to these intangible assets developed
by the Acquirer of the Veyance North America Air Springs Business shall
be owned solely by that Acquirer.
G. ``Warehouses'' means the Air Springs storage and handling assets
used for the Veyance North America Air Springs Business located at:
1. Circuito Exportacion 412, Parque Industrial Tres Naciones, San
Luis Potosi, SLP, CP 78395;
2. 1957 Route DD, Moberly, Missouri 65270; and
3. 237 Brunel Road, Mississauga, Ontario L4Z 1T5, Canada.
III. Applicability
A. This Final Judgment applies to Continental and Veyance, as
defined above, and all other persons in active concert or participation
with any of them who receive actual notice of this Final Judgment by
personal service or otherwise.
B. If, prior to complying with Section IV and V of this Final
Judgment, defendants sell or otherwise dispose of all or substantially
all of their assets or of lesser business units that include the
Divestiture Assets, they shall require the purchaser to be bound by the
provisions of this Final Judgment. Defendants need not obtain such an
agreement from the
[[Page 76382]]
Acquirer of the assets divested pursuant to this Final Judgment.
IV. Divestitures
A. Defendants are ordered and directed, within ninety (90) calendar
days after the filing of the Complaint in this matter, or five (5)
calendar days after notice of the entry of this Final Judgment by the
Court, whichever is later, to divest the Divestiture Assets in a manner
consistent with this Final Judgment to an Acquirer acceptable to the
United States, in its sole discretion. The United States, in its sole
discretion, may agree to one or more extensions of this time period not
to exceed sixty (60) calendar days in total, and shall notify the Court
in such circumstances. Defendants agree to use their best efforts to
divest the Divestiture Assets as expeditiously as possible.
B. In accomplishing the divestiture ordered by this Final Judgment,
defendants promptly shall make known, by usual and customary means, the
availability of the Divestiture Assets. Defendants shall inform any
person making an inquiry regarding a possible purchase of the
Divestiture Assets that they are being divested pursuant to this Final
Judgment and provide that person with a copy of this Final Judgment.
Defendants shall offer to furnish to all prospective Acquirers, subject
to customary confidentiality assurances, all information and documents
relating to the Divestiture Assets customarily provided in a due
diligence process except such information or documents subject to the
attorney-client privileges or work-product doctrine. Defendants shall
make available such information to the United States at the same time
that such information is made available to any other person.
C. Defendants shall provide the Acquirer and the United States
information relating to the personnel involved in the development,
manufacture and sale of Air Springs to enable the Acquirer to make
offers of employment. Defendants shall not interfere with any
negotiations by the Acquirer to employ any defendant employee whose
primary responsibility is the development, manufacture and sale of Air
Springs, and shall not interfere with negotiations by the Acquirer to
employ the following personnel (1) Head of Air Springs Business, (2)
Head of Sales and Marketing, (3) a Chief Chemist for Air Springs, and
(4) aftermarket sales personnel.
D. Defendants shall permit prospective Acquirers of the Divestiture
Assets to have reasonable access to personnel and to make inspections
of the physical facilities of the Divestiture Assets; access to any and
all environmental, zoning, and other permit documents and information;
and access to any and all financial, operational, or other documents
and information customarily provided as part of a due diligence
process.
E. Defendants shall warrant to the Acquirer that each asset will be
operational on the date of sale.
F. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
G. At the option of the Acquirer, Continental shall enter into a
supply contract for compounds and calendered materials (rubberized
fabric used in the production of Air Springs) sufficient to meet all or
part of the Acquirer's needs for a period of up to one (1) year. The
terms and conditions of any contractual arrangement meant to satisfy
this provision must be reasonably related to market conditions for
compounds and calendered fabrics. The United States, in its sole
discretion, may approve one or more extensions of the term of this
supply contract for a period totaling not more than one (1) additional
year. If the Acquirer seeks an extension of the term of this supply
contract, it shall so notify the United States in writing at least
three (3) months prior to the date the supply contract expires. If the
United States approves such an extension, it shall so notify the
Acquirer in writing at least two (2) months prior to the date the
supply contract expires.
H. At the option of the Acquirer, Continental shall enter into a
transition services agreement with the Acquirer for back office and
technical support sufficient to meet all or part of the Acquirer's
needs for a period of up to six (6) months. The United States, in its
sole discretion, may approve one or more extensions of this agreement
for a total of up to an additional six (6) months. The terms and
conditions of any contractual arrangement intended to satisfy this
provision must be reasonably related to the market value of the
expertise of the personnel providing any needed assistance.
