[Federal Register Volume 75, Number 234 (Tuesday, December 7, 2010)]
[Notices]
[Pages 76026-76036]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30621]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. Graftech International Ltd., Et al.; Proposed 
Final Judgment and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation and Competitive Impact Statement have been filed with the 
United States District Court for the District of Columbia in United 
States of America v. GrafTech International Ltd., et al., Civil Action 
No. 1:10-cv-02039. On November 29, 2010, the United States filed a 
Complaint alleging that the proposed acquisition by GrafTech 
International Ltd. (``GrafTech'') of Seadrift Coke L.P. (``Seadrift'') 
would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The proposed 
Final Judgment, filed the same time as the Complaint, requires that 
GrafTech and Seadrift modify an existing supply agreement with one of 
Seadrift's competitors in the provision of petroleum needle coke, 
ConocoPhillips Company (``Conoco''), to remove terms that might have 
facilitated the sharing of pricing and production information. In 
addition, future supply agreements between GrafTech and Conoco must not 
provide Seadrift the means with which to verify customer-specific 
competitor pricing or production. In order to ensure compliance with 
these provisions, GrafTech must provide to the United States: (1) All 
future agreements between Conoco and GrafTech for the provision of 
petroleum needle coke; and (2) Seadrift documents prepared in the 
ordinary course of business that demonstrate Seadrift's production, 
capacity and sales. GrafTech must also institute a firewall, which 
restricts the flow of competitively sensitive information to and from 
Conoco during GrafTech's supply negotiations with that company, as well 
as preventing the flow of any competitively sensitive information to 
GrafTech personnel that may be provided to Seadrift from its customers.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection at the Department of 
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth 
Street, NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-
2481), on the Department of Justice's Web site at http://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court 
for the District of Columbia. Copies of these materials may be obtained 
from the Antitrust Division upon request and payment of the copying fee 
set by Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Maribeth Petrizzi, Chief, Litigation II Section, Antitrust Division, 
U.S. Department of Justice, 450 Fifth Street, NW., Suite 8700, 
Washington, DC 20530 (telephone: 202-307-0924).

Patricia A. Brink,
Director of Civil Enforcement.

United States District Court for the District of Columbia

    United States of America, Department of Justice, Antitrust 
Division, 450 5th Street, NW., Suite 8700, Washington, DC 20530, 
Plaintiff,
     v.
    Graftech International Ltd., 2900 Snow Road, Parma, Ohio 44130, and
    Seadrift Coke L.P., 8618 Highway 185 North, Port Lavaca, Texas 
77979, Defendants.

Case No.: 1:10-Cv-02039
Judge: Rosemary M. Collyer
Deck Type: Antitrust
Date Stamp: November 29, 2010

Complaint

    Plaintiff, the United States of America, acting under the direction 
of the Attorney General of the United States, brings this civil 
antitrust action against defendants GrafTech International Ltd. 
(``GrafTech'') and Seadrift Coke L.P. (``Seadrift'') to obtain a 
permanent injunction and other relief to remedy the harm to competition 
caused by GrafTech's acquisition of Seadrift. Plaintiff alleges as 
follows:

I. Nature of the Action

    1. GrafTech is one of the largest producers of graphite electrodes 
in the world. On April 1, 2010, GrafTech agreed to acquire the 81.1 
percent of Seadrift that it does not already own for approximately 
$308.1 million. Seadrift produces petroleum needle coke, the primary 
input in the production of graphite electrodes.
    2. Historically, GrafTech has sourced the majority of its petroleum 
needle coke from Seadrift's competitor, ConocoPhillips Company 
(``Conoco''). At various times, there have been constraints in the 
supply of needle coke. Beginning January 1, 2001, GrafTech and Conoco 
formalized their relationship by negotiating two, nearly-

[[Page 76027]]

identical, long-term supply agreements for petroleum needle coke 
supplied from Conoco's two production facilities, in Lake Charles, 
Louisiana, and South Killinghorne, England (collectively referred to 
hereinafter as ``Supply Agreement'').
    3. The Supply Agreement provides each party with the ability to 
audit the books, records, and documents of the other to ensure 
compliance. Though the ``termination clause'' of the Supply Agreement 
was recently activated, notice of termination essentially locks in the 
terms of the Supply Agreement for three years. During this period, 
Conoco must provide petroleum needle coke to GrafTech on a most-
favored-nation (``MFN'') basis, meaning that prices to GrafTech may not 
exceed the lowest price charged by Conoco to its other customers. To 
ensure compliance with the MFN guarantee, GrafTech could demand to 
audit Conoco documents reflecting the company's costs, pricing to 
specific customers, volume of production to each customer and other 
commercially sensitive terms of sale.
    4. GrafTech's acquisition of Seadrift effectively would allow 
GrafTech to determine Seadrift's capacity and utilization rate for the 
production and supply of petroleum needle coke. The acquisition would 
also provide Seadrift with direct access to all of the information 
GrafTech collects via the Supply Agreement with Conoco. This would 
allow access to verified, customer-specific pricing and production 
information between two petroleum needle coke competitors, Seadrift and 
Conoco. Such control over Seadrift and access to information could 
facilitate tacit coordination of prices or output. Thus, the merger 
would remove a significant barrier to collusion among suppliers of 
petroleum needle coke, enhancing GrafTech's, Seadrift's and Conoco's 
ability to coordinate prices and output, with the likely effect of 
increased prices or reduced supply to consumers, in violation of 
Section 7 of the Clayton Act, 15 U.S.C. 18.

II. The Defendants

    5. Headquartered in Parma, Ohio, GrafTech, through its graphite 
power systems division, is the largest manufacturer of graphite 
electrodes (``graphite electrodes'') sold in the United States. 
GrafTech has no U.S. production facility, but produces graphite 
electrodes for sale in the United States at some of its international 
facilities, located in Mexico, Brazil, Africa, France and Spain. 
GrafTech's revenues from the sale of graphite electrodes were 
approximately $483 million in 2009.
    6. Seadrift, headquartered in Port Lavaca, Texas, is one of two 
domestic manufacturers of petroleum needle coke, the key input product 
in the manufacture of graphite electrodes in North America. Seadrift 
produces petroleum needle coke for sale to customers producing graphite 
electrodes sold in the United States from a single manufacturing plant, 
also located in Port Lavaca. The Port Lavaca plant has an annual 
production capacity of approximately 150,000 metric tons of petroleum 
needle coke, representing approximately 19 percent of worldwide 
petroleum needle coke capacity.

