United States v. Georgia-Pacific Corporation; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States v. Georgia-Pacific Corporation; Proposed Final

Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. Sec. 16 (b)-(h), that a proposed Final

Judgment, Stipulation and Order, and Competitive Impact Statement have

been filed with the United States District Court in Delaware, Civil No.

96-164, as to defendant, Georgia-Pacific Corporation (``Georgia-

Pacific'').

On March 29, 1996, the United States filed a Complaint alleging

that the proposed acquisition by Georgia-Pacific of the gysum business

assets of Domtar, Inc. (``Domtar'') would violate Section 7 of the

Clayton Act, 15 U.S.C. Sec. 18. The proposed Final Judgment, filed the

same time as the Complaint, requires Georgia-Pacific to divest its

Buchanan, New York and Wilmington, Delaware gypsum board plants, along

with certain tangible and intangible assets.

Public comment is invited within the statutory 60-day comment

period. Such comments and responses thereto will be published in the

Federal Register and filed with the Court. Comments should be directed

to J. Robert Kramer, Chief, Litigation II Section, Antitrust Division,

United States Department of Justice, 1401 H Street, N.W., Suite 3000,

Washington, D.C. 20530 (telephone: 202/307-0924).

Copies of the Complaint, Stipulation and Order, Proposed Final

Judgment, and Competitive Impact Statement are available for inspection

in Room 207 of the U.S. Department of Justice, Antitrust Division, 325

7th Street, N.W., Washington, D.C. 20530, (telephone: 202/307-0924).

Copies of the Complaint, Stipulation and Order, Proposed Final

Judgment, and Competitive Impact Statement are available for inspection

in Room 207 of the U.S. Department of Justice, Antitrust Division, 325

7th Street, N.W., Washington, D.C. 20530, (202) 514-2841. Copies of

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

fee.

Constance K. Robinson,

Director of Operations.

Stipulation

It is stipulated by and between the undersigned parties, by their

respective attorneys, that:

1. The Court has jurisdiction over the subject matter of this

action and over each of the parties hereto, and vence of this action is

proper in the District of Delaware.

2. The parties consent that a Final Judgment in the form hereto

attached may be filed and entered by the Court, upon the motion of any

party or upon the Court's own motion, at any time after compliance with

the requirements of the Antitrust Procedures and Penalties Act (15

U.S.C. Sec. 16 (b)-(h)), and without further notice to any party or

other proceedings, provided that plaintiff has not withdrawn its

consent, which it may do at any time before the entry of the proposed

Final Judgment by serving notice thereof on defendant and by filing

that notice with the Court.

3. The parties shall abide by and comply with the provisions of the

proposed Final Judgment pending entry of the Final Judgment, and from

the date of the filing of this Stipulation, shall comply with all the

terms and provisions of the Final Judgment as though they were in full

force and effect as an order of the Court.

4. In the event plaintiff withdraws its consent, or if the proposed

Final Judgment is not entered pursuant to this Stipulation, this

Stipulation shall be of no effect whatever and the making of this

Stipulation shall be without prejudice to any party in this or any

other proceeding.

Dated: March 29, 1996.

For Plaintiff, United States:

Anne K. Bingaman,

Assistant Attorney General District of Columbia #369900.

Anthony V. Nanni,

Chief, Litigation I Section, State of New York (no bar number

assigned).

Willie L. Hudgins,

Asst. Chief, Litigation II Section, State of Virginia #01547.

John Schmoll,

Attorney, State of Wisconsin #1013897, Antitrust Division, U.S.

Department of Justice, 1401 H Street, NW, Suite 4000, Washington, DC

20530, (202) 307-5780.

Gregory M. Sleet,

US Attorney,

By: Richard G. Andrews,

AUSA, State of Delaware #2199, 1201 Market Street, Suite 1100,

Wilmington, Delaware 19899, (302) 573-6277.

For Defendant, Georgia-Pacific Corp.

Donald L. Flexner,

Esquire, Crowell & Morning 1001 Pennsylvania Avenue, N.W. Washington,

DC 20004-2595 (202) 624-2500.

Matthew B. Lehr,

Esquire, State of Delaware #2370, Morris, Nichols, Arsht & Tunnell,

1201 Market Street, Wilmington, Delaware 19801, (302) 575-7281.

O r d e r

It is so ordered, this 29th of March, 1996.