I. Defendants shall warrant to the Acquirer that there are no
material defects in the environmental, zoning or other permits
pertaining to the operation of each asset, and that following the sale
of the Divestiture Assets, defendants will not undertake, directly or
indirectly, any challenge to the environmental, zoning, or other
permits relating to the operation of the Divestiture Assets.
J. At the option of the Acquirer, defendants shall enter into a
sublease for the first and third floors of the Fairlawn Facility for a
period of six (6) months. The United States, in its sole discretion,
may approve one or more extensions of this sublease for a total of up
to an additional six (6) months.
K. Defendants shall create physical barriers that segregate the Air
Springs operations at the Fairlawn Facility from the portions of the
Fairlawn Facility that will remain occupied by defendants. Defendants'
areas and operations at the Fairlawn Facility shall be secured
separately from those of the Acquirer so that the Acquirer's areas and
operations cannot be accessed by defendants and defendants' areas and
operations cannot be accessed by the Acquirer, other than for facility
repair, support, and maintenance pursuant to a lease or other lease
agreement.
L. At the option of the Acquirer, defendants will provide the
Acquirer with complete and sole access to the laboratory and all the
equipment located on the second floor of the Fairlawn Facility for a
continuous pre-scheduled, 48-hour period each week.
M. Defendants will program the equipment located on the second
floor of the Fairlawn Facility to ensure that no results related to Air
Springs testing are stored on the equipment and that such results
instead will be routed only to a server designated by the Acquirer.
N. At the option of the Acquirer, defendants shall enter into a
sublease with the Acquirer for space at any or all of the Warehouses.
O. Defendants shall create physical barriers that segregate the Air
Springs areas at each of the Warehouses from the portions of each
Warehouse that will remain occupied by defendants. Defendants' areas
and operations at the Warehouses shall be secured with access locks
separate from those of the Acquirer so that the Acquirer's areas and
operations cannot be accessed by defendants and defendants' areas and
operations cannot be accessed by the Acquirer.
P. Unless the United States otherwise consents in writing, the
divestiture pursuant to Section IV, or by a Divestiture Trustee
appointed pursuant to Section V, of this Final Judgment, shall include
the entire Divestiture Assets, and shall be accomplished in such a way
as to satisfy the United States, in its sole discretion, that the
Divestiture Assets can and will be used by the Acquirer(s) as part of a
viable, ongoing business in the development, manufacture and sale of
commercial vehicle Air Springs to customers in North America. The
divestitures, whether pursuant to Section IV or Section V of this Final
Judgment,
[[Page 76383]]
(1) shall be made to an Acquirer that, in the United States' sole
judgment, has the intent and capability (including the necessary
managerial, operational, technical and financial capability) of
competing effectively in the development, manufacture, and sale of
commercial vehicle Air Springs to customers in North America; and
(2) shall be accomplished so as to satisfy the United States, in
its sole discretion, that none of the terms of any agreement between an
Acquirer and defendants give defendants the ability unreasonably to
raise the Acquirer's costs, to lower the Acquirer's efficiency, or
otherwise to interfere in the ability of the Acquirer to compete
effectively.
V. Appointment of Divestiture Trustee
A. If defendants have not divested the Divestiture Assets within
the time period specified in Section IV(A), defendants shall notify the
United States of that fact in writing. Upon application of the United
States, the Court shall appoint a Divestiture Trustee selected by the
United States and approved by the Court to effect the divestiture of
the Divestiture Assets.
B. After the appointment of a Divestiture Trustee becomes
effective, only the Divestiture Trustee shall have the right to sell
the Divestiture Assets. The Divestiture Trustee shall have the power
and authority to accomplish the divestiture to an Acquirer acceptable
to the United States at such price and on such terms as are then
obtainable upon reasonable effort by the Divestiture Trustee, subject
to the provisions of Sections IV, V, and VI of this Final Judgment, and
shall have such other powers as this Court deems appropriate. Subject
to Section V(D) of this Final Judgment, the Divestiture Trustee may
hire at the cost and expense of defendants any investment bankers,
attorneys, or other agents, who shall be solely accountable to the
Divestiture Trustee, reasonably necessary in the Divestiture Trustee's
judgment to assist in the divestiture. Any such investment bankers,
attorneys, or other agents shall serve on such terms and conditions as
the United States approves including confidentiality requirements and
conflict of interest certifications.
