NO. 05-60192


IN THE UNITED STATES COURT OF APPEALS


FOR THE FIFTH CIRCUIT


CHICAGO BRIDGE & IRON COMPANY N.V., 

CHICAGO BRIDGE & IRON COMPANY, 

Petitioners, 

v. 

FEDERAL TRADE COMMISSION, 

Respondent. 

ON PETITION FOR REVIEW OF A FINAL ORDER


OF THE FEDERAL TRADE COMMISSION


BRIEF OF RESPONDENT


FEDERAL TRADE COMMISSION


JEFFREY SCHMIDT 

Director 

ELIZABETH A. PIOTROWSKI 

Deputy Assistant Director 

STEVEN L. WILENSKY 

Attorney 

BUREAU OF COMPETITION 

AUGUST 21, 2006


WILLIAM BLUMENTHAL 

General Counsel 

JOHN D. GRAUBERT 

Principal Deputy General Counsel 

JOHN F. DALY 

Deputy General Counsel for Litigation 

DAVID C. SHONKA 

Assistant General Counsel for Litigation 

IMAD D. ABYAD 

Attorney 

FEDERAL TRADE COMMISSION 

600 PENNSYLVANIA AVENUE, N.W. 

WASHINGTON, DC 20580 

(202) 326-2436 
STATEMENT REGARDING ORAL ARGUMENT 

Pursuant to 5th Cir. R. 28.2.4, the Federal Trade Commission concurs with the 

petitioners that oral argument may aid in the Court’s resolution of this case. 

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TABLE OF CONTENTS


Page


STATEMENT REGARDING ORAL ARGUMENT ....................... i 


TABLE OF AUTHORITIES ........................................ v


GLOSSARY ..................................................... xi


STATEMENT OF JURISDICTION ................................... 1


STATEMENT OF THE ISSUES PRESENTED FOR REVIEW ............. 1


STATEMENT OF THE CASE ....................................... 2


STATEMENT OF FACTS .......................................... 3


A.	 The Industry and the Challenged Acquisition .................. 3


B.	 The Commission Decision and Order ....................... 5


(1)	 Market Definition .................................. 5


(2)	 Market Concentration ............................... 6


(3)	 Entry Conditions ................................... 8


(4)	 CB&I’s Rebuttal .................................. 11


(5)	 The Commission’s Final Order ....................... 15


C.	 CB&I’s Petition for Reconsideration and Its


Petition for Review ..................................... 17


D. The Reinstated Petition for Review ......................... 19


STANDARD OF REVIEW ........................................ 19


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TABLE OF CONTENTS – Cont’d	 Page 

SUMMARY OF ARGUMENT ...................................... 21


ARGUMENT .................................................... 23


I.	 REVIEW IS LIMITED TO THE RECORD BELOW AND


THE ARGUMENTS CB&I HAS PROPERLY ADVANCED


IN ITS BRIEF .............................................. 23


A.	 CB&I’S Petition Must Be Rejected To The Extent


It Relies On Extra-Record Evidence That Is Not


Properly Before This Court ............................... 23


B.	 CB&I’s Challenge To The Commission’s Factual


Findings Must Be Limited To the LNG Tank Market .......... 26


II.	 SUBSTANTIAL RECORD EVIDENCE SUPPORTS THE


COMMISSION’S FINDINGS OF FACT ......................... 27


A.	 Substantial Record Evidence Supports The Commission’s


Finding That The Acquisition Has Increased CB&I’s


Market Power In Highly Concentrated Markets ............... 28


B.	 Substantial Evidence Supports the Commission’s Finding


That Each of the Relevant Markets Is Characterized by


High Entry Barriers ..................................... 34


1.	 The Commission’s Findings of High Entry Barriers


Are Supported by Substantial Record Evidence .......... 34


2.	 CB&I’s Objections to the Commission’s Factual


Findings Are Without Merit ......................... 36


C.	 Post-Acquisition Entry Into the Relevant Markets Has Been


Insufficient to Constrain CB&I’s Market Power .............. 39


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TABLE OF CONTENTS – Cont’d	 Page 

D.	 The Commission Correctly Rejected CB&I’s “Sophisticated


Customer” Defense ..................................... 45


III.	 THE COMMISSION PROPERLY FOUND A SECTION 7


VIOLATION IN EACH RELEVANT MARKET .................. 46


A.	 Section 7 Does Not Require Proof of Actual


Anticompetitive Effects .................................. 46


B.	 CB&I’s Argument That the Commission Improperly


Shifted The Burden of Persuasion Lacks Any Support


in Section 7 Case Law ................................... 47


C.	 There Is No Merit In CB&I’s Arguments That The


Commission Imposed Too High a Standard on CB&I in


Considering the Entry Issues .............................. 49


IV.	 THE COMMISSION’S FINAL ORDER OF DIVESTITURE


IS PROPER AND SHOULD BE ENFORCED .................... 52


CERTIFICATE OF SERVICE


CERTIFICATE OF COMPLIANCE


CONCLUSION .................................................. 56


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TABLE OF AUTHORITIES


FEDERAL CASES Page 

Advo, Inc. v. Philadelphia Newspapers,


854 F. Supp. 367 (E.D. Pa. 1999) .................... 36, 37, 45


Atlantic Refining Co. v. FTC,


381 U.S. 357, 377 (1965) ................................ 53


California v. American Stores Co.,


495 U.S. 271 (1990) .................................... 47


Camp v. Pitts,


411 U.S. 138 (1973) .................................... 24


Cascade Natural Gas Corp. v. El Paso Natural Gas Co.,


386 U.S. 129 (1967) .................................... 52


Colonial Stores Inc. v. FTC,


450 F.2d 733 (5th Cir. 1971) ........................... 20, 39


Diamond M. Drilling Co. v. Marshall,


577 F.2d 1003 (5th Cir. 1978) ............................. 19


Evanston Northwest Healthcare Corp., In re,


FTC Docket No. 9315 .................................... 5


Federal Power Comm’n v. Transcontinental Gas Pipe Line Corp.,


423 U.S. 326 (1976) .................................... 24


Fiess v. State Farm Lloyds,


392 F.3d 802 (5th Cir. 2004) ........................... 25, 26


Ford Motor Co. v. U.S.,


405 U.S. 562 (1972) .............................. 16, 52, 55


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FEDERAL CASES – Cont’d Page 

Foremost Dairies, Inc. v. FTC,


348 F.2d 674 (5th Cir. 1965) ............................ 20, 39


FTC v. Algoma Lumber Co.,


291 U.S. 67 (1934) ..................................... 19


FTC v. Cement Institute,


333 U.S. 683 (1948) .................................... 21


FTC v. Cardinal Health, Inc.,


12 F. Supp. 2d 34 (D.D.C. 1998) ........................ 36, 39


FTC v. H.J. Heinz Co.,


246 F.3d 708 (D.C. Cir. 2001) ............. 28, 34, 36, 43, 48, 51


FTC v. Ind. Fed’n of Dentists,


476 U.S. 447 (1986) ................................. 19, 20


FTC v. Nat’l Lead Co.,


352 U.S. 419 (1957) ................................. 20, 21


FTC v. PPG Indus., Inc.,


798 F.2d 1500 (D.C. Cir. 1986) ........................ 32, 48


FTC v. Proctor & Gamble Co.,


386 U.S. 568 (1967) ................................. 43, 47


FTC v. University Health, Inc.,


938 F.2d 1206 (11th Cir. 1991) ...................... 28, 33, 48


FTC v. Warner Comms.,


742 F.2d 1156 (9th Cir. 1984) ............................. 48


Grand Union Co., In re


102 F.T.C. 812, 1983 FTC LEXIS 61 (1983) ................. 44


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FEDERAL CASES – Cont’d Page 

Harris v. Plastics Mfg. Co.,


617 F.2d 438 (5th Cir. 1980) .............................. 27


Harris v. U.S.,


19 F.3d 1090 (5th Cir. 1994) .............................. 24


Hospital Corp. of Am. v. FTC,


807 F.2d 1381 (7th Cir. 1986) .............. 20, 27, 28, 33, 47, 48


Humble v. Boeing Co.,


305 F.3d 1004 (9th Cir. 2002) ............................. 27


Jacob Siegel Co. v. FTC,


327 U.S. 608 (1946) .................................... 21


Jim Walter Corp. v. FTC,


625 F.2d 676 (5th Cir. 1980) .............................. 19


Kost v. Kozakiewicz,


1 F.3d 176 (3rd Cir. 1993) ................................ 27


MSC.Software Corp., In re,


FTC Docket No. 9299 .................................... 5


NLRB v. Columbian Enameling & Stamping Co.,


306 U.S. 292 (1939) .................................... 19


Oahu Gas Serv., Inc. v. Pacific Resources, Inc.,


838 F.2d 360 (9th Cir. 1988) .............................. 42


Olin Corp. v. FTC,


986 F.2d 1295 (9th Cir. 1993) ............................. 20


Pennzoil Co. v. FERC,


789 F.2d 1128 (5th Cir. 1986) .......................... 47, 48


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FEDERAL CASES – Cont’d Page 

Rebel Oil Co., Inc. v. Atlantic Richfield Co.,


51 F.3d 1421 (9th Cir. 1995) .............................. 41


Rothe Dev. Corp. v. Dep’t of Def.,


413 F.3d 1327 (Fed. Cir. 2005) ............................ 27


Singh v. Gonzales,


436 F.3d 484 (5th Cir. 2006) .............................. 24


State of Louisiana v. Verity,


853 F.2d 322 (5th Cir. 1988) .............................. 24


Stearns Airport Equip. Co., Inc. v. FMC Corp.,


170 F.3d 518 (5th Cir. 1999) ........................... 36, 50


Town of Norwood v. FERC,


962 F.2d 20 (D.C. Cir. 1992) ............................. 27


U.S. v. Baker Hughes, Inc.,


908 F.2d 981 (D.C. Cir. 1990) ................. 22, 32, 45, 48, 50


U.S. v. Carlo Bianchi & Co.,


373 U.S. 709 (1963) .................................... 24


U.S. v. E.I. du Pont de Nemours & Co.,


366 U.S. 316 (1961) ........................ 16, 21, 51, 52, 55


U.S. v. E.I. du Pont de Nemours & Co.,


353 U.S. 586 (1957) .................................... 28


U.S. v. Eastman Kodak Co.,


853 F. Supp. 1454 (W.D.N.Y. 1994) ....................... 41


U.S. v. General Dynamics Corp.,


415 U.S. 486 (1974) .................................... 33


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FEDERAL CASES – Cont’d Page 

U.S. v. Marine Bancorp., Inc.,


418 U.S. 602 (1974) .................................... 43


U.S. v. Menting,


166 F.3d 923 (7th Cir. 1999) .............................. 24


U.S. v. Microsoft Corp.,


253 F.3d 34 (D.C. Cir. 2001) ............................. 55


U.S. v. Syufy Enters.,


903 F.2d 659 (9th Cir. 1990) .............................. 50


U.S. v. United Tote, Inc.,


768 F. Supp. 1064 (D. Del. 1991) .......................... 42


Universal Camera Corp. v. NLRB,


340 U.S. 474 (1951) .................................... 30


Yankton Sioux Tribe v. Gaffey,


188 F.3d 1010 (8th Cir. 1999) ............................. 26


Yohey v. Collins,


985 F.2d 222 (5th Cir. 1993) .............................. 27


FEDERAL STATUTES & RULES 

15 U.S.C. § 18 ............................................. 2, 5


15 U.S.C. § 18(a)(i)(1) ........................................ 5


15 U.S.C. § 21(b) ....................................... 1, 15, 53


15 U.S.C. § 21(c) .......................................... 1, 19


15 U.S.C. § 45 ............................................... 2


-ix­
FEDERAL STATUTES & RULES – Cont’d Page


15 U.S.C. § 45(b) ............................................. 1


15 U.S.C. § 45(c) ............................................. 1


Fed. R. App. P. 17 ........................................... 26


Fed. R. App. P. 28(a)(7) ...................................... 26


MISCELLANEOUS 

Phillip E. Areeda, Herbert Hovenkamp & John Solow, 

Antitrust Law: An Analysis of Antitrust Principles


and Their Application (2d ed. 2002) ............ 39, 41, 45, 48, 51


P. Areeda & D. Turner,


Antitrust Law (1980) .................................... 33


U.S. Dep’t of Justice & Federal Trade Commission,


Horizontal Merger Guidelines (1992, as amended 1997) . . 31, 41, 50


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GLOSSARY 

For ease of reference, the following abbreviations and citation forms are 

used in this brief: 

Tr. – Transcript of Trial Testimony before the Administrative Law Judge 

CX – Complaint Counsel’s Exhibit 

RX – Respondents’ Exhibit 

JX – Joint Exhibit 

Op. – The Commission’s Opinion 

ID – Initial Decision of the ALJ (Page Number) 

IDF – Initial Decision of the ALJ (Factual Finding Number) 

* – In Camera Material 

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STATEMENT OF JURISDICTION


This is a petition to review a Final Order of the Federal Trade Commission, 

entered pursuant to Section 11(b) of the Clayton Act and Section 5(b) of the 

Federal Trade Commission Act, 15 U.S.C. §§ 21(b), 45(b). This Court has 

jurisdiction to review the Order pursuant to 15 U.S.C. §§ 21(c), 45(c). We concur 

with petitioners’ statement that review of the Order is timely. 