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

United States District Judge

Final Judgment

Whereas, plaintiff, United States of America, having filed its

Complaint herein on March 29, 1996, and plaintiff and defendant, by

their respective attorneys, having consented to the entry of this Final

Judgment without trial or adjudication of any issue of fact or law

herein, and without this Final Judgment constituting any evidence

against or an

[[Page 17722]]

admission by any party with respect to any issue of law or fact herein;

And whereas, defendant has agreed to be bound by the provisions of

this Final Judgment pending its approval by the Court;

And whereas, the essence of this Final Judgment is prompt and

certain divestiture of assets to assure that competition is not

substantially lessened;

And whereas, plaintiff requires defendant to make certain

divestitures for the purpose of establishing viable competition in the

production and sale of gypsum board;

And whereas, defendant has represented to plaintiff that the

divestitures ordered herein can and will be made and that defendant

will later raise no claims of hardship or difficulty as grounds for

asking the Court to modify any of the divestiture provisions contained

below;

Now, therefore, before the taking of any testimony, and without

trial or adjudication of any issue of fact or law herein, and upon

consent of the parties hereto, it is hereby ORDERED, adjudged, and

decreed as follows:

I. Jurisdiction

This Court has jurisdiction over each of the parties hereto and the

subject matter of this action. The Complaint states a claim which

relief may be granted against defendant under Section 7 of the Clayton

Act, as amended (15 U.S.C. Sec. 18).

II. Definitions

As used in this Final Judgment:

A. ``Georgia-Pacific'' or ``defendant'' means defendant Georgia-

Pacific Corporation, a Georgia corporation headquartered in Atlanta,

Georgia, and includes its successors and assigns, and its subsidiaries,

directors, officers, managers, agents, and employees acting for or on

behalf of any of them.

B. ``The Northeast Region'' means the District of Columbia and the

states of Maine, Vermont, New Hampshire, Rhode Island, Connecticut,

Massachusetts, New York, New Jersey, Delaware, Pennsylvania, Maryland,

and Virginia.

C. ``Gypsum Board Assets'' means: (1) all rights, titles and

interests, including all fee and all leasehold and renewal rights, in

Georgia-Pacific's Buchanan, New York gypsum board plant and related

warehouses and docking facilities (the ``Buchanan Plant'') including,

but not limited to, all real property, capital equipment, fixtures,

inventories, contracts (including but not limited to customer

contracts), customer lists, trucks and other vehicles, interests,

assets or improvements related exclusively to the production,

distribution and sale of gypsum board at the Buchanan Plant; and

(2) All rights, titles and interests, including all fee and all

leasehold and renewal rights, in Georgia-Pacific's Wilmington, Delaware

gypsum board plant and related warehouses and docking facilities (the

``Wilmington Plant'') including, but not limited to, all real property,

capital equipment, fixtures, inventories, contracts (including but not

limited to customer contracts), customer lists, trucks and other

vehicles, interests, assets or improvements related exclusively to the

production, distribution and sale of gypsum board at the Wilmington

Plant.

D. ``Gypsum board'' means material that consists primarily of a

solid, flat core of processed gypsum between two sheets of paper

surfacing, and which is used principally for constructing or repairing

interior walls and ceilings of commercial and residential buildings.

III. Applicability

A. The provisions of this Final Judgment apply to the defendant,

its successors and assigns, subsidiaries, directors, officers,

managers, agents, and employees, and all other persons in active

concert or participation with any of them who shall have received

actual notice of this Final Judgment by personal service or otherwise.

B. Defendant shall require, as a condition of the sale or other

disposition of all or substantially all of the Gypsum Board Assets,

that the purchaser or purchasers agree to be bound by the provisions of

this Final Judgment.

IV. Divestitures

A. Georgia-Pacific is hereby ordered and directed in accordance

with the terms of this Final Judgment, within one hundred and fifty

(150) calendar days after the filing of this Final Judgment, to:

(i) Divest the Gypsum Board Assets to a purchaser or purchasers;

(ii) Enter into a perpetual, non-exclusive license (or licenses, as

the case may be) with the purchaser or purchasers, transferable to any

future purchaser of the Wilmington or Buchanan Plants, to use, in

manufacturing gypsum board at such Plants, all intangible assets,

wherever located, that have been used in the last six (6) months in the

manufacture of gypsum board at such Plants, including but not limited

to, trade secrets and know-how, but excluding patents for the DENS

products, trademarks, trade names, service marks, and service names;

and

(iii) At the option of the purchaser or purchasers, enter into a

supply contract for gypsum rock (which may or may not include

transportation) and/or gypsum linerboard paper sufficient to meet all

or part of the capacity requirements of the Buchanan and Wilmington

Plants over a period of up to ten (10) years; provided that the terms

and conditions of any contractual arrangement meant to satisfy this

provision must be related reasonably to market conditions for gypsum

rock and/or gypsum linerboard paper.

B. Divestiture of Georgia-Pacific's leasehold interest, if any, in

the Gypsum Board Assets shall be by transfer of the entire leasehold

interest, which shall be for the entire remaining term of such

leasehold, including any renewal rights.

C. Defendant agrees to use its best efforts to accomplish the

divestitures as expeditiously and timely as possible. Plaintiff, in its

sole discretion, may extend the time period for any divestiture for two

additional periods of time not to exceed sixty (60) calendar days in

toto.