III. Jurisdiction and Venue

    7. The United States brings this action against defendants GrafTech 
and Seadrift under Section 15 of the Clayton Act, 15 U.S.C. 25, as 
amended, to prevent GrafTech from violating Section 7 of the Clayton 
Act, 15 U.S.C. 18.
    8. Defendant GrafTech manufactures, sells and provides services 
related to graphite electrodes sold in the United States and in the 
flow of interstate commerce. GrafTech's manufacture, sale and provision 
of services related to graphite electrodes substantially affect 
interstate commerce. Defendant Seadrift produces and sells petroleum 
needle coke in the United States in the flow of interstate commerce, 
and those activities substantially affect interstate commerce. The 
Court has jurisdiction over this action and over the parties pursuant 
to 15 U.S.C. 25 and 28 U.S.C. 1331 and 1337.
    9. Defendants have consented to venue and personal jurisdiction in 
this judicial district.

V. Trade and Commerce

A. Relevant Market

    10. Petroleum needle coke, a crystalline form of carbon derived 
from decant oil, is the key ingredient in, and is used only in, the 
production of graphite electrodes. Graphite electrode producers such as 
GrafTech combine petroleum needle coke with pitch adhesives and other 
inputs to form cylinders that are shot through with electricity and 
baked to produce graphite electrodes. Graphite electrodes are then 
assembled into columns using connecting pins and sold to steel 
manufacturers for use in furnaces and foundries. Steel manufacturers 
dip the graphite electrodes into the belly of an electric arc furnace 
and use the graphite electrodes as a conductor to shoot electricity 
into the furnace, heating the furnace and melting scrap steel.
    11. Graphite electrodes oxidize and gradually are consumed. They 
are replaced about every eight hours. Graphite electrodes that oxidize 
too quickly or break while in use reduce the efficiency of the furnace 
and, in the case of breakage, require the electric arc furnace to be 
shut down so the fragments can be extracted from the molten steel, 
which imposes a significant cost on steel producers. The quality of the 
petroleum needle coke used to make the graphite electrode is the most 
important factor in preventing breakage or accelerated consumption of 
graphite electrodes.
    12. Petroleum needle coke, relative to other varieties of coke, is 
distinguished by its needle-like structure and its quality, which is 
measured by the presence of impurities, principally sulfur, nitrogen 
and ash. The needle-like structure of petroleum needle coke encourages 
expansion along the length of the electrode, rather than the width, 
which reduces the likelihood of fractures. Impurities reduce quality 
because they increase the coefficient of thermal expansion and 
electrical resistivity of the graphite electrode, which can lead to 
uneven expansion and a build-up of heat and causes the graphite 
electrode to oxidize rapidly and break. Petroleum needle coke is 
typically low in these impurities. In order to minimize fractures 
caused by disproportionate expansion over the width of an electrode, 
and minimize the effect of impurities, large-diameter graphite 
electrodes (18 inches to 32 inches) employed in high-intensity electric 
arc furnace applications are comprised almost exclusively of petroleum 
needle coke.
    13. An alternative form of needle coke is produced from coal tar 
pitch. Pitch needle coke (``pitch coke'') tends to include more 
impurities than petroleum needle coke. Pitch coke can be used to make 
graphite electrodes, but it must be processed differently, is more 
costly and time-consuming to produce, and typically results in a lower 
quality graphite electrode. Pitch coke cannot be blended with petroleum 
needle coke. Because of these disadvantages, most producers of large-
diameter graphite electrodes do not use pitch coke as an input.
    14. Anode coke, like petroleum needle coke, is a derivative of 
decant oil, but it lacks the needle-like structure of petroleum needle 
coke. Instead, anode coke particles are spherical and cause a graphite 
electrode to expand across the width rather than just the length of the 
electrode. This pattern of expansion makes fractures more likely, 
particularly in large-diameter graphite

[[Page 76028]]

electrodes, the greater width of which exaggerates the effect. Although 
producers may blend anode coke with petroleum needle coke to produce 
graphite electrodes, most producers carefully restrict the amount of 
anode coke used in graphite electrode production and do not use 
significant quantities of anode coke in the production of large-
diameter graphite electrodes.
    15. Petroleum needle coke customers can and do obtain petroleum 
needle coke from multiple sources worldwide. Petroleum needle coke is 
produced at manufacturing facilities located in the United States, 
England and Japan. Each facility ships petroleum needle coke 
internationally, and transportation costs comprise a small fraction of 
the cost of petroleum needle coke. Petroleum needle coke purchasers 
typically pay the same price for petroleum needle coke regardless of 
the location of the production facility or the destination.
    16. A small but significant increase in the price of petroleum 
needle coke would not cause customers to substitute volumes of pitch 
needle coke or anode coke sufficient to make such a price increase 
unprofitable. Accordingly, worldwide production and sale of petroleum 
needle coke is a line of commerce and a relevant product market within 
the meaning of Section 7 of the Clayton Act.

