Monday, March 10, 2008

U.S. Antitrust Chief Points to Recent Acquisition Approval as Sign of U.S., EC Cooperation

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The U.S. Department of Justice Antitrust Division and the European Commission (EC) have approved the combination of two U.K.-based companies that are suppliers to the foundry and steel making industries. Approval of Cookson Group plc’s proposed $1 billion acquisition of Foseco plc was conditioned on divestitures.

“This resolution by the Antitrust Division and the European Commission is an example of effective cooperation in global competition enforcement,” said Thomas O. Barnett, Assistant Attorney General in charge of the Antitrust Division.

Divestiture of U.S. Business

The Justice Department will require Cookson and Foseco to divest Foseco's U.S. carbon bonded ceramic (CBC) business, under the terms of a proposed consent decree. The Justice Department said that the transaction, as originally proposed, would have substantially lessened competition in the United States for certain CBCs used in the continuous casting steelmaking process, resulting in increased prices and reduced service and innovation.

Cookson and Foseco are two of only three competitors that produce CBCs in North America, according to the Justice Department. CBCs are products made of carbon-bonded alumina graphite that control the flow of molten steel during the continuous casting of steel.

The U.S. alleged in its complaint, filed in the federal district court in Washington, D.C., that the transaction would have eliminated competition between Cookson and Foseco for two types of CBCs—stopper rods and ladle shrouds—sold to customers in the United States.

EC Competition Concerns

To resolve EC competition concerns, the parties agreed to divest most of Foseco's business of isostatically pressed products (IPP) and to divest Cookson's Hi-Tech foam filter business. Without the divestitures, Cookson would have become the leader in the IPP market after the merger, and the limited number of remaining competitors would not have been able to counter the new entity's market power. With respect to the filters business, an area where Foseco has a strong market position, the merger would have combined the existing market leaders and closest competitors in terms of quality, service, and innovation.

Due to insufficient pressure from competitors, the proposed transaction would have threatened to impede effective competition in this market, according to the EC.

The settlements were announced March 4. An EC press release appears here on the website. The Department of Justice complaint and proposed consent decree can be found on the Department of Justice website.

The text of the proposed U.S. consent decree will appear in the CCH Trade Regulation Reporter at ¶50,955.

No comments: