Insilco Corporation; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 961-0106]

Insilco Corporation; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft

complaint that accompanies the consent agreement and the terms of the

consent order--embodies in the consent agreement--that would settle

these allegations.

DATES: Comments must be received on or before November 7, 1997.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: Casey R. Triggs, Federal Trade

Commission, S-2308, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

(202) 326-2682. Nicholas R. Koberstein, Federal Trade Commission, S-

2308, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580. (202) 326-

2743.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the above-captioned consent agreement containing a consent

order to cease and desist, having been filed with and accepted, subject

to final approval, by the Commission, has been placed on the public

record for a period of sixty (60) days. The following Analysis to Aid

Public Comment describes the terms of the consent agreement, and the

allegations in the accompanying complaint. An electronic copy of the

full text of the consent agreement package can be obtained from the

Commission Actions section of the FTC Home Page (for August 27, 1997),

on the World Wide Web, at ``http://www.ftc.gov/actions/htm.'' A paper

copy can be obtained from the FTC Public Reference Room, Room H-130,

Sixth Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580,

either in person or by calling (202) 326-3627. Public comment is

invited. Such comments or views will be considered by the Commission

and will be available for inspection and copying at its principal

office in accordance with Section 4.9(b)(6)(ii) of the Commission's

Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission (the ``Commission'') has accepted for

public comment an agreement containing a proposed Consent Order from

Insilco Corporation (``Insilco''). The proposed Consent Order contains

a number of provisions designed to remedy the anticompetitive effects

that have resulted, and that are likely to continue to occur, because

of Insilco's acquisition of the assets of Helima-Helvetion, Inc.

(``Helima'') from Helima's German parent company, Helmut Lingemann &

Co. GmbH (``Lingemann'').

The Transaction

Pursuant to a purchase agreement dated July 10, 1996, Insilco

acquired from Lingemann the assets of Helima, a New York corporation

with its only plant in Duncan, South Carolina, and the stock of ARUP

Alu-Rohr und Profil GmbH, Lingemann's German subsidiary engaged in the

production and supply of welded-seam aluminum tubes.

The Complaint

The proposed complaint alleges that the consummated acquisition of

Helima violates Section 7 of the Clayton Act, as amended, 15 U.S.C.

Sec. 18, and Section 5 of the Federal Trade Commission Act, as amended,

15 U.S.C. Sec. 45, in two relevant markets: (1) the market for welded-

seam aluminum tubes with diameters of 50 millimeters or greater; and

(2) the market for welded-seam aluminum tubes with diameters less than

50 millimeters. Welded-seam aluminum tubes with diameters of 50

millimeters of greater are generally used in charged air coolers

(``CAC'') installed on heavy-weight trucks,\1\ whereas welded-seam

aluminum tubes with diameters less than 50 millimeters are generally

used in radiators. In both CAC and radiators, the welded-seam aluminum

tubes act as the heat exchange component, which is a device that

transfers heat from one fluid or gas to another medium, generally air.

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\1\ Heavy-weight truck is the designation given to a truck over

19,000 lbs. The Department of Transportation categorizes such trucks

as either Class 6, 7, or 8 vehicles.

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The complaint alleges that Insilco's acquisition of Helima gave it

a virtual monopoly or near-monopoly in these two types of welded-seam

aluminum tubes. This acquisition thereby increased the likelihood that

consumers would be forced to pay higher prices for welded-seam aluminum

CAC and radiator tubes.

A. The Welded-Seam Aluminum CAC Tube Market

In the market for welded-seam aluminum CAC tubes, Insilco's post-

acquisition market share is 100%. Currently, there is no foreign

supplier of

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welded-seam aluminum CAC tubes shipping product into North America, and

it is unlikely that there will be such a supplier in the next two

years, or at any time in the foreseeable future. Because the cost of

entering and producing welded-seam aluminum CAC tubes is relatively

high compared to the limited potential sales revenues available to an

entrant, entry into this market is not likely to be profitable, and is

therefore not likely to occur in a timely manner to counteract the

additional anticompetitive effects likely to result from the Helima

acquisition. Indeed, there has been no entry into the market for

welded-seam aluminum CAC tubes since the acquisition of Helima nearly a

year ago, nor has the threat of entry deterred any of the actual

anticompetitive effects resulting from the acquisition.

B. The Welded-Seam Aluminum Radiator Tube Market

In the merchant market for welded-seam aluminum radiator tubes,

Insilco's post-acquisition market share increased to about 90%.

Although there is one foreign supplier of welded-seam aluminum radiator

tubes shipping product into North America, that supplier has limited

sales. It is highly unlikely that this supplier's market share will

significantly expand within the next two years because of import

duties, shipping costs and time, and customer concerns about the

accessibility of the supplier.