B. Competitive Effects

1. Market Structure and Supply Relationships
    17. Four significant firms operating out of five facilities 
worldwide produce petroleum needle coke. There have been instances in 
which demand has exceeded available supply; artificial restrictions on 
output could lead to supply constraints and higher prices. Conoco has 
the largest production capacity of all petroleum needle coke producers, 
and is the only manufacturer with two production facilities, including 
a plant in South Killinghorne, England and another in Lake Charles, 
Louisiana. Conoco's two plants collectively represent 55 percent of 
worldwide petroleum needle coke capacity. Seadrift owns a single plant 
in Port Lavaca, Louisiana. Seadrift is the second-largest producer of 
petroleum needle coke, with approximately 19 percent of capacity. It 
historically has sold petroleum needle coke to most of the major 
graphite electrode producers. GrafTech's acquisition of Seadrift would 
enable it to alter Seadrift's capacity and utilization rates. Two other 
producers each operate a plant in Japan; historically, the Japanese 
producers have not significantly increased the amount of petroleum 
needle coke they ship into the United States from year to year.
    18. Conoco supplies nearly every graphite electrode manufacturer in 
the world with some portion of the manufacturer's petroleum needle coke 
requirements, including GrafTech and all of its graphite electrode 
competitors. Even following its acquisition of Seadrift, GrafTech 
intends to continue to purchase petroleum needle coke from Conoco. All 
major graphite electrode producers have multiple plants worldwide, and 
typically rely upon either Conoco or Seadrift for some portion of their 
petroleum needle coke requirements. Supply agreements are typically 
negotiated annually for the following year, with sporadic monthly 
purchases as-needed to fill gaps between projected and real demand.
2. GrafTech-Conoco Long-Term Supply Relationship
    19. Over the past ten years, GrafTech has been engaged in a long-
term supply arrangement with Conoco, buying the vast majority of its 
petroleum needle coke requirements from Conoco's South Killinghorne and 
Lake Charles facilities. The Supply Agreement includes a target range 
for the volume of purchases by GrafTech from each Conoco plant, and is 
modified annually to record negotiated price terms for the coming year.
    20. The Supply Agreement includes a clause entitled ``Audit 
Rights,'' which permit Conoco and GrafTech to audit each other's books, 
records and documents. The audit rights do not exclude contemporaneous 
books, records and documents.
    21. The Supply Agreement also includes a ``termination clause,'' 
which is activated upon notice by either party. When activated, the 
termination clause requires the Supply Agreement to continue for a 
period of three years, with modified volume commitments and pricing 
terms. GrafTech's obligations to buy petroleum needle coke from Conoco 
are based on past purchase volumes and decline each year by a set 
percentage. Conoco, in turn, must grant GrafTech MFN pricing for that 
three-year period, which requires that GrafTech's prices shall be no 
higher than the lowest price charged by Conoco for the relevant grade 
of petroleum needle coke among all of its petroleum needle coke 
customers.
    22. On September 27, 2010, Conoco notified GrafTech that it 
intended to terminate the Supply Agreement. Activation of the 
termination clause converted the price term to MFN pricing. The audit 
rights clause remains unchanged.
    23. Even after the three-year period remaining under the Supply 
Agreement expires, GrafTech intends to continue to contract with Conoco 
for a substantial volume of petroleum needle coke. Such a relationship 
could expose GrafTech to information regarding Conoco's pricing, supply 
and output. GrafTech could utilize such information to coordinate 
petroleum needle coke pricing and output.
3. Impact of GrafTech's Merger with Seadrift
    24. On April 1, 2010, GrafTech agreed to acquire the outstanding 
majority interest in Seadrift. When announcing the proposed 
acquisition, GrafTech also described various improvements that it 
intended to make to the Seadrift facility, including expansion in 
available capacity, in anticipation of using a significant volume of 
Seadrift's production following the acquisition.
    25. The audit rights clause provides GrafTech access to Conoco's 
facilities, books, records and documents to ensure compliance with the 
Supply Agreement. The MFN clause now requires that Conoco charge to 
GrafTech prices no higher than the lowest price it offers to other 
graphite electrode producers. To ensure compliance with the MFN, 
GrafTech could request to audit Conoco's books, records and documents 
reflecting prices charged to specific graphite electrode customers. 
Such an audit also could reveal Conoco's costs, production, terms of 
sale and related commercial information. Access to invoices and billing 
records, for example, would provide direct information about volume 
sold, prices charged and the credit terms under which payment was 
collected for individual customers.
    26. Once Seadrift is acquired by GrafTech, it will have access to 
the same information as GrafTech under the Supply Agreement, including 
any information arising from GrafTech's access to Conoco's facilities 
and audits of Conoco's contemporaneous books, records and documents. 
Because Conoco sells petroleum needle coke to nearly every graphite 
electrode producer in the world, the scope of that access is 
essentially market-wide.
    27. Consequently, post-merger, GrafTech would be able to exercise 
rights under the Supply Agreement at the behest of Seadrift, Conoco's 
competitor. Indeed, the activation of the MFN clause maximizes 
GrafTech's ability to verify the prices that Seadrift's primary 
competitor charges to specific petroleum needle coke customers, and

[[Page 76029]]

the volume of petroleum needle coke promised to each customer. The 
merger would allow the exploitation of those rights by Seadrift. Such 
access by a competitor could facilitate a tacit understanding between 
Seadrift and Conoco about the prices that should be charged to each 
customer, or the rate of output of each facility. Further, the ability 
to verify a competitor's contemporaneous, customer-specific production 
and pricing would eliminate the incentive and opportunity to deviate 
from any such understanding, as detection would be likely, removing 
another barrier to coordination.
    28. Accordingly, the MFN and audit rights clauses would 
substantially reduce competition in the petroleum needle coke market, 
which likely would lead to higher prices and reduced output, in 
violation of Section 7 of the Clayton Act.
    29. Even in the absence of the MFN and Audit Rights, however, the 
ongoing supply relationship between GrafTech and Conoco could provide 
GrafTech (and hence Seadrift) with inappropriate competitive 
information regarding pricing, supply and output. Such information 
could enhance the potential for price and output coordination.

V. Violation Alleged

    30. GrafTech's acquisition of Seadrift, by permitting access to 
verified, customer-specific production, pricing and related commercial 
information by competitors Seadrift and Conoco under the terms of the 
Supply Agreement, and possibly other supply arrangements, would 
substantially reduce competition and likely increase prices and reduce 
output in the petroleum needle coke market in violation of Section 7 of 
the Clayton Act, 15 U.S.C. 18.

VI. Requested Relief

    31. Plaintiff requests that this Court:
    a. Adjudge and decree that GrafTech's acquisition of Seadrift would 
violate Section 7 of the Clayton Act, 15 U.S.C. 18;
    b. Compel GrafTech to strike the audit and MFN clauses from the 
Supply Agreement;
    c. Prohibit GrafTech from including in future contracts with Conoco 
any term that conveys an audit right, MFN pricing, or otherwise allows 
the exchange of third-party production, pricing and related commercial 
information between GrafTech and Conoco;
    d. Award Plaintiff the cost of this action; and
    e. Grant Plaintiff such other and further relief as the case 
requires and the Court deems just and proper.

Dated: November 29, 2010

Respectfully Submitted,

For Plaintiff United States of America:

Christine A. Varney,
Assistant Attorney General, D.C. Bar No. 411654.

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Katherine B. Forrest,
Deputy Assistant Attorney General

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Molly S. Boast,
Deputy Assistant Attorney General

/s/--------------------------------------------------------------------
Patricia A. Brink,
Director of Civil Enforcement

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Maribeth Petrizzi,
Chief, Litigation II Section, D.C. Bar No. 435204

/s/--------------------------------------------------------------------
Dorothy B. Fountain,
Assistant Chief, Litigation II Section, D.C. Bar No. 439469

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Stephanie A. Fleming,
Kevin Quin,
Jillian E. Charles,
James K. Foster,
Suzanne Morris
Attorneys,
U.S. Department of Justice, Antitrust Division, Litigation II 
Section, 450 Fifth Street, NW., Suite 8700, Washington, DC 20530, 
(202) 514-9228, <a href="/cdn-cgi/l/email-protection#9bc8effeebf3faf5f2feb5ddf7fef6f2f5fcdbeee8fff4f1b5fcf4ed"><span class="__cf_email__" data-cfemail="9fccebfaeff7fef1f6fab1d9f3faf2f6f1f8dfeaecfbf0f5b1f8f0e9">[email protected]</span></a>

United States District Court for the District of Columbia

    United States of America, Plaintiff, v. Graftech International 
Ltd. And Seadrift Coke L.P., Defendants.

Case No.: 1:10-Cv-02039.
Judge: Rosemary M. Collyer.
Deck Type: Antitrust.
Date Stamp: November 29, 2010.

