[Federal Register Volume 75, Number 8 (Wednesday, January 13, 2010)]
[Notices]
[Pages 1785-1788]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-410]


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FEDERAL TRADE COMMISSION

[File No. 091 0068]


Agrium Inc. and CF Industries Holding, Inc.; Analysis of the 
Agreement Containing Consent Orders to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint 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 January 22, 2010.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to ``Agrium and 
CF Industries, File No. 091 0068'' to facilitate the organization of 
comments. Please note that your comment -- including your name and your 
state -- will be placed on the public record of this proceeding, 
including on the publicly accessible FTC website, at (http://www.ftc.gov/os/publiccomments.shtm).
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual's Social Security 
Number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential. . . .,'' as provided in 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which 
confidential treatment is requested must be filed in paper form, must 
be clearly labeled ``Confidential,'' and must comply with FTC Rule 
4.9(c), 16 CFR 4.9(c).\1\
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    \1\The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 
4.9(c).
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     Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink (https://public.commentworks.com/ftc/agriumcf) and following the instructions on 
the web-based form. To ensure that the Commission considers an 
electronic comment, you must file it on the web-based form at the 
weblink: (https://public.commentworks.com/ftc/agriumcf). If this Notice 
appears at (http://www.regulations.gov/search/index.jsp), you may also 
file an electronic comment through that website. The Commission will 
consider all comments that regulations.gov forwards to it. You may also 
visit the FTC website at (http://www.ftc.gov/) to read the Notice and 
the news release describing it.
    A comment filed in paper form should include the ``Agrium and CF 
Industries, File No. 091 0068'' reference both in the text and on the 
envelope, and should be mailed or delivered to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-135 (Annex 
D), 600 Pennsylvania Avenue, NW, Washington, DC 20580. The FTC is 
requesting that any comment filed in paper form be sent by courier or 
overnight service, if possible, because U.S. postal mail in the 
Washington area and at the Commission is subject to delay due to 
heightened security precautions.
    The Federal Trade Commission Act (``FTC Act'') and other laws the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding as appropriate. The Commission will 
consider all timely and responsive public comments that it receives, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC website, to the extent practicable, 
at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of 
discretion, the Commission makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC website. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at (http://www.ftc.gov/ftc/privacy.shtm).

[[Page 1786]]


FOR FURTHER INFORMATION CONTACT: Robert S. Tovsky (202-326-2634), 
Bureau of Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 
20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 the 
Commission 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 thirty (30) 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 December 23, 2009), on the World Wide Web, at (http://www.ftc.gov/os/actions.shtm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

     The Federal Trade Commission (``Commission'' or ``FTC'') has 
accepted, subject to final approval, an Agreement Containing Consent 
Orders (``Consent Agreement'') from Agrium Inc. (``Agrium''), that will 
completely remedy the anticompetitive effects that would likely result 
from Agrium's proposed acquisition of CF Industries Holdings, Inc. 
(``CF''). Under the terms of the Consent Agreement, Agrium is required 
to, among other things, divest anhydrous ammonia (``AA'') terminals in 
Ritzville, Washington, and Marseilles, Illinois to Terra Industries 
Inc. (``Terra'') or another Commission-approved purchaser. Agrium is 
also required to divest its rights to market and distribute the AA 
produced by Rentech at Rentech's East Dubuque, Illinois manufacturing 
plant back to Rentech.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
proposed Consent Agreement, and will decide whether it should withdraw 
from the proposed Consent Agreement, modify it, or make it final.

II. Description of the Parties and the Proposed Acquisition

    Agrium, a Calgary, Alberta-based company, is a major supplier of 
agricultural products and services in North and South America. It is 
also a leading global producer, distributor, and marketer of three 
primary groups of fertilizers: nitrogen, phosphate, and potash, as well 
as control release fertilizers and micronutrients. Agrium's operations 
in North America include four nitrogen fertilizer manufacturing plants 
and ten fertilizer storage and distribution terminals. Agrium's total 
net sales in 2008 were approximately $10 billion.
    CF Industries Holdings, Inc. is headquartered in Deerfield, 
Illinois, and is the holding company for CF Industries, Inc., a major 
producer and distributor of nitrogen and phosphate fertilizers. CF owns 
two nitrogen fertilizer manufacturing plants and twenty-two fertilizer 
storage and distribution terminals in North America. Its customers 
include cooperatives and independent fertilizer retailers primarily 
located in the eastern and western cornbelt states. CF's total net 
sales in 2008 were approximately $3.9 billion.
    On February 25, 2009, Agrium publicly announced that it had 
submitted a proposal to CF's board of directors to acquire CF for a 
total consideration of approximately $3.6 billion. Since then, Agrium 
has repeatedly extended its tender offer and CF's Board of Directors 
has consistently rejected these offers. Most recently, Agrium increased 
its offer to approximately $4.95 billion. This offer will expire on 
January 22, 2010. If CF accepts Agrium's tender offer, Agrium will hold 
100 percent of the voting securities of CF, and CF will become a wholly 
owned subsidiary of Agrium.