Entry sufficient to avert the anticompetitive effects of this

acquisition is unlikely. Indeed, there has been no entry into the

market for welded-seam aluminum radiator tubes since the time of the

Helima acquisition, and the threat of entry has not deterred

anticompetitive effects resulting from the Helima acquisition.

C. The Pre-Consummation Transfer of Competitively-Sensitive Information

The proposed complaint also alleges that Lingemann, at Insilco's

request, gave Insilco comprehensive competitively-sensitive information

before consummation of the acquisitions. In particular, Helima gave

Insilco customer-specific price information, current and future pricing

plans, competition strategies, price formulas, and price strategies.

This information transfer was particularly harmful because Insilco and

Helima competed against each other in two highly concentrated markets

(duopolies) and the information concerned products that are relatively

fungible. This transfer had the potential to harm competition in the

interim pre-consummation period and in the event the acquisitions were

delayed, modified, or abandoned, may have led to even greater and more

long-lasting harm. The complaint thus alleges that the transfer of such

competitively-sensitive information in such highly concentrated markets

violates Section 5.

The Consent Order

The proposed Consent Order requires Insilco to divest two welded-

seam aluminum tube mills (out of the assets acquired from Lingemann)

within four months of the date on which the proposed Consent Order

becomes final. The proposed Consent Order also prohibits Insilco from

engaging in the pre-consummation transfer of competitively-sensitive

information.

A. Divestiture Provisions

Under the proposed Consent Order, Insilco is required to divest two

welded-seam aluminum tube mills from the former Helima Duncan, South

Carolina facility. One of the mills to be divested must be capable of

producing welded-seam aluminum CAC tubes, and one must be capable of

producing radiator tubes. In addition, the package of assets to be

divested includes one set of tooling that is capable of being used on

both mills, as well as additional ancillary assets such as machinery,

fixtures, equipment, and software used in the maintenance and operation

of the assets to be divested. Further, Insilco must provide the

acquirer access to Insilco employees with knowledge of the Helima mills

for the purposes of training, and must sell to the acquirer sole-source

spare and replacement parts. Pursuant to a customer's request, Insilco

would be required to divest to the acquirer the tooling used to make

that customer's tubes. If Insilco fails to divest the package of assets

within four months after the date on which the proposed Consent Order

becomes final, the Commission may appoint a trustee to divest all five

of the mills located at the former Helima plant in Duncan, South

Carolina.

To help ensure that the acquirer has access to customers, the

proposed Consent Order includes a provision prohibiting Insilco's

enforcement of any supply contracts that were entered into after the

acquisition and that are operative for a period grater than one year.

Further, the proposed Consent Order requires Commission approval of the

acquirer, and requires a potential acquirer to submit a five year

business plan showing how it will use the divested assets, how it will

compete in the markets, and that the divested assets will remain and be

competitive in North America. The purpose of the divestiture is to

ensure the reinstitution of a viable, ongoing competitor to Insilco in

the markets for welded-seam aluminum CAC tubes and welded-seam aluminum

radiator tubes.

The proposed Consent Order also requires Insilco to provide the

Commission a report of compliance with the divestiture provisions of

the Consent Order within 30 days following the date the proposed

Consent Order becomes final, and every 30 days thereafter until Insilco

has completed the required divestiture.

Finally, Insilco will be required to provide prior notification to

the Commission for certain acquisitions involving tube mills or tube

producers.

B. Bar on Information Transfer

The proposed Consent Order prohibits Insilco from obtaining, or

providing, prior to the consummation of an acquisition or sale of an

interest in any of its businesses, customer-specific price and cost

information, current or future pricing plans, current or future

strategies or policies relating to competition, and analyses or

formulas used to determine costs or prices. The proposed Consent Order

thus prohibits the exchange of specific types of information that would

likely harm competition in any market. The proposed Consent Order does,

however, acknowledge that a situation might arise wherein Insilco, or a

future acquisition partner, may benefit from having access to

competitively-sensitive information in order to assess a proposed

acquisition. In such a case, the party possessing such information

would be allowed under the proposed Consent Order to transfer the

information to an independent agent who will mask the customer-specific

and/or competitor-specific nature of the information before providing

it to its acquisition partner. Transferring this type of information

through an independent agent permits the benefits of the information

transfer while avoiding the potential for injury to competition.

Public Comment

The proposed Consent Order has been placed on the record for 60

days for reception of comments by interested persons. Comments received

during this period will become part of the public record. After 60

days, the Commission will again review the agreement and the comments

received, and will decide whether to withdraw from the agreement or

make final the agreement's proposed Order.

The purpose of this analysis is to facilitate the public comment on

the proposed Consent Order, and it is not

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intended to constitute an official interpretation of the agreement and

proposed Consent Order or to modify in any way its terms.

Donald S. Clark,

Secretary.

[FR Doc. 97-23680 Filed 9-5-97; 8:45 am]

BILLING CODE 6750-01-M