Monier Lifetile LLC, et al.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[Dkt. 9290]

Monier Lifetile LLC, et al.; 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 administrative

complaint issued in September 1998 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 May 11, 1999.

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: William Baer or Nicholas Koberstein,

FTC/H-374, Washington, DC 20580. (202) 326-2932 or 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 3.25(f) of

the Commission's Rules of Practice (16 CFR 3.25(f)), 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 March 2, 1999), 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 of Proposed Consent Order To Aid Public Comment

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

public comment, from Monier Lifetile LLC (``Monier Lifetile''), Boral

Ltd. (``Boral'') and Lafarge S.A. (``Lafarge''), an agreement

containing consent Order (``Agreement'') designed to remedy the

anticompetitive effects resulting from the formation of Monier

Lifetile, a joint venture that combined the United States concrete

roofing tile manufacturing and marketing operations of Boral and

Redland PLC, a wholly-owned subsidiary of Lafarge. Under the terms of

the agreement, Monier Lifetile, Boral and Lafarge (``Respondents'')

will be required to divest certain concrete roofing tile manufacturing

assets to CRH PLC (``CRH''), an Irish corporation that manufactures

materials and products for use in the construction industry. The

Agreement has been placed on the public record for sixty (60) days for

receipt of comments from 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 Order

(``Order'').

The Commission issued an administrative Complaint on September 22,

1998, charging Boral and Lafarge with acquiring shares in and

contributing assets to a joint venture limited liability corporation,

Monier Lifetile, in violation of 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, in the markets for standard-weight

concrete roofing tile in Southern California, Nevada, Arizona and

Southern Florida.

In September of 1997, Boral and Redland PLC combined their United

States concrete roofing tile operations, Boral Lifetile, Inc. and

Monier, Inc., to form Monier Lifetile. Monier Lifetile was formed as a

limited liability company (LLC) under Delaware state law. The

transaction was not reportable under the Hart-Scott-Rodino (HSR) Act

because the joint venture was formed as an LLC. If this transaction had

been consummated after March 1, 1999, it would have been reportable

under Formal Interpretation 15 of the HSR rules. See 64 FR 5808

(February 5, 1999). Under Formal Interpretation 15, the formation of an

LLC will be reportable it two or more pre-existing, separately

controlled businesses will be

[[Page 12340]]

contributed, assuming the HSR size-of-person and size-of-transaction

requirements are met and at least one of the members will control the

LLC (i.e., have an interest entitling it to 50 percent of the profits

of the LLC or 50 percent of the assets of the LLC upon dissolution).

Such formations will be treated as mergers or consolidations under

Sec. 801.2(d) of the HSR rules.

Concrete roofing tile is the predominant material installed on the

roofs of new homes in the Southwest United States and Southern Florida.

Other roofing materials, such as asphalt shingles and clay tiles, are

not considered substitutes for concrete roofing tile by consumers in

these areas due to aesthetic, cost and structural differences. Because

of the preference of homeowners for concrete roofing tile in these

areas, builders and roofing contractors typically will not switch to

other roofing materials.

The areas where concrete roofing tile is the primary material used

in new home construction, Southern California, Nevada, Arizona and

Southern Florida, are each relevant geographic markets. Tile producers

outside these markets cannot compete in these areas because of the

substantial costs associated with transporting the heavy and fragile

tile into these markets.

Prior to the formation of Monier Lifetile, Boral Lifetile and

Monier were the two largest suppliers of concrete roofing tile in the

relevant geographic markets. Each of the relevant geographic markets is

highly concentrated. In Southern California, Nevada and Southern

Florida, there are only two other significant producers of concrete

roofing tile. In Arizona, there is only one other significant producer

of concrete roofing tile. Additionally, prior to the formation of

Monier Lifetile, Boral Lifetile and Monier each controlled significant

excess production capacity in the Southwest United States and Florida.

As a result, Boral Lifetile and Monier were vigorous, head-to-head

competitors in each of the relevant markets.

