UNITED STATES OF AMERICA
 

BEFORE THE FEDERA TRAE COMMISSION
 

In the Matter of ) 

)

Polypore International, Inc., )

a corporation. ) 

) 

PUBLIC 

Docket No. 9327
 

COMPLAINT COUNSEL'S POST-TRIL FINDINGS OF FACT
 

RlCHARD A. FEINSTEIN 

Director 

NORMAN ARMSTRONG 

Acting Deputy Director 

Bureau of Competition 

CATHARIE MOSCA TELL!
 

Assistant Director 

MORRS BLOOM 

Deputy Assistant Director 

Bureau of Competition 

Mergers II 

J. ROBERT ROBERTSON 

STEVEN DAHM 

BENJAMIN GRlS 

JOEL CHRlSTIE 

STEPHEN ANTONIO 

CHRlSTIAN WOOLLEY 

PRI A VISW ANATH 

Federal Trade Commission 

Bureau of Competition 

600 Pennsylvania Ave., N.W. 

Washington, DC 20580 

Telephone: (202) 326-2008 

Fax: (202) 326-2884 

Counsel Supporting the Complaint 

July 17, 2009 
POL YPORE, D. 9327 

COMPLAINT COUNSEL'S
 

EXHIBIT INDEX
 

IN CAMERA
 
POL YPORE, D. 9327
 

COMPLAINT COUNSEL'S
 

WITNESS INDEX 
Arthur Balcerzak 

Christo he Thuet 

Dale Leister 

Dan Weerts
 

Don Wallace
 

ie 

Eric He lie 

Gu Dauwe
 

Hans-Peter Gau I 

Har Seibert 

Consultant 

Crown Batte 

Business Director for 

Asia/Pacific 

Daramic 

Director of Procurement 

Strategy and Supplier 

Development 

East Penn 

VP Sales and Marketing 

Entek 

Executive VP of Sales and 

Marketing 

US Batte 

Vice President, Global 

Procurement 

Exide 

Principal 

Industrial Growth Partners 

Vice President of Business 

Development, North 

America 

Atraverda Limited 

Managing Director 

Amer-Sil 

Managing Director of 

Austrian Facility 

Daramic 

VP, Business Director 

Daramic 

Director 

LECG 

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1 
James Dou las 

James Kun
 

John Crai 

John Ga e 

John Sim son 

Kevin Porter 

Kevin Whear 

Minority Owner, Member of 

Board of Directors 

Baoding Fengfan Rising 

Se arator Co. 

Chairman and President 

Eners s 

Senior Director of 

Engineering and Quality 

Assurance 

EnerS s 

Economist / CC Expert 

Witness 

Federal Trade Commission 

Director of Glass 

Technology 

Hollin sworth & Vose 

VP Technology 

Daramic 

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2
 
Lar Axt
 

Lar Burkert
 

Lar Trevathan
 

Michael Gilchrist 

Michael Gilchrist 

Michael Graff 

Mitchell Bre man 

Nawaz Qureshi 

Vice President of Global 

Procurement 

Eners s 

Senior Procurement 

Manager 

EnerS s 

Business Unit Manager, 

Teledyne Fluid Systems 

(Former VP of Operations 

at Microporous) 

Daramic 

CEO & President 

Atraverde Ltd
 

(former President & CEO 

of MPLP 

CEO & President 

Atraverde Ltd
 

(former President & CEO 

of MPLP 

Managing Director 

Warbur Pincus 

President of Industrial 

Americas Division 

Exide 

VP Engineering and 

Technology 

US Batte 

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3 
Norman Ben'amin 

Pierre Hauswald 

Rick Godber 

Robert Cullen
 

Robert Toth 

Rod er Hall 

Steve McDonald 

Tim Rine
 

Tucker Roe 

VP-General Manager 

Daramic 

CEO & President 

Tro'an Batte 

VP of Sales and Marketing 

Hollin sworth & Vose 

President and CEO 

(PolyPore)

Daramic 

Global Vice President of 

Procurement 

JCI 

Sales Manager 

Daramic 

VP Finance 

Daramic 

Vice President, Sales and 

Marketing 

Daramic 

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4
 
POL YPORE, D. 9327
 

COMPLAINT COUNSEL'S
 

FINDINGS OF FACT
 

AND
 

CONCLUSIONS OF LAW
 
i. Jurdiction ........ ....,.... .....,......... ...... ............. .... ....... ............. ........... .................... 'mm.. .....,.... ,. .... ......... ...... ........ 5
 

II. Background ...m........................m....'.........'.....m..................................m.....m........,..................................m.. 5
 

A. Overvew of Tranaction .. ........... ......... ..m.....'.. .... ................... ......... ................ ....... ...m.. ...... ,...... ...... ....... 5
 

B. Pares .... ............ ,...... ...... ...... ...... ......... m........ ..... .......... ....... ..... ...... ....... ............ .................... .......... ........ 5
 

1. Polypore competes in the flooded lead acid batter separtor industr though its Daramc business unt .. 5
 

2. Microporous ... ...... ....., .......m ............ ................. ....... ..... ......... ......... ........... ............ ...... ..................;......... ...... 6
 

m. Product Markets ................ ........... ...... .,..............,.. .................. .......' ....,. ..... ...................,.. ..... ....... m" ..... ,. ....... 7
 

A. Flooded Lead Acid Battry Separtors Generally .....m........m.................................................................. 7
 

1. Physical Distinctions Afect Perormce ......................,.....,................mm...................m............m........... 7
 

i) Formulations...,. .............. .... .........................'.,.. .... ...... ... ... ............,.. ...... ...... ............ ...... ,....... ........... .........8
 

ii) Thickness....... .................. ......... ....... ,....,.......... ....... .... ............., ....,. .....,....... ........... ......... .............8
 

iii) . Applications................ .......................... ....... .m... ......... ............ ..... ............ .......................... .... .....m. 9
 

2. Separtors are not substitutable for dierent end use applications........mm..................,m.........................9
 

3. Producers can price discriate by end use applications......................,...................................................9
 

i) Aritrge will not defeat price discriation by end use application ...................................................12
 

B. Product Markets Generally.... ....................,...... ........, .............. ..... ............ .......,.......... ......... ............ ....... ....12
 

C. Deep-cycle Battry Separators are a Product Market...............................................................;..................13
 

1. Product Chacteristics ..... ........ ...... ..................... ..... ........ ..... ..... ......... ....... .................,. .......... .......,.... .......13
 

i) Role of Antimony ..................................................................................................................................14
 

ii) Need to suppress antimony trnsfer .............................................................................................. 15
 

a. Pue Rubber (Flex-Sil) .............. .............:................................................,....................................15
 

b. Rubber/PE Hybrid (CellForce and HD)......................................................................................... 16
 

2. PE Separators do not work in Deepcycle .................................................................................................. 16
 

3. Other Technologies do not work in deepcycle ...................................................................~...................... 17
 

4. End Use Applications .......,..................................................m......' ......,.................................................18
 

i) Origina Equipment ..... .............................................................................................,..............................18
 

n) Afer Market ................................................................................................................................18
 

5. Demand for Deep-cycle Separtors is inelastic ..........................................................................................18
 

i) Post Acquisition Price Increases on Deep-cycle Separators have not Induced Switchig to non-rubber
 

based- separators.. ...., ......... ..... ....... ............ ............ ..................... ...... ................ .... ..... ....... ........ .......... ......... ....18
 

ii) Limted Supply ofDeep-cyc1e separtors due to Owensboro stre did not càuse substitution to
 

non-deep-cycle separtors ... ........... .......... ........ ...... ...... ..... ......... .... ................. .......... ....... ....... ... .... ............ ..... 19
 

D. Motive Separtors are a Product Market ..........................................,.........................................................20
 

1. Product Characteristics ...... .........' .............. ....... ........... ................................ ............... ......... ... .......... ...... ..... 20
 

i) Thickèr than other separtors ...........................................,.....................................................................20
 

ii) Unique Formulations. ....... ........ ............. ..... ........ ......... ..... ............ ........ ....... ..... ..... ....... ....... ....... .... 20
 

2. End us applications.. ........ .... ............... ....... ...... .......... ........ ..... ..............,., .......... ......... ....... ............ ..... ......21
 

3. Respondent recognes motive separtors as a distict market in documents .............................................21
 

4. PVC is not an alterntive in Nort America..............................................................................................21
 

5. Demand for motive separtors is inelastic...................................................................................................22
 

E. UPS Separators are a Product Market .....................................................................................................23
 

1. Product Charcteristics ........ .... ............. ........... ..................... ............ ..... .......... .......... ..... .................. ....... 23
 

2. Special Formulations .... ............ ................ ....... ............ ........... .......... ....... ............. ..... ........... ........... ......... 24
 

F. SLI Separtors are a product Market..........................................................................................................24
 

1. Product Chaacteristics........ .......... .................. ......... ............. ..... ....... .................. ..... ......... ........................ 25
 

2. Physical Distictions Affect Pedormance .......... .....:.. .............. ........... ....... ..... ............ ....... .........................25
 

N. Geogrphic Market is Nort Amerca ............................................................................................................26
 

A. Manufactuers in Nort America can price discriate to customers based on geography.......................26
 

B. Darc charges different prices in different geogrphic regions .............................................................26
 

C. Nort American Customers Look to Nort American Suppliers for Separtors ........................................27
 

i. Lage Nort American customers expect worldc1ass suppliers ................................................................28
 

2. Local Supply a benefit to customers....................................,......................................................................28
 

3. Cost of exportg se artors to Nort America is rohibitivel expensive ................................................. 32
 i) L ......... ....... ........... ................. ..... .............. 33
 
a. )......................................................34


b. ).................... ....... ..... ..... ....... ...... ..._............ ................. 37
 c. )....... ...... ..... .......... .............. ....... ............. 38
 4. Separator manufactuers outside of Nort America do not sell separators for flooded lead acid batteries
 

into Nort Amerca.... ...... .... ........................... ...... ........................... ...... ....... ...... ...................... ....................... 39
 

5. Respondents documents analyzed Nort American market separate from other geogrphic regions .........40
 

V. Market Parcipants..... ....... ....... ....... ...., .... ........ ......... ....... .... ....... ......, ...... ..... '" .... ........ ....... ............. ......... ...... 40
 

A. Daramc and MPLP Were Ony Suppliers of 
 Deep-cycle Separtors in Nort America.........................40
 

1. Darc produces HD ... ............. ...... ............ .............. ......,....... ........ ..... ..... ............. ........... ....... ....... ..... ...42
 

2. MPLP Produced Flex-Sil and CellForce ..................................................................................................42
 

3. No Oter Suppliers in the World...............................................................................,...............................43
 

B. Darc and MPLP were the only Suppliers of 
 Motive Separators in Nort America .............................43
 C. Daramc has been the Primar Supplier of UPS but MPLP is a Market Paricipant and was about to
 

Commercialie a Product..................... ..... ....................... ... ....... ....., ...... ...... ...... .:................. .......... ....... .......... 45
 

D. Darc and Entek were Priar Suppliers of SU but MPLP is a Market Parcipant and was Expandig
 

to Serve Customers in that Market ........................................,...............................................................................45
 

1. Entek is not an uncommitted entrant in any non-SU product market ....................................................47
 

2. Suppliers outside Nort America are not Market Parcipants in Nort America .......................................49
 

VI. Competitive Effects......... ...... ......,. .... .......................... ...... ....... .......................,........ .... ...................... ......... 50
 

A. MPLP and Darc were Closest Competitors in 3 of 4 Markets..............................................................50
 

1. Darc was MPLP's only competitive Constraint in Deep-cycle ...........................................................50
 

i) Darc DC Introduced to Compete with MPLP's Flex-Sil..................................................................51
 

a. Darc DC Won Business from MPLP's Flex-Sil......................................................................52
 

ü) MPLP Responded to Competition ...................................,.............................................................53
 

üi) Darc Improved Product and Introduced HD ........................................................................53
 

a. Customers Viewed Darc HD and MPLP's Deep-cycle Products as Substitutes.......................57
 

b. HD Took Sales from MPLP.....................................................................................................58
 

c. HD Constrined Pricing ofMPLP ..............................m............................................................. 59
 

d. MPLP Responded to HD with CellForce....:...............................................................................~.64
 

e. Flex-Sil, HD and CelIorce Compete for OEM Business .............................................................65
 

B. The acquisition had anti-competitive effects in the deep-cycle maket...................................................... 65
 

1. An anticompetitive effect of 
 the acquisition is Darc's refual to honor MPLP commtments to Trojan.
 

65
 

2. Daramc's post-acquisition strategy is to sell the higher priced Flex-Sil to deepcycle customers that
 

wanted a cheaper alternative ...... ............. ....... ...... ...... ............ ...... .......... .......... ..... .................. ..... ................ 68
 

C. MPLPwas Darmic's only competitive Constrt in Motive................................................................ 70
 

1. Darc viewed MPLP as a theat ........................................................................................................ 72
 

2. MPLP took sales... ........ -. ................... ...... ........... .......... .... .............. ....... ...... ............ ~.... ........ ...... ............ ..... 75
 

D. MPLP wa Darc's only competitive constrait in UPS ..................................................................... 76
 

1. MPLP was in the process of commercializg a UPS separtor to address the black scum issue .............. 77
 

i) MPLP expected sales in late 2008 or 2009-07-08 ......................................~........................................ 78
 

2. Acquisition ended MPLP's effort to address black scum in UPS ..............................................................79
 

i) MPLP development team eliminated................................................................................................. 79
 

E. MPLP was a Competitive Constrt in SLI ......................................................................................... 79
 

F. The acquisition wil facilitate coordiation in the SU market .............................................................80
 

1. SLI market has only two competitors tOday .........................................................................................82
 

2. Respondent documents state that competition is not strong in SU ......................................................... 83
 

G. MPLP wa expanding in SU at customers' request....................................................................................83
 

1. Worked with customers to quali in SLI.........................................................................................:......84
 

i) Work with JCI in 2003 to brig competition to SU market.......................................................:........84
 

a. Darc forced JCI into contract extension tht styed entr .................................................84
 

2. JCI renewed work with MPLP in 2005 ................................................................................................. 89
 

i) JCI negotiations ended. ........ ..... ....... ...... .............. ....... ................ ................... ............ ........ ................. 90
 

ii) MPLP worked with Exide to become supplier of SU separtors up until acquiition ..................91
 

2 
iii) MPLP also held discussions with East Penn regarding SLI separtor supply............................... 93
 

iv) MPLP planed to sell SLI separators to European customers as well ......:.....................................94
 

H. SLI separtor maket revert to a duopoly as a result of acquisition which elimiated a global new entrnt 

95
 

I. Daramc acquired MPLP to eliinate a competitive theat..........................................................................97
 

J. Darc tred to stop MPLP from buidig a European plant by suing MPLP for using Jungfer technology in
 

. Europe ........................ ...... ............... ....... ........... ....... ........... ........... ....... .................., ........ ............ ............ ..........99
 

K. Prior to the Acquisition MPLP was Expanding..................................................................................... 1 00
 

1.. MPLP was Adding Capacity ............~...................................................................................................100
 

i) Secured all ofEnerSys's Motive Business ..........................................................................................101
 

a. Commtted to build capacity in the US for EnerSys..................................;~...............................101
 

ii) Backfil supply for Nort America ............................................................................................102
 

a. MPLP wa marketig backfll CellForce Capacity in competition with Daramic.....................l03
 

2. MPLP owners had fuded and were willng to contiue to fud MPLP expanion plan....................... 	 103
 

i) Mandate had no impact on MPLP's existig expansion plans ........................................................... 103
 

L. Competition between Daramc and MPLP increased in 	 the months preceding the acquisition.....:......... 105
 

M. The acquisition eliated capacity expanion plan .............................................................................. 106
 

1. Discussions with Daramc impacted MPLP expanion plans................................................................ 107
 

2. Acquisition elimiated the inovation competition between MPLP and Daramc .................................... 107
 

i) Inovation competition exited in deep-cycle .................................................................................... 107
 

ii) Inovation competition existed in UPS ...................................................................................... 108
 

ii) Inovation competition existed in SLI................................................................................... 110
 

N. Daramc Reaction to the MPLP Expanion - The MP Plan ...................................................................110
 

1. Polypore Board documents analyzing the acquisition predict unlateral anticompetitive effects..............114
 

i) Daramc acquired MPLP to avoid market share loss and EBITDA loss ...............................................117
 

ii) Daramc acquied MPLP in order to rase prices ...........................:...........................................119
 

ii) Darc acquired MPLP to avoid capacity expansion ................................................................120
 

2. Polypore Board approved the acquisition based on the due diligence team's fidigs as stated in the Board 

Documents.........................................................................................................,...............................................120
 

3. MPLP recognzed that Darc's offer to acquie it elited competition .........................................121
 

i) MPLP and Dararc found assignent of contrcts irelevant because customers had no options .......123
 

4. The acquisition resulted in anticompetitive price increases................................................................... 123
 

O. Daramc Used its Enhanced Market Power to Extrct Monopoly Rents in 2008 and 2009 ....................126
 

VII. Entr into the Batter Separtor Markets at Issue would not be Timely, Likely 	 and Suffcient .................. 128
 

A. General.... ........ ....... ..... ............ ...................... ...... ........ ................ ................. ........ ....... ..... ........ ....... ...... 128
 

B. Buildig and operatig a PE line is a long and diffcult process ........:...................................................129
 

1. MPLP entr into PE at Piney Flats took many years........................................:.................................... 132
 

2. MPLP expaiion in Austra took longer than two years as well............................................................. 134
 

3. Development of a new separtor is a lengty, and not always successfu process ....................................136
 

C. Customer switchig times are barers to entr .....................................\.......:...................................137
 

1. Genera ............. ........... ......,.. ............ ....... ....... ..... .................. .............. ............. ..... ........ ............ ....... .......137
 

i) Testig for motive and UPS ...............................................................................................................138
 

a. PVC testing taes two years ................................................................................................. 139
 

2. Deep-cycle testig ............... ....... ...... ...... ....... ............ ...... ....... ........ ..... ..... ....................... ..... ...... .............. .139
 

3~ SLI testig. ........ ...................... ....... ....... .............. .......... ....... .............. ...........:. ................... ....... ............ .140
 

i) Darc documents recogne long testig time...............................:.................................................. 141
 

D. The PE separtor manufactug process is complicated and requires special know how...................:.... 141
 

1. Lack of experience is a barer to entr: ................................................................................................ 142
 

E. Entek is not likely to enter the deep-cycle, motive or UPS markets...................................................... 142
 

F. Amer-Sil is unely to enter any of the Nort American makets for PE or deepcycle separtors ........145
 

G. Regional separtor manufactuers are not likely to begin supplying batter manufactuers in Nort 

Amerca.... ...... ....... ..... ....... ....... ..... ...... ...... ......... ..... ....... ....... ..... ................................. ....... .............. .................... 146
 

H. None Of the l-i maufactuer will be a significant supplier to Exide in the next two years............ 	 146
 

I. Epoch and Baotou are less liely to supply tò Exide in Nort Amerca than BFR ..................................... 148
 

3 
J. NSG is not an option for supply ofPE separtors to customers in Nort America....~................................149
 

K. Asian entr would not be suffcient to relace MPLP ............................................................................149
 

1: l-)....................................................................,.....,....,............................;............153


i) -~cogne that barers to entr exist..............................................................154
 

2. MPLP alo recogned barers to entr ..............................................................................................156
 

i) Risk of acquisition by Darmic is a barer to entr. ........................................................................156
 

ii) IP and Proprieta Technology are barers to entr .............................................;...................157
 

iii) Battery separator manufactug equipment and experienced personnel are not readily available
 

158
 

3. Scale is required for suffcient entr................................,...,.............................:.....................................160.
 

L. Batt maufactuer are not liely to vertcally integrate into separtor maufactug....................... 
 162
 

vnI. Respondent has no failing fi defense..........................................,......................................................163
 

IX. Effciencies ........... ............ ..... .............. ..... ... ............ ..... ...................... ..... ................... ....... ....... ....., ........ .......164
 1. ): ..165
 X. Monopoliation. ....... ....... ........ ..... ......., ........... ......... .... ....... ...... ..... .... .......... ..................... ....... ....... ...... ........ 165
 

A. . Existi Market Power .....................................................................................................;...................165
 2. ).......................167


3. .. ....... ..... ....... .......... ................ ....... ...... .................. .......... ..... ........ 168
 

B. In 2007, Darc solicited Microporous's agreement to not enter the SLI separator market in exchange for
 

Daramic's deepycle technology ...............................:................;...................................~...................................170
 

1. Market conditions were favorable for using exclusive contrcts to impede entr. ....................................171.
 

2. Market share discounts can have simlar effects as exclusive contrcts. .................................................172
 

C. Darc's Latest Effort to Block the MPLP Expanion - the MP Plan............................................... 
 173 

D. Exclusiona effects on MPLP. .............................................................................................................173
 

E. Darc did not need to use exclusive contracts to att effciencies...............................,................... 
 174
 

i) Hard Ball:.... ................ ........... ............... ......................... ....... ................... ..... .......,......... ...... .... ....... ..174
 

F. EnerSys Story ........................................................................................................................................175
 

1. The Impact of the Contrct Extension with Darc .........................................................................181
 

XI. Hollgswort & V ose.... ......... ..... ...... ....... ..... ............................. .... ...... .... ............. ........ ..... .......... ..... ...... ...182
 

XI. Remedy... ..... ................... ..... ....... ........ ..... ..... ..... ... ....... ......... ........ .... ...... ....... ............... ..... ...... ......................186
 

XI. Witness Backgrounds ..............~................ ........ .,........ .......... ...... ........ ......... .......... ........~... ........ ......... ....... 190
 

PROPOSED CONCLUSION OF LAW ..........,................................................................................................. 197
 

4 
i. Jursdiction
 

1. Daramic is, and all times relevant herein, has been engaged in "commerce" as defined in 

Section 1 of the C1ayon Act, as amended, 15 V.S.C. § 12, and is a corporation whose 

businesses are in or affect "commerce" as defined in Section 4 ofthe Federal Trade 

Cotiission Act, as amended, 15 U.S.C. § 44. (R01589 at 003).
 

II. Background
 

A. Overew of 
 Transaction 

2. On Februar 29,2008, Daramic Acquisition Corporation, a subsidiar of 
 Polyp ore, 

acquired 100% of the outstading stock of Micro porous Holdings Corporation, the parent 

of Micro porous, from Industral Growt Pares II L.P.("IGP") and other stockholders. 

(R01589 at 003; PX0162 (Stock Purchase Agreement, in camera)). 

B. Partes
 

1. Po1ypore competes in the flooded lead acid batter separator industr
 

though its DaIamc business unt 

3. Po1ypore Interational, Inc. ("Po1ypore") is a leading global high technology filtration
 

company that develops, manufactues, and markets specialized microporous membranes 

used in the separation and fitration processes. (PX2160 at 006). Its products and 

technologies are used in two primar segments, energy storage and separation media. 

(PX2160 at 006). The energy storage business accounted for approximately 74% of 

Po1ypore's $610.5 millon of2008 fiscal net sales. (pX2160 at 006,028). 

4. The energy storage segment includes two businesses ­

1 (PX0901 (Toth, Dep. at 22), in camera). The name of the electronics 

business is Celgard, which makes lithum ion separators for small e1ectr~oth, Tr.
 

1498-1499). The name of 
 the transportation and industral business is _1 

(PX0901 (Toth, Dep. at 28-29), in camera). 

5. Po1ypore's separation media segment and its lithum ion electronics business segments
 

are not at issue in ths matter. 

6. Daramc is the business unt in Po1ypore that manufactuers and sells separators for 

flooded lead-acid batteries. (Hauswald, Tr. 661). Darc contrbutes about half of 
 the 

revenues to Po1ypore. (Toth, Tr. 1386; see also (Hauswa1d, Tr. 1159 (More than half of 

Po1ypore's business is Daramic in ters of dollars.); PX0908 (Amos, Dep. at 111), in 

camera (Daramic represents approximately -l% of 
 Polyp ore's revenue)). 

7. Daramic has thee manufactug facilities in the United States which make PE separators 

- Owensboro, Corydon, and Piney Flats. In addition, Daramic has PE separator 

5 
manufactung facilities in Feistrtz, Austra; Prachinbur, Thailand; Tianjin, China; 

Bangalore, India; Selestat, France; and Potenza, Italy. (Hauswa1d, Tr. 711-13;PX0582 at 

018). 

8. Daramic has a history of acuirng separator plants. In ápproximate1y 1999, Daramc
 

acquied a plant that produces SLI separators from Exide, a large batter manufactuer. 

(Gilchrst, Tr. 319-320). Later, Daramic acquired Jungfer, an Austran separator 

manufactuer which, in addition to sellng PE separators to European batter 

manufactuers, sold polyethylene manufactung lines to other separator manufactrers. 

(Gilchrst, Tr~' 320-21).
 

2. ~icroporous
 

9. Microporous Products L.P., ("~icroporous" or "MPLP") was a leading developer, .
 

manufactuer, and marketer of 
 highy specialized rubber and polyethylene battery 

.separators for use in lead-acid batteries. (pX0131 at 008). Michael Gilchrst was 

President and CEO of Microporous. (PXOI31 at 009). Prior to the acquisition of 

Microporous by Daramic, Microporous's management team had more than 170 years of 

aggregate industr experience with an average of more than 1 o 
 year serice with 

Microporous. (PXOI31 at 009). 

10. Microporous is a subsidiar of Microporous Holding Corporation, a Delaware
 

corporation. (pX0162 at 005, in camera). Microporous Products, GmbH, an Austran 

registered company, is a solely owned subsidiar of 
 Micro porous. (pX0611 at 003). 

11. Microporous waS the successor of a company called American Hard Rubber, which
 

produced rubber separators and other products in New Jersey beginng in the early 

1930's. In the early 1950's, Amerace Corporation acquied Amercan Hard Rubber. 

Microporous was formed in the mid-1980's as a 
 result ofa leveraged buy-out by a 

management group occurng around the tie that another:f bought Amerace's other
 

product lines. (Gilchrst, Tr. 313-315). 

12. Microporous sold thee brands of batter separators: i) F1ex-Sil which was 

predomiantly used in deep-cycle batteries; ii) Ace-Si1 'which was used in high-end 

stationar applications (i.e., industral batteres); and iii) CellForce which, at the tÙIe of 

the acquisition, was predominantly used in deep-cycle and motive power batteries. 

(Gilchrst, Tr. 300-301). 

13. Prior to the acquisition, Microporous owned plants at Piney Flats, Tenessee and
 

Feistrtz, Austra. The plant in Piney Flats includes a building for-1e manufactue of 

F1ex-sil iid Ace-Si1, and an adjoinging building for the manufactue of Cell Force. The

two buildings have never operated "independently." (Gaugl, Tr. 4641). At the Piney
 

Flats plant facility, Microporous operated thee production lines - one line for each of its 

6 
three products (i.e., F1ex-Si1, Ace-Si1 and CellForce). (Gilchrst, Tr. 311; see PX0078, in 

camera). 

14. Microporous employed seven or eight employees in its lab and testing facility at its Piney 

. Flats location. (Gilchrst, Tr. 326). Having a lab and testing facilities was imperative to 

. MPLP's ability to compete in the marketplace. (Gilchrst, Tr. 327-328). 

15. Prior to the acquisition, Microporous had about 15 employees at its Feistra facilty. As
 

the facility moved into (u1 production mode, Microporous anticipated having up to 40 

employees at the facility. (Gilchrst, Tr. 333-334). 

III. Product Markets
 

A. Flooded Lead Acid Battery Separtors Generaly
 

16. Batter separators prevent electrcal shorts in flooded batteres by insulating the positive
 

and negative plates. The rubber or polyethylene material in the separators is microporous 

(i.e., contais ver small holes) and facilitates the movement of electrcal curent between 

the batter's plates. (Gilchrst, Tr. 304-305; Benjam, Tr. 3504; PX0078 at 003). 

17. A flooded lead acid battery is one that contains an electrolyte liquid in it. When the 

batter is charged or discharged, the liquid tends to evaporate because it creates H20 in
 

the gas bubbles, which evaporates and requires addmg additional water. (Godber, Tr. 