Competitive Impact Statement

    Plaintiff United States of America (``United States''), pursuant to 
section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. 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

    Defendants GrafTech International Ltd. (``GrafTech'') and Seadrift 
Coke L.P. (``Seadrift'') entered into an Agreement and Plan of Merger, 
dated April 1, 2010, pursuant to which GrafTech agreed to acquire the 
81.1 percent of Seadrift stock it does not already own for about $308.1 
million.
    The United States filed a civil antitrust Complaint on November 29, 
2010, seeking to enjoin GrafTech's proposed acquisition of Seadrift. 
The Complaint alleges that the acquisition likely will substantially 
lessen competition in the worldwide sale of petroleum needle coke used 
to manufacture graphite electrodes, in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18. That loss of competition likely would result 
in higher prices, reduced output and less favorable terms of sale in 
the global petroleum needle coke market.
    At the same time the Complaint was filed, the United States filed a 
proposed Final Judgment, which is designed to remedy the expected 
anticompetitive effects of the acquisition. Under the proposed Final 
Judgment, which is explained more fully below, GrafTech and Seadrift 
are required to modify the long-term petroleum needle coke supply 
agreements (``Supply Agreement'') between GrafTech and ConocoPhillips 
Company (``Conoco''), a competitor of Seadrift, and provides for 
ongoing reports regarding petroleum needle coke demand, capacity 
utilization and the imposition of firewalls. After the proposed 
acquisition, GrafTech would control Seadrift's capacity utilization for 
petroleum needle coke. Seadrift effectively would also have direct 
access to all of the information it collects from its customers as well 
as the information GrafTech collects via the Supply Agreement. The 
Supply Agreement would include the ability to verify Conoco's customer-
specific pricing, volume of production and other commercially sensitive 
information, via the audit rights and most-favored-nation (``MFN'') 
pricing clauses included therein.\1\ Future supply arrangements also 
could provide similar opportunities to access commercially sensitive 
information, as well as other sensitive information from Seadrift's own 
customers. The ability of a vendor to verify current commercial terms 
granted by a competitor could facilitate a tacit understanding on price 
or output and provide a means to detect cheating on such an 
understanding, increasing the likelihood of coordination. Accordingly, 
as the merger would remove a significant barrier to collusion, it 
likely would lead to anticompetitive effects.
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    \1\ GrafTech has not received MFN pricing from Conoco under this 
clause to date. Conoco's September 2010 termination of the Supply 
Agreement activated this dormant provision, which would have applied 
to sales beginning in 2011.
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    Under the proposed Final Judgment, the Defendants are permitted 
only to engage in ongoing and future purchases of petroleum needle coke 
from Conoco pursuant to a revised supply agreement, one that does not 
provide Seadrift the means to verify customer-specific competitor 
pricing or production. The proposed Final Judgment also bars

[[Page 76030]]

GrafTech from negotiating any future agreement with Conoco that would 
confer any such rights to Seadrift, for a period of ten years from 
entry of the proposed Final Judgment. In order to ensure compliance 
with these provisions, all future agreements for the provision of 
petroleum needle coke from Conoco to GrafTech and Seadrift must be 
provided to the United States within two business days of execution. 
GrafTech also must produce documents prepared in the ordinary course of 
business that demonstrate Seadrift's production, capacity and sales. 
The proposed Final Judgment also restricts the flow of competitively 
sensitive information between GrafTech personnel who negotiate 
GrafTech's supply of petroleum needle coke from Conoco, and Seadrift 
personnel who make decisions about Seadrift's production and prices.
    The United States believes the provisions in the proposed Final 
Judgment will remove the potential for competitors to verify customer-
specific pricing, production and other commercial terms. At the same 
time, the proposed Final Judgment preserves the quality improvements 
likely after the merger, and would not impede the potential cost 
savings that the parties claim will result from the merger, and that 
may incentivize discounting in the downstream market for graphite 
electrodes.
    The United States and the Defendants 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 Final Judgment and to punish violations 
thereof for a period of ten years after entry of the Final Judgment.

II. Description of the Events Giving Rise to the Alleged Violations

A. The Defendants

    GrafTech, headquartered in Parma, Ohio, through its graphite power 
systems division, is the largest manufacturer of graphite electrodes 
sold in the United States, and one of the two leading providers of 
graphite electrodes worldwide. GrafTech produces graphite electrodes at 
facilities in Mexico, Brazil, Africa, France and Spain. GrafTech 
realized revenue of approximately $483 million from the sale of 
graphite electrodes in 2009.
    Seadrift, headquartered in Port Lavaca, Texas, is one of two U.S. 
manufacturers of petroleum needle coke, the key input in the 
manufacture of graphite electrodes in North America. Seadrift operates 
a single manufacturing plant, which has a current annual production 
capacity of approximately 150,000 metric tons of petroleum needle coke, 
representing approximately 19 percent of worldwide petroleum needle 
coke capacity, and Seadrift realized revenue of $62 million in 2009. 
Post-acquisition, GrafTech would control Seadrift's capacity and 
utilization rates.

B. The Competitive Effects of the Acquisition on the Market for 
Petroleum Needle Coke

1. Relevant Market
    Petroleum needle coke is used exclusively in the production of 
graphite electrodes. Graphite electrodes are large columns of virtually 
pure graphite used in the production of steel from scrap in electric 
arc furnaces, ladle metallurgy furnaces, and foundries. As graphite 
electrodes heat the steel, they are consumed through oxidation, and are 
replaced by connecting the end of the new graphite electrode with the 
end of the chain of graphite electrodes in the furnace. The highest-
intensity electric arc furnaces require large-diameter graphite 
electrodes, which range in size between 18 inches in diameter to 32 
inches in diameter.
    Petroleum needle coke is the key material input into large-diameter 
graphite electrodes used in electric arc furnaces in the United States. 
All sizes of graphite electrodes are manufactured out of needle coke, 
but some small-diameter graphite electrode manufacturers blend a 
percentage of anode coke with the needle coke during the production 
process. Large-diameter graphite electrodes require approximately one 
metric ton of raw needle coke to produce one metric ton of finished 
graphite electrode.
    Needle coke is a nearly pure form of carbon that can be derived 
either from petroleum (``petroleum needle coke'') or coal tar pitch 
(``pitch coke''). Petroleum needle coke is manufactured from decant 
oil, a byproduct from the catalytic cracking process of refining crude 
oil. Petroleum needle coke's structure differs from that of anode coke, 
also derived from decant oil, in that it is crystalline with needle-
like particles. This structure provides a low coefficient of thermal 
expansion, which allows it to maintain its shape in high-temperature 
settings, and a low electrical resistivity, permitting efficient 
conduction of electricity. Additionally, petroleum needle coke has a 
lower content of sulfur and nitrogen than does pitch coke, which 
minimizes changes in shape caused when coke over-expands during 
graphite electrode manufacturing, creating cracks or voids within the 
graphite electrode, drastically altering both its strength and density.
    Graphite electrode producers obtain their supply of petroleum 
needle coke from one or more of four firms: Seadrift, Conoco, and two 
vendors located in Japan. Historically, the Japanese suppliers have not 
substantially increased the volume of petroleum needle coke that they 
ship into the United States from year to year. Conoco is the only 
manufacturer with two petroleum needle coke production facilities, one 
in Lake Charles, Louisiana and one in South Killinghorne, England. 
Conoco, Seadrift, and the Japanese producers all have worldwide 
customers and ship internationally. There have been instances of supply 
constraint in the manufacture of petroleum needle coke. Transportation 
costs make up a small fraction of the cost of petroleum needle coke, 
and customers typically pay the same price for petroleum needle coke 
regardless of the location of the production facility or the 
destination.
    Manufacturers of large-diameter graphite electrodes worldwide 
typically use petroleum needle coke to produce their graphite 
electrodes and would not, in response to a small but significant 
increase in price of petroleum needle coke, switch to pitch or anode 
cokes in sufficient volumes such that the attempted price increase 
would be defeated or deterred. Thus, worldwide production and sale of 
petroleum needle coke is a relevant market for purposes of antitrust 
analysis of the proposed transaction.
2. Anticompetitive Effects
    The proposed acquisition of Seadrift by GrafTech could 
substantially lessen competition in the international petroleum needle 
coke market because it would allow GrafTech to control Seadrift's 
capacity and utilization rates for the manufacture of petroleum needle 
coke, and also provide Seadrift direct access to verified, customer-
specific competitor pricing and production information. The basis for 
the Complaint, and the essence of the expected anticompetitive effect 
of this acquisition, is that GrafTech's acquisition of Seadrift, 
Conoco's largest petroleum needle coke competitor, would draw Seadrift 
into GrafTech's current Supply Agreement and future supply arrangements 
with Conoco, while also allowing GrafTech to control Seadrift's output. 
It is GrafTech's control of Seadrift and its addition to