The formation of Monier Lifetile has combined the two largest

suppliers in the relevant geographic markets and reduced the number of

concrete roofing tile competitors in Southern California, Nevada and

southern Florida from four to three and the number of competitors in

the Arizona market from three to two. Further, as a result of the joint

venture, Monier Lifetile now controls most of the excess production

capacity serving the relevant geographic markets. By reducing the

number of competitors and placing almost all of the excess production

capacity under the control of a single firm, the joint venture has

substantially increased the likelihood of coordinated interaction and

significantly diminished competition in the relevant markets.

Since the formation of the joint venture, Monier Lifetile has

closed plants and reduced the amount of production capacity serving the

relevant geographic markets. Concrete roofing tile customers are now

reporting significant tile shortages in the relevant markets. Monier

Lifetile has also recently announced a five per cent increase in the

price of its concrete roofing tile. Customers have reported that Monier

Lifetile's competitors in the relevant markets have followed Monier

Lifetile's lead and raised their prices. Concrete roofing tile

customers in the relevant geographic markets have also complained that

the joint venture has reduced the number of product lines and colors

available.

New entry has not deterred or counteracted the anticometitive

effects of the formation of Monier Lifetile nor is it expected to do so

in the future. A new entrant into the concrete roofing tile market

would need to undertake the expensive and time-consuming process of

constructing manufacturing facilities, developing a competitive

product, procuring necessary licenses and approvals, and gaining

customer acceptance. Because of the difficulty in accomplishing these

tasks, new entry could not be accomplished in a timely manner.

Moreover, it is unlikely that new entry would occur at all because of

the high costs involved with entering and producing concrete roofing

tile relative to the potential sales revenues available to a new

entrant.

Since September 1998, this matter has been in pretrial discovery

before an administrative law judge, with trial scheduled to begin on

May 17, 1999. This matter was removed from administrative adjudication

on February 19, 1999, on a joint motion by Respondents and Commission

counsel so that the Commission could consider the Agreement. The

Agreement, if finally accepted by the Commission, would settle the

charges alleged in the Complaint.

The proposed Order effectively remedies the joint venture's

anticompetitive effects in the concrete roofing tile market alleged in

the Complaint by requiring Respondents to divest three concrete roofing

tile manufacturing facilities serving the relevant markets. Pursuant to

the Agreement, Respondents are required to divest the following assets,

collectively known as the ``Tile Manufacturing Assets To Be Divested,''

to CRH within five (5) business days of the date the Commission issues

and serves its decision containing the Order:

(1) The Corona tile manufacturing facility, located at 1745 Sampson

Avenue, Corona, California;

(2) The Casa Grande tile manufacturing facility, located at 1742

South Rooftile Road, Casa Grande, Arizona; and

(3) The Ft. Lauderdale tile manufacturing facility, located at 1900

N.W. 21st Avenue, Ft. Lauderdale, Florida.

CRH, headquartered in Dublin, Ireland, is an international producer

and marketer of construction products and building materials with

worldwide sales of approximately $6 billion annually. CRH operates

seven roof tile plants in Europe. CRH manufactures concrete roofing

tile in the United States through its Westile division located in

Littleton, Colorado.

In the event that Respondents fail to divest the Tile Manufacturing

Assets To Be Divested to CRH within five (5) days from the day the

Order becomes final, the Commission may appoint a trustee to divest

these assets.

In order to ensure the viability and competitiveness of the Title

Manufacturing Assets To Be Divested, the Order requires Respondents,

upon reasonable notice and request by CRH, to provide CRH with six (6)

months of assistance, personnel and training as are reasonably

necessary to enable CRH to manufacture concrete roofing tile in

substantially the same manner and quality employed or achieved by

Monier Lifetile, and to enable CRH to obtain necessary government

approval to manufacture concrete roofing tile. The Order also requires

Respondents to provide the Commission a report of compliance with the

divesture provisions of the Order within thirty (30) days after the

date the Order becomes final, and every sixty (60) days thereafter

until Respondents have fully complied with their obligations under the

Order.

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

proposed Order, and it is not intended to constitute an official

interpretation of the Agreement and Order or to modify in any way their

terms.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 99-6119 Filed 3-11-99; 8:45 am]

BILLING CODE 6750-01-M