147). Flooded batteres lose water continuously though gassing. Proper battery 

maintenance requires the addition of 
 water, so that the water level stays above the batter 

plates. (Brilmyer, Tr. 1854-1855). 

18. Flooded lead acid batteres are different from valve-regulated and AGM technology.
 

(Douglas, Tr. 4052-53). Flooded batteres have electrolyte freely flowing whie va1vereguated batteries use an absorbed glass mat that absorbs the acid like a thck toilet tissue 

so there is no free acid in the batter. (Douglas, Tr. 4053-54). AGM batteres, i.e., 

absorbed glass mat, are not flooded acid batteries. (Wallace, Tr. 1978). 

19. AGM separators are more expensive than PE batter separators. (Gilespie, Tr. 2982). 

1. . Physical Distinction~ Affect Perormance
 

20. Batter separators are differentiated by varous characterstics including: ingredients
 

(e.g., rubber, polyethylene), rib spacing, backweb thickness, border areas, and fishig 

characterstics (i.e., delivered in large rolls or cut into smaler flat sheets). (Gilchrst, Tr. 

352, 364-366). Many types of 
 batteres have perormance specifications that requie a 

. unque fuction or featue for the separator. Hence, batter separator manufactuers 

make different separator products or brands, each of which is suitable for 
 parcular . 

applications. (Gichrst, Tr. 350-351; Brilmyer, Tr. 1829, 1831).
 

7 
i) Formulations
 

21. Battery separators are distingushed by additives that sere a varety of fuctions and are
 

addedto thePE base according to the requirements of specific battery applications. . 

(Wear, Tr. 4667-4668). 

22. DaramIc's PE separator tyes are all chemcally and physically talored to perorm in 

specific applications based on the fuction of the battery in which the separators are 

contained. (Wear, Tr. 4681-4682).
 

23. There are 
 cerain chemical properies of the separator that wil requie greater or 

emphasis dependig on the specific 
 application. (Wear, Tr. 4782). The specific 

formula ofseparatoris set according to the needs of 
 the customer. (Wear, Tr. 4782). 

24. In industral applications, both UPS and motive power, the PE separators are made using
 

a special "clean" oil that reduces the presence of black scum, which can interfere with the 

proper maintenance and fuction of these types of batteres. (Whear, Tr. 4807; PX0582 

at 050). 

25. The Clean Oil that Daramc uses is patented by Daramic. (Wear, Tr. 4807).
 

ii) Thckness
 

26. Separators with different backweb thcknesses perforr differently. (Leister, Tr. 4041­

4042). You canot have a separator with a thinner backweb perorm in the same maner 

as a separator with a thcker backweb. (Leister, Tr. 4042). 

27. For example, East Penn does not use separators with the same backweb thckness in both
 

motive and deep-cycle applications. (Leister, Tr. 3982). For motive power, East Penn 

specifies a backweb thckness of 0.020 as the minimum thickness, whie Eas P.en's 

deep-cycle batteres use 0.012-0.013 thicknesses. (Leister, Tr. 3996). There is also no 

overlap between the backweb thcknesses of separators that East Penn purchases for use 

in motive power batteres with those that it purchases for automotive batteres. (Leister, 

Tr. 4021, 3982). 

28. Swapping separators ofthe same backweb thckness would affect the life and 

performance of the batter because in addition to backweb thickness there are other 

properes with a separator that impact on the perormance of 
 the batter. (Leister, Tr. 

4023). These varations in separator properties include electrcal resistace, punctue 

resistance and oxidation resistance, all of which are importt in determng which 

separator to use in any partcular end use application. (Leister, Tr. 4023-4024). 

29. For example, East Pen might have a ver limted overlap in the backweb thcknesses of
 

certain large eighteen wheeler trck SLI separators and some of its deep-cycle separators. 

East Pen were to take the separators in the eighteen­ (Leister, Tr. 4022). However, if 


8 

" 
wheeler and place them in a deep-cycle battery it would devalue the deep-cycle battery 

by shortenig the life of the batter. (Leister, Tr. 4022-4023).
 

iii) Applications
 

30; The following flooded batter applications use different typs of separators: deep-cycle, 

SLI or automotive, motive and UPS batteres. (Gilchrst, Tr. 351-352). Daramic 

categorizes its separator sales by general categories such as Automotive, Industral, 

HDDC, and Specialty. (Hauswa1d, Tr. 676-677; see also PX0582 at 031). 

31. Trojan has never considered using motive power constrction in its deep-cyCle batteres
 

because they are so much smaller and there is not enough space for all of the insulation. 

(Godber, Tr. 146). Moreover, the cost of 
 the insulation does not make it cost-competitive

as the applications in which deep-cycle batteres are used do not require that length of 

life. (Godber, Tr. 146). 

2. Separators are not substitutable for different end use 
 applications 

32. Misapplyig the battery separators would "change the way (the batter) works. . .( and) 

change the life of 
 the batter. . .". (Wear, Tr. 4683). 

. 3. Producers can price discrmiate by end use applications
 

33. aratormanufactuer know the end use a 1ications of the s
 

34. Daramic keeps track ofthe sales of its products. (Hauswa1d, Tr. 676). Daramic keeps 

track of whether the separator is sold in the United States or elsewhere. (Hauswa1d, Tr. 

677). 

35. Daramc has suffcient information regarding the applications for its products that it is 

able to provide information regarding the demand for each tye of application, including
 

deep-cycle, motive power, reserve power, and SLI. (pX0395 at 019, in camera; Burkert, 

Tr. 2336). 

36. At MPLP Mr. McDonald tracked revenue numbers based on application. (RXOI 120, in 

camera; McDonald, Tr. 3895-3896, in camera). 

37. Daramic is aware of the end use a 

Daramic has an agreement with l 

9 
38. Daraic was aware of 
 the locations and end use applications where its separators would 

be used by Exide in its response to Exide's RFP.(Gilespie, Tr. 3013-3014, in camera). 

39. Daraic is aware that cerin backweb thcknesses are typically used in paricular tyes 

of end use applications. (Roe, Tr. 1308). Customers often request a specific backweb 

thickness when orderg a separator from Daramic. (Roe, Tr. 1308-1309). Daramic 

tracks the backweb thckness of all separators that it sells in the AFS database. (Roe, Tr. 

1309-1310). 

40. When EnerSys provides techncal specifications to a separator manufactuer, those 

specifications convey the type of battery and even the nomenclatue of the batter. For
 

example, when Ene~ts specifications to _l the drawings noted that it 

was a request for a _l with certain attrbutes. (Gagge, Tr. 2523, in 

camera). 

41. Mr. Gagge is not aware of a single instance in which a separtor manufactuer did not 

know for what batter its separator was intended. (Gagge, Tr. 2524, in camera). EnerSys 

conveys the intended batter application to the separator supplier so that the supplier can 

assist EnerSys in choosing the appropriate separator characterstics. (Gagge, Tr. 2524, in 

camera). 

42. Daraic can discrminate by end use to EnerSys because EnerSys manufactues specific
 

batteres at specific facilties. In Richmond, Kentucky, it manufactues a tubular-plate 

motive power batter. (Axt, Tr. 2099-2100). In Ooltewah, Tennessee, it manufactues a.
 

flat-plate ~otive power batter. (Axt, Tr. 2099-2100). In Monterey; Mexico, it 

manufactues a flat-plate motive power batter and Mexican te1ecom batteres, and in 

Hays, Kansas it produces flooded batteres for the telecom and UPS industr in addition 

to battery backup for utilities. (Axt, Tr. 2099-2100). 

43. Separator suppliers work with batter manufacters to design and make sure that the
 

separators it is using work well with all of the components of the batter in order to meet 

the customer's end use application. (Gillespie, Tr. 2932). 

44. In developing a new separator product for battery manufactuer, it is necessar to know
 

for what application the batter is intended. In Dr. Brilmyer's position as Director of
 

R&D, he insisted upon knowing the application that his separators would serve before a 

developmental separator project could be green-lighted. From his perspective such 

knowledge is essential. (Bri1myer, Tr. 1828-1829). 

45. Daraic actally suggests specfic separators for specific applications. 

10 
J (PX0913 (Wear, Dep. at 6, in 

46. Daramic tres to fid out what the customer wants and then provide the customer with the
 

appropriate separator for the specified application. (Wear, Tr. 4779). If asked which 

separator is appropriate for a golf car batter for instance Mr. Whear would tell the 

customer that Daramic's HD is designed for that application. (Wear, Tr. 4776). 

47. Most of Daramc' s product is order based, which means that when Daramic produces a
 

product it knows the customer for who it is producing that product. (Gaugl, Tr. 4623­

4624). Daramc rarely builds any inventory without having the name of a customer. 

(Gaug1, Tr. 4624). 

48. Daramic prices its separators such that separators for different end use applications retu 

different gross margins for Daramic. For example, in 2006 Daramic was sellng both 

motive power and stationar separators to C&D. (PX0806 at 002-003; Roe, Tr. 1325­

1326). At that time, Daramic was aware of the breakdown in sales to C&D of motive 

power versus stationa separators, and was getting a 60% gross margin on the stationar 

separators and a 40% gross margin on the motive power separators. (pX0806 at 003). 

49. The average price of 
 an SLI separator in North Amerca is $0.70 per square meter. (Roe, 

Tr. 1313). Most of the UPS and stationar separators that Daramc sells are sold for more 

than $2.00, and Daramic does not sell any UPS or stationar separators for less than 

$1.00 per square meter. (Roe, Tr. 1315-1316). Daramic's HD separators being sold into 

deep-cycle applications range in price from $1.50 - $2.9Q. (Roe, Tr. 1314-1315). 

Daramic's motive power separators range in price from $1.90 - $3.00. (Roe, Tr. 1315). 

50. Mr. McDonald did not negotiate the 2007 price increase to Trojan batter. That 

negotiatig was done by Mike Gilchrst himself. (McDonald, Tr. 3877-3878, in camera).
 

51. 

J (pX0395 at 040-041, in camera; Hauswald, Tr. 794-795, in camera). 

52. A PowerPoint presentation for a April 22-23, 2008 meetig, shows that the 2008 

f 

11 
i) Arbitrage wil not defeat price discrmiation by end use
 

application 

53. Arbitrage wil not occur because separators are manufactured for customer specific
 

designs. EnerSys canot resell UPS separators to other manufactuers because they are 

made for EnerSys design and "there is no other market for them." (Burkert, Tr.2326; 

2399). At one time EnerSys asked its sales person, Randy Hanschu, ifDaramic could 

take back some separators and resell them. (Burkert, Tr. 2328). Mr. Hanschu informed. 

EnerSys that no other customer used the same materal and he cOuld not resell it. 

(pX1257 at 001; Burkert, Tr. 2330). 

54. When EnerSys sought toretu motive separators to Daramc, Daramc responded that. 

"( e )ver industral motive power customer wants their specific size. For one reason or 

another .company X believes they need a separator W' aller than EnerSys." (pX1275 at 

001). 

55. Durg the Ownsboro strke, EnerSys was only able to fid one common separator in the 

Feistrtz plant that could be used for one of its batteres in Mexico. (Burkert, Tr. 2333). 

The cost of the separator was approximately 20 percent more because EnerSys had to pay 

in euros, stock, car, and freight the material to Mexico. The duties that EnerSys had to 

pay from Austra were approximately 6.5 percent. (Burkert, Tr. 2402). 

B. Product Markets Generally
 

56. Dr. Simpson opined that deep-cycle, motive, UPS and SLI are all product markets. 

(Simpson, Tr. 3170-3171). "(T)he starng point for definig the product market would 

be to look at 
 the paricular separators that are sold and ask what are the substitutes for 

these." (Simpson, Tr. 3173-3174). Because battery manufactuers design a battery for a . 

paricular application, and the separator plays a signficant role in the performance 

characterstics of the battery, batter manufactuers have little discretion to shift among 

different batter separtors. Thus, according to Dr. Simpson, demand for a small set of
 

battery separators suitable for a paricular batter design would be highy ineiastic. 

(Simpson, Tr. 3414, in camera). 

57. Applyig the Merger Guidelines hypothetcal monopolist test here, Dr. Simpson noted 

that since the demand cure was highy inelastic, a price increase would be profitale 

regardless of the contrbution margi. (Simpson, Tr. 3414, in camera). Even Dr. 

Kahwaty conceded that demand for separators used in deep-cycle batteres is inelastic. 

(Kahwaty, Tr. 5317, in camera). 

58. When Guidelines market analysis leads to many ver small product markets - in some 

cases specific to a paricular buyer - it makes sense to aggregate these very narow 

product markets into broader ones where 
 the market conditions (e.g., entr conditions, 

12 
market paricipants) are the same. (Simpson, Tr. 3174; Kahwaty, Tr. 5294-5295, in 

camera). 

59. Such aggregation leads to the following fOUfmarkets descrbed in the FTC's complaint:
 

deep-cycle, motive, UPS, and SLI. (Simpson, Tr. 3170-3171). Aggregatig 
 beyond the 

markets identified in the FTC's complait would lead to a loss of detail because one 

would combine markets where market parcipants differ and entr conditions differ. 

(Simpson, Tr. 3175). 

60. Daramic recognzes separate product markets for SLI, motive 

reserve power. l 

in camera). 

61. Daramc's Strategy Audit states there are "(n)o substitutes for PE separators on the
 

horizon." (pX0265 at 004, in camera).
 

C. Deep-cycle Battery Separators are a Product Market
 

62. The market for deep-cycle batter separators is a product market. (Simpson, Tr. 3170­

3171 ). 

63. Company documents analyze competition in the context of a market for deep-cycle
 

battery separators. (pX0131 at 028-029; PX0506 at 001-003, in camera).
 

1. Product Characterstics
 

64. A deep-cycle battery is one that is built for long durations of discharge at a lower 

amperage. (Godber, Tr. 137-138). The constrction ofa deep-cycle is much different 

from òther types of batteres . (Godber, Tr. 138). Deep-cycle batteres are made with 

thcker plates so that they can beter withstand deep discharges and corrosion of the grd 

Oead plates pasted with lead oxide) that occurs in a golf car batter. (Godber, Tr. 138).
 

Furer, the active materal that is put into the positive plate is a different materal than 

what is used in automotive batteres. (Godber, Tr. 138). The important measurer of a 

deep-cycle battery are capacity and life. (Godber, Tr. 138). 

.,65. Daramc uses the term "deep-cycle" in its business operations to denote batteres that 

deeply discharge such as those intended for golf car and floor scrubbers. (Wear, Tr.
 

4764). 

13 
66. Deep-cycle batteries are distinct from SLI batteries. SLI batteries are used to star an 

engie, whereas "deep-cycle batteres are designed to run at relatively lower curent draw 

for a long perod of time, such as driving a golf car, scissor lifts, floor-sweeping 

machines." (Qureshi, Tr. 1994). 

67. Both deep-cycle and motive batteres are cycling batteries. (Roe, Tr. 1197). However,
 

deep-cycle batteries are differentiated from motive power batteries in that deep-cycle 

batteres are more deeply discharged. (Roe, Tr. 1197). 

68. The components of deep-cycle batteries differ from an SLI battery. Deep-cycle batteries 

use a high-antimony lead alloy grd and use high-density active materal that takes 10iiger 

to fall apar. (Qureshi, Tr. 1995). The positive lead alloy grd at U.s. Batter has an 

antimony content of 5% and the negative grd has an antimony content of2.75%. 

(Qureshi, Tr. 1998). SLI grds have much lower antimony content or none at alL. 

(Queshi, Tr. 1996). Also the grd for a deepcycle batter is generally thcker than that 

of an SLI batter. (Qureshi, Tr. 1997).
 

69. A key component to deep-cycle batteries is the separator. The separator reduces 

antiony transfer which can cause antimony poison. (Godber, Tr. 139). The reduction
 

of antimony transfer is importt property for separators used in deep-cycle batteries. 

(Leister, Tr. 4039). The separator plays an important role in scavengig or tyig up the 

antimony in the electrolyte, preventig it from going to the negative plate. (Qureshi, Tr. 

2004). 

70. U.S. Batter uses leaf separators for all its deep-cycle batteries and assembles the 
 plates 

and separators by hand. (Queshi, Tr. 2035-36). While it has an enveloping machie 

that it could use to automate the deep-cycle batter manufactung process when using 

HD separators, 
 U.S. Batter has detemined that though testing and expermentation that 

enveloped separators do not work well in deep-cycle batteres "(b )ecause the shed 

materal falls to the bottom and creates punctres and the shed material rises to the top 

and prematuely creates interal shorts agaist the strap." (Queshi, Tr. 2035). 

71. . hi a deep-cycle battery, the lead and lead oxide are the most expensive components.
 

(Qureshi, Tr. 1993). The separator is the next most expensive component. (Qureshi, Tr. 

1993). 

i) Role of Antimony
 

72. Antimony plays two fuctions in the deep-cycle batteries. (Qureshi, Tr. 2001). The first 

one is that antimony hardens the lead to make it easier to handle and assemble. (Queshi, 

Tr.2001). hi deep-cycle batteres the positive plate has an antiony 
 alloy. The 

antimony helps cast the plate by increasing the flow of the molten lead that is poured into 

the grd mold. Antimony also prevents corrosion in a cycling application as well as 

creating better adesion on the grd for active materal flow. (Godber, Tr. 139). 

14 
73. Antimony also is what makes the battery a deep-cycle; if 
 you do not have enough 

antiony the cycle loses capacity. (Qureshi, Tr. 2001-2002). Dung the opèrationof a 

deep-cycle battery, traces of antimony comes out from the corrosion of paricles on the 

metal grd, which if allowed to migrate to the negative plate wil cause the battery to gas 

more. (Queshi, Tr. 2002). 

74. The deposition of antimony onto the negative plate, sometimes called "antimony
 

the battery. (pX1791 at 001; PX1124 at 

001). 

poisoning" drastically reduces the cycle life of 


ii) Need to suppress antimony transfer
 

75. Antimony poison occurs when the antimony migrates from the positive to the negative 

plate. (Godber, Tr. 139; see also Queshi, Tr. 2002). Antiony poisonig causes the . 

voltage of the battery to drop, and that causes the charger to charge longer, which creates 

more gas and more 1;eat leading to increased water loss and corrosion. (Godber, Tr. 139­

140). 

76. Excessive gassing weaens the batter causing the batter to have a shorterlife. 

(Qureshi, Tr. 2002-2003). Excessive gassing also results in water loss, which requires the 

battery owner to water the batter 
 more frequently. (Qureshi, Tr. 2002-2003). Daramc's 

techncal bulletin on golf car separators has an entire section that explais ths antimony 

.effect. (Hauswald, Tr: 663; PX1791 (Techncal Bulletin Topic: Golf 
 Car Batter
 

Separators)). 

77. Rubber based separators work best at preventing antimony tranfer. (Godber, Tr. 140, 

150). Rubber based separators reduce the antimony effect. Daramc offer multiple 

separator products that are designed for golf car applications and have the "Rubber 

Effect" to combat antiony. (pX1791 at 001; Hauswa1d, Tr. 663-664). For the deep-


cycle applications the separators are enanced with latex and rubber additives in order to 

aid in the suppression of antimony migration and styme water loss that deep dischargig 

batteres tends to produce. (Wear, Tr. 4682; PX0913 (Wear, Dep. at 052, in camera)). 

78. East Pen uses Daramic HD separators in its golf car and floor scrbber batteres in 

ordèr to reduce antimony transfer in those batteries. Leister, Tr. 4038-39). 

a. Pue Rubber (F1ex-Sil) 

79. In Daramc products 1ikeF1ex-Sil, the separator is made of natual rubber. (Hauswald, 

Tr. 664; PX1791 at 001, in 
 camera). F1ex-Sil includes rubber in a solid form, the rubber 

makes up about 40% of 
 the separator's content. (Hauswa1d, Tr. 673). 

15 
b. RubberlPE Hybrid (CellForce and HD)
 

80. In other Daramic products, such as Daramic HD or CellForce, the separator is made from
 

PE for its increasèd strengt and incorporates a rubber additive. (Hauswa1d, Tr. 664; 

PX1791 at 001, in camera). Daramic HD includes rubber in the form oflatex, which is 

added in a liquid form. (Hauswa1d, Tr. 671-672). 

81. The HD latex additive 
 allows HD to perorm similarly to rubber separator in a way that 

straight PE separators canot. (Wear, Tr. 4806; PX0582 at 046). Daramc HD contains 

uncross1ined rubber materal in order to retard antimony poisoning affects. (pX0675 at 

013). 

82. Ce1IForce includes rubber in the form of ground-up Ace-Sil, which is added in a powder
 

form. (Gilchrst, Tr. 312; Hauswald, Tr. 672; PX0798). CellForce is used in deep-cycle
 

batteres. (Gilchrst, Tr. 360-361).
 

83.. Daramic HD is tyically available in backweb thcknesses of between 13 to 15 mils. 

(Wear, Tr. 4806; PX0582 at 046). 

84. Deep-cycle batteres requie separators contang rubber or latex to suppress antimony
 

poisonig. (PX1791 at 001; pxoon at 020; PX0798).
 

2. PE Separators do not work in Deep-cycle
 

85. Pure PE separators do not work for deep cycling applications. (Hauswald, Tr. 666; 

PXI124). Separators made of pure polyethylene are not able to suppress antiony. 

(Qureshi, Tr. 2005). 

86. Polyethylene separators and 
 other iner materals are not suitable for deep-cycle batteres, 

which expand and contract the grd of a separator when the batter cycles through 

charges and dischages. Because antiony is used for the grd in deep-cycle batteres, 

the separator materal must inbit the antimony from leaching and collecting on the
 

negative batter plate. Rubber based separators inhbit the leachig of antimony well.
 

(Gilchrst, Tr. 365).
 

87. Whle it is physically possible to put a tyical car battery into a deep-cycle application, 

the bater life would be extremely short. (Gadber, Tr. 150-151). Trojan has tested
 

straight PE separators in its deep-cycle products "off and on, and they just don't last." A 

PE separator in a deep-cycle product would drastically reduce the life of the batter to 

about 20 percent of 
 what it would be ifrubber was used. (Godber, Tr. 151). 

Polyetylene separators give substantially less number of cycles, less than half of what 

U.S. Batter expect from its separators. (Queshi, Tr. 2005). 

16 
88. U.S. Battery expects a deep-cycle battery in a golf car use to go at least 600 or more
 

cycles, which is 
 defined as a charge/discharge. (Qureshi, Tr. 2005-2006). A pure 

polyethylene separator gives substatially less number of cycles, less than half of what 

U.S. Battery expects. (Qureshi, Tr. 2005). A pure polyethylene separator ''would last 

perhaps 150 to 300 cycles." (Queshi, Tr. 2005).
 

89. Exide does not use a straight PE separator in deep-cycle batteries because straight PE 

separators do not meet the performance crteria for those batteries. (Gilespie, Tr. 2933). 

In negotiations with Daramc and MPLP, Exide never theatened to switch to a straight 

PE separator. Doing so would not make sense as a straight PE separator in a deep-cycle 

batter would negatively impact the quality and reliability of the batter and would 

negatively impact on Exide's reputation. (Gilespie, n. 2933-2934). 

90. Trojan has never theatened to move business to a straight polyethylene separator to 

constrai the prices it pays for deep-cycle separators. (Godber, Tr. 154). Mr. Godber 

canot recall any instances where Trojan successfully used PE as leverage in negotiations 

with Microporous. (Godber, Tr. 223). 

91. All ofDaramc's deep-cycle separator products function in a similar way, and differently 

from how pure PE performs, in terms of their perormance for golf car applications, as 

shown in Daramc's technical bulletin on golf car batter 
 separators. (Hauswa1d, Tr. 664, 

666; PX1791 at 001). 

3. Other Technologies do not work in deep-cycle
 

92. A PVC/silca separator is not a competitor in the deep-cycle market because it does not . 

provide antimony suppression. (pX0319 at 007; see also Gagge, Tr. 2520, in camera). 

93. Exide wil not use PVC in deepcycle batteries. PVC s
 

deep-cycle batteries because PVC is 

_l (Gilespie, Tr. 3042, in camera).
 

94. Sealed batteres using AGM separators do not perform well in golf car and floor 

scrbber applications. (Roe, Tr. 1208; Gilchrst, Tr. 366). AGM does not work well in 

dee-cycle batteres because use of AGM can result in the shedding oflead parcles in a 

dee':cyc1e battery which could enetrate the AGM s arators, according to a former VP 

of worldwide technology at l (pX0433 at 002;


PX0911 (Roe, Dep. at 118-120, in camera)). Bob Cullen ofH&V does not foresee widescale use of AGM in deep-cycle batteres in his lifetime. (PX0433 at 002). 

95. Sealed batteres last about 50% to 75% of 
 what a good deep-cycle battery would last. 

(Godber, Tr. 147-148). In other words, flooded deep-cycle batteries have a 25 to 50 

percet longer life than a sealed battery. (Godber, Tr. 149). Sealed batteres are more 

. expensive than flooded deep-cycle batteries. AGM batteres cost approximately 30% 

17 
more than a flooded batter, and a gel batter costs around 50% more than a flooded 

battery. (Godber, Tr. 149);
 

96. Sealed batteres go into deep-cycle applications where there may be a regulation that
 

prohibits a flooded batter such as in an aiort or a hospital. (Godber, Tr. 148). Trojan 

does not produce sealed batteries, but buys some for resell. (Godber, Tr. 148). About 

one percent of the batteres Trojan sells are sealed. 
 (Godber, Tr. 148). 

4. End Use Applications
 

97. The priar end-use application for deep-cycle batteres is golf cars, but deep-cycle
 

batteres also are used in other applications. (Godber, Tr. 143; see also Gilchrst, Tr. 305;
 

Wallace, Tr. 1955-1956; Gilespie, 'fro 2931). The biggest markets for Trojan are golf, 

floor scrbbers, scissor lifts, and boom lift. (Goober, Tr. 143). 

98. L head of sales and marketing, defines deep-cycle
 

L batteres. (pX0922 (Roe,IHT at 54). Similarly, Daramic documents refer to 

99. Daramic's marketing F1ex-Sil, CellForce and HD for golf car batteres. (pX1791 at
 

001). 

i) Orginal Equipment
 

100. Exide expects to qualify HD for'use in all of 
 its dee-cycle batteres, including those 

going into OE applications. (Gillespie, Tr. 3091). 

ii) Afer Market
 

101. Typically, 14-15% of deep-cycle batteres are sold by original equipment manufactuers. 

while the remaining porton of deep-cycle batteries are sold in the afterarket. 

(Gilchrst, Tr. 357-358, 608-609). 

102. Exide sells golf car batteres into both OE and afterarket markets. (Gilespie, Tr. 

2932). Approximately 90% of 
 the golf car batteries that Exide sells are sold into the 

afterarket, with the remaider going to OE applications. (Gillespie, Tr. 2932). 

5. Demand for Deep-cycle Separators is inelastic 

i) Post Acquisition Price Increases on Deep-cycle Separators have
 

not Induced Switching to non-rubber based separators . 

18 
103. Since the acquisition, U.S. Batter must single source the separators for its 
 deep-cycle 

flooded batteries from Daramc. (Wallace, Tr. 1951). 

104. Following the acquisition, Daramic increased prices on F1ex-Si1, CellForce, and HD.
 

(Roe, Tr. 1218). Despite these price increases, Daramc has not lost any deep-cycle
 

business to any competitor anywhere in the world. (Roe, Tr. 1217-1218). Nor have
 

Daramc's post-acquisition price increases on deep-cycle separators caused any customer 

to switch from a rubber or hybrid rubber/PE separator to a straight PE separator for use in 

a deep-cycle battery. (Roe, Tr. 1218).
 

105. East Pen purchases HD from Daramic for use in its golf car batteries under a contract 

Daramic and East Penn entered into in 2008. (Roe, Tr. 1220-1221;RXOI519). East 

Penn continued to purchase HD for their golf car batteres despite the 5% price increae 

that Daramic passed through to East Penn on the HD separators in 2009. (Roe. Tr. 1222­

1223). 

that 

106. U.S. Batter sought additional suppliers for its deep-cycle separator needs over the years, 

but was unsuccessful in finding anyone willng or able to do so. (Wallace, Tr. 1943­

1944). At one point in the last few years, U.S. Batter sought to persuade Entek to 

supply these separators, but Entek said it was not interested in enterig the deep-cycle 

separator market. (Wallace, Tr. 1943-1944; 1950-1951). 

