Antitrust Division; U.S. v. Oldcastle Northeast, Inc. et al.; Public Comments and Response on Proposed Final Judgment

DEPARTMENT OF JUSTICE

Antitrust Division; U.S. v. Oldcastle Northeast, Inc. et al.;

Public Comments and Response on Proposed Final Judgment

Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.

16 (c)-(h), the United States publishes below the comment received on

the proposed final judgment in United States, et al. v. Oldcastle

Northeast, Inc., et al., Civil Action No. 396CV01749 AWT, filed in the

United States District Court for the District of Connecticut, together

with the United States' response to that comment.

Copies of the comment and response to the comment are available for

inspection and copying in Room 215 of the U.S. Department of Justice,

Antitrust Division, 325 7th Street, N.W., Washington, DC 20530

(telephone: (202) 514-2481), and at the Office of the Clerk of the

United States District Court for the District of Connecticut. Copies of

these materials may be obtained upon request and payment of a copying

fee.

Constance K. Robinson,

Director of Operations.

December 2, 1996

James A. Dunbar, Esquire

Venable, Baetjer and Howard

1800 Mercantile Bank & Trust Building

Two Hopkins Plaza

Baltimore, Maryland 21201-2978

Re: United States, et al. v. Oldcastle Northeast, Inc., et al.,

Civil Action No.: 396CV01749 AWT (District of Connecticut, September

3, 1996)

Dear Mr. Dunbar: This letter responds to your letter of November

1, 1996 commenting on the proposed Final Judgment in the above-

referenced civil antitrust case challenging the acquisition by CRH

plc (CRH) through Oldcastle Northeast, Inc. (Oldcastle) of Tilcon,

Inc. (Tilcon) from BTR plc (BTR). The Complaint alleges that the

acquisition violated Section 7 of the Clayton Act, as amended, 15

U.S.C. Sec. 18, because it is likely substantially to lessen

competition in the manufacture and sale of asphalt concrete in the

greater Hartford, Connecticut area. Under the proposed Final

Judgment, the defendants are required to divest Tilcon's East

Granby, Connecticut quarry; two, three-ton, hot-mix plants located

at the East Granby Quarry; and all intangible assets located at the

quarry to assure that competition is not substantially lessened in

the greater Hartford area.

In your letter, you expressed concern that the proposed Final

Judgment does not address competitive concerns in additional

geographic areas (Vermont and the southwestern and central parts of

New Hampshire). The analytical process used by the Antitrust

Division to determine which areas the acquisition might raise

substantial competitive concerns required us to assess a number of

factors including market concentration, potential adverse

competitive effects, and entry. These factors must be evaluated in

an economically meaningful product and geographic market. This

analysis is aimed at allowing the Division to answer the ultimate

inquiry: whether the acquisition is likely to create or enhance

market power or facilitate the exercise of market power in a

relevant market. After a thorough investigation which included the

geographic areas mentioned in your letter, the Division concluded

that the asphalt concrete market in the greater Hartford area was

the relevant market where Oldcastle's acquisition of Tilcon might

create or enhance market power. It was determined that in Vermont

and central New Hampshire, the same number of competitors would be

present after the acquisition as were present before the

acquisition. In southwestern New Hampshire, a sufficient number of

competitors were found to be active in the region. The Division

concluded that in these three areas, the acquisition did not raise

significant competitive concerns.

Your letter also raises concerns about the transfer to Pike

Industries (a subsidiary of Oldcastle) of Tilcon's right of first

refusal to purchase the assets of your client, Frank W. Whitcomb

Construction Corporation (Whitcomb). Until Oldcastle elects to

exercise this option, Whitcomb will remain a competitor to Pike

Industries in Vermont and New Hampshire. If Oldcastle elects to

exercise the option, the Division has the ability to investigate the

competitive impact of the potential acquisition at that time.

In carefully reviewing the concerns made in your letter about

asphalt concrete competition in New Hampshire and Vermont, it is

clear that your concerns are outside the scope of the Complaint

filed by the Division. When evaluating a complaint and proposed

final judgment under the Antitrust Procedures and Penalties Act,

unless a strong showing of bad faith or improper behavior can be

made, a court will not reach beyond the complaint to evaluate claims

that the Division did not make and to inquire why they were not made

(See, United States v. Microsoft Corp., 56 F.3d 1448, 1459-60 (D.C.

Cir 1995)). A court's authority to review a decree depends on how

the Division exercises its prosecutorial discretion. In this

instance, the Court's review is linked to whether the proposed Final

Judgment assures that competition will not be substantially lessened

as alleged in the Complaint brought by the Division.