D. In accompanying the divestitures ordered by this Final Judgment,

defendant promptly shall make known, by usual and customary means, the

availability of the Gypsum Board Assets and the licenses and supply

contracts described in Section IV (A) of this Final Judgment

(collectively, the ``Divestiture Package''). Defendant shall inform any

person making an inquiry regarding a possible purchase that the sale is

being made pursuant to this Final Judgment and provide such person with

a copy of this Final Judgment. Defendant shall make known to any person

making an inquiry regarding a possible purchase of the Divestiture

Package that the assets described in Section II (C) and the licenses

and supply contracts described in Section IV (A) of this Final Judgment

are being offered for sale and that the Buchanan and Wilmington Plants

and related assets may be purchased as a two-plant package or sold

separately to two different purchasers. Defendant shall also offer to

furnish to all bona fide prospective purchasers, subject to customary

confidentiality assurances, all information regarding the Divestiture

Package customarily provided in a due diligence process except such

information subject to attorney-client privilege or attorney work-

product privilege. Defendant shall make available such information to

plaintiff at the same time that such information is made available to

any other person.

E. Defendant shall not interfere with any negotiations by any

purchaser or

[[Page 17723]]

purchasers to employ any Georgia-Pacific employee who works at, or

whose principal responsibility is the manufacture, sale or marketing of

gypsum board produced at Georgia-Pacific's Buchanan and Wilmington

Plants.

F. Defendant shall permit prospective purchasers of the Divestiture

Package to have access to personnel and to make such inspection of the

Gypsum Board Assets, the intangible assets relating to the licenses

described in Section IV (A) of this Final Judgment, and any and all

financial, operational, or other documents and information customarily

provided as part of a due diligence process.

G. Unless plaintiff otherwise consents in writing, the divestiture

pursuant to Section IV (A), or by the trustee appointed pursuant to

Section V of this Final Judgment, shall include the Divestiture Package

and be accomplished by selling or otherwise conveying the assets

described in Section II (C) and by entering into the licenses and

supply contracts described in Section IV (A) of this Final Judgment, to

one or two purchasers, in such a way as to satisfy plaintiff, in its

sole discretion, that the Divestiture Package can and will be used by

the purchaser or purchasers as part of a viable, ongoing business or

businesses engaged in the manufacture and sale of gypsum board. The

divestiture, whether pursuant to Section IV or Section V of this Final

Judgment, shall be made to a purchaser or purchasers for whom it is

demonstrated to plaintiff's sole satisfaction that: (1) The purchaser

or purchasers have the capability and intent of competing effectively

in the manufacture and sale of gypsum board in the Northeast Region;

(2) the purchaser or purchasers have or soon will have the managerial,

operational, and financial capability to compete effectively in the

manufacture and sale of gypsum board in the Northeast Region; and (3)

none of the terms of any agreement between the purchaser or purchasers

and defendant give defendant the ability unreasonably to raise the

purchaser's or purchasers' costs, to lower the purchaser's or

purchasers' efficiency, or otherwise to interfere in the ability of the

purchaser or purchasers to compete effectively in the Northeast Region.

V. Appointment of Trustee

A. In the event that Georgia-Pacific has not divested the

Divestiture Package within the time specified in Sections IV (A) or (C)

of this Final Judgment, the Court shall appoint, on application of the

United States, a trustee selected by the United States to effect the

divestiture of the Divestiture Package.

B. After the appointment of a trustee becomes effective, only the

trustee shall have the right to sell the Gypsum Board Assets and enter

into the licenses and supply contracts described in Section IV (A) of

this Final Judgment. The trustee shall have the power and authority to

accomplish the divestiture at the best price then obtainable upon a

reasonable effort by the trustee, subject to the provisions of Sections

V and VI of this Final Judgment, and shall have such other powers as

the Court shall deem appropriate. Subject to Section V (C) of this

Final Judgement, the trustee shall have the power and authority to hire

at the cost and expense of defendant any investment bankers, attorneys,

or other agents reasonably necessary in the judgment of the trustee to

assist in the divestiture, and such professionals and agents shall be

accountable solely to the trustee. The trustee shall have the power and

authority to accomplish the divestiture at the earliest possible time

to a purchaser or purchasers acceptable to plaintiff, and shall have

such other powers as this Court shall deem appropriate. Defendant shall

not object to a sale by the trustee on any grounds other than the

trustee's malfeasance. Any such objections by defendant must be

conveyed in writing to plaintiff and the trustee within ten (10)

calendar days after the trustee has provided the notice required under

Section VI of this Final Judgment.

C. The trustee shall serve at the cost and expense of defendant, on

such terms and conditions as the Court may prescribe, and shall account

for all monies derived from the sale of the assets sold by the trustee

and all costs and expenses so incurred. After approval by the Court of

the trustee's accounting, including fees for its services and those of

any professionals and agents retained by the trustee, all remaining

money shall be paid to Georgia-Pacific and the trust shall then be

terminated. The compensation of such trustee and of any professionals

and agents retained by the trustee shall be reasonable in light of the

value of the Divestiture Package and based on a fee arrangement

providing the trustee with an incentive based on the price and terms of

the divestiture and the speed with which it is accomplished.