107. In the last year, U.S. Batter designed two new batter product lines called US 27DC and 

US 31DC which contaied Daramc's HD separators. (Wallace, Tr. 1947-1948). Dug 

the design phase, U.S. Batter informed Daramc of 
 these new applications for HD 

separators. At that time, Daramic did not indicate it would not be able to supply the 

specified HD separators. After the acquisition and close in time to the production phase, 

Daramic informed U.S. ~atter that it would only supply the F1ex-Sil separator, which 

cost twice as much as the HD separator, for the two new batter lines. (Wallace, Tr.
 

1948-1950). Dr. Simpson evaluated the crtical 
 loss and deterined that 

012, in camera; Simpson Tr. 3169-3172) 

ii) Limited Supply of 
 Deep-cycle separators due to Owensboro stre 

did not cause substitution to non-deep-cycle separators 

108. HD supply was limited durg the 2008 stre at Daramc's Öwensboro manufacturig 

plant. (Roe, Tr. 1219). Despite the lited availability of HD durg the stre, no 

customer switched from HD to a straight PE product for use in deep-cycle applications. 

(Roe, Tr. 1219).
 

109. The Owensboro strke limited the availabilty of HD for use at Exide. (Roe, Tr. 1223). 

Because of the HD shortage, Exide was forced to purchase Flex -Si1, which was the only 

19 
available alternate product for their deep-cycle batteries. (Roe, Tr. 1223). Ony by 

purchasing F1ex-Si1 was Exide able to avoid a supply interption durng the strke.
 

(RXOI260). In purchasing F1ex-Sil in place ofHD durng the stre, Exide paid a
 

premium for the F1ex-Si1 separators rather than switch to any alterate type of separator 

for use in thei golf car batteres. (Roe, Tr. 1223). Additionally, by switchig from HD 

to F1ex-Si1 durg the strke, Exidehad to forego the credit towards its shortfall payments 

to Daramc that it was otherse due under its contract with Daramc. (R01260). 

D. Motive Separators are a Product Market
 

110. The market for motive power battery separators is a product market. (Simpson, Tr. 3170­

3171 ). 

1. Product Characteristics
 

i) Thcker than other separators
 

111. Motive batteres are extremely large and sere as counterweights in the design of 

industral vehicles and are among the largest batteries made. (PX211O at 35). Motive 

batteres are much larger than deepcycle batteres and their constrction is much more 

robust. Instead of plastic, motive batteres use a steel tray and glass mat is wrapped 

around the plate. (Godber, Tr. 142).
 

112. Motive batteries must be able to withstand at least five years of 
 use as that is the tyical waranty on a fork lift battery. (Godber, Tr. 142). Motive batteres tend to corrode like 

the dee-cycle, but the grds are a lot thcker and it takes longer to corrode. (Godber, Tr. 

142). In addition, the positive plate is surounded with a lot of insulation and glass mat, 

so that none of the materal can get out and short. (Godber Tr. 142). The glass mat and 

insulation used in motive batteres is very expenive and is not a cost-effective option for 

deep-cycle batteres. (Godber, Tr. 142-143).
 

113. Motive batter separators are so much thcker than other separators that Daramc has to 

alocate a paricular par of its plant capacity for it. (Hauswald, Tr. 708-709). 

ii) Unique Formulations
 

114. For traction batteres, Daramc sells a product called Daramc Industral CL. (Hauswald, 

Tr.681). Daramic CL is specifically designed for use in motive power applications. 

(Roe, Tr. 1327). Daramc CL is a standard PE separator that utilizes clean oil as an 

ingredient. (Roe, Tr. 1327).
 

115. CellForce, a PE-based separator with a rubber additive (i.e., Ace-Sil dust) is used in 

motive batteres. (Gilchrst, Tr. 385). 

20 
2. End use applications
 

116. Motive power batteres are batteries used priarly in fork trcks. (Gilchrst, Tr. 306­

307; Axt, Tr. 2097; Hauswald, Tr. 708; Godber Tr. 142). Motive power batteres must 

provide a low, steady power source over a much longer perod of time than light duty 

deep-cycle batteres. (PX0319 at 008). The vast majority of demand for motive power is 

limited to two geographies: North Amerca and Europe. (Gilchrst, Tr. ~99). 

3. Respondent recognzes motive separators as a distinct market in 

documents 

117. Respondent's documents analyze competition in the context of a market for motive 

battery separators. (pX0080 at 021, in camera; PX0131 at 030-031,035,062-065; 

PX0395 at 025, in camera; PX0506 at 001-002,004-005, in camera). 

118. At Po1ypore's Januar 11, 2006 Board of 
 Director's Meeting, the board document 

referred to the markets as motive, deep-cycle, and SLI, among öther. (pX0042 at 012, in 

camera). 

119. Microporous' s former owners wrote that
 

e.g., (PXOOn at 020; PX0185 at 006). 

120. A Daraiic marketig flyer describes the motive market as follows: 

the requiements for traction batteres in respect of mechancal properes aDd 

chemical stability are considerably higher than for starer separators. (A J forklift 

battery is typically operated for about 40,000-50,000 hours 
 in charge - discharge
 

servce whereas a staer batter only for 2000 hours. The requirements as to
 

electrcal resistace are lower because of the tyically low curent densities for 

traction batteres. These diferences are reflected in the design of the modern traction 

battery separator material. (pX1790 at 001 (emphasis added)).
 

4. PVC is not an alterative in North Amerca 

121. Batter manufacturers in Nort Amerca have shied away from using PVC separators in
 

recent year due to cerai disadvantages ofPVC as compared to PE separators. PVC is
 

less stable than PE due to the fact that chlorine that can be released by the PVC 

. separators into the batter. (pX0916 (Dauwe, Dep. at 22)). Whle Amer-Sil would like 

to eliminate the chlorie release, it is impossible for Amer-Sil to entirely prevent the 

chlorie re1east: associated with the use ofPVC separators. (PX0916 (Dauwe, Dep. at 

125)). 

21 
122. Daramic's own documents detail the problems with PVC, stating that "In Nort America 

and Wester Europe, sintered PVC separators are never used in motive power 

applications. Batteres with sintered PVC separators will not meet the demanding 

peormance and cycle life applications (the batter is required to achieve a minimum life 

of 4 years under arduous deep-cycle duty." (pX1790 at 002). 

123. 

is more heavy-duty. (Axt, Tr. 2307, in camera). 

124. Amer-Si1 has taen certai steps to improve the stability of 
 the PVC separators t 

(PX0916 (Dauwe, Dep. at 158, in camera)). 

125. PVC is also more britte than PE, and therefore unike PE separators, PVC canot be used 

in batteries that use a sleeved or enveloped separator. (pX0916 (Dauwe, Dep. at 22-23)). 

5.. Demand for motive separators is inelastic 

126. If Daramic threatened to ~l off if it did not pay a _l increase in

price for its separators, t-iu1d have no choice but to pay because there are no
 

alternatives available to Daramic. (Craig, Tr. 2567, in camera). 

127.	 Daramc is currèntly seekig a price increas~oximate1y _l from 

EnerSys. (Craig, Tr. 2552, in camera). If l-l has to pay that price increase
 

worldwide, customers will not switch to alterative technologies for their motive or UPS 

batteries. (Craig,. Tr. 2552-2553, in camera). A small change in the price of separators 

would not change the dynamics of 
 the batter market. (Craig, Tr. 2553, in camera). . 

128.	 A I_l increase in Daramc's batter separator prices would have ver little 

impact on the price of a motive or UPS battery. (Craig, Tr. 2553-2554, in camera). 

129. There is
 no motive separator technology available to motive customers for a small but 

signficat and non-transitory increase in rice. Daramic is curently seeking price
 

increases from EnerSys of 

(Axt, Tr. 2220, in camera). Motive battery manufactuers 

_l (Axt, Tr. 2220, in camera).
 

22 

.L 
130.	 When EnerSys used Amer-Sil PVC separators in Europe durig Daramic's declared force 

majeure in 2006, they were 20 percent more expensive than the PE that EnerSys was 

buyig from Daramic. (Axt, Tr. 2102). 

131.	 A UPS batter like PX3002 costs EnerSys approximately ~ make. (Craig, Tr. 

2553, in camera). The cost of 
 the separator is approximateK-l percent of 
 the cost
 

of the batter. (Craig, Tr. 2553, in camera). EnerSys sells ths batter for approximately 

_l (Craig, Tr. 2553, in camera). Using Il percent as a percent of cost for ease of
 

calculation, the cost of the separators in the battery are approximately .l and a Il .
 

percent increase would be approxiate1y_l (Craig, Tr. 2554, in camera). If 

EnerSys passed this price increase on, the price of 
 the batter would increase by only .l
 

percent. (Craig, Tr. 2554, in camera). The figues for motive batteres are slightly 

different, but the result is the same. (Craig, Tr. 2554, in camera). 

132.	 EnerSys would likely eat a .l percent price increase rather than destroyig customer 

relations by givig them the impression that EnerSys was "nickel-and-diming" them. 

(Craig, Tr. 2554, in camera). 

E. UPS Separators are a Product Market 

133. The market for UPS batter separators is a product market. (Simpson, Tr. 3170-3171). 

134. Microporous documents analyze competition in the context of a market for UPS batter . 

separators. (PX0078 at028, in camera; PX0135 at 002, in camera; PXOI40, in camera; 

PX0402 at 022, in 'Camera). 

1. Product Characterstics
 

135. An uninterptib1e power supply or source ("UPS ") batter is designed to be used as a 

backup power source usually for computer systems. (Bri1myer, Tr. 1832; Roe, Tr. 1736­

1737; see also Axt, Ti. 2099). In the event of a power failure, the UPS batteres are 

designed to provide a quick burst of energy between 5 to 30 minutes in duration. The 

batteres are typically built using clear cases that allow for the easy visual inspection and 

maintenance of electrolyte levels with the batter. These batteres need to be 

trstworty and are generally rated at 15 to 20 year life span. (Brilmyer, Tr. 1833). 

136. Classic resere power batteres generate a low curent over a relatively long perod of 

time, whie UPS batteres, a tye of resere power batter, generate a higher curent over
 

a shorter perod of time. (Gilchrst, Tr. 305-306).
 

137. UPS batteres are ver dependable batteries lasting 15-20 years and provide short burts 

of power for five minutes to 30 inutes when used. They have thck plates and tyicaly 

a clear 	 case that facilitates the inspection of 
 the batter's acid leveL. (Bri1myer, Tr. 1833).
 

23 
2. Special Formulations
 

138. UPS batter separators are tyically made ofPE, i.e., microporous polyethylene. 

(Brilmyer, Tr. 1833). Specifically, for the stationar UPS applications the separators 

have lower overall oil content than separators built for other applications in order to 

fuer reduce the presence of 
 black scum. (Whear, Tr. 4713-4714). 

139. Black scum intereres with the efficient maintenance of a flooded UPS batter where the 

case of the batter is clear by obscurng the lie indicators used to visually inspect and 

maintain the acid levels withn the battery. (Bri1myer, Tr. 1852-1855). 

140. The black scum problem 
 also. presents itself in batter applications where an automatic 

waterg system is employed. Here the scum can clog the float bob mechanism used to 

trigger the waterg system thus preventig the proper maintenance of water 
 level withn the batter. (Brilmyer, Tr. 1852-1853). . 

141. Daramc stag working on the 
 black scum problem in the early 1990's. (Wear, Tr. 

4710). Durng the early test work Daramc discovered a tye of oil that would reduce the 

scum formation. (Wear, Tr. 4710-4711). Later Daramic began to adjust 
 the amount of residual oil 
 left in the separator in fuer effort to address the black scum issue but 

neither the new oil nor the reduced overall oil content intiatives completely elimated 

the presence of 
 black scum. (Wear, Tr. 4713-4714). 

142. Not all PE separator products are appropriate for UPS batter application. Daramc has 

. different separators designed for different uses. For intance, "Daramic HP is aPE 

product made by Daramic, not for UPS products. It's a high punctue resistance product 

made for the automotive industr." (Brilmyer, Tr. 1915).
 

143. Daramc CL was made for industral applications where scum formation was a potential 

. problem. (Brilmyer, Tr. 1834).
 

144. Using the HP PE separator in a UPS application would lead to a much greater scum issue 

than using Daramc CL. (Brilmyer, Tr. 1922). 

145. Daramc's DAR separator, which is used in industral batteres largely in Europe is a 

unque separator that is stiff ver chemcally stable, and contains no oiL. It is 
 not aPE 

separator product. (Bri1myer, Tr. 1864, 1911).
 

146. CellForce, a PE-based separator with a rubber additive (i.e., Ace-Si1 dust) can be used in 

UPS batteres. (Gilchrst, Tr. 397-398). 

F. SLI Separators are a Product Market
 

24 
147. . 
 The market for SLI battery separators is a product market. (Simpson, Tr. 3170-3171). 

148. Respondent's documents analyze competition in the context of a market forSLl batter 

separators. (PX0080 at 060, in camera; PX0088 at 001; PX0131 at 031-032; PX0402 at 

012, in camera; PX0506 at 001-002, in camera; 006-007, in camera). 

1. . Product Characterstics
 

149. SLI batteres are batteres used in automobiles. (Gilchrst, Tr. 307). SLI is an acronym 

for staring, lighting and igntion. (Brilmyer, Tr. 1831). 

150. For the SLI application, the PE separator is enanced to provide superior Oower)
 

electrcal resistance and puncte resistance. (Wear, Tr. 4682, PX0913 (Wear, Dep. at 

14, in camera)). 

151. SLI separators must also have a very low electrcal resistance ("ER") to provide the surge
 

in curent. (pX0913 (Wear, Dep. at 16, in camera); PX0669 at 004, in camera, 019, in 

camera). 

152. Daramc uses the ter "SLI" to differentiate between other types of separators in its 

business. (Wear, Tr. 4761). Withn the SLI category 90 percent of 
 sales in Nort 

. Amerca are of separators between six and ten mils in thckness. (Wear, Tr. 4762). 

2. Physical Distinctions Affect Perormance
 

153. Daramc HP represents the majority of Daramic's sales ofSLI separators. (Wear, Tr.
 

4805). The typical backweb thickness for this separator ranges :fom .150mm to .20Om. 

(Wear, Tr. 4805, PX0582 at 044). 

154. Daramic Stadard is not adversed to the SLI market due to the fact that at the tyical 

overall thicknesses prevailing in the SLI market Standard PE would not have suffcient 

punctue resistace necessar to prevent damage to the separator durg batter
 

production. (Wear, Tr. 4804805; PX0582 at 041-042). 

155. 

L (pX0913 (Wear, Dep. at 26, in camera)). 

156. Ce1IForce can be used in SLI batteries and has some advanta es because _ 

L (Gilchrst, Tr.


440-441, in camera). 

25 
157. The backweb thicknesses of SLI separators have been reduced in recent years. (Leister,
 

Tr. 4024). Ths reduction in thickness is meant to reduce the overall cost of the
 

separators. (Leister, Tr. 4024). SLI battery separators are ver th and ver strong so as 

to resist punctues and have mechancal strength. (Brilmyer, Tr. 1829, 1831). 

158. lis the stadard backweb thckness in use in SLI batteries sold in the 

US. (PX0907 (Kung, 
 Dep. at 75-76,80), in camera). 

159. Over 99% of the separators that Darc tracks that are sold in the automotive market 

have a backweb thickness between 6 and 10 mils (150-250 microns). (Hauswa1d, Tr.
 

677-678). 

160. It is very diffcult for a separator manufacturer to change the thckness of their PE 

separator from f 

camera). 

iv. Geographic Market is North Amerca
 

A. Manufactuers in Nort America can price discrminate to customers based on 

geography. 

161. Dr. Simpson explained that Nort Amerca is the relevant geographic market with which 

to analyze ths transaction. (Simpson, Tr. 31'83). Because manufactuers of deep-cycle, 

motive, UPS, and SLI battery separators can set different prices for different geographic 

regions they can price discrminate based on geography. (Simpson, Tr. 3183). 

162. Where sellers can price discrimiate based on geographical location, the 
 Merger 

Guidelines state: "The agency will consider additional geographic markets consisting of 

parcular locations of 
 buyers for which a hypthetical monopolist would profitably and 

separately impose at least a small but signficant and nontransitory increase in price." 

(Merger Guidelines, Section 1.22). Dr. Simpson concluded from reviewing the testimony 

buyers and the documents in this cae that a hypthetical monopolist could impose 

such a price increase on buyers in Nort America. (Simpson, Tr. 3183). 

of 

163. A hypthetical monopolist of all production facilties in Nort Amerca can price 

discrmiate to Nort American customers because suppliers ship directly to customers. 

(e.g., PX0920 (Gilchrst IHT 64-65); see PX0033 at 005 FN5 (Simpson Report); PX2251 

at 004 (Simpson Rebuttal Report), in camera). 

B. Daramic charges different prices in different geographic regions 

164. 

(Rey, Tr. 4958, in camera; Roe, Tr. 1317). 

L (Roe, Tr. 1797, 1799,in camera). 

26 
165. t_J determes the market price in each geographic region based in par on the 

competitive landscape that exists in each region. (pX0922 (Roe, IHT at 27, in camera); 

Roe, Tr. 1317-1318). 

166. Even in global negotiations with Daramc, EnerSys received different prices depending 

on the geographic market. In November 2005, Daramc and EnerSys negotiated an 

energy surcharge that would t 

_J (Axt, Tr. 2137-2138, in camera; RX00582, in camera).
 

167. 

J (Gilespie, Tr. 2998, in camera, 3060­ 3062, in camera). 

168. The average price of an SLI separators sold in North Amerca is $0.70 per square meter. 

(Roe, Tr. 1313). Whereas in Europe the average price of an SLI separator is $1.00 per 

squae meter attoday's exchange rates. (Roe, Tr. 1313-1314). 

169. Daramc contiues to rice s arators differently depending on the geographic region. In 

an t J Daramic offered different prices for comparable
 

materal in different geographic zones. (pX2296 at 005-006, in camera; Roe, Tr. 1792, 

in camera). 

C. Nort Amercan Customers Look to Nort American Suppliers for Separators 

170. 

camera). 

171. 

172. Nort Amercan suppliers export separtors to customers overseas at a higher cost to both 

the supplier and the customers. For example, MiCfoporous exported 75% of the 

CellForce separators that it produced at Piney Flats to HawkerÆnerSys facilties in 

Europe. (Gilchrst, Tr. 345). It shipped these separators to HawkerÆnerSys in 

contaIer at a freight cost of several thousand dollars per container. (Gilchrst, Tr. 599). 

It also took typica11ybetween 18-21 days to ship from Nort Amerca to Europe. 

(Gilchrst, Tr. 595). MPLP also had to pay HawkerÆnerSys for warehouse space for 

. consignent stock, so as to avoid supply shortges. (Gilchrst, Tr. 599). 

27 
1. Large North Amercan customers expect worldc1ass suppliers
 

i 73. Exide believes that there are very few world-class separator manufactuers that are
 

capable of providing separators to a large battery manufacturer such as Exide. (Gilespie, 

Tr. 2955-2958). In order for a separator supplier to be a viable option for supply 
 of 

separators to Exide in Nort Amerca, it must have: (i) the abilty to provide quality 

separators that meet Exide's requirements on a consistent, reliable basis; (ii) technology 

to be able to provide for Exide's curent and futue needs; (iii) the infrastrctue and 

wherewithal to supply a company of the size of 
 Exide; (iv) suffcient capital to be able to 

make investments in R&D and equipment; (v) the logistical wherewithal to supply 

Exide's facilities on a global basis; (vi) pricing to meet Exide's coiiercial needs; (vii) 

the ability to provide year-over.,year improvements in Exide's total costs; (viii) the ability 

to improve their own processes and methodologies to provide mutual gains to Exide and 

the supplier; and (ix) the ability from an engineerig prospective to undertand and 

develop separators capable of improving the perormance of the batteres. (Gillespie, Tr. 

2956-2958). 

2. Local Supply a benefit to customers
 

174. It is a market advantage to be able to supply separators locally to battery manufactuers. 

(pX0582 at 018; RX01498 at 001, in camera). Daramic supplies customers locally in 

order to reduce the risk of supply chain disruption to the customer. (Hauswald, Tr. 724­

725). 

175. All PE SLI batter manufactuers in Nort Amerca who buy separators from Daramc
 

receive those separators from Daramc plants in the United States. (Hauswald, Tr. 716­

717). 

176. Havig a separator manufacturing plant located close to battery manufacturing 

plant allows for the technical support team to respond to the customers needs faster. 

429, in camera)). (PX0919 (Rney, IHT at 


177. Global batter manufactuers want to elimate long supply chains for battery separators 

in order to reduce their inventory, warehouse, and other costs associated with a reserve 

stock of separators, as well as increase their flexibility in orderg separators for their 

production lines. Customers want a consistent supply and to know the separator 

manufactuer will be around in five year. (PX0918 (Rey, IHT 36, in camera)). For 

example, instead of orderng separators a month ahead of tie, they could order the 

separators several days before they would be used on the batter production line.
 

(Gilchrst, Tr. 594-596). 

28 
178. A local separator supplier was more likely to respond quickly to any technical and quality 

issues relating to delivered separators. (Gilchrst, Tr. 594-96). 

camera)). (Rney, IHT at 196, in' 


179. Ocean transport is the most economic mode for tranporting batter separators from Asia 

to the United States. (Hauswa1d, Tr. 723). In order to ship separators from China to the 

United States, they would have to travel six to eight weeks via ship. (Hauswa1d, Tr. 722­

723). 

180. Local supply is also an important factor that Daramc emphasizes in sales pitches to 

customer. (Roe, Tr. 1318-1319). For example, in a 2003 sales pitch to JCI, Daramc 

discussed the possibility of 
 building a new plant in Brazil to supply JCI's Brazilian 

batter manufactung plant on a local basis. (Roe, Tr. 1321; RXOI188). Daramic 

believed that building a plant to supply JCI on a local basis would provide many 

advantages to JCI's business. (Roe, Tr. 1321). Those advantages included the avoidance 

of import duties and the need to car less inventory, both of which would lower JCI's 

overall costs for separator purchases. (Roe, Tr. 1321-1322; RX01188 at 003). 

181. In addition to the tangible price benefits of local supply, Daramic underood that local 

supply would be beneficial to JCI as it would facilitate Daramc's local sales managers. 

and techncal support personnel working with the customer on a weekly basis, along with 

Daramic support personnel fluent in the local 
 language, all of which would provide added 

value to the customer as opposed to supply from a distat manufactung location. (Roe, 

Tr. 1322-1324; RX01188 at 003). 

182. JCI understood the value oflocal supply ver welL. 

L (pX0652;' PX0924 (Jensen, Dep. at 94-95, 
 in camera)). The offer was for $10 per square foot while 

the 1aid had a commercial value of 
 "at least $30 per SQM." (pX0652 at 001; PX0924 

(Jensen, Dep. at 99, in camera)). Ths deep discount came from Entetec's strong interest 

in enticig Daramc to build a production line close to its facility. (pX0652 at 001 

("Enerec is not sellng us land for the money; they are looking for a Brazil supplier."). 

"Enerec is willng to sell us par of their land for two reasons, first they have a large site 

with no plans to use it for expansion and secondly they understand the advantage of a 

lower landed cost by having a batter separator plant near." (pX0653 at 001; PX0924 

(Jensen, Dep. at 110, in camera)). 

183. Similarly, in 2006, JCI worked to develop a new supplier in Asia to introduce new
 

competition to that geographic region. (Hall, Tr. 2702). JCI looked at Anpei and BFR as 

possible new suppliers in Asia. (Hall, Tr. 2702-2703; PX1509 at 003, in camera). JCI 

believed that the addition of one or more new Asian suppliers would 

1 (pX1519 at 009, in camera). JCI's strategy with regard to BFR was 

Tr. 2856, in camera, 2878, in camera). L (Hall, 

29 
.184. 

185. EnerSys prefer to have its separator suppliers to be located close to its plants, not 

necessarly next door, but ''wthin a 50-mile radius." (Axt, Tr..2108). EnerSys prefers to 

have local suppliers to reduce shipping costs, inventory carng costs, freight forward 

fees, logistics, lead times, timeliness of 
 supply, and duties. (Axt Tr. 2109, 2130). Ths is 

parcularly tre in Europe and Nort America where EnerSys does a lot of 
 business. 

(Axt Tr. 2108). Even for its low-volume motive business in China, EnerSys is concerned 

about logistics. (Axt Tr. 2240-2241). However there is 

_l (Axt, Tr. 2220, in camera).
 

186. Prior to the openg of 
 Microporous's Feistrtz facility, EnerSys purchased CellForce 

separators from Microporous for its plants in Europe. (Axt, Tr. 2141-2142, in camera). 

However, this raised concerns for EnerSys because l 

187. MPLP and EnerSys l 

camera). l 

(PX1200 at 002-003, in camera). 

188. Logistic considerations including shipping cOsts to the customer, reductions in lead ties 

as well as pure customer preference framed the basis ofMPLP decision to expand into 

Europe. (Trevathan, Tr. 3709). 

189. Batter 
 manufactuers who purchase separators from local supplier save on ocea 

freight costs. For example, after Microporous opened its Feistrtz plant, Hawker/EnerSys 

no longer had to pay ocean freight costs of several thousand dollars per contaner to 

import CellForce separators from Piney Flats. (Gilchrst, Tr. 599). 

30 
190. In the sumer of2007, East Pen was interested in getting a new batter separator
 

competitor for local supply ofPE SLI separators. (Leister, Tr. 4007). East Penn was
 

lookig for an alterate source due to the long lead times and added freight costs that East
 

Penn faces when orderng PE SLI separators from Entek on the west coast. (Leister, Tr. 

4008). The long lead ties are an important issue for East Penn because shipments from
 

Entek on the West Coast exceed East Penn's manufactug time and necessitate East 

Penn's carng additional supplies ofPE separators at an added cost to East Penn. 

(Leister, Tr. 4008). The freight costs are an issue as well as East Pen incurs larger 

freight costs when obtag supply from Entek. (Leister, Tr. 4008-4009). Freight and 

lead times are important components of East Pen's evaluation of separator suppliers as 

East Pen evaluates suppliers based on the total cost of doing business with a si;pplier, 

rather than on the list price of 
 the separators. (Leister, Tr. 3986). 

191. East Pen considers the abilty to meet with separator sales representatives and engieers 

on a regular basis as an important component of its separator supplier considerations. 

(Leister, Tr. 4026). 

192. East Penn is not curently seekig tn obtain PE separators supplies from any Asian PE
 

separator manufactuers. (Leister, Tr. 4035-4036). East Penn believes that obtag PE 

separator suppler from Asia would be problematic as ths would pose an even greater 

challenge to East Penn than does its curent supply situation with Entek. (Leister, Tr. 

4035). 

193. East Penn approached Entek on multiple occasions about the possibility of 
 Entek settng
 

up an East Coast facility so that Entek could provide local supply to East Penn. (Leister, 

Tr.4020-4021). Entek informed East Pen that Entek would take it under advisement, 

which East Pen understood to mean that Entek was not going to move forward with 

establishing an East Coast manufactug facility. (Leister, Tr. 4021). 

194. With Entek out of 
 the pictue for local supply, East Penn tued towards MPLP. (Leister, 

Tr. 4021). East Penn initiated conversations with MPLP about the possibilty ofMlLP 

supplying East Penn with PE SLI separators. (Leister, Tr. 4006-4007; PXOI41). Eást Tr.4008). . Penn did so because it was seekig a new local supplier ofPE SLI separators. (Leister,

195. 

L (Balcerak, Tr. 4097,4108, in camera).
 

31 
,,; 

196. Crown tres to maintain just-in-time deliver of its separator supply. (Balcerzak, Tr.. 

4130). Havig to ship materal from overseas would interere with Crown's j",st-in-time 

methods. (Balcerak, Tr. 4130). 

197. . Douglas Battery has a preference for local supply because it reduces distance, tie,
 

travel, just-in-time opportties, and enables the supplier to quickly respond if 
 Douglas 

has problems with their separators. (Douglas, Tr. 4080). 