The Division appreciates you bringing your concerns to our

attention and hopes that this information will alleviate them. While

the Division understands your position, we believe that the proposed

Final Judgment will adequately alleviate the competitive concerns

created by CRH's acquisition of Tilcon from BTR. Pursuant to the

Antitrust Procedures and Penalties Act, a copy of your letter and

this response will be published in the Federal Register and filed

with the Court.

Thank you for your interest in the enforcement of the antitrust

laws.

Sincerely yours,

Frederick H. Parmenter,

Senior Trial Attorney.

November 1, 1996

VIA HAND-DELIVERY

J. Robert Kramer, Esquire

Chief, Litigation II Section

Antitrust Division

United States Department of Justice

1401 H Street, N.W.--Suite 3000

Washington, D.C. 20530

Re. United States of America, et al. v. Oldcastle Northeast, Inc.,

et al., Civil Action No. 396 CV 01749 AWT, In the United States

District Court for the District of Connecticut

Dear Mr. Kramer: This letter will serve as the comments of my

client, The Frank W. Whitcomb Construction Corporation

(``Whitcomb''), on the proposed final judgment in the above-

referenced matter. These comments concern an issue that has already

been raised with the Department of Justice, but has not been acted

upon.

We believe that the facts and circumstances set forth in this

letter demonstrate that the acquisition of Tilcon, Inc. by Oldcastle

Northeast, Inc. (``Oldcastle'') presents a substantial threat to

competition in the aggregate and asphalt paving business in Vermont

and the southwestern and central parts of New Hampshire, by

elimination of a potential

[[Page 65237]]

competitor and the possible elimination of substantially all

competition in those areas.

Whitcomb is in the aggregate and asphalt paving business,

primarily in the states of New Hampshire and Vermont. Pike

Industries is Whitcomb's primary competitor. Whitcomb and Pike are

the only competitors in Vermont with the exception of occasional

minimal competition in the southeast and northeast corners of the

State. Pike is a subsidiary of Oldcastle Northeast, Inc., and an

indirect subsidiary of CRH, Inc., defendants in the above-referenced

matter.

Tilcon is a large regional aggregate and paving company that,

Whitcomb believes, works primarily in New York, parts of New

England, and the Middle Atlantic States. At present, it is not a

direct competitor in most of Whitcomb's market area as described

above, but it is a potential competitor.

Since 1993, Whitcomb has been considering the sale of portions

or all of its business. In 1993, Whitcomb sold an asphalt plant

located in Keene, New Hampshire (which is in the southwestern part

of the State) to a subsidiary of Tilcon. As a part of that sale

Tilcon also purchased a Right of First Refusal to purchase other

plants and real estate owned by Whitcomb. (A copy of the portion of

the sale contract relating to the Right of First Refusal is attached

hereto.) We understand that as part of the purchase of Tilcon by

Oldcastle, this Right of First Refusal has been assigned to

Oldcastle.

The proposed acquisition of Tilcon by Oldcastle threatens

competition in the aggregate and asphalt paving business in Vermont

and south-central New Hampshire in two ways. First, it eliminates

Tilcon as a potential competitor. Before the acquisition, the market

consisted of two significant actual competitors, Pike and Whitcomb,

and at least one potential competitor, Tilcon. After the

acquisition, Tilcon will no longer offer potential competition.

Second, with the assignment of the Right of First Refusal to

Oldcastle, the proposed acquisition threatens to eliminate

competition in the Whitcomb market area almost completely. Whitcomb

would like to sell all or part of its business to an entity that can

provide viable competition in the market area. The existence of the

Right of First Refusal in the hands of its principal competitor

makes it difficult to find such a purchaser. Knowledge on the part

of a potential purchaser that a competitor could prevent any

purchase of Whitcomb or its assets will discourage most entities

from attempting to buy Whitcomb or any part of it. If Oldcastle is

permitted to exercise the Right of First Refusal, then competition

in Vermont will be almost completely eliminated and competition in

south-central New Hampshire will be significantly impaired.

As is set forth in the compliant and the competitive impact

statement in this case, there are high entry barriers into the

manufacture and sale of asphalt concrete. The paving business

itself, with the extensive use of expensive heavy equipment, is also

capital intensive.

There are no real substitutes for asphalt concrete products, and

manufacturers and buyers of asphalt concrete recognize asphalt as

the distinct product. Transportation costs and delivery time make it

difficult for entities outside of a geographic market--in this case

the Whitcomb market area of Vermont and south-central New

Hampshire--to compete with competitors located in the market.