[[Page 76031]]

the Conoco alliance, by and through the proposed acquisition, which has 
triggered a violation of the Clayton Act. It is the consequent 
agreement between competitors that the proposed Final Judgment is 
designed to address, by removing the opportunity and means for Seadrift 
and Conoco to engage in anticompetitive activity under cover of the 
Supply Agreement, and possibly future supply arrangements.
    On September 27, 2010, in response to the proposed merger, the 
termination clause of the Supply Agreement was activated. The 
activation of the termination clause has initiated a three-year wind-
down period during which GrafTech is obligated to buy specified volumes 
in each year and Conoco must provide that volume with pricing on an MFN 
basis. The MFN requires that prices to GrafTech shall be no higher than 
the lowest price charged by Conoco for the relevant grade of coke among 
all of its coke customers other than GrafTech. Included among the 
clauses in the Supply Agreement that remain in place during the wind-
down period is the mutual right for GrafTech and Conoco, in order to 
ensure compliance with the Supply Agreement, to audit each other's 
books, records and documents, which likely would include current cost 
information, production schedules, invoices that contain third-party 
pricing and volume information, records that reveal credit terms, and 
similar competitively sensitive information. By operation of the 
merger, the audit clause would extend to Seadrift the information 
provided to GrafTech, allowing Seadrift to verify the real-time, 
customer-specific pricing its main competitor charges and the volume of 
petroleum needle coke sold to nearly every electrode manufacturer in 
the world.
    The legacy audit right included in the Supply Agreement would 
provide Seadrift with the means to verify a key rival's contemporaneous 
prices, which could facilitate an understanding between Seadrift and 
Conoco about the prices to be charged to each customer, and could be 
used to enforce that understanding by deterring cheating. At the same 
time, the MFN effectively could have a chilling effect on Conoco's 
willingness to offer discounts to other graphite electrode customers, 
because it would have to provide the same discount for the large volume 
of petroleum needle coke it sells to GrafTech.
    Even after the three-year extension of the Supply Agreement 
expires, however, GrafTech intends to purchase substantial quantities 
of petroleum needle coke from Conoco via other supply arrangements; 
combined with its ownership of Seadrift, this could provide the 
conditions for output coordination.
    Exchanges of current price information have the potential to 
generate anticompetitive effects and, although not per se unlawful 
under the antitrust laws, have consistently been held to violate the 
Sherman Act. Moreover, the residual audit right in the Supply Agreement 
provides that GrafTech and Conoco may audit each other's 
contemporaneous books, records and documents. Post-merger, GrafTech's 
cost structure would include the production of Seadrift petroleum 
needle coke. This clause, if left unchecked, would allow Conoco to know 
Seadrift's volume and cost of production, and would allow GrafTech to 
review all of Conoco's production volume and costs. Moreover, should 
the audit clause be used in conjunction with the MFN, to verify that 
GrafTech was, in fact, receiving the lowest price, for example, 
Seadrift potentially would have access to its largest competitor's 
pricing and production to all other customers. Ongoing supply 
arrangements also have the potential to provide Seadrift, through 
GrafTech, with competitively sensitive information.
    Therefore, GrafTech's acquisition of Seadrift likely will 
substantially lessen competition in the development, production and 
sale of petroleum needle coke in the United States, likely leading to 
higher prices, reduced output and less favorable terms of sale in the 
worldwide petroleum needle coke market, in violation of Section 7 of 
the Clayton Act.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment will eliminate the anticompetitive 
effects that otherwise would result from GrafTech's acquisition of 
Seadrift. Conoco, having activated the termination clause of the Supply 
Agreement, has initiated the three-year wind-down period during which 
GrafTech must buy specified volumes each year, and Conoco must provide 
that volume with pricing on an MFN basis. The audit rights, also 
included in the Supply Agreement, give GrafTech and Seadrift access to 
Conoco's pricing and commercial terms to all of its customers, for the 
purpose of enforcing MFN pricing. The proposed Final Judgment requires 
GrafTech and Seadrift immediately to abrogate, amend or otherwise alter 
the current petroleum needle coke Supply Agreement between GrafTech and 
Conoco to remove the terms related to the ongoing audit rights, sharing 
of non-public or proprietary information, and MFN pricing.
    The proposed Final Judgment also provides that the Department of 
Justice's Antitrust Division must receive copies of any and all 
agreements regarding the provision of petroleum needle coke between the 
defendants and Conoco for the term of the Final Judgment, as well as 
ordinary course business documents that illuminate Seadrift's output 
and sales decisions. These provisions ensure that Defendants comply 
with the proposed Final Judgment and also will serve to deter them from 
entering into any agreement that may have the effect of enhancing 
coordination among competing suppliers of petroleum needle coke. 
Production of contracts between GrafTech and Conoco will allow the 
Division to monitor future agreements for audit rights or other 
provisions that facilitate the exchange of proprietary pricing and 
output information. Production of ordinary course business documents 
will allow the Division to monitor changes in production in relation to 
capacity that may suggest output coordination. As an additional 
safeguard, the proposed Final Judgment requires that GrafTech strictly 
segregate employees who negotiate terms with Conoco from those who make 
decisions about pricing and production at Seadrift. Similarly, Seadrift 
employees who negotiate arrangements with competitors of GrafTech will 
be prevented from sharing any competitively sensitive information 
thereby obtained.
    Further, striking the audit clause and MFN provision of the Supply 
Agreement will not imperil the potential efficiencies that GrafTech 
expects will result from the merger. GrafTech anticipates substantial, 
merger-specific efficiencies by internal consumption of Seadrift 
petroleum needle coke, which would allow the elimination of double 
margins. Should this result in lower GrafTech prices for graphite 
electrodes downstream, it likely would incentivize other graphite 
electrode competitors to reduce prices in response to that competition. 
Verified plans to improve the quality of Seadrift petroleum needle coke 
likely will benefit Seadrift's graphite electrode customers, as well as 
the downstream consumers of finished graphite electrodes, in the 
future. Thus, by removing the audit rights and MFN provisions from the 
Supply Agreement, and providing other protections in connection with 
the future supply arrangements, that source of potential harm is 
eliminated without threatening to deprive consumers of the pro-
competitive efficiencies that GrafTech