D. Defendant shall use its best efforts to assist the trustee in

accomplishing the required divestiture. The trustee and any

consultants, accountants, attorneys, and other persons retained by the

trustee shall have full and complete access to the personnel, books,

records, and facilities of defendant, and defendant shall develop

financial or other information relevant to such assets as the trustee

may reasonably request, subject to reasonable protection for trade

secret or other confidential research, development, or commercial

information. Defendant shall take no action to interfere with or to

impede the trustee's accomplishment of the divestiture.

E. After its appointment, the trustee shall file monthly reports

with the parties and the Court setting forth the trustee's efforts to

accomplish the divestiture order under this Final Judgment. If the

trustee has not accomplished such divestiture within six (6) months

after its appointment, the trustee thereupon shall file promptly with

the Court a report setting forth (1) the trustee's efforts to

accomplish the required divestiture, (2) the reasons, in the trustee's

judgment, why the required divestiture has not been accomplished, and

(3) the trustee's recommendations; provided, however, that to the

extent such reports contain information that the trustee deems

confidential, such reports shall not be filed in the public docket of

the Court. The trustee shall at the same time furnish such report to

the parties, who shall each have the right to be heard and to make

additional recommendations consistent with the purpose of the trust.

The Court shall enter thereafter such orders as it shall deem

appropriate in order to carry out the purpose of the trust, which may,

if necessary, include extending the trust and the term of the trustee's

appointment by a period requested by the United States.

VI. Notification

Within two (2) business days following execution of a definitive

agreement, contingent upon compliance with the terms of this Final

Judgment, to effect, in whole or in part, any proposed divestiture

pursuant to Sections IV or V of this Final Judgment, Georgia-Pacific or

the trustee, whichever is then responsible for effecting the

divestiture, shall notify plaintiff of the proposed divestiture. If the

trustee is responsible, it shall similarly notify defendant. The notice

shall set forth the details of the proposed transaction and list the

name, address, and telephone number of each person not previously

identified who offered to, or expressed an interest in or a desire to,

acquire any ownership interest in the assets that are the subject of

the binding contract, together with full details of same. Within

fifteen (15) calendar days of receipt by plaintiff of such notice,

plaintiff may request from defendant, the proposed purchaser or

purchasers,

[[Page 17724]]

or any other third party additional information concerning the proposed

divestiture and the proposed purchaser or purchasers. Defendant and the

trustee shall furnish any additional information requested within

fifteen (15) calendar days of the receipt of the request, unless the

parties shall otherwise agree. Within thirty (30) calendar days after

receipt of the notice or within twenty (20) calendar days after

plaintiff has been provided the additional information requested from

defendant, the proposed purchaser or purchasers, and any third party,

whichever is later, plaintiff shall provide written notice to defendant

and the trustee, if there is one, stating whether or not it objects to

the proposed divestiture. If plaintiff provides written notice to

defendant and the trustee that it does not object, then the divestiture

may be consummated, subject only to defendant's limited right to object

to the sale under Section V (B) of this Final Judgment. Absent written

notice that plaintiff does not object to the proposed purchaser or upon

objection by plaintiff, a divestiture proposed under Section IV shall

not be consummated. Upon objection by plaintiff, or by defendant under

the proviso in Section V (B), a divestiture proposed under Section V

shall not be consummated unless approved by the Court.

VII. Affidavits

A. Within twenty (20) calendar days of the filing of this Final

Judgment and every thirty (30) calendar days thereafter until the

divestitures have been completed whether pursuant to Section IV or

Section V of this Final Judgment, Georgia-Pacific shall deliver to

plaintiff an affidavit as to the fact and manner of compliance with

Sections IV or V of this Final Judgment. Each such affidavit shall

include, inter alia, the name, address, and telephone number of each

person who, at any time after the period covered by the last such

report, made an offer to acquire, expressed an interest in acquiring,

entering into negotiations to acquire, or was contacted or made an

inquiry about acquiring, any interest in the Divestiture Package, and

shall describe in detail each contact with any such person during that

period. Each such affidavit shall further describe in detail any

negotiations, including negotiations concerning the terms, conditions

and price, between a purchaser or purchasers of the Gypsum Board Assets

and Georgia-Pacific for the license(s) and supply contract(s) for

gypsum rock and/or gypsum linerboard paper described in Section IV (A)

of this Final Judgment.

B. Within twenty (20) calendar days of the filing of this Final

Judgment, Georgia-Pacific shall deliver to plaintiff an affidavit which

describes in detail all actions Georgia-Pacific has taken and all steps

Georgia-Pacific has implemented on an on-going basis to preserve the

Gypsum Board Assets pursuant to Section IX of this Final Judgment and

describes the functions, duties and actions taken by or undertaken at

the supervision of the individual(s) described at Section IX (F) of

this Final Judgment with respect to Georgia-Pacific's efforts to

preserve the Gypsum Board Assets. The affidavit also shall describe,

but not be limited to, Georgia-Pacific's efforts to maintain and

operate the Gypsum Board Assets as an active competitor, maintain the

management, sales, marketing and pricing of the Gypsum Board Assets

apart from Georgia-Pacific's gypsum business, maintain and increase

sales of gypsum board producted at the Buchanan and Wilmington Plants,

and maintain the Gypsum Board Assets in operable condition at current

or greater capacity configurations. Georgia-Pacific shall deliver to

plaintiff an affidavit describing any changes to the efforts and

actions outlined in Georgia-Pacific's earlier affidavit(s) filed

pursuant to this Section within fifteen (15) calendar days after the

change is implemented.