In this case, the United States decided to sue Tilcon and CRH/

Oldcastle because the acquisition would reduce the number of

competitors operating hot mix plants in the greater Hartford area

from 3 to 2 and reduce the number of competitors supplying asphalt

concrete construction projects in that area from 2 to 1. The

proposed acquisition has a comparable competitive effect in the

Whitcomb market area. It reduces by 1 the number of potential

competitors, by eliminating Tilcon; and it threatens to reduce the

number of competitors supplying asphalt concrete construction

projects in the market area from 2 to 1, in the event that Oldcastle

is able to exercise the Right of First Refusal to purchase all or a

substantial part of Whitcomb. In such an event, Oldcastle would

control the price of asphalt concrete in the State of Vermont.

The potential harm stemming from the acquisition is particularly

substantial in this case because the main purchasers of asphalt

concrete for paving projects are tax-supported government entities

such as the State of Vermont.

Under the circumstances, we request that the Justice Department

withdraw its consent to the proposed acquisition unless and until

there is an agreement by both Tilcon and the acquiring companies

that the Right of First Refusal is null and void, and that they will

not exercise or attempt to exercise it. In the alternative, if the

government declines to take any action relating to the Right of

First Refusal, then the Court should modify the Consent Decree to

add such a provision.

Thank you for your attention to this matter. Please do not

hesitate to call me if you should have any questions.

Very truly yours,

James A. Dunbar

Attachment

16. Right of First Refusal. (a) As an additional inducement to

enter into this Agreement, Seller agrees that Seller shall not,

directly or indirectly, sell or transfer (whether by sale of stock,

acquisitive merger, business combination or otherwise), or offer to

sell, transfer or lease (other than a lease for a term of not more

than three years) (any such sale, lease, transfer or offer therefor

herein as ``Transfer'') any of its business real estate, now owned

or hereafter acquired (except the real estate identified on Schedule

16.1), to any other person without first offering to Transfer such

assets to the Buyer. If the Buyer and Seller are unable to agree on

the price and the terms of any Transfer after full disclosure of

information and negotiating in good faith for a period of sixty (60)

days, then Seller shall be free to solicit offers on such property

to or from any third parties, but only at a price and on terms no

more favorable to the purchaser than the price and terms offered to

the Buyer. In the event that the Seller receives a bona fide offer

to purchase or lease any such property, directly or indirectly,

Seller shall provide Buyer with notice of its intent to Transfer.

Buyer shall have thirty (30) days to decide internally whether it

wishes to purchase or lease the property at such price and on such

terms, and, if so, Buyer shall have another thirty (30) days to

obtain the approval of its parent corporation(s). Seller agrees to

provide Buyer with notice of the acquisition of any after-acquired

real estate used in connection with its aggregate and hot mix

business, and Seller agrees to execute any such instruments for

recordation on the appropriate land records as Buyer shall

reasonably request. For purposes of this Section 16, the term

``Seller'' shall include not only the Frank W. Whitcomb Construction

Corp. (``FWWCC''), but also any other company, corporation, trust,

partnership, association or entity of any form in which either

FWWCC, Claire R. Whitcomb, Frank L. Whitcomb or the Frank W.

Whitcomb Trust shall have an interest whether direct or indirect.

(b) Frank L. Whitcomb and the Frank W. Whitcomb Trust, (the

``shareholders'') agree not to sell or transfer more than one-third

of the outstanding shares of stock of Seller to any other person

without in each and every case first offering to sell any such

business assets or shares of stock at the same price and on the same

terms as offered to any such person. As to any proposed sale

exceeding one-third of the share, Buyer shall have sixty (60) days

in which to exercise the right of first refusal granted hereunder.

The sixty (60) day period shall commence after written notice to

Buyer and the delivery of all information reasonably necessary to

enable Buyer to make a decision. Notwithstanding the foregoing, the

shareholders shall be free to transfer shares to any family member

or any trust or other entity established for the benefit of any

family member provided that the transferee agrees to be bound by the

same terms and conditions hereof.

(c) Seller agrees that it shall not issue any shares of stock,

or warrants, options or other rights to acquire shares of stock, to

any persons other than Frank L. Whitcomb or the Frank W. Whitcomb

Trust if the issuance of such shares of stock would result in the

aggregate ownership of the Frank L. Whitcomb or the Frank W.

Whitcomb Trust (or any transferees permitted under paragraph (b)

above) to be less than two-thirds of the total stock issued and

outstanding, computed on a fully diluted basis.

[FR Doc. 96-31468 Filed 12-10-96; 8:45 am]

BILLING CODE 4410-11-M