[[Page 76032]]

and Seadrift expect their merger to generate.
    As a result of the proposed Final Judgment, Seadrift and Conoco 
will remain independent, competitive suppliers of petroleum needle 
coke, while GrafTech will be free to realize the efficiencies it 
expects to result from the Seadrift acquisition. Finally, in the 
future, any new agreement between Seadrift and Conoco that might 
facilitate collusion by incorporating terms such as those required to 
be abrogated by the proposed Final Judgment will be deterred.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 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 
attorneys' fees. Entry of the proposed Final Judgment will neither 
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. 
16(a), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against Defendant.

V. Procedures Applicable for Approval or Modification of the Proposed 
Final Judgment

    The United States and Defendant 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 who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register, or the last date of 
publication in a newspaper of the summary of this Competitive Impact 
Statement, whichever is later. All comments received during this period 
will be considered by the United States Department of Justice, which 
remains free to withdraw its consent to the proposed Final Judgment at 
any time prior to the Court's entry of judgment. 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: Maribeth Petrizzi, Chief, Litigation II Section, Antitrust 
Division, United States Department of Justice, 450 Fifth Street, NW., 
Suite 8700, Washington, DC 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 against Defendants. The 
United States could have litigated and sought preliminary and permanent 
injunctions against Defendant GrafTech's acquisition of Seadrift, in 
order to avoid providing Seadrift access to competitively sensitive 
information available under the Supply Agreement. The United States is 
satisfied, however, that the proposed Final Judgment will preserve 
competition for the provision of petroleum needle coke without the time 
or expense of litigation. The proposed Final Judgment will achieve all 
or substantially all of the relief the United States would have 
obtained through litigation, but avoids the time, expense, and 
uncertainty of a full trial on the merits of the Complaint.

VII. Standard of Review Under the APPA for the Proposed Final Judgment

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a sixty-day comment period, after which the court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. 16(e)(1). In making that determination in 
accordance with the statute, the court is required to consider:
    (A) The competitive impact of such judgment, including termination 
of alleged violations, provisions for enforcement and modification, 
duration of relief sought, anticipated effects of alternative remedies 
actually considered, whether its terms are ambiguous, and any other 
competitive considerations bearing upon the adequacy of such judgment 
that the court deems necessary to a determination of whether the 
consent judgment is in the public interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, 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. 16(e)(1)(A)-(B). In considering these statutory factors, 
the court's inquiry is necessarily a limited one as the government is 
entitled to ``broad discretion to settle with the defendant within the 
reaches of the public interest.'' United States v. Microsoft Corp., 56 
F.3d 1448, 1461 (D.C. Cir. 1995); see generally United States v. SBC 
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public 
interest standard under the Tunney Act); United States v. InBev N.V./
S.A., 2009-2 Trade Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, 
No. 08-1965 (JR), at *3 (D.D.C. Aug. 11, 2009) (noting that the court's 
review of a consent judgment is limited and only inquires ``into 
whether the government's determination that the proposed remedies will 
cure the antitrust violations alleged in the complaint was reasonable, 
and whether the mechanism to enforce the final judgment are clear and 
manageable.'').
    As the United States Court of Appeals for the District of Columbia 
has held, under the APPA a court considers, 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 Microsoft, 56 
F.3d at 1458-62. 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) (citing United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d 
at 1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 
(D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have 
held that:

[t]he 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

[[Page 76033]]

public interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree. Bechtel, 648 
F.2d at 666 (emphasis added) (citations omitted).\1\ In determining 
whether a proposed settlement is in the public interest, the court 
``must accord deference to the government's predictions about the 
efficacy of its remedies, and may not require that the remedies 
perfectly match the alleged violations.'' SBC Commc'ns, 489 F. Supp. 2d 
at 17; see also Microsoft, 56 F.3d at 1461 (noting the need for courts 
to be ``deferential to the government's predictions as to the effect of 
the proposed remedies''); United States v. Archer-Daniels-Midland Co., 
272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court should grant 
due respect to the United States' prediction as to the effect of 
proposed remedies, its perception of the market structure, and its 
views of the nature of the case); United States v. Republic Serv., 
Inc., 2010-2 Trade Cas. (CCH) ]77, 097, 2010 U.S. Dist. LEXIS 70895, 
No. 08-2076 (RWR), at *10 (D.D.C. July 15, 2010) (finding that ``[i]n 
light of the deferential review to which the government's proposed 
remedy is accorded, [amicus curiae's] argument that an alternative 
remedy may be comparably superior, even if true, is not a sufficient 
basis for finding that the proposed final judgment is not in the public 
interest'').
---------------------------------------------------------------------------

    \1\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass''). See generally Microsoft, 56 F.3d at 1461 
(discussing whether ``the remedies [obtained in the decree are] so 
inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest' '').
---------------------------------------------------------------------------

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[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.''' United States v. Am. Tel. & Tel. Co., 
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United 
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd 
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also 
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985) (approving the consent decree even though the court would have 
imposed a greater remedy). Therefore, the United States ``need only 
provide a factual basis for concluding that the settlements are 
reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 489 
F. Supp. 2d at 17; Republic Serv., 2010 U.S. Dist. LEXIS 70895, at *2-3 
(entering final judgment ``[b]ecause there is an adequate factual 
foundation upon which to conclude that the government's proposed 
divestiture will remedy the antitrust violations alleged in the 
complaint'').
    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its Complaint, and does not authorize the court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also InBev, 2009 
U.S. Dist. LEXIS 84787, at *20 (``the `public interest' is not to be 
measured by comparing the violations alleged in the complaint against 
those the court believes could have, or even should have, been 
alleged''). Because the ``court's authority to review the decree 
depends entirely on the government's exercising its prosecutorial 
discretion by bringing a case in the first place,'' it follows that 
``the court is only authorized to review the decree itself,'' and not 
to ``effectively redraft the complaint'' to inquire into other matters 
that the United States did not pursue. Microsoft, 56 F.3d at 1459-60. 
As this Court confirmed in SBC Communications, courts ``cannot look 
beyond the complaint in making the public interest determination unless 
the complaint is drafted so narrowly as to make a mockery of judicial 
power.'' 489 F. Supp. 2d at 15.
    In its 2004 amendments to the Tunney Act,\2\ Congress made clear 
its intent to preserve the practical benefits of utilizing consent 
decrees in antitrust enforcement, stating: ``[n]othing in this section 
shall be construed to require the court to conduct an evidentiary 
hearing or to require the court to permit anyone to intervene.'' 15 
U.S.C. 16(e)(2). The language wrote into the statute what Congress 
intended when it enacted the Tunney Act in 1974, as Senator Tunney 
explained: ``[t]he 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. 24,598 (1973) (statement of Senator 
Tunney). Rather, the procedure for the public interest determination is 
left to the discretion of the court, with the recognition that the 
court's ``scope of review remains sharply proscribed by precedent and 
the nature of Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d 
at 11.\3\
---------------------------------------------------------------------------