STATEMENT OF THE ISSUES PRESENTED FOR REVIEW 

1. Whether review is limited to the record and the arguments CB&I 

properly advances in its brief. 

2. Whether substantial evidence supports the Commission’s findings that (a) 

CB&I’s acquisition of its principal rival substantially increased market 

concentration; (b) high entry barriers characterize each relevant market; (c) postacquisition entry and potential entry cannot constrain CB&I’s market power; and 

(d) sophisticated customers cannot constrain CB&I’s market power. 

3. Whether Section 7 of the Clayton Act requires showing actual competitive 

harm; and whether the Commission properly allocated the evidentiary burdens or 

imposed too great a burden on CB&I as to the competitive effects of new entry. 

4. Whether the Commission’s Order is within the bounds of its discretion 

and whether the Commission properly denied CB&I a separate remedies trial. 

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STATEMENT OF THE CASE


This is a petition to review a final divestiture order that the Federal Trade 

Commission (“Commission”) issued following an administrative adjudication 

under Section 5 of the Federal Trade Commission Act (“FTC Act”). 15 U.S.C. 

§ 45. It involves the acquisition of a specialty engineering and construction 

company by that company’s primary – and in some markets, only – competitor. 

The Commission issued an administrative complaint on October 25, 2001, 

charging that CB&I’s1

 acquisition of certain assets of its principal rival, Pitt-Des 

Moines, Inc. (PDM), violated Section 7 of the Clayton Act, 15 U.S.C. § 18. The 

complaint sought to undo the anticompetitive effects of the acquisition through 

divestiture. An Administrative Law Judge (“ALJ”) presided over a nine-week 

evidentiary hearing, producing a record including 8400 pages of testimony and 

over 1400 exhibits. The ALJ then issued a 126-page Initial Decision and a 

divestiture order. After full briefing and argument, and reviewing the record de 

novo, the Commission affirmed the ALJ’s holding of liability, and issued a final 

order containing a modified divestiture order. See Final Order of December 21, 

2004. 

1 We refer to petitioners, Chicago Bridge & Iron Company N.V. and Chicago Bridge 

& Iron Company, collectively as “CB&I.” 

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STATEMENT OF FACTS


A. The Industry and the Challenged Acquisition 

Both CB&I and PDM designed, engineered, and constructed industrial 

storage tanks for liquified natural gas (LNG),2 liquified petroleum gas (LPG),3 

liquid atmospheric gases such as nitrogen, oxygen, and argon (LIN/LOX),4 and 

thermal vacuum chambers (TVCs), used to test satellites for the aerospace 

industry.5 Op. 1. As CB&I conceded, the two firms “were the dominant suppliers 

of the products in these four relevant markets prior to the acquisition.” Id. at 8. 

Indeed, before 2001, the two firms had a virtual duopoly in those markets. Id. at 

20. Between 1990 and 2001, CB&I and PDM were the only firms that built any 

2 LNG tanks are field-erected tanks that store 2.5-42 million gallons of natural gas at 

cryogenic temperatures of around -260" F, and cost $35-50 million each. Op. 11. They must have 

inner walls made of 9 percent nickel steel, and therefore require special welding techniques. Id. 

LNG tanks can serve two types of facilities: import terminals that receive LNG from tankers and 

offload it to storage tanks; and the usually smaller peak-shaving plants, used by utilities to store 

LNG as emergency reserves. Id. at 13. 

3 LPG tanks are field-erected tanks for liquified, petroleum-based gases, but are 

substantially less expensive than LNG tanks, costing approximately $5 million each, and store the 

liquified gases at significantly higher temperatures of around -50" F. Op. 13. 

4 LIN/LOX tanks are an essential part of air separation facilities used by major 

industrial gas firms. Op. 14. They are also designed for cryogenic temperatures, but are much 

smaller than LNG or LPG tanks, and significantly less expensive, costing $500,000 to $1.5 million 

each. Id. 

5 TVCs simulate outer space temperature and vacuum conditions. Op. 15. The TVC 

system consists of an inner “shroud,” surrounded by a cryogenic tank. Id. Typically, one company 

builds the shroud and another – namely, CB&I or PDM – builds the surrounding tank, such that 

TVC projects are performed by teams of the two respective constructors. Id. 

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LNG tanks in the United States. Id. Between 1975 and the acquisition, CB&I and 

PDM were the only firms to build LNG tanks for import terminals, id. at 20-21 

n.110, and they built all but 7 of the 95 peak-shaving LNG tanks built during that 

period. Id.; see CX 125, 1645. 

In the LPG tank market, only two of the 11 projects between 1990 and the 

acquisition were awarded to firms other than CB&I and PDM. Op. 23; Tr. 3046, 

3052-54, 3670; see CX 26 at CBI-PL069530*, 161 at CBI-PL006114, 824, 1210*, 

1212*. Although the LIN/LOX tank market was not historically a CB&I/PDM 

duopoly, the only other significant competitor, Graver Tank,6

 left the market in 

2001, leaving CB&I as the dominant firm in this market. Op. 25; Tr. 1543, 7312­

13; see CX 1546. 

In the TVC market, CB&I’s acquisition combined the only two builders of 

large, field-erected TVCs in the U.S. IDF 363; Tr. 3489; see CX 94 at PDMHOU017583, 264, 272, 857*, 1040 at PDM-HOU010889.7

 CB&I and PDM were 

the only firms that built any TVCs in the U.S. since 1960. Tr. 1110, 1115, 1267, 

1564. 

6 Of the 109 LIN/LOX tanks built between 1990 and the acquisition, CB&I built 25, 

PDM 44, and Graver 34. Tr. 2452, 3422, 3429-30; see CX 85, 155, 183, 260, 282, 755, 1170, 1458. 

7 Before the acquisition, CB&I and PDM allied with the two dominant constructors 

of the “shroud” part of the TVC system, XL Technology Systems (XL) and Process Systems 

International (PSI), respectively. Op. 15; see Tr. 1262-64. The TVC market was thus dominated 

by the CB&I/XL and PDM/PSI alliances. 

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On February 7, 2001, CB&I acquired all of PDM’s assets relating to these 

four markets. It did so despite receiving notice that the Commission had 

significant antitrust concerns and was “in the midst of [an] investigation of the 

acquisition,” Op. 1, and before responding to the Commission’s pending subpoenas 

and Civil Investigative Demands.8

 CB&I thereby acquired monopoly status in two 

product markets and near-monopoly status in two others. 

B. The Commission Decision and Order 

(1) Market Definition 

Section 7 makes illegal any acquisition that may tend to create a monopoly 

or substantially lessen competition in any line of commerce in any section of the 

country. 15 U.S.C. § 18. The Commission began by noting that the “relevant 

product and geographic markets are uncontested” (Op. 8; see CB&I Br. 8), and, 

after reviewing their respective structures and characteristics (Op. 11-17), affirmed 

the ALJ’s determination that the acquisition must be judged for its effects on the 

8 CB&I asserts that post-acquisition merger challenges are “unusual” (CB&I Br. 2), 

and implies that this challenge may be inequitably tardy. Id. at 4-5. Although pre-merger reporting 

requirements have lessened the need for post-acquisition challenges, such challenges remain an 

important enforcement mechanism, see, e.g., In re Evanston Northwest Healthcare Corp., FTC 

Docket No. 9315; In re MSC.Software Corp., FTC Docket No. 9299, and are entirely appropriate. 

See 15 U.S.C. § 18a(i)(1) (“any failure of the Federal Trade Commission ... to take any action under 

this section shall not bar any proceeding or any action with respect to such acquisition at any time 

under any other section of this Act or any other provision of law”). 

-5­
8.9 

United States markets for LNG tanks, LPG tanks, LIN/LOX tanks, and TVCs. Op. 

(2) Market Concentration 

The ALJ found that sales of the relevant products are sporadic – i.e., many 

months or years may lapse between projects. ID 91-93. Accordingly, he rejected 

the traditional method of measuring market concentration, using the HerfindahlHirshman Index (“HHI”), reasoning that sporadic sales made it difficult to use 

HHIs, which are generally calculated on an annualized basis, to assess the 

competitive landscape.10 Id. Nonetheless, after examining the bidding history in 

each market, he found that the acquisition has resulted in an undue accretion of 

market power in CB&I which could not be constrained by timely entry into the 

markets. See ID 93-98. 

The Commission rejected the ALJ’s refusal to rely on HHI concentration 

measures. While the Commission understood “the ALJ’s point and agree[d] that in 

9 CB&I’s brief blurs the distinctions among the four markets, treating them as if they 

were one “field-erected cryogenic storage tanks” market, CB&I Br. 5; see also id. at 9 n.9. Such 

an imprecisely defined market is contradicted by the Commission’s findings (see IDF 19; Op. 8), 

and by CB&I’s own position. See CB&I Br. 8. To prevail here, CB&I must show that the 

Commission’s findings are unsupported as to each of those four distinct markets. 

The HHI is calculated by squaring the market share of each firm competing in the 

market and summing the resulting numbers. The Index takes into account the relative size and 

distribution of each firm. It approaches zero when there are many firms of relatively equal size and 

reaches its maximum of 10,000 when there is only one firm in the market. 

-6­

10 
markets with sporadic sales, finders of fact must treat concentration statistics with 

care” (Op. 18), it was “unwilling” to “disregard ... the concentration statistics” 

altogether. Id. Noting that CB&I did not “contest that [CB&I and PDM] were the 

dominant suppliers in all four markets prior to the acquisition” (id.), and that they 

were “the only competitors that ... made significant sales in each of the four 

markets for at least the past two decades” (id. at 19), the Commission concluded 

that “an extended time frame is an appropriate period in which to analyze the 

parties’ sales data.” Id.; see also Tr. 7228. The Commission found that the HHIs 

for the markets “range from 5,000 to 10,000 post-acquisition, with concentration 

increases that range from 2,600 to 5,000” – numbers “well above the level needed 

to establish a prima facie case and entitle Complaint Counsel to a presumption” 

that the acquisition violates Section 7.11 Op. 19. 

The Commission also found “an independent reason for finding a strong 

prima facie case of presumptive illegality” in other, “qualitative evidence” showing 

that “the acquisition left CB&I as the dominant player – indeed the only major 

player – in all of the markets.” Op. 20. The Commission cited, for example, the 

views of customers with first-hand knowledge that “PDM and CB&I were the only 

11 For the period 1990-2001, the HHI shows the following post-acquisition 

concentration data: LNG tanks market – HHI of 10,000 (increase of 4,956); LPG tanks market – 

HHI of 8,380 (increase of 3,911); LIN/LOX tanks market – HHI of 5,845 (increase of 2,635); TVCs 

market – HHI of 10,000 (increase of 4,999). Op. 17; see Tr. 3055, 3403-05, 3443, 3494. 