C. Defendant shall preserve all records of all efforts made to

preserve and divest the Divestiture Package.

VIII. Financing

With prior written consent of the plaintiff, defendant may finance

all or any part of any purchase made pursuant to Sections IV or V of

this Final Judgment.

IX. Preservation of Assets

Until the divestitures required by the Final Judgment have been

accomplished:

A. Defendant shall take all steps necessary to ensure that the

Gypsum Board Assets will be maintained and operated as an independent,

ongoing, economically viable and active competitor in the manufacture

and sale of gypsum board in the Northeast Region; and that, except as

necessary to comply with Section IX (B) of this Final Judgment, the

management of the Gypsum Board Assets will not be influenced by

Georgia-Pacific and the books, records, and competitively sensitive

sales, marketing and pricing information associated with the Gypsum

Board Assets will be kept separate and apart from Georgia-Pacific's

other gypsum board business.

B. Defendant shall use all reasonable efforts to maintain and

increase sales of gypsum board produced at its Buchanan and Wilmington

Plants, and defendant shall maintain at 1995 or previously approved

levels, whichever are higher, promotional, advertising, sales,

marketing and merchandising support for gypsum board sold from the

Buchanan and Wilmington Plants. Georgia-Pacific's sales and marketing

employees responsible for sales of gypsum board from the Buchanan and

Wilmington Plants shall not be transferred or reassigned to other

plants of defendant.

C. Defendant shall take all steps necessary to ensure that the

Gypsum Board Assets are fully maintained in operable condition at no

lower than their current rated capacity configurations, and shall

maintain and adhere to normal maintenance schedules for the Gypsum

Board Assets.

D. Defendant shall not, except as part of a divestiture approved by

plaintiff, remove, sell or transfer any of the Gypsum Board Assets,

including all intangible assets that relate to the licenses described

in Section IV (A) of this Final Judgment, other than gypsum board and

related products sold in the ordinary course of business.

E. Defendant shall take no action that would jeopardize the

divestiture of the Divestiture Package.

F. Defendant shall appoint a person or persons to oversee the

Gypsum Board Assets, and who will be responsible for defendant's

compliance with Section IX of this Final Judgment.

X. Compliance Inspection

Only for the purposes of determining or securing compliance with

the Final Judgment and subject to any legally recognized privilege,

from time to time:

A. Duly authorized representatives of the United States Department

of Justice, upon written request of the Attorney General or of the

Assistant Attorney General in charge of the Antitrust Division, and on

reasonable notice to defendant made to its principal offices, shall be

permitted:

(1) Access during office hours of defendant to inspect and copy all

books, ledgers, accounts, correspondence, memoranda, and other records

and documents in the possession or under the control of defendant, who

may have counsel present, relating to enforcement of this Final

Judgment; and

(2) Subject to the reasonable convenience of defendant and without

restraint or interference from it, to interview its officers,

employees, and agents, who may have counsel present, regarding any such

matters.

B. Upon the written request of the Attorney General or of the

Assistant Attorney General in charge of the

[[Page 17725]]

Antitrust Division, made to defendant's principal offices, defendant

shall submit such written reports, under oath if requested, with

respect to enforcement of this Final Judgment.

C. No information or documents obtained by the means provided in

Section X of this Final Judgment shall be divulged by a representative

of plaintiff to any person other than a duly 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

defendant to plaintiff, defendant represents and identifies in writing

the material in any such information or documents to which a claim of

protection may be asserted under Rule 26(b)(7) of the Federal Rules of

Civil Procedure, and defendant marks each pertinent page of such

material, ``Subject to claim of protection under Rule 26(c)(7) of the

Federal Rules of Civil Procedure,'' then ten (10) calendar days notice

shall be given by plaintiff to defendant prior to divulging such

material in any legal proceeding (other than a grand jury proceeding).

XI. Retention of Jurisdiction

Jurisdiction is retained by this Court for the purpose of enabling

any of the parties to this Final Judgment to apply to this Court at any

time for such further orders and directions as may be necessary or

appropriate for the construction or carrying out of this Final

Judgment, for modification of any of the provisions hereof, for the

enforcement of compliance herewith, and for the punishment of any

violation hereof.

XII. Termination

Unless this Court grants an extension, this Final Judgment will

expire on the tenth anniversary of the date of its entry.

XIII. Public Interest

Entry of this Final Judgment is in the public interest.

Dated: ______________

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United States District Judge

Competitive Impact Statement

The United States, pursuant to Section 2(b) of the Antitrust

Procedures and Penalties Act (``APPA''), 15 U.S.C. Sec. 16 (b)-(h),

files this Competitive Impact Statement relating to the proposed Final

Judgment submitted for entry in this civil antitrust proceeding.