198. Planng for the Raia II project began in 2006.
 

rationales for the Prachinbur expansion was the
 

001; PX0924 (Jensen, Dep. at 56, in camera)).
 

J (PX0924 (Jensen, Dep. at 72, in camera)). 

3. Cost of exportg separators to Nort Amerca is prohibitively expensive
 

199. Daraic has not shipped separators from either of its Asian manufactng plants to
 

customers in North America. (Roe, Tr. 1233-1234).
 

2ÓO. EnerSys would prefer to have a supplier with plants both in Nort Amerca and in 

Europe. (Burlært, Tr. 2385). If 
 EnerSys had to have a supplier with two plants in North 

Amerca and none in Europe, it would be a negative cost to EnerSys. (Burlært, Tr. 2386). 

EnerSys does not want to stock, pay freight, or worr about supply interrptions. (Burlært, Tr. 2467). . 

201. 

202. EnerSys was forced to ship a container of separators to its Monterey plant from 

Daraiic's Feistrtz facility durng the Ownsboro stre at a high freight and time cost 

(PX1285). 

203. 

J (pX0782 at 002; PX0912 (Rney, Dep at 240, in camera)). 

204. If the 
 price of motive separators in Nort Amerca increased by five percent, Douglas 

Batter would not look for separator suppliers 
 abroad. (Douglas, Tr. 4082). 

205. PE separtors that are manufactued in China are subject to added taxes by the Chinese 

governent resulting in higher manufactug costs for Chinese separator manufactuers. 

(pX0871 at 002, in camera).PE separators exported from Chia are subject to a valueadded ta. (Thuet, Tr. 4404-4405). The value-added ta includes a 12% charge on the
 

32 
J
 

sale price of 
 the separators that is non-recoverable for the separator manufactuer. 

(Thuet, Tr. 4405). This value-added tax has a negative impact on the direct 

manufactung costs of 
 battery separator manufactuers in China, including on Daraiic's 

Tianjin joint ventue facilty. (Thuet, Tr. 4405).
 

206. 

i) 

207. f 

I (Roe, Tr.


1807; PX0907 (Kung, Dep. at 186-187, in camera)). 

208. BFR faces a number of 
 barers to export of separators outside of Cha. Separators 

manufactued by BFR and exported out of China are subject to a non-refudable va1ueadded ta ("VAT") of 12% which seres as a barer to export. (Hall, Tr. 2717). The 

VAT is a "cost adder to product roduced inside of Chia whose destination was outside 

of China." (Hall, Tr. 2717). f

) (PX1522 at 005, in camera; Hall, Tr. 2723-2725, in camera). 

209. I (Hall, Tr. 2846-2847, in camera). Mr. Hall testified that he is aware that there are Chiese gudelines that allow a 

manufactuer to f 

I (Hall, Tr. 2846-2847, 2879, in camera). 

210. Another barer to export is the relative value of Chinese curency. (Hall, Tr. 2717~ 

2718). The Chiese curency has strengtened since China unpegged 
 its curency from 

the US dollar. (Hall, Tr. 2718). Ths strengtenng of 
 the Chiese curency has made 

BFR products more expensive to export because inputs such as labor are now more 

expensive relative to other curencies. (Hall, Tr. 2718-2719; see also PX1522 at 005, in 

camera f 

33 
211. Yet another barer to BFR' s export of product from Chia are the freight costs associated 

with transporting separators 
 from BFR's Chinese manufactug facility to other 

countres. (Hall, Tr. 2721-2722). 

212. Duties also sere as barers to BFR export to cerai countres. (Hall, Tr. 2721-22). For 

example, Mexico imposes duties on separators coming from Chia. (Hall, Tr. 2722). 

Ths is parcularly signficat for JCI who manufactuers its golf car batteres in a plant 

in Mexico. (Hall, Tr. 2665). 

213. 

214. Mr. Hall perormed a benchmarking analysis ofBFR's cost strctue to deterine the 

viability ofBFR's opportity to export to JCI's Asian joint ventues. (Hall, Tr. 2716). 

The.benchmark analysis perormed by Mr. Hall is a comparson of costs for production

of a separator between ~ (Hall, Tr. 2724, 2729, in camera). 

r 

215. In his procurement role, Mr. Hall regularly builds cost strctues for key commodities 

like separators. (Hall, Tr. 2728, in camera). Mr. Hall views ths as a good way to 

compare suppliers. (Hall, Tr. 2728, in camera). JCI uses their analysis of suppliers cost 

strctues to make sure their pricing is reasonable in the market and to compare one 

supplier with another. (Hall, Tr. 2729, in camera). 

216. In order to do an efficient benchmarking analysis, Mr. Hall ~ 

217. Mr. Hall utilized BFR data that he received from t 

L (Hall, Tr. 2847, in camera). 

218. The benchmarkig analysis examined the materal costs as well as the manufactung 

costs (otherwise known as converion and SG&A costs). (Hall, Tr. 2726, in camera; 

PX1522at 005, in camera). Materal costs include the component raw materals that go 

34
 

l 
into the manufactue of 
 the separators. (Hall, Tr. 2726, in camera). Manufactung costs 

include the fixed overhead and the sales and general administration costs. (Hall, Tr. 

2726, in camera). 

219. Labor is L of 
 manufactug a PE s Tr. 2727-2728, in camera). Much of 
 the manufactung process is ~ 

220. Mr. Hall obtained information to prepare the benchmarkig analysis from multiple
 

sources, including discussions with all three suppliers regardig their material costs. 

(Hall, Tr. 2724-2725, in camera). 

221. 

referenced the ~
 

(Hall, Tr. 2730, in camera). 

222. 

camera). 

223. Mr. Hall was also able to detenine _l conversion costs manufactu 

for a tyical PE s . arator. Mr. Hall utilized information from
 

224. Mr. Hall deterined ~_l conversion costs for a
 

extrapolation from his understanding of how l
 

.225. anal sis, in 2007, BFR's material costs were
 

l (Hall, Tr. 2725-2726, in


camera; PX1522 at 005, in camera). According to Mr. Hal's anal sis BFR's material 

costs were ~
 

35 
~ (Hall, Tr. 2732-2733, in camera; PX1522 at 005, in camera). 

226. Mr. Hall's benchmarking analysis showed that BFR's manufactung costs in 2007 
 were 

_l per square meter of 6 mil backweb separator. (Hall, Tr. 2727, in camera;
 

PX1522 at 005, in camera). Mr. Hall's benchmarking analysis indicated 

) as


to the conversion costs. (Hall, Tr. 2733, in camera). According to Mr. Hall's analysis, 

005, in camera). 

227. 

) 

(Hall, Tr. 2733-2734, in camera). 

228. Mr. Hall understands that
 

_) (Hall, Tr. 2735, in camera). According to Mr. Hall, the tota cost for BFR to
 

. produce a tyical 6 mill backweb separator was _l per square meter in 2007. (Hall,
 

Tr. 2727, in camera; PX1522 at 005, in camera). According to Mr. Halls' analysis, 

~_) cost to produce an equivalent separator-l per square meter, and 

~-rost to produce that same separator was ~per square meter in 2007.
 

(PX1522 at 005, in camera; Hall, Tr. 2734-2735, in camera). 

229.. At BFR's most recent board meetig in March 2009, Mr. Hall analyzed updated figues
 

with regards to BFR's cost strcte. Based on BFR's curent cost strctue, the same 6 

mil backweb separator now costs BFR approximately 

) (Hall, Tr. 2735-2736, , in camera, 2764, in camera).
 

230. EnerSys had looked to Asia for futue potential suppliers. In his search for alternatives, 

Mr. Axt located two companes in Chia that curently make SLI separators, t 

l (Axt, Tr. 2217, in camera). EnerSys is working with these companies 

(Axt, Tr. 2218-2219, in camera). 

231. 

(Axt, Tr. 2218, in camera). 

36 
232. 

233. 

234. BFR canot compete on price term . th D d E t k . 11' PE s ators to
 !. A.
 

customers in the United States - l 

_l (PX0907 (Kung, Dep. at 172-173, in camera)). In the United States, Daramc
 

and Entek have low manufactung costs relative to BFR, largely because of their local 

production facilities, cheaper raw material sourcing, and mass production volumes. 

(PX0907 (Kung, Dep. at 172-173, in camera). 

235. 

(PX0907 (Kung, Dep. at 176-177, in camera). 

236. When asked how much prices would have to increase in North America for BFR to 

supply a Nort Amercan battery manufacturer with PE SLI separators Mr. Kung 

responded by saying l 

(pX0907 (Kung, Dep. at 186-187, in camera)). 

237. 

238. t 

2747, in camera). f 

L (Hall, Tr. 2745, in camera). 

37 
(Hall, Tr. 2745, in camera). . 

239. As far as Mr. Hall knows, BFR
 

l (Hall, Tr. 2745,
 in camera; PX0907 (Kung, Dep a 

240. 

241. 

242. BFR is not consideng building a manufactung 1ant in Nort America. The BFR 

board has not approved any plans to f l (Hall,
 

Tr. 2879, in camera). 

243. All ofBFR's PE separator production is curently sold f l
 

(pX0907 (Kung, Dep. at 85, in camera)). JCI purchases separators from BFR, but these separators are t J (pX0907 (Kung,
 

Dep. at 90, in camera . 

244. 

245. 

246. 

38 
4. Separator manufacturers outside of 
 Nort Amerca do not sell separators for flooded 
 lead acid batteres into Nort America. 

247. Other flooded lead acid batter suppliers, including Amer-Si1 and firms in India and 

China, did not have a global reach and only supplied the local marktt near their plants. 

(Gilchrst, Tr. 307-08). 

248. As worldwide VP of sales and marketing, Mr. Roe was the person at Daramic who was 

responsible for competitive intelligence. (Roe, Tr. 1193-1194). Mr. Roe testified that he 

is not aware of any instance prior to Daramic's acquisition ofMPLP where Asian 

manufactuers ofPE separators supplied Nort Amercan battery manufacters with PE 

separatorS for use in any tye of 
 flooded lead acid batteres. (Roe, Tr. 1236). Mr. Roe, 

fuer testified that he does not know of any instaces where an Asian PE separator
 

manufacturer had supplied Nort Amercan batter manufactuer with separators for any 

tye of flooded applications since the acquisition ofMPLP. (Roe, Tr. 1236-1237).

249. Daramic has not faced competition in North Amerca from Asian PE battery separator 

manufactuers. (Thuet, Tr. 4381-4382; Seiber, Tr. 4266-4267, in camera). Nor has 

Darc ever seen any instances of Asian PE battery separator manufactuers sellng PE 

separators for flooded lead acid batteres to customers in Nort America. (Thuet, Tr. 

4379-4380). Daramic does not compete with any Asian battery separator producer
 

in North America. (Seiber, Tr. 4165, in camera; RXOI084, in camera). According to
 

Po1ypore's CEO, the Asian separator manufactuers are not sellng separators in Nort 

Amerca because the margins are not high enough. (Toth, Tr. 1404). 

250. Microl'rous did not consider the regional Asian suppliers as potential competitors for its 

separator business in Nort Amerca. (Gilchrst, Tr. 308). 

251. 

252. 

253.
 

39 
L (PX0916 (Dauwe, Dep. at 152-153, in camera)). 

254. 

Five Percent Price Increases in Batter Separators Wil Not Cause an Increase in Imports of
 

Batteries
 

255. With the exception of an extremely low volume tan battery called OPz, EnerSys does
 

not import flooded lead batteres into Nort America. (Craig, Tr. 2548-49). It is not 

cost-effective to ship large flooded lead acid batteries like EnerSys's motive and UPS 

batteres. (Craig, Tr. 2549-50). EnerSys must drain flooded lead acid batteries in order 

to ship them and then refill them 
 when they arve. (Craig, Tr. 2550). 

5. Respondents documents analyzed Nort Amercan market separate from
 

other geographic regions .
 

256. 

(R01073 at 006,010,014, in camera; RX01074 at 006,010,014, in camera). 

257. Daramc is curently seekig a price increase of 
 approximately _l from
 EnerSys. (Craig, Tr. 2552, in camera). If 
 EnerSys has to pay that price increase in 
 just 

Nort Amerca, it will not begi importg motive or UPS batteries from abroad. (Craig,
 

Tr. 2552-53, in camera). 

V. Market Parcipants
 

'­

A. Darc and MPLP Were Only Supplier of 
 Deep-cycle Separtors in Nort 

America 

258. Prior to the acquisition, Microporous parcipated in the Nort Amercan deep-cycle 

market with its CellForce and F1ex-Si1 products. (Gilchrst, Tr. 300-301).
 

40 
259. Prior to the acquisition, Daramic paricipated in the North Amercan deep-cycle market 

with its HD product. (Gilchrst, Tr. 343). 

260. Prior to the acquisition of 
 Microporous by Daramic, the only competitors in the world for 

the sale of 
 battery separators for deep-cycle applications were Daramic and Microporous. 

(Godbe., Tr. 153-54; Gilchrst, Tr. 305, 343; Wallace, Tr. 1931, 1943; Hauswald, Tr. . 

674-675; McDonald, Tr. 3948). 

261. Prior to the acquisition, U.S. Batter, which primarly manufactues deep-cycle batteries, 

only bought separators for its deep-cycle flooded batteries from Daramic and 

Microporous. (Wallace, Tr. 1942-1943). U.S. Batter is not aware of any other suppliers 

of batter separators for deep-cycle flooded batteries. (Wallace, Tr. 194; Qureshi, Tr. 

2011). 

262. The only separators that are available for flooded lead acid deep-cycle batteres are F1exSi1, HD, and CellForce, which all come from Daramic. (Godber, Tr. 151-152; see also 

Queshi, Tr. 2004). 

263. Prior to the acquisition, Daramic and Microporous competed for the sale of separators 

that went into golf car batteres. (Hauswald, Tr. 653-654). 

264. In the past ten years, Mr. Gilchrst has not seen any competition other than that between 

MPLP and Daramc for deep-cycle applications. (Gilchrst, Tr. 366). 

265. As a result of 
 the acquisition, Daramic has "complete control" or 100% of 
 the deep-cycle 

separator markets world-wide. (pX0076 at 002, Gilchrst, Tr. 421). 

266. Today, Daramc is the only supply option in the world for deep-cycle batter separators. 

(Godber, Tr. 229; Queshi, Tr. 2010-2011). 

267. JCI is not aware of any separator manufactuer other than Daramc that can supply a
 

deep-cycle battery separator that will work in JCI's batteres. (Hall, Tr. 2705).. 

268. 

L (PX1515 at 002, in camera). Followig the acquisition of MPLP, JCI scheduled what it called "red flag" meeting to discuss the impact of 
 the 

acquisition on JCI's purchases of dee -cycle s arators. (Hal, Tr. 2705-2707).
 

269. i 

(pX0023 at 003, in camera).
 

(pX0023 at 003, in camera).
 

41 

l 
270. Respondent's documents show that Microporous and Daramic are the only curent sellers 

and the only market participantS in the Nort American market for rubber and PE/rubber 

deep-cycle battery separators used in golf cars and scrubbers. (PX0131 at 035; PX11 04 

at 001; PX0395 at 027, in camera). 

271. Sales data from 2007 show that the change in HHI and the post-merger HHI for the 
 deepcycle market far exceeds the thesholds listed in the Merger Guidelines. (Simpson, Tr. 

3184-3185). l 

I (Simpson, Tr. 3184-3185; PX0033 at 040, 042 (Simpson Report), in camera). Dr. Simpson noted that the 2007 data undertates the 

competition between Microporous and Daramic in ths market because the firm with the 

smaller share was 
 in the process of gainig market share. (Simpson, Tr. 3438, in 

camera). 

272. Microporous's separators have approximately 90% market share for golf-car batter
 

applications because its application specific separator prevents gassing and water loss in 

these deep-cycle batteres. (Brilmyer, Tr. 1831). .
 

273. 2005-2007 Market shares and HHI calculations for deep-cycle battery separators 
 in Nort 

America are: 

Sales Shares
 

. 

. 

(PX0949 at 190-214, in camera; PX0949 at 224..233, in camera; PX0033 at 40, in camera). 

274. DaraiIc's market share in deep-cycle has increased each year from 2005 though 2007.
 

PX0033 at 40, in camera). 

1. Daramic produces HD
 

275. Daramc's HD separator is a separator with a rubber additive (i.e., latex or liquid rubber) 

which is used in deep-cycle batteres. (Gilchrst, Tr. 338-339, 343). Daramc markets 

HD to deep-cycle battery manufactuers. (Gilchrst, Tr. 381). 

2. MPLP Prodùced F1ex-Si1 and CellForce 

42 
276. Microporous developed CellForce in the mid-1990's to address customer needs for a 

more flexible separator materal that can fold around the batter plates and be sealed
 

along one edge, while retaining the electrochemical attbutes of a rubber-based 

separator. (Gilchrst, Tr. 316-317). Because there were cost advantages for customers to
 

. use CellForce that related to seaing and sleeving the separator, Microporous anticipated 

that its F1ex-Si1 customer would migrate to CellForce separators for many of its battery 

applications. (Gilchrst, Tr. 373-374). 

3. No Other Supplier in the World
 

B. Daramc and MPLP were the only Suppliers of 
 Motive Separators in Nort 

Amerca 

277. Prior to the acquisition, Microporous paricipated in the Nort Amercan motive market 

with its CellForce product. (Gilchrst, Tr. 300-301). 

278. 

L (pX0211 at 001, in camera; Himswald, Tr. 

279. As a resut of the acquisition, Daramic has "complete control" or more than 97% of the 

industral markets for motive power separators world-wide. Amer-Si1 in Luxembourg 

would be the remaing competitor. (pX0076 at 002, Gilchrst, Tr. 422). 

280. Sales data from 2007 show that the change in HHI and the post-merger HHI for the
 

motive market far exceeds the thesholds listed in the Merger Guid~ 

3184-3185). Daric's acquisition 
 of Microporous increased the t_
 

_l in the motive market. (Simpson, Tr. 3185; PX'U033 at 040, 042 (Simpson
 

Report), in camera). 

281. In August 2007, Mr. Gilchrst informed the Micro orous board that
 

L (pX0080 at 058-059, in camera). In September 2007, Mr. Gilchrst informed the Microporous board that "left to our own 

initiatives, MPLP will captue the majority of 
 the industral segment on its own in the 

next thee to four year." (pX0077 at 003, in camera). 

282. Dr. Simpson noted that the 2007 data understates the competition between Microporous 

and Daramic in ths market because the fi with the smaller share was in the process of 

gaing market share. (Simpson, Tr. 3438, in camera). Microporous anticipated that, by 

the end of2009, new sales of 
 Cell Force to manufactuers of motive batteries would 

43 
increase its U.S. share of the motive market segment to 45-50%. (Gilchrst Tr., 398-399). 

Sales data estimated by Microporous for 2010 show that the change in HHI (4872) and 

the post-merger HHI (10000) for the motive market exceeds the thesholds listed in the 

Merger Guidelines. (Simpson, Tr. 3185-3186). 

283. After the acquisition ofMPLP by Daramic there is only 
 one option for Crown's industral 

separator supply. (Balcerzak, Tr. 4128). When Daramic had quality problems with its 

separators at Crown, its salesman, Randy Hanschu undertood that Crown had nowhere 

to tu. (PX0803 at 1 ("It is sure getting diffcult to convince our customers we are not a 

monopoly.")). 

284. When EnerSys's contract with Daramic expires, it wil continue to purchase separators 

from Daramc because it has no other choice. (Craig, Tr. 2611). 

285. Dung the Daramc Strke at the Owensboro facility, Crown experienced some order 

disruption, comig close to shuttg down productions lines as a result of the strke. 

(Balcerzak, Tr. 4099). 

286. Entek was unable to supply Crown with industral PE separators durng the Owensboro
 

stre according to Mr. Balcerak because Entek did not posses the proper tooling neeed 

to make Crown's'required profile. (Balcerak, Tr. 4100-4101).
 

287. MPLP documents reflect the fact that motive separators are a product market and reflect a 

highy concentrated North Amercan geographic market projecting shares of29 percent 

for Microporous and 71 percent for Daramic in 2008. (PX0072 at 024-025). 

288. 2006-2007 Market Shares and HHI calculations for motive batt 

Sales Share
 

. . 

I. 

(pX0080 at 60, in camera; PXQ033 at 41, in camera). 

Based on Microporous planed expansion, the estimated 2010 market shares and HHI 

calculations for motive batter se arators in N.A. are: 

44 
(pX0949 at 190-214, in camera; PX0949 at 224-233, in camera; PX0033 at 42, in 

camera). 

C. Daramc has been the Primar Supplier öfUPS but MPLP is a Market Parcipant 

and was about to Commercialize a Product 

289. Prior to the acquisition, Microporous parcipated in the 
 Nort Amercan UPS market
 

with its CellForce product. (Gilchrst, Tr. 300-301). 

290. Prior to the acquisition, Daramic parcipated in the Nort Amercan UPS market with its 

Daramic CLproduct. (Burker, Tr. 2318; Hauswa1d Tr. 988). 

291. Daramic PE separators 
 have 95% market share for UPS batter applications in Nort 

Amerca. (Bri1myer, Tr. 1834). 

292. As a result of the acquisition, Daramc has "complete control" of the industral flooded
 

resere power separator markets world-wide. (PX0076 at 002, Gilchrst, Tr. 422).
 

D. Daramic and Entek were Priar Suppliers ofSLI but MPLP is a Market
 

Paricipant and was Expanding to Sere Customers in that Market 

293. Prior to the acquisition, Microporous paricipated in the Nort Amercan SLI market with 

its PE product. (Gilchrst, Tr. 311). 

294. Priòr to the acquisition, Daramc paricipated in the Nort Amercan SLI market with its 

Daramic HP product. (PX0669 at 003, in camera). 

295. In Nort Amerca, Daramic and Entek had vially the entie automotive separator 

market pri9r to the acquisition. (pX0171 at 004). However, MPLP had manufacted 

and sold SLI separators in Nort Amerca and considered itself a competitor in that 

market. (Gilchrst, Tr. 308,313,341-342). 

296. Entek is a global supplier ofSLI separators that operates plant facilities innortem 

England and on the West Coast of the United States. The West Coast plant supplies the 

Asia Pacific markets. (Gilchrst, Tr. 307-308, 310-311). 

297. At the time of the acquisition, MPLP, Daramc and Entek were the only fis in Nort
 

Amerca with production lines for PE separators. (Gichrst, Tr. 307-308,342,616). 

45 
. 298. When it comes to PE separators there are only two options in the industr after the 

acquisition, Entek and Daramic. (Balcerak, Tr. 4128). 

299. MiCfoporous was a recent entrant in the SLI Separator market. MiCfoporous had begu 

testing PE materal for SLI at JCI in 2003, and in November of2005 JCI was still testing 

material from MiCfoporous for SLI batteres. (Trevathan, Tr. 3690-91). 

300. MiCfoporous planed to produce polyethylene (PE) separators for automotive batteres on 

one of 
 the two production lines at its recently built plant in Feistrtz, Austra. (Gilchrst, 

Tr.331-332). Several ofMiCfoporous's customers were interested in buying PE 

separators from this production line and Mr. Gilchrst, Microporous's CEO prior to the 

acquisition, was confident that actual sales would ensue. (Gilchrst, Tr. 345-346; 440­

443, in camera). 

301. 

L (Simpson, Tr. 3439, in camera). Dr. Simpson noted that a MiCfoporous document predicted futue 

market shares for 2010 in a Nort Amercan SLI batt s arator market. (Simpson, Tr. 

3439, in camera). 

(Simpson, Tr. 3186; PX0033 at 041 (Simpson Report), in camera). 

302.	 One measure ofMiCfoporous's impact on the SLI market is the use ofthe l 

303.	 Similarly, Daramic market share chars for SLI in Nort Amerca give MPLP a 4 percent 

share of SLI sales, Entek 49 percent, and Daramc 47 percent, but nothg to any Asian 

producer. (pX0264 at 003). 

304.	 At the tie of
 the acquisition, Johnson Controls Europe was contemplatig using 

CellForce separators in some of 
 their SLI batteres. (Gilchrst, Tr. 440-441, in camera). 

Johnson Controls was testig samples on its batter production lines. (Gilchrst, Tr. 441­ 442, in camera). .

305. ~~ .A.~:
 ril . .. 

46 
(PX0949 at 190-214, in camera; PX1833 at 13-65, in camera; 

camera). 

306. Based on 
 Microporous planed expansion, estimated 2010 market shares and HHI 

calculations for SLI battery s arators in N.A. are:
 

Sales Shares
 

1. Entek is not an uncommtted entrant in any non-SLI product market
 

307. Dr. Simpson explained that l_l is not a market paricipant in the deep-cycli: and 

motive markets because it was not an uncommtted entrant under the Merger Guidelines. 

(Simpson, Tr. 3461-3462, in camera). 

308. Entek does not manufactue industral product.
 

(Weers, Tr. 4503-4504, in camera). 

309. 

(Weer, Tr. 4492-4493, in camera; PX1833 at 004, in camera). 

310. 

311. 

47 
(Weerts, Tr. 4503-4504, in camera). f_ 

) 

(RX00114 at 008, in camera). 

312. 

camera). 

313. 

Tr. 4515-4516, in camera). 

314. 

315. Entek exited the industral PE separator market in the early par of this decade. 

(Balcerak, Tr. 4097). Entek does not manufacture industrial separators today. 

(Seibert, Tr. 4174, in camera). 

316. 

317. There are signficant sun costs for Entek to enter the deep-cycle, motive, or UPS 

markets. Calender rolls cost approximat1y $20,000 to $50,000 a piece. (Gaugl, Tr. 4553­

4554). The lead time from order to delivery of a calender roll takes approximately 12 to 

14 weeks. (Gaugl, Tr. 4553). Microporous has approximately 20 calender rolls at its two . 

48 
facilities. (Gaugl, Tr. 4618). Daramc estimated its calender rolls cost up to $80,000 a 

piece and it has approximately 100 different ones. (Whear, Tr. 4678). 

318. Trojan did not reach out to Entek as a potential supplier of deep-cycle battery 
 separators 

because Trojan had previously tested Entek separators for golf applications in the mid90s and the performance was not there. (Godber, Tr. 289). The technology that Entek 

had available then is the same as Entek has available today. (Godber, Tr. 289). Since the 

mid-90s, Entek has not called on Trojan for its deep-cycle business. (Godber, Tr. 290). 

319. East Pen does not know wheter Entek curently sells deep-cycle separators. (Leister, 

Tr. 4041). East Pen did purchase some deep-cycle separators from Entek in the past, but 

stopped buyig those separators at least thee years ago. (Leister, Tr. 3985). At that 

time, East Penn was paying Entek higher prices for deep-cycle separators than East Penn 

is curently paying to Daramc for HD separators.. (Leister, Tr. 4041). 

2. Supplier outside Nort America are not Market Parcipants in Nort
 

Amenca 

320. Amer-Si1, a regional supplier, operates a plant facility in Luxembourg that produces 

PVC-based separators for 
 motive battenes. (PX0916 (Dauwe, Dep. at 15); Gilchrst, Tr. 

306-307; PX0078, in camera). Amer-Sil produces PVC separators for lead acid battenes 

and does not produce PE separators. (PX0916 (Dauwe, Dep. at 14)). Amer-Sil's PVC 

separators are used in European flooded motive and stationar battenes, but are not used 

in automotive battenes. (pX0916 (Dauwe, Dep. at 18-19)). 

321. There are regional suppliers in India, China, fudonesia and Korea that produce separators 

for local customers. They include Anpei and BFR, Chiese manufactuers of SLI .
 

separators, Korido, an Indonesian manufactuer of SLI and industral separators, and 

Global Industral, a Korean manufacter of SLI and industal separators. (Gilchrst, Tr. 

307-308,424,430). 

322. . JCI entered into a thee way joint ventue in Februar 2007 with Rising and Fengfang. 

1 to form the joint ventue known as BFR. (Hall, Tr. 2715-2716, 2740, in camera). JCI does not have a controlling interest in BFR. (Hall, Tr. 2741, in 

camera). JCI has a 1 equity share in BFR, while Fengfang's equity share in BFR is 

_1 and Rising's is 1 (Hall, Tr. 2740, in camera). The pricipal owner of
 

Rising is 1 (Hall, Tr. 2836, in camera). Unanous BFR board approval
 

is requied for 1 (Hall, Tr. 2826, in camera).
 