-7­
viable LNG tank suppliers prior to the acquisition and that the acquisition 

substantially harmed competition.” Id. at 21-22; see Tr. 324, 703*, 1830; See also 

Op. 27-28 (citing Tr. 192-93, 384-87, 1443). It also cited PDM’s and CB&I’s own 

documents, which confirmed that the two firms “focused almost exclusively on 

each other in their assessment of the competitive landscape and paid little or no 

attention to what other companies were doing.” Op. 22 (citing, e.g., CX 68, 94 at 

PDM-HOU017580; Tr. 4851); see also CX 212 at CBI-PL031721; Tr. 1159.12 

(3) Entry Conditions 

After concluding that “the acquisition ... resulted in a merger to monopoly 

or near-monopoly in each relevant market,” the Commission analyzed entry 

conditions “to determine if there is any evidence to suggest that the acquisition is 

less anticompetitive than the concentration levels show.” Op. 28. Addressing 

Complaint Counsel’s evidence and considering it “in the context of [the] prima 

facie case,” the Commission noted that “evidence of high entry barriers necessarily 

strengthens the conclusions to be drawn from ... high concentration levels.” Id.13 

12 The Commission found similar qualitative evidence in the LPG and LIN/LOX tank 

markets. See Op. 23-25 (discussing PDM’s and CB&I’s internal market assessments and customer 

views in the LPG tank market); id. at 26-27 (discussing both factors in LIN/LOX tank market). 

13 Although entry conditions are not normally considered part of the prima facie case 

in a merger proceeding, the Commission explained that because that evidence was introduced as part 

of Complaint Counsel’s case, “as a practical matter it would be difficult to consider this evidence 

elsewhere in our analysis.” Op. 28-29 n.171. 

-8­
The Commission separately considered entry conditions in each market. Op. 

33-49. After reviewing the evidence, including customer testimony and behavior 

in past LNG project awards, see id. at 33-41, the Commission found a variety of 

reasons why entry into this market is exceedingly difficult and cannot be achieved 

in a timely fashion. It noted, for example, that the nickel-steel composition in 

LNG tanks requires “a specialized construction skill set.”14 Id. at 36; Tr. 881, 

1831, 6701-02; CX 1731 at 44, 1792. LNG tanks require sophisticated engineering 

(Tr. 881, 1566, 1792) and must be built by companies with trained supervisors and 

a knowledge of local labor markets.15 Tr. 310, 1598-99, 1641*, 2625-34, 4521, 

5906-07, 5917-18, 5952-53, 7017-18. Construction companies develop specialized 

procedures and employ proprietary techniques to weld and assemble the units. Op. 

36-39; Tr. 1601, 2379, 6028-29; CX 109 at PDM-HOU006700. Additionally, the 

Federal Energy Regulatory Commission (FERC) regulatory and approval process 

is complicated and potentially time-consuming and builders must master the 

process to complete projects on time and in accordance with requirements. Op. 40; 

Tr. 310, 627, 1639-40, 4930, 6287. 

14 There are “tremendous safetyconsiderations” regarding LNG tanks. Tr. 293-94, 564­

65, 1789. Nickel-steel has crack resisting properties at very cold temperatures and is less brittle than 

carbon steel. Tr. 881-82, 4109-10; CX 1074 at CBI001245-PLA. 

15 While CB&I has told this Court that LNG tanks are beveled steel plates put together 

by local labor (CB&I Br. 8), the record shows that they are “built out of fairly sophisticated 

materials [that you] don’t just weld up any old way.” Tr. 1789, 2379. 

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Customers require potential suppliers to have significant experience in that 

market (Op. 33-34), and it takes at least “a few years” of experience to gain 

proficiency in building LNG tanks. Tr. 1637-38*, 2379-80; CX 392 at 3. 

Attaining the necessary experience is a function of repeated successful completion 

of similar projects and is particularly difficult here, where “the LNG tank market is 

characterized by long-standing dominance by the two merged firms and a 

reluctance on the part of customers to take a chance on firms with no experience.” 

Op. 35.16 The Commission found “CB&I’s long-standing presence in the U.S. 

confers on it a virtually insurmountable advantage in many of the attributes [of 

successful entry], at least for the foreseeable future.” Id. at 41. 

Similar high entry barriers also characterize the LPG and LIN/LOX tank 

markets. Experience, reputation for reliability, safety records, and specialized 

skills are critical supplier attributes. Op. 42-43, 44-47; Tr. 467*, 848-49, 852, 

1343-44, 1609, 1995, 2289-97, 3323, 6570-71, 7083-84, 7134, 7141-42; see JX 27 

at 115-16. By way of example, the Commission noted that “Air Products requires 

that the engineers, field crew, and supervisors all have prior LIN/LOX experience” 

16 The Commission observed that such barriers explain why Asian tank manufacturers 

historically have built the majority of LNG tanks in Asia, and European-based manufacturers have 

built the bulk of tanks in Europe – just as PDM and CB&I have built virtually all the tanks in the 

United States. Op. 41; Tr. 699*, 717-18*; see CX 1649; RX 738 at FTC001535*. 

-10­
to qualify for Air Products’ projects. Op. 46-47; Tr. 849, 1357-60, 1388-91, 1994­

96; see JX 25 at 83-84.17 

The Commission concluded that “entry and expansion in these markets are 

not likely to replace the competition lost through the acquisition or to sufficiently 

constrain CB&I in a timely manner.” Op. 49. 

(4) CB&I’s Rebuttal 

CB&I did not contest either the product or geographic markets before the 

Commission. Nor did it argue that the acquisition would lead to enhanced 

efficiencies that would benefit competition. Rather, it simply contends that 

Complaint Counsel’s evidence of extraordinarily high market concentration and 

high entry barriers were rebutted by actual successful recent entry and potential 

entry into three of the four markets.18 On examining the record evidence, however, 

the Commission affirmed the ALJ’s conclusion that the purported new entry “is 

insufficient to constrain CB&I post-acquisition.” Op. 81. 

17 The Commission also examined the evidence relating to the TVC market and found 

that barriers are extraordinarily high in that market, noting that “[t]he difficulty of entry . . . is not 

in dispute.” Op. 28 n.170; see Tr. 206, 1103, 1141-44, 1454, 1734-37, 1920*; JX 27 at 47-48. 

18 CB&I proffered no evidence of attempted entry into the TVC market, and the record 

shows entry is unlikely. Op. 80; Tr. 1147-49, 1272. CB&I advanced other defenses, arguing that 

the relevant markets are small, CB&I lacked presence in the TVC market, and its expert’s “critical 

loss analysis” showed that CB&I could not raise prices in the future. The Commission rejected each 

of these arguments (see Op. 49-50 n.309, 50-52, 82-87) and CB&I has abandoned them here. 

-11­

The Commission analyzed the LNG tank market, considering the 

qualifications and experience of each alleged new entrant (Op. 52-57), the postacquisition bidding behavior of CB&I and the entrants together with the bidding 

outcomes (id. at 58-63), and the views of customers regarding the ability of those 

firms to compete with CB&I. Id. at 63-66. The Commission found that the three 

joint ventures CB&I identified as new entrants – Skanska/Whessoe, 

Technigaz/Zachry, and TKK/AT&V – lacked sufficient experience to compete 

effectively with CB&I. Id. at 57. None had ever built an LNG tank in the United 

States. Id. at 52-53 & nn. 323, 325; Tr. 596, 1402, 1645*, 2336, 2393-95, 4458­

59, 4521, 4599-600, 4719*, 6693, 6993; see CX 115, 135*, 693 at BP01028. As 

of the time of trial, none had won an LNG tank bid post-acquisition (Op. 58), while 

CB&I had won six sole-source contracts since the acquisition. Id. at 59; Tr. 

4399.19 Moreover, some customers with upcoming LNG projects were not even 

aware of one or more of the alleged new entrants. Op. 54; Tr. 1326, 1846-53. The 

Commission concluded that, although these new entrants may “have taken a 

necessary step toward competing in the United States by partnering with U.S. 

19 For several post-acquisition projects, “CB&I has insisted that it do the work on a 

turnkey basis – even after customers have expressed a strong preference to bid parts of the project 

competitively.” Op. 64. Indeed, CB&I refused even to bid on the Dynegy project (Op. 59; Tr. 

4576-77; CX 139, 140, 1528); and, by refusing to separate the initial FERC work from the rest of 

the project, CB&I forced British Petroleum (“BP”) to award it sole-source contracts for three LNG 

tanks. Op. 60-61; Tr. 6069-71. 

-12­
construction firms,” there has been no new meaningful entry because “even 

entrants with the technical wherewithal to build LNG tanks have not restored the 

competition lost from the acquisition and likely cannot do so in the foreseeable 

future.” Op. 56, 57. 

The LPG tank market “has been characterized more by exit than by entry,” 

and the actual or potential entrants proffered by CB&I “appear vastly overmatched 

by CB&I.” Op. 66. The Commission found, for example, that AT&V, the one 

remaining “competitor” in the market at the time of the trial, suffers from lack of 

experience, equipment, personnel, and financial standing needed to compete 

meaningfully with CB&I. Id.; Tr. 2365-66, 2375, 2385, 2421-22, 3292-3315, 

7088-89, 7129-34; see CX 107 at PDM-HOU005015. None of the other firms 

identified by CB&I as “would-be LPG tank suppliers” has ever won an LPG tank 

bid in the U.S. Op. 67; Tr. 1609, 3750-51; JX 27 at 71-72; CX 660 at 

HOU005015. Morse – the last domestic firm identified by CB&I as an entrant – 

built a single LPG tank in 1994 and did not thereafter make another bid in the U.S. 

Op. 68; Tr. 7297. The Commission also concluded that the participation of other 

bidders for the single post-acquisition LPG tank project cited by CB&I – which 

CB&I won – did not evince an ability to constrain CB&I’s conduct in that market 

(Op. 69-70), and that CB&I’s assertion that foreign suppliers “theoretically might 

-13­

enter” the LPG market is only a “speculative possibility.” Id. at 69; see Tr. 2431, 

4708*, 7778-79. 

The LIN/LOX tank market is similarly devoid of meaningful postacquisition entry. New entry was attempted by the French company BSL, but it 

“never won a bid” and “has since gone out of business.” Op. 77; Tr. 955, 1351, 

1380, 2001. Similarly, post-acquisition expansion attempts by AT&V, Matrix, and 

Chattanooga (see Op. at 71-77) have been “insufficient to replace the competition 

that was lost from the acquisition.” Id. at 77. Chattanooga “still has not won a 

bid” (Op. 76; Tr. 6413-15; JX 2 at 2); “increased costs have made Matrix noncompetitive” (Op. 75; Tr. 457*, 2159-61); and AT&V suffers from capacity 

shortage (Tr. 2375-76, 3315), and recent problems have made its competitive 

viability doubtful. Op. 79-80; Tr. 931-32, 1369, 2235-36*, 2241*, 2251-55*, 

2355-56, 5036, 5269, 5273-74. 

Last, the Commission addressed CB&I’s argument that sophisticated 

customers can constrain CB&I. The Commission noted, however, that even 

sophisticated customers “must have alternative suppliers in order to have any real 

bargaining power” and the variability and infrequent nature of transactions makes 

it unlikely that customers can get accurate pricing information. Op. 87, 88; Tr. 

705*, 6060-61, 6207-08, 6290*, 7033. As one customer testified, it had to 

-14­

“operat[e] a little bit in the dark in terms of knowing ... the costs ... for LNG tank 

suppliers.” Op. 88; Tr. 6238. The Commission also found that, although 

consultants may give some assistance, they cannot ensure that customers receive 

sufficient pricing information, citing CB&I’s own evidence “that it is difficult, if 

not impossible, to compare prices of various tanks because the specifications vary 

so widely from project to project.” Op. 89; Tr. 6239. 

(5) The Commission’s Final Order 

In the light of “a strong prima facie case,” the Commission found CB&I’s 

rebuttal evidence “establishes neither that entry or expansion into these markets is 

easy nor that it has actually occurred at a level that will meaningfully constrain 

CB&I post-acquisition.” Op. 90. It concluded that “customers in these markets 

will likely be harmed post-acquisition.” Id. Having determined that CB&I’s 

acquisition of PDM’s assets violates Section 7, the Commission fashioned a 

remedy that would “pry open to competition the markets that have been closed.” 

Id. at 93 (citation and internal brackets omitted). 

The Commission rejected CB&I’s arguments that divestiture is unwarranted 

and that CB&I lacked sufficient notice that the remedy might be imposed here. 

