UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION ORIGINAL 

In the MaUer of ) 

) Docket No. 9327 

Polypore International, Inc. 

a corporation 

) 

) 

) 

PUBLIC 

) 

RESPONDENT'S POST-TRIAL BRIEF 

Counsel for Respondent: 

Wiliam L. Rikard, Jr. 

Eric D . Welsh 

Deborah L. Edney 

Adam C. Shearer 

Brian R. Weyhrich 

PARKER POE ADAMS & BERNSTEIN LLP 

401 South Tryon Street, Suite 3000 

Charlotte, NC 28202 

Telephone: (704) 372-9000 

Facsimile: (704) 335-9689 

wiliamikard (gparkerpoe.com
 

ericwelsh (gparkerpoe.com 

John F. Graybeal 

PARKER POE ADAMS & BERNSTEIN LLP 

150 Fayettevile Street
 

Raleigh, NC 27602 

Telephone: (919) 835-4599 

Facsimile: (919) 828-0564 

johngraybeal (gparkerpoe.com 

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TABLE OF CONTENTS 

TABLE OF CASES AND AUTHORITIES ..................................................................................iii
 

i. INTRODUCTION............ ....... ... .................... ....... ............... ........... ........ ... ... ... ... ... ... ........0
 

II.	 SUMMARY OF ARGUMENT ....... .... ............ ........ ............ .......... ....... .... ... ... ..... ...... .......0
 

III. APPLICABLE LEGAL ST ANDARDS...........................................................................4
 

A. COMPLAINT COUNSEL BEAR THE BURDEN OF PERSUASION ON ALL
 

ELEMENTS IN A SECTION 7 CASE................................................................... 4
 

B. COMPLAINT COUNSEL BEAR THE BURDEN OF PROVING THE
 

RELEVANT PRODUCT AND GEOGRAPHIC MARKET, ESTABLISHING A
 

PRIMA FACIE CASE AND REBUTTING THE RESPONDENT'S CASE ........5
 

IV. COMPLAINT COUNSEL HAVE NOT PROVED THEIR PRIMA FACIE CASE.. 7
 

A. COMPLAINT COUNSEL HAVE NOT PROVED A PROPER PRODUCT
 

MARKET................ ........... ....... ..... ...... ....... ...... ..... ..... .............. ......... .... ............ .....7
 

B. COMPLAINT COUNSEL HAVE NOT PROVED A PROPER GEOGRAPHIC
 

MARKET .............................................................................................................. 13
 

C. COMPLAINT COUNSEL CANNOT MEET THEIR BURDEN OF SHOWING
 

COMPETITIVE HARM AS A RESULT OF THE MERGER ............................16
 

V. RESPONDENT HAS REBUTTED ANY PRIMA FACIE CASE MADE BY
 

COMPLAINT COUNSEL..............................................................................................29
 

A.	 RESPONDENT HAS SHOWN THAT ACTUAL ENTRY INTO THE
 

RELEVANT MARKET WOULD BE TIMELY, LIKELY AND SUFFICIENT 29
 

B.	 RESPONDENT HAS SHOWN THA T SOPHISTICATED CUSTOMERS IN
 

THE BATTERY SEPARATOR INDUSTRY HAVE PROMOTED ENTRY AND
 

OTHERWISE HA VE THE ABILITY TO PREVENT ANTICOMPETITIVE
 

EFFCTS. . ....... ...... ....... ... ................. ............ .............. .......... .... ................ ............34
 

VI. RESPONDENT HAS SHOWN THAT EFFICIENCIES THAT HAVE BEEN
 

IMPLEMENTED SINCE THE ACQUISITION DEMONSTRATE THAT
 

MICROPOROUS WAS A HIGH COST OPERATION BEFORE THE
 

ACQUISITION OCCURRED. .. ............... ....... ..... ........ ....... ...... ............ ..... ............ .... ...43
 

VII. RESPONDENT HAS SHOWN THAT IF THE ACQUISITION HAD NOT
 

OCCURRED, MICROPOROUS WOULD NO LONGER BE AN EXISTING
 

COMPETITIVE ENTITY OR, AT BEST, WOULD NOT BE A VIABLE
 

COMPETITIVE ENTITY ..............................................................................................46
 

A. Microporous was in a Precarious Financial Position that Would have been made
 

Worse by the Current Economic Climate .............................................................46
 

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VIII. COMPLAINT COUNSEL HAVE FAILED TO SHOW THAT DARAMIC HAD OR
 

HAS MONOPOLY POWER IN ANY ALLEGED MARKET...................................50
 

I
 A. Complaint Counsel Have Not Shown That Daramic Had Monopoly Power....... 50
 

IX. COMPLAINT COUNSEL HAVE FAILED TO SHOW THAT DARAMIC
 

ENGAGED IN EXCLUSIONARY CONDUCT. ......................................................... 51
 

A. The FTC Has Not Shown the Extent of Any Exclusionary Conduct by Daramic 51
 

X. THE H&V AGREEMENT HAD NO ANTI 
 COMPETITIVE EFFECTS.................54
 

A. The Cross Agency Agreement Between H& V and Daramic was a Legitimate Sales
 

Joint Venture Between the Companies ................................................................. 55
 

XI. RESPONDENT HAS SHOWN THAT COMPLAINT COUNSEL'S
 

RECOMMENDATIONS REGARDING RELIEF ARE OVERBROAD,
 

INAPPROPRIATE AND PUNITIVE. .... ... ... ............ ................................... .......... .......57
 

A. Punitive Relief Is Not Permissible ........................................................................58
 

B. The Divestiture Relief Sought by Complaint Counsel is Overbroad, Inappropriate
 

and Punitive ......... ............. ........... ........... ....... .............. ........ ........ ................. ......... 58
 

C. There is no Basis for any Required Divestiture of the Feistritz Plant.................. 61
 

D. Any Competitive Harm From the Merger Could Be Addressed Through
 

Divestiture of Microporous' PRLine in Piney Flats............................................. 65
 

E. The Other Relief Sought is Punitive and Unnecessary........................................ 67
 

XII. SUMMARY AND CONCLUSION ....... ......... ....... .............. ......................... ..... ............. 68
 

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TABLE OF CASES AND AUTHORITIES 

Cases
 

California v. Sutter Health Sys., 130 F.Supp. 2d 1109, 1124 (N.D. CaL. 2001) ...........................13, 15
 

Cargill, Inc. v. Monfort of Colorado, Inc., 479 u.s. 104, 119 n.15 (1986) ........................................ 30
 

Chicago Bridge & Iron Co. v. FTC, 534 F.3d 410,423 (5th Cir. 2008)............................................ 6, 7
 

Chicago Bridge & Iron Co., 138 F.T.c. 1392, 1552 (2003)(initial decision); aff'd, 138 F.T.C. 1024
 

(2004) ... ....... .... .............. ...... .............. ...... ............................ ...... ........... ................. ....... ...... ....... 22, 26
 

Cliffstar Corp. v. Riverbend Products. Inc., 750 F.Supp. 81, 13 UCC2d 392 (W.D.N.Y., 1990) ......53
 

Crowell. Coller & MacMillian. Inc., 361 F.Supp. at 991 ..................................................................58
 

Dentsply, 399 F.3d at 191 .............. ........... ............. ........................ .......................... ................. ..........54
 

duPont, 353 U.S. at 595 ....... .............. ............................................ ........... ............... ..... ... ........... .......... 5
 

F. Hoffann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 165 (2004).........................................62
 

Forsyth v. Humana, Inc., 114 F.3d 1467, 1476 (9th Cir. 1997)...........................................................22
 

Frank Saltz & Sons v. Hart Schaffner & Marx, 1985 WL 2510 (S.D.N.Y. 1985) ............................. 10
 

FTC v. Arch Coal, Inc., 329 F. Supp.2d 109, 116-17 (D.D.C. 2004) ............................................. 5,46
 

FTC v. Elders Grain, 868 F.2d 901, 905 (7th Cir. 1989).....................................................................20
 

FTC y. Freeman Hosp., 69 F.3d 260, 268 (8th Cir. 1995) ...................................................................13
 

FTC v. H.J. Heinz Co., 246 F.3d 708 (D.C. Cir. 2001) ........................................................................4
 

FTC v. R.R. Donnelley & Sons Co., Civ. No. 90-1619 SSH, 1990 U.S. Dist. LEXIS 11361, at 10
 

(D.D. C. 1990)..... ...... ............................................... ................... ............................. ..................20, 21
 

FTC v. Staples, Inc., 970 F. Supp. 1066, 1072-73 (D.D.C. 1997) ........................................................ 6
 

FTC v. Swedish Match, 131 F.Supp.2d 151, 165 (D.D.C. 2000) .......................................................13
 

FTC v. Tenet Health Care Corp., 186 F.3d 1045, 1054 (8th Cir. 1999) ..............................................45
 

FTC v. Univ. Health. Inc., 937 F.2d 1206, 1218 (11th Cir. 1991).....................................................4,5
 

FTC v. Whole Foods Market, Inc. 548 F.3d 1028, 1037 (from sec IV(B) of the opinion) (DC Cir.
 

2008).......................................................................................................................... ........................ 7
 

In re B.A.T. Industries, 104 F.T.C. 852,926-28 (1984). .............................................................19, 28
 

In re Grand Union Co., 102 F.T.C. 812 (1983).............................................................................58, 62
 

In the Matter of B.F. Goodrich Co., 110 F.T.c. 207, 345 (1988) ................................................. 31, 58
 

In the Matter of Chicago Bridge & Co., Dkt. No. 9300 at 7 (Op. of Comm'n)(Jan. 6, 2005)............ 58
 

Jefferson Parish Hospital District No.2 v. Hyde, 466 U.S. 2,45 (1984) .....................................54,56
 

Kaiser Aluminum & Chemical Corp. v. FTC, 652 F.2d 1324, 1341 (7th Cir. 1981)...........................46
 

Kraft General Foods, 926 F. Supp. at 361...........................................................................................10
 

Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255 (7th Cir. 1981)...................................................26,46
 

New York v. Kraft General Foods, Inc., 926 F. Supp. 321, 359 (S.D.N.Y. 1995)................................5
 

Omega Environmental. Inc. v. Gilbarco. Inc., 127 F.3d 1157, 1162 (9th Cir. 1997) .......................... 54
 

Polk Brothers. Inc. v. Forest City Enterprises, 776 F.2d 185 (7th Cir. 1985).....................................57
 

Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir. 1995) ............................................... 10
 

Reynolds Metals Co. v. FTC, 309 F.2d 223, 231 (D.C. Cir. 1962) ..................................................... 62
 

Roland Machinery Co.., 749 F.2d at 394 ............................................................................................ 54
 

RSR Corp. v. FTC, 602 F.2d 1317, 1325-26 (9th Cir. 1979).............................................................. 58
 

Tampa Electric Co. v. Nashvile Coal Co., 365 U.S. 320, 327 (1961) .........................................13,54
 

Texaco Inc. v. Dagher, 547 U.S. 1 (2006) .......................................................................................... 57
 

U.S. v. Baker Hughes. Inc., 908 F.2d 981, 984 (D.C. Cir. 1990) ........................... 5, 16,20,30,35,43
 

U.S. v. E.I. duPont de Nemours & Co., 366 U.S. 316, 326 (1961).....................................................58
 

Union Carbide Corp., 59 F.T.C. 614, 657 (1971)............................................................................... 62
 

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United States v. Baker Hughes, Inc., 731 F. Supp. 3,9 (D.D.C. 1990) ....5,6,7,22,29,30,32,33,35
 

United States v. Carrols Dev. Corp., 454 F. Supp. 1215, 1222-23 (N.D.N.Y. 1978) ........................62
 

United States v. Country Lake Foods, Inc., 754 F. Supp. 669,673 (D. MN 1990) ...................... 22,45
 

United States v. E.I. duPont de Nemours & Co., 351 U.S. 377, 391 (1956) ......................................50
 

United States v. E.I duPont de Nemours & Co., 353 U.S. 586, 595 (1957) .............................. 5,8,50
 

United States v. Falstaff Brewing Corp., 383 F. Supp. 1020 (D.R.I. 1974) ....................................... 26
 

United States v. Ford Motor Co., 315 F. Supp. 372,379-80 (E.D. Mich. 1970), aff'd, 405 U.S. 562
 

(1972) ....... ..... ....................... ............ ...... .... .... ..... ..... .... ....... ....... ... ................ .... ........... ..... ..... ...... ...62
 

United States v. General Dynamics Corp., 415 U.S. 486,498 (1974)............................................6,46
 

United States v. Gilette Co., 828 F. Supp. 78 (D.D.C. 1993) ............................................................30
 

United States v. International Harvester Co., 564 F.2d 769 (7th Cir. 1977)..................................26,46
 

United States v. Marne Bancorp., 418 U.S. 602, 633 (1974). ...................................19,20,26,27,28
 

United States v. Microsoft Corp., 253 F.3d 34, 69 (D.C. Cir. 2001). .................................................54
 

United States v. Oracle Corp., 331 F. Supp.2d 1098, 1110 (N.D. CaI. 2004)..........................5, 21, 24
 

United States v. Syufy Enterprises, 903 F.2d 659, 665 n.6 (9th Cir. 1990).....................................6,30
 

I
 United States v. Tenet Health Care Corp., 186 F.3d 1045, 1054 (8th Cir. 1999)................................44
 

United States v. UPM-Kymmene Oyj et aI., No. 03 C 2528 (N.D. liI., 7-25-03)................... 51,52,53
 

United States v. Waste Management, Inc., 743 F.2d 976,982 (2d Cir. 1984).......................... 6,30,58
 

I
 Vaney v. Coleman Co., 385 F. Supp. 1337 (D..N.H. 1974) ...............................................................26
 

Statutes
 

15 U.S .C. § 45( a)(3)(A) . ....... ...... .............. ...... ............... ......... ....... ....................... ........ ............. .........62
 

Other Authorities
 

Clayton Act, 15 U .S.C. § 18..... ................ ... ............... .................... ....................... .................. .............. 2
 

Horizontal Merger Guidelines, 57 Fed.Reg. 41552, 41560, S 2.22 (1992) ..........................7,8, 13,20
 

Mergers and Acquisitions at 159-60 ................................................................................. 20,33,34,62
 

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i. INTRODUCTION
 

After almost five weeks of trial, 30 live witnesses, 22 witnesses presented by deposition i , and 

over 2,000 trial exhibits, it is clear that Complaint Counsel have failed to prove their case for at least 

five reasons: 

I	 1. They have not properly defined the relevant product market; 

,	 2. They have not properly defined the relevant geographic market; i 

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3.	 They have not shown a reasonable probability that the acquisition of
 

Microporous by Polypore would substantially lessen competition;
 

4. They have not shown that Daramic has monopoly power or engaged in
 

exclusionary conduct; 

5. They have not shown that the divestiture relief they seek is appropriate and 

not punitive; and 

6. They have not shown that the Feistritz plant in Austria is properly included in 

any necessary divestiture. 

Because Complaint Counsel have failed in these fundamental underpinnings to their case, the 

FTC's claims in its Complaint cannot succeed and this Court must find that the acquisition of 

Microporous Products, L.P. ("Microporous"), a niche and fringe player in the battery separator Ii 

I I industry, by Polypore International, Inc. ("Polypore"), has not lessened competition. 

II. SUMMARY OF ARGUMENT II 

Before the acquisition at issue II this case, Polypore's Daramic subsidiary produced
 

polyethylene ("PE") battery separators for sale to flooded lead acid battery manufacturers throughout 

the world from its seven manufacturing facilities. (FOF 227, 230, 232-33). By contrast, 

Microporous had become the sole provider of rubber-based separators to flooded lead acid battery 

manufacturers throughout the world from its one manufacturing location in Piney Flats, Tennessee. 

1 Four third-party witnesses were presented by deposition, the other 18 deposition and investigational hearng transcnpts all 

relate to testimony given by Daramic, Polypore and former Microporous employees provided to the FTC pnor to the hearing on this 

matter. 

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(FOF 316, 318, 325, 332). Daramic's total worldwide sales in 2007 were (
 

1 (FOF 239, 338) Daramic's PE separators did not compete
 

with Microporous' rubber-based separators and they were not, and are not, economic substitutes for
 

each other. (FOF 84, 120-24, 239, 248, 335 544-550, 1201; Hauswald, Tr. 676-77). Daramic
 

produced PE separators for use in two general types of batteries: industrial and staring, lighting and 

ignition ("SLI"). (FOF 84, 239, 248; Hauswald, Tr. 676-77). Again, in contrast, Microporous
 

primarily produced separators for "specialty" batteries used in golf cars and floor scrubbers, a niche 

where Daramic had virtually no sales. (FOF 106-108, 118, 128, 239, 314, 569, 734; Gilchrist, Tr.
 

299,461-62, in camera; Hall, Tr. 2799).
 

Prior to the time of the acquisition, Microporous did not sell pure PE separators, but instead a
 

product called CellForce that is made of PE with a rubber additive. (FOF 17, 127, 318, 336).
 

Microporous' CellForce product was high cost vis-a-vis pure PE separators, and its sales of
 

CellForce in North America were ( 1 (FOF 339, 1298). CellForce is the only
 

product that was produced by Microporous at the time of the acquisition for which there was any
 

competitive overlap with Daramic products. (FOF 127, 339, RXOII19). Even if Microporous' sales
 

of CellForce are included, it only resulted in a North American market share of ( 1 which gave
 

it no market power. (FOF 338-339, RX00114, RX01119, PX0949) Thus, in the only overlap
 

market in this case, the acquisition had no market or competitive effects.
 

This transaction, as these facts show, essentially is a market extension, not a horizontal
 

merger. (FOF 108, 262-67, 1329). Complaint Counsel's claims that Daramic and Microporous
 

competed against each other "for years" and that "prices went down and products improved" during
 

that time are baseless and unsupported by the evidence that was adduced at triaL. (Robertson, Tr. 

12). There is no evidence that this transaction has, or wil, "substantially lessen competition" in the 

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I sale of PE products. Nor is there evidence that Daramic has improperly obtained monopoly power,
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or engaged in exclusionary conduct. 

Moreover, Complaint Counsel have not provided sufficient evidence to support the four 

product markets they allege, or the geographic market they claim. As a result, they fail in a 

. i "necessary predicate" of a claim under Section 7 of the Clayton Act, 15 U.S.c. § 18 ("Section 7").
 

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The FTC has also failed to prove that the acquisition threatens to "substantially lessen competition" 

or that Daramic has a monopoly in the correct market of "PE Separators" (also alleged in the 

I complaint as a market) or in the incorrect markets on which the FTC and its expert have attempted to
 

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rely. 

Complaint Counsel ignore the market realities since the acquisition. The reality is, and the 

evidence at trial showed, that in the time since the acquisition Dararc ( 

1 (FOF 948-950, 963-972). ( 

1 wil be supplied by
 

one or more of Daramic's competitors. (FOF 946). In assessing the available "competition" in the 

PE marketplace, ( 

l 1 (FOF 

l 948-950, 963-972, 981, 991, 1022). The Asian competitors are real, and their existence, along with 

the looming presence of Entek, is sufficient to curtail any alleged anticompetitive effects of the 

acquisition. (FOF 941-942,981,991, 1022, 1033, 11035, 1043). I 

Entek's PE separator sales in 2007 ( 1. Although its separator 

I production is primarily focused on SLI batteries, 

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(FOF 943). Further, the evidence at trial showed that Entek does, in fact, produce non-SLI battery 

separators and it ( 1 (RX00114, FOF 948­

950, 963-972). The majority of the ( 

(FOF 948-950, 963-972). 

Additionally, because of ( 1 quickly shift its existing production facilities from 

producing SLI battery separators to all other types of PE separators, and ( 

sufficient to constrain any anticompetitive events alleged as a result of the acquisition. (FOF 969). 

The FTC has also not met its burden with respect to its claim that in the post-transaction 

world competition is threatened both by coordinated interaction and unilateral effects of the merger. 

Not one iota of evidence adduced at trial would suggest that Daramic ( 1 can realistically 

be expected to engage in brotherly anticompetitive coordination or that Daramic could increase 

pnces unilaterally as a result of the merger in light of (
 

1. 

Although, the acquisition of Microporous closed over 16 months ago, Complaint Counsel 

were unable to produce any evidence that competition has actually been lessened. (FOF 1094, 1152, 

1298, 1300, 1384, 1403). The evidence at trial was more than adequate to show that entry has been, 

and wil continue to be, sufficient, timely and likely to resolve any competitive concerns. (FOF 

1061-1104). No anticompetitive effects have been demonstrated as a result of the acquisition and 

none is likely. Further, there is no proof that Daramic acquired additional market power from its 

acquisition of Microporous or that it has the power to control prices or exclude competition. (FOF 

1462-1463). Indeed, substantial efficiencies specific to the merger have been realized, and have had, 

and wil continue to have, the effect of reducing production costs and thus show that Microporous 

was a high cost producer. (FOF 273-276). Finally, evidence at trial defeats Complaint Counsel's 

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claims that Daramic has used exclusionary conduct to monopolize any markets or that its agreement 

with Hollingsworth & V ose ("H& V") was not a legitimate and productive joint venture. 

Finally, the FTC has sought the divestiture of the former Microporous plant in Austria (the 

"Feistritz Plant"). However, even if any divestiture is necessary, which Respondent disputes, the 

divestiture of the Feistritz Plant is unnecessary and inappropriate. Not only is it outside the FTC's 

jurisdiction, but it was not a part of the acquisition as an operating facility, is not located within the 

FTC's alleged North America market and was not even owned by Microporous Products L.P. 

(Trevathan, Tr. at 3571-72; RX1227 at 2,39, Exh. A; RX1228; RX1229 at 47; RX1572; FOF 378.) 

Furthermore, the Feistritz Plant does not sell products to customers located in North America 

or the United States and there is no evidence that its operation enhanced North American
 

competitive conditions. Finally, there is no evidence that the Feistritz Plant is in any way necessary 

for a reconstituted Microporous to be "viable," and, in fact, there is evidence that its inclusion would 

further threaten the viability of a new entity. (Gilchrist, Tr. at 511, 540-41; Gaugl, Tr. at 4643; 

Hauswald, Tr. at 922-24, in camera.) 

Ultimately, the FTC has failed to prove that any remedy is necessary. However, to the extent 

the Court finds otherwise, Complaint Counsel have also failed utterly to show that the remedies they 

I ! propose are required to cure the impacts on competition they have alleged. (FOF 1133-1150).
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III. APPLICABLE LEGAL STANDARDS
 

A. COMPLAINT COUNSEL BEAR THE BURDEN OF PERSUASION ON ALL
 

ELEMENTS IN A SECTION 7 CASE 

Complaint Counsel bear the burden of proving every element of their claim that the merger 

or acquisition violates Section 7. Complaint Counsel retain the ultimate burden of persuasion at all 

times and on all components of the Section 7 claim. FTC v. H.J. Heinz Co., 246 F.3d 708, 715 (D.C. 

Cir. 2001); FTC v. Univ. Health. Inc., 937 F.2d 1206, 1218 (11th Cir. 1991); FTC v. Arch Coal. Inc., 

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329 F. Supp.2d 109, 116-17 (D.D.C. 2004); United States v. Oracle Corp., 331 F. Supp.2d 1098, 

1110 (N.D. CaI. 2004). 

This burden is not insubstantial. "(T)o satisfy section 7, the government must show a 

I reasonable probability that the proposed transaction would substantially lessen competition in the 

future." University Health at 1218 (emphasis added). Complaint Counsel must show 

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"demonstrable and substantial anticompetitive effects." New York v. Kraft General Foods. Inc., 926 

F. Supp. 321, 359 (S.D.N.Y. 1995) (emphasis added). I 

It is also necessary for the government to show that the alleged violation affected a 

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substantial volume of commerce. "The market affected must be substantiaL." United States v. E.I. 

I duPont de Nemours & Co., 353 U.S. 586, 595 (1957). The government's case has a problem where

that is not the case. As the district court in Baker Hughes said, "The minuscule size of the market 

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creates problems for the government's case, because one element of a Section 7 violation is that 

'(t)he market must be substantial.'" United States v. Baker Hughes. Inc., 731 F. Supp. 3, 9 (D.D.C. 

1990)(citing duPont, 353 U.S. at 595). , I
 

B. COMPLAINT COUNSEL BEAR THE BURDEN OF PROVING THE RELEVANT I PRODUCT AND GEOGRAPHIC MARKET, ESTABLISHING A PRIMA FACIE ! CASE AND REBUTTING THE RESPONDENT'S CASE 

Section 7 decisions describe the procedure as involving, first, establishment of a prima facie 

case by Complaint Counsel and, second, rebuttal of that case by the respondent. University Health 

Ii at 1218 ; United States v. Baker Hughes Inc., 908 F.2d 981, 983 (D.C. Cir. 1990). But, since the 

prima facie case involves "showing that a transaction wil lead to undue concentration in the market I 

for a paricular geographic area," Baker Hughes at 983, it is necessary for the government first to 

r establish its product and geographic market(s). "Determination of a relevant market is the necessary 

predicate" to a claimed violation of Section 7. duPont at 593. Indeed, assessing a merger or l 

acquisition under Section 7 "requires determinations of (1) the 'line of commerce' or product market 

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in which to assess the transaction, (2) the 'section of the country' or geographic market in which to 

assess the transaction, and (3) the transaction's probable effect on competition in the product and 

I geographic markets." FTC v. Staples. Inc.. 970 F. Supp. 1066, 1072-73 (D.D.C. 1997). 

Even if Complaint Counsel can establish a prima facie case on the basis of concentration .1 

statistics,2 courts, and the FTC itself, have warned that market shares and concentration data alone 

may not be sufficient to determine whether a violation has occurred or might occur. The Merger 

Guidelines state that "market share and concentration data provide only the staring point for
 

analyzing the competitive impact of a merger." Sec. 2.0. The Guidelines further provide that 

"market share and market concentration data may either understate or overstate the likely future 

competitive significance of a firm or firms in the market or the impact of a merger." Sec. 1.52. The 

courts have agreed that concentration data "(are) not conclusive indicators of anticompetitive effect." 

United States v. General Dynamics Corp., 415 U.S. 486, 498 (1974). Further, "evidence of a high 

market share does not require a district court to conclude that there is an antitrust violation" (United 

States v. Syufy Enterprises, 903 F.2d 659, 665 n.6 (9th Cir. 1990)), because market share statistics 

can be "misleading as to actual future competitive effect." United States v. Waste Management. 

Inc., 743 F.2d 976, 982 (2d Cir. 1984). The D.C. Circuit summed up these views in Baker Hughes 

I ! when it said, "(e)vidence of market concentration simply provides a convenient staring point for a
 

broader inquiry into future competitiveness." 908 F.2d at 984. 

Importantly, judicial and other authority establish that it is not necessary for the respondent's 

rebuttal case to prevail by a preponderance of the evidence. It is only necessary for the rebuttal case 

"to cast doubt on the accuracy of the Government's evidence as predictive of future anticompetitive 

effects." Chicago Bridge & Iron Co. v. FTC, 534 F.3d 410, 423 (5th Cir. 2008). The Horizontal 

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2 "Typically the Government establishes a prima 


facie case by showing that the transaction in question wil significantly increase market concentration, thereby creating a presumption that the transaction is likely to substantially lessen competition." 

Chicago Bridge, 534 F.3d at 423. 

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Merger Guidelines merely require that the rebuttal case make a "showing" that presumptions raised 

by Complaint Counsel's case may not be justified. 

The Horizontal Merger Guidelines themselves provide guidance regarding the rebuttal case 

to be made by the respondent. The Guidelines state that any presumptions that are raised by the 

government's prima facie case "may be overcome by a showing that factors set forth in Sections 2 ­

5 of the Guidelines make it unlikely that the merger wil create or enhance market power or facilitate 

its exercise, in light of market concentration and market shares." Horizontal Merger Guidelines, 57 

Fed.Reg. 41552, 41560, § 1.51(c) (1992). The rebuttal case puts the ball back in Complaint 

Counsel's court with all of the burdens of persuasion noted above. "(I)f the respondent successfully 

rebuts the prima facie case, the burden of production shifts back to the Government and merges with 

the ultimate burden of persuasion, which is incumbent on the Government at all times." Chicago 

Bridge & Iron Co. v. FTC , 534 F.3d 410, 423 (5th Cir. 2008). 

IV. COMPLAINT COUNSEL HAVE NOT PROVED THEIR PRIMA FACIE CASE
 

A. COMPLAINT COUNSEL HAVE NOT PROVED A PROPER PRODUCT
 

MARKET 

j i Complaint Counsel II this case have acknowledged that "(d)etermination of a relevant 

I I 

market is a necessary predicate" to proof of the case. Complaint Counsel's Pre-Trial Brief at 8-15. 

(Baker Hughes, 908 F.2d at 983). However, by asserting four incorrect product markets they have 

not met this necessary predicate. Specifically, Complaint Counsel have ignored the smallest market i :
 

principle and use of the hypothetical monopolist and SSNIP system, both of which were established 

,

in the FTC/Department of Justice Horizontal Merger Guidelines "(t)o facilitate (the) analysis" that 

had been established by the relevant authorities. FTC v. Whole Foods Market, Inc. 548 F.3d 1028, 

1037 (from sec IV(B) of the opinion) (DC Cir. 2008). "The Guidelines' method for implementing 

the hypothetical monopolist test stars by identifying each product produced or sold by each of the 

merging firms." Commentary on the Horizontal Merger Guidelines at 5 (2006). Rather than looking 

PPAB l585952vl 
- 8 ­

at such specific products, however, Complaint Counsel "began" their product market analysis by 

looking at categories of products according to their end uses. (FOF 1165, 1182). 

Because Complaint Counsel have not met the "necessary predicate" to a legitimate Section 7 

. i claim by proving a valid product market, it is impossible to identify the alternatives available to
 

consumers and evaluate whether competition has been adversely affected in light of those 

alternatives. See E.I. duPont de Nemours & Co., 353 U.S. at 593. 

1. Applying the Correct Standard Proves a "PE Separators" Relevant Market
 

The Guidelines identify the "hypothetical monopolist test" as the method for defining a 

relevant market. 3 Complaint Counsel have wholly ignored the Guidelines system of economic 

substitutes and have offered proof only of functional substitution. (FOF 133, 139, 1201, 1352). 

They fail even in this incorrect application as set forth below. Applying a correct "hypothetical 

monopolist test" to the four markets alleged by the FTC shows that those markets are not valid 

relevant markets in which to analyze the acquisition. Instead, the "alternative" all PE separator 

market is the correct relevant market here. Complaint ll6; (FOF 76, 77, 116, 126). 

PE separators are identified, and priced, according to their thickness. (FOF 14, 29, 45-46, 

58). Thicker product is more expensive than thinner product. (FOF 244; Riney, Tr. 4497).
 

Generally, separators made for SLI type applications are thinner, while separators made for the 

various industrial applications are thicker. (FOF 25, 65, 67-68). Despite Complaint Counsel's 

attempts to show four alternative markets of "UPS," "SLI," "Motive" and "Deep Cycle" on the basis 

II that "separators manufactured for a paricular application cannot be effectively used for other
 

applications" the evidence presented at trial does not bear this out. (FOF 69-78). 

As an initial matter, there was significant evidence at trial that separators among the 

categories advocated by the FTC overlap significantly. (FOF 69-78). For instance, Mr. Hauswald, 

3 Honzontal Merger Guidelines, at §§ I. 11,2.22 (herein "Guidelines").
 

PPAB l585952vl
 
- 9­

Mr. Whear and Mr. Brilmyer, in addition to several customers, ( 

1 all testified that a so-called "UPS" separator might well be effectively 

used in a "motive" application, or that an "SLI" separator may be used in a "deep cycle" application. 

(FOF 37, 72, 1185-1188, 769, 885). In fact, the evidence not only shows that this "could" happen, 

but that it does happen every day in the reality of the PE battery separator market. (FOF 37, 721, 

1185-1188, 769, 885). This is true in all of the FTC's alleged product categories. (FOF 69-78). 

Further evidence shows that various products made by Daramic are used across the spectrum 

of the FTC's product categories. (FOF 45-46, 64, 67, 69-78). Daramic CL is used in the "motive" 

.'1 

and "UPS" categories, Daramic HD is used in "motive," "UPS" and "deep-cycle" and CellForce is 

i used in "deep-cycle" and "motive." (FOF 89,95, 127-128). In 2008, Daramic sold an individual PE 

profile called "FC" with a backweb thickness of 11 mils to ( 1 for use in a UPS application, to
 

i 

1 for use in a deep-cycle application and to ( 1 for use in an SLI application.
 

(FOF 73). 

Considering the characteristics of separators - primarily backweb thickness and overall 

product thickness - it is impossible to classify them into distinctive "buckets." (69, 70, 74). Since 

the only real difference between industrial and automotive separators is thickness, a separator for a 

UPS application may be as thin as 8 mils - a size that easily fits into SLI applications. (FOF 65). 

Similarly, an "industrial" separator of 11 mil thickness is just as functionally effective in a car í ' 

I	 battery as a separator of 10 mil thickness, although the extra thickness is generally not worth the 

additional cost. (FOF 67, 71, 244; Riney, Tr. 4497). Further, because some separator profiles are Iunique to individual customers, a separator manufactured for one customer's deep-cycle application 

I may not be substituted into the same type of application for another customer. (PX1124-003;
 

Trevethan Dep., p. 114-115; Gaugl Dep., p. 146-148; FOF 588,691,795,799,885). This turns the 

FTC's "functional substitution" theory on its head in that two separators produced for different 

PPAB l585952vl 
- 10­

customers but used in the same application become their own product markets because they are not 

functionally substitutable. (FOF 588, 691, 795, 799, 885, 1334-1336,; PX1124-003; Trevethan I 

J Dep., p. 114-115; Gaugl Dep., p. 146-148). Importantly, all PE looks identical until it passes 

through the calender rolls fitted with specific profile patterns and adjusted to specific widths. It is 

the calender roll patterns, along with the thickness of the material, that differentiates PE separators 

from each other. (FOF 151-154,939-940). 

Furthermore, the FTC concedes that AGM and PVC separators are not par of their separator 

markets, but there is ample evidence that when looking at the "end-use" of separators (ie: whether 

j 

they are going into a "deep-cycle" golf car battery, or an "SLI" car battery) both AGM and PVC 

I	 separators are found in all these end-use applications. (FOF 105, 134-139). This alone is enough to 

show that the FTC has failed in the fundamental proof of identifying a product market in which to 

analyze the effects of the transaction at issue. 

The high degree of supply-side substitution that exists in the production of PE separators also 

supports their designation as the relevant product market here - separate and apar from Ace-Sil and 

Flex-SiI. It is easy to shift between production of different kinds of PE separators. (FOF 155, 156, 

969). Courts have recognized that where one facility can easily switch from producing one product 

to another, they may belong in the same relevant market.4 It is also telling that it is not easy to 

switch between the production of PE separators and rubber separators like Ace-Sil and Flex-SiI. 

(FOF 181, 160, 161, 162, 165-180). In fact, testimony and evidence prove that ( 

I ' 

1 (FOF 181-185). 

4 Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir. 1995)(holding full-serve gasoline sales and self-serve sales 

in the same market since stations could easily convert from full-serve to self-serve); Kraft General Foods, 926 F. Supp. at 361 (holding 

all ready-to-eat cereals in the same product market because of production flexibility); Frank Saltz & Sons v. Hart Schaffner & Marx, 

1985 WL 2510 (S.D.N.Y. 1985)(holding all men's suits in the same product market because plants could easily switch from producing 

low quality to higher quality suits). 