C. Defendants shall not object to a sale by the Divestiture Trustee
on any ground other than the Divestiture Trustee's malfeasance. Any
such objections by defendants must be conveyed in writing to the United
States and the Divestiture Trustee within ten (10) calendar days after
the Divestiture Trustee has provided the notice required under Section
VI.
D. The Divestiture Trustee shall serve at the cost and expense of
defendants pursuant to a written agreement, on such terms and
conditions as the United States approves including confidentiality
requirements and conflict of interest certifications. The Divestiture
Trustee shall account for all monies derived from the sale of the
assets sold by the Divestiture Trustee and all costs and expenses so
incurred. After approval by the Court of the Divestiture Trustee's
accounting, including fees for its services yet unpaid and those of any
professionals and agents retained by the Divestiture Trustee, all
remaining money shall be paid to defendants and the trust shall then be
terminated. The compensation of the Divestiture Trustee and any
professionals and agents retained by the Divestiture Trustee shall be
reasonable in light of the value of the Divestiture Assets and based on
a fee arrangement providing the Divestiture Trustee with an incentive
based on the price and terms of the divestiture and the speed with
which it is accomplished, but timeliness is paramount. If the
Divestiture Trustee and defendants are unable to reach agreement on the
Divestiture Trustee's or any agents' or consultants' compensation or
other terms and conditions of engagement within 14 calendar days of
appointment of the Divestiture Trustee, the United States may, in its
sole discretion, take appropriate action, including making a
recommendation to the Court. The Divestiture Trustee shall, within
three (3) business days of hiring any other professionals or agents,
provide written notice of such hiring and the rate of compensation to
defendants and the United States.
E. Defendants shall use their best efforts to assist the
Divestiture Trustee in accomplishing the required divestiture. The
Divestiture Trustee and any consultants, accountants, attorneys, and
other agents retained by the Divestiture Trustee shall have full and
complete access to the personnel, books, records, and facilities of the
business to be divested, and defendants shall develop financial and
other information relevant to such business as the Divestiture Trustee
may reasonably request, subject to reasonable protection for trade
secret or other confidential research, development, or commercial
information or any applicable privileges. Defendants shall take no
action to interfere with or to impede the Divestiture Trustee's
accomplishment of the divestiture.
F. After its appointment, the Divestiture Trustee shall file
monthly reports with the United States and, as appropriate, the Court
setting forth the Divestiture Trustee's efforts to accomplish the
divestiture ordered under this Final Judgment. To the extent such
reports contain information that the Divestiture Trustee deems
confidential, such reports shall not be filed in the public docket of
the Court. Such reports shall include the name, address, and telephone
number of each person who, during the preceding month, made an offer to
acquire, expressed an interest in acquiring, entered into negotiations
to acquire, or was contacted or made an inquiry about acquiring, any
interest in the Divestiture Assets, and shall describe in detail each
contact with any such person. The Divestiture Trustee shall maintain
full records of all efforts made to divest the Divestiture Assets.
G. If the Divestiture Trustee has not accomplished the divestiture
ordered under this Final Judgment within six months after its
appointment, the Divestiture Trustee shall promptly file with the Court
a report setting forth (1) the Divestiture Trustee's efforts to
accomplish the required divestiture, (2) the reasons, in the
Divestiture Trustee's judgment, why the required divestiture has not
been accomplished, and (3) the Divestiture Trustee's recommendations.
To the extent such reports contains information that the Divestiture
Trustee deems confidential, such reports shall not be filed in the
public docket of the Court. The Divestiture Trustee shall at the same
time furnish such report to the United States which shall have the
right to make additional recommendations consistent with the purpose of
the trust. The Court thereafter shall enter such orders as it shall
deem appropriate to carry out the purpose of the Final Judgment, which
may, if necessary, include extending the trust and the term of the
Divestiture Trustee's appointment by a period requested by the United
States.
H. If the United States determines that the Divestiture Trustee has
ceased to act or failed to act diligently or in a reasonably cost-
effective manner, it may recommend the Court appoint a substitute
Divestiture Trustee.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following execution of a definitive
divestiture agreement, defendants or the Divestiture Trustee, whichever
is then responsible for effecting the divestiture required herein,
shall notify the United States of any proposed divestiture required by
Section IV or V of this Final Judgment. If the Divestiture Trustee is
responsible, it shall similarly notify defendants. The notice shall set
forth
[[Page 76384]]
the details of the proposed divestiture and list the name, address, and
telephone number of each person not previously identified who offered
or expressed an interest in or desire to acquire any ownership interest
in the Divestiture Assets, together with full details of the same.