The Commission noted that the administrative complaint sought divestiture as a 

remedy, that the very language of the Clayton Act, 15 U.S.C. § 21(b), contemplates 

-15­

divestiture, and that the Supreme Court has instructed that “divestiture ‘should 

always be in the forefront of a court’s mind when a violation of § 7 has been 

found.’” Op. 93 (quoting U.S. v. E.I. du Pont de Nemours & Co., 366 U.S. 316, 

331 (1961) (“DuPont”)). The Commission concluded that the record confirms that 

“divestiture is the most appropriate remedy to effectuate” the goal of restoring 

competition to the markets. Op. 93. 

Addressing CB&I’s objection that it should not be required to divest assets 

not directly involved in building LPG, LNG, and LIN/LOX tanks or TVCs, the 

Commission observed that “the Supreme Court has recognized that ‘[t]he relief 

which can be afforded’ from an illegal acquisition ‘is not limited to the restoration 

of the status quo ante’” but rather “must be directed to that which is ‘necessary and 

appropriate in the public interest to eliminate the effects of the acquisition.’” Op. 

94-95 (quoting Ford Motor Co. v. U.S., 405 U.S. 562, 573 n.8 (1972)). Noting that 

PDM’s Water Division produced the relevant products and that the acquired assets 

operated as a cohesive unit before the acquisition, the Commission stated that it is 

“impossible to know whether a new entrant must have the assets similar to those of 

PDM’s Water Division in order to compete in the relevant markets.” Op. 95. The 

Commission therefore kept that division within the scope of the divestiture Order, 

but included a provision that “allows the exclusion” of those assets should they be 

-16­

found unnecessary upon the approval of a prospective buyer. Id. The 

Commission’s Order directs CB&I “to reorganize its Industrial Division (and, to 

the extent necessary, its water tank unit) into two separate, stand-alone divisions 

(New PDM and New CB&I) and to divest New PDM within six months” of its 

Order becoming final. Id. at 94. 

C. CB&I’s Petition for Reconsideration and Its Petition for Review 

On February 1, 2005, CB&I asked the Commission to reconsider its Order 

on the basis of purportedly new evidence of market entry following the close of the 

administrative record. On March 11, 2005, while its petition for reconsideration 

was pending, CB&I filed in this Court a petition for review of the Commission’s 

Final Order. On April 4, 2005, to allow the Commission to consider CB&I’s 

petition, this Court dismissed the petition for review pursuant to Circuit Rule 42.4, 

without prejudice to reinstatement. 

CB&I’s petition for reconsideration dealt only with the LNG tank market, 

and alleged that since the record’s close, demand had increased, four LNG tank 

projects had been awarded to new firms, and such post-acquisition entry renders 

divestiture unnecessary. See Decision and Order Partially Denying Respondents’ 

Petition for Reconsideration (May 10, 2005) (“R.O.”), at 2.20 

20 The four projects proffered by CB&I as “new evidence” were: (1) Dynegy’s LNG 

tank award to Skanska; (2) Sempra’s award to Kvaerner/IHI of an engineering, procurement, and 

-17­

The Commission denied CB&I’s petition, finding the proffered evidence 

neither new nor convincing. The Commission noted that CB&I’s petition raised no 

new issues – CB&I argued both to the ALJ and to the Commission that increased 

demand for LNG tanks had triggered new entry that constrains CB&I postacquisition – and that much of the purportedly new evidence had been available to 

CB&I long before the Commission issued its Final Order. R.O. 4-6. Moreover, 

that CB&I has not won every post-acquisition bid was not conclusive, reasoned the 

Commission, on the relevant question of whether new entrants effectively replaced 

the competition lost through the acquisition. Id. at 9. Even considering the newly 

proffered extra-record materials, the Commission concluded that CB&I still had 

“not shown that the competition lost from CB&I’s acquisition of the PDM assets 

has been restored.” Id. 

CB&I neither filed a separate petition for review of the May 10, 2005, 

reconsideration order, nor amended its original petition for review to include that 

order. 

construction (“EPC”) contract; (3) Freeport LNG’s award of an LNG tank contract to 

Technigaz/Zachry; and (4) Cheniere’s LNG tank award to MHI/Matrix. R.O. 2. 

In this regard, EPC contracts are “turnkey” contracts, for the design and construction of the 

entire LNG facility. Op. 16. An EPC contractor is essentially a general manager who engineers the 

project, procures the equipment and material, and constructs (or manages the construction of) the 

facility. Id. at 16, 58. The EPC contractor may subcontract portions of the project (such as the LNG 

tanks) to others. Id. at 16. See infra, at 40-41. 

-18­
D. The Reinstated Petition for Review 

At CB&I’s request, this Court reinstated this petition for review on October 

14, 2005. In its request for reinstatement, CB&I made no reference to the 

Commission’s May 10, 2005, order denying its petition for reconsideration. On 

December 15, 2005, however, CB&I filed in this Court a “Motion to Adduce 

Additional Evidence,” seeking to remand the case to the Commission to re-open 

the administrative record and adduce “additional evidence” – the same evidence 

the Commission had rejected in denying the petition for reconsideration. This 

Court denied CB&I’s motion on April 13, 2006. 

STANDARD OF REVIEW 

“The findings of the Commission ... as to the facts, if supported by 

substantial evidence, shall be conclusive.” 15 U.S.C. § 21(c); Jim Walter Corp. v. 

FTC, 625 F.2d 676, 681 (5th Cir. 1980). “Substantial evidence is evidence that 

provides ‘a substantial basis of fact from which the fact in issue can be reasonably 

inferred.’” Diamond M. Drilling Co. v. Marshall, 577 F.2d 1003, 1006 (5th Cir. 

1978) (quoting NLRB v. Columbian Enameling & Stamping Co., 306 U.S. 292, 

299-300 (1939)). Reviewing courts may not “make [their] own appraisal of the 

[evidence], picking and choosing ... among uncertain and conflicting inferences.” 

FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 454 (1986) (quoting FTC v. Algoma 

-19­

Lumber Co., 291 U.S. 67, 73 (1934)); accord Foremost Dairies, Inc. v. FTC, 348 

F.2d 674, 676 (5th Cir. 1965) (“it is not our function to weigh the evidence or 

consider the credibility of witness[es]. Furthermore, reasonable inferences drawn 

from the facts by the Commission are not to be disturbed”). This deferential 

standard also applies to the Commission’s findings regarding the economic effects 

of particular conduct. Olin Corp. v. FTC, 986 F.2d 1295, 1297 (9th Cir. 1993); 

Hospital Corp. of Am. v. FTC, 807 F.2d 1381, 1385 (7th Cir. 1986). 

Review of the Commission’s legal analysis and conclusions is de novo, 

“although even in considering such issues the courts are to give some deference to 

the Commission’s informed judgment.” Ind. Fed’n of Dentists, 476 U.S. at 454; 

accord Colonial Stores, Inc. v. FTC, 450 F.2d 733, 740 n.14 (5th Cir. 1971) (“even 

when the Commission’s findings are framed in terms of legal conclusions, their 

presumptive validity is considerable”). 

Remedial provisions are subject to an abuse of discretion standard, because 

“the Commission is clothed with wide discretion in determining the type of order 

that is necessary to bring an end to the unfair practices found to exist.” FTC v. 

Nat’l Lead Co., 352 U.S. 419, 428 (1957). As “the expert body to determine what 

remedy is necessary,” the Commission “has wide latitude for judgment and the 

courts will not interfere except where the remedy selected has no reasonable 

-20­

relation to the unlawful practices found to exist.” Id. (quoting Jacob Siegel Co. v. 

FTC, 327 U.S. 608, 612-13 (1946)); see also FTC v. Cement Inst., 333 U.S. 683, 

726 (1948). Particularly where the remedy seeks to undo a violation of Section 7, 

“it is well settled that once the Government has successfully borne the considerable 

burden of establishing a violation of law, all doubts as to the remedy are to be 

resolved in its favor.” DuPont, 366 U.S. at 334 (emphasis added) (citations 

omitted). 

SUMMARY OF ARGUMENT 

Substantial evidence supports the Commission’s determination that each of 

the four markets at issue is highly concentrated, and that CB&I’s acquisition of its 

principal rival created a monopoly in two markets and a near-monopoly in two 

others. (Indeed, CB&I has challenged the record evidence with respect to only one 

of those markets, the LNG tank market). Substantial evidence also supports the 

Commission’s determination that entry barriers in these markets are high and 

future entry is unlikely to restore the competition lost as a result of this transaction 

or constrain CB&I’s market power for the foreseeable future. In these 

circumstances, the Commission properly concluded that this acquisition violated 

Section 7 of the Clayton Act. 

-21­

CB&I relies considerably on its argument that there is evidence of postacquisition competition by new or potential entrants in the LNG tank market. 

There are two main problems with this argument. First, this evidence does not 

show any effective competition for LNG tank contracts, and CB&I ignores clear 

evidence of the greatly enhanced power it enjoys in that market. Also, because 

CB&I failed to appeal the Commission’s denial of its motion for reconsideration 

and this Court denied CB&I’s motion to remand for the taking of additional 

evidence, much of the material CB&I relies on in its brief is not part of the record 

and is not before the Court. The Commission properly found that none of the new 

or potential entrants identified by CB&I is able to constrain the merged entity’s 

conduct or offset the lessening of competition occasioned by the merger. This 

analysis does not change even if CB&I’s extra-record materials are considered. 

CB&I also misstates the law and the record in urging that, by producing 

“some” evidence, it eliminated any presumption of illegality that is created by the 

increase in concentration arising from this merger. Contrary to CB&I’s contention, 

the probative weight of a defendant’s evidence is clearly important in considering 

whether the presumption of illegality is warranted in a particular case, and “the 

more compelling the prima facie case, the more evidence a defendant must present 

to rebut it successfully.” U.S. v. Baker Hughes Inc., 908 F.2d 981, 991 (D.C. Cir. 

-22­

1990). This record shows overwhelming evidence of an increase in market power 

as a result of this merger, and a failure by CB&I to show that timely entry will 

restore the competition lost in the transaction. 

Finally, the Commission’s order of divestiture follows textbook Section 7 

principles, is fully supported by the record, and is well within the bounds of the 

Commission’s discretion. The Commission was not required to hold a second trial 

to consider the form of remedy. CB&I was on notice of the proposed remedy from 

the very beginning of the case, presented evidence on the issue, and never asked 

for a bifurcated proceeding. 

ARGUMENT 

I.	 REVIEW IS LIMITED TO THE RECORD BELOW AND THE 

ARGUMENTS CB&I HAS PROPERLY ADVANCED IN ITS BRIEF 

A.	 CB&I’S Petition Must Be Rejected To The Extent It Relies On 

Extra-Record Evidence That Is Not Properly Before This Court 

Although CB&I did not appeal from, and does not challenge, the 

Commission’s rejection of its post-record evidentiary materials, it nonetheless 

relies heavily on those materials. See, e.g., CB&I Br. 7 n.6 (citing CB&I’s petition 

for reconsideration before the Commission); id. at 12 (same); id. at 13 (citing 

declarations appended to CB&I’s petition); id. at 14, 15, 16, 41 (same); id. at 28, 

30, 32 (citing Commission’s order on CB&I’s petition for reconsideration). These 

-23­

materials did not provide the basis for the Commission’s Final Order, they are not 

part of the record, and this Court should not consider them. References to them 

should be stricken from CB&I’s brief.21 

The Commission rejected CB&I’s “new” evidence, finding that the evidence 

had been available to CB&I long before the Commission issued its Final Order and 

was not material to the outcome. CB&I has never argued that the Commission 

erred in denying its petition. It did not amend its February 1, 2005, petition for 

review, which sought review in this Court of only “the Order and Opinion of the 

Federal Trade Commission entered ... on December 21, 2004,” see CB&I’s 

“Petition for Review.” CB&I also did not file a separate petition for review of the 

Commission’s May 10th order rejecting CB&I’s post-trial evidence. Needless to 

say, any review of such a discretionary administrative ruling would have been 

subject to a highly deferential standard of review. See Singh v. Gonzales, 436 F.3d 

21 See Fed. Power Comm’n v. Transcontinental Gas Pipe Line Corp., 423 U.S. 326, 331 

(1976) (“review of [an] administrative decision[] is to be confined to ... the evidence on which it 

was based’”) (quoting U.S. v. Carlo Bianchi & Co., 373 U.S. 709, 714-715 (1963)) (emphasis 

added); Camp v. Pitts, 411 U.S. 138, 142 (1973) (“the focal point for judicial review should be the 

administrative record already in existence”); Harris v. U.S., 19 F.3d 1090, 1096 n.7 (5th Cir. 1994) 

(“we may not consider evidence outside the administrative record when determining whether to 

uphold agency action”); State of Louisiana v. Verity, 853 F.2d 322, 327 n.8 (5th Cir. 1988) (“Nor are 

courts permitted to consider evidence outside the administrative record”). 