PPAB 1585952vl 
- 11 ­

a. Ace-Sil is a separate product market
 

The paries agree that Ace-Sil comprises its own product market and that the acquisition has
 

had no effect in this market. Ace-Sil is a product without competitors that simply moved from
 

Microporous to Daramic. (FOF 11, 114-116, 161; Gilchrist, Tr. 339; Gilchrist IHT, pp. 24-25, 27­

28). 

b. Flex-Sil is a separate product market
 

Contrary to Complaint's Counsel's claims, Flex-Sil is also its own relevant product market. 

Flex-Sil is a niche product used in very specific applications - particularly in OE golf cart batteries. 

(FOF 119, 120, 121, 123, 126,239, 314, 569; Gilchrist, Tr. 299; Hall, Tr. 2799). The evidence is
 

clear that Flex-Sil is a superior product to PE and PE/rubber separators, and that Flex-Sil has very
 

different technical capabilities compared to those separators because it is made of pure rubber.
 

(Gilchrist Dep., p. 117-118; FOF 117-127, 1200; Heglie Dep., p. 98-99; Whear, Tr. 4684-4685).
 

Furthermore, it cannot be "enveloped" putting it even more squarely into a unique 'niche' market. 

(FOF 21, 123, 125, 734; PX0433 at 022; Godber, Tr. 373; PX0428-003.)
 

Approximately ( 1 were made to two customers that position 

their products as high end and unique - in large par because of the inclusion of Flex-Sil as opposed 

to cheaper (and less effective) PE or PE/rubber separators. (FOF 1332, 1394, 121, 867-68, 1200,
 

341, 727, 740, 743, 66, 855). These customers continue to purchase significant amounts of Flex-Sil
 

I
 despite the ( 1 (FOF 66,548-49, 745-754, 864-865,
 

1339; Gilespie Tr. 2954-2955). Testimony that those customers "could" substitute some of their 

I i
 

Flex-Sil purchases with HD is not only suspect in light of their continued failure to do so, but does 

I
 not advance the FTC's product market cause, as they also testified that HD definitely could not be 

substituted, regardless of the price of Flex-Sil, for a majority of the separators they use. (FOF 1, I
 

124, 745-747, 751,868-70,875,877).
 

I
 

PPAB 1585952v1 
- 12 ­

I 

I 

I 

:1 

i i 

i 

r 

i 

r 

! 1 and does not have the superior 

characteristics demanded by the customers for high-end batteries. (FOF 18, 121-125,548-549, 745, 

747; Godber, Tr. 271,274-75,278; Roe, Tr. 1762, McDonald, Tr. 3822; RX1094). By analogy, HD 

is to Flex -Sil as Timex is to Rolex - the fact that the cost of a Rolex goes up by 5-10% wil not make 

the consumers of that watch switch to a Timex - even though they both tell time. Similarly, the 

evidence at trial makes it clear that a further SSNIP increase to Flex-Sil would not lead to a 

substitution from Flex-Sil- the gold standard in deep-cycle separators - to HD. (FOF 121-125, 271, 

278,545-549, 745, 747, 1338-39). 

The behavior and testimony of ( 

1 (FOF 535-537). Specifically, ( 

1 (FOF 535-539; PX00442; RX00677). In 2008, the purchase of 

1 (RX00677,
 

PX1040-002, PX1063). When the credit is included in the price comparison for 2008, the adjusted 

sellng price for ( 1 (RX00677,
 

PX0489). Nevertheless, despite the fact that ( 

1 (FOF 537, 541, 545, 547; RX00677). Furthermore, the incentive to 

purchase 

1 not purchase any meaningful quantities of ( 1 until 2006. (RX01119; FOF 535-539, 541, 

545, 546, 547). These facts preclude any argument that Flex-Sil and HD are economic substitutes. 

PPAB 1585952vl 
- 13 ­

Simply because both products can be used in 'deep-cycle' applications does not make them 

economically substitutable as the SSNIP test requires. (FOF 271,278,545-49,550, 1201, 1338-39). 

See. ~, FTC v. Swedish Match, 131 F.Supp.2d 151, 165 (D.D.C. 2000)(concluding that chewing
 

tobacco and snuff were not in the same market despite similar uses because consumers would not 

switch for price reasons or in response to a SSNIP). 

B. COMPLAINT COUNSEL HAVE NOT PROVED A PROPER GEOGRAPHIC
 

MARKET 

Complaint Counsel have also failed to adduce sufficient evidence to show their claimed 

North American geographic market. (FOF 186-223). The FTC's geographic market case requires it 

to show that a hypothetical monopolist could engage in price discrimination on a worldwide basis. 

Making that case depends, in turn, on a showing that such discrimination would not be defeated by 

arbitrage. Commentary on the Horizontal Merger Guidelines at 7-8. But Complaint Counsel's
 

economic expert, Dr. Simpson, acknowledged that he had not adequately considered whether
 

arbitrage could be used by worldwide customers to defeat price discrimination by the hypothetical 

monopolist. (FOF 1178, 1203-1204; Simpson, Tr., 3332-34, in camera). 

The relevant geographic market is the "area of effective competition . . . in which the seller 

I 

II 

operates, and to which the purchaser can practicably turn for supplies." Tampa Electric Co. v. 

I j Nashvile Coal Co., 365 U.S. 320, 327 (1961). It is the area in which "antitrust defendants face
 

competition." FTC v. Freeman Hosp., 69 F.3d 260, 268 (8th Cir. 1995)(citations omitted). 

Importantly, "determnation of the proper geographic market. . . must involve a dynamic as opposed 

to static analysis of 'where consumers could practicably go, not on where they actually go." 

California v. Sutter Health Sys., 130 F.Supp. 2d 1109, 1120 (N.D. CaI. 2001)(citations omitted). 

At trial, the Court noted, before Complaint Counsel had even put on its first witness, that i 

I they could not avoid describing the PE battery separator business as "worldwide." (Robertson, Tr. 

I ~ 

IPPAB 1585952v1 
- 14­

17, 19-20). It is undisputed that producers of PE separators sell globally. (FOF 186-202,203-223, 

493, 985).
 

Throughout the trial, Complaint Counsel repeatedly focused on the "need" for local supply, 

I yet attempted to "gloss over" the fact that (
 

1 (FOF 194-95,443, 926, 932, 933, 936, 937, 1353; 

RXOI530-003.) ( 

1 Id.; (FOF 933). ( 1 cannot offer "local" 

supply to Austria any more than it can offer such supply to any country in Asia. Yet it ships and 

sells its products on every continent without disruption or impact on its ability to compete for sales 

of PE separators. (FOF 932, 933, 936, 937, 963, Hauswald, Tr. 1044-45; Simpson, Tr. 3335, in 

camera; ( 1). Likewise, Microporous, prior to the acquisition, had been 

operating from one small facility in Piney Flats, TN for many years, but sold its separators to 

customers all over the world, ( 1 (FOF
 

192, 1146). Daramic, is, in fact, the only separator supplier of any type (including AGM and PVC) 

that operates numerous manufacturing facilities located throughout the world. (FOF 936; Gilchrist, 

Tr. 307; Hauswald, Tr. 859, 862; RX00677; RX01084). Asian PE separator manufacturers like 

I i 

1 supply separators to South America and Italy, while the ( I 

1 sells to customers in Korea - neither have more than one manufacturing 

facility. (FOF 1049, 1109). 

In 2008 Daramic exported 24 percent of its product and ( I' 

1 North America.s Thus, applying a SSNIP in North America, while holding prices in 

I the rest of the world constant, Daramic's South American customers would switch to suppliers in 

Asia and Europe, while ( 1 manufacturers. (FOF 

5 Daramic exported pnmanly to South Amenca (80 percent of exports) (while Entek exported 30.7 percent to 

Korea,) with the remaining amount spread across the globe. 

PPAB 1585952vl 
I 

- 15 ­

1356, 1208, 1334, 1349-50; PX1833, RX01120, RX00677, in camera, RX01407, in camera). 

Switches by these customers alone would be significant and well outside the "critical 
 loss" needed to 

sustain a profitable SSNIP. (FOF 1350-51). For ( 1 South American customers of 

( 1 Daramic, supplies from the United States are not "locaL." Evidence at trial also makes
 

clear that shipping costs, tariffs and freight "into" North America are not prohibitive to the 

importation of supply from other regions of the world, specifically Asia. (FOF 192, 1110, 1360-61, 

. I 1178, 1208). Shipping costs are considered to be minimaL. (Thuet, Tr.4351-52, in camera; Roe 

IHT, p. 372; Hauswald IHT, pp. 74-75 Riney IHT, p. 424-39; FOF 1110, 1357). 

There are several suitable Asian separator producers that could easily begin exporting 

materials to North America. (FOF 977-1049, 152-55). They are already exporting their products to 

South America and Europe, and Complaint Counsel presented no evidence to show that they could 

not export to North America. (FOF 493, 1049). The key to any analysis of the proper geographic 

market is not where consumer are turning for supply, but where they might turn in response to a 

SSNIP. See also Sutter Health Sys., 130 F.Supp.2d at 1124 (looking to whom consumers could 

practically turn if faced with anticompetitive pricing, not just those to which consumers currently 

turn). Much evidence was presented at trial showing that customers are turning to Asian suppliers, 

and could have, and in some cases intend to have, access to those suppliers for the North American 

market. (( ); Thuet Dep., p. 80­

82). Evidence proves that applying a 10% SSNIP to a product produced at one of Daramic's US 

plants, while holding the price of the same product from Daramic's Prachinburi plant constant, 

customers would find it economically feasible to import that product from Thailand to North 

America. (FOF 1111; Thuet, Tr. 721). 

Further, Complaint Counsel's short-sighted focus on the V AT taxes on exports out of China 

caused them to ignore evidence showing not only that there are a number of viable Asian producers 

PPAB 1585952vl 
- 16 ­

outside of China, but also that it is possible to avoid some, if not all, the V A T taxes on exports,
 

therefore erasing that handicap to exports to North America for Chinese producers. (FOF 192, 995, 

1110, 1208).
 

Testimony and evidence at trial make it clear that the valid and proper relevant geographic 

market is worldwide. 

I 

C. COMPLAINT COUNSEL CANNOT MEET THEIR BURDEN OF SHOWING 

COMPETITIVE HARM AS A RESULT OF THE MERGER 

By failing to define a relevant product and geographic market, Complaint Counsel have 

I already failed in their proof. However, the FTC is also entirely unable, even within its own improper 

markets, to prove that there has been competitive harm as a result of the merger. "(M)arket share and 

I 

concentration data provide only the staring point for analyzing the competitive impact of a merger." 

.1 

I Guidelines § 2.0; U.S. v. Baker Hughes. Inc., 908 F.2d 981, 984 (D.C. Cir. 1990).
 

( 

1 (FOF 1362). ( 

l - smaller than in the worldwide calculation because Microporous
 

exported a significant amount of its production outside of North America, so its worldwide share 

was more than its North American share. (FOF 192, 338-342). These calculations are only the 

"staring point" for analyzing the competitive effects of the merger and when additional facts are 

I ì viewed in context it is evident that there is no proof of any competitive har as a result of the 

I 

merger - either now, or in the future. 

i i 1. Complaint Counsel Fail to Show Any Adverse Effects on Competition in Any
 

of Their Alleged Individual Markets 

I The FTC's claims regarding anticompetitive effects in its alleged individual markets (deep 

cycle, motive, SLI and UPS) lack foundation because these are not relevant markets. See supra pp. 

I. 

12-15. 

I a. The Alleged Deep Cycle Market 

PPAB 1585952vl 
- 17­

The FTC's claim that the acquisition gave Daramic a monopoly in the deep cycle segment 

has no basis since the evidence at trial shows that Microporous' Flex-Sil separator and Daramic's 

HD were not competitive and were not in the same relevant market. See supra pp. 12-15. The only 

thing that happened with the acquisition is that Microporous' competitive share was shifted to 

Daramic and thus it has no adverse impact. 

I 

b. The Alleged Motive Power Market
 

Further, since the evidence adduced at trial also shows that the alleged "motive" segment 

does not qualify as a relevant product market, and thus there could not have any anticompetitive 

.1 

effects as a result of the acquisition. (FOF 78, 970, 1288). Moreover, ( 

1 market share in this alleged segment based on ( 1 uncommtted entrant. 

(FOF 940. 968. 970. 1218. 1220. 1238). Finally, testimony and documentary evidence at trial 

confirm that many Asian producers of industrial separators are also in a position to supply the 

alleged North American market and, in fact that they may already do so indirectly through the sale of 

Asian industrial batteries into North America. (Thuet, Tr. 1057). 

c. The Alleged SLI Market
 

II Similarly, "SLI" fails as a relevant market. Even if it survived, Complaint Counsel's case at 

trial was devoid of evidence sufficient to show that Microporous, which had never had a 

"commercial" salé of SLI material, would have begun selling SLI separators in North America "but 

for" the acquisition. (FOF 318, 576-582, 1336). Microporous had no contracts for the sale of SLI 

products at the time of the acquisition. In fact, it had never had a contract for the sale of any SLI 

product in its entire history. Id. The ( 

1 in July 2007, which contemplated such sales, was going nowhere and the 

6 The only "commercial" sale of SLI separators by Microporous was made to company called V oItmaster. The matenal that 

was sold to V oltmaster was t originally made as a sample run for JCI, but it failed JCl's tests.) (FOF 336; PX77). Microporous 

was then able to sell it to V oltmaster as a "one time" sale - without any intention of producing any other SLl matenal going forward. 

(FOF 336). This cannot be considered a competitive commercial sale with Entek and Daramic. 

PPAB 1585952vl 
- 18 -


Microporous board had directed that there be no further capital expansion without board approval. 

(FOF 376,576-582,385-412). Although ( 1 was renewed in February 2008, conveniently 

J 

in time to place it in the "black box" for Daramic's review, no action occurred prior to the
 

i 

acquisition that would suggest it would be any more successful than ( 1 moving the I 

paries forward to an agreement. (FOF 382-84, 414-419). Far from showing that Microporous was 

"very close" to selling SLI separators in North America in February 2008, the evidence relating to 

the purported ( 1 shows instead that Microporous had little hope of securing SLI sales
 

in North America. (FOF 382, 576-82, 383, 414-419). 

I 

Further, there is significant evidence that Microporous had taken absolutely no steps to 

Î proceed with the installation of a production line to supply SLI separators ( 1 in Piney Flats. 

(FOF 385, 374-376, 1147). Additionally, the "new" line the FTC alleges was intended for Piney i 

i 

Flats consisted of 11 millon square meters of capacity in an alleged market segment with ( 

1. (FOF 407, 428, 943, 968, 1059, 1089, 1090, 1108, 

1113, 220, 1331). The addition of such minimal capacity under such circumstances is de minimus, 

paricularly in comparison to ( 

1. (FOF 927). ( 1 SLI separator business even
 

before the JCI/aramic contract ended, as all of Daramic's sales ( 1 shipped to Mexico. I ' 

(Roe, Tr. 1695-96, 1764). Further, since ( 1 business from Daramic, any 

possible entry into an SLI market by Microporous was reduced to irrelevance in the competitive 

landscape. (FOP 306-309,946-957). 

d. The Alleged UPS Market
 

Complaint Counsel's attempt to paint a single project to produce a separator for a non-lead 

acid battery that was described as in its "infancy" as supporting Microporous' entry into the UPS 

market fails utterly. (PX0663-002, 335-365, 723, 1222-23, 1365). The FTC was entirely unable to 

PPAB 1585952vl 

l 
- 19­

show any evidence at trial that Microporous "was nearing the successful conclusion of a three year 

project to enter (the UPS) market." FTC Br. p. 21; (FOF 355-365, 723, 1222-23, 1365). 

The FTC touts Microporous as a "Maverick" in its development of its "Project LENO" for 

use in UPS batteries. (Robertson, Tr. 48; Simpson, Tr. 3202) However, Complaint Counsel 

conveniently ignore the fact that this product was intended to be used in "Gel batteries in the US and 

Europe for UPS." PX0663 at 002; FOF 355-365). Gel batteries are not flooded-lead acid batteries 

and thus have no import here. (FOF 24, 103; Godber, Tr. 147-49; Gilchrist, Tr. 429-30). 

Furthermore, the project was for the development of a product for use by ( 1 not
 

approved the product, or requested supply. (FOF 355-365, 663, 722; Brilmyer, Tr. 1901-02;
 

McDonald Dep., p. 74; Whear Depo., p. 227). Furthermore, the DARAK replacement par of this 

project, contemplated Microporous shipping or producing product in Europe with no North 

American impact. (FOF 622, 355-365). ( 

1 but Microporous had not even entered into "preliminary talks" with any other potential 

customers regarding this potential product. (McDonald IHT, 202-208, 1364.1 ( 1 actual 

paricipant in this segment with ( 1 impact present and future competitive 

conditions than Microporous. (FOF 682-83, 1325, 1431). There is simply no evidence that 

Microporous would have entered into this alleged market and any entry would have been of 

minimal, if any, significance. (FOF 355-365, 622, 1364). 

likely, e.g., management studies and capital expenditure plans. In re B.A.T. Industries, 104 F.T.c. 

852, 926-28 (1984). There is no such evidence here. In addition, Marne Bancorp established the 

requirement that the would-be entrant "offer a substantial likelihood of ultimately producing 

PPAB 1585952vl 
- 20­

I 

I 

I j 

I 

r 

I 

deconcentration of that market or other significant pro-competitive effects." United States v. Marine 

Bancorp., 418 U.S. 602, 633 (1974). In light of the size of both Daramic ( 1 in the SLI 

and UPS segments, Microporous' alleged entry at the small scale available and at the high costs it 

faced could not have provided sufficient competitive impact to satisfy this standard. 

2. COMPLAINT COUNSEL HAVE FAILED TO SHOW THAT
 

ANTICOMPETITIVE COORDINATED INTERACTION IN THE 

CORRECT RELEVANT MARKET HAS OCCURRED OR IS LIKELY. 