I.

Nature and Purpose of the Proceeding

On March 29, 1996, the United States filed a civil antitrust

Complaint,) which alleges that Georgia-Pacific Corporation's

(``Georgia-Pacific'') proposed acquisition of the gypsum business of

Domtar Inc. (``Domtar'') would violate Section 7 of the Clayton Act, 15

U.S.C. Sec. 18. The Complaint alleges that the combination of the third

and fourth largest gypsum board sellers in the Northeast Region would

lessen competition substantially in the production and sale of gypsum

board in the Northeast Region. As defined in the Complaint, the

Northeast Region encompasses Washington, D.C. and the states of Maine,

New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New

York, New Jersey, Pennsylvania, Delaware, Maryland, and Virginia. The

prayer for relief in the Complaint seeks: (1) a judgment that the

proposed acquisition would violate Section 7 of the Clayton Act; and

(2) a permanent injunction preventing Georgia-Pacific from acquiring

control of Domtar's gypsum business, or otherwise combining such

business with Georgia-Pacific's own business in the United States.

When the Complaint was filed, the United States also filed a

proposed settlement that would permit Georgia-Pacific to complete its

acquisition of Domtar's gypsum business, but require certain

divestitures that will preserve competition in the Northeast Region.

This settlement consists of a Stipulation and Order and a proposed

Final Judgment.

The proposed Final Judgment orders Georgia-Pacific to divest to one

or more purchases its Buchanan, New York and Wilmington, Delaware

gypsum board plants, and certain related tangible and intangible

assets. Georgia-Pacific must complete the divestiture of these plants

and related assets within one hundred and fifty (150) calendar days

after the date on which the proposed Final Judgment was filed (i.e.,

March 29, 1996), in accordance with the procedures specified therein.

The Stipulation and Order and proposed Final Judgment require

Georgia-Pacific to ensure that, until the divestitures mandated by the

proposed Final Judgment have been accomplished, the two gypsum board

plants and related assets to be divested will be maintained and

operated as an independent, ongoing, economically viable and active

competitor. Georgia-Pacific must preserve and maintain the gypsum board

plants to be divested as saleable and economically viable, ongoing

concerns, with competitively sensitive business information and

decision-making divorced from that of Georgia-Pacific's gypsum board

business. Thus, subject to Georgia-Pacific's obligation to preserve the

assets to be divested, the two plants will be operated independent of,

and in competition with, Georgia-Pacific, pending divestiture. Georgia-

Pacific will appoint a person or persons to monitor and ensure its

compliance with these requirements of the proposed Final Judgment.

The United States and Georgia-Pacific 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. Georgia-Pacific, Domtar and the Proposed Transaction

Georgia-Pacific, based in Atlanta, Georgia, is a diversified

producer of building products and pulp and paper, with net sales of

over $12 billion for its 1994 fiscal year. Operating ten gypsum board

plants in the United States, Georgia-Pacific is the nation's third

largest gypsum products manufacturer, with an annual capacity to

produce approximately 3.1 billion square feet of gypsum board. In 1995,

Georgia-Pacific's United States gypsum board sales totaled about $251

million.

Domtar, Inc., a Canadian corporation headquartered in Montreal,

Canada, operates its gypsum business in the United States through its

wholly owned subsidiaries, Domtar gypsum, Inc., and Domtar Industries,

Inc., with offices in Ann Arbor, Michigan. The fourth largest producer

and seller of gypsum board in the United States, Domtar has the annual

capacity to produce about four billion square feet of gypsum board in

North America. In 1995, Domtar's United States gypsum board sales

totaled about $221 million.

On November 8, 1995, Georgia-Pacific agreed to acquire certain

stock and all the gypsum manufacturing operations of Domtar and its

subsidiaries in a cash transaction valued at $350 million. For $280

million, Georgia-Pacific will acquire Domtar's nine U.S. gypsum board

plants, one gypsum linerboard paper mill, and two plants producing

gypsum joint treatment. Georgia-Pacific

[[Page 17726]]

also proposes to acquire for $70 million Domtar's forty-nine percent

interest in a gypsum quarry in Mexico, four Canadian gypsum board

plants, one Canadian gypsum plaster plant, one Canadian gypsum joint

treatment plant and a Canadian gypsum products warehouse. This

transaction, which would take place in a concentrated oligopolistic

industry, precipitated the government's suit.

B. The Transaction's Effects in the Northeast Region

The Complaint alleges that the manufacture of gypsum board

constitutes a line of commerce, or relevant product market, for

antitrust purposes, and that the Northeast Region constitutes a section

of the country, or relevant geographic market. The Complaint alleges

the effect of Georgia-Pacific's acquisition may be to lessen

competition substantially in the manufacture and sale of gypsum board

in the Northeast Region.

Gypsum board consists of processed gypsum rock sandwiched between

sheets of liner board paper. Sometimes called drywall, wallboard or

sheetrock, gypsum board is used to construct and repair interior walls

and ceilings in residential and commercial buildings. No good economic

functional substitutes exist for gypsum board.