The reasons for such a rule are important: consideration by the reviewing court of extrarecord evidence distorts the administrative record that formed the basis of the decision on review, 

and the judicial process itself, for such evidence was not subjected to the rigors of trial and the 

reviewing court cannot be assured of its reliability. See, e.g., U.S. v. Menting, 166 F.3d 923, 928 

(7th Cir. 1999). 

-24­
484, 487 (5th Cir. 2006) (“We review the [agency’s] denial of both a motion to 

reopen and a motion for reconsideration under a highly deferential abuse-ofdiscretion standard”). 

In an analogous context, this Court has held that “an issue initially raised in 

a post-judgment motion” in a federal district court proceeding “cannot be 

considered by this court unless the judgment or order disposing of it is properly 

noticed for appeal.” Fiess v. State Farm Lloyds, 392 F.3d 802, 806 (5th Cir. 2004). 

As this Court explained in Fiess, even this Circuit’s “forgiving approach” to 

construing notices of appeal will not cure a party’s failure to amend its notice to 

cover a subsequent denial of a motion for reconsideration. Id. at 806-07. 

Although CB&I asserts that its “proffered evidence ... was accepted into the 

record by the Commission” (CB&I Br. 7 n.6), CB&I cannot support that 

assertion.22 After failing to seek judicial review of the Commission’s rejection of 

its post-record evidence, CB&I filed in this Court a motion to have the 

administrative record reopened to include that same evidence, upon which CB&I 

relies here. See CB&I’s Motion to Adduce Additional Evidence. This Court 

22 In support, CB&I cites only its petition for reconsideration. See CB&I Br. 7 n.6; but 

see R.O. 6 (CB&I “have not met their burden under our rules for either reopening the record or 

reconsideration of an issued decision”); id. at 9 (even if the proffered “new” evidence were to be 

credited, CB&I still “have not shown that the competition lost from CB&I’s acquisition of the PDM 

assets has been restored”). 

-25­
denied that motion on April 13, 2006. Thus, CB&I’s post-record materials have 

never been admitted in evidence. Had the Commission indeed “accepted” such 

evidence into the record, CB&I would have had no reason to file its motion to 

adduce with this Court. 

Because the rejected evidence is not part of the record, this Court cannot 

properly consider it and should order it stricken from CB&I’s brief. See Fed. R. 

App. P. 28(a)(7) (appellate brief must contain “a statement of facts ... with 

appropriate references to the record”) (emphasis added); see also, e.g., Yankton 

Sioux Tribe v. Gaffey, 188 F.3d 1010, 1015 n.4 (8th Cir. 1999) (affidavits that were 

not part of the record on review stricken).23 

B.	 CB&I’s Challenge To The Commission’s Factual Findings Must 

Be Limited To the LNG Tank Market 

As CB&I acknowledges, the focus of its brief is “on the LNG tank business” 

(CB&I Br. 9) and its sole statement regarding the remaining three markets is in a 

footnote in which CB&I asserts that “many of the issues presented in this brief 

regarding the LNG tanks also exist with regard to the other relevant products in 

23 Nor does the inclusion of the post-judgment materials in the package sent to this 

Court (see Fed. R. App. P. 17), somehow render the proffered evidence “accepted into the record 

by the Commission.” See CB&I’s Response to the FTC’s Motion to Extend the Deadline to File Its 

Brief, at 3. CB&I cites no authority to support such a proposition. Indeed, CB&I’s argument would 

mean that the mere proffer of post-decision evidence would render the proffered evidence part of 

the record for purposes of appellate review. This Court has rejected any such notion. See Fiess, 

supra. 

-26­
this case.” Id. at 9 n.9. Such generalized statements are insufficient designations 

of error with regard to the LPG and LIN/LOX tank markets and the TVC market. 

See supra, at 6 n.9. It is settled law that a petitioner abandons arguments by failing 

to argue them in its appellate brief. Yohey v. Collins, 985 F.2d 222, 224-25 (5th 

Cir. 1993); Harris v. Plastics Mfg. Co., 617 F.2d 438, 440 (5th Cir. 1980); see also 

Rothe Dev. Corp. v. Dep’t of Def., 413 F.3d 1327, 1339 (Fed. Cir. 2005); Humble 

v. Boeing Co., 305 F.3d 1004, 1012 (9th Cir. 2002); Kost v. Kozakiewicz, 1 F.3d 

176, 182 (3rd Cir. 1993); Hospital Corp. of Am., 807 F.2d at 1392. The mere 

reference in an opening brief to an argument is insufficient to preserve it for 

judicial review, and any subsequent attempt to raise it in a reply brief is untimely. 

Town of Norwood v. FERC, 962 F.2d 20, 25 (D.C. Cir. 1992). By not discussing 

Commission’s findings as to those markets in its brief, CB&I has abandoned those 

issues on appeal. 

II. SUBSTANTIAL RECORD EVIDENCE SUPPOR TS THE 

COMMISSION’S FINDINGS OF FACT 

Substantial record evidence supports each of the four key factual 

conclusions made by the Commission: (1) each of the four product markets is 

highly concentrated and CB&I has acquired a dominant share of each market; (2) 

barriers to entry are extraordinarily high in each market, making it unlikely that 

timely entry will undo any harm to competition caused by CB&I’s acquisition; (3) 

-27­

the new and potential entrants identified by CB&I cannot constrain CB&I’s market 

power; and (4) sophisticated customers cannot constrain CB&I’s market power. 

A.	 Substantial Record Evidence Supports The Commission’s Finding 

That The Acquisition Has Increased CB&I’s Market Power In 

Highly Concentrated Markets 

Section 7 is “designed to arrest in its incipiency ... the substantial lessening 

of competition from the acquisition by one corporation” of the stock or assets of a 

competing corporation. U.S. v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 589 

(1957). The Section is aimed at preventing firms or groups of firms from gaining 

so large a share of the market that they are able to exercise market power either 

through unilateral conduct or tacit collusion. See, e.g., FTC v. H.J. Heinz Co., 246 

F.3d 708, 717-19 (D.C. Cir. 2001). As Judge Posner has observed, “all that is 

necessary is that the merger create an appreciable danger of [anticompetitive] 

consequences in the future.” Hospital Corp. of Am., 807 F.2d at 1389. Once 

relevant product and geographic markets are delineated, the very first question in 

any merger analysis concerns the ability of firms to exercise market power. Id.; 

H.J. Heinz Co., 246 F.3d at 717; FTC v. University Health, Inc., 938 F.2d 1206, 

1218 (11th Cir. 1991). 

The Commission properly found that each of the four product markets is 

highly concentrated, and that the acquisition enables CB&I to exercise market 

-28­

power in each market. CB&I has acquired its only competitor in the LNG and 

TVC markets, thereby acquiring monopoly status, and its only significant 

competitor in the LPG and LIN/LOX markets, thereby acquiring near-monopoly 

status. CB&I did not contest the high market concentration resulting from its 

acquisition, conceding that “CB&I and PDM were the dominant suppliers of the 

products in these four relevant markets prior to the acquisition.” Op. 8. Customers 

with first-hand knowledge also testified that “PDM and CB&I were the only viable 

LNG tank suppliers prior to the acquisition and that the acquisition substantially 

harmed competition.” Id. at 21-22; see Tr. 324, 703*, 1830. Similarly, PDM’s and 

CB&I’s internal documents confirmed that the two firms “focused almost 

exclusively on each other in their assessment of the competitive landscape and paid 

little or no attention to what other companies were doing.” Op. 22; see Tr. 4851; 

CX 68, 94 at PDM-HOU017580.24 

The record also shows that CB&I has been able to exercise market power. 

In the post-acquisition world, CB&I has forced customers into dealing on CB&I’s 

terms. See supra, at 12 n.19. It has refused to enter into bidding contests for new 

24 See also Op. 23-25 (discussing PDM’s and CB&I’s internal market assessments and 

customer views in the LPG tank market); id. at 26-27 (discussing both factors in the LIN/LOX tank 

market); id. at 27-28 (discussing same factors in the TVC market). 

-29­
projects, insisting instead on lucrative sole-source contracts.25 See Op. 63-64. In 

the less than two years between the acquisition and the close of the evidentiary 

record, CB&I successfully negotiated sole-source contracts for five LNG tanks, 

and was negotiating a sixth. Id. at 59. 

Given the indisputable record evidence about the actual structure of the 

markets and CB&I’s monopoly or near-monopoly position in each market, there is 

no room for CB&I’s objection that the Commission relied too greatly on “historic 

HHIs.” CB&I Br. 33-37. No matter how the markets are examined, CB&I has 

acquired its only significant competitor. Except for a few fringe firms, no one is 

left in any of the markets. 

Equally important, CB&I’s argument misstates the Commission’s analysis 

of market concentration. Even as the Commission rejected the ALJ’s refusal to 

rely on HHI data, it acknowledged the care with which HHI data must be generated 

and analyzed. The Commission explained its disagreement with the ALJ on that 

issue,26 noting, for example, that the sporadic nature of sales in the markets can be 

adjusted for by analyzing “an extended period of time.” See Op. 18, 20-21 n.110 

25 “Sole-source” contracts refer to negotiated contracts awarded to a single supplier, as 

opposed to contracts awarded through an open competitive bidding process. A sole-source contract 

is typically more expensive than a competitively bid contract. ID 110. 

26 The Supreme Court has made clear that the standard of review “is not modified in 

any way when the [agency] and its [ALJ] disagree.” Universal Camera Corp. v. NLRB, 340 U.S. 

474, 496 (1951). 

-30­
(since 1975, PDM & CB&I were the only companies that constructed LNG tanks 

for import terminals, and constructed all but 7 of the 95 LNG tanks for peakshaving facilities); CX 125, 1645. The Commission reasoned that when “the 

probative value of the concentration data” is considered “in light of all other 

evidence” of market concentration in the record – which alone established a strong 

prima facie case – the ALJ’s “total disregard” for the corroborative HHI data could 

not be justified. Op. 18 (emphasis added). 

The authorities CB&I relies upon to challenge the Commission’s use of 

HHIs do not support its argument. While CB&I argues that the Commission acted 

contrary to the Merger Guidelines, the Guidelines expressly provide that where 

“sales are large and infrequent so that annual data may be unrepresentative,” the 

antitrust agencies “may measure sales over a longer period of time.” Merger 

Guidelines § 1.41. That is exactly what the Commission did. The record also does 

not support CB&I’s claim (CB&I Br. 38) that under the Guidelines, the 

Commission should “have assigned each competitor a share based upon the 

number of bidders” who participated in bidding contests. Such an approach is only 

appropriate in bidding markets where “all firms have on a forward looking basis, 

an equal likelihood of securing sales.” Id. § 1.41 n.15. But as we will show (see 

-31­

infra, at 39-45), the marginal or fringe firms that CB&I has identified do not have 

anything approaching “an equal likelihood of securing sales.” 

CB&I also misreads the cases it cites. In Baker Hughes, the court noted that 

sales in the market were “volatile and shifting” and “easily skewed,” 908 F.2d at 

986, and “entry was likely.” Id. at 987. In those circumstances, high market shares 

were not an accurate predictor of future competition, and low entry barriers made it 

unlikely that the merged entity could ever exercise market power to harm 

competition. While the only similarity between Baker Hughes and this case is the 

sporadic nature of sales, the dispositive differences are the presence here of the 

same two major competitors, PDM and CB&I, year after year for more than three 

decades, and – as we show in Parts II.B and II.C, infra – the high barriers to entry 

into the relevant markets. 