323. Dr. Kahwaty estimated market shares for a global PE battery separator market. 

(R00945-179). Using these market shares, Daramc's acquisition of Micro porous 

increased the HHI by 189 points to 3920. (Simpson, Tr. 3189). These figues understate 

the change in HHI because Dr. Kahwaty had erroneously assigned some Daramc sales to 

Entek. (Simpson, Tr. 3190). Dr. Simpson also testified that the2007 data understates the 

49 
competition between Microporous and Daramc in ths market because the firm with the 

smaller share was in the process of gaining market share. (Simpson, Tr. 3438, in 

camera). 

VI. Competitive Effects
 

A. MPLP and Daraic were 
 Closest Competitors in 30f 4 Markets 

324. The acquisition enabled Daramc to increase pnce unilaterally. (Simpson, Tr. 3192-3194, 

in camera). 

325. Mr Seibert, the Vice-President and Business Director for sales, marketing, and technca 

assistance, 

326. MPLP's low-pnced competition made it a mavenck in the separator industr. 

Histoncal1y, there was not an "aggressive nval among competitors." (pX0482 at 002). 

According to Daraic's worldwide VP of sales and marketing, that changed when MPLP 

entered the 
 market with its PE-based CellForce separators. (PX0482 at 002; Roe, Tr. 

1281). 

1. Daramc was MPLP's only 
 competitive Constraint in Deep-cycle 

327. F1ex-Si1 has unque properies that differentiate it from other battery separators. (PX0131 

at 14). Dr. Simpson explained that because F1ex-Si1 is differentiated from other products, 

its owner has market power, and thus would not lose all of its sales if it were to increase 

pnce above cost. (Simpson, Tr. 3176). Consequently, in Dr. Simpson's opinon, "the 

owner ofFlex-Si1 has the incentive to increase pnce until it gets to the point where the 

profit that it loses as sales shift to other products just begins to exceed the additional 

profit that it gets from getting a higher price on those sales it continues to make." 

(Simpson, Tr. 3177; PX2251 at 017, in camera). 

328. Dr. Simpson rejects Dr.Kahwaty's arguent that F1ex-Si1's pricig is constrained by a 

long-ter contract with Trojan which set its price below the profit maxing level 

because MPLP was recently wiling to offer concessions to buyers ofF1ex-Sil and MPLP 

presumably would be unwiling to lower pnce fuer if it already thought that it had set 

too low a price. (Simpson, Tr. 3181-3182). 

50 
329. Daramic HD was the closest independently-owned substitute for Flex-SiL. Thus, ifthe 

owner ofF1ex-Si1 were to increase price a little more, some of the sales that would be lost 

would shift to Daramic HD. (Simpson, Tr. 3177-3178). IfF1ex-Si1 and Daramic HD are 

owned by the same 
 owner, then the joint owner recovers some of the profit on the lost 

F1ex-Si1 sales that shift to Daramic HD. (Simpson, Tr. 3178). "(I)n this way a price 

increase that would not make sene for an independently owned F1ex-Si1 (or F1ex-Si1 and
 

CellForce) would make sense if 
 they also owned Daramc HD." (Simpson, Tr. 3178, 

PX2251 at 017, in camera; Kahwaty, Tr. 5514-5515, in camera). 

330. Daramc analyzed the effect of rubber price increases on Flex-Si1 versus HD in an effort 

to gauge the impact of rubber prices on the prices of the two competig products because 

ofMPLP's new rubber pass-through agreements. (PX0948; Whear, Tr. 4785- 4786). 

331. Before the acquisition, Daramic's pricing for HD was _l than Microporous's 

pricing for CellForce and Flex-SiL. (Gilchrst, Tr. 467, in camera). 

332. None of the Asian batter separator manufactuers are producing a deep-cycle separator
 

contang an antimony suppression additive. (Thuet, Tr. 4396). 

333. Exide believes that following Daramc's acquisition ofMPLP, Exide no longer has the 

same leverage for the purchase of deep-cycle battery separators that it had prior to the 

acquisition, because now there is only one provider of deep-cycle separators for Exide to 

negotiate with. (Gillespie, Tr. 2953-2954). 

334. 

i) Daramc DC Introduced to Compete with MPLP's Flex-Si1
 

335. . Daramic spent many years trg to develop a battery separator that would work well in 

deep-cycle applications. (pX0433at 001). 

336. Daramc made repeated attempts to develop a product to compete with MPLP's F1ex-Si1 

separators in the deep-cycle market. (pX0433 at 001). Daramic first developed a 

separator known as DC, a separator for deep-cycle batteres manufactued by combinig 

PE with a hardwood 1ignan additive intended to suppress antimony tranfer and water 

loss in deep-cycle batteries. (PX0911 (Roe, Dep. at 69-70)). 

337. Daramc DC was Daramic's origial deep-cycle separator introduced to the market in 

2002. (PX0319 at 003). .
 

338. Daramic DC was specifically designed for the golf car application. (Wear, Tr. 4776). 

51 
339. Daramc began testig J, as a replacement for J, in 2003. 

(PX0949 at 019, (Response to CID Request No.8, in camera)). 

340. Daramc's early work with U.S. Battery 
 ultimately led to Daramic DC. (Qureshi,Tr. 

2020). U.S. Battery and Daramc tested Daram.c DC and found it to be quite acceptable. 

(Queshi, Tr. 2020). The product was commercialized in about 2002. (Qureshi, Tr. 

2021). U.S. Battery began purchasing Daramc DC in approximately 2003 . (Qureshi, 

Tr. 2021). At the time U.S. Batter began purchasing Daramic DC, its price was much
 

lower than the price of 
 the Microporous F1ex-Sil product. (Qureshi, Tr. 2021). 

341. U.S. Batter fist used Daramc DC in a new economy line golf car batter, the US 1800. 

(Queshi, Tr. 2021; McDonald, Tr. 3946-3947). Microporous responded to Daramc's 

introduction of the DC separator by offerg to lower the price of 
 its F1ex-Sil separator for use in the US 1800 batter to close to the price of 
 the Daramic DC. (Qureshi, Tl; 

2023; PX1764 at 002; McDonald, Tr. 3947). Once Microporous lowered the price of 

Flex-Si1 for the U.S. 1800 batter, U.S. Batter approved and began purchasing both 

Flex-Sil and Daramic DC for use in the US 1800. (Qureshi, Tr. 2024). Mr. Queshi 

testified that there was no noticeable or fuctional differences between the US 1800 

batteries with the Daramic DC separator and those with the F1ex-Si1 separator. (Queshi, 

Tr. 2025). 

342. U.S. Batter expanded the use of Daramic DC to 10 different types of deep-cycle 

batteres that it produced that were all previously using Flex-SiL. (Queshi, Tr. 2025). 

The waranties on the batteres that iIcorporated Daramic DC in place ofF1ex-Si1 cared 

U.S. Batter's normal one-year waranty. (Qureshi, Tr. 2026). U.S. Batter also used 

Daramc DC on their economy line batteres that car a six month waranty. (Queshi, 

Tr. 2026). These economy line batteries also contain fewer lead plates to reduce their 

cost. (Queshi, Tr. 2027). Less lead plates wi11essen the product life. (Queshi, Tr.
 

2027). The lengt of the waranty U.S. Battery puts on its batteres, is related more to 

the number of plates in the batter than the type of separator the batter is using. . 

(Qureshi, Tr. 2085). 

343. The November 9, 2005 Trip Report concludes that U.S. Batt's owner, Jon Anderson, 

"appreciates that we developed a competing product for rubber. . . Jon sees their benefit 

as havig two suppliers in order to manage costs while maintaing product perormance. 

Meawhile, we benefit by continuing to gain incremental volume (and takng it away 

from Microporous Products) in a market where we are relatively new entrants." (pX0557 

at 003). As the trp report confis, U.S. Batter communcated to Daramic its interest 

in incorporating more HD into its higher quality batteres, and Daramic was interested in 

supplying more product to U.S. Battery. (Qureshi, Tr. 2029-30). 

a. Daramc DC Won Business from MPLP's F1ex-Si1 

52 
344. Begig in 2003, U.S. Batter 
 began manufacturing deep-cycle batteres with 

Daramc's DC separator in place ofF1ex-Sil. (Wallace, Tr. 1945). Prior to purchasing 

Daramc's separator, U.s. Batter was only buyig F1ex-Si1 for its deep-cycle batteries. 

(Wallace, Tr. 1945-1946). 

345. 

ii) MPLP Responded to Competition
 

346. Prior to purchasing Daramic's DC separator, U.S. Batter was only buying F1ex-Si1 for
 

its deep-cycle batteres. When Microporous found out that U.S. Battery was additionally 

buyig Daramc's DC separator for its deep-cycle batteries, it lowered its pricing on F1exSi1 separators. (Wallace, Tr. 1945-1946). 

iii) Daramc Improved Product and Introduced HD
 

347. Daramic developed the HD separators to replace its DC sèparators. (Roe, Tr. 1196). 

Daramic HD separators are manufactued by combining PE with a latex rubber additive. 

(Hauswa1d, Tr. 699-700). HD separators provide improved perormance over the DC 

separators. (Roe, Tr. 1196; (PX0911 (Roe, Dep. at 69-70)). HD separators provide better 

antimony suppression and less water 
 loss in deep-cycle batteries than the old DC 

separators. (Roe, Tr. 1196). HD separators also provide improved end-of-charge 

perormance over tie than standard PE separators. (pX0423 at 002). 

348. U.S. Battery 
 tested Daramc HD product and the Microporous Flex-Sil product side by 

side and deterned the two "are ver comparable." (Qureshi, Tr: 2033). The mai 

advantage ofHD is its cost advantage. (Qureshi, Tr. 2033). .
 

349. Exide had tested previous versions ofDaramc separators for deep-cycle batteres and 

none of 
 the versions prior to HD had passed Exide testig. (Gilespie, Tr. 2937). 

350. Daramc HD was developed to compete in the deep-cycle market. (Roe, Tr. 1195-1196; 

PX0911 (Roe, Dep. at 56); PXL 791; PX1744 at 004, in camera; PXI071; PX222 at 001, 

in camera). 

351. 

4304, in camera).
 

I (Seibert, Tr. 4308-4309, in camera). t
 

53 
L (Seiber, Tr. 4309-4310, in camera).
 

352.
 

353. 

. in camera). 

354. Because Daramc felt that HD perormed better than rubber separators such as F1ex-Si1, 

and PE based separators with rubber additives,. 
 such as CellForce and DaramicDC, 

J)aramic decided to phase out Daramc DC and replace it with Daramic HD. (PX0695 at 

003; Wallace, Tr. 1947, 1960-1961). US batter switched its DC purchases to lI when 

DC was discontinued by Daramc in 2006. 
 (Wallace, Tr. 1947).
 

355. Daramc HD's fist commercial sales took place in 2005. (Roe, Tr. 1209). 

356. Dararc HD was specifically targeted as an alternative to Microporous's rubber 

separtor, F1ex-Sil, beig used in golf car and floor scrbber batteries. (pX0319 at 003). 

Pierre Hauswald, as general manager of 
 Daramic, parcipated in developing the Daramic 

HD strategy, as descrbed in PX0319. (Hauswa1d, Tr. 688:22-24). 

357. Tests conducted by Daramic accurately showed L 

(Wear, Tr. 4839, in camera). Daramc is curently still testing HD in comparson to 

Flex-SiL. (Wea, Tr. 4787). 

358. Prior to the acquisition, Daramc tred to sell Daramc HD to Trojan, for use in its deepcycle batteries, including golf car batteres. (Hauswa1d, Tr. 659-660). 

359. In 2006, U.S. Batter switched all its applications that were using Daramic DC to
 

Daric's replacement product, Daramc HD, (Qureshi, Tr. 2028). Daramic HD is
 

. superor to Daramic DC in ters of cycle life. (Qureshi, Tr. 2028). 

360. A November 9,2005 Daramic Trip Report to U.S. Batter confis that U.S. Battery 

viewed HD as a superior to DC. (PX0557 at 002). Based on a comparson ofDaramc 

HD to Daramc DC in enveloped golf cart batteres, Daramc reported that ''Nawaz 

54 
(Queshi) wants to switch all DC product immediately to HD. . . . Nawaz want to make a 

rug change as soon as it is available." (PX0557 at 002). Moreover, Daramc noted
 

that U.S. Batter's Nawaz Qureshi "provided a list offour (4) new product lines he 

would like to switch away from rubber. NOTE: Some of 	 these new sizes include midlevel product lie." (pX0557 at 002). . Included with the four new products, was the
 

"US 2000 (mid-level golfcar batter)." (PX0557 at 002). The Daramic Trip Report also
 

states that "(i)t maybe up to us to determe how much more business we want to take 

away from Microporous Products and when we want to take it." (pX0557 at 002). 

361. t l (PX0904 (Seiber, Dep. at


131, in camera)). In response to Mr. Keith's emai1 that said "We know we can price the 

product where we want to either get business or cause Amerace to reduce theirs," Mr 

Seiber wrote "knowing that we're 'competitive' should we take prices down 5% to 10% . 

to get even more aggressive?" (PX0329 at 001). 

362.	 In Februar 2007, Mr. Roe, infomed the individuals at Daramic who were directly in 

charge ofHD strategy that HD was meant for the same market as MPLP's F1ex-Si1 

separators. (pX0316 at 002; Roe, Tr. 1200-1201). Mr. Keith, a Daramc salesman, 

sepecifically noted the competition between HD and F1ex-Si1, stating that Daramc "must 

continue to improve our serce on HD or we stand a good chance of losing golf car 

business back to Amerace F1ex-Sil." (pX0413 at 5). 

363.	 t.l ~ separators could match the antimony suppression af 

t l t_l separator. (pX0911 (Roe, Dep. at 58-59, in 

camera)). Daramic even advertsed to customers that HD matched the antimony 

poisomng retadation ofthe F1ex-Si1 separators. (PX0423 at 002; Roe, Tr. 1202-1203).
 

Ths adversement was par of the marketing product literatue that was provided to 

battery manufactuers. (Roe, Tr. 1203). 

364.	 . Additionally, Daramic provided battery manufactuers with test resuts comparng 

Daramic HD to rubber separators. (pX0423 at 002). The test results indicated that HD 

outperormed pure rubber separators as well non-active separators over the life of a 

batter. (PX0423 at 002). These test results were clearly designed to compare _ 

l separator available on the market. 

(pX0911 (Roe, Dep. at 59, in camera)). 

365. Daramic informed customers that the HD separators are superior to Ce1IForce. 

(R00598 at 001). 

366. When Daramc introduced the HD separators it understood that on a perormance basis 

they were close to the level ofMPLP's F1ex-Si1 separators. (PX0433 at 001). However, 

Daramc was not satisfied 
 with simply being close to the perormance of F1ex-Sil, and it 

continued to work hard to improve the HD separators.. 

55 
367.
 

l (pX0911 (Roe, Dep. at 227, in camera)). For example, when HD was introduced to the marketplace witha 12 mil backweb thickness 

there were problems associated with wrling ofthe separators. (Roe, Tr. 1312-1313).
 

Daramic was subsequently able to overcome ths wrnking problem by increasing the 

backweb thckness of 
 the HD separators to 13 milL. (Roe, Tr. 1312-1313). 

368. Exide understood that Daramic was marketing the HD separators for use in golf car
 

batteres. (Gilespie, Tr. 2937). When Daramc introduced the HD separators, Mr.
 

Tucker Roe approached Mr. Gillespie and asked that Exide test the HD in golfcar 

batteres to see how it penorms. (Gilespie, Tr. 2937). Daramic wanted to know what it 

would take for Exide to getHD into Exide's olf car batteres. Giles ie, Tr. 2937­ 2938). l l

(Gilespie, Tr. 2996, in camera). 

369. From Exide's perspective, Daramic's interest in gettg Exide's golf car.business was a 

ten on a scale of one to ten. (Gilespie, Tr. 2938-2939; see also PX1071 at 001-002 (May 

2006 emai1 from Mr. Roe to Mr. Gillespie "we are aggressively pursuing ths market")). 

370. When Daramic introduced the HD separators Exide was interested in buying HD for its 

dee-cycle batteres for penormance and commercial reasons. Exide's testing indicated 

that HD mefExide's penormance crtera for deep-cycle batteres. Daramc offered 

Exide a competitive price on the HD separators. Additionally, Exide received a "double 

kiss" when buyig HD because it also received a credit back from Daramc for ever 

purchase ofHD under their contractual agreements. (Gilespie, Tr. 2937-2938). 

. 371. Prior to Daramic's acquisition ofMPLP, Daramc was attemptig to grow HD's sales in
 

the deep-cycle segment. (Roe, Tr. 1209; PX0736 at 002). In fact, in Februar of2006, 

Mr. Roe informed Exide's head of procurement that Daramc was "aggressively 

pursuing" sales in the "golf cardeep-cycle and motorcycle battery business." (PX1071 

at 001-002; Roe Tr. 1209-1211). In order to grow HD's market share in the deep-cycle 

market, Daramc provided HD samples to most of the signficant deep-cycle batter 

manufactuers includingTrojan, Exide, US Batter, and Crown. (pX0262 at 003). 372.

(pX0904 (Seibert, Dep. at 106-107, in camera)). Daramc's Februar 2007 HD Product 

 l l
 

Strtegy Presentation showed that l 

373. 

56 
57

008, in camera). This “action plan” targeted a complete conversion of Exide’s deepcycle batteries from Flex-Sil to HD. (PX0263 at 008). Daramic’s “action plan” also 

including qualification of HD for use in Exide’s deep-cycle OEM batteries. (PX0263 at 

008, in camera). 

} (PX0263 at 008, in 

camera). 

374. Daramic wrote in their September 2007 America Monthly Sales Report that East Penn 

and US Battery were concerned about receiving a consistent supply of HD separators 

from Daramic. (PX0305 at 007). In fact, US Battery wanted to increase its purchases of 

HD separators from Daramic. (PX0305 at 007). In the Monthly Sales Report, Daramic 

noted it must continue to improve its service or it would “stand a good chance of losing 

golf car business back to Amerace Flex-Sil.” (PX0305 at 007). 

a. Customers Viewed Daramic HD and MPLP’s Deep-cycle 

Products as Substitutes 

375. Exide regards Flex-Sil and Daramic HD separators to be substitutes for each other. 

(Gillespie, Tr. 2933). Exide uses Flex-Sil and Daramic’s HD separators in its flooded 

lead acid batteries for use in golf cart and floor scrubber applications. (Gillespie, Tr. 

2932). Exide does not use any other type of separators in its deep-cycle batteries. 

(Gillespie, Tr. 2933). No other separators meet Exide performance criteria for deep-cycle 

batteries. (Gillespie, Tr. 2933). 

376. Flex-Sil and HD are used as exact substitutes in Exide’s most common golf cart battery, 

the GC110, which makes up approximately 80% of Exide’s deep-cycle sales. (Gillespie, 

Tr. 2941-2944; PX1401 and PX1402 (demonstrative batteries)). With the exception of 

the separator, there are no differences between these batteries. The batteries have the 

exact same labels and there is no way to tell the difference between them without cutting 

them open. (Gillespie, Tr. 2941-2944). For the end user, there is no difference in the 

price or warranty between Exide’s GC110 batteries which use HD and those that use 

Flex-Sil. (Gillespie, Tr. 2944). 

377. The testing conducted by US Battery comparing Flex-Sil and HD showed comparable 

results. (Wallace, Tr. 1972; Qureshi, Tr. 2004, 2063). 

378. US Battery’s 1800 model deep-cycle battery contains either Flex-Sil or Daramic HD 

today with no distinction in their performance or warranty claims rate. (Wallace, Tr. 

1946). Based on its battery performance testing, U.S. Battery found that Flex-Sil and HD 

separators are comparable products, i.e., one is not better than the other. (Wallace, Tr. 

1971-1972). 

379. In 2007, Mr. McDonald suggested “doctor[ing]” an HD/Flex-Sil comparison test data in 

order to protect Flex-Sil sales volume at Exide. (McDonald, Tr. 3951-3954; PX0497 at 
001). Mr. McDonald knew Exide was intent on switching some of its purchases from 

F1ex-Sil to HD and felt he needed data to show Exide that F1ex-Si1 was superor to HD. 

(McDonald, Tr. 3955). 

380. Prior to DaramIc's acquisition ofMPLP, JCI purchased HD separators from Daramc for.
 

use in golf car batteries. (Hall, Tr. 2703-2705; 2874, in camera). JCI was engaged in 

discussions with MPLP for supply of separators for golf car batteries prior to Daramc's 

acquisition ofMPLP. (Hall, Tr.2704). JCI was interested in MPLP's deep-c)'Ce
 

separators in order to have an alterative to Daramic's HD s arators because JCI wanted 

to "see competition." (Hall, Tr. 2706-2707). JCI had 

). (pX1515 at 006, in camera). Discussions with MPLP contiued even after . 

the discussions about a possible MPLP expansion to support PE SLI separator business 

with JCI had fallen apar, and continued right up to the tie perod when MPLP was 

acquired by Daramic. (Hall, Tr. 2704-2705). 

381. JCI's contract with Entek 

). (Hall, Tr.


2874, in camera; RXOOOn, in camera). 

382. Exide benefits from purchasing HD because l ). (Gilepsie,
 

Tr. 2944; Gillespie, Tr. 2996, in camera). Exide has no issues with the quality of 
 the HD 

separators. (Gilepsie, Tr. 2944). 

383. After the merger, Mr. Queshi met with Daramc's David Gunter and told hi that in
 

identical applications, there were no noticeable differences between HD and Flex-SiL 

(Qureshi, Tr. 2088-2089; see also PX0682 at 002, in camera 

Emphasis in origial)). 

384. Daramc HD is undergoing testig at Crown as a replacement for F1ex-Si1 in its golf 

batteries. (Balcerak, Tr. 4138). Crown has qualified HD in deep-cycle golf car 

app1ication~ (Balcerak, Tr. 4123-4124).
 

b. HD Took Sales from MPLP 

385. HD competed with F1ex-Si1 for deep-cycle applications. (Godber, Tr. 152-153). 

386. 

l. (Gilchrst, Tr. 467-468, in camera).
 

387. Daramc successfuly increased the sales ofHD in ever year between the introduction of 

HD and Daramic's acquisition ofMPLP. (Roe, Tr. 1209). Daramc was gaing market 

share in the deep-cycle market in par though customers who were converng the 

58 
separators that they were using in their deep-cycle batteres from F1ex-Sil to HD. (Roe, 

Tr. 1212-1213; 1277-1278). Both Exide and US Batter switched from F1ex-Si1 to HD 

for a portion of 
 their deep-cycle golf car batteries. (Roe, Tr. 1212-1213). 

388. Exide began switchig from F1ex-Si1 to HD separators for its deep-cycle batteries in 

2005. (Gillespie, Tr. 2936-2937). 

389. U.S. Batter switched from F1ex-Si1 to HD separators for some of 
 its deep-cycle batteres. 

(Gilchrst, Tr~ 368-370).
 

390. Today, US Batter is pleased with the performance ofHD such that its purchases have 

increased over time and have grown to include additional models in its product line. 

(Wallace, Tr. 1947-1948). US Batter planed additional purchases of 
 the HD separator in its Group 27 and 311ines of 
 batteres prior to Po1ypore's purchase of Micro porous. 

(Wallace, Tr. 1948). US Batter also planed to put HD in its US 2000 model batter 

which has a one year waranty. (Wallace, Tr. 1978). The longest standard waranty 

offered by US Battery is one year. (Wallace, Tr. 1965). 

391. U.S. Batter sells deep-cycle flooded batteries contag Daraic's HD separators to 

manufactuers of scissor lifts and boom lifts, including JLG Industres and Skyjack. 

(Wallace, Tr. 1934-1935). 

392. Daramic felt that it was withn its discretion, when and how much of 
 US batter's de ­

cycle business it wanted to win away from MPLP. (PX0557 at 002, in camera H 

393. 

002, 007, in camera). Darc believed that Exide l 

l. (Roe, Tr. 1789, in camera).
 

394. Daramic'.s December 200: HD sales pitch to Exid~ hit its i.ark, and ~e.!~!!~~th, 

Mr. Roe mformed Daramic's mana ement that Exide was mterested m _ 

1. (pX0222 at 001, in camera). 

c. HD Constrained Pricing ofMPLP 

59 
395. Daramc's acquisition of Microporous was a merger to monopoly in the deep-cycle
 

market. (Simpson, Tr. 3193, in camera). By eliminating the competition between
 

Daramc and Microporous, the acquisition enables Daramic to increase price. (Simpson, 

Tr. 3193, in camera). 

396. Prior to the acquisition, as a result of competition between Microporous and Daramic, 

customers buyig deep-cycle separators had some leverage in pricing negotiations with 

separator suppliers. Daramic's HD separator had been makg inoads into the deepcycle golf car market prior to the merger. (McDonald, Tr. 3943-3945). HD sales had 

been growig among MPLP golf car customers. (McDonald, Tr. 3945). . Due to the 

theat ofHD's emerging presence in the deep-cycle market, MPLP lowered prices on its 

F1ex-Si1 separator attempting to protect market share. (McDonald, Tr. 3943). Trojan, 

Exide and US Batter al used HD asa a competitive theat to Microporous' deep-cycle 

batter separators. (Gilchrst, Tr. 379-380,406). 

397. In 2005 the possibilty that US Batter could also retaliate against an 
 effective price 

increase by purchasing HD prevented MPLP from removing a material rebate program 

US Batter enjoyed. (pX0509; McDonald, Tr. 3912). 

398. On no less than thee occasions between 2006 and 2007, Exide used HD to successfully 

constrai the price ofF1ex-Sil. (Gilespie, Tr. 2945-2953). Exide benefitted from the
 

competition between Daramic and MPLP for the sale of deep-cycle battery separators. 

(Gillespie, Tr. 2945-2946). With both HD and F1ex-Sil qualified for use in deep-cycle 

batteres, Exide had some added leverage in negotiations with both Daramic and MPLP. 

(Gilespie, Tr. 2945-2946). Havig two potential suppliers of dee-cycle separators 

mitigated Exide's risk and exposure in the supply chain, by mitigating the risk of 
 solesourcing and by providing a backup source of supply in case of disruption of supply 

capabilty. (Gillespie, Tr. 2945). Additionally, the knowledge that both Daramc and 

MPLP wanted Exide's deep-cycle business provided Exide with leverage in negotiations. 

(Gilespie, Tr. 2946).
 

399. In 2006, Exide used HD as leverage in negotiations with MPLP to get better pricing and 

payment ters from MPLP. (Gillespie, Tr. 2946-2950). In March 2006, MPLP informed 

Exide that it was raising prices on the F1ex-Sil separators and decreasing Exide's 

payment ters. (pX1059 at 001; PX0636 at 002). At that tie, Exide told MPLP that 

''we wil begi to explore other opportties to obtain golf car separators." (pX1059 at
 

001). One day later, Gordon U1sh, Exide's CEO informed Mr. Gilchrst that MPLP's 

pricig action were "forcing us to ru quicker to alternate supply". (PX0636 at 001).
 

Mr. Gillespie peronally told Mr. Gilchrst that Exide had qualified HDandwould move 

the majority (and possibly all) of the deep-cycle purchases to Daramc in response to 

MPLP's pricing actions. (Gilespie, Tr. 2946-2948). 

400. With two weeks time, Daramc became aware that Exide had theatened to move from
 

F1ex-Si1 to HD. (pX1710 at 001). On March 17,2006, Mr. Hauswald informed Mr. Toth 

60 
that MPLP "found out that we are taing their market share with our Daramic HD, for the 

golf car business." (PX1710 at 001). 

401. Eventually, Exide and MPLP came to an agreement on the pricing ofF1ex-Sil, with Exide 

receiving more favorable pricing terms and obtaining pricing concessions from MPLP. 

(Gilespie, Tr. 2949; see also PX0635 (April 2006 emai1 from Mr. Gilchrst to Mr. U1sh 

noting "we are anious to return our relationship with Exide to a more cooperative real. 

And as such (...J I am extending our terms to Exide to 50 days.")). 