B. Within fifteen (15) calendar days of receipt by the United
States of such notice, the United States may request from defendants,
the proposed Acquirer, any other third party, or the Divestiture
Trustee, if applicable, additional information concerning the proposed
divestiture, the proposed Acquirer, and any other potential Acquirer.
Defendants and the Divestiture Trustee shall furnish any additional
information requested within fifteen (15) calendar days of the receipt
of the request, unless the parties shall otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice or
within twenty (20) calendar days after the United States has been
provided the additional information requested from defendants, the
proposed Acquirer, any third party, and the Divestiture Trustee,
whichever is later, the United States shall provide written notice to
defendants and the Divestiture Trustee, if there is one, stating
whether or not it objects to the proposed divestiture. If the United
States provides written notice that it does not object, the divestiture
may be consummated, subject only to defendants' limited right to object
to the sale under Section V(C) of this Final Judgment. Absent written
notice that the United States does not object to the proposed Acquirer
or upon objection by the United States, a divestiture proposed under
Section IV or Section V shall not be consummated. Upon objection by
defendants under Section V(C), a divestiture proposed under Section V
shall not be consummated unless approved by the Court.
VII. Financing
Defendants shall not finance all or any part of any purchase made
pursuant to Section IV or V of this Final Judgment.
VIII. Hold Separate
Until the divestiture required by this Final Judgment has been
accomplished, defendants shall take all steps necessary to comply with
the Hold Separate Stipulation and Order entered by this Court.
Defendants shall take no action that would jeopardize the divestiture
ordered by this Court.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter, and every thirty (30) calendar days thereafter until
the divestiture has been completed under Section IV or V, defendants
shall deliver to the United States an affidavit as to the fact and
manner of its compliance with Section IV or V of this Final Judgment.
Each such affidavit shall include the name, address, and telephone
number of each person who, during the preceding thirty (30) calendar
days, made an offer to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was contacted or made an
inquiry about acquiring, any interest in the Divestiture Assets, and
shall describe in detail each contact with any such person during that
period. Each such affidavit shall also include a description of the
efforts defendants have taken to solicit buyers for the Divestiture
Assets, and to provide required information to prospective Acquirers,
including the limitations, if any, on such information. Assuming the
information set forth in the affidavit is true and complete, any
objection by the United States to information provided by defendants,
including limitation on information, shall be made within fourteen (14)
calendar days of receipt of such affidavit.
B. Within twenty (20) calendar days of the filing of the Complaint
in this matter, defendants shall deliver to the United States an
affidavit that describes in reasonable detail all actions defendants
have taken and all steps defendants have implemented on an ongoing
basis to comply with Section VIII of this Final Judgment. Defendants
shall deliver to the United States an affidavit describing any changes
to the efforts and actions outlined in defendants' earlier affidavits
filed pursuant to this section within fifteen (15) calendar days after
the change is implemented.
C. Defendants shall keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after such
divestiture has been completed.
X. Appointment of Monitoring Trustee
A. Upon application of the United States, the Court shall appoint a
Monitoring Trustee selected by the United States and approved by the
Court.
B. The Monitoring Trustee shall have the power and authority to
monitor defendants' compliance with the terms of this Final Judgment
and the Hold Separate Stipulation and Order entered by this Court, and
shall have such other powers as this Court deems appropriate. The
Monitoring Trustee shall be required to investigate and report on the
Defendants' compliance with this Final Judgment and the Hold Separate
Stipulation and Order and the defendants' progress toward effectuating
the purposes of this Final Judgment, including but not limited to the
terms of a supply contract for compounds and calendered materials, a
transition services agreement, and the physical segregation of the
Fairlawn Facility and the Warehouses.
C. Subject to Section X(E) of this Final Judgment, the Monitoring
Trustee may hire at the cost and expense of defendants any consultants,
accountants, attorneys, or other agents, who shall be solely
accountable to the Monitoring Trustee, reasonably necessary in the
Monitoring Trustee's judgment. Any such consultants, accountants,
attorneys, or other agents shall serve on such terms and conditions as
the United States approves including confidentiality requirements and
conflict of interest certifications.