Likewise, CB&I misleadingly quotes Judge Bork’s comment in FTC v. PPG 

Indus., Inc., 798 F.2d 1500, 1505 (D.C. Cir. 1986), that the lower court there was 

“unable to calculate an HHI” for a supposedly similar market. CB&I Br. 36 n.42. 

In fact, the PPG court upheld the Commission’s right to an injunction because, 

regardless of potential difficulties with a precise HHI calculation, the merger left 

the market with “only three fully capable firms,” and therefore highly concentrated 

even if entry were possible. 798 F.2d at 1505. The present acquisition, which 

-32­

leaves one capable firm and only speculative prospects for future entry, makes for 

a more compelling case. 

CB&I also misstates the holding in U.S. v. General Dynamics, 415 U.S. 486, 

501 (1974), and its reliance on it to support its claim that the Commission 

improperly relied on HHIs (CB&I Br. 38) overstates the Commission’s carefully 

delimited reliance on them. In that case, the Supreme Court held that market share 

statistics were insufficient to sustain a Section 7 case because, by failing to take 

into account the acquired firm’s long-term contracts to sell most of its reserves, the 

statistics overstated that firm’s ability to compete in the future. 415 U.S. at 500­

504. As the Eleventh Circuit aptly noted, General Dynamics stands for the 

“unremarkable proposition” that “a defendant may rebut the government’s prima 

facie case by showing that the government’s market share statistics overstate the 

acquired firm’s ability to compete in the future.” University Health, 938 F.2d at 

1221 (citing Hospital Corp. of Am., 807 F.2d at 1385; 4 P. Areeda & D. Turner, 

Antitrust Law ¶935b, at 140-41 (1980)). CB&I made no such showing here. 

Nothing in this record suggests that either PDM’s or CB&I’s future competitive 

strengths were in any way diminished at the time of the acquisition. 

-33­

B.	 Substantial Evidence Supports the Commission’s Finding That 

Each of the Relevant Markets Is Characterized by High Entry 

Barriers 

As the D.C. Circuit has noted, high entry barriers “largely eliminate[] the 

possibility that the reduced competition caused by the merger will be ameliorated 

by new competition from outsiders and further strengthen[]” a strong statistical 

case. H.J. Heinz Co., 246 F.3d at 717. Here, substantial record evidence supports 

the Commission’s finding that high entry barriers will likely shield CB&I “from 

the threat of new entry,” making its acquired market power “more secure.” Op. 29. 

1.	 The Commission’s Findings of High Entry Barriers Are 

Supported by Substantial Record Evidence 

Substantial evidence supports the Commission’s findings that solid 

reputation for safety and reliability, substantial prior experience in the U.S., high 

technical skills, and specialized regulatory know-how are necessary to achieve 

meaningful entry into each of the relevant markets. In the LNG tank market, 

customers and industry participants testified, for example, that “fairly sophisticated 

materials” are used in LNG tanks, requiring sophisticated engineering, specialized 

techniques, and skilled labor to construct. Tr. 2379. Safety considerations dictate 

stringent building criteria to maintain extreme cryogenic temperatures and avoid 

catastrophic leaks. Tr. 6234-35. Skilled engineers must convert generalized FERC 

regulations for vapor dispersion and thermal radiation into project-specific 

-34­

construction specifications. Tr. 533-34, 6969-71. Specialized construction 

procedures, including proprietary welding techniques, must be employed on each 

project. Tr. 1601, 2379, 6028-29. Customers do not consider even a successful 

history of building petroleum tanks as sufficient experience to build LNG tanks. 

Tr. 6701-02. Customers also look for builders who can deliver LNG tanks on time 

and who have significant bonding and liquidated damages capacity. Tr. 6154-55, 

6385, 6485-86. Overall cost competitiveness may require “years” of experience to 

achieve. CX 392 at 3; CX 629 at CBI-PL033069*. See Op. 11-13, 33-42; ID 6-7, 

27-29. 

Customers and industry participants testified in similar specificity to equally 

difficult hurdles facing entrants in the LPG tank, LIN/LOX tank, and TVC 

markets. See Op. 13-15, 28 n.170, 42-48; ID 8-10, 38-39, 50-51, 61. 

These obstacles to timely entry have persisted for a long time in each 

market, and together have kept entrants out of the markets in the years and decades 

prior to the acquisition. As CB&I concedes, it and PDM dominated each of the 

four markets for many years, despite numerous attempts at entry by other firms. 

See supra, at 6-8. Courts have recognized that the absence of new entry in a 

concentrated market for a prolonged period is highly probative of the existence of 

high barriers, and the likelihood that a merger resulting in a sharp increase in 

-35­

concentration will have substantial anticompetitive effects. E.g., H.J. Heinz Co., 

246 F.3d at 717 (“that there had been no significant entries in the [relevant] market 

in decades ... largely eliminates the possibility that the reduced competition caused 

by the merger will be ameliorated by new competition”); FTC v. Cardinal Health, 

Inc., 12 F. Supp. 2d 34, 56 (D.D.C. 1998) (“the history of entry into the relevant 

market is a central factor in assessing the likelihood of entry in the future”). 

Substantial evidence and established case law thus support the 

Commission’s findings of high entry barriers in each market. 

2.	 CB&I’s Objections to the Commission’s Factual Findings 

Are Without Merit 

Limiting its objections to the LNG tank market, CB&I advances two 

arguments. First, it argues that some of the entry barriers the Commission found 

are not barriers at all. Second, it argues that new and potential entrants into that 

market effectively constrain CB&I’s conduct, thereby showing that entry is easy 

and rebutting the evidence the Commission cites. We discuss CB&I’s first 

argument in this Part II.B.2, and its second argument in Part II.C, infra. 

CB&I asserts that reputation and experience are not really entry barriers and 

instead merely reflect customers’ generalized preferences for dealing with familiar 

suppliers. CB&I Br. 45-46 (citing Stearns Airport Equip. Co., Inc. v. FMC Corp., 

170 F.3d 518 (5th Cir. 1999); Advo, Inc. v. Phila. Newspapers, Inc., 51 F.3d 1191 

-36­

(3rd Cir. 1995)). But as the Philadelphia Newspapers court so well stated, prior 

case law is not particularly helpful in this area because “the importance of knowhow can be determined only in the context of a particular business.” 51 F.3d at 

1201. The specific holdings of those two cases, where the plaintiffs failed to show 

any substantial entry barriers, do not apply here, where experience and reputation 

are demanded by customers, are critical to every project, and are effectively 

mandated by the catastrophic consequences of product failure. 

CB&I’s cavalier attitude toward regulatory and technical expertise is 

similarly belied by the record facts. CB&I argues that “it is the owner, not the tank 

builder, who is required to file an application with FERC to obtain an approval” 

(CB&I Br. 47), and notes that “expert consultants” are available to customers who 

seek assistance. Id. at 46. However, the record shows that BP awarded CB&I 

three contracts because CB&I refused to do the FERC work on those projects 

unless BP awarded it contracts for the entire LNG projects. See supra, at n.19. 

Plainly, FERC experience plays a substantial role in selecting a builder, even when 

sophisticated customers make the selection. 

Finally, CB&I asserts that access to local labor and trained supervisors is not 

an entry barrier because potential foreign entrants can form “teaming alliances” 

with “U.S.-based construction firms [who] obviously have access to local labor and 

-37­

supervisory employees.” CB&I Br. 48. However, CB&I has not identified any 

domestic construction firm, other than itself, that has had any experience building 

LNG tanks. Op. 53. The record does not even suggest that the “alliances” that 

CB&I speaks of are enduring. The ability of any foreign firm to compete depends 

on its ability to find a “teaming alliance” for each project that it wishes to bid on. 

See id. at 52-54. Finally, CB&I’s argument confuses the ability of U.S. 

construction firms to supervise the projects they work on with the requirement that 

LNG tank builders supply the supervisors who will oversee the work of their 

domestic partners. The ability of LNG tank builders to build tanks outside their 

domestic markets is constrained by the necessity of their providing supervisors 

who can interface with local labor markets. Op. 54. The record is devoid of 

evidence showing that a foreign tank builder can do that in the U.S., except 

perhaps on an episodic basis. 

CB&I’s criticism is merely a disagreement with the factual conclusions 

reached by the Commission after a thorough review of the evidence. But, as this 

Court has “consistently reiterated,” the Commission’s findings may not be set aside 

“if the evidence in the record reasonably supports the administrative conclusion, 

even though suggested alternative conclusions may be equally or even more 

-38­

reasonable and persuasive.” Colonial Stores, 450 F.2d at 739; accord Foremost 

Dairies, 348 F.2d at 676. 

C.	 Post-Acquisition Entry Into the Relevant Markets Has Been 

Insufficient to Constrain CB&I’s Market Power 

“The history of entry into the relevant market is a central factor in assessing 

the likelihood of entry in the future.” Cardinal Health, 12 F. Supp. 2d at 56. 

“[T]he only truly reliable evidence of low barriers is repeated past entry in 

circumstances similar to current conditions.” 2A Phillip E. Areeda, Herbert 

Hovenkamp & John Solow, Antitrust Law: An Analysis of Antitrust Principles and 

Their Application, ¶420b, at 60 (2d ed. 2002) (hereinafter, “Areeda, Hovenkamp & 

Solow”). 

CB&I argues that it “produced rebuttal evidence showing actual entry, 

without price increases,” and that such evidence “negates a finding of ‘high’ entry 

barriers.” CB&I Br. 44. However, even in the LNG tank market, which 

purportedly experienced a growth in demand (see CB&I Br. 12), in the nearly two 

years between the acquisition and the end of the trial, no firm other than CB&I won 

a project. Op. 58. The three joint ventures identified by CB&I as “new entrants” 

only managed to submit bids for LNG tanks, but could not pry away market share 

from CB&I as of the time of the trial. The Commission found that CB&I’s rebuttal 

evidence establishes at most a desire by some firms to compete, or limited attempts 

-39­

at expansion by existing firms, but falls woefully short of showing entry or 

expansion that replaces the competition lost through CB&I’s merger-to-monopoly, 

or that can effectively constrain CB&I’s post-acquisition conduct. Id. at 56-57. 

CB&I proffers Dynegy’s award to Skanska of an EPC contract27 on the 

“Hackberry” project – and that same project’s extra-record re-award to IHI/Aker 

Kvaerner after Dynegy sold the project to Sempra – as evidencing competition in 

the LNG tank market. See CB&I Br. 14-15, 41. But both the award reflected in 

the trial record and the extra-record EPC award concern LNG tanks only indirectly. 

As the Commission explained (Op. 58-59), EPC contracts are awarded for entire 

LNG import terminals or peak-shaving facilities, only one part of which pertains to 

the LNG tanks. Competition for EPC contracts is not indicative of competition in 

any relevant market here. Indeed, to save costs, Dynegy had bid the EPC 

engineering work separately from the LNG tank portion of the project, and the 

award of the EPC contract to Skanska did not include the LNG tank work. Tr. 

4568-71. After Dynegy awarded the EPC contract to Skanska, CB&I refused to 

bid on the LNG tank work, continuing to push for a turnkey contract for the entire 

facility. Tr. 4571-72, 4576-77; CX 138, 139, 140. Ultimately, CB&I relented, but 

Dynegy declined CB&I’s LNG tank offer as late. Tr. 4572. 

27 See supra, at n.20. 

-40­
While CB&I claims that new entrants have flocked to the LNG tank market 

since the acquisition, in that period, CB&I has secured lucrative, non-competitive, 

sole-source contracts for six LNG tanks.28 Tr. 4399. That Dynegy ultimately 

found an alternative to CB&I, or that other fringe firms have managed to bid on 

LNG contracts does not show that CB&I’s market power is constrained by new 

competition. 