According to the Commentary on the Merger Guidelines, "Successful coordination typically 

requires rivals (1) to reach terms of coordination that are profitable to each of the paricipants in the 

coordinating group, (2) to have a means to detect deviations that would undermine the coordinated 

interaction, and (3) to have the ability to punish deviating firms, so as to restore the coordinated 

status quo and diminish the risk of deviations. . . . It may be relatively more difficult for firms to 

coordinate on multiple dimensions of competition in markets with complex product characteristics or 

terms of 
 trade." Commentary on the Horizontal Merger Guidelines at 18-19. 

Moreover, the presence of sophisticated customers ("power buyers") in markets involving 

infrequent purchases, long-term contracts and bidding can be a substantial factor in promoting a 

competitive market. FTC v. Elders Grain, 868 F.2d 901, 905 (7th Cir. 1989)(sophisticated buyers 

may cause sellers to cheat on any price agreement); FTC v. RR Donnelley & Sons Co., Civ. No. 

90-1619 SSH, 1990 U.S. Dist. LEXIS 11361, at 10 (D.D.C. 1990)("(T)he sophistication and 

bargaining power of buyers play a significant role in assessing the effects of a proposed 

transaction.") In Baker Hughes Inc., , the court pointed to sophisticated buyers purchasing
 

expensive equipment using "multiple, confidential bids for each order." (908, F2d. 986). The court 

there said that "(t)his sophistication . . . was likely to promote competition even in a highly 

concentrated market." Id.; ABA Mergers and Acquisitions at 159-60 ("Courts have recognized that 

evidence that a small number of buyers purchase most of the product in the market indicates that 

PPAB 1585952v1 
- 21 ­

sellers may not have a great deal of freedom in establishing prices and thus may be less likely to 

adhere to a collusive agreement. Sophisticated buyers are more likely to detect collusion and offer 

sellers large orders to induce defections from the agreement or to vertically integrate."); 

In this case, not only have Complaint Counsel failed to prove that battery separator 

manufacturers could reach terms of coordination, but there is no evidence they would be able to 

detect or punish deviations. (FOF 1240-41, 1369, 1436). In fact, the indisputable evidence that 

( 1 of Daramic's business, ( 1 

defeats the argument of Complaint Counsel that coordinated interaction wil occur. (FOF 306-09, 

946-57). 

Additionally, it is equally clear from the evidence adduced at trial that this industry is 

characterized by the strength and sophistication of the customers such that their leverage and power 

is more than sufficient to prevent anticompetitive coordination. (FOF 277, 358,438,478,507-509, 

559, 588, 603, 634, 677).
 

3. COMPLAINT COUNSEL HAVE FAILED TO SHOW THAT
 

ANTICOMPETITIVE UNILATERAL EFFCTS IN THE CORRECT 

RELEVANT MARKET HAVE OCCURRED OR ARE LIKELY. 

The Merger Guidelines describe the unilateral effects theory as follows: "A merger between 

firms in a market for differentiated products may diminish competition by enabling the merged firm 

I 

to profit by unilaterally raising the price of one or both products above the premerger leveL." Sec. 

2.21. Such a price increase is possible only if a significant portion of sales in the market are 

"accounted for by consumers who regard the products of the merging firms as their first and second i 

choices, and . . . repositioning of the non-paries' product lines to replace the localized competition 

r lost through the merger (is) unlikely." Id. The court in United States v. Oracle Corp., 331 F. 

Supp.2d 1098 (N.D. Cal. 2004) described four factors as preconditions for a unilateral effects claim i 

in such a product setting: (1) the products are differentiated; (2) the products "controlled by the
 

I. : 

PPAB 1585952vl 
- 22­

I 

I 

I 

i 

i j 

Ii 

II 

merging firms must be close substitutes;" (3) products produced by other firms in the market "must 

be sufficiently different" that a SSNIP would be profitable for the merged firm; and (4) 

"repositioning by the non-merging firms must be unlikely." 331 F. Supp.2d at 1117-18. Applying 

these principles, the court rejected the government's claim of anticompetitive unilateral effects in 

Oracle, finding that the government failed to prove that the products of the merging companies 

occupied a "product 'node' alone," i.e., "a 'node' or an area of localized competition." Id. at 1170, 

1172. 

As noted above, the presence of power buyers in markets can also be a substantial factor in 

promoting a competitive market. In Baker Hughes, the court in affirming the lower court pointed to 

the fact of sophisticated buyers purchasing expensive equipment using "multiple, confidential bids 

for each order." (908 F.2d at 986). The court said that "(t)his sophistication. . . was likely to 

promote competition even in a highly concentrated market." Id. The role of such purchasers was
 

also relied upon in United States v. Country Lake Foods. Inc., 754 F. Supp. 669, 673 (D. MN 1990) 

where the five substantial purchasers of fluid milk in the MSPIMSA, if faced with a threatened price 

increase, would "negotiate a reduction or . . . seek a substitute or replacement supplier of fluid milk," 

if necessary "from outside dairies." Id. 

The FTC itself has recognized that where its focus In a merger case is on the alleged 

dominance of the merged entity, it must show that the "merger may result in a single firm that so 

dominates a market that it is able to maintain prices above the level that would prevail if the market 

were competitive" and it must show that such increased prices are accompanied by "lower output." 

In the Matter of Chicago Bridge & Iron Co.. Dkt. No. 9300 at 7 (Jan. 6,2005). Forsyth v. Humana, 

Inc., 114 F.3d 1467, 1476 (9th Cir. 1997). 

The facts and evidence presented at trial cannot, and do not, support any theory that Daramic 

could, as a result of the acquisition of Microporous, unilaterally exercise market power to increase 

r. 

PPAB 1585952vl 
- 23­

prices and decrease output, resulting in "unilateral" anticompetitive effects. (FOF 1236, 1308, 1313, 

1366-72). Microporous was the high cost producer in the PE market and, looking at the FTC's 

markets, was a real factor only in deep cycle where Daramic was not competitive. (FOF 339, 239, 

569,314, 734, 442, 1384, 1200, 1339, 120, 1298; PX0489). Microporous posed no market threat in 

sales of pure PE separators. (FOF 17, 127,318,336). Guidelines § 2.22. 

Evidence at trial of ( 1 since the acquisition underscores Daramic's lack of any
 

market power. (FOF 306-309, 946-951). Testimony and documents before the Court make clear 

that ( 1 demonstrated great competitive prowess vis-a-vis Daramic, perhaps more 

obviously since the acquisition than prior to February 2008. Id. Further, there was significant 

substantiation of the fact that (
 

1 (FOF 428,
 

943-44, 964-66, 968). l
 

1 (FOF 943-44,946,968,1092-93, 1220). 

Among the preconditions that Complaint Counsel cannot satisfy here is that they cannot 

II show that "repositioning of the non-parties' product lines to replace the localized competition lost 

through the merger (is) unlikely." Sec. 2.21. A variety of evidence at trial confirmed that ( 

1 "reposition" its product line so as to replace any allegedly 

localized competition lost as a result of this acquisition. ( 

1 (FOF 943-44, 946, 

968,1092-93, 1220). 

On the other hand, the evidence shows that Microporous' extremely modest PE market share 

1 in Complaint Counsel's North American geographic market and its high structure was 

PPAB 1585952v1 
- 24­

I i not sufficient to enhance Daramic's ability to impose unilateral effects. (RX00114, RX01119, 

I 

I 

I 

I iI 

I 

¡ 

PX0949; RXOOI15). The Guidelines themselves explain that a market share of ( 1 is not likely 

to be of concern.7 In short, the FTC's argument that Daramic is an effective market predator
 

because of the acquisition has no merit. The Guidelines and case law impose several preconditions 

for application of the unilateral effects concept. E.g., United States v. Oracle Corp., 331 F. Supp. 2d 

1098 (N.D. Cal. 2004). 

4. COMPLAINT COUNSEL HAVE BEEN UNABLE TO SHOW POSTACQUISITION PRICE INCREASES ATTRIBUTABLE TO INCREASED 

MARKET POWER 

Although this matter has come on for trial over 16 months after the acquisition, Complaint 

Counsel have been unable to show any post-acquisition price increases that can be attributed to any 

increased market power of Daramic. (FOF 244, 246-253, 256-57; RX01119, RX01323, RC00631, 

RX00677, RX01604, RX01605, RXI450). Furthermore, the evidence related to the ( 

1 does not support Complaint Counsel's case. (FOP 759-763). If
 

Daramic must resort to the court system for interpretation of a contract, or, indeed for help raising a 

price which it contends is validated by significant increases in cost, that shows that it lacks market 

power. The fact that ( 1 for months, and, in fact sued Daramic in 

( 1 soon after, merely reinforces Daramic's lack of power to increase prices postacquisition. Id. 

There is no evidence showing that Daramic increased pnces immediately after the 

acquisition, or, importantly, that any post-acquisition pnce Increase was out of line with preacquisition increases or was not cost justified. (FOF 244, 246-253, 256-57; RX01119, RX01323, 

RX00631, RX00677, RX01604, RX01605, PXI450). Furthermore, Complaint Counsel failed to 

provide any evidence that any post-acquisition price increases resulted from enhanced market power. 

7 "The smaller the percentage of total supply that a firm controls, the more severely it must restnct its own output in order to 

produce a given pnce increase, and the less likely it is that an output restnction wil be profitable." Guidelines § 2.0 

PPAB 1585952vl 
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Complaint Counsel made much at trial of documentation suggesting that Daramic ( 

1 prior to acquisition, but the facts amply illustrate that such fears 

were unfounded since Microporous was a high cost competitor. (FOF 1315, 1366, 1384). In any 

case, such fears are not proof of market power either pre- or post -acquisition. 

i Complaint Counsel's failure to support its claim of unilateral effects was further evidenced 

I

i 

by documents and testimony substantiating Daramic's inability to increase prices since the 

acquisition. (FOF 253; RX00927 at 14-16). In 2008, Daramic's attempt to increase prices ( 

1 reflect its raw material cost increases was completely unsuccessfuL. (RX00927 at 5-16; 

FOF 255, 279, 282).. Similarly, in 2009 it sought a ( 1 increase from ( 1 was 

forced to settle for a ( 1 (RX00927 at 14; Riney, Tr. 15 4948, 4952-53, in camera). 

Other customers also rejected the 2008 price increase, many rejecting any increase. (FOF 630, 678, 

759, 762, 1389). Overall, the facts show that Daramic's attempt to increase prices was only parially 

successful, notwithstanding that these increases were entirely justified by increases in raw material 

costs and by contract. (RX00631; RX00677; RX011189; RX01323; RX01604; RX01605; PXI450). 

Further defeating Complaint Counsel's case regarding price increases, the FTC improperly 

IIi relied on cost indices rather than on evidence of Daramic's actual raw material costs and it
 

improperly relied on prices Dararc has attempted to obtain from its customers rather than those it 

has actually obtained. (FOF 242, 253, 1255-1259, 1265, 1385). 

Additionally, Complaint Counsel relied on contracts entered into pre-acquisition to show 

market power but, improperly analyzed those contracts against other pre-acquisition contracts. (FOF 

1263-1269). Importantly, the evidence and testimony at trial also made clear that the three contracts 

used to analyze this issue ( 1 were entered into by each of 

those customers without regard to Microporous despite the fact that Complaint Counsel allege 

Microporous was a competitive influence pre-acquisition. (FOF 779-782,814,828,832). Any postI 

PPAB 1585952v1 
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I 

I 

I 

I 

~ 

I 

r 

I ~ 

acquisition price increase claim based on enhanced market power evaporates when viewed in light of 

these facts. 

The FTC's price increase case evidences no post-acquisition anticompetitive effect. The 

FTC's attempt to show post-acquisition price increases in Chicago Bridge was rejected as 

"unreliable" and "speculative." Chicago Bridge & Iron Co., 138 F.T.C. 1392, 1552 (2003)(initial 

decision), aff'd, 138 F.T.C. 1024 (2004). 

The evidence brought forth in this case is also speculative and unreliable - there is simply no 

proof that Daramic had market power in either the PE separator market, or in Complaint Counsel's 

improper "application" markets. (FOF 1288, 1316, 1386). In fact, there was both testimony and 

documentary evidence that Daramic's profits have declined. (FOF 278, 283, 291). Additionally, 

evidence that Daramic' s market share has declined in the wake of loss of (
 1 is 

substantial. (FOF 306, 946, 959, 1287, 1362, 1369). Such evidence supports the fact that there has 

been no anticompetitive effect post-acquisition. See. e.g., United States v. International Harvester 

Co., 564 F.2d 769 (7th Cir. 1977)(post-acquisition evidence showed no anticompetitive conduct); 

Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255 (7th Cir. 1981)(post-acquisition evidence showed 

that defendant's profits and market shares declined); Vaney v. Coleman Co., 385 F. Supp. 1337 

and profits). 

5. COMPLAINT COUNSEL HAVE BEEN UNABLE TO SHOW THAT
 

MICROPOROUS WAS A VIABLE POTENTIAL ENTRANT INTO 

SEGMENTS OF THE BATTERY SEPARATOR INDUSTRY OTHER 

THAN DEEP CYCLE. 

The Supreme Court in United States v. Marine Bancorp., 418 U.S. 602 (1974) provided the 

legal standards relating both to the theory of elimination of actual potential competition and the 

theory of perceived potential competition. The Court affirmed the district court, which had decided 

PPAB 1585952vl 

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- 27­

against the government on the ground that extensive state and federal regulation of banks created 

"legal" barriers to entry preventing National Bank of Commerce ("NBC"), a subsidiary of Marine 

Bancorp based in Seattle, from entering independently into the Spokane banking market located in 

. I the eastern par of the state. United States v. Marine Bancorp, 418 U.S. 602 (1974).
 

There, the Court identified the elements of the perceived potential competition theory,
 

finding that a market extension merger may be unlawful if: (1) the target market is substantially 

concentrated, (2) the acquiring firm has the characteristics, capabilities and economic incentive to 

render it a perceived potential de novo entrant, and (3) the acquiring firm's premerger presence on 

the fringe of the target market in fact tempered oligopolistic behavior on the par of existing 

paricipants in that market. 418 U.S. at 624-25. The Court found in Marine Bancorp, however, that 

existing paricipants in the Spokane banking market were aware of the regulatory bariers preventing 

NBC from entering that market and, therefore, its presence did not exercise any competitive impact 

in that market. Id. Complaint Counsel have not presented evidence sufficient to show that
 

j Microporous' presence in their "UPS," "Motive" or "SLI" markets raised it to the level of a 

perceived potential competitor. (FOF 360, 385, 391, 409, 723, 1222). In fact, the evidence shows 

I

i i	 that existing paricipants in those alleged markets, like the banks in Spokane, were aware of the 

limitations on Microporous with respect to entering the "application" markets and its presence did 

II 

not have any competitive impact in those markets. (FOF 486, 580, 360, 723, 780-83). 

I Specifically, with respect to SLI, Motive and UPS, evidence shows that, although those 

markets were substantially concentrated, Microporous did not have the characteristics, capabilities I 

and economic incentive to render it a perceived potential de novo entrant in any of the three markets. 

r (FOF 1221-23, 1366). Furthermore, there is no proof that Microporous' premerger presence on the 

fringe of those markets tempered oligopolistic behavior on the par of existing paricipants in those
 

markets. (FOF 1273, 1366). 

I 

i 

PPAB 1585952vl 
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The Court in Marine Bancorp also applied the actual potential competition theory and noted 

two requirements, in addition to those identified for the perceived potential competition theory: (1) 

"that in fact NBC has available feasible means for entering the Spokane market other by acquiring 

WTB; and (2) that those means offer a substantial likelihood of ultimately producing deconcentration of that market or other significant pro-competitive effects." 418 U.S. at 633. The 

Court found that this second requirement was not met because legal restrictions would have 

.1 prevented expansion from an initial toehold acquisition. 418 U.S. at 636-37.
 

As for the first prong, "clear proof' that the firm would have entered the market is required.
 

In re B.AT. Industries, 104 F.T.C. 852, 926-28 (1984). In B.A.T. Industries, the FTC found that
 

subjective evidence, e.g., capital expenditure plans and internal management studies, were the "best
 

evidence" that the firm would have entered but it also relied on objective evidence, e.g., capabilities,
 

interests and incentives to enter. 104 F.T.C. at 922, 926-28. Complaint Counsel have not met their
 

burden with respect to this proof as it relates to Microporous' presence in these markets. (FOF 360,
 

385,391,409, 723, 1222).
 

Testimony and documents presented at trial show that at the time of the acquisition there was 

no proof, let alone "clear proof," that Microporous had a feasible means for entering the SLI and 

UPS markets. (FOF 360, 385, 391, 409, 723, 1222). Capital expenditure plans for expanding
 I
 

production in the United States had been halted almost a year before the acquisition, and there was
 

no valid evidence that the LENO project that would allegedly allow Microporous to enter the "UPS"
 

market was moving forward, or was even feasible from a technological standpoint. (FOF 360, 385,
 

391,409, 723, 1222). Furthermore, there is no evidence that, even if Microporous had built a new
 

I-
 line in North America for the production of SLI separators, it would have had a substantial 

likelihood of ultimately producing de-concentration of that market or other significant I
 

I. 

PPAB 1585952v1 
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pro competitive effects - paricularly in light of (
 

1 (FOF 1112-13, 1331).
 I 

.¡ 

Complaint Counsel have failed to support any claim that Microporous was a viable potential 

entrant into segments of the battery separator industry other than deep cycle. 

V. RESPONDENT HAS REBUTTED ANY PRIMA FACIE CASE MADE BY I COMPLAINT COUNSEL 

A. RESPONDENT HAS SHOWN THAT ACTUAL ENTRY INTO THE RELEVANT
 

MARKET WOULD BE TIMEL Y, LIKELY AND SUFFICIENT 

1. ACTUAL ENTRY INTO THE RELEVANT MARKET HAS OCCURRED
 

AND ENTRY BARRIERS ARE LOW. 

The Merger Guidelines provide that "(a) merger is not likely to create or enhance market 

power or to facilitate its exercise, if entry into the market is so easy that market participants, after the 

merger, either collectively or unilaterally could not profitably maintain a price increase above 

premerger levels. Such entry likely wil deter an anticompetitive merger in its incipiency, or deter or 

counteract the competitive effects of concern." Sec. 3.0. "In the absence of significant (entry) 

i I bariers, a company probably cannot maintain supracompetitive prices for any length of time."
 