III. The Proposed Complaint

    The proposed complaint alleges that Agrium's acquisition of CF, if 
consummated, may substantially lessen competition or tend to create a 
monopoly in the distribution and sale of AA in the Pacific Northwest 
(``PNW'') and two geographic areas in Northern Illinois in violation of 
Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec.  18, and 
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
Sec.  45. Specifically, the acquisition would eliminate actual, direct, 
and substantial competition between Agrium and CF in the relevant 
markets; increase Agrium's ability to exercise market power 
unilaterally in the relevant markets; and substantially increase the 
level of concentration in the relevant markets and enhance the 
probability of coordination in the two markets in Northern Illinois.
    AA is one of the three major forms of nitrogen fertilizer with the 
other two being urea and urea ammonia nitrate (``UAN''). Of the three 
nitrogen-based fertilizers, AA has the highest nitrogen content at 82 
percent, while urea and UAN have 46 percent and 28 to 32 percent 
nitrogen content, respectively. AA also tends to be the least expensive 
nitrogen fertilizer on a per pound of nitrogen basis. Thus, AA can 
often be the most cost effective means to deliver nitrogen to the soil.
    When deciding which type of nitrogen fertilizer to use, customers 
consider soil and topographical characteristics, equipment, and 
weather. AA is the most cost effective and efficient to use in dry 
areas where the topsoil is relatively thin. In moist conditions, there 
is a danger that AA will leach into the water table, thus becoming less 
effective, and that the heavy machinery required to apply AA would 
damage the field.
    AA is applied as a fertilizer directly by injecting or ``knifing'' 
it into the soil. This process requires specialized equipment to 
transport, store, and apply the fertilizer. Customers who use AA have 
already made significant investments to acquire the necessary 
infrastructure and application equipment. Switching away from AA thus 
would require customers to: (a) abandon the investments they have 
already made to use AA; and (b) make additional investments to obtain 
the necessary infrastructure and application equipment to apply other 
nitrogen products. These investments are costly and switching from AA 
to one of the other nitrogen-based fertilizers would be time-consuming. 
Thus, existing customers are not likely to shift away from using AA.
    The proposed complaint alleges that the three geographic areas in 
which to analyze the competitive effects of the transaction are the PNW 
and two adjacent areas in Northern Illinois. AA is transported from its 
site of production or from import terminals by barge, pipeline, rail, 
and truck to fertilizer storage terminals or, in limited situations, 
directly to fertilizer retailers. From there, AA is delivered by truck 
to local fertilizer retailers, where it is stored in smaller scale 
storage tanks.

[[Page 1787]]

The fertilizer retailers pump liquid AA from their storage tanks into 
smaller mobile nurse tanks. These nurse tanks are then towed to a 
farmer's field and hitched behind a tractor for application. Because 
fertilizer application seasons are highly compressed, fertilizer 
retailers expect a timely and reliable source of AA supply to meet 
customer demand during the peak of application season. As 
transportation costs can make it difficult for terminal owners to be 
price competitive and profitable, AA distributors must have adequate 
terminals or storage facilities within 100 to 140 miles of customer 
locations.
    In the PNW, Agrium and CF are the only major suppliers of AA. Thus, 
the proposed acquisition would reduce the number of significant AA 
suppliers in the PNW from 2 to 1. In the two areas in Northern 
Illinois, Agrium and CF are two of only three significant suppliers of 
AA. As a result, the proposed acquisition would reduce the number of 
major AA suppliers in those areas from three to two.
    As stated in the proposed complaint, entry would not be timely, 
likely, or sufficient to deter or counteract the anticompetitive 
effects of this acquisition. A new entrant would need: (1) sufficient 
AA storage capacity to supply customers; (2) a proper distribution 
infrastructure; and (3) a secure source of AA for the storage facility. 
For a new entrant to satisfy each of these steps requires significant 
sunk costs, onerous regulatory approvals and local permitting, and 
technical expertise. This does not take into account the cost and time 
it takes to achieve a significant market impact. Thus, it is unlikely 
that new entry or fringe expansion from another supplier would be 
timely, likely, or sufficient enough to thwart anticompetitive harm 
from the proposed acquisition.

IV. The Terms of the Agreement Containing Consent Orders

    The Consent Agreement will remedy the Commission's competitive 
concerns about the proposed acquisition and preserve competition in 
each of the relevant markets. Under the terms of the Consent Agreement, 
Agrium would be required to divest: (1) the CF Ritzville, Washington AA 
terminal; (2) its Marseilles, Illinois AA terminal; and (3) its rights 
to market the AA produced by Rentech at Rentech's East Dubuque, 
Illinois, manufacturing plant. Agrium plans to divest the Ritzville and 
Marseilles terminals to Terra, but the proposed Decision and Order 
provides for a divestiture to another purchaser with a source of AA if 
Terra is unable to accomplish the divestitures. The Order also provides 
that Rentech will receive the rights to distribute and market the AA 
produced in its own manufacturing facility in East Dubuque. Pursuant to 
a settlement agreement between Agrium and the Canadian Competition 
Bureau, Terra will acquire a 50 percent interest in Agrium's nitrogen 
fertilizer production plant in Carseland, Alberta. The Carseland 
divestiture will give Terra an unencumbered supply of AA for the 
Ritzville, Washington terminal.
    The Order to Hold Separate and Maintain Assets requires Agrium to 
maintain the assets to be divested and operate the Ritzville Terminal 
independently until the respective divestitures are completed.