402. Exide believes that in ths instace the only reason that 
 they "were able to 
 negotiate or 

have ths leverage" to obtain lower prices and better pricig terms from MPLP was 

because it had HD as a "viable option." (Gilespie, Tr. 2949-2950). 

403. In 2007, Exide used HD as leverage with MPLP to fight off a rubber surcharge on FlexSi1 separtors. (Gillespie, Tr. 2950-2953; Gilchrst, Tr. 377-379). In 2007, MPLP sought 

to impose on Exide a rubber surcharge on the price ofF1ex-Sil separators. (Gilespie, Tr. 

2950-2951; Gilchrst, Tr. 375-376). Prior 
 to Daramic's acquisition ofMPLP, Exide 

refused to pay the rubber surcharge to MPLP because Exide had HD as a "viable 

alterative to switch the business" and informed MPLP that "if you levy the surcharge, 

you're going to lose that business." (Gilespie, Tr. 2951-2953). 

404. Also in 2007, Exide used HD as leverage to fight off a price increase on F1ex-Sil 

separators. (Gillespie, Tr. 2953). At that time, MPLP attempted to impose a base price 

increase on the F1ex-Si1 separators being sold 
 to Exide. Exide refused to pay ths price 

increae because at that time it had the abilty to theaten to move its deepcycle business 

to Daramc. (Gillespie, Tr. 2953; see also PX1097, in camera (February05, 2008 emai1 

from Exide to MPLP regarding f 

405. Exide experenced price decreases or no price increases from MPLP due to competition 

from HD. (Gilespie, Tr. 2947-2953). 

406. Trojan also used the theat of switching to Daric's HD as leverage in pricing 

negotiations with Microporous. (Gi1chrst,Tr. 371-372, 379; PX1663). 

407. Trojan used J with MPLP. (Godber, Tr.
 

258, in camera). Likewise, Mr. GilchIst testified that Trojan would brig up HD "ever 

time there was us instigating the need for a price increase." (Gilchrst, Tr. 406).
 

408. Trojan met with Daramc in Februar 2005 to discuss the fact that Daramic was going to 

introduce the HD product at the BCI convention in April, and that test results showed the 

product would do as well as F1ex-SiL. (Godber, Tr. 178). At the tie, Trojan was 

concered with Microporous's capacity to supply it with separators and was also 

61 
interested in learing ifthe HD product had some pricing advantage. (Godber, Tr. 182­

183). 

409. Trojan discussed the potential of 
 using the Daramic HD separator at an interal meeting 

on Februar 21,2005 because of its "(n)eed for a second source to ensure supply and 

competitive pricing." (PX 1651; Godber Tr. 183-184). After Februar 2005, Daramc's 

potential ability to offer a competitive product became a platform for discussions with 

Microporous regarding price reductions and capacity. (Godber, Tr. 183-184; see also 

PX0429 (emai1 from Rick Godber to Mike Gilchrst: "We now understand that Daramc 

May have a separator that can compete in performance, and may have cost advantages to 

Flex-Si1 and CellForce.")).
 

410. At the 2005 BCI convention, Daramc made a presentation about the HD product, which 

1eftpeop1everyexcitedthatDaramichad a product that could match F1ex-Si1 

performance. (Godber, Tr. 187-188; see also PX1653 (emai1 from Trojan's techncal 

director stating: "Daramc's techncal presentation at BCI was well received by the 

people I talked to. . . . Thei (Daramic's) presentation wil generate additional interest in 

HD separators which will make it a common separator for deep-cycle applications in 

tie.). Trojan received samples of and pricing for the HD separator in May 2005.
 

(Godber, Tr. 188). The pricing on the HD separator was, depending on the product line, 

10 to 28 percent below what Trojan was curently payig Microporous for Flex-SiL. ' 

(Godber, Tr. 188). 

411. Trojan tested Daramc's HD separator and approved it in its Pacer line of golf car 

batteres. (Godber, Tr. 171). Today, CellForce, Daramic HD, and F1ex-Si1 are qualified 

for use in Trojan's Pacer batteres. (Godber, Tr. 172). 

412. Trojan was able to get Microporous to provide cost reductions based on Trojan 

theatening to test and switch to Daramic's HD separator. (Godber, Tr. 190-191; see also 

PX1655 at 001 (emai1 from Trojan to Microporous stating: "(HD) appears to be a fairly 

imediate replacement for CellForce at a substantia110wer cost. Longer term it may 

work as a F1ex-Si1 replacement in our products.")). The cost savigs were around 

$200,000 to $300,000, which represents two percent of 
 Trojan's spend with Microporous 

at that time. (Godber, Tr. 191-192; PX1659 ("total savings to Trojan will be about 

$350,000.");1657 at 001 "As you can see, based on the volumes you gave us there isa 

potential anual savings of over $288;000. ").
 

413. Prior to the introduction of HD separators by Daramic, Microporous did not respond
 

positively to Trojan's request for price reductions. (Godber, Tr. 199). After the 

introduction of 
 the Daramic HD separator, however, Microporous told Trojan that it was 

going to work with Trojan to reduce its costs to a11eviat~ the need for Trojan to star using 

HD separators. (Godber, Tr. 199-200). . 
 Mr. Godber, Trojan's CEO testified that Daramc 

HD was mentioned by 
 both him and Microporous's CEO, Mie Gilchrst, durng their 

discussions relating to Microporous's price reductions: (Godber, Tr. 200). 

62 
414.	 Mr. Godber testified he does not recall any instance where Trojan successfully used any 

product other than HD as leverage in price negotiations with Microporous. (Godber, Tr. 

223). 

415.	 Durg the 2005 discussions with Microporous regarding cost reduction related to the 

theat of switchig to Daramc HD, Trojan also was trng to accelerate its ability to use 

more CellForce since it wàs less expensive than F1ex-SiL. (Godber, Tr. 191). At the time, 

Trojan was not able to get all the CellForce that it wanted from Microporous because 

there was limted capacity and a large demand from the motive market. (Godber, Tr. 

195). 

416.	 From 2005 to the time of the acquisition, Trojan continually used the theat of buying 

Daramc HD to get lower prices from Microporous. (Godber, Tr. 200-215). In October 

2005, Trojan used the threat of movig business to HD as leverage against Microporous 

to negotiate down a proposed energy charge from 5.5 percent to 3.75 percent. (Godber, 

Tr. 200-201). 

417.	 In early 2006, Microporous attempted to increase the prices it charged Trojan by around 

6.5 percent for Flex-Sil and by 4.5 percent for CellForce. (Godber, Tr. 202). Trojan did 

not accept the price increases. (Gödber, Tr. 202). Mr. Godber testified that 
 ,in his 

negotiations with Microporous, Trojan used the only amunition it had -- the theat of 

switchig to HD separators -- to reduce the aIount of 
 the price increase down to 4.5 

percent across the board for all Microporous separators. (Godber, Tr. 202). At the time 

Trojan was negotiatig the price increase, Mr. Gilchrst stated: "We must put the specter 

ofDaramc's (HD) product totally behid us." (PX1660 at 004; Godber, Tr. 203-204). 

418.	 Durg 2007 pricing negotiations, Trojan threatened Microporous that it would 

switch to HD separators for its deep-cycle batteries. (Gilchrst, Tr. 371-372, 379,468, 

in camera, 535, 609-610; PX1789 at 041, in camera). 

419.	 In Augut 2007, Microporous once agai proposed a price increase to Trojan on its F1exSil and CellForce products of 6.5 and 4.5 to 5 percent, respectively. (Godber, Tr. 204). 

The price increases covered separators that went into Trojan's OE and afterarket golf 

batteres. (Godber; Tr. 293-295). The August 2007 price increase led to heated 

discussions in which Trojan told Microporous "(y)ou're forcing us to agai now go look 

at an alterative like Daramc HD, which was the only alterative." (Godber, Tr. 204­

205; see also PX0428 at 004, in camera ("appears to be a perception we have no options. 

. . . I felt they (IGP) needed to undertad there are alteratives."). A Trojan interal 

email exchange confrms that Trojan was 
 contemplating HD as an alternative on some of 

its product lines and was also contemplating givig up the exclusive separator design that 

Microporous provided Trojan in retu for its sole source commitment. (Godber, Tr. 

206-207; PX1663). 

420.	 Trojan's use ofHD as a competitive threat to Mi~trained

Microporous's across the board price increases. _ 

63 
(Godber, Tr. 214-215; PX1664, in camera). By accepting these 

price increases, Trojan and Microporous agreed that there would be no fuer price
 

increases available to Mi~us on 
 December 1,2008. Godber, Tr. 214-215). Thus,

the next price increase to_ could not occur until (Godber, Tr. 

235, in camera). Mr. Godber testified that and I agreed" that
 

would be allowed no fuer rice increases over and above the signed 

(Godber, Tr. 214-215; 235, in camera; PX1664, in camera). 

421. As a result of its 2007 negotiations with owered its pricig 

~~ agr~ed that it would not increase prices again.unti1 after . 

_ (Gilchrst, Tr. 408-409; PXI664, in camera). Ths compronuse


occured in response to Trojan's threat to switch to HD separators for some of its 

dee-cycle batteries sold to the replacement market. (Gilchrst, Tr. 410,526, in camera). 

422; 

423. 

424. 

d. MPLP Responded to HD with CellForce 

425. When MPLP began to recognze the HD theat, Mr. McDonald and his sales force began 

to offer CellForce at a cost savings as a means of combating the lower cost Daramic 

dee-cycle separator. (McDonald, Tr. 3949). 

426. In response to the competition from Daraic's HD separator, Microporous developed the 

CellForce separator and offered to sell it to U.S. Batter. (Wallace, Tr. 1952-1953). 

Prior to US Batter's use ofHD Microporous had not offered it CellForce for deep-cycle 

application. (Wallace, Tr. 1953). 

427. U.S. Battery approved 
 the purchase of CellForce and planed to purchase ths new brand 

of separators from Microporous. (Wallace, Tr. 1977). 

64 
428. Trojan has determined that 25 percent of its deep-cycle batteries could use Ce1IForce 

instead ofF1ex-Sil. (Godber, Tr. 173). The same 25 percent of 
 Trojan's batteries that could use CellForce, also could use Daramc HDinstead ofF1ex-Sil. (Godber, Tr. 173). 

429. Cuently, 16 percent of 
 Trojan's deep-cycle batteries contan CellForce. (Godber, Tr. 

i 76). The percentage of Trojan's batteres using CellForce was expected to grow to 21
 

percent prior to Daramic's acquisition of 
 Micro porous. (Godber, Tr. 176). Microporous 

expected to satisfy Trojan's demand for CellForce though its Austran expansion. 

Microporous informed Trojan that "once we get ths (the Austran expansion) up and 

going, we has some more CellForce that wil be available in the states. (Godber, Tr: 

224). 

430. Trojan wanted to expand its use ofCe11F0rce to get a cost savings because Ce1IForce was 

less expensive. (Godber, Tr. 225). Trojan had plans to move a considerable amount of 

its F1ex-Si1 batteries to CellForce when Microporous got its Austran plant up 
 and 

rug in Spring 2008. (Godber, Tr. 226-227). The conversion to CellForce was
 

delayed approximately 4 months once Daramic acquired Microporous, which resulted in 

Trojan payig approximately $140,000 more for its separators than it had been expecting. 

to. (Godber, Tr. 228-229).
 

e.. F1ex-Si1, HD and CellForce Compete for OEM Business 

43J. Microporous's CellForce separator competes with Daramc's HD separators used for
 

deep-cycle batter applications. For example, Trojan purchased CellForce for some of its 

deep-cycle batteries. (Gilchrst, Tr. 360-361). 

432. Trojan has qualified CellForce for some OEM floor scrbber accounts. (Godber, Tr.
 

277). US Battery sells to a varety of customers including original equipment 

manufactuers like Skyjack and JLG Industres. Included in these sales to OEM 

customers are batteres containing HD separators. (Wallace, Tr. 1933-1935). 

433. 

(pX1744 at 004, in camera). 

B. The acquisition had anti-competitive effects in the deepcycle market 

1. An anticompetitive effect of 
 the acquisition is Daramc's refusal to 

honor MPLP commtments to Trojan. 

434. Just pror to Daramic's acquisition of 
 Micro porous, Trojan was in discussions with . 

Microporous on a contract extension and had agreed to most major ters including
 

contract lengt and the pricing formula. (Godber Tr. 215-217). The curent contract 

between Microporous and Trojan was set to expire in 2010 and Trojan wanted to create a 

65 
longer-ten arrangement so that it would be protected in the event that Microporous was 

sold. (Godber, Tr. 215).
 

435. After the acquisition Daramic stated to Trojan that it wanted to stand behind the 

commitments that MiCfoporous had made to Trojan. (Godber Tr. 218-219). In a letter to 

Trojan~s Rick Godber on March 31, 2008, about one month after the acquisition, 

Daramc's Pierre Hauswa1d wrote: 

Mike (Gilchrst) has explained to me that just before Daramc 

acquired MiCfoporous, you and he were very, very close to 

. concluding a new supply contract between Trojan and MP that 

would have gone though 2019. Weare prepared to stand behind 

the commitments MP made to you before ths acquisition. So, if 

you are still interested, we just need to work out the ver few 

details tat were still open when you last 
 discussed ths topic with 

Mike, and then we could fialize the extension. . . . I just wanted 

you to know that we are stil willing to honor the 
 commitments MP 

made to you peronally and to Trojan. (PX1666).
 

436. Notwthstading Daraiic's pledge to "stad behind the commitments MP made" before
 

the acquisition, f 

) (Godber, Tr. 239-240, in camera). None of these ters were in the draft 

contracts exchanged between Trojan and MiCfoporous prior to the mer er. (Godber, Tr. 

240, in camera). ( 

437. After the acquisition, Trojan was left with no alternatives to Daramc for deep-cycle 

separators. (Godber, Tr. 291). 

438. Microporous also notified Trojan ofa t 

L (Godber, Tr. 235, in camera). Mr. Gilchrst confied ths understanding in his
 

testimony in ths proceeding. (Gilchrst, Tr. 407.;410). Mr. Godber was an about the 

notice because of 
 ' 'te thought that they would be comig out with 

camera). 

66 
439. 

440. 

L (PX0904 (Seiber, Dep. at 203, in camera)). 

441. Notwithstanding the 2007 signed agreement between Trojan and Microporous regarding 

pricing, l 

442. Mr. Godber testified that he was concered about the acquisition when he became aware 

of it because "(0 )ne company was going to control the deep-cycle separator market." 

(Godber, Tr. 242-43, in camera). Based on Daramic's post-acquisition actions, Mr. 

Godber testified that his concers have increased. (Godber, Tr. 242, in camera). 

443. Rather than negotiate in good faith, Daramic first sued Trojan. (Godber, Tr. 247-248 in 

camera). The dispute between Daramic and Trojan is ongoing. (Godber, Tr. 238, in 

camera). 

44. 

L (Gilespie, Tr. 3044-3045, 3132, in camera). After the acquisition ofMPLP, Daramic informed Exide that it l 

(Gilespie, Tr. 3044, 3132-3133, in camera). 

445. 

L (Gilespie, Tr. 3044-3046,3121,3132-3134, in 

camera). 

67 
2. Daramc's post-acquisition strategy is to sell the higher priced F1ex-Si1 

to deep-cycle customers that wanted a cheaper alternative 

446. 

l (PX1740 at 001, in camera).

In a November 2007 Microporous Customer Contact Report to U.S. Battery, 

Microporous reported that U.S. Battery ''was ver comfortble with CellForce" and 

would decide if it would commit a cerain volume once it received pricing. (pX1763 at 

003). The report states that Microporous told U.S. Battery that it would have capacity 

available, but ifU.S. Battery did not want to commt, Microporus needed to know so that 

it could sell the CellForce volume elsewhere. (pX1763 at 003). 

447. On Februar 5, 2008, just thee weeks before the acquisition, Microporous's North 

Amercan Sales representative, Roger Berger, informed u.s. Batter's Mr. Queshi that 

l 

Mr. Queshi responded that 

_l (pX1741 at 003, in camera).
 

448. When US Batter approached Daramc for supply of its HD separator for a new batter it 

had been developing Mr. McDonald communcated to US Batter that Daramic did not 

have the appropriate tool to be able to produce an HD separator in the requested profile. 

. (McDonald, Tr. 3823-3824). Neither could Daramic provide CellForce in the requested 

profile, again due to not having the proper tooling. (McDonald, Tr. 3823-3824). Instead, 

Mr. McDonald offered US Batter a Flex-Si1 quotation. (McDonald, Tr. 3824). 

449. Notwthstanding Microporous's wilingness to sell U.S. Batter CellForce at a cost 

savigs versus F1ex-Si1, and notwthstading U.S. Batter's desire to use CellForce in its 

mid-level golf 
 batteres premerger, Mr. Qureshi testified that the US 2000 batter 

curently is using Flex-SiL. (Qureshi, Tr. 2042). When asked why it is not using 

CellForce, Mr. Queshi testified: "We were told that CellForce would not be available." 

(Qureshi, Tr. 2042). Today, U.S. Battery continues to use the more expensive F1ex-Si1
 

in these mid-level batteries. (Qureshi, Tr. 2042). 

450. Since its acquisition of 
 Micro orous, the Daramc strate 

68 
451. In response to a June 12,2008 eiail from Piere Hauswald r
 

camera). 

452. Daramc has restrcted the number ofHD separators available to u.s. Batter for 

purchase. (Wallace, Tr. 1979). Consequently, U.S. Batter predomiantly purchased 

F1ex-Si1 separators from Microporous for its deep-cycle batteries. (Wallace, Tr. 1972). 

453. In the later part"of2008, after the merger, Mr. Qureshi at U.S. Batter 
 had designed two 

deep-cycle batteries - the Group 27 and 31 batteries - that the company was previously 

purchasing from another company. (Qureshi, Tr. 2042-43). Mr. Queshi designed the 

batteres to use Daramc HD. (Qureshi, Tr. 2044; PX1747). Daramic informed Mr. 

Queshi that the separators he wanted for the batteries was not available in either 

CellForce or RD. (Qureshi, Tr. 2049). Mr. Qureshi testified that when these batteries go 

into production, they will be 
 using F1ex-Si1 separators. (Qureshi, Tr. 2044). Mr. Queshi 

testified that he ''was somewhat surrised because now this product will cost us more. I 

had designed it with the more cost-effective separator; which we could not use." 

(Queshi, Tr. 2049). Mr. Queshi testified he had no understanding as to why Daramic 

could not make an HD or CellForce separator for these batteries. (Queshi, Tr. 2049). 

454. 

in camera). 

455. Prior to the merger, U.S. Batter had hoped to increase its purchase of Daramic's HD 

separators in the next two to thee year to between 30 to 50%. (Queshi, Tr. 2090). 

Daramc internal trp reports to U.S. Battery also recognized that U.S. Battery had hoped 

to achieve a more even balance in purchases between Daramic and Micro orous prior to 

the merger. (See, e.g., PX1739 at 002, in camera f 

l; PX0681 at 002 (''U.S. Batter prefer to split their business 

move (sic) eveny between Daramc and the competition thus enance stiffess appears
 

to be key."); PX0326 at 001 ("U.S. Batter is presently pruchasng 1 T/L (trckload) of 

Daramic for 5 T/L of Micro Porous Products materiaL. They would like to achieve a more 

even balance between thei two separator suppliers.")). Since the merger, u.s. Batter
 

has been unable to purchase more HD from Daramic. (Wallace, Tr. 1980). 

69 
456. In Apri12008, Mr. Qureshi met with Daramic's salesperson, Mr. David Gunter, and
 

discussed the then recent acquisition of Micro porous. (Qureshi, Tr. 2051). Mr. Queshi 

showed Mr. Gunter his displeasure with the acquisition and told him that it was "not 

healthy" because "anything that reduces competition in a free market system is not 

healthy." (Queshi, Tr. 2051-2052; see also PX0682 at 002, in camera 
 ( 

1 Emphasis in original)). Mr. Qureshi continues to believe that today over a year after the acquisition. (Qureshi, Tr. 2052). 

457. Exide lost the leverage it had to get a competitive price when Daramic bought MPLP 

because there was "only one provider" of deep-cycle separators left. (Gilespie, Tr. 2953­

2954). 

458. 

(Seiber Dep. at 191, in camera)). 

459. After the merger, when Daramc was unable to supply suffcient HD to Exide due to the 

strke at Owensboro, Exide was forced to purchase F1ex-Sil, which was the only available 

alterate product for their deep-cycle batteres. (Roe, Tr.1223). l 

1 (R01260, in camera). In purchasing F1ex-Si1 in place ofHD durg the strke, Exide had to pay a 

premium for F1ex-SiL. (Roe, Tr. 1223-24). l 

(RX01260, in camera). 

460. Exide's post-acquisition experience is in contrast to Trojan's pre-merger experence with 

MPLP. When Microporous's CellForce capacity became constained in 2006, 

Microporous offered to provide Flex-Si1 product at Ce1IForce pricing on Trojan's T-605, 

which at the time was using CellForce, so that Microporous could win CellForce business 

at a tracton customer. (PX1659; Godber, Tr. 198). Though ths arangement, Trojan 

was able to purchase F1ex-Sil for its T-605 batteres at a 10% discount. (Godber, Tr. 

225). 

C. MPLP was Daramc's only competitive Constraint in Motive 

461. Daramc's acquisition of Micro porous was a merger to monopoly in the motive market. 

(Simpson, Tr. 3193, in camera). By elimiating the competition between Daramc and 

Microporous, the acquisition enables Daramc to increase price. (Simpson, Tr. 3193, in 

camera). 

70 
462. Prior to the acquisition, Daramic and Microporous were the only suppliers of separators 

for motive power patteres used in fork-lifts to North Amercan customers. (Gilchrst, Tr. 

306-307,342; Benjamin, Tr. 3533; Douglas, Tr. 4075-4076; Leister, Tr. 4027-4028). As 

of 2007, Mr. McDonald was aware of no other Motive power separator supplier other 

than Daramic and MPLP. (McDonald, Tr. 3949 (pX0506 in camera)). 

.463. Mr. Roe stated that HD competed against CellForce in the "motive power traction
 

market." (Roe, Tr. 1202; PX0316 at 002).
 

464. Entek is not in the motive separator business an 

465. For at least 6 years prior to the acquisition ofMPLP by Daramc, Daramic and MPLP 

were the only competitors for Nort American batter manufactuers' motive power 

business. The only price competition that Daramic faced in the sale of motive power 

separators came from MPLP. (Roe. Tr.1264-1266). Indeed, durg the entie tie perod
 

from 2003 until the acquisition ofMPLP, the only competitor that Daramc lost Nort 

Amercan motive power business to was MPLP. (Roe, Tr. 1278-1279; PX0911 (Roe, 

Dep. at 16, in camera)). Dug that time. MPLP was also the only battery separator 

manufactuer whose competition caused Daramic to loWer prices on motive batteres. 

(Roe, Tr. 1264-1266, 1812-1813). 

466. MPLP was poised to captue substantial market share from Daramic in the motive 

market. (Simpson, Tr. 3185-3186,3438, in 
 camera; PX0131 at 062-065). l 

l (PX0247. in camera; PX0153 at 2; PX0243, in

camera). 

467. 

.l (pX0258 at 002; PX0255 at 001, in camera; Roe, Tr. 1292­

1294, in camera, 1350-1354, in camera). 

468. Since the acquisition ofMPLP in Februar 2008, Daramc has not lost any motive power
 

business in North Amerca to 
 any competitors. (Roe,Tr. 1279). Nor has Daramic made 

any price concessions to Nort Amercan customers for motive products due to 

competition from any other competitor. (Roe, Tr. 1812-1813). Post-merger, customer 

have less leverage in price negotiations with separator suppliers. 

71 

r 
469.
 

470. After the acquisition, Daramic raised the prices for CellForce separators sold to Bulldog 

Batteries by 10%. Ths price increase took effect on Janua 1, 2009. (Benjamin, Tr. 

3522). Previously, Daramic charged Bulldog Batteres a 7% energy surcharge in 2008. 

(Benjam, 'fr. 3521). Bulldog has no abilty to detere whether these increases are
 

justified by increases in Daramic's raw materal costs. (Benjam, Tr. 3524-3525). 

However, as compared to past pricing increases from separator supplier, the President of 

Bulldog Batteres feels the 10% price increase is "prett exorbitant." (Benjamin, Tr.
 

3525). For example, in the five year period durng which it purchased CellForce 

separators from Microporous, the cuulative price increases from Microporous totaed 

about 3% and the largest price increase was 1-1/2%. (Benjamin, Tr. 3526). 

471. After Daramic notified Bulldog Batter that a ten percent price increase effective Januar 

1, 2009 would be occurng, Mr. Benjamin, the President; stated he did not tr to 

negotiate a lower price with Daramc because "(t)here was no way to negotiate a lower 

price. There was no place to go." (Benjamin, Tr. 3522). After the anounced price 

increase Bulldog Batter did not look to source their needs from another motive batter 

separator manufacture because there is no other supplier. (Benjam, Tr. 3526). 

1. Daramic viewed MPLP as a theat
 

472. The only motive competitor that Daramc lowered its prices to meet in North America 

was Microporous. (Roe, Tr. 1265). As far back as 2002, Daramc was lowerig prices on motive products L (PX0243 at 001, in 

camera; Roe, Tr. 1254). In 2002, Daramc lowered prices on industral products to t.
 

l (pX0243 at 002, in camera). Daramic documents reflect the benefits of competition between MPLP and Daramic in the motive market, statig, e.g., that in this market, (pX0023 at 004, in 

camera). 

473. In 2002, Daramc signed an exclusive supply agreement with C&D Batter to supply 

C&D with motive power PE separators. (pX0836 at 001; Roe, Tr. 1254). Daramc's 

contract with C&D contained a competitive pricing ~lause which allowed C&D the 

opportity to move product to a competitor if it received a lower priced offer and 

Daramic declined to match the offer. (PX0836 at 001; Roe, Tr. 1254-1255). 

72 
474. Soon after signg the contract with Daramic, C&D brought a: lower-priced offer from 

MPLP for motive power separators to Daramic. (Roe, Tr. 1255; PX0836 at 001). In 

response to MPLP's low priced offer, Daramic made price concessions to C&D in order to 

maintain the C&D business. (Roe, Tr. 1255-1257; PX0836 at 001). Daramic did not 

expect that MPLP would contiue to offeI C&D ever lower prices. (PX0836 at 001). 

475. In early 2003, Daramc 1eared that MPLP was again offering even lower prices to entice 

C&D to switch from Daramic to MPLP. (pX0836 at 001). This time C&D informed 

Daramic that Daramic's prices were 60% higher than the MPLP offer. (pX0836 at 001). 

C&D agai remded Daramic about the competitive price clause in their contract. 

(PX0836 at 001). Mr. Roe was surrised that MPLP continued to offer lower prices. 

(Roe, Tr. 1257). In response to MPLP's second attempt to win C&D's business, Daramc 

again offered price concessions to C&D amounting to a savigs for C&D of $275,000. 

(PX0836 at 001). At the end of 
 the day, Daramic gave C&D an 11.2% price reduction in

Apri12004 in order to maintai C&D's business in the face of competition from MPLP. 

(PX0409 at 001; Roe Tr. 1261). 

476. Daramc recognzed the threat to its business, noting that "we have a new polyethylene 

competitor enterig the Nort Amercan market. Micro-Porous Products. .. they have 

attacked all the 
 large manufactuers and to keep from losing business, we have adjusted 

prices as needed which has eroded our margis. . ." (PX0153 at 002). 

477. By the time Daramc was responding to the second low price offer from MPLP at C&D, 

Daramic had had enough of the competitive price clause in the C&D agreement, and Mr. 

Roe felt that the key to moving forward with C&D was to "eliminate the competitive 

clause of 
 the agreement." (PX0836 at 002). By eliminating the competitive price clause, 

Daramc felt that it could tie up 100% the C&D business for the next thee years and keep 

MPLP from supplying C&D. (pX0836 at 002; Roe, Tr. 1259). 

, . 478. In June 2004, just two months after lowering prices to C&D, competition from MPLP 

forced Daramic to lower prices on motive power separators at EnerSys by about 14% from 

an average price of 
 $2.04 per square meter to an average price of$1 .75 per square meter. 