Baker Hughes, 908 F.2d at 987. The Guidelines further provide that if entry wil be "timely, likely 

and sufficient in its magnitude," then "the merger raises no antitrust concern and ordinarily requires 

no further analysis." Id. 

Entry may be shown by any one of the following circumstances: (1) that there has been or is 

threatened to be actual entry by certain firms; (2) that bariers to entry into the paricular industry are 

low; (3) that expansion by previously existing firms either has occurred or is likely to occur; and (4) 

that the mere threat of entry may operate to foster competitive conditions in a market. Commentary 

on the Horizontal Merger Guidelines at 37; Baker Hughes, 908, F.2d at 987-89; United States v. 

Syufy Enter., 903, F.2d 659 (9th Cir. 1990); Waste Management, 743 F.2d at 981-84; United States 

v. Calmar. Inc. 612, F.Supp 1298 (D.N.J. 1985). With each of these forms of entry, the question is 

PPAB 1585952v1 
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whether entry would be sufficient to offset any anticompetitive effects in the market, i.e., whether 

entry would defeat any supracompetitive prices and whether the existence of such supracompetitive 

prices might eliminate or reduce the entry barriers "that existed during competitive conditions." 

Cargil. Inc. v. Monfort of Colorado. Inc., 479 u.s. 104, 119 n.15 (1986).
 

a. Entry Barriers Are Low
 

Low bariers to entry have been found in many merger cases, e.g., Baker Hughes, 908 F.2d 

981; Waste Management, 743 F.3d 976; United States v. Gilette Co., 828 F. Supp. 78 (D.D.C. 

1993); Syufy Enterprises, 712 F. Supp. 1386. Barriers are measured by whether entry would be 

timely, likely and sufficient to offset any competitive harm. To be sufficient entry must offset the 

competition potentially lost. To be timely it must occur within two years, and to be likely it must be 

profitable. Guidelines §§ 3.2-3.3. 

In this case, since barriers to entry are low, Daramic has no market power. (PX2110-033 

("low barriers to entry in () SLI... ")). In the absence of significant ( entry) bariers, a company 

probably cannot maintain supracompetitive pricing for any length of time." Baker Hughes. 908 F.2d 

at 987.
 

. i 

I 

i Here, ( 1 Dararc and Microporous have all developed and set up new production 

lines in 18 months or less. ( 1; RX00147 at 001; RX01314 atOOl; RX01045 at
 

I.i 

001; Gaugl, Tr.4543, FOF 1061-1088). The equipment and technology needed to set up a new PE 

line is not proprietary and is generally known and available in the industry. (Gaugl Tr. 4545-46, 

4547-48; lQ The facts show that required testing can be done concurrently with building a new 

I ' 

facility, and within the applicable two year time frame. (RX01045 at 001; FOF 1061-62, 1070-75). 

r Further, there was ample evidence at trial that testing is largely customer dependent. (FOF1077). 

Thus, if a customer wants and needs a separator qualified within a short period, it is clear from the i 

I.. 

PPAB 1585952v1 
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testimony and documents that such qualification is easily accomplished. (FOF1077-80, 1082-87; 

RXOOI15). 

New entry is also likely. First, there was abundant evidence that Asian manufacturers are 

aggressive competitors who are already competing around the world. (FOFll06-07, 1109). 

Although there was evidence suggesting that there may be certain hurdles to Chinese competitors 

exporting product to North American, additional testimony showed not only that such hurdles can be 

overcome, but that they have not prevented Chinese manufacturers from exporting their materiaL. 

(FOF 1109- 10). Evidence supports the fact that it would be profitable for a supplier to export 

product from Thailand to North America, even with additional shipping costs, because of low labor 

rates. (Thuet, Tr. 4357-58, in camera; Thuet Dep., p. 80-83.) 

Sufficiency need only be measured by whether a new entrant of Microporous' scale could 

replace the competitive effects of concern - in other words entry must only replace one small PE line 

in the FTC's North American relevant market. In the Matter of B.F. Goodrich Co., 110 F.T.C. 207, 

345 (1988); FOP 1250-51). Furthermore, since the evidence at trial showed that f 

1 into the North American market to replace 

Microporous' impact. (FOF 425). Thus, to prove sufficient entry to offset any lost competition, 

Respondent need only show that a new entrant could infuse this amount of production into North 

America. Guidelines § 3.4. 

b. Actual entry has occurred or is likely
 

Entry need not be de novo in order to counteract anticompetitive effects. Thus, a current 

I- Asian PE supplier could enter the FTC's North American market and it would only need to build one 

PE line to sufficiently replace the competitive effects allegedly lost in North America by the 

I. 

acquisition. (FOP 1250-51). This could be done in 16-18 months, and, as several of the Asian 

i. 

PPAB 1585952v1 
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suppliers already have product qualified at US battery manufacturers plants, qualification could be 

accomplished well within the two year time frame. (FOF 1074-75, 1029,993,989). 

Testimony and documents show that several Asian separator manufacturers are considered to 

be equal to their North American counterpars in tefIS of quality, technology and capability. (FOF I 

977-1052). Many Asian products have been globally approved and have already been qualified by 

I North American battery makers. (FOF 1074-75, 1029, 993, 989). The facts ilustrate that 

.1 Microporous had an infinitesimal "competitive presence" in PE separators in North America with 

only ( 1 (RX01120, in camera). The loss of such a minor 

presence can easily be replaced by the entry of anyone of a number of Asian firms. (RXOI 120; FOF 

1105-1111). 

c. Expansion by previously existing firms either has occurred or is likely 

to occur 

Expansion by pre-existing firms is considered "entry" as established in Baker Hughes where 

the court noted that two companies had entered the market and were "poised for future expansion." 

908 F.3d at 988-89. The Merger Guidelines also refer to "repositioning" by existing firms as a form 

i I of entry, i.e., where "rival sellers likely would replace any localized competition lost through the


I i 

merger by repositioning their product lines." Sec. 2.212. 

The special case of potential expansion and/or repositioning ( 1 is crucial here.
 

( 

I 1 (FOP 1112-1113, 932, 938, 934, 943-45, 969, 947). Section 2.212 of the 

Guidelines provides that "(a) merger is not likely to lead to unilateral elevation of prices of I 

differentiated products if, in response to such an effect, rival sellers likely would replace any 

localized competition lost through the merger by repositioning their product lines." Id. This is
 

directly on point here. ( 

PPAB 1585952vl 
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1 (FOF 1112-1113, 932, 943-45, 969, 947). Certainly, its ability and capacity are 

sufficient to curtail any possible anticompetitive effects of the merger given Microporous' minute 

presence in any competitive market in North America. (FOF 943-45). Given these factors, "the 

.j merger is not likely to lead to a unilateral elevation of prices." Guidelines § 2.212.
 

The Guidelines also note that "where it is costly for buyers to evaluate product quality, 

buyers who consider purchasing from both merging paries may limit the total number of sellers they 

consider. (Guidelines §2.212). If either of the merging firms would be replaced in such buyers'
 

consideration by an equally competitive seller not formerly considered, then the merger is not likely 

j 

to lead to a unilateral elevation of prices." Id. Baker Hughes also took note of threatened entry, 

saying that "a number of firms competing in Canada and other countries had not penetrated the U.S. 

market, but could be expected to do so if (the acquisition led to higher prices)." 908 F.2d at 988-89. 

I 

I 

These situations mirror the circumstances ilustrated at trial in this matter. Not only was there 

testimony from a number of ( 

! 

I !
 

I. : 1 (FOF 598-99,501,680-709).
 

Importantly in this case, entry sponsored by large customers also counts in the Court's 

I ; 

assessment of Respondent's rebuttal case. "(L)arge, sophisticated buyers can counteract potentially 

anti competitive post-merger behavior by encouraging entry. A 'power buyer' may subsidize new 

entry or incumbent expansion in order to increase market output or lessen the likelihood of seller 

coordination. The power buyer itself may become a seller via vertical integration with an existing 

producer." ABA, Mergers and acquisitions: Understanding the Antitrust Issues at 196 n.27 (3d ed. 

2008) (hereinafter, "ABA, Mergers and acquisitions"). 

PPAB 1585952v1 

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- 34­

Given the size and strength of the buyers in this industry, it easily lends itself to "sponsored 

entry. If (
 

1. (RX00239; McDonald Dep., p. 34-36; Gilchrist Dep., p. 100-21; 

FOF 480, 491). 

Complaint Counsel were also unable to put forth any evidence showing that there are 

intellectual property impediments to entry with a PE/rubber product. Testimony and documents .1 

, 

show unequivocally that several other additives for PE separators for antimony suppression exist, 

I 

and that another competitor ( 1 could produce a PE/rubber deep-cycle separator easily 

I with a small capital cost in approximately six-months or less. (RX00676; PX2174; FOF 1078, 

1092,-93). In fact, there was evidence that 1
 

1 (FOF 809,
 

1235, 962). ( 

1 excess capacity, there was adequate evidence that other separator manufacturers i I
 

can, and wil, invest the capital and time to produce these separators for the low-end deep-cycle
 

products in order to fil idle lines. (RX01120; RX00061, in camera ( 

)). 

B. RESPONDENT HAS SHOWN THAT SOPHISTICATED CUSTOMERS IN THE
 

BATTERY SEPARATOR INDUSTRY HAVE PROMOTED ENTRY AND 

OTHERWISE HAVE THE ABILITY TO PREVENT ANTICOMPETITIVE 

EFFCTS. 

As was pointed out above, a "'power buyer'" may subsidize new entry or incumbent
 

expansion in order to increase market output or lessen the likelihood of seller coordination." ABA, 

Mergers and Acquisitions at 196 n.27. The facts adduced at trial show that ( 

PPAB 1585952v1 
- 35­

1 Moreover, "power buyers" have the ability to forestall anticompetitive practices. The 

Baker Hughes court found just such effects where the customers were large and demanded multiple 

i 

. i bids on projects. Baker Hughes, 908 F.2d at 986. 

The behavior of the four "power buyers" in this case is strong evidence of their ability to 

forestall anticompetitive practices. 

1. JCI
 

Johnson Controls (JCI) is the largest battery manufacturing company in the world, with over 

( 1 in the lead-acid automotive battery market, and producing more 

than 120 milion lead acid batteries in 2008 with sales over 38 bilion dollars in sale. (Hall, Tr. 

2793; RX00034 at 004, 13; RX01187 at 003). JCI also manufactures about 2 to 3 percent of its 

production in the form of deep-cycle golf car batteries. (Hall, Tr. 2665). 

Under supply agreements with JCI, Daramic supplied separators for SLI and golf car 

applications to JCI until December 31,2008. (Hauswald, Tr. 754). As of today JCI does not buy f! 

I single separator from Daramic, having instead entered into a long-term supply contract with (
 

! I
 

1 (Hall, Tr. 2715-2716; RX00053, in camera; 

i I
 

i I RX00052, in camera; RX00072, in camera; Hall, Tr. 2747, in camera).
 

I. Without even looking at the behavior of the other buyers, it is clear that JCI alone is powerful
 

enough to have ( 1 in the market in order to 

I counteract any possible anticompetitive effects of Daramic's acquisition of Microporous. (Hall, Tr. 

2715-2716; RX00053, in camera; RX00052, in camera; RX00072, in camera; Hall, Tr. 2747, in 

I, 

camera). Ironically, ( 1 meaning 

I that, considering the significant ( 

1 Microporous I 

would have been relegated to practical oblivion by January 1,2009. 

I 

PPAB 1585952v1 
".' j 

I 

i" 

I 

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I 

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r. 

i ' 

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Evidence shows that part of ( 

1 (RX00040 at 05-08, 

in camera). JCI has been able to do this remarkably effectively. ( 

1 

( 

1 

It is axiomatic that a "power buyer" that can cause ( 

1 is well positioned 

to control the competitive aspects of its supplier's markets. (RXOOI84, in camera, Toth, Tr. 1535­

36; Hauswald, Tr. 909, in camera, FOF 961). ( 

1 (Toth, Tr. 1535; Weerts, Tr. 4447, in camera;
 

Hauswald, Tr. 1118). 

Further, ( 1 (RX00041;
 

RX00066 at 002-003, in camera; RX00070 at 05-06, in camera; Hall, Tr. 2670). It has succeeded in 

this goal, ( 

PPAB 1585952vl 
- 37­

1 (RX00032, in camera; RX00041; RX00045 at 002, Hall Tr. 2809, 

in camera). 

(RX00055; Hall, Tr. 2838-2839, in camera). There is no evidence that Microporous' presence in the 

separator marketplace would have had any impact on JCI or its business. Microporous never had a 

contract with JCI for the use of CellForce or PE separators prior to the time of the acquisition and 

discussions for any possible supply by Microporous to JCI were termnated in June 2007 and never 

resumed. (Gilchrist, Tr. 504,562, in camera; RX00047). 

Simply put, no evidence adduced by Complaint Counsel in the entire five weeks at trial is 

suffcient to overcome the fact that JCI, and the other power buyers, have the ability to prevent any 

anticompetitive effects of the acquisition. 

2. Enersys
 

I i 

EnerSys too has the power and ability to manage the competitive marketplace for battery 

separators that it uses. Its power is such that it "rallied" its other "power buyer" competitors to 

Ii oppose the acquisition of Microporous despite the fact that there has been no impact on its own
 

business. The evidence also showed that Daramic has understood from EnerSys that it doesn't 

believe the contract between the two companies is "worth the paper it was written on." (Toth Tr. at 

1512; Axt Tr. at 2167-68, in camera). The testimony and documents at trial make it abundantly 

clear that EnerSys' purchase of separators has not been affected by the acquistiion and that it has the 

PPAB 1585952vl 
- 38 ~
 

power and ability to promote the entry of other suppliers, and, thus to avoid any anticompetitive 

effect of the merger. 

EnerSys is the largest manufacturer of industrial batteries in the world, with annual sales in 

2007 of$2 bilion. (Craig Tr. 2557, 2561; Burkert Tr. 2421-23, in 
 camera). Its negotiation strategy I 

includes ( 1 (Axt Tr. 2230-31, 2244, in camera).
 

I 

Under the various EnerSys-Daramic contracts, ( 

i 

.j 1 (RX 964 at 002, in camera). As with Daramic's 

other customers, ( 

(Seibert Tr. 4213-17, in camera; RX831; RX773; RX606; RX1549; RX590; 

RX768 in camera; Burkert Tr. 2436, in camera; RX768, in camera; RX1032; Burkert, Tr. 2438, in 

camera; Seibert, Tr. 4195,4215-16, in camera; Axt, Tr. 2215-16, in camera; Seibert, Tr. 4216, in 

camera; Burkert, Tr. 2434, 2464-65, in camera; Seibert Tr. 4216-17, in camera; PX2264 in camera; 

Seibert, Tr. 4217, in camera). 

( 

(RX207, in 

camera; Burkert, Tr. 2424, in camera; RX241; RX220 at 008, in camera; Burkert, Tr. 2428, in 

camera; Burkert, Tr. 2429, 2431; RX221, in camera; RX1349 at 002 in camera; RX953 at 001, 005, 

in camera; RX953 at 003, in camera). 

The evidence presented at trial also shows that ( 

1 (RX21O; Axt, Tr. 2245-46, in 

camera; Axt, Tr. 2246, in camera; RX21O; RX228, in camera). This is further evidence of 
 EnerSys' 

strength as a power buyer. 

PPAB 1585952v1 
- 39­

Testimony and evidence also show that EnerSys has available to it ( 

i 

I 1 (Burkert, Tr. 2311, 2446, 2448, in 

camera; Gagge, Tr. 2514, in camera; RX201; Burkert, Tr. 2448, in camera). 

Further, it is clear that ( 

1 (Burkert, Tr. 2311,
 

~ I 

2446,2448, in camera; Gagge, Tr. 2514, in camera; RX201; Burkert, Tr. 2448, in camera). Further, 

I as evidenced at trial, ( 

1 (Gagge,
 

i 

Tr. 2514, in camera). 

Additionally, ( 

1 (Axt, Tr. 2272, in camera; Burkert, Tr. 2449-51, in camera; RX239, in camera; 

I 

i. !
 RX193; RX203, in cqmera; RX199 in camera; Axt, Tr. 2277, in camera; Burkert, Tr. 2456, in

camera; RX223, in camera; Burkert, Tr. 2450, in camera). Documentary evidence shows that
 

( 

1 

(RXI203, in camera; RX195; RX194 

1 (RX222 in camera). 

EnerSys has also ( 

1 (RX197 in camera; Burkert, Tr. 2445, in 

camera; Axt, Tr. 2273, in camera; Berkert, Tr. 2445, in camera). 

PPAB 1585952vl 

I 
- 40­

I 

I 

I 

.1 

I 

Evidence adduced at trial also showed that ( 

1 I 

1 (Burkert, Tr. 

i j 2451, in camera; PX1262; RX199, in camera; RX239, in camera; Berkert, Tr. 2456, in camera). 

I 

1 (Gagge, Tr. 2512, in camera; Axt, Tr. 2288, 2183, in camera; PX1280; 

I RX215). 

These actions show EnerSys is not at the mercy of its suppliers, and, in fact, has the power I 

and leverage sufficient to sponsor and promote entry into the North American battery separator 

r industry such that the merger of Microporous and Dararic has had, and wil have, no 

anticompetitive effect. I. 

3. Exide
 

I 

PPAB 1585952v1 
I 

- 41 ­

1, is (
 

~ I
 

.1 (Gilespie, Tr. 2930; 2957; 3093; Gilespie, Tr. 3052, in camera). Exide sold 

almost 

$3.7 bilion worth of automotive, truck, motorcycles, recreational vehicles, golf cart, boats, forklift 

and network batteries in fiscal 2008 and ( 

1 (RX01186 at 27, 57; Gilespie, Tr. 2929; RX01186 at 006-7; Gilespie, Tr. 2930). 