    \2\ The 2004 amendments substituted the word ``shall'' for 
``may'' when directing the courts to consider the enumerated factors 
and amended the list of factors to focus on competitive 
considerations and address potentially ambiguous judgment terms. 
Compare 15 U.S.C. 16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see 
also SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004 
amendments ``effected minimal changes'' to Tunney Act review).
    \3\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ] 
61,508, at 71,980 (W.D. Mo. 1977) (``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.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 
(1973) (``Where the public interest can be meaningfully evaluated 
simply on the basis of briefs and oral arguments, that is the 
approach that should be utilized.'').
---------------------------------------------------------------------------

VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Dated: November 29, 2010.

Respectfully submitted,

/s/--------------------------------------------------------------------
Stephanie A. Fleming, Esq.,
United States Department of Justice, Antitrust Division, Litigation 
II Section, 450 Fifth Street, N.W., Suite 8700, Washington, D.C. 
20530, (202) 514-9228, <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="56252233263e37383f3378303a333b3f383116232532393c78313920">[email protected]</a>.

Certificate of Service

    I, Stephanie A. Fleming, hereby certify that on November 29, 2010, 
I caused a copy of the foregoing Competitive Impact Statement to be 
served upon defendants GrafTech International Ltd. and Seadrift Coke 
L.P. by mailing the documents electronically to the duly authorized 
legal representatives of defendants as follows:
    Counsel for Defendant GrafTech: Jonathan Gleklen, Esq., Arnold & 
Porter LLP, 555 12th Street, NW., Washington, DC 20004.
    Counsel for Defendant Seadrift: Craig Seebald, Esq., Joel Grosberg, 
Esq., McDermott, Will & Emery, 600 13th Street, NW., Washington, DC 
20006.
    Stephanie A. Fleming, Esq., United States Department of Justice, 
Antitrust Division, Litigation II Section, 450 Fifth Street, NW., Suite 
8700, Washington, DC 20530, (202) 514-9228, 
<a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="2b785f4e5b434a45424e054d474e4642454c6b5e584f4441054c445d">[email protected]</a>.

[[Page 76034]]

United States District Court for the District of District of Columbia

    United States of America, Plaintiff, v. GrafTech International Ltd. 
and Seadrift Coke L.P., Defendants.
    Case No.: 1:10-Cv-02039.
    Judge: Rosemary M. Collyer.
    Deck Type: Antitrust.
    Date Stamp: November 29, 2010.

Final Judgment

    Whereas, Plaintiff, United States of America, filed its Complaint 
on November 29, 2010, and the United States and Defendants GrafTech 
International Ltd. (``GrafTech'') and Seadrift Coke L.P. 
(``Seadrift''), by their respective attorneys, have consented to the 
entry of this Final Judgment without trial or adjudication of any issue 
of fact or law, and without this Final Judgment constituting any 
evidence against or admission by any party regarding any issue of fact 
or law;
    And whereas, Defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And whereas, this Final Judgment requires the prompt and certain 
modification of particular contracts to which GrafTech is a party and 
the imposition of certain conduct restrictions and obligations on 
GrafTech to assure that competition is maintained;
    And whereas, GrafTech has represented to the United States that the 
contract modifications required below can and will be made, that 
GrafTech will abide by the conduct restrictions and obligations 
required below, and that GrafTech will later raise no claim of hardship 
or difficulty as grounds for asking the Court to modify any of the 
provisions contained below;
    Now therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is Ordered, Adjudged And Decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against Defendants under Section 7 of the Clayton 
Act, 15 U.S.C. 18, as amended.

II. Definitions

    As used in this Final Judgment:
    A. ``GrafTech'' means defendant GrafTech International Ltd., a 
Delaware corporation with its headquarters in Parma, Ohio, its 
predecessor, UCAR International Ltd., its successors and assigns, and 
its subsidiaries, divisions, groups, affiliates, partnerships, and 
joint ventures, and their directors, officers, managers, agents, and 
employees.
    B. ``Seadrift'' means defendant Seadrift Coke L.P., a Delaware 
Limited Partnership with its headquarters in Port Lavaca, Texas, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    C. ``Conoco'' means ConocoPhillips Company, a Delaware corporation 
with headquarters in Houston, Texas, which includes the subsidiaries 
managing the production facilities in Lake Charles, Louisiana and South 
Killinghorne, England, as well as all other successors and assigns, and 
its subsidiaries, divisions, groups, affiliates, partnerships, and 
joint ventures, and their directors, officers, managers, agents, and 
employees.
    D. The ``Supply Agreement'' encompasses those two agreements 
effective January 1, 2001, between GrafTech and Conoco, which relate to 
the provision of petroleum needle coke and any agreement created to 
supersede, modify or amend those agreements.
    E. ``Contract'' means any agreement, understanding, amendment, 
modification or other document describing the commercial terms of sale.
    F. ``Merger'' means GrafTech's proposed purchase of the 81.1 
percent of voting securities of Seadrift that it does not already own, 
and the concurrent merger between GrafTech and Seadrift, pursuant to 
the agreement executed on April 1, 2010.
    G. ``Exempted Employee'' means any employee of Defendants who is 
not a GrafTech Covered Employee or Seadrift Covered Employee, 
including: (a) GrafTech's Chief Executive Officer and Chief Financial 
Officer; and (b) any employee of Defendants whose primary 
responsibilities includes accounting, tax, corporate development, human 
resources, legal, information systems, and/or finance.
    H. ``GrafTech Covered Employee'' means any employee of GrafTech 
other than an Exempted Employee whose principal job responsibility 
involves the operation or day-to-day management of GrafTech's 
Industrial Materials or Engineered Solutions businesses.
    I. ``Petroleum Needle Coke Supplier Confidential Information'' 
means all information provided, disclosed, or otherwise made available 
to GrafTech by petroleum needle coke suppliers or potential petroleum 
needle coke suppliers that is not in the public domain, including but 
not limited to information related to such suppliers' current or future 
output, capacity, prices, or forecasted shutdown schedules, but does 
not include prices paid by GrafTech or quantities purchased by GrafTech 
from a petroleum needle coke supplier.
    J. ``Seadrift Covered Employee'' means any employee of Seadrift 
other than an Exempted Employee whose principal job responsibility 
involves the operation or day-to-day management of Seadrift's petroleum 
needle coke business.
    K. ``Seadrift Customer Confidential Information'' means all 
information provided, disclosed, or otherwise made available to 
Seadrift by Seadrift customers or potential customers that is not in 
the public domain, including but not limited to information related to 
such customers' current or future purchases, output, capacity, prices, 
or forecasted shutdown schedules.