The economic theory underlying the Commission’s case predicted that 

entrants might be able to win some contracts, but CB&I, as the lowest-cost 

supplier, would still profit if it lost some business to them. See R.O. 10-11. Such 

“entry” would not restore the competition to pre-merger levels, however, because 

these firms historically have higher costs than CB&I or PDM. See U.S. v. Eastman 

Kodak Co., 853 F. Supp. 1454, 1469 (W.D.N.Y. 1994) (“[a]t a high enough price, 

even poor substitutes look good to the consumer”); see also Merger Guidelines, 

n.21. Increased sales by fringe firms can actually indicate anticompetitive conduct 

where dominant firms yield some market share to maximize profits while allowing 

fringe firms “to expand to the extent of their ability.” 4 Areeda, Hovenkamp & 

Solow ¶932e2, at 184. In Rebel Oil Co., Inc. v. Atlantic Richfield Co., 51 F.3d 

1421, 1440 (9th Cir. 1995), for example, the court found that “[t]he fact that entry 

28 See supra, at 30 n.25. 

-41­
has occurred does not necessarily preclude the existence of ‘significant’ entry 

barriers.” Similarly, in Oahu Gas Serv., Inc. v. Pacific Resources, Inc., 838 F.2d 

360, 367 (9th Cir. 1988), the court rejected a claim of low entry barriers where the 

new entrants remained relatively small. See also U.S. v. United Tote, Inc., 768 F. 

Supp. 1064, 1080-82 (D. Del. 1991) (entry by one firm insufficient to constrain 

anticompetitive pricing, despite firm’s ability to bid regularly and despite winning 

two bids). 

Nor does this analysis change if this Court considers CB&I’s extra-record 

evidence, most of which relates to either EPC contracts that do not directly concern 

the LNG tank market or to situations where CB&I refused to bid.29 

29 On reconsideration, the Commission noted that, even if CB&I’s post-record evidence 

were fully credited, it would “fail to demonstrate that CB&I is constrained to the pricing that 

prevailed before the acquisition.” R.O. 11. Indeed, CB&I’s often-successful insistence on solesource, turnkey contracts after the close of the record evidences the insufficient competitive forces 

in the post-record LNG tank market. Id. at 9. 

As with the bidding of the Hackberry project when Dynegy owned it, supra, Sempra 

apparently re-solicited bids and awarded an EPC contract for the entire facility, not just the LNGtank part of it. As the Commission noted, “winning an EPC contract for the entire LNG project does 

not necessarily show an ability to compete for building an LNG tank.” R.O. 12. 

Similarly, in the Freeport LNG project, the owner apparently turned to Zachry (in association 

with the EPC contractor, Technip) for the preliminary “FEED” work on the project, but only after 

CB&I refused to do such work absent a commitment that it be awarded a contract for the entire 

facility on a turnkey basis. R.O. 15. CB&I refused to perform the preliminary FEED work although 

that would have given it a distinct advantage in gaining the subsequent LNG tank work. See Miles 

Declaration, attached to CB&I’s petition for reconsideration, at ¶15. CB&I’s purported loss of that 

contract was apparently not the result of competition, but the result of CB&I’s attempt to leverage 

its market power to force a lucrative contract for the entire facility. 

The purported award of the LNG tank work in the Sabine Pass project to a firm other than 

CB&I can also be attributed to CB&I’s attempt to secure a sole-source, turnkey contract for the 

-42­

Similarly, CB&I’s argument regarding the constraining effects of potential 

entry (CB&I Br. 42-43), ignores that “ease of entry ... is a central premise of the 

potential-competition doctrine.” U.S. v. Marine Bancorp., Inc., 418 U.S. 602, 628 

(1974). As the Commission explained, “for a potential entrant or the threat of a 

potential entrant to act as a competitive constraint on incumbent firms, entry – at 

least for that firm – must be easy.” Op. 82 (citing Marine Bancorp.; FTC v. 

Proctor & Gamble Co., 386 U.S. 568, 581 (1967)). Because CB&I has failed to 

overcome the Commission’s findings of high entry barriers (see supra, at 36-39), 

its potential entry argument fails. 

Finally, the record establishes virtually impenetrable market power by CB&I 

in the LPG and LIN/LOX tank markets. In the LPG tank market, the one other 

existing firm suffers serious difficulties (Tr. 2365-66, 2421-22; CX 107), and the 

“potential entrants” identified by CB&I are “vastly overmatched.” See Op. 66-69. 

The LIN/LOX tank market is even more secure for CB&I, with the record 

reflecting one failed attempt at entry by a firm that has since gone out of business, 

whole facility. R.O. 16. But even if Sabina Pass were lost by CB&I “on the merits” to a new 

entrant, that incident of post-record entry still falls far short of “restoring the competition lost from 

the merger.” H.J. Heinz Co., 246 F.3d at 717. 

As the Commission pointed out, when the analysis takes into account the number of LNG 

tank projects awarded after the acquisition – both before and after the close of the record – it is clear 

that CB&I has won many more contracts than it has lost, and most of those wins were “sole-source” 

contracts, where no competitive bidding took place. R.O. 9. 

-43­
and ineffective expansion efforts by the three existing small firms. Tr. 955, 1351, 

1380, 2001. 

Although actual post-acquisition entry can be probative of entry barriers, 

ineffective entry – which is what CB&I’s proffered evidence at best shows – is 

insufficient to negate a finding of high entry barriers.30

 Before the acquisition, 

each relevant market exhibited the characteristics of a market with high entry 

barriers. CB&I conceded that it and PDM dominated each one, despite numerous 

entry attempts by other bidders, and despite the occasional project being awarded 

to a firm other than CB&I or PDM. See Op. 20-28. CB&I has not explained how 

nominal post-acquisition entry in the LNG tank market reflects any change from 

the dynamic that prevailed before the acquisition, when high entry barriers ensured 

that CB&I and PDM remained the dominant firms despite their occasional loss of a 

project to a third firm. If anything, the record demonstrates CB&I’s increased 

market power after the acquisition – as would be expected after having acquired its 

principal competitor. 

30 In re Grand Union Co., 102 F.T.C. 812 (1983), 1983 FTC LEXIS 61 – the only 

authority CB&I cites to support its proposition – is not to the contrary. The Commission there found 

that “the record establishes substantial recent entry in at least 10 of the 13 markets” under 

consideration, and concluded that “this degree of actual recent entry”shows that “barriers to entering 

these 10 markets are sufficiently low.” 102 F.T.C. at 1086, 1983 FTC LEXIS 61 at *581 (emphasis 

added). 

-44­
D.	 The Commission Correctly Rejected CB&I’s “Sophisticated 

Customer” Defense 

CB&I criticizes the Commission’s rejection of its evidence of customer 

sophistication. CB&I Br. 49-50. The ability of customers to exert bargaining 

power is tied closely to the availability of meaningful alternatives. See Op. 87-88. 

For this reason, the “customer sophistication” defense has generally succeeded 

only in cases where entry barriers are low. See, e.g., Baker Hughes, 908 F.2d at 

987; Phila. Newspapers, 51 F.3d at 1200-1202. 

Moreover, CB&I’s customers lack information that would enable them to 

detect price increases. See Op. 88-89. In markets characterized by large purchases 

and project-specific negotiations, such as those here, “final prices ... are not 

typically known to non-participants in the agreement.” 4 Areeda, Hovenkamp & 

Solow ¶943a, at 223. Even if some customers can protect themselves from 

attempts to exercise market power, it does not follow that most customers can do 

so. Where customers have varying degrees of knowledge – as the Commission 

noted is the case here (see Op. 88-89) – a “common consequence ... is likely to be 

recurrent and more or less systematic price discrimination,” where the adverse 

effects fall on the less knowledgeable customers. 4 Areeda, Hovenkamp & Solow 

¶943b, at 224. 

-45­

Alternatives to CB&I are at best weak and speculative in the LNG, LPG, and 

LIN/LOX tank markets, and non-existent in the TVC market. Even with a 

purported growth in demand for LNG tanks, CB&I has repeatedly and successfully 

insisted post-acquisition on negotiating sole-source contracts for LNG tank 

projects – even over the objections of its customers. See supra, at nn.19, 29; see 

also Op. 59, 63-64; Tr. 4399. CB&I’s claim that sophisticated customers can 

sufficiently constrain its power is contradicted by CB&I’s own conduct. 

III.	 THE COMMISSION PROPERLY FOUND A SECTION 7 

VIOLATION IN EACH RELEVANT MARKET 

A.	 Section 7 Does Not Require Proof of Actual Anticompetitive 

Effects 

Although CB&I claims that “there is no basis for the Commission’s finding 

of anticompetitive effects,” and “Complaint Counsel failed to meet its burden to 

prove any such effects” (CB&I Br. 52), its argument misconstrues both the 

Commission’s decision and the legal standards for proving Section 7 violations. 

The Commission’s findings correctly related to the likely – not actual – 

anticompetitive effects of CB&I’s acquisition. See Op. 89 (“we find that ... 

CB&I’s acquisition of PDM is likely to lessen competition substantially”), 90 (“we 

find that customers in these markets will likely be harmed post-acquisition”) 

(emphasis added). 

-46­

As the Supreme Court has consistently held, “[i]f the enforcement of § 7 

turned on the existence of actual anticompetitive practices, the congressional 

policy of thwarting such practices in their incipiency would be frustrated.” Proctor 

& Gamble, 386 U.S. at 577. More recently, in California v. American Stores Co., 

495 U.S. 271, 284 (1990), the high Court noted that the anticompetitive effects of a 

challenged acquisition need not be proven with certainty.

31 See also Hospital Corp. 

of Am., 807 F.2d at 1389. 

B.	 CB&I’s Argument That the Commission Improperly Shifted The 

Burden of Persuasion Lacks Any Support in Section 7 Case Law 

CB&I argues that a Section 7 defendant satisfies its burden of rebutting a 

prima facie case if it “come[s] forward with some evidence challenging the 

presumed fact, at which point the prima facie presumption ‘simply disappears’.” 

CB&I Br. 23 (citing Pennzoil Co. v. FERC, 789 F.2d 1128, 1137 (5th Cir. 1986)).32 

This argument contradicts Section 7 jurisprudence and misconstrues Pennzoil. 

31 CB&I’s claim that the Commission’sfinding of anticompetitive effects was “cursory” 

and “rests entirely on Complaint Counsel’s prima facie case,” CB&I Br. 51, is spurious. As 

discussed above, Section 7 does not require the Commission to make findings as to actual 

anticompetitive effects, and its findings of likely effects were supported by an extensive discussion 

constituting the majority of its 104-page opinion – including a 40-page analysis of CB&I’s rebuttal 

case. Op. 49-89. 

32 See also CB&I Br. 23 (“CB&I ‘need not [disprove the challenged fact], but only 

produce some evidence to the contrary’”) (citing Pennzoil, 789 F.2d at 1136) (emphasis and brackets 

CB&I’s own). Elsewhere, however, CB&I contradicts its own argument. See CB&I Br. 25 n.37 

(“The strength of Complaint Counsel’s prima facie case affects the weight of the defendant’s burden 

of production on rebuttal”). 

-47­
The probative weight of a defendant’s evidence is clearly important in 

considering whether the presumption of illegality is warranted in a particular case, 

and “the more compelling the prima facie case, the more evidence the defendant 

must present to rebut it successfully.” Baker Hughes, 908 F.2d at 991; see also 

PPG, 798 F.2d at 1503; H.J. Heinz Co., 246 F.3d at 717. The D.C. Circuit’s Baker 

Hughes holding is consistent with the decisions of other Circuit Courts that have 

passed on the question. See University Health, 938 F.2d at 1218; Hospital Corp. of 

Am., 807 F.2d at 1389-92; FTC v. Warner Comms., 742 F.2d 1156, 1164 (9th Cir. 

1984); see also 4 Areeda, Hovenkamp & Solow ¶941e, at 195 (when concentration 

numbers are extremely high, doubts about the case “should ordinarily be resolved 

against the defendants”). CB&I’s argument that Section 7’s presumption of 

illegality “disappears” once a defendant presents “some” evidence has no basis in 

Section 7 jurisprudence. 

Nor does Pennzoil support CB&I’s argument. In that case, FERC refused to 

give any evidentiary weight to the evidence supporting a prima facie case in the 

face of evidence tending to rebut a key presumption in the prima facie case. This 

Court reversed, holding that “[t]he base fact ... which established the presumed 

fact ... simply is not negated by the rebuttal evidence.... Granted, the presumption 

is dispelled, but the underlying evidence remains in the case.” 789 F.2d at 1137. 