Despite Exide's checkered financial history, it too has been able to use its size and leverage 

to "manage" the competitive marketplace of its suppliers. It has also promoted entry and has the 

power and sophistication to prevent any possible anticompetitive effects of the acquisition. 

This power is demonstrated by the evidence showing that even though Exide entered into a 

1 (PX0726; PX0728,
 

PX0835, in camera; RX00976, in camera; in camera RX00977, in camera; RX01517, in camera; 

RX01285; RX00342 at 033, in camera; RX01281, in camera; RX00979, in camera; RX01282, 

RX01283, RX01284, RX01285; Gilespie, Tr. 3102, in camera; Gilespie, Tr. 2985, 3095, 3100, 

3112; Gilespie, Tr. 3073, 3100-3103, in camera; RX00537, in camera; RXOOOI9, in camera; 

Gilespie, 3101-3103, in camera; RXOOOI9, in camera; Gilespie, 3101-3103, in camera; Gilespie 

I Ii Tr. 3070).
 

( 

PPAB 1585952vl 
- 42­

(Gilespie, Tr. 3020).
 

I 

( 

.1 

I 

1 (Gilespie Tr. 2695; 3124-3126, in camera). ( 

1 (Gilespie,
 

Tr. 3122-23, in camera). 

Furthermore, ( 

1 (Gilespie Tr. 2962). ( 

1 (RX00303-002, in camera). 

( 

1 (Gilespie Tr. 3022-24, 3041, in camera). ( 

I 

1 (Gilespie, Tr. 3034, in camera). I 

At the time of the Acquisition, Exide had not stared working with Microporous on testing or 

I- approving Microporous' industrial PE material and had never even tested Microporous' proposed 

SLI separators prior to mid-2007. (Gilespie, Tr. 2974; Gilespie, Tr. 3083). (
 

I 

i. 

PPAB 1585952vl 
I 

- 43­

1 (Gilespie Tr. 3053-54, in camera). Despite this, ( 

1 (RX00009; RX00399; Gilespie, Tr. 3075-76; 

PX1018 at 004; PX1018 at 002-3; PX1096; McDonald Tr. 3838; PX1018 at 002-3; Gilchrist, Tr. 

400,486-87, in camera; McDonald, Tr. 3836-3837, 3839; PX0512; PX0396 ;PX0396; Gilespie Tr. 

3081,3095). 

The evidence again is clear that Exide has the means, leverage and power to subsidize new 

entry or incumbent expansion. 

VI. RESPONDENT HAS SHOWN THAT EFFICIENCIES THAT HA VE BEEN
 

IMPLEMENTED SINCE THE ACQUISITION DEMONSTRATE THAT 

MICROPOROUS WAS A HIGH COST OPERATION BEFORE THE ACQUISITION 

OCCURRED. 

The Merger Guidelines recognize that efficiencies may result from mergers and state that 

"(t)he Agency wil not challenge a merger if cognizable efficiencies are of a character and 

i I magnitude such that the merger is not likely to be anticompetitive in any relevant market." Sec. 4.
 

i I "Cognizable efficiencies" are defined as "merger-specific efficiencies that have been verified and do


I I 

not arise from anticompetitive reduction in output or service." Id. The Guidelines go so far as to
 

I. .I praise one kind of efficiency that evidence shows has been realized in this case: "efficiencies
 

resulting from shifting production among facilities formerly owned separately, which enable the 

merging firms to reduce the marginal cost of production, are more likely to be susceptible to 

verification, merger-specific, and substantial, and are less likely to result from anti 
 competitive 

reductions in output." Guidelines § 4.
 

Specifically, Daramic ( 

(Riney, Tr. 4971-73, in camera; Hauswald, Tr. 1063-64; FOF 430). Evidence shows that following 

PPAB 1585952vl 
- 44­

¡ the acquisition, Daramic began shifting the production of its HD product to the former Microporous " I
 

Piney Flats facility thereby locating all products using a rubber additive in one facility. (PX0910; 

Trevathan Dep., p. 102). Additionally, Daramic was able to utilize the Piney Flats facility during the 

strike in Owensboro in order to continue supplying customers by shifting HD production at that time 

as welL. (Hauswald, Tr. 1073-74). (
 

1 (Riney, Tr. 4963, in camera; Gaugl, Tr. 4572-73) 

i Testimony and evidence also showed at trial that Daramic has realized approximately 

l 1 for the Piney Flats and Feistritz facilities. (Riney, Tr. 

.1 

4972, in camera; FOF 431). 

I 1 (Riney, Tr. 4972-73, in 

camera; Hauswald, Tr. 1062-64; FOF 432). ( 

1 (Riney, Tr. 4972, in camera; Hauswald, Tr. 1062-64). (
 

1 (Riney, Tr. 4973, in 

camera; Hauswald, Tr. 1062-64). And finally, Daramic has sought to l i I
 

1 (Riney, Tr. 4973, in camera; FOF 432). Altogether, 

Daramic expects to achieve approximately l 

l 1, many of which are already evident. (Graff, Tr. 4863, in camera; FOF 270). 

L j 

The Eighth Circuit Court of Appeals held in the Tenet Health Care case that "the district 

I court should. . . have considered evidence of enhanced efficiency in the context of the competitive 

effects of the merger." United States v. Tenet Health Care Corp., 186 F.3d 1045, 1054 (8th Cir. I 

1999). It held that there was evidence that the merged hospital could offer better medical care than 

I either of the merging hospitals could alone and that it would "be able to attract more highly qualified 

physicians and specialists and to offer integrated delivery and some tertiary care." !d. 

PPAB 1585952vl 
- 45­

The efficiencies that have been realized in this case since the acquisition demonstrate that the 

Microporous facility at Piney Flats, Tennessee was a high cost operation. (FOF 1315, 1366, 1384). 

The loss of a high cost operation would not have had an adverse effect on competition in any alleged 

product market and the efficiencies that Daramic has realized, and wil continue to realize, are 

beneficial to the marketplace and to the consumers in it. (FOP 1384-1385). 

Price reductions and significant efficiencies have already been generated and demonstrated 

by the acquisition. Daramic ( 

1 (RX00537; RX00538; RX00689; PX0223; 

PX1054; Gilespie, Tr. 3121, in camera). 

Daramic has also implemented programs to make Piney Flats and Feistritz more efficient, 

better able to monitor their scrap usage, better able to use recycled material, improve their extraction 

and extrusion techniques and reduce the use of solvent, among others. (FOF 273-275, 433-435, 

1385). The annualized savings on raw materials alone are l 1
 

(Riney Dep., p. 46; FOF 276, 436). 

In light of the discussions herein showing that no competitive har has resulted, or is likely 

to result, from the acquisition, any and all efficiencies achieved are directly pro-competitive. The 

I 

efficiencies are merger specific, verifiable and not the result of reductions in output or service.
 

I Guidelines § 4.0. Moreover, the efficiencies here wil result in marginal cost reductions. (Riney 

Dep., p. 200-201; FTC v. Tenet Health Care Corp., 186 F.3d 1045, 1054 (8th Cir. 1999)(enhanced
 

I 

efficiencies should be considered "in the context of the competitive effects of the merger"); Country 

I Lake Foods, 754 F. Supp. at 674, 680 (efficiencies involving lower plant and transportation costs 

and "other savings" found as "further evidence that the proposed acquisition wil enhance
 

competition") ). 

PPAB 1585952vl 
- 46­

I 

VII. RESPONDENT HAS SHOWN THAT IF THE ACQUISITION HAD NOT 

OCCURRED, MICROPOROUS WOULD NO LONGER BE AN EXISTING 

COMPETITIVE ENTITY OR, AT BEST, WOULD NOT BE A VIABLE 

COMPETITIVE ENTITY 

c .1 Without having to resort to a failing firm defense, there is strong authority for the proposition 

that financial weakess, deteriorating financial health, scarce future resources and/or poor
 

management of the acquired company weighs against a finding that the acquisition would have an I 

adverse effect on competition. See. e.g.. United States v. General Dynamics Corp., 415 U.S. 486, 

503-04 (1974); Lekto-Vend Corp. v. Vendo Co., 660 F.2d 255, 276 (7th Cir. 1981); Kaiser 

Aluminum & Chemical Corp. v. FTC, 652 F.2d 1324, 1341 (7th Cir. 1981); United States v. 

International Harvester Co., 564 F.2d 769, 776-79 (7th Cir. 1977). These factors may demonstrate 

that the acquired company would not have been a major contributor to the competitiveness of the 

industry if it had remained independent. Id. 

In Arch Coal, the court found that the acquired company was a "relatively weak competitor." 

FTC v. Arch CoaL. Inc., 329 F. Supp.2d 109, 158 (2004). The acquired firm "face(d) high costs, 

hard) low reserves, hard) at best uncertain prospects for loans or new reserves, (was) in a weakened 

.1 financial condition, and ha( d) no realistic prospects for other buyers." !d. The court concluded that
 

! 

the acquired firm's "past and future competitive significance in the. . . market hard) been far
 

I ..
 

1.1 overstated" in light of its "weak competitive status." Id. 

! ! A. Microporous was in a Precarious Financial Position that Would have been made 

1 

i Worse by the Current Economic Climate 

At the time of the acquisition Microporous was in a highly leveraged position following the 

building of the Feistritz plant and it had at least one, if not two, separator productions lines that were 

destined to be empty by early 2008. (RX00996; RX00999; Seibert Dep., p. 150-152; PX2300; 

(Heglie, IHT at 72-73); Trevathan, Tr. 3610, 3628-31; FOF 395). The Microporous board had lost 

faith in management, particularly Mike Gilchrist, and had mandated that the success of Feistritz be 

"proven" before any additional funds would be expended. (RX00401; RX00244; RX00248; PX2300 

PPAB 1585952vl 
- 47­

(Heglie, IHT 58); PX2301 (Heglie, Dep. at 161); FOF 392, 401). As Eric Heglie stated in his 

Investigational Hearing, "I think we generally discovered through our ownership that we had I 

. i	 philosophical differences with Mike Gilchrist and the management team." (PX2300 (Heglie, IHT 

59); FOP 401). A large par of these differences related to IGP's focus being "a lot more driven by 

financial results and return on investment for different growth areas that we were contemplating" as 

opposed to management lack of focus "on the return on investment and on the numbers or at least 

the risks associated with those numbers." (PX2300 (Heglie IHT, 60); FOF 401). I 

Furthermore, Microporous did not have a good grasp of its actual costs for producing 

.1 

separators and had low margins on a number of products. (FOF 300, 422). The Microporous Board 

I	 was concerned about Microporous' financial situation given this exposure and questioned Gilchrist's 

financial acumen and his credibility. (PX2300 (Heglie IHT, 60); RX00244 at 003; FOF 404). 

Microporous was in fierce negotiations over proposed price increases with its largest customer, 

1 (RX00560; RX00559; RX00565; PX0396). Several members of the upper management 

i team were seriously concerned with the ultimate viability of Microporous as a stand alone company 

in light of the European expansion path on which it had embarked. (Trevethan Dep., p. 77; i 

Trevathan Tr. at 3628; FOF 398, 400). 

I' Evidence at trial showed that at the time of the acquisition in February 2008, there were no 

contracts or MOUs in place on the second line in Feistritz, and that if the facility was operating I 

alone, without production having been transferred by Daramic from Potenza, it would have a 

I	 f 1 (Gaugl, Tr. at 4569, 4571; Riney, Tr. at 4962,4969, 

in camera; Gilchrist, Tr. at 502, in camera; Hauswald, Tr. at 922, in camera; FOF 1144). f I 

1 (Riney, Tr. at 4969, in camera).
 

r 

PPAB 1585952v1 
- 48­

Furthermore, the capacity being utilized at Feistritz today includes l 1 of
 

production that was moved by Daramic from its Potenza plant when that plant was closed. 

.I 

(Hauswald, Tr. at 922, in camera; Gaugl, Tr. at 4572-73; FOF 308, 1144). If Daramic had not 

closed its Potenza plant and shifted that production to Feistritz, ( I 

1 (FOF 1144). This would not be sufficient to sustain a 

I 

company with considerable debt, mounting raw material costs and no long term contracts for its 

excess capacity. (FOF 386, 398, 408, 422, 427). 

Microporous also had considerable capital exposure and was significantly leveraged at the 

.1 

time of the acquisition. (PX2300 at 11-12 (Heglie IH, p. 72-73)). As of December 31, 2007, 

Microporous was saddled approximately $46,139,000 in debt. (PX0078 at 021; Gilchrist, Tr. 549). 

This debt included the $5.4 million used to purchase the turn-key PE line from Jungfer in 2001 as 

well as the monies expended in 2007 for the Feistritz expansion. (PX0078 at 021; Gilchrist, Tr. 550). 

Add to all of the above the global recession that is a stark reality today, the continued 

I 

viability of Microporous as a stand alone entity is seriously in question. Over 72 percent of 

Microporous' sales in 2007 were to the golf car industry which, today, is in a downturn unmatched 

in twenty years and trending along with the general automobile industry. (RXOI120; Godber, Tr. 

280). Further, as more and more car manufacturers worldwide layoff workers and reduce
 

r i 

production it is highly unlikely that Microporous - a new entrant into an old business in Europe ­

I' would be able to fil its new lines with SLI type separators, particularly when ( 1 Daramic 

( 1 millions of square meters of excess capacity in Europe and the United States. (Weerts,
 

Tr. at 4459-60, in camera; Hauswald Dep., p. 60; FOF 943, 1089). Daramic's North American and 

Asian excess capacity is also significant. (FOF 1108, 1331). The "CellForce" line at Piney Flats is 

l 

PPAB 1585952vl 
- 49­

1 (FOF
 

425, 1108; Thuet, Tr. at 4338). 

Microporous' financial frailty is further evidenced by the fact that immediately after the 

acquisition, ( 

1 (Riney Depo., p. 229:3-230:231:20;
 

Riney, Tr. 4961, in camera; RXOI562). ( 

1 (Riney, Tr. 4961, in camera). ( 

1 (Riney, Tr. 4961, in camera). (
 

1 (Riney, Tr.
 

4961, in camera). 

( 

I 

1 (Riney, Tr. 4962-63, in camera). I 

All of these facts taken together show that Microporous was not a healthy, competitively 

II viable company engaged in 'maverick' competition, but an overextended weak rival that knew, with 

the tremendous debt it was carying because of the Feistritz expansion, and the lack of any contracts 

to fil its lines, that its viable days are numbered. Although the Piney Flats facility had demonstrated 

over many years that it could be viable on its own, the addition of the Feistritz "millstone" around its 

neck, put it in a precarious position notwithstanding the economic status of the world today. Thus, 

PPAB 1585952vl 

I 
- 50­

rather than cause anticompetitive har, the acquisition of Microporous by Polypore preserved a 

potentially failing company and its assets. 

VIII. COMPLAINT COUNSEL HAVE FAILED TO SHOW THAT DARAMIC HAD OR
 

HAS MONOPOLY POWER IN ANY ALLEGED MARKET. 

A. Complaint Counsel Have Not Shown That Daramic Had Monopoly Power
 

The FTC alleged that Daramic had monopoly power in its alleged UPS and motive markets, 

but no proof sufficient to support his claim was offered at trial. Monopoly power is "the power to 

control prices or exclude competition." United States v. E.I. duPont de Nemours & Co., 351 U.S. 

377, 391 (1956). Evidence through both testimony and documents show that Daramic had neither. 

As set forth above, and in ample evidence, it is clear that Daramic has not previously, and 

certainly does not today, control prices in Complaint Counsel's alleged UPS and motive power 

markets. Daramic l 

1 (RX000927 at 005-16, in camera; FOF 253). The 

evidence shows that the customers for these products have sufficient power and leverage to negotiate 

prices rather than have them dictated to them. Further, there are other manufacturers of these
 

Ii products throughout the world, further reducing any effect Daramic could have in these improperly


I i 

alleged markets. (FOF 977-1060). It is also clear from testimony that these separators are generally 

simply thicker, or differently patterned than any other PE separator, thus Daramic has no ability to 

constrain prices because anyone of its competitors could simply purchase a relatively inexpensive 

tool and begin production of these separators. (FOF 1066, 1093, 1098). 

I The evidence is also overwhelming that Daramic also lacks the power to exclude 

competition. On January 1, 2009, Daramic lost l 1 business from l I 

I 1 which added production lines to supply l 1 (FOF 306, 491, 495). 

Furthermore, as a result of current economic conditions, l I 

PPAB 1585952vl 
- 51 ­

1 

( 1 FOF 943, 1089). "(E)xcess capacity in the hands of a rival is 

always a threat to a producer that wishes to raise its prices." United States v. UPM-Kymmene Oyi et 

.1 aI., No. 03 C 2528 (N.D. IlL., 7-25-03). Entry conditions are such that other producers could also
 

feasibly commence production of PE UPS and motive battery separators in short order. (FOF 1066, 

1093, 1098). l 1 (FOF 970,991, 1024). 

Since the evidence supports the fact that Daramic lacked "the power to control prices or 

exclude competition," it also shows that Daramic lacked monopoly power in the FTC's alleged 

markets or in the PE separator market. (FOF 1288,1316, 1386-1387). 

IX. COMPLAINT COUNSEL HAVE FAILED TO SHOW THAT DARAMIC ENGAGED
 

IN EXCLUSIONARY CONDUCT. 

A. The FTC Has Not Shown the Extent of Any Exclusionary Conduct by Daramic 

Complaint Counsel cannot show that Daramc engaged in exclusionary conduct. Although it 

was unclear through trial, which specific conduct of Daramic Complaint Counsel objected to as 

being "exclusionary," it was clear that no conduct adduced through evidence rises to the level of 

"exclusionary behavior." Complaint Counsel seemed to suggest that Daramic's "first" exclusionary 

-I 

act was the purchase of the Jungfer facility in 2001 in order to "shut it down." (Gilchrist, Tr. 320­

¡. 

I ¡ 21). Complaint Counsel fail to acknowledge that Jungfer was in bankrptcy at the time Daramic
 

acquired it and it was not shut down for almost 5 years following its acquisition. (Gaugl Dep., 69). 