Gypsum board customers in the Northeast Region have been served

almost exclusively by gypsum board manufacturing plants located in the

Region. Gypsum board is a bulky, fragile and heavy product and is

cumbersome and expensive to ship long distances. It is generally sold

on a delivered price basis, and freight is an important cost component.

As a result, competition is regional, with producers selling the

majority of gypsum board to buyers within a 500 mile radius of the

producing plant. Domtar services the Northeast Region from its

Newington, New Hampshire and Camden, New Jersey gypsum board plants,

and Georgia-Pacific serves the Region from its Buchanan, New York and

Wilmington, Delaware plants.

The Complaint alleges that Georgia-Pacific's acquisition of Domtar

would increase the likelihood of coordinated pricing activity among

gypsum board in manufacturers serving the Northeast Region and will

increase the likelihood of anticompetitive price increases for

consumers there. The acquisition would increase concentration

significantly in the already highly concentrated, difficult-to-enter

Northeast Region. If the proposed acquisition were to proceed, Georgia-

pacific and the two largest producers in the Northeast Region, United

States Gypsum Co. and National Gypsum Co., each with approximately 30

percent of the market, would control collectively about 90 percent of

the gypsum board sales in the Northeast Region. Using the Herfindahl-

Hirschman Index (``HHI'') as a measure of market concentration (HHI is

defined and explained in Appendix A to the Complaint), the acquisition

increases the HHI by over 400 points to over a 2700 post-merger level

in the Northeast Region.

The structure of the gypsum board industry is fertile grounds for

anticompetitive coordination. For example, gypsum board is a

homogeneous product, and price is an important dimension of

competition. Capacity, production and pricing information is widely

available and price changes are normally announced well in advance of

implementation. In addition, at least once every generation this

century, civil or criminal actions have exposed successful price-fixing

agreements among the dominant gypsum board manufacturers. See United

States v. Gypsum Industries Association, et al., E25-215 (S.D.N.Y.

1922); United States v. United States Gypsum Co., 333 U.S. 364 (1948);

Wall Products Co. v. National Gypsum Co., 326 F. Supp. 295 (N.D. Cal.

1971); United States v. United States Gypsum Co., et al., 600 F.2d 414

(3rd Cir. 1979).

New entry in the Northeast Region is unlikely to restore the

competition lost through Georgia-Pacific's removal of Domtar from the

marketplace. De novo entry into gypsum board manufacturing requires a

significant capital investment and likely would take over two years

before the gypsum board plant comes on-line.

Furthermore, manufacturers with gypsum board plants outside the

Northeastern United States are unlikely to offer significant

competition in the Northeast Region. With their capacity largely

devoted to servicing the needs of customers concentrated around their

plants, which are far from the Northeast, manufacturers outside the

Northeast Region have neither the ability nor the incentive to ship

sufficient quantities of gypsum board to defeat a small but significant

nontransitory price increase in the Northeast Region. Collectively, the

outside manufacturers represent less than six percent of the footage of

gypsum board sold in the Northeast Region in 1995. Historically,

whether in times of strong or weak demand, manufacturers located

outside the Northeast have not had anything more than a small share of

the sales in there.

D. Harm to Competition as a Consequence of the Acquisition

The Complaint alleges that the transaction would have the following

effects, among others: competition generally in the Northeast Region

will be lessened substantially; actual and potential competition

between Georgia-Pacific and Domtar in the Northeast Region will be

eliminated; and prices for gypsum board in the Northeast Region are

likely to increase above competitive levels.

III

Explanation of the Proposed Final Judgment

The proposed Final Judgment would preserve competition in the

production and sale of gypsum board in the Northeast Region by placing

in independent hands the two gypsum board plants used by Georgia-

Pacific to serve the Northeast Region prior to this acquisition. Within

one hundred and fifty (150) calendar days after filing the proposed

Final Judgment, Georgia-Pacific must divest its Wilmington, Delaware

and Buchanan, New York gypsum board plants and related assets. Georgia-

Pacific shall enter into a supply contract for gypsum rock and/or

gypsum liner board paper which at the option of the purchaser(s) may be

up to 10 years and sufficient to meet all or part of the Buchanan and

Wilmington plants' requirements at terms reasonably related to market

conditions. The plants and related assets will be sold to one or more

purchasers who demonstrate to the sole satisfaction of the United

States that they will be an economically viable and effective

competitor, capable of maintaining or surpassing Georgia-Pacific's pre-

acquisition market performance in the sale of gypsum board in the

Northeast Region.

Until the ordered divestitures take place, Georgia-Pacific must

take all reasonable steps necessary to accomplish the divestitures, and

cooperate with any prospective purchaser. If Georgia-Pacific does not

accomplish the ordered divestitures within the specific one hundred and

fifty (150) calendar days, which may be extended by up to sixty (60)

calendar days by the United States, the proposed Final Judgment

provides for procedures by which the Court shall appoint a trustee to

complete the divestitures. Georgia-Pacific must cooperate fully with

the trustee.