(PX0409 at 001; Roe, Tr. 1263-1264). 

479. Several months later, Daramc again reacted to MPLP price competition on motive power
 

separators by lowerg prices by 3% at East Pen to mainta that business. (pX0409 at 

001; Roe, Tr. 1262-1263). . 

480. Competition between MPLP and Darac resulted in lower prices for EnerSy's in 2004. In 

2004, EnerSys was able to 
 use a bid from Microporous for its motive power business to 

negotiate a reduction in price from Daramc in the $200,000 range for its Nort Amercan 

motive separator business. (Axt Tr. 2121-2122; RX00208). 

481. Competition between MPLP and Daramic resulted in lower prices for EnerSys in 2005. 

t 

73 
482. In 2005, Daramc used the absence of competition from Microporous to "negotiate a little 

tougher" for higher prices with Exide. (pX0843 at 001). 

483. Daramic expected that it would continue to face price competition at C&D from MPLP in 

the futue. (Roe, Tr. 1266). In 2005, Mr. Roe informed Mr. Hauswald that he expected
 

there to be a "price fight" with MPLP for the C&D business when the contract expired at 

the end of2006. (Roe, Tr. 1266-1267; PX0209 at 001). Mr. Roe also expected that 

Daramc's prices would be higher than MPLP's at the end of the contract perod. 

(pX0209 at 001). 

484. Daramc had no interest in splittg C&D's separator business with MPLP after 2006. 

(pX0209 at 01). In order to keep 100% ofC&D's business, Mr. Roe suggested that 

Daramc "play our card that we supply all or nothig." (PX0209 at 001). Mr. Roe 

thought that an "all or nothing" strategy could be successful with C&D because he did not 

believe that MPLP was capable of supplying all of C&D motive and stationar separator 

needs at that time. (pX0209 at 001; PX0922 (Roe, IHT at 104-105, 115-116, in camera)). 

485. Competition between MPLP and Daramic resulted in lower prices for 

Daramc's fist offer 

(Axt, Tr. 2166, in camera; PX1204, in camera). 

486. Daramc saw Microporous as a theat in its 3-Year Strategy and that Microporous's 

planed capacity expansions could theaten additional Daramic industral sales. (pX0171 

at 008). 

487. In its 3- Year Strategy, the key for Daramic to securg its motive sales was either 

execution of a long-ter contract with EnerSys or the acquisition of Micro porous. 

(PX0171 at 008). 

488. Competition between MPLP and Daramc resulted in lower prices for EnerSys in 2007. In 

2007, MPLP sought a rubber pass-thou a eenent with its customers, 
 including 

EnerSys. (RX00210 at 001). l 

l (RX00207, in camera). Nevereless, afer several weeks of 
 negotiations, EnerSys accepted it with respect to Ace-Sil, but not for CellForce. 

74 
(R0021O at 001-002; McDonald, Tr. 3909; Burkert, Tr. 2313-2314,2334-2336,2358­

2359, in camera). With respect to CellForce, EnerSys was able to theaten to switCh its 

volume to Daramic in, 
 order to avoid the new rubber adjustment formula. (R0021O at 

001; Axt, Tr. 2246). 

490. EnerSys's Mr. Burkert responded to Mr. Roe's emailstatig that he was t
 

(R00768 at 001, in camera; Burkert, Tr. 2343-2344, in camera). Mr. 

Burkert testified that he was able to make that statement because he was f 

491. Daramc sold "HD to certain tracton customers, primarly as a defensive move agaist 

Amerace's CellForce." (PX0316 at 002; PX0023 at 004, in camera). f_
 

(pX0023 at 010, in camera). Daramic's Febru 2007 HD Product Strategy Presentation showed that 

2. MPLP took sales
 

492. Bulldog was MPLP's first big motive customer. 
 (Benjamn, Tr. 3515). 

493. In 2002-2003, Bulldog Batter switched to Microporous (i.e., Amerace) for separators for 

its motive batteres because Daramic, its supplier at that time, was not providing reliable 

delivery and consistent product quality. (Benjamn, Tr. 3511-3512). Daramc had been 

supplying Bulldog Batter with a PE tye separator which could ru on a sleeve machie. 

Microporous began supplying Bulldog Batter with its newly developed CellForce 

product which could also ru on a sleeve machine. (Benjamin, Tr. 3508, 3514). 

75 
494. In an effort to source motive separators from the only other motive separator supplier, 

Bulldog Batter proposed buying a tool for Microporous, ifMicroporous would ru the 

tool for Bulldog. Microporous countered Bulldog's offer, by sayig it would buy the tool 

if Bulldog would sign a one year contract. Bulldog agreed to Microporous's proposaL. 

(Benjam, Tr. 3513-3514). 

495. Once Bulldog Battery became a customer of 
 Micro porous, Daramic would perodically contact them. Daramc would say to Bulldog "Well, you really need to come back to 

Daramc and buy our materal, we can give you a better price, we can do this." 

(Benjamin, Tr. 3517). Daramc's motive Separator pricing was lower than Microporous. 

(Benjam, Tr. 3558). 

496. In motive, Daramc intended to leverage its HD product to respond to competition from 

Microporous. (PX0171 at 004). 

497. In 2006, after Bulldog Batter had switched to Microporous, Daramc unsuccessfuly
 

tred to win back ths business by offerg Bulldog Batter lower pricing on Daramic HD..
 

(Benjam, Tr. 3516, 3518, 3557). Bulldog 
 Battery continued to source most of its

motive batter separators from Microporous who lowered its price for CellForce in 

response to Daramc's pricing offer. (Benjamin, Tr. 3516-3517). 

498. Because Daramic and Microporous competed so vigorously for motive batter. 

manufactues, in 2006 Bulldog Batter was able 
 to receive a 2.5% price decrease on all 

of its separator purchases :fom Microporous without using Daramc as a theat, but 

simply by stating Daramic had offered it a lower price. (Benjam, Tr. 3545-3548). If 

Bulldog Batter 
 wanted to switch its motive separators from Microporous's Ce11Force 

separators to DaramIc's HD separators, it could do so. (Benjam, Tr. 3518, 3555). 

Thus, ifMicroporous and Daramic were independent today, Bulldog Batter would have 

two sourcing options for its motive separator needs instead of only one today. 

(Benjamin, Tr. 3526, 3555). 

499. Prior to the acquisition, Microporous lowered its pricing for the CellForce separators sold 

to Bulldog Batteries after finding out that Daramc had offered Bulldog Batteres a lower 

price for its competig HD separators. (Benjam Tr. 3517-3518). 

500. Daramic was achieving 37.2% average gross margin for its PE industral separtors, but 

average of28% for its HD separators. Daramic feared that a shift to PE/rubber separators 

for the motive market would lead to higher HD sales and that it could not charge a 

premum for HD due to competition from CellForce. (pX0319 at 013) 

D. MPLP was 
 Daramc's only competitive constrait in UPS 

76 
501. Prior to the acquisition, Daramic and Microporous were the only suppliers of separators
 

for reserve power for flooded high-end batteres to Nort Amercan customers. . 

(Gilchrst, Tr. 305-306; 343). 

502. 

(Simpson, Tr. 3193, in camera; Gilespie, Tr. 3048)., 

503. 

(Axt, Tr. 2216-2217, in camera). There is no one

other than Daramc who makes UPS separators either in Nort America or worldwide. 

(Axt, Tr. 2102-2103). 

504. EnerSys planed to shift its separator purchases from a split between Daramic and MPLP 

to sole sourcing with MPLP. The only component of the plan that had not been achieved 

was havig a replacement for Daramc's Darak product. (McDonald, Tr. 3929-3930; 

PX0511). 

505. Prior to the acquisition, Microporous had made some sales for over a "year and a half' to 

C&D and had already won a contract with EnerSys that would have given Microporous 

40-50% of 
 the North Amerca UPS market. (Gilchrst, Tr. 398-399). 

506. There is no other UPS separator technology availàb1e to UPS custòmers for a small but
 

signficant and non-transitory 
 increase in price. 

L (Axt, Tr. 2220-2222, in camera). 

507. In its global search for UPS s arators, l 

today, other 

than Daramic, there is no one in the world that makes a separator that can be used in 

EnerSys's UPS batteres. (Axt, Tr. 2101). 

(Axt, Tr. 2216-17, in camera). As of 


1. MPLP was in the process of commercializing a UPS separator to address 

the black scum issue 

508. Planing for project LENO began in late 2006 at the approval of 
 the R&D steerg 

commttee which included Mike Gilchrst and Lar Travathan, as well as Steve 

McDonald and Matt Wilhje1m. (Brilmyer, Tr. 1836). 

509. The LENO had a varety of people with different area of expertse from development 

and sales to finance, in order to keep the R&D developers "based in reality." The fiance 

and sales team members kept the team focused on the market for the new product and the 

costs associated with its development as well as the price the product could achieve in 

that market. (Bri1myer, Tr. 1837-1838). 

77 
510. The LENO team met regularly once a month, specifically the second Tuesday of 
 the 

month in order to "ke( ep) the project moving" and to "ke( ep) everbody on track." 

(Bri1myer, Tr. 1838).
 

511. The minutes from the LENO.team meetings were recoded by Dr. Bri1myer and copies
 

were distrbuted to the steerng commttee ever month. (Brilmyer, Tr. 1838-1839).
 

512. Whte PE was another name for the LENO project. Par of 
 the LENO project goal was to 

find a solution to the black scum problem inerent in UPS batteres that used PE 

separators. Whte PE was a varation on the low ER no oil theme origially intended to 

become a rep1acement- for Daramc's Darak product commonly used in gelled batteres. 

(Bri1myer, Tr. 1837, 1839-1840). 

513. 

514. The LENO project was initiated at the request of a customer, EnerSys, who had interests 

in a competing separator product for their gel batteries (Darak) and also for a separator 

that would address the ''black scum problem they were havig in their UPS batteres." 

(Brilmyer, Tr. 1'839).
 

515. The UPS batteries that EnerSys was experencing the black scum problem with were 

flooded lead acid batteres produced in its Hays, Kansas facility. (Bri1myer, Tr. 1841). 

516. The LENO team at MiCfoporous was eventually successful in disèovering the root cause 

and a solution to the black scum problem. (Bri1myer, Tr. 1855). 

517. MiCfoporous had sent separators to EnerSys at its Hays, Kansas facilty for batter builds 

and testing prior to the merger with 
 Daramc. (Brilmyer, Tr. 1924-1925; PX0665 at 002, in camera). . 

518. The testig that the LENO project team had conducted was progressing ver well before
 

the merger. (Bri1myer, Tr. 1856-1857). Life-testing taes two year to complete for UPS 

batteres. . (Bri1myer, Tr. 1902). 

519. 

camera; Brilmyer, Tr. 1868, in camera). (pX0490, in 


i) MPLP expected sales in late 2008 or 2009-07-08 

520. Due to the strong customer demand for the product and the techncal success 

Microporous achieved, MiCfoporous had already made capital expenditues in its 

78 
European facility, and was plang on additional expenditues.at its United States 

facility, in anticipation of separator sales from project LENO as early as late 2008 or 

early 2009. (Bri1myer, Tr. 1858; PX0664 at 002, in camera). 

2. Acquisition ended MPLP's efforts to address black scum in UPS
 

521. 

522. 

. (PX0913 (Wear, Dep. at 197, in camera); Whear, Tr. 4825, in camera)). As a 

fial solution it offered the Darak product as an alternative to EnerSys. (Wear, Tr. 

4722; PX0913 (Whear, Dep. at 200, in camera)). Darak does not create black scum. 

(Axt, Tr. 2104). 

523. There was little support for the LENO project among Daramc management since the 

goal of 
 the project was to replace the costly, "very high-margin" Darak product with a 

less expensive, lower margin PE based separator. (Brilmyer, Tr. 1863-1864). 

i) MPLP development team elimiated
 

524. 

525. After the merger, Daramic moved Dr. Briyer from Piney Flats Tennessee to its 

Owensboro Kentucky facilty and disbanded the R&D group of 
 the former Microporous 

. against the request of 
 Dr. Briyer and Rick Wimberly who thought the projects that they 

were engaged in under an independent Microporous were worty of a continued 

concered focus. As a result, work on the LENO project slowed down. (Bri1myer, Tr. 

1861-1862). 

E. MPLP was a Competitive Constrait in SLI 

526. In 2003, Mr. Roe was negotiating with JCI for a contract extension. (Roe, Tr. 1237). 

Durng the course of these negotiations, Mr. Roe came to understad that MPLP was 

bidding on a porton of JCI's SLI business in both the US and Europe. (Roe, Tr. 1237; 

PX0693). Mr. Roe understood that JCI was reviewing a proposal for the establishment of 

a new battery separator manufactug facility in Europe, and Mr. Roe assumed that ths 

would be a new MPLP manufactug facility. (Roe, Tr. 1240; PX0693). 

79 
527. After learng about MPLP's attempt to gain a share of JCI's SLI business, Daramic 

grew very concerned about the 
 potential theat to Darc from MPLP's possible

entrance into the SLI market. (PX0244). Just two weeks after Daramic forced JCI into a 

contract extension, Mr. Roe informed Daramic's'worldwide sales team that MPLP had 

. been qualified for use in automotive products at JCIand might soon be pursuing 

automotive opportties. (PX0244; Roe Tr. 1249-1250). Mr. Roe told the Daramic sales
 

team that it had "become crtical that we assess the tre sales situation of(MPLP's) CellForce (sic) product." (pX0244; Roe Tr. 1248). Daramic understood that at that time, 

MPLP's Ce1IForce line was rung at ful capacity and that MPLP was planing a
 

second PE line for their Piney Flats facility. (PX0244; Roe, Tr. 1251-1253). Mr. Roe 

requested that his sales team estiate where MPLP might be supplying customers, and 

informed the sales team that ths was a "critical exercise in order to understand the 

potential theat ofthis competitor." (PX0244; Roe, Tr. 1251). 

528. Dr. Kahwaty's asserion that Microporous was a high-cost :f is belied by 

MiCfoporous's position in the deep-cycle and motive markets. l 

Tr. 3438, in camera). 

529. did have higher cost than l_ in
 the manufacture of l these higher costs did not prevent 

MiCfoporous from competing. (Simpson, Tr. 3463, in camera). Signficantly, Daramic 

~rices for SLI battery separators in response to competition from


~. (PX0258). .
 

F. The acquisition will facilitate coordiation in the SLI market 

530. Dr. Simpson concluded that Daramic's acquisition ofMiCfoporous would facilitate 

coordinated interaction. (Simpson, Tr. 3201-3202, in camera). 

531. Coordinated interaction refers to anti 
 competitive effects that can only occur when the 

merged fi acts in concer with some of 
 its rivals. (Simpson, Tr. 3199-3200, in camera; 

Merger Guidelines §2.1). Whle outrght collusion is an example of coordinated 

interaction, Dr. Simpson noted: "firms that repeatedly interact can lear over time that
 

they make more profits if 
 they don't compete too aggressively, so just that over time 

:fs though repeated interaction begin to behave in a way that's less competitive. . . 

and recognze that by behaving not as aggressively they ear more profits." (Simpson, 

Tr. 3200, in camera). The tens of coordination need not be overly elaborate - such
 

tens could be as simple as a division of markets or the assignent of customers. (Simpson, Tr. 3200, in camera). ' 

532. "Whle seller someties explicitly coordinate their behavior, sellers often simply lear 

to cooperate though repeated interaction." (PX0033 at 020-021, in camera). 

80 
533. "Economic theory suggests that successful coordination becomes easier as the number of 

sellers involved declines." (pX0033 at 021, in camera). "Ths is confirmed by studies of 

actual carels which fid that carels generally have only a small number of parcipants." 

(PX0033 at 021, in camera). 

534. Dr. Simpson noted that for coordiated interaction to occur, firms need to reach ters of 

cordination, monitor those ters, and enforce those terms. (Simpson, Tr. 3201, in
 

camera). Dr. Simpson testified that the following factors would make coordinated 

interaction more 
 likely: repeated interaction among fis; a small number of firms; and 

information being readily available in the marketplace about what other fis are doing.
 

(Simpson, Tr. 3201, in camera). 

535. 

142-143, in camera)). 

536. These factors are present in ths market. (Simpson, Tr. 3201-3202, in camera). A small 

number of fis repeatedly interact, and information about what other firms are doing is 

widespread in ths market. (Simpson, Tr. 3201-3202, in camera).
 

537. If Daramc hears a ruorabout a competitor, it is a small enough communty that 

Daramic can check and find out wheter the information is accurate. (Hauswald, Tr. 834, 

in camera). The industr is small enough such that competitive information such as
 

Microporous's openg of a factory, Daramic's strke at a plant, or a plant closing for any 

signficant lengt of 
 time, is known by everone in the industr. (Hauswald, Tr. 835-37, 

in camera). 

538. In 2006, f l leared and Wrote in his personal notebook f l 

sales information relating to the customers to whom -ll was selling and the 

quantities they sold. (PX0093 at 046, in camera). ~ such information 

from its work force regarding what customers are buyig. (Hauswald, Tr. 840, in 

camera; PX0093 at 046, in camera). 

539. 

046, in camera; Hauswa1d, Tr. 843, in camera). 

540. A Po1ypore document indicates that ths effect is indeed present in these markets. The 

CFO of Polyp ore advised a subordinate to address barers to entr when discussing 

Po1ypore's business, including Daramic, with Standard and Poor's: ''Te reason why we 

81 
don't worr too much about 'backlog' in the traditional sense is that with the 

SUBSTANTIAL techncal ability, capital investment, lengthy qualification requirement, 

market share, and other 'barers to entr,' the likelihood of our base business leaving us
 

without our advance (in some cases significant advance) knowledge is very very low." 

(pX0829 at 001 (emphasis in origial)). The subordinate, advised Standard and Poor's of 

the barers to entr as instrcted. (PX0828 at 001; PX2251 at 009, in camera).
 

541. Dr. Simpson noted that Daramc's acquisition of 
 Microporous makes reaching terms of 

coordination, monitorig those ters, and enforcing those ters much easier for two
 

reasons. (Simpson, Tr. 3201-3202, in camera). First, it reduces the number of 
 players 

from three to two. (Simpson, Tr. 3202, in camera). Second, it elimnates a mavenck 

fi: Microporous was the fi that was most aggressive about introducing new
 

products and competing for 
 market share. (Simpson, Tr. 3201-02, in camera). 

542. JCI's PE SLI separator suppliers from 2004 though 2007 were Daramcand Entek. 

(Hall, Tr. 2687-2688). In ths tieframe, JCI purchased between 110 and 120 milion 

squae meters ofPE separators on an anual basis from Entek without a contract. (Hall, 

Tr. 2690). 

543. JCI believes that Daramic and Entek were not competing for JCI's business. (Hall, Tr.. 

2692). In 2004, JCI described the separator supply base L (pX1505 

at 002, in camera). 

544. One reason that JCI felt that Daramic and Entek were not competing for its business was 

that JCI contiued to see price increase during ths time penod despite double digit
 

growth in its separator purchases, whereas JCI got lower prices from suppliers of other 

commodities as JCI's business grew. (Hall, Tr. 2692). 

545. Whle JCI investigated moving some supply 
 away from Entek, JCI had no other supplier 

outside ofDaramc that JCI could use as a source of separator supply. (Hall, Tr. 2802­

2803). Durg ths tie penod, JeI's separator strategy continued to have a goal of
 

briging new separator entrants into the marke lace in order to get more coni etition. 

(Hall, Tr. 2691, 2693). JCI's goal was to 

546. 

L (Simpson, Tr. 3390-3391, in camera). 

1. SLI market has only two competitors today
 

82 
547. Prior to the acquisition, Daramic, Microporous, and Entek were the only suppliers of 

separators for SLI or automotive batteres to Nort Amercan customers. (Gilchrst, Tr. 

307-308,342). The SLI market is the largest separator 
 market. (pX0131 at 032). 

548. Daramc views itself as the "market leader when it comes to pricing. (PX0235). 

Daramc was the first in the industr to anounce a price increase for 2006. Soon after 

Daramc's aiouncement, Entek "followed our lead" and increased prices. (PX0235). 

Daramc was "excited" because Entek ''had again shown that Daramc is the market 

leader." (PX0235). Daramic's VP of worldwide sales inormed his sales team to ''NOT 

BE AFRAID TO FORCE THE INCREASE." (PX0235, emphasis in origial). 

2. Respondent documents state that competition is not strong in SLI 

549. 

l (pX0265 at 004,008, in camera). In comments on an earlier draft of ths Strategy Audit, Tucker Roe of Daramic stated: "I 

would say that over the 
 past year there has not been an aggressive rivalry among 

competitors but this has changed when Microporous Products entered the market and 

more recently seen by Entek," which implies that Microporous's entr prompted the 

increased rival. (pX0482 at 002). Finally, a Microporous document titled "Overiew 

of Battery Separator Industr, September 2007" states: "Microporous Products, at the

invitation of 
 these (battery) manufactuers seeks to become a supplier to the domestic 

U.S. automotive industr and help the above manufactuers create a more competitive 

envionment." (PX0088 at 001-002). 

G. MPLP was expanding in SLI at customers' request 

550. 

PX0174 at 003, in camera). 

551. Prior to the acquisition, at its Piney Flats plant, Microporous manufactued extensive 

samples and some commercial-use separators for SLI batteries for Johnson Controls, 

83 
Exide, V oltmaster and several battery manufactuers in the European Union. Several 

trckloads of material were shipped to Johnson Control's Tampa plant. (Gilchrst, Tr. 

312-13,417-18). Mr. McDonald also talked to East Pen about supplying them PE for 

SLI. (McDonald, Tr. 3879-3880 in camera). 

552. 

1. Worked with customers to qualify in SLI 

i) Work with JCI in 2003 to brig competition to SLI market
 

553. Johnson Controls ("JCI") is the largest manufactuer of flooded lead acid batteries in the 

world. (Hall, Tr. 2662-2663). In the United States, JCI is one of "only thee major. 

automotive battermanufactuers!' (pX0088 at 001) 

554.
 

555. As par of JCI's separator sourcing strategy, JCI engaged in discussions with MPLP prior
 

to 2003 in an effort to develop MPLP as a new entrant into the SLI separator business. 

(Hall, Tr. 2670). 

556. JCI tested a sample PE SLI separator manufactued by MPLP in 2003. (Hall, Tr. 2696). 

The MPLP sample SLI separator was produced off of a production line in MPLP's 

Tennessee facility that was not set up to ru the process; instead MPLP's production line 

was modified to tr to create the requisite SLI sam 1e for JCI. (Hall, Tr. 2696). l 

camera; PX0672 at 006, in camera). 

a. Daramic forced JCI into contract extension that styed entr 

84 
557. In 2002, JCI was "primarly a Nort American company." (Hall, Tr.2666). It had 
 just 

acquired Hoeppeke, a smaller European batter producer. (Hall, Tr. 2666). About one
 

year later, it also acquired Vara,another European batter producer. (Hall, Tr. 2672). 

558. 

559. l_l was the exclusive supplier ofPE battery separators to JCI facilities in the United
 

States though December 31, 2003. (pX2112 at 11, in camera; PX0820 at 017). l-l
 

also supplied l 1 (PX2112at 014, in camera).
 

560. Soon after becoming Global VP for Procurement at JCI in 2002, Rodger Hall sought 

better separator pricing for the company. (Hall, Tr. 2666). It did not appear to Mr. Hall 

that JCI and Daramic were aggressively competing for JCI's business. (Hall, Tr. 2666­

2267). For example, JCI requested a quote on U.S. business from Daramc and after a 

delay on Daramc's par of several months, the quote received from suggested to JCI that 

Daramic was not aggressive about gettg into JCI's U.s. business. (Hall, Tr. 2668). Mr. 

Hall reasoned that, as JCI's overall production volumes increased, it should have been 

able to obtai better pricing from its separator suppliers. (Hall, Tr. 2666). 

561. 

1 (R0039 at 

016, in camera). In order to get a competitive price, JCI's strategy was to develop new 

entrants for competition. (Hall, Tr. 2670). 

562. However, JCI strggled to brig on new com etitors due to Daramc's negotiatig tactcs. 

JCI felt that Daramc and Entek were l 

563. 

564. Internally, Daramic viewed its negotiations with JCI in 2003 as 

) (PX0243 at 001, in camera). Mr. Roe told his boss, Fran Nasisi, that he believed the JCI negotiation would help l_ 

1 (pX0243 at 001, in camera). 

85 
565. Mr. Hall of JCI, on the other hand, wanted to reduce the mandatory minimum volumes 

'commtted to Entek and Daramc so that space could be created for new competition. 

(Hall, Tr. 2670-2674). 

566. Negotiations contiued durng 2003 and Daramic continued to supply JCI's facilities in 

. Europe and elsewhere outside the United States at previously invoiced prices. (Hall, Tr. 

2672,2780). As of 
 November 2003, Daramic considered its "negotiations for a global 

contract (with JCI) . . . are still pending." (PX1786 at 027). 

567. 

L 

(pX0928 at 001; Hall, Tr. 2873-2874, in camera). Mr. Hall thought the competitive 

market was ''uealthy.'' (Hall, Tr. 2873-2874). JCI felt that Daramic and Entek ''were
 

not aggressively competing against each other for business." (Hall, Tr. 2667,2692). tl 

568. At a meetiIg in June 2003 at JCI headquarers, Mr. Gilchrst and an offcial from Kelso
 

(then-owner ofMPLP) discussed the potential for MPLP to supply "as high as 

50,000,000 square meters on a worldwide basis" of JCI's polyethylene separator needs 

for the SLI market. (pX0928 at 001). Mr Hall explaied that Daramc had been 

"'arogant' and diffcult to deal with" and unwilling to lower its prices to JCI durig ''te
 

last six or seven years" while JCI's purchasing volume had grown. 
 (pX0928 at 001 :-002). 

569. 

570. In addition to considerng MPLP, JCI also considered a star-up company in Europe
 

named Alpha as a potential new supplier. (Hall, Tr. 2683-2686). However, JCI 

considered there to be high risks associated with Alpha because it was not yet in 

existence. (Hall Tr. 2686, 2872; PX1505 at 002, in camera). Mr. Hall was not sure what 

the outcome of JCI's work with Alpha would be. (Hall, Tr. 2872, in camera). Mr. Hall 

did not view Alpha as being on equal footig with MPLP, because MPLP was producing 

separators with a proven technology, thus JCI was "much more comfortable with the 

capability of (MPLP) to develop SLI separator production capability." (Hall, Tr. 2872­

2873, in camera). 

571. . Meanwhile, Daramc began to get frstrated at its failure to peruade JCI to accept its 

previous proposal. (Rpe,.Tr. 1674-1676). On December 2,2003, Mr. Roe informed 

. Laura Pier of JCI that Daramic was withdrawing all earlier proposals. (PX1504 at 001). 

If JCI did not sign Daramic's proposed contract by the end of 
 the month, then "all 

purchases for product in Europe will be priced on a spot purchase price that will be 

signficantly higher than those previously quoted." (pX1504 at 001). 

86 
572. Negotiations deterorated. On December 3,2003, JCI told Daramic it wanted two
 

proposals, one for the US and one for Europe. (PX0965 at 013, in camera). Daramic 

was unwiling to submit a proposal for JCI's European business only. (Roe, Tr. 1680­

1681 ). 

573. In late 2003, Daramc believed that MPLP was offerng to supply JCI under a 
 five year 

contract with continuous price reductions passed along to JCI (Roe, Tr. 1237-1238; 

PX0693; PX0758 at 017, in camera). JCI had requested a similar price reduction clause 

from Daramc, which Daramic "totally rejected." (PX0693). 

574. Dug the course of negotiations with JCI, Daramic took a position that they would only 

negotiate for a worldwide contract, and was unwilling to submit a proposal for JCl's 

European business only. (Roe, Tr. 1680-1681).
 

575. Soon after learg ofMPLP's bid for JCI's SLI business, Daramic theatened to cut off 

supply to Jei in Europe if JCI did not sign a long term contract. (PX0758 at 017, in 

camera; Roe, Tr. 1676). 