Similarly, Daramic's purchase of Corydon was l 

1 (FOF 519, 522-526). The lawsuit brought by Daramic against 

Microporous for breach of contract in 2006, related to the sale of SLI separators in Europe only. 

(FOF 267; PX2237). Daramic's claims in that case passed the scrutiny of the courts on both a 

PPAB 1585952vl 
I-I 

- 52­

12(b)(6) motion to dismiss and a motion for summar judgment - a strong indication that the claims 

were valid and justified. 

Furthermore, the evidence showed that the contracts that Complaint Counsel allege are 

.j 

I "exclusionary," are not. Specifically, the contract signed between l 1 and Daramic in 2006
 

was not exclusive and in fact, l 

1 (RX00983; FOF 

621, 1272). In fact, f 1 for
 

significant production. (RX00965; RX00957). Importantly, in 2006 and 2007, the time at issue here, 

Microporous had no excess capacity for the products ( 1 in the United States.
 

(PX0920 (Gilchrist IHT., p.46-48)). Thus, Microporous could not have been foreclosed from taking 

on ( 1 business during that time by Daramic because it was not capable of doing so. Id.
 

Similarly, the ( 

(FOF 445­

451; Hall, Tr. at 2670). The contract negotiated between ( 1 Daramic in ( 1 took many 

months to negotiate and it is clear that Microporous was neither being considered ( 1 for
 

supply at this time, and when it had been previously considered, its product had failed JCI's 

specifications. (FOF 445-451, 486; Hall, Tr. at 2670, 2695-96). Thus, Microporous cannot have 

I.J 

been, and was not, excluded by any actions attributable to Daramic.
 

The long term contracts entered into by Daramic with (
 

1 are also not "exclusionar." For instance, ( 1 was entered into as 

par and parcel of the l 1, and was entered into prior to
 

the time that Microporous even had a PE line. Furthermore, at the time ( 

1 (FOF
 

526,551-56). 

PPAB 1585952vl 
- 53 ­

Likewise, the ( 1 Daramic entered into in January 2008, is not exclusive
 

and allows purchase of up ( 1 separators from another supplier, and was entered into 

during a time that Microporous had no excess capacity so could not have supplied product to ( 

1 (PX0637-002). Further, l 1 testified at trial that it did not consider Microporous 

and entered the contract with Daramic because it contained good terms and pricing. This is not an 

I 

exclusionary contract. (FOF 773, 775, 779, 782). Neither the ( 1 contract, nor the l 1
 

contract were exclusionary either since both l
 

1 

.1 

(Balcerzak, Tr. at 4106-08, in camera; Douglas, Tr. at 4063,4067, in camera; FOF 814,832). 

i Complaint Counsel also made much at trial of the allegedly "fake" force majeure to force 

1 hand in signing the 2006 contract. However the evidence at trial, beyond the self­ .1 

i 

serving statements of EnerSys and Mr. Gilchrist (who by his own admission does not like Daramc), 

overwhelmingly shows that the force majeure was reaL. (Gilespie, Tr. at 2985, 3095; FOF 554, 

636). The force majeure letters from ( 1 Daramic's largest supplier of PE was certainly not
 

fake, nor were emails and documents showing that other customers, and even Microporous, had i 

i 

confirmed that the force majeure was real. (FOF 639; PX1806; PX1805; PX0911 (Roe Dep, p. 197­

200)). Daramic declared a force majeure to all its customers allocating its own limited supply fairly 

and according to legal guidelines. Id. See also, Cliffstar Corp. v. Riverbend Products. Inc., 750
 

F.Supp. 81, 13 UCC2d 392 (W.D.N. Y., 1990)( concluding that allocating 31 % to some buyers, but 

greater than 85% to others was reasonable as a matter of law as the seller based allocation on proper 

factors like customer loyalty, past performance, buyer needs and the seller's projections of potential 

future sales to the buyer). Furthermore, as Mr. Trevathan confirmed, the amount of UHWMPE that 

Daramic purchases and requires for its facilities is at least 10 times more than the PE supply required 

for Microporous even now (with two PE lines more than it had at the time of the force majeure). 

PPAB 1585952vl 
- 54­

Thus the fact that Mr. Gilchrist testified that Microporous was not affected by the decrease in PE 

supply is completely inconsequential. (FOF 638; Trevathan, Tr. at 3646). 

Furthermore, there was no evidence at trial showing which of the FTC's alleged markets 

were foreclosed to Microporous by these allegedly exclusionar contracts. This is contrar to the
 

leading authorities, including the D.C. Circuit, which spoke precisely to this point in Microsoft. 

saying "it is clear that in all cases the plaintiff must both define the relevant market and prove the 

degree of foreclosure" United States v. Microsoft Corp., 253 F.3d 34, 69 (D.C. Cir. 2001). Further, 

"(t)he share of the market foreclosed is important because, for the contract to have an adverse effect 

upon competition, 'the opportunities for other traders to enter into or remain in that market must be 

significantly limited.' -l., quoting Tampa Electric Co. v. Nashvile Coal Co., 365 U.S. 320, 328 

(1961). Similarly, the Seventh Circuit Court of Appeals stated that the plaintiff in an exclusive 

dealing case "must prove. . . that it is likely to keep at least one significant competitor of the 

defendant from doing business in a relevant market. If there is no exclusion of a significant 

competitor, the agreement cannot possibly har competition." Roland Machinery Co.., 749 F.2d at 

394. See also Dentsply, 399 F.3d at 191 ("(t)he test is . . . whether the challenged practices bar a 

substantial number of rivals or severely restrict the market's ambit."); Omega Environmental. Inc. v. 

Gilbarco. Inc., 127 F.3d 1157, 1162 (9th Cir. 1997) quoting Jefferson Parish Hospital District No.2 

v. Hyde, 466 U.S. 2, 45 (1984)( O'Connor, J. concurrng) ("'Exclusive dealing is an unreasonable 

restraint on trade only when a significant fraction of buyers or sellers are frozen out of a market by 

the exclusive deal."). 

Complaint Counsel's case did not, and could not, achieve liftoff unless it could show the 

f' relevant markets and the extent of alleged foreclosure in each. It was unable to do that at trial, or 

through any evidence and thus any such claim must faiL. 

X. THE H&V AGREEMENT HAD NO ANTI 
 COMPETITIVE EFFECTS. 

PPAB lS85952vl 

i 
- 55­

A. The Cross Agency Agreement Between H& V and DaramIc was a Legitimate Sales 

Joint Venture Between the Companies 

The FTC's claim that the 2001 Cross Agency Agreement ("Agreement") between Dararc 

and H&V "unlawfully restrained trade" is without foundation and Complaint Counsel have adduced 

no evidence at trial supporting their claim. 

i 

I Pursuant to the Agreement, ( 

1 (PX0925 (Porter 

Dep., pp. 106-107, 156, 168, in camera); RX00688, in camera; FOF 1123). The companies also 

planned potential sharing of technologies and development of new products at the outset of the 

Agreement. (PX0925 (Porter Dep., pp. 106-107; 156; 168, in camera; Roe, Tr. at 1746-47; FOF 

1123). 

Daramic makes PE separators and H& V makes AGM separators - the two are not 

competitive according to evidence elicited repeatedly at trial by Complaint CounseL. (PX0925 

(Porter Dep., p. 25-26; FOF 1124). Daramic had no plans to produce AGM separators and ( 

1 (PX0925 (Porter Dep., pp. 170-174, in camera). 

Complaint Counsel have produced no evidence in documentary or testamentary form that supports 

the idea that Daramic had plans to produce AGM separators,l 

I 1 (FOF 1124). In fact, contrary to Complaint Counsel's position, l 

1 (Whear, Tr. at 4837, in camera). l 

1 (Whear, Tr. at 4837, in 

camera; RX00688, in camera). Accordingly, since Daramic and H&V were not actual or potential 

competitors in the AGM and PE market, the non-compete provisions in the H&V Agreement cannot 

have had any adverse effect on competition and imposed no restraint of trade. (FOF 1124, 1130-32). 

PPAB 1585952vl 
- 56­

I 

I 

I 

I 

I 

r 

r 

A fact ignored by Complaint Counsel is that one of the primary motivations for the 

Agreement was to allow Daramic and H& V to compete with a similar agreement between Entek and 

Dumas, another AGM producer and a competitor of H&V. (PX0925 (Porter Dep., p. 110); FOF 

1125). Entek and Dumas ( 

1 (Id.) 

( 

1 ff) H& V and
 

Daramic's joint activities included significant joint marketing, promotional efforts and joint exhibits 

at trade shows and conventions - ( 1 (PX0925
 

(Porter Dep., pp. 126-128, in camera); FOF 1126). 

The record shows that the Agreement promoted the businesses of both companies. Daramic 

represented H&V primarily l 

1 (PX0917 (Cullen
 

Dep., pp. 314-315, in camera; FOF 1128). Daramic received ( 

1 (RX00381, in camera; FOF 1129). ( 

1 (PX0917 (Cullen Dep., pp. 59-60,63-64, 124-28, 130-32, in 

camera); FOF 1129). 

( 

1 (FOF 1130). ( 

1 (PX0925 (Porter
 

Dep., p. 66 (( 

PPAB 1585952v1 
- 57­

1 These exchanges promoted and facilitated the venture's activities. f 

1 (FOF 1130). I 

In Texaco Inc. v. Dagher, a joint sales venture case the Court endorsed (without applying it) 

the historical "ancilary restraints" method for assessing collateral restraints in joint ventures. 547 

U.S. 1 (2006) The Court said that the doctrine requires a court to determine whether it confronts "a 

naked restraint of trade. . . or one that is ancilary to the legitimate and competitive purposes of the 

.1 

business association." 547 U.S. at 7. Here the non-compete does not rise to the level of an ancilary 

I "restraint" since it had no trade restraining effect, but even if it did, the non-compete was ancilary to 

the Agreement's legitimate purposes. 

I 

Ancilary restraint analysis was also used by the court in Polk Brothers. Inc. v. Forest City 

Enterprises, 776 F.2d 185 (7th Cir. 1985). There court found no violation where two potential retail 

competitors agreed not to sell competing products in order to facilitate joint ownership of a retail 

outlet. It held that this ancillary restraint was valid because it might "contribute to the success of a 

I cooperative venture that promises greater productivity and output." 776 F.2d at 189. Here, the 

argument is even stronger, as the non-compete in Polk Brothers prevented competition while the 

1.1 

non-compete here prevented no competition whatsoever. 

Like the agreement in Polk Brothers, the Agreement was a legitimate and productive 

"cooperative venture" which (1) had no effect of limiting or restraining competition between the two I 

companies and/or (2) was reasonably ancilary because it "promote(d) the success of this more 

extensive cooperation." 776 F.2d at 189. 

XI. RESPONDENT HAS SHOWN THAT COMPLAINT COUNSEL'S
 

RECOMMENDATIONS REGARDING RELIEF ARE OVERBROAD, 

INAPPROPRIATE AND PUNITIVE. 

PPAB 1585952vl 
i 

- 58­

A. Punitive Relief Is Not Permissible 

As shown above, it would have been impossible for the acquisition of Microporous by 

¡ 

, I Daramic to have enhanced any market power of Daramic in the PE separator market in North 

America given that Microporous had a mere (1.6% 1 of that market. The FTC has not demonstrated 

to the contrary. The subject of relief is governed by well-known principles: (1) Divestiture is "an 

equitable remedy designed to protect the public interest." U.S. v. E.I. duPont de Nemours & Co., 366 

U.S. 316, 326 (1961). It must be based on facts "and economic theory as applied to such facts." 

Crowell. Collier & MacMillan. Inc., 361 F.Supp. at 991. The "key" to an antitrust remedy is a 

determnation of the measures needed to effectively restore the competition that was lost and 

eliminate the effects of the acquisition. See In the Matter of Chicago Bridge & Co., Dkt. No. 9300 at 

7 (Op. of Comm'n)(Jan. 6, 2005). Relief is intended to "restore competition to the state in which it 

existed prior to, and would have continued to exist but for, the ilegal merger." In the Matter of B.F. 

Goodrich Co., 110 F.T.C. at 345 ; (2) Complete divestiture of all acquired assets is not required 

unless necessary to restore the competition lost. See. e.g., RSR Corp. v. FTC, 602 F.2d 1317, 1325­

26 (9th Cir. 1979); United States v. Waste Management, 588 F. Supp. 498, 514 (S.D.N.Y. 1983), 

rev'd on other grounds, 743 F.2d 976 (2d Cir. 1984); and (3) Courts are not authorized in civil 

proceedings to punish antitrust violators, and relief must not be punitive." E.I. du Pont de Nemours 

& Co., 366 U.S. at 326; See also In re Grand Union Co., 102 F.T.C. 812 (1983)("The Supreme Court 

. . . has ruled that punitive relief is inappropriate in a civil antitrust proceeding."). 

B. The Divestiture Relief Sought by Complaint Counsel is Overbroad, Inappropriate and 

I, Punitive 

The relief sought by the FTC is unsupportable in many respects. Complaint Counsel have 

failed to consider what Microporous would look like today if it had not been acquired by Polypore. 

As noted above, Microporous was in a precarious financial position at the time of the acquisition and 

its survival was far from clear. (FOF 386-87,394, 395, 399,400-01,406-08,421-429). Moreover, 

PPAB 1585952vl 
- 59­

the global economic crisis is unprecedented, and it is beyond dispute that the world today absent the 

acquisition - embroiled as it is in recession with intense pressure on the automotive industry and the 

suppliers to that industry - would not look like the world on February 28, 2008, the day before the 

.1 acquisition. (Id.; FOF 720-721). Relief sufficient to restore competition to the state in which it
 

existed prior to, and would have continued to exist but for, the acquisition must be based on a view 

of the reality today, not the view through rose-colored glasses that Complaint Counsel would have 

the Court wear. 

Complaint Counsel also previously called for this Court to include a separate Polypore PE 

facility in the divestiture. FTC Pre-Trial Br., p. 37. There is no support for such a drastic remedy as 

there is no set of circumstances in which Microporous would have had more than one PE line in 

operation in North America at the time of the acquisition, currently, or at any time in the foreseeable 

future. (FOF 386-387, 390-396, 400, 407-409, 421-429). No evidence or testimony supports the 

idea that Microporous would have had another PE line in operation in North America, let alone that 

it would have had an entire additional "facility." Id. Daramic operates two facilities in North 

America, one in Owensboro, Kentucky and one in Corydon, Indiana - both operate more lines than 

Piney Flats. Required divestiture of either of these facilities could not be viewed as anything but 

I i punitive.
 

Complaint Counsel have also made no viable case at trial for divestiture of the Ace-Sil or 

Flex-Sil production lines. They have acknowledged that Ace-Sil did not compete with any Daramic 

product.8 (FOF 114-116). Similarly, Flex-Sil is not par of the FTC's PE market, and has been 

incorrectly included in the FTC's improperly delineated application specific markets. (FOF 106, 

121, 123-126). It does not effectively compete with any Daramic product, including HD. Thus there 

8 Although Ace-Sil dust is used in the manufactunng process of CellForce an appropnate 'remedy' to restore competition to 

the status it was in pnor to the Acquisition would be to have the buyer of the Piney Flats PE line enter into a contract to purchase AceSil (in onginal, scrap or dust form) in an arms-length negotiation. 

PPAB l585952vl 
- 60­

are no horizontal, vertical or potential anticompetitive concerns with regard to Flex-Sil, and no basis 

to seek its divestiture.9 Id. 

Finally, complete divestiture is not required either by law or by the circumstances of this case 

where a parial divestiture would satisfy entirely the FTC's concerns. (FOF 1401-1405). Complaint 

Counsel cannot obtain complete divestiture unless it proves, not just assumes, that such a remedy 

would be necessary to restore the competition allegedly lost through the acquisition. Since it cannot 

do that, the complete divestiture it seeks is not appropriate and is overbroad and punitive. If the 

Court finds the acquisition violated Section 7, a partial divestiture would remedy the claimed 

:.' I 

competitive harm. 

The appropriate remedy to restore competition in the FTC's defined relevant geographic 

market is to divest the PE line at Piney Flats only. The only product Microporous produced that was 

legitimately competitive with Daramic product inside North America was approximately f 

1 CellForce sold into North America from that line each year. (FOF 339, 1329). 

I 

The fact that another PE production line in the United States had been under consideration by
 

Microporous does not show that it would have come to fruition, or that it was competition 'lost' as a 

I result of the acquisition. (FOF 1139, 1145-47, 1149). The evidence at trial made clear that the 

addition of a second PE line at Piney Flats had been suspended at the time f-1 backed out of a


Ii 

deal with Microporous in June 2007 - long before the merger was contemplated, and was never 

resumed. (FOF 1145-47). The Microporous Board had not approved a second U.S. line, and had, in 

fact, mandated that there were to be no new projects or capital expenditures until Microporous could i 

prove the viability of the Feistritz operation. (PX2301 (Heglie Dep., pp. 73; 156); PX2300 (Heglie 

r IHT p. 185); RX00752; FOF 387-95). Adding those facts to the current economic climate and the 

significant leveraged position of Microporous (and its failure to execute contracts for production in 

i. 

9 The Ace-Sil and FIex-Sil production lines are located in a building that is entirely separate from the PE separator line at 

Piney Flats. Thus the physical divestiture of the PE portion of the plant could easily be accomplished without affecting the Ace-Sil and

i. Flex-Sillines. (FOF 333-335). 

PPAB 1585952v1 
- 61 ­

Austria) confirm that such an expansion would not have occurred.10 (PX091O (Trevethan Dep., p.
 

76-77); Trevathan Tr. 3610, 3628-31; Riney Tr. 4962,4969-70; RX00283; FOF 386-409, 427). 

C. There is no Basis for any Required Divestiture of the Feistritz Plant 

The FTC seeks divestiture of the former Microporous plant in Austria (the "Feistritz Plant"). 

For the reasons set forth below, divestiture of the Feistritz Plant is unnecessary, inappropriate under 

the facts and, significantly, outside the jurisdiction of the FTC. 