A. Key Provisions of the Decision and Order

    The proposed Decision and Order will allow for effective 
divestiture of the key assets that today allow CF to provide an 
independent competitive presence to Agrium in the relevant markets, and 
therefore will preserve the market structure. Paragraph II of the 
Decision and Order provides that Agrium divest the Ritzville Terminal 
and Carseland Facility Interest to Terra within forty-five days of 
Agrium's acquisition. This paragraph further states that in the event 
that the Ritzville Terminal divestiture cannot be made to Terra, Agrium 
will have one-hundred-twenty days from the date the Decision and Order 
becomes final to divest these assets to a Commission-approved acquirer 
that has a secure and stable, independent, long-term source of AA.
    Paragraph III of the Decision and Order provides that Agrium divest 
the Marseilles Terminal to Terra within forty-five days of Agrium's 
acquisition of CF. If this does not occur, the Order requires that 
Agrium divest the Marseilles Terminal to a Commission-approved acquirer 
within one-hundred-twenty days from the date the Decision and Order 
becomes final. Paragraph IV requires Agrium to terminate its rights to 
distribute AA produced by Rentech pursuant to the Agrium/Rentech 
Distribution Agreement no later than five days after Agrium acquires 
CF.
    The Decision and Order defines the scope of the assets to include 
the attributes of an ongoing business, such as necessary real property, 
tangible personal property, inventories, contracts, records of the 
business, accounts receivable permits, and all applicable regulatory 
registrations, permits, and applications. Pursuant to Paragraphs II.G 
and III.G of the proposed Decision and Order, Agrium also is required 
to provide necessary transition services to Terra or another 
Commission-approved acquirer. The purpose of this provision is to allow 
for a smooth transition of the terminal operations to the acquirer.
    Paragraph V of the proposed Decision and Order requires that the 
Parties keep private, except where necessary under the agreement, 
confidential business information related to the divested terminals. 
Paragraph VI of the proposed Decision and Order provides for 
appointment of a divestiture trustee. Paragraph VII of the Decision and 
Order provides mechanisms for the retention of Ritzville Terminal and 
Marseilles Terminal employees by the Commission-approved acquirer.
    Paragraph VIII of the proposed Decision and Order requires that the 
Parties provide the Commission with ``advance written notification'' of 
any intent to acquire assets or interests in terminals that store AA in 
any area affected by the proposed divestitures. Paragraphs IX-X define 
reporting obligations. Paragraph XI requires Agrium to provide the 
Commission access to company information and employees for purposes of 
determining or securing compliance with the Decision and Order. 
Paragraph XII states that the Decision and Order shall terminate ten 
years after the date on which the Order becomes final.

B. Key Provisions of the Order to Hold Separate and Maintain Assets

    The Order to Hold Separate and Maintain Assets (``Hold Separate 
Order'') requires that Agrium maintain the Marseilles Terminal, 
Ritzville Terminal, and Carseland Facility assets until such time as 
the assets are divested. The Hold Separate Order requires that Agrium 
establish a system to maintain confidential information until the 
divestitures are completed. It also gives the Commission the option to 
appoint a Monitor to ensure that Agrium complies with all of its 
obligations and performs all of its responsibilities as required by the 
Decision and Order and the Hold Separate Order. The Hold Separate Order 
incorporates the traditional provisions that allow the Monitor broad 
oversight of the assets, and requires the Monitor to report to the 
Commission on a regular basis. The Hold Separate Order also requires 
Agrium to maintain the Ritzville Terminal assets as an independent 
business pending divestiture. After the acquisition, the Commission can 
require Agrium to appoint a Manager to run the terminal on an 
independent basis pending the divestiture of the assets. Finally, the 
Hold Separate Order allows the Commission to appoint a Hold Separate

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Trustee to operate the assets if the assets are not divested by the 
deadline set by the Commission.
    The purpose of this analysis is to invite public comment on the 
proposed Consent Agreement, in order to aid the Commission in its 
determination of whether to make the proposed Consent Agreement final. 
This analysis is not intended to constitute an official interpretation 
of the proposed Consent Agreement nor is it intended to modify the 
terms of the proposed Consent Agreement in any way.
    By direction of the Commission.

Donald S. Clark,
Secretary.
[FR Doc. 2010-410 Filed 1-12-10; 8:45 am]
BILLING CODE 6750-01-S