-48­

Pennzoil does not help CB&I here, where the fact of a merger to monopoly 

and near-monopoly is clear, and ample additional evidence bolsters the inferences 

that can be drawn from the market share data. CB&I’s introduction of “some” 

evidence does not negate the fact that CB&I has acquired its only competitor in 

two markets and its principal competitor in two others. More important, here the 

Commission carefully and systematically weighed all the evidence – market share 

data (the fact that creates the Section 7 presumption), qualitative evidence relating 

to market structure and behavior, and entry barriers, as well as CB&I’s rebuttal 

arguments concerning the effect of recent and potential entry. Nothing in the 

Commission’s opinion suggests it did not give due weight to all of the evidence.33 

C.	 There Is No Merit In CB&I’s Arguments That The Commission 

Imposed Too High a Standard on CB&I In Considering the Entry 

Issues 

CB&I raises two legal issues concerning entry, arguing, first, that the 

Commission should have asked whether there would be sufficient entry “if” CB&I 

charged supracompetitive prices (CB&I Br. 29-31), and, second, that the 

33 CB&I mischaracterizes the Commission’s decision when it asserts that “[a]lthough 

the Commission acknowledged that the correct burden-shifting framework should apply to this case 

..., it explained that ‘as a practical matter it would be difficult’ to apply”). CB&I Br. 21. The words 

“as a practical matter it would be difficult,” did not refer to the burden-shifting framework at all, but 

rather to consideration of Complaint Counsel’s evidence of high entry barriers as part of the prima 

facie case. In context, the Commission merely noted “as a practical matter it would be difficult to 

consider this evidence elsewhere in our analysis, because Complaint Counsel introduced this 

evidence as part of their prima facie case.” Op. 28-29 n.171; see supra, at n.13. 

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Commission somehow imposed too great a burden on CB&I by requiring it to 

show that new entrants would have replaced the competition lost through the 

acquisition. Id. at 31-33. While CB&I’s brief does not make clear exactly what 

CB&I would have had the Commission do in this case, it is clear that the 

Commission’s analysis fully comports with Section 7 jurisprudence. 

As discussed above, the Commission properly found that entry into the 

relevant markets is subject to significant barriers, which bolsters CB&I’s acquired 

market power and contributes significantly to the inability of new entrants to 

constrain CB&I post-acquisition.34 The Commission considered all of the record 

evidence relating to every actual, would-be, or potential entrant that CB&I 

identified and found that none can challenge CB&I competitively – and none will 

be in a position to do so for the foreseeable future. 

CB&I’s argument that the Commission erred by considering only entry that 

had “already” taken place, rather than entry that would likely take place “if” CB&I 

exercises market power through higher prices (CB&I Br. 30) ignores the 

34 In the cases and Merger Guidelines section that CB&I cites, the reference to 

“sufficient entry” when supracompetitive prices are charged is premised on the existence of low 

entry barriers. See FMC Corp., 170 F.3d at 530 (“no evidence of special industry conditions ... that 

would block such an entry”); Baker Hughes, 908 F.2d at 987 (“compelling evidence on ease of entry 

into this market”); U.S. v. Syufy Enters., 903 F.2d 659, 664-65 (9th Cir. 1990) (“no barriers to entry 

in the Las Vegas movie market”); Merger Guidelines § 3.0 (“A merger is not likely to create or 

enhance market power ... if entry into the market is so easy that market participants after the merger 

... could not profitably maintain a price increase above premerger levels”) (emphasis added). 

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Commission’s painstaking analysis. While the Commission properly rejected 

CB&I’s arguments based on entry that had supposedly already taken place (e.g., 

Op. 52-53), it also considered and rejected CB&I’s contention that effective 

potential entrants “can be expected to enter the market in the event of 

anticompetitive price increases by CB&I.” Op. 82.35 The Commission reached 

this conclusion – which, like the entirety of its Section 7 analysis, was forwardlooking – based on its prior (and unrebutted) analysis of entry barriers and 

conclusion that they were sufficiently high to render effective new entry unlikely. 

See id. at 82 n.512 (referring to Op. 33-44). 

As to CB&I’s argument that the Commission imposed “too high an entry 

standard” by inquiring whether purported new entrants would be “on par” with 

CB&I (CB&I Br. 31-33), the Commission properly considered CB&I’s postacquisition evidence to determine whether it would be sufficient to “replace the 

competition lost” from the acquisition. See supra, at 39-41; see also DuPont, 366 

U.S. at 326; H.J. Heinz Co., 246 F.3d at 717. Before the acquisition, PDM was the 

principal competitor of CB&I in each of the relevant markets, and had garnered 

sufficient market share in each market to be “on par” with CB&I. The 

35 While it is correct that supracompetitive prices may enable new firms to enter or 

fringe firms to expand (see 4 Areeda, Hovenkamp & Solow ¶932e2, at 184), it does not follow that 

such entry or expansion will be effective. See supra, at 41-42. 

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Commission considered whether the “new entrants” will be able to constrain 

CB&I’s conduct, as PDM had done – i.e., whether they would replace the 

competition that had been lost. It concluded that the substantial loss of 

competition resulting from the acquisition likely would not be replaced by the 

insubstantial entrants that CB&I had identified. 

IV.	 THE COMMISSION’S FINAL ORDER OF DIVESTITURE IS 

PROPER AND SHOULD BE ENFORCED 

Divestiture is the “natural remedy” for a Section 7 violation, intended “to 

pry open to competition” the markets that have been closed by the illegal 

acquisition. DuPont, 366 U.S. at 329, 323. Moreover, “[t]he relief which can be 

afforded” from an illegal acquisition “is not limited to the restoration of the status 

quo ante,” but must include whatever terms are “necessary and appropriate in the 

public interest to eliminate the effects of the acquisition.” Ford Motor Co., 405 

U.S. at 573 n.8. Even after-acquired assets may be included in the divestiture 

order. See Cascade Natural Gas Corp. v. El Paso Natural Gas Co., 386 U.S. 129, 

136-37 (1967). Here, CB&I has acquired monopoly or near-monopoly market 

power in four markets. Because entry barriers are high in each market, and new 

entry or expansion efforts have been woefully ineffective in curbing CB&I’s 

market power, the Commission found it “highly unlikely that the relevant markets 

will return to their pre-acquisition state absent divestiture.” Op. 93. 

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The manner and scope of divestiture orders are subject to the Commission’s 

discretion. See 15 U.S.C. § 21(b) (granting the Commission the power to order 

divestiture “in the manner and within the time fixed by said order”); Atlantic 

Refining Co. v. FTC, 381 U.S. 357, 376 (1965) (Commission has “wide discretion 

in its choice of a remedy”). To “restore the competition lost through CB&I’s 

acquisition,” Op. 93, the Commission properly exercised its broad discretion and 

ordered CB&I to reorganize its Industrial Division into two separate, reasonably 

equivalent stand-alone businesses and to divest one of them to an approved buyer. 

The Order terms are flexible, designed to restore competition without imposing 

excessive or unnecessary conditions on CB&I. See Final Order of December 21, 

2004. The divestiture requirement is adaptable to ensure that the prospective buyer 

gets only what it needs to compete effectively. E.g., Op. 95 (“we have included a 

provision that allows the exclusion of the water assets if the acquirer and monitor 

trustee both find them unnecessary”). 

CB&I objects to the scope of the Order, and to the manner in which the 

Commission reached its remedy conclusions (CB&I Br. 52-59), but neither 

objection withstands scrutiny. CB&I objects that the Order is punitive and 

overbroad because it sought “to divest assets beyond those acquired from PDM,” 

CB&I Br. 52. But as we have shown, that argument is contrary to the facts, the 

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terms of the Order, and well-settled authorities. Without adequate divestiture, 

CB&I has the power to harm competition in each relevant market. 

Moreover, CB&I raised these objections with the Commission in its petition 

for reconsideration. See R.O. 6-8. Responding to the overbreadth argument, the 

Commission directed CB&I to file a brief and “include an alternative suggestion 

for a divestiture package” consistent with the Commission’s findings on the relief 

necessary to ensure the divested business’s ability to compete effectively. Id. at 

22-25. Contrary to CB&I’s representations to this Court (CB&I Br. 53-55), the 

Commission fully considered the remedy issues and found that CB&I’s showing 

was insufficient to support its claims that the Order’s scope was unnecessarily 

overbroad and that a narrower set of assets, or CB&I’s suggested alternative to the 

Order, would restore an effective competitor to the relevant markets. See Order 

Granting in Part and Denying in Part Respondents’ Petition for Reconsideration of 

the Final Order (August 30, 2005).36 CB&I has not sought review of that ruling. 

CB&I’s remaining objection – that it was not granted a separate evidentiary 

hearing on the remedy issue – is also without merit. Incorrectly citing U.S. v. 

Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001), as authority for a “fundamental 

36 The Commission did modify the Order to clarify that CB&I’s foreign assets are 

available for divestiture only if necessary to enable the acquirer to compete in the relevant United 

States markets. Id. 

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right to a remedy-specific evidentiary hearing” (CB&I Br. 55-56), CB&I ignores 

the fact that the Microsoft court itself distinguished that case – which concerned 

single-firm conduct – from a merger case, where “the Supreme Court has clarified 

that ... ‘complete divestiture is particularly appropriate where asset or stock 

acquisitions violate the antitrust laws.’” 253 F.3d at 105 (quoting Ford Motor Co., 

405 U.S. at 573).37 The other cases cited by CB&I are similarly inapposite. The 

Supreme Court in DuPont remanded that case because the record there bore on tax 

and other investor issues having nothing to do with “the competition-restoring 

effect of the several [remedy] proposals” at issue. 366 U.S. at 320-21. In Ford 

Motor Co., the Court remanded on the remedy issue because the record lacked the 

evidence – abundantly available here – relating to the structure and competitive 

conditions of the relevant market, necessary to craft a proper divestiture remedy. 

See 405 U.S. at 572-77. 

CB&I had a full opportunity to submit evidence on the appropriateness and 

scope of any divestiture order and availed itself of this opportunity. See generally 

Op. 93-104, ID 77-83. As the Commission explained, CB&I never proffered any 

37 CB&I asserts that the Commission “concedes in its Opinion” that it has such a right, 

but fails to identify where the Commission allegedly made such a concession. CB&I Br. 55. The 

Commission, in fact, expressly rejected that claim. Op. 103 (“We also decline to remand this case 

to receive evidence on remedy. Although [CB&I] assert[s] that the appellate court’s decision in 

Microsoft requires a remand, we do not agree”) (emphasis added). 

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_____________________________ 

evidence at trial or on appeal that might have warranted a separate evidentiary 

hearing on remedy. Op. 103-04; R.O. 22-23. CB&I’s objections to the remedy 

must therefore fail. 

CONCLUSION 

For the foregoing reasons, the petition for review should be denied and the 

Commission’s Order affirmed and enforced.

 Respectfully submitted, 

WILLIAM BLUMENTHAL 

General Counsel 

JEFFREY SCHMIDT


Director JOHN D. GRAUBERT


Principal Deputy General Counsel


ELIZABETH A. PIOTROWSKI


Deputy Assistant Director JOHN F. DALY


Deputy General Counsel for Litigation


STEVEN L. WILENSKY


Attorney DAVID C. SHONKA


Assistant General Counsel for Litigation


BUREAU OF COMPETITION 

IMAD D. ABYAD 

Attorney 

FEDERAL TRADE COMMISSION 

600 PENNSYLVANIA AVENUE, N.W. 

WASHINGTON, DC 20580 

AUGUST 21, 2006 (202) 326-2436 

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___________________________ 

CERTIFICATE OF SERVICE


I certify that on August 21, 2006, I caused two copies of the foregoing brief 

to be delivered by overnight courier to each of the following: 

Charles W. Schwartz 

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 

1000 Louisiana Street, Suite 6800 

Houston, TX 77002 

Clifford H. Aronson 

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 

Four Times Square 

New York, NY 10036 

Counsel for Petitioners 

Chicago Bridge & Iron Company N.V. and 

Chicago Bridge & Iron Company 

Imad D. Abyad 

Attorney for 

FEDERAL TRADE COMMISSION 
CERTIFICATE OF COMPLIANCE


This brief complies with the type-volume limitation of FED. R. APP. P. 

32(a)(7)(B), and with 5TH CIR. R. 32.3, because it contains 13,804 words, excluding 

the parts of the brief exempted by FED. R. APP. P. 32(a)(7)(B)(iii). 

____________________ ___________________________ 

Date Imad D. Abyad 

Attorney for 

FEDERAL TRADE COMMISSION