If a trustee is appointed, the proposed Final Judgment provides

that Georgia-Pacific will pay all costs and expenses of the trustee.

The trustee's compensation will be structured so as to

[[Page 17727]]

provide an incentive for the trustee to obtain the highest price for

the assets to be divested, and to accomplish the divestiture as quickly

as possible. After the effective date of his or her appointment, the

trustee shall serve under such other conditions as the Court may

prescribe. After his or her appointment becomes effective, the trustee

will file monthly reports with the parties and the Court, setting forth

the trustee's efforts to accomplish the divestiture. At the end of six

(6) months, if the divestiture has not been accomplished, the trustee

shall file promptly with the Court a report which sets forth the

trustee's efforts to accomplish the divestiture, explains why the

divestiture has not been accomplished, and makes any recommendations.

The trustee's report will be furnished to the parties and shall be

filed in the public docket, except to the extent the report contains

information the trustee deems confidential. The parties each will have

the right to make additional recommendations to the Court. The Court

shall enter such orders as it deems appropriate to carry out the

purpose of the trust.

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 may bring suit in federal court to recover three times

the damages the person has suffered, as well as costs and reasonable

attorney's fees. Entry of the proposed Final Judgment neither will

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 Georgia-

Pacific or Domtar.

V

Procedures Available for Modification of the Proposed Final Judgment

The United States and Georgia-Pacific 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 should comment within sixty (60)

days of the date of publication of this Competitive Impact Statement in

the Federal Register. The United States will evaluate and respond to

the comments. All comments will be given due consideration by the

Department of Justice, which remains free to withdraw its consent to

the proposed Final Judgment at any time prior to entry. The comments

and the response of the United States will be filed with the Court and

published in the Federal Register.

Written comments should be submitted to: J. Robert Kramer, Chief,

Litigation II Section, Antitrust Division, United States Department of

Justice, 1401 H Street, N.W., Suite 3000, Washington, D.C. 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 of its Complaint against

Georgia-Pacific. The United States is satisfied, however, that the

divestiture of the assets and other relief contained in the production

and sale of gypsum board that otherwise would be affected adversely by

the acquisition. Thus, the proposed Final Judgment would achieve the

relief the government would have obtained through litigation, but

avoids the time, expense and uncertainty of a full trial on the merits

of the government's Complaint.

VII

Standard of Review Under the APPA for proposed Final Judgment

The APPA requires that proposed consent judgments in antitrust

cases brought by the United States be subject to a sixty (60) day

comment period, after which the court shall determine whether entry of

the proposed Final Judgment ``is in the public interest.'' In making

that determination, the court may consider--

(1) the competitive impact of such judgment, including

termination of alleged violations, provisions for enforcement and

modification, duration or relief sought, anticipated effects of

alternative remedies actually considered, and any other

considerations bearing upon the adequacy of such judgment;

(2) the impact of entry of such judgment 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. Sec. 16(e) (emphasis added). As the Court of Appeals for the

District of Columbia Circuit recently held, the APPA permits a court to

consider, 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 United States v. Microsoft, 1995-1

Trade Cas. (CCH) para. 71,027, at 74,822 (D.C. Cir. 1995).

In conducting this inquiry, ``the 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. 24598 (1973).

Rather,

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.

United States v. Mid-America Dairymen, Inc., 1977-1 Trade cas. (CCH)

para. 61,508, at 71,980 (W.D. Mo. 1977).

Accordingly, 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.), cert. denied, 454 U.S. 1083

(1981); see also Microsoft, 1995-1 Trade Cas. at 74,829-74,833.

Precedent requires that:

the 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 17728]]

United States v. Bechtel, 648 F.2d at 666 (citation omitted) (emphasis

added).

The proposed Final Judgment, therefore, should not be reviewed

under a standard of whether it is certain to eliminate every

anticompetitive effect of a particular practice or whether it mandates

certainty of free competition in the future. Court approval of a final

judgment requires a standard more flexible and less strict than the

standard required for a finding of liability. ``[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.' ''

(citations omitted). United States v. American Tel. and Tel. Co., 552

F. Supp. 131, 150 (D.D.C. 1982), aff'd sub nom., Maryland v. United

States, 460 U.S. 1001 (1983).

VIII

Determinative Documents

There are no determinative materials or documents within the

meaning of the APA that were considered by the United States in

formulating the proposed Final Judgment.

Respectfully submitted,

Executed on: April ____, 1996.

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

John Schmoll,

Attorney, State of Wisconsin #1013897 Dept. of Justice, Antitrust

Division, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530,

(202) 307-5780.

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

Gregory M. Sleet,

United States Attorney,

By:

Richard G. Andrews,

Esquire, State of Delaware #2199, 1201 Market Street, Suite 1100,

Wilmington, Delaware 19899, (302) 573-6277.

[FR Doc. 96-9767 Filed 4-19-96; 8:45 am]

BILLING CODE 4410-01-M