The Dow Chemical Company; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 971-0105]

The Dow Chemical Company; 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--embodied in the consent agreement--that would settle

these allegations.

DATES: Comments must be received on or before February 6, 1998.

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

Room 159, 6th St. & Pennsylvania Ave., N.W., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

William Baer, Federal Trade Commission, 6th & Pennsylvania Ave., N.W.,

H-374, Washington, DC 20580. (202) 326-2932, or Howard Morse, Federal

Trade Commission, 6th & Pennsylvania Ave., N.W., S-3627, Washington, DC

20580. (202) 326-2949.

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 November 28,

1997), on the World Wide Web, at ``http://www.ftc.gov/os/

actions97.htm.'' A paper copy can be obtained from the FTC Public

Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W.,

Washington, DC 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 (``Commission'') has accepted, subject

to final approval, an Agreement Containing Consent Order

(``Agreement'') from The Dow Chemical Company.

The proposed Order has been placed on the public record for sixty

(60) days for reception of comments by interested persons. Comments

received during this period will become part of the public record.

After sixty (60) days, the Commission will again review the Agreement

and the comments received and will decide whether it should withdraw

from the Agreement or make final the Agreement's proposed Order.

The Dow Chemical Company, a Midland, Michigan based company and

producer of chemicals, plastics, and agricultural and consumer

products, announced on August 5, 1997, a cash tender offer to acquire

all of the share of Sentrachem Limited, a South African chemical

company that operates in the U.S. through its wholly-owned subsidiary,

Hampshire Chemical Company, Hampshire and Dow, through its Chemical

Division, produce aminopolycarboxylic chelating agents, also known as

chelants. Hampshire produces chelants in Nashua, New Hampshire and Deer

Park, Texas, and chelant intermediates in Lima, Ohio. Dow produces

chelants in Freeport, Texas.

The proposed administrative complaint alleges that the proposed

acquisition may substantially lessen competition in the research,

development, manufacture, and sale of chelants, which are chemicals

used in cleaners, pulp and paper, water treatment, photography,

agriculture, and food and pharmaceutical applications to neutralize and

inactivate metal ions. The proposed complaint alleges that the United

States is the relevant geographic market for evaluating the

acquisition's effect on chelants because the shipping costs of

chelants, which are sold mostly in a liquid solution, are high and

there are too many uncertainties and delays inherent in long distance

shipping.

The proposed complaint alleges that Hampshire and Dow are the two

leading

[[Page 64591]]

of only three producers of chelants in the United States, with a

combined market share of over 70 percent. With only one competitor, the

acquisition would likely lead to an unilateral price increase, 1992

Horizontal Merger Guidelines Sec. 2.22.

Entry into the chelant market would not be timely, likely, or

sufficient to deter or offset the adverse effects of the acquisition on

competition because a new entrant would have to build both a chelant

production plant and a plant to produce hydrogen cyanide (``HCN''), a

key input in the production of chelants, which would take over two

years and entail large fixed, and mostly sunk, costs. In order to

recoup its investment, a new entrant would need to obtain a market

share at least as large as that held by any of the current domestic

producers, which would be difficult because of the significant amount

of chelant sales that are subject to long term supply agreements.

The proposed Order would remedy the alleged violation by preserving

the competition that would otherwise be lost as a result of Dow's

acquisition. The proposed Order requires Dow, simultaneously with its

acquisition of Sentrachem, to divest Hampshire's Chelant Business to

Akzo Nobel N.V., a Dutch chemical company that is a leading European

producer of chelants with strong chelant technology. Dow must divest,

among other things, all rights of Hampshire relating to the research,

development and manufacture of chelants in the United States and the

distribution and sale of chelants in North America, including

Hampshire's Lima, Ohio facility and its contract for the supply of HCN

at Lima. Once it acquires the Hampshire Chelant Business, Akzo will

build additional chelant capacity at the Lima, Ohio facility, which

will curtail the need for inefficient, hazardous HCN shipments from the

site.

The proposed Order sets certain Milestones that must be met to

accomplish the construction of the additional chelant capacity at Lima.

The Milestones include the submission of complete permits for the

additional capacity within one year after the Order becomes final, and

the installation of the structural steel within one year after the

additional capacity is permitted. In the event any of the Milestones

has not been achieved, Dow must reacquire the Hampshire Chelant

Business from Akzo. The proposed Order further requires that upon its

reacquisition of the business, Dow or a trustee will divest the

Hampshire Business Unit, which, in addition to the Hampshire Chelant

Business, includes other Hampshire businesses and Hampshire facilities

at Nashua, New Hampshire and Deer Park, Texas. The proposed Order

requires Dow to maintain the viability and marketability of the

Hampshire Business Unit in the interim. This crown jewel provision

provides an incentive for realizing the additional chelant capacity at

the Lima, Ohio facility in a timely manner. The crown jewel also

ensures that the Order will result in effective relief by requiring a

divestiture of all of Hampshire in the event that any Milestone is not

achieved.

The proposed Order requires Dow to toll manufacture chelants for

Akzo from Hampshire's Nashua and Deer Park facilities while Akzo builds

additional chelant capacity at Lima. The proposed Order also contains a

firewall provision that requires Dow to maintain the confidentiality of

the Hampshire Chelant Business form Dow's Competing Chelant Business.

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

proposed Order. This analysis is not intended to constitute an official

interpretation of the Agreement or the proposed Order or in any way to

modify the terms of the Agreement of the proposed Order.

Donald S. Clark,

Secretary.

[FR Doc. 97-32033 Filed 12-5-97; 8:45 am]

BILLING CODE 6750-01-M