Lafarge Corporation; Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 9810161]

Lafarge Corporation; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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

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 December 21, 1998.

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

Room 159, 6th St. and Pa. Ave., NW, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Joe Lipinsky or Patricia Hensley, Seattle Regional Office, Federal

Trade Commission, 915 Second Avenue, Suite 2896, Seattle, WA. 98174,

(206) 220-6350.

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 complaint. An electronic copy of the full text of

the consent agreement package can be obtained from the FTC Home Page

(for October 16, 1998), 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, NW,

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 to Aid Public Comment on the Proposed Consent Order

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

public comment an agreement containing a proposed Consent Order from

Lafarge, S.A., and Lafarge Corporation (collectively ``Lafarge''),

which is designed to remedy the anticompetitive effects resulting from

Lafarge's acquisition of Holnam, Inc.'s (``Holnam''), Seattle

Washington, cement plant and related assets. Under the terms of the

consent agreement, Lafarge's purchase price for Holnam's assets cannot

be affected by the quantity of cement produced or sold by Lafarge in

any market in the states of Washington or Oregon.

The agreement containing the proposed Consent Order has been placed

on the public record for 60 days so that the Commission may receive

comments from interested persons. Comments received during this period

will become part of the public record. After 60 days, the Commission

will again review the proposed Consent Order and the comments received,

and will decide whether it should withdraw from the proposed Consent

Order or make final the proposed Order.

On February 4, 1998, Lafarge and Holnam signed a Letter of Intent

setting out the principal elements of a proposed transaction, whereby

Lafarge would acquire Holnam's Seattle cement plant and related assets.

According to the Commission's draft complaint that the Commission

intends to issue, the acquisition, if consummated, may substantially

lessen competition in the portland cement market in the Puget Sound

area of the state of Washington, and would violate Section 7 of the

Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal

Trade Commission Act, as amended, 15 U.S.C. 45.

Lafarge and Holnam, along with Lone Star Northwest, Ash Grove

Cement Company and CBR Cement Corp., sell portland cement in the Puget

Sound area. Portland cement, the essential binding ingredient in

concrete, is a construction raw material that users mix with water and

aggregates (crushed stone, sand, or gravel) to form concrete. Portland

cement is a closely controlled chemical combination of calcium

(normally from limestone), silicon, aluminum, iron and small amounts of

other ingredients. It is made by quarrying, crushing and grinding the

raw materials, burning them in huge kilns at extremely high

temperatures and grinding the resulting marble-size pellets (called

``clinker'') with gypsum into an extremely fine, usually gray, powder.

Portland cement produced by one manufacturer is virtually

indistinguishable from that manufactured by another.

The Puget Sound area of the state of Washington consists of the

portion of Washington state south from the Canadian border to the area

just south of the state capital of Olympia (roughly halfway between

Seattle and Portland, Oregon) and east from the Pacific Ocean to the

Cascade mountains, plus two adjacent counties just east of the

[[Page 56653]]

Cascade Mountains. Its commercial center is the city of Seattle. The

counties in this market west of the Cascades are Clallum, Grays Harbor,

Island, Jefferson, King, Kitsap, Mason, Pierce, San Juan, Skagit,

Snohomish, Thurston and Whatcom, and the two counties east of the

Cascade mountains are Chelan and Kittitas.

Absent the proposed acquisition, Holnam would likely have increased

the amount of cement it supplied to the Puget Sound market, which would

likely have resulted in a decrease in the price of cement. As

originally structured, the proposed acquisition would likely have

prevented this increase in supply because it contained a contractual

provision that imposed a significant cost penalty on Lafarge for

quantities of cement produced at the Holnam cement plant in excess of

85% of the plant's capacity. The proposed acquisition thus would have

given Lafarge the incentive to restrict the output of cement at the

Holnam plant in order to avoid the additional contractual cost. This

would have prevented any increase in the supply of cement to the market

and thus avoided the expected price decrease.

The proposed Consent Order would eliminate the contractual penalty

provision. Therefore, Lafarge would no longer have this incentive to

limit the amount of cement that it supplies to the Puget Sound area

portland cement market.

By accepting the proposed Consent Order, the Commission anticipates

that the competitive problems alleged in the draft complaint will be

resolved. The purpose of this analysis is to aid public comment on the

proposed Order. It is not intended to constitute an official

interpretation of the agreement and proposed Order or to modify in any

way their terms.

By direction of the Commission.

Donald Clark,

Secretary.

[FR Doc. 98-28399 Filed 10-21-98; 8:45 am]

BILLING CODE 6750-01-M