576. JCI did not 
 consider the negotiations fialized with Daramc over the contract on the 

table in the beging of 
 2004. JCI was stil negotiating pricing and was unappy with 

the minimum volume requirements. (Hall, Tr. 2674). Additionally, JCI was not satisfied 

with the length of the contract and wished to have a shorter-ter contract. (Hall, Tr.
 

2684). JCI informed Daramc that it was not though negotiating the contract. (Hall, Tr. 

2675). 

577. By early Januar, the back-and-fort discussions between Daramc and JCI had
 

"escalated," so Mr. Hall became directly involved. (Hall, Tr.2676-2677). Fran Nasisi, 

the general manager of 
 Daramc at the tie, called Mr. Hall and told him the contract 

"negotiations weren't movig forward at a pace that (Nasisi) considered appropriate and 

that (an 85%) price increase was oin to occur" on a date cerain in the immediate 

futue. (Hall, Tr. 2676-2677). l 

(Hall, Tr. 2866-2867, in camera). 

578. Mr. Hall responded that the pares should have a five day "cooling-off perod" and then
 

resume discussions about the contract(s). (Hall, Tr. 2677-2678). The pares then a eed 

to get back to each other aft five days. (Hall, Tr. 2677-2678). Meanwhile, l 

(Hall, Tr. 2865-2866, in camera). 

579. 

1 (Hall, Tr. 2677-2678; PX0965 at 013, in camera). Mr. Nasisi 

informed Mr. Hall that if the contract was not signed Daramc intended on closing down 

. Daramcs's mai supply plant to JCI located in Potena, Itay. (Hall, Tr. 2678). 

87 

1 
580. Mr. Nasisi said he would supply JCI with separators it had in inventory (about a nine-day 

supply), and when those ran out, JCI would no longer be a Daramic customer unless it 

signed the contract. (Hall, Tr. 2677-2678). He gave JCI only several days to sign the 

. contract and send it back to Daramic as it was, without any changes. (Hall, Tr. 2678). 

581. Subsequently, JCI understood that Daric's Potenza, Italy 1ant was actually shut down.
 (Hall, Tr. 2678.;2680). J (pX0757

at 002, in camera . 

Tr. 2868-2869, in camera). 

582. Mr. Hall understood that the impact of a shutdown of Daramic' s Potena plant on JCI in
 

Europe would be dire; it would create "a ver serous problem with supplyig (the 

company's) customers."(Hal1, Tr. 2679-2680). IfDaramic stopped production at the 

Potenza plant, JCI would be forced to choose which of its batter customers to sere, and
 

which it could no longer supply. (Hall, Tr. 2680-2681). ("Since we need separators to 

build batteries, we would not have been able to build batteres for some of our key 

customers."). 

583. JCI immediately reached out to 
 Entek to find how much available capacity Entek could 

supply to JCI. However, Entek could not supply the "sizes and the volume that would be 

. required to replace what (JCI) couldn't get from Daramic and the Potenza plant." (Hall, 

Tr. 2680). Even if JCI could obtai some separators from Entek, it still would have 

faced "a considerable shortfall" in meeting its needs in Europe at that time. (Hall, Tr. 

2680). 

584. Daramc and Entek were the only suppliers qualified by JCI to supply separators to the 

company in Europe as of Janua 2004. (Hall, Tr. 2681). JCI had noother suppliers to 

tu to. (Hall, Tr. 2681).
 

585. After searchig for other supply options, Mr. Hall imediately went to Greg Sherll, 

JCl's General Manager and explained the situation. At that point JCI decided it "had no 

choice but to sign the contract as it was." (Hall, Tr. 2681-2682). Jei did not wish to sign 

ths contract with Daramic, but the company's management "felt we were beig forced to 

sign ths contract." (Hall, Tr. 2682). 

586. On Januar 12, 2004, JCI conceded that Daramc's l 

587. 

J (Hall, Tr. 2869, in camera). Mr. Hall testified 

88 
that he t 1 (Hall, Tr. 2869, in 

camera). 

588. Daramic believed that by forcing JCI into a long ter contract, it had stopped MPLP's 

work with JCI on SLI supply; (PX0433 at 004). At the same time, Daramic recognzed 

that the JCI contract did not entirely eliminate the futue theat ofMPLP in the SLI 

business. (PX0433 at 004). Daraic worred that JCI and MPLP rrght continue to work 

together durg the course of the Daramc contract, with MPLP bringig on new capacity 

in the US and/or Europe to fulfill volume commtments that JCI could make for the end 

of the contractual perod. (pX0433at 004; Roe, Tr. 1274-1275). 

589. In a seres of emai1s, Daramic's executives acknowledged "strong aning" JCI durg 

2003-04 contract negotiations. Daramic knew that its coercive negotiating engendered 

"bad blood" between JCI and Daramic. (PX0750 at 001). 

590. 

591. 

592. 

1 (PX0751 at 

001, in camera). Tucker Roe acknowledged that he knew ''Vara (a JCIaffliate in 

Gerany) has received and is reviewing a commitment proposal for a new PE separator 

facility to be built" in connection with what he viewed was "par of the (MPLP) 

proposal" to JCI. (PX0693). 

593. The 2004 Daramic/JCI contract also affected 
 Alpha, the other potential new supplier. 

The minum volume requirements and the five-year contract lengt of 
 the coiitract, 

forced JCI to end its work with a sta-up company called Alpha. (Hall, Tr. 2683-2684). 

. The mium volume requirements in Europe did not leave JCI suffcient room to 

develop any additional supplier for PE separators. (Hall, Tr. 2684). 

2. JCI renewed work with MPLP in 2005
 

89 
594. Despite difficulties in 2003, Microporous continued to work towards enterng the SLI 

market. JCI reengaged in discussions with MPLP in 2005 about possible supply ofPE 

SLI separators from MPLP to Jei in the US and in Europe. (Hall, Tr. 2693-2694). 

595. JCI informed MPLP that it wanted to bring them on as an additional SLI separator 

supplier because Daramiè and Entek needed competition to improve their pricing and 

their perormance as suppliers. (Hall, Tr. 2698-2699). 

596. In the context of discussions with MPLP, JCI was interested in local supply of separators, 

contemplating that MPLP's futue European facility would supply separators to JCI's 

European manufactung plants, and MPLP's Tennessee facilty would supply separators 

to JCI's plants in Tampa and/or Winston-Salem. (Hall, Tr. 2695). 

597. In 2005 MPLP was intending to expand into SLI for JCI and fuer expand into 

industral with CellForce production for EnerSys. (Trevathan, Tr. 3718-3719). 

598. The MPLP expansion was a strategic mu1tiphase plan which encompassed both SLI and 

industral customers in both Nort Amerca and Europe. (Trevathan, Tr. 3721-3724). 

599. Subsequent to JCI's 2005 discussions with MPLP, JCI tested MPLP's PE SLI separators
 

a second time after MPLP had improved the manufactug process. (Hall, Tr. 2696­

2697). Ths time the problems that were encountered by JCI in its earlier testing of 

MPLP separators were fixed. (Hall, Tr. 2696-2697). 

600. JCI's techncal representatives had discussions with MPLP personnel to make sure that
 

MPLP understood the manufactug process and understood the changes that were made 

from the previous failed attempt by MPLP, in order make sure that MPLP could 

successfully manufactue the separators on a repeated basis. (Hall, Tr. 2697). Following 

these discussions, JCI was comfortble that MPLP could roduce an SLI se arator that 

JCI could use. (Hall, Tr. 2697). 

_l (pX0672 at 006, in camera).
 

i) JCI negotiations ended
 

601. Ultiately JCI and MPLP negotiations did not lead to a contract between the two pares. 

(Hall, Tr. 2697). JCI did not contract with MPLP because (a) uncertainty surounding an 

arbitration that Daramic had fied agaist MPLP in Europe, and (b) reluctance on the par 

ofMPLP's owners to grant iei an assignent clause to prevent the sale ofMPLP to a 

competitor. (Hall, Tr. 2697-2700; 2800). 

602. JCI was concered that Daramc's arbitration could delay MPLP's installation of 

capacity such that it would not have the requisite production capacity by the end of2008. 

(Hall, Tr. 2700). JCI felt strongly that it ne~ded new capacity in place in a timely maner 

to avoid being in the same situation it was in with Daramic in 2004. (Hall, Tr. 2699­

90 
L (Hall, Tr. 2701, 2748-2749, in camera). JCI believed that with the arbitration Daramic had l L
 

(PX1510 at 004, in camera). 

603. JCI felt the need for an assignent clause with MPLP because it was aware ofDaramic's
 

previous acquisitions of separator manufactuers. (Hall, Tr. 2701). JCI considered it a 

possibilty that Daramic might acquire any new separator manufacturing entrant 

(including MPLP) and thereby undo JCI's strategy to add new competitors to the marketplace. (Hall, Tr. 2701). . 

ii) MPLP worked with Exide to become supplier of SLI separators up 

until acquisition 

604. In the sumer of2007, Exide issued an RFP to MPLP, Daramc, Entek, Nippon Sheet
 

Glass (NSG), and Amer-Sil for requests for bids on Exide's global separator business 

staring in 2010. (Gilespie, Tr. 2962; 2965-2967; RX00013). The RFP covered Exide's 

needs for automotive, motive, stationar and golf car batteres. (Gillespie, Tr. 2967). At
 

that time, Daramic was the only separator manufactuer in the world that could supply all 

ofExide's PE separator needs. (Gilespie, Tr. 2978). . 

605. Exide intended on 
 using the RFP process to "go from a single source to a multi-source 

environment to mitigate the risk and exposure that Exide had from the single exposure." 

the potential suppliers aware that Exide intended 

to pursue a multi-sourcing strategy. (Gillespie, Tr. 2966). Exide believed that the more 

competition there was in the marketplace, the better off Exide would be in the long ru in 

(Gillespie, Tr. 2966). Exide made all of 


obtag lower costs, better quality and better serce. (Gillespie, Tr. 2976-2978). 

606. NSG refused to quote on Exide's RFP. (Gilespie, Tr. 2963-2964; PX1079 at 001-003). 

607. Daramc and MPLP were the only companes that bid on supply for Exide's golf car 

batteres. (Gilespie, Tr. 2967).
 

608. In response to the RFP, Amer-Sil submitted a bid for a porton of 
 Exide's European 

motive power requirements. (Gilespie, Tr. 2967). Exide views Amer-Sil as a small 

player only capable of supplyig limited applications in Europe. (Gillespie, Tr. 2968­

2969). Amer-Si1 did not bid on Exide's automotive requiements. (Gilespie, Tt. 2968). 

609. MPLP's response to Exide's RFP was in the form of a memorandum of understanding 

(MOD) signed 
 by Exide and MPLP in 2007. (Gilespie, Tr. 2968-2969; PX1080). The

signng of 
 the MOD represented Exide'g commitment to go forward with supply from 

MPLP. (Gilespie, Tr. 3084). The MOD documented the discussions between Exide and 

MPLP to move forward with MPLP supplyig 22 millon square meters ofPE 

automotive separators to Exide beging in 2010. (Gillespie, Tr. 2968-2969; PX1080). 

91 
Ths represented about one third of Ex ide's PE separator business on a worldwide basis. 

(Gilespie, Tr. 2978-2979). 

610. Mr. Gilespie was responsible at Exide for negotiating the MOU with MPLP. Mr. 

Gillespie's counterpar at MPLPjn negotiations over the MOU was Mr. Gilchrst. 

(Gilespie, Tr. 2970-2971). 

611. MPLP executed the MOU on July 20,2007. (pX1080 at 007). Exide and MPLP agreed 

that their work together would remain confidential. (Gilespie, Tr. 2971-2972). Exide 

did not execute the MOU until September 2007 due to concer at Exide over the 

potential for MPLP to have to disclose Exide's name to Daramc in connection with 

Daramic's lawsuit against MPLP. (Gilespie, Tr. 2971-2972; PX1080 at 007). 

612. Mie Gilchrst was the point person in negotiations with Exide on the expansion for SLI 

in the u.s. (Trevathan, Tr. 3756).
 

613. MPLP signed an MOÙ with Exide for SLI volume for Exide's US facilities. (Trevathan, 

Tr. 3732-3734). 

614. At the August 16,2007 Microporous Board of 
 Directors meeting, Microporous 

management reported that an MOU (Memorandum of 
 Understanding) on the two-line 

SLI expansion had been signed, and that MiCfoporous had given Exide a draft supply 

agreement. (pX1106 at 031). 

615. Exide believed that the MOU would eventully lead to Exide's purchasing ofPE SLI
 

separators from MPLP in 2010. (Gilespie, Tr. 2976). In fuherance of 
 that belief, Exide 

and MPLP continued to work towards the goals of 
 the MOU in the months preceding 

Daramc's acquisition ofMPLP. (Gilespie, Tr. 2974-2976, 3088-3089). After 

negotiating the MOU, Exide went forward with testig ofMPLP's separator samples and 

developing specific pricing for the separators. (Gilespie, Tr. 2974). 

616. Exide personnel also met with MPLP personnel on numerous occasions in fuerance of
 

their work together on futue supply ofPE SLI separators. (Gilespie, Tr. 2975). For 

example, member's of 
 Exide's procurement team met with MPLP in Pars in Januar 

2008 to discuss MPLP's capabilties and 
 testing ofMPLP separators. (PX1023 at 001, 

100). Additionally, Exide was working thoughout ths perod of tie to get interal buy-


in for the strategy to moveforward with MPLP, including working on a red-lined draf of 

a supply contract. (Gilespie, Tr. 3075, 3077). 

617. Exide received and tested PE SLI separators from MPLP. (Gillespie, Tr. 2973). Exide's 

intial bench testing ofMPLP's PE SLI separators looked good and Exide then produced 

batteres in the US and Europe for testing using MPLP separators. (Gilespie, Tr. 2973­

2974; PX1024; PX1095). . Exide felt that Exide and MPLP were going though a lot of 

hurdles very easily with the product." (Gillespie, Tr. 2975-2976). 

92 
618. The original MOU between Exide and MPLP expired in 2007. (PX1080). In Februar
 

2008, Exide and MPLP extended their MOU. (Gilespie, Tr. 2976). At that point in time, 

Exide had every intention that they woùld be purchasing PE SLI separators from MPLP 

in 201O~ (Gilespie, Tr. 2976).
 

619. 

620. Mr. Gilchrst was concered until the last minute that the acquisition might fall through 

and cared on developing Microporous's business until the merger agreement was
 

signed. This is why Microporous renewed its Memorandum of Understading with 

Exide on Februar 14, 2008 durng a perod when acquisition negotiations with Daramic 

were in "stop-star" mode. (Gilchrst, Tr. 448-449, in camera; RX00403). 

621. One day before the Daramc purchase, MPLP executives including Mr. Trevathan and 

Mr. Gilchrst traveled to Atlanta just two days before the acquisition to meet with Exide 

in order to ¡'finalize an agreement" between MPLP and Exide for the PE line expanion at 

Piney Flats. (Trevathan, Tr. 3734; Gilchrst, Tr. 447-449, in camera; PX0392). MPLP 

Was workig in good faith to fialize the agreement. (Gilchrst, Tr. 447-49). At the 

Atlanta meeting, Exide reiterated its desire to move forward with the expansion process. 

(Gilchrst, Tr. 447-449) 

622. The purose of 
 the Februar 2008 meeting between Exide and MPLP was in par to 

reassure Exide that MPLP was still interested in building a line for them. (McDonald~ Tr. 

3939). 

623. Right up to the date of 
 the deal, MPLP had no assurance that the deal would be. 

consumated with Daramc. (Trevathan, Tr. 3753). And had the deal fallen though, 

MPLP would have continued 
 with its expansion plan including those with Exide. 

(Trevathan, Tr. 3753-3754). Mr. Trevathan thought that MPLP was on its way to fuer 

improve profitability in the event that the merger with Daramc fell though. (Trevathan, 

Tr.3750). 

ii) MPLP also held discussions with East Penn regarding SLI 

separator supply 

624. Followig an intial phone converation between Mr. Leister of 
 East Pen and Roger 

Berger ofMPLP, Mr. Berger visited East Pen's Pennsylvana manufactung plant to 

conduct fuer discussions with Mr. Lester regarding the possible supply of PE SLI 

separators to East Penn. (Leister, Tr. 4009). Durg ths face to face meetig, East Pen 

indicated to Mr. Berger that East Pen was interested in seeing MPLP enter the SLI 

market. (Leister, Tr. 4010). 

93 
625. East Penn's conversations with MPLP about possible supply ofPE SLI separators
 

continued with a visit by East Pen representatives to MPLP's Piney Flats facility in 

October 2007. (Leister, Tr. 4011-4012) (PX0082). Accompanying Mr. Leister, East 

Penn's Director ofPprocurement Strategy and Supplier Development, on this trp to 

Piney Flats was Roger Bar, and Davis Knauer. (Leister, Tr. 3971-3976; 4011). As VP 

of Automotive Manufactung And Purchasing, Mr. Bar is involved in 
 the purchasing of 

SLI sepaiators, while Mr. Knauer as VP of Automotive Engieerg is involved in the
 

testig and qualifyng ofSLI products. (Leister, Tr. 4011). 

626. Durg East Penn's visit to Piney Flats in October 2007, as a signal of 
 East Pen's 

serousness about working with MPLP, the East Pen representatives indicated that East 

Penn might be wiling to enter a long term contract with MPLP for the supply ofPE SLI 

separators. (Leister, Tr. 4016-4017). 

627. Following East Penn's visit to Piney Flats, Mr. Leister requested a price quote on 11
 

millon square meters ofPE SLI product from MPLP. (Leister, Tr. 4018). MPLP
 

provided a price quote soon thereafter. (Leister, Tr. 4018).
 

628. Based on the discussions and tour of the facility, East Pen felt that MPLP had the 

requisite knowledge to make SLI separators for East Pen. (Leister, Tr. 4013). In late 

2007, East Penn saw MPLP as a viable supplier for SLI separators. (Leister, Tr. 4018­

4019). Up to the time of 
 Daramc's acquisition ofMPLP, East Pen had not ruled out the 

possibility of 
 buying SLI separators from MPLP. (Leister, Tr. 4019). 

629. MPLP believed that it would have been producing SLI separators for East Pen, but for 

the acquisition. (Trevathan, Tr. 3722-3723 (phase II for East Penn was "discontinued 

because of the acquisition of 
 Microporous by Daramic.")). 

630. In the event that the lawsuit brought by Daramc agaist MPLP was successfu, the 

contingency plan withn MPLP was to produce SLI on the two lines in Tennessee and 

produce CellForce on the two lines in Austra. (Trevathan, Tr. 3705; PX0090). 

iv) MPLP planed to sell SLI separators to European customers as 

well 

631. Microporous was planng on selling SLI separators from the Feistrtz facility prior to its 

acquisition by Daramc, and would have purued selling SLI separtors from the Feistrtz 

had it not been acquied by Daramic. (Gaugl, Tr. 4626). 

632. At the Feistrtz plant facility, Microporous built two production lines both of 
 which could 

produce CellForce separators or plain polyethylene separators for SLI batteries. 

(Gilchrst, Tr. 332).
 

94 
H. SLI separator market reverts to a duopoly as a result of acquisition which 

eliminated a global new entrant 

633. The acquisition enabled Daramic to increase price unilaterally. (Simpson, Tr. 3192-3194, 

in camera). 

6:34. Daramic's acquisition of 
 Microporous had two harful unlateral effects in the SLI 

market, the first concered sales to Exide. (Simpson, Tr. 3194, in camera). Although 

Microporous would not intially be in a position to supply all ofthe needs of 
 Ex ide, Exide 

wanted to have Microporous as an independent supplier because they believed that they 

could obta better pricing with an additional supplier competing for their business. 

(Simpson, Tr. 3194, in camera). 

635. The second concered sales to smaller battery manufactuers. Dr. Simpson testified: 

"For smaller batter manufactuer, 
 Microporous would be in a position to meet all of 

their demand. And Microporous could be their best supplier, in which case eliminating it 

would reduce competition. They (Microporous J could be their second best supplier, in 

which case they would be the constraint on the supplier who was the best. ... (In that
 

way), the acquisition would reduce competition." (Simpson, Tr. 3194-3195, in camera). 

In fact, Daramic had aleady lowered prices to some smaller battery manufactuers in 

response to Microporous's expansion of capacity. (PX0258). 

636. 

camera). 

637. 

638. Entek will not constrain Daramc's post-acquisition pricing. Dr. 'simpson noted that, 

although Entek curently has some excess 
 capacity, that excess capacity was created by 

the ongoingreèession. (Simpson, Tr. 3195, in camera). Dr. Simpson then noted that 

when the economy recovers, demand wil increase and that e~e. 

(Simpson, Tr. 3195, in camera). Dr. Simpson fuer noted l_
 

1 so excess capacity does not 

motivate a firm necessarly to be fiercely competitive and cut price and tr to gain market
 

share." (Simpson, Tr. 3196-3197, in camera). 

95 
639.

640. Dr. Simpson concluded that i l segments the

industry by alignng those two suppliers with i l and making them less effective

substitutes for other battery manufacturers. (Simpson, Tr. 3442, in camera). Dr.

Simpson explained: i

641. Dr. Simpson also noted that i l

(Simpson, Tr. 3197, in camera). As a matter of economic theory, most-favored nation

clauses tend to make firms less competitive by preventing them from making selective

price cuts. (Simpson, Tr. 3197-3198, in camera).

642. Dr. Simpson testified that a useful way to see i

L (Simpson, Tr. 3198-

3199, in camera). Microporous was building a new factory in Austra and had plans to

add an additional line at its Tennessee plant. (Gaugl, Tr. 4576). The additional capacity

at the Austria plant would have freed up capacity at its Tennessee plant which previously

had supplied Eurpean customers. PX2301 He lie, De . at 38-39)). Daramic

responded to i

camera, see generally 3209-3224, in camera).

643.

(PX1823 at 001, in camera).

96
644.
 

645. 

L (pX0258 at 002; PX0255 at 001, in camera; Roe, Tr. 1292-1294, in 

camera, 1350-1354, in camera). 

1. Daramic acquired MPLP to 
 eliminate a competitive threat 

646. As early as July 2003, Daramic's head of sales, Tucker Roe, sent a memo to the President 

ófDaramc sumarzing the rationale for acquiring Microporous, thus: "The only reaon 

for acquisition would be purely defensive to secure our market share of the traction 

market and termate the continued price erosion." (PX0935 at 001; PX0433 at 004 ("The 

main disadvantage I see if we do not acquire Amerace is that Amerace may continue their 

plans for a second line resulting in either our loss of curent customers or fuer 

reduction in our market pricing, hence loss of margis.")).
 

' 

647. In 2003, the President of Daramc put an acquisition of Microporous at the top of his list 

of possible acquisitions, describing the benefit to Daramc simply as "Eliminate price 

competition." (PX0932). 

648. The effects of price competition eventually led Daramc in 2005 to consider an outrght 

acquisition ofMPLP. (PX0433). Daramc understood that the benefit of an acquisition of 

MPLP would be the elimination of 
 their low price competitor. (PX0433 at 003). On the 

other hand, Daramc also believed that if MPLP remained independent and was "allowed 

to add additional capacity it would "fuer reduce the overall market pricing." (pX0433 

at 003-004; Roe, Tr. 1270-1271; PX0919 (Riney, IHT at 294-295, in camera)). 

649. The mai disadvantage that Daramic saw in 2005 in not acquirng MPLP was that MPLP 

might continue thei expansion plans resulting in either a loss of customers for Daramc, 

or a fuer reduction in Daramc's market pricing. (pX0433 at 004; Roe, Tr. 1271-72).
 

650. Bob Toth became CEO of 
 Polyp ore in July 2005. (pX0901 (Toth, Dep. at 7), in camera). 

Upon becomig CEO, Mr. Hauswa1d provided Mr. Toth "a sumar of several memos 

done by Tucker (Roe)" regarding Daric's f
 

97 
) (PJq242 àt 001, in

camera). 

651. In September 2005, Mr. Hauswa1d agai advises Mr. Toth that Daramic should buy 

Amerace because it has taken EnerSys business from Daramic and theatens to take even 

more. (PX0168). Mr. Hauswa1d told Mr. Toth that "Amerace is a real theat for our 

business, not only in the industral market, but, later, il the automotive market, because 

there is no doubt that JCI and EXIE wil contact them for a deal, when our contracts wil 

expire. I'm stil recommending to buy Amerace, as a defensive action." (PX0168 at 002). 

652. One month later in October 2005, Fran Nasisi, advised Mr. Toth that based on the 

information Daramc has received about Amerace buiding a plant in Europe for EnerSys, 

"(w)e must do everrhing possible to stop this process. . . . The bottom line is that 

Amérace can be another Entek: building plants to exclusively supply EnerSys, JCI, East 

Penn and so fort." (PX0694 at 001). Mr. Hauswa1d felt that Daramic should "solve the 

(Microporous) case definitively." (pX0694 at 001). 

653. Daramc understood that an acquisition ofMPLP might not sit well with batter 

manufactuer. Daramic recognzed that customers might view a Daramic acquisition of 

MPLP as an elimnation of a potential PE supplier, thereby creating a situation where 

batter manufactuers would have even greater dependency on Daramic for supply ofPE
 

separators. (pX0433 at 04). Daramc fuer understood customers would not tae well to
 

a Daramc acquisition ofMPLP in light ofDaramic's past history of acquisitions of other 

PE suppliers such as Evante, PIL, and Jungfer. (PX0433 at 004; Roe, Tr. 1275-1276). 

654. Whle Daramc decided not to acquie MPLP in 2005, the same factors were at play in 

2008 when Daramic eventually acquied MPLP. (Roe, Tr. 1276-1277; PX0911 (Roe, 

Dep. at 221-222, in camera)). 

655. In August of2006, Daramic personnel including, Mr. Hauswald, Mr. Roe, Mr. Whear,
 

and Mr. Riey, met to discuss the direction of 
 the company. (PX0992 at 001, in-camera; 

Hauswald, Tr. 826, in camera). Daramic at the time believed that f 

) (Hauswald, Tr. 827-828, in camera; PX0992 at 004, in camera). Daramic
 

also stated that f 

_) (pX0992 at 004, in camera).
 

656. On August 23, 2006, Mr. Fran Nasisi sent an e-mail to Piere Hauswald on varous 

issues at Daramic, because Mr. Nasisi's time at Daramic-Po1ypore was soon comig to an 

end. In his e-email.Mr. N asisi stated, "Amerace will be a problem for Daramic. They 

have acquired momentu and it wil be ver diffcult to stop them uness the BOAR 

wil approve its purchase at any price (it will be more now than a year ago)." (PX0167; 

Hauswald, Tr. 649- 650). 

98 
J. Daramic tred to stop MPLP from building a European plant by suig MPLP for
 

using Jungfer technology in Europe 

657. Po1ypore became aware in the spring of2005 that it might be able to stop any futue 

MiCfoporous expansion in Europe, or better yet buy MiCfoporous at a discount to other 

potential bidders. In May 2005, Fran Nasisi, the deparing CEO of Polyp ore, notified 

Michael Graff by emai1 that while looking though his fies he had found the contract 

between Jungfer and Microporous relating to the PE production line that Jungfer instaled 

for MiCfoporous in 2001. (PX0747). In the emai1 he stated: 

The contract puts 
 a restrction on MiCfoporous Products to sell PE 

product for automotive application in Europe or Korea, places 

where at that time Jungfer was selling its product. Ths is cery 

a big restrction of anyone who wants to expand the business by 

going into the automotive market. . . . 

It cerainly will reduce their value for anyone outside Daramic. 

Phillp (Bryson, Po1ypore GC,) will investigate it fuer and 

provide us with a clear pictue of this new finding. 

658. In June 2006~ Michael Graff emai1ed Mr. Tofu and Mr. Hauswald t
 

L (pX0751 at 001, in camera). In his email reply, Mr. Hauswa1d confied that indeed Mr. Bryson was "on 

it:" 

659~ Daranc not only took legal action to stop the MiCfoporous expansion in Europe, it also 

took other intiatives as well. Piere Hauswald t 

99 
K. Prior to the Acquisition MPLP was Expanding
 

660. Worldwide sales of Cell Force in 2007 were approximate1y$8 milion. (Gilchrst, Tr. 

555). At the 
 time of the acquisition, Microporous anticipated that sales of CellForce 

would grow substantially. (Gilchrst, Tr