III. Applicability

    This Final Judgment applies to Defendants GrafTech and Seadrift, as 
defined above, and all other persons in active concert or participation 
with them who receive actual notice of this Final Judgment by personal 
service or otherwise.

IV. Required Conduct

    A. Defendants shall not consummate the Merger until the Supply 
Agreements have been modified in a manner consistent with this Final 
Judgment, including compliance with the following conditions:
    1. The audit rights described in section 5.6 of the Supply 
Agreement shall be deleted and have no further force or effect.
    2. The most-favored-nation basis price clause included in section 
12.3.C of the Supply Agreement shall be deleted and have no further 
force or effect.
    B. Defendants shall not agree to incorporate the following 
provisions in any future contract with Conoco for the provision of 
petroleum needle coke:
    1. Any provision that grants to Defendants the right to audit or 
otherwise review the non-public financial and commercial records of 
Conoco, or grants such rights to Conoco with respect to Defendant's 
non-public financial and commercial records.
    2. Any provision that grants to Defendants the right to obtain any 
non-public information about third-party petroleum needle coke pricing 
or related commercial terms from Conoco, or grants such rights to 
Conoco with respect to Defendants' non-public information about third-
party petroleum needle coke pricing or related commercial terms.

[[Page 76035]]

    C. Beginning on the date of entry of this Final Judgment and 
continuing for the term of the Final Judgment:
    1. Within two business days of execution, Defendants shall provide 
to the United States complete and unredacted copies of any Contract 
formed between Defendants and Conoco relating to the provision of 
petroleum needle coke.
    2. Within ten business days of the end of each quarter, Defendants 
shall provide to the United States a copy of documents prepared in the 
ordinary course of business sufficient to show:
    (a) Seadrift's projection of demand and sales for petroleum needle 
coke in the subsequent twelve-month period;
    (b) Seadrift's year-to-date production and sales of petroleum 
needle coke versus forecast; and
    (c) Seadrift's changes to petroleum needle coke production capacity 
or other major capital projects, and capital spending by project.
    3. If, at any time, Defendants elect to make a change in Seadrift's 
capacity or production plans that changes Seadrift's annual output by 
more than ten percent and that is not reflected in the most recent 
document provided in response to Paragraph IV(C)(1) or (2), Defendants 
shall:
    (a) within two business days provide the Division written notice of 
that change; and
    (b) within ten business days provide any documents prepared in the 
ordinary course of business that describe the change, reflect the 
reasons for the change or project the impact of that change.
    D. All documents required to be produced to the United States under 
Paragraph IV(C) shall be delivered by certified mail to the following 
address: Chief, Litigation II Section, Antitrust Division, Department 
of Justice, 450 Fifth St., NW., Washington, DC 20530.

V. Prohibited Conduct

    A. Subject to Paragraph V(B), Defendants shall not:
    1. disclose to any GrafTech Covered Employee any Seadrift Customer 
Confidential Information; or
    2. disclose to any Seadrift Covered Employee any Petroleum Needle 
Coke Supplier Confidential Information.
    B. Notwithstanding the provisions of Paragraph V(A), GrafTech may:
    1. disclose to Seadrift Covered Employees information regarding 
GrafTech's purchases of petroleum needle coke from petroleum needle 
coke suppliers other than Seadrift;
    2. disclose to any GrafTech Covered Employee any Petroleum Needle 
Coke Supplier Confidential Information;
    3. disclose Petroleum Needle Coke Supplier Confidential Information 
to an Exempted Employee who requires the information in order to 
perform his or her job function(s); provided, however, that such 
Exempted Employee may not use Petroleum Needle Coke Supplier 
Confidential Information to perform any job function(s) that primarily 
involve(s) the day-to-day operation or management of Seadrift's needle 
coke business;
    4. disclose Seadrift Customer Confidential Information to an 
Exempted Employee who requires the information in order to perform his 
or her job function(s); provided, however, that such Exempted Employee 
may not use Seadrift Customer Confidential Information to perform any 
job function(s) that primarily involve(s) the day-to-day operation or 
management of GrafTech's Industrial Materials or Engineered Solutions 
businesses; and
    5. disclose Petroleum Needle Coke Supplier Confidential Information 
and/or Seadrift Customer Confidential Information to any Defendant 
employee where so required by law, government regulation, legal 
process, or court order, so long as such disclosure is limited to 
fulfillment of that purpose.

VI. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time authorized representatives of the United States 
Department of Justice Antitrust Division (``Antitrust Division''), 
including consultants and other persons retained by the United States, 
shall, upon written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, and on 
reasonable notice to Defendant, be permitted:
    1. access during Defendants' office hours to inspect and copy, or 
at the option of the United States, to require Defendants to provide 
hard copies or electronic copies of, all books, ledgers, accounts, 
records, data, and documents in the possession, custody, or control of 
Defendants, relating to any matters contained in this Final Judgment; 
and
    2. to interview, either informally or on the record, Defendants' 
officers, employees, or agents, who may have their individual counsel 
present, regarding such matters. The interviews shall be subject to the 
reasonable convenience of the interviewee and without restraint or 
interference by Defendants.
    B. Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendants shall submit written reports or response to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    C. No information or documents obtained by the means provided in 
this section or pursuant to Paragraph IV(C) shall be divulged by the 
United States to any person other than an 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 
Defendants to the United States, Defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(1)(G) of the 
Federal Rules of Civil Procedure, and Defendants mark each pertinent 
page of such material, ``Subject to claim of protection under Rule 
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United 
States shall give Defendants ten (10) calendar days notice prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding).

VII. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

VIII. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry.

IX. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including making copies available to the 
public of this Final Judgment, the Competitive Impact Statement, and 
any comments thereon and the United States's responses to comments. 
Based upon the record before the Court, which includes the Competitive 
Impact Statement and any comments and response to comments

[[Page 76036]]

filed with the Court, entry of this Final Judgment is in the public 
interest.

Date: ------, 20----

    Court approval subject to procedures of the Antitrust Procedures 
and Penalties Act, 15 U.S.C. 16.

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Honorable

[FR Doc. 2010-30621 Filed 12-6-10; 8:45 am]
BILLING CODE P


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