First, the Feistritz Plant was not a par of the acquisition as an operating facility since it was 

not in operation as of February 29, 2008. (FOF 337). 

Second, the Feistritz Plant is not located within North America, the relevant geographic 

market alleged by the FTC, and was not even owned by Microporous Products LLP, the entity 

regarding which the FTC seeks its extraordinary relief. (Trevathan, Tr. at 3571-72; RX1227, pp. 2, 

39, Exh. A; RX1228; RX1229, p. 47; RXI572). 

Third, inclusion of the Feistritz plant with U.S.-based assets that could be subject to a 

¡ divestiture order would make no contribution to the "viability" of Microporous or any acquiring 

i 

i I 

company. In fact, Gilchrist admitted during the hearing that the Feistritz Plant was not necessary for 

Microporous to be viable, and that Microporous for years had manufactured and shipped separators 

f 

out of Piney Flats to Europe and Asia. (Gilchrist, Tr. at 511, 540-41). 

Fourth, the Feistritz Plant, which came online between March and June 2008, does not sell 

I products to customers located in North America or the United States. (Gaugl, Tr. at 4643; FOF 

I 

1138). 

Fifth, the FTC has not shown that operation of the Feistritz plant enhanced North American 

(or United States) competitive conditions, the United States being the jurisdiction for which the FTC 

10 Additionally, Microporous had obligations to repay grants to the Austnan government that had been negotiated and those 

obligations would have added further financial stress to Microporous going forward. 

PPAB 1585952v1 
I 

- 62­

has authority to act regarding maintenance of competitive conditions. II More specifically, there is 

no evidence that opening of the Feistritz Plant had the effect of enabling the plant in Piney Flats, 

Tennessee, to sell products either in the United States or North America that it otherwise would not 

have been able to selL. (FOF 1139). 

There is no dispute that the plant was not in operation as of Februar 29, 2008. (Gaugl, Tr. 

4603; Gilchrist, Tr. 374-75). The Feistritz Plant did not commence operation until March 2008 and 

did not become fully operational until June 2008. (Id.) Thus, when Daramic acquired Microporous 

it did not acquire an operating plant in Feistritz, but only non-operating assets. (FOF 337). 

Divestiture should not be required of a business that was not par of the acquisition.12 

The Feistritz Plant is also obviously not located within the North American geographic 

market alleged by Complaint CounseL. Indeed, since the FTC generally alleges that production 

facilities outside North America are incapable of competing effectively in North America 

(Complaint ll 16; FOF 1141; RX01572 at 004-005), it is wholly disingenuous to simultaneously 

urge divestiture of the Feistritz Plant. The FTC has, of course, urged that if Respondent's claim of a 

global market is accepted, then this objection would be eliminated. (Kahwaty, Tr. at 5519). 

However, when asked about this at the hearing, Dr. Kahwaty replied that it would be l 

1 (lCahvvaty,
 

Tr. at 5519, In camera). Thus, even if Respondent's global geographic market is accepted, the
 

11 F. Hoffann-La Roche Ltd. v. Empagran SA., 542 U.S. 155, 165 (2004)("(O)ur courts have long held that application of 

our antitrust laws to foreign anticompetitive conduct is nonetheless reasonable, and hence consistent with pnnciples of prescnptive 

comity, insofar as they reflect a legislative effort to redress domestic antitrust injury that foreign anticompetitive conduct has caused.") 

(emphasis in onginal); U. S. Department of Justice & Federal Trade Commission, Antitrust Enforcement Guidelines for International 

Operations (l995)("Anticompetitive conduct that affects U.S. domestic or foreign commerce may violate the U.S. antitrust laws 

regardless of where such conduct occurs or the nationality of the parties involved." "(VV)ith respect to foreign commerce other than 

imports, the Foreign Trade Antitrust Improvements Act ("FT AlA") applies to foreign conduct that has a direct, substantial, and 

reasonably foreseeable effect on U.S. commerce.") Adoption of the predecessor of the FTAIA by Congress in 1982 included 

amendment of the FTC Act to comply with the terms of the 1982 statute. 15 U.S.C. § 45(a)(3)(A). 

12 ABA Section of Antitrust Law, Mergers and Acquisitions at 607 n.18l (3d ed. 2008), citing "Reynolds Metals Co. v. FTC, 

309 F.2d 223, 231 (D.C. Cir. 1962); United States v. Carrols Dev. Corp., 454 F. Supp. 1215, 1222-23 (N.D.N.Y. 1978); United States 

v. Ford Motor Co., 315 F. Supp. 372, 379-80 (E.D. Mich. 1970), aff'd, 405 U.S. 562 (1972); Union Carbide Corp., 59 F.T.c. 614, 657 

(1971 )(reversing heanng examiner order that acquinng company divest plant built after the ilegal acquisition on theory that order 

exceeded the return to status quo mandate of divestiture)." 

PPAB l585952vl 
.1 

- 63­

_ I "competitive effects story does not support any required divestiture of the Feistritz Plant as amply
 

shown at triaL. 

Specifically, testimony at the hearing showed that although Microporous l 

1 (Gilchrist, Tr. at 528-31, 

in camera). In fact, evidence was presented to the Court, that if anything, the Feistritz Plant l 

1 (FOF 1143). 

It is undisputed that at the time of the acquisition in February 2008, ( 

1 (Gilchrist, Tr. at 502). The Microporous Board was concerned about Microporous' 

financial situation given this exposure and questioned Gilchrist's financial acumen. (Heglie, Depo. 

at 91-93, 149-53). The Feistritz Plant today is no where near full and is only where it is because 

Dararc closed its Potenza plant of l 1 and relocated production 

to Feistritz. (Hauswald, Tr. at 922, in camera; Gaugl, Tr. at 4572-73). 

Whatever may have been the circumstances as of February 2008, it is quite clear today that 

adding Feistritz to a divestiture package would only create serious viability issues for the "newco" 

and would add to the difficulty of accomplishing divestiture. Feistritz is now operating at 

diminished capacity and 2009 forecasts were that, considered as a free-standing entity, Feistritz 

I ' would have l 1 (Gaugl, Tr. at 4569, 4571; Riney, Tr. at 4962, 

4969; FOF 1144). Moreover, without the addition of the transferred Potenza orders, the capacity 

level at Feistritz would only be about l 1 (Gaugl, Tr. 4572-73; FOF 1144). This is the level 

at which Feistritz would be operating had the merger not occurred. Including Feistritz operating at 

1 of capacity with a l 1 would 

create an extremely unattractive divestiture package. In addition, divestiture would also result l 

PPAB 1585952vl 

l 
- 64­

1 (Riney, Tr. at 5020-22; FOF 1144). 

Nor is there evidence to support any claim that the Feistritz plant has indirectly added to 

output or otherwise promoted competitive conditions in the U.S. or North America. While the 

CellForce line at Piney Flats was apparently operating at or near full capacity in 2005, there was 

discussion of expanding that capacity (Trevathan, Tr. 3582) and an expansion plan was momentarily 

considered, that plan was terminated in 2007, never revived and the Piney Flats CellForce line is 

now operating at l 1. (Trevathan, Tr. 3647; Gaugl, Tr. 4558-65; Trevathan, Tr. 

.1 

3598-3615; FOF 1145). 

I At the time of the acquisition, apparently some l 1 of the PE line at Piney Flats was 

being exported to Europe and sold to l 1 (Trevathan, Tr. 3774; Gaugl, Tr. 4555; FOF 

1146). The plan, which was implemented, was for the l 1 product to be produced at the 

Feistritz plant when it came online. The numbers noted above show that the CellForce line at Piney 

Flats did not add to its customer base after the transfer of l 1 of its production to Feistritz. The 

transfer to Feistritz theoretically enabled Piney Flats to produce more product for U.S. and North 

Ii i I 

i j America sales, but that production did not occur and that has never been the reality. (FOF 1146).
 

Various plans had been considered regarding the addition of production facilities in Europe 

and at Piney Flats by Microporous over the years. (FOF 1147). Ultimately, one line of the facility at 

Feistritz was to be used to supply l 1 in Europe. (FOF 395, 1147). Although Microporous 

began makng purchases of "long-lead" equipment for three lines initially (two in Austria and one in 

Piney Flats), consideration of adding the "third" line in Piney Flats was based on conversations first 

I with l 1 for the production of SLI material in the US. (FOF 1147). Ultimately, 

however, l 1 termnated its interests in purchasing product from Microporous and entered into an I 

agreement with l 1, in Mayor June 2007, at which time the equipment purchase was 

I 

PPAB 1585952vl 
- 65 ­

put "on hold." (RX00047; FOF 1147). Despite various discussions with l 1 the equipment 

orders were never resumed and no work was done by Microporous for any US expansion for 

l 1. (FOF 1147). The equipment that had already been purchased was put in boxes and, as of
 

June 2009, it was still sitting in those boxes located in Feistritz and Piney Flats. (Gaugl, Tr. 4558­

65; Trevathan, Tr. 3598-3615; FOF 1147). 

Trevathan testified that producing the l 1 products at Feistritz freed up capacity at 

Piney Flats (Trevathan, Tr. 3721) and "helped Microporous expand its business in the United 

States." (Trevathan, Tr. 3773). He said that "we would be able to go out to customers and bring in 

incremental volume." (Trevathan, Tr. 3774). But he was never asked and never testified that 

Microporous actually obtained new business in the U.S. that made use of the freed-up capacity. 

And, while Gilchrist testified that Microporous "had more offers for business than (it) was going to 

be able to handle" (Gilchrist, Tr. 344) after the l 1 business was transferred to Feistritz, he 

was unable to identify any customers pertinent to such business. (Gilchrist, Tr. 503; FOF 1148). 

In short, there is no credible evidence that the capacity at Piney Flats that became available 

as a result of the Feistritz plant was actually put to use producing product for U.S. or North 

American customers. And there is certainly no credible evidence that that capacity was necessary to 

enable Piney Flats to supply all of its customers. (FOF 1149). 

Accordingly, there is no basis for any requirement that the Feistritz plant be divested. 

D. Any Competitive Har From the Merger Could Be Addressed Through Divestiture 

of Microporous' PE Line in Piney Flats 

As noted above, no evidence has been presented to this Court that Daramic's acquisition of 

the ACE-SILCI product line from Microporous has had any anticompetitive effect. (FOF 1151). 

Accordingly, there is no basis for its request that the ACE-SILCI production line be divested. 

PPAB 1585952vl 
- 66­

Further, l 

1. (FOF 1152). Thus, ( 

! I bays. (Gilchrist Tr. at 311-14, 539; Hauswald Tr. at 999-1000; FOF 1155).
 

1 (FOF 1152). A divestiture of Daramic HD would be 

easier to accomplish than a divestiture of a CellForce production facility, as there would be no 

I 

, lingering issue of obtaining the ACE-SILCI dust. Divestiture of the PE line with the ability to make 

I Daramic HD would produce the same competitive effect and avoid the issue of obtaining the ACESILCI dust by the acquiring company that it would need to make CellForce. (FOF 1153). 

I 

If there were some competitive concern about the alleged motive market segment, such 

I concern could be adequately addressed by divestiture of the PE line in Piney Flats designed to 

produce straight PE separators and also having the ability to produce either CellForce or HD. That 

capacity would replicate the capacity of Microporous PE line pre-merger. (FOF 1154). 

Evidence has been presented to this Court that a divestiture of the PE line at Piney Flats is 

feasible. The Piney Flats facility is actually comprised of two plants: a rubber plant and a PE plant. 

The rubber and PE plants are housed in separate facilities and have separate entrances and loading 

I!

I 

I 

I 

I 

PPAB 1585952vl 
- 67­

E. The Other Relief Sought is Punitive and Unnecessary
 

There is no factual or economic basis for any of the other remedies sought by the FTC in its 

brief. Among other things, the FTC seeks: 

(a) Assignment of contracts to the new entity, recession of contracts and assignment or 

licensing of all intellectual property and know-how associated with the relevant markets. The 

wording of this extraordinar remedy would suggest that Complaint Counsel believe that Daramic
 

should be required to license or assign its own IP and know-how for the products the FTC alleges 

fall within their relevant markets (to the extent they able to identify such products). To that extent, 

this requested relief is clearly punitive and should not be allowed. 

(b) The provision of services that are currently provided by Daramic to the former 

Microporous locations. The FTC cannot justify a request for relief that would require Daramc to 

provide services to a new competitive company that it did not provide to Microporous prior to the 

acquisition. Daramic has, as noted above, provided services after the acquisition to the former 

I 

Microporous locations to make them more efficient, better able to monitor their scrap usage, increase 

the use of recycled material, improve their extraction and extrusion techniques and reduce the use of 

solvent, among others. To restore competition to the state it would otherwise have been today 

cannot include forcing Daramic to provide services to make any new company more efficient and 

competitive than it would have been but for the transaction. This again is a punitive remedy and is 

inappropriate. 

(c) The rescission of non-compete agreements between Polypore and its employees.
 

l Polypore employs thousands of people in three different companies. Complaint Counsel appear to 

claim that it is entitled to a remedy whereby any and all non-compete agreements Polypore has with 

PPAB 1585952vl 
- 68­

any of its current and/or former employees are rescinded. This goes well any possible beyond 

legitimate relief. 

(d) A covenant not to sue the divested entity for its use of PE technology. Again, any 

such relief could not be justified. In fact, a full divestiture of the former Microporous should 

require that the settlement of the previously pending arbitration between Microporous and Dararc 

be rescinded. This settlement was par of the consideration for the acquisition. If Microporous were 

to be reconstituted with the Feistritz plant, then the state of the competitive landscape prior to, and 

but for, the acquisition includes that arbitration. To also suggest that Daramic be required to give up 

its constitutional and statutory rights to protect its intellectual property and trade secrets should 

Microporous attempt to use them in violation of the law, is outrageous and should be denied. 

(e) Relief Related to the H& V Agreement. Complaint Counsel have failed to prove any
 

violation of Section 5 of the FTC Act regarding the agreement between H& V and Daramic. 

Although the agreement between H& V and Daramic was a legitimate joint venture, it has been 

terminated and no relief is necessary. 

(f) No exclusionar Contract Relief is Necessary. Complaint Counsel failed to prove
 

I' 

I I that Daramic had monopoly power. In addition, Microporous was not excluded from any separator
 

business because it either lacked production facilities or capacity at the time in question or evidence 

relating to the customers indicates that they would not have purchased from Microporous in any 

event. No relief is necessary. 

XII. SUMMARY AND CONCLUSION 

As set forth above, Respondent has not violated Section 5 of the F.T.C. Act or Section 7 of 

I the Clayton Act and the Court need not impose any remedy. However, should the Court find that a 

I 

l 

violation has occurred, the divestiture remedy sought by Complaint Counsel is extreme and 

inappropriate and should not be ordered. The FTC has not met its burden of proving that its 

PPAB 1585952vI 
- 69­

proposed remedy is proper, or that such a remedy would restore the allegedly "lost" competition in 

any of its relevant markets. When viewed through the lens of today's economic realities, Complaint 

I 

Counsel's proposed remedy is more likely to har competition than help it. Respondent has
 

proposed a number of remedies which would restore any competition the Court finds has been lost I 

without the danger inherent in Complaint Counsel's proposed remedy. 

For the reasons set forth herein, Respondent respectfully requests that Complaint Counsel's 

i
 

i
 

. I claims be dismissed with prejudice, and that judgment be rendered in Respondent's favor.
 

PPAB 1585952vl 
¡, 

I
 

I
 

Dated: July 17, 2009 

i
 

i
 

Respectfuly Submitted,
 

illam L. Rikard, Jr. 

Eric D. Welsh 

PARKER POE ADAMS & B STEIN LLP
 

401 South Tryon Street, Suite 3000
 

Charlotte, NC 28202
 

Telephone: (704) 372-9000
 

Facsimile: (704) 335-9689
 

wiiiiamikard~parkerpoe.com
 

ericwelsh~parkerpoe.com
 

John F. Graybeal 

PARKR POE ADAMS & BERNSTEIN LLP 

150 Fayettevile Street 

Raleigh, NC 27602
 

Telephone: (919) 835-4599
 

Facsimile: (919) 828-0564
 

johngraybeal~parkerpoe.com
 

Attorneys for Respondent 

PPAB 1585952vl 
CERTIFICATE OF SERVICE 

I hereby certify that on July 17, 2009, I caused to be filed via hand delivery and electronic 

mail delivery an original and two copies of the foregoing Respondent's Post-Trial Brief ¡PUBLIC 

RECORDj, and that the electronic copy is a true and correct copy of the paper original and that a 

paper copy with an original signature is being fied with: 

Donald S. Clark, Secretary 

Offce of the Secretary 

Federal Trade Commission 

600 Pennsylvania Avenue, NW, Rm. H-135 

Washington, DC 20580 

secretary~ftc. g;ov
 

-I 

I hereby certify that on July 17, 2009, I caused to be served one copy via electronic mail 

delíveryand four copies via hand-delivery of 
 the foregoing Respondent's Post-Trial Brief (PUBLIC 

RECORDj upon: 

The Honorable D. Michael Chappell 

Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Avenue, NW 

Washington, DC 20580 

oali~ftc.gov 

I hereby certify that on July 17, 2009, I caused to be served via first-class mail delivery 
 and 

electronic mail delivery a copy of the foregoing Respondent's Post-Trial Brief ¡PUBLIC 

RECORDj upon: 

1. Robert Robertson, Esq. Steven Dah, Esq. 

Federal Trade Commission Federal Trade Commission 

600 Pennsylvania Avenue, NW 600 Pennsylvania Avenue, NW 

Washington, DC 20580 Washington, DC 20580 

rrobertson~ftc.gov sdahm~ftc. gOV

i 

i Cle.~ 

Adam C. Shearer 

Parker Poe Adams & Bernstein LLP 

Three Wachovia Center 

401 South Tryon Street, Suite 3000 

Charlotte, NC 28202 

Telephone: (704) 335-9050 

Facsimile: (704) 334-4706 

PPAB 1585952vl