D. Defendants shall not object to actions taken by the Monitoring
Trustee in fulfillment of the Monitoring Trustee's responsibilities
under any Order of this Court on any ground other than the Monitoring
Trustee's malfeasance. Any such objections by defendants must be
conveyed in writing to the United States and the Monitoring Trustee
within ten (10) calendar days after the action taken by the Monitoring
Trustee giving rise to the defendants' objection.
E. The Monitoring Trustee shall serve at the cost and expense of
defendants pursuant to a written agreement with defendants and on such
terms and conditions as the United States approves including
confidentiality requirements and conflict of interest certifications.
The compensation of the Monitoring Trustee and any consultants,
accountants, attorneys, and other agents retained by the Monitoring
Trustee shall be on reasonable and customary terms commensurate with
the individuals' experience and responsibilities. If the Monitoring
Trustee and defendants are unable to reach agreement on the Monitoring
Trustee's or any agents' or consultants' compensation or other terms
and conditions of engagement within 14 calendar days of appointment of
the Monitoring Trustee, the United States may, in its sole discretion,
take appropriate action, including making a recommendation to the
Court. The Monitoring Trustee shall, within three (3) business days of
hiring any
[[Page 76385]]
consultants, accountants, attorneys, or other agents, provide written
notice of such hiring and the rate of compensation to defendants and
the United States.
F. The Monitoring Trustee shall have no responsibility or
obligation for the operation of defendants' businesses.
G. Defendants shall use their best efforts to assist the Monitoring
Trustee in monitoring defendants' compliance with their individual
obligations under this Final Judgment and under the Hold Separate
Stipulation and Order. The Monitoring Trustee and any consultants,
accountants, attorneys, and other agents retained by the Monitoring
Trustee shall have full and complete access to the personnel, books,
records, and facilities relating to compliance with this Final
Judgment, subject to reasonable protection for trade secret or other
confidential research, development, or commercial information or any
applicable privileges. Defendants shall take no action to interfere
with or to impede the Monitoring Trustee's accomplishment of its
responsibilities.
H. After its appointment, the Monitoring Trustee shall file reports
monthly, or more frequently as needed, with the United States, and, as
appropriate, the Court setting forth defendants' efforts to comply with
its obligations under this Final Judgment and under the Hold Separate
Stipulation and Order. To the extent such reports contain information
that the Monitoring Trustee deems confidential, such reports shall not
be filed in the public docket of the Court.
I. The Monitoring Trustee shall serve until the divestiture of all
the Divestiture Assets is finalized pursuant to either Section IV or
Section V of this Final Judgment and the expiration of any continuing
transition services agreement.
J. If the United States determines that the Monitoring Trustee has
ceased to act or failed to act diligently or in a reasonably cost-
effective manner, it may recommend the Court appoint a substitute
Monitoring Trustee.
XI. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of any related orders such as any Hold Separate
Order, or of determining whether the Final Judgment should be modified
or vacated, and subject to any legally recognized privilege, from time
to time authorized representatives of the United States Department of
Justice, including consultants and other persons retained by the United
States, shall, upon written request of an authorized representative of
the Assistant Attorney General in charge of the Antitrust Division, and
on reasonable notice to defendants, be permitted:
(1) access during defendants' office hours to inspect and copy, or
at the option of the United States, to require defendants to provide
hard copy or electronic copies of, all books, ledgers, accounts,
records, data, and documents in the possession, custody, or control of
defendants, relating to any matters contained in this Final Judgment;
and
(2) to interview, either informally or on the record, defendants'
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews shall be subject to the
reasonable convenience of the interviewee and without restraint or
interference by defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
defendants shall submit written reports or response to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If at the time information or documents are furnished by
defendants to the United States, defendants represent and identify in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(1)(g) of the
Federal Rules of Civil Procedure, and defendants mark each pertinent
page of such material, ``Subject to claim of protection under Rule
26(c)(1)(g) of the Federal Rules of Civil Procedure,'' then the United
States shall give defendants ten (10) calendar days notice prior to
divulging such material in any legal proceeding (other than a grand
jury proceeding).
XII. No Reacquisition
Defendants may not reacquire any part of the Divestiture Assets
during the term of this Final Judgment.
XIII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XIV. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten years from the date of its entry.
XV. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16, including making copies available to
the public of this Final Judgment, the Competitive Impact Statement,
and any comments thereon and the United States' responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the Court, entry of this Final Judgment is in the public interest.
Date:------------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16
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United States District Judge
[FR Doc. 2014-29862 Filed 12-19-14; 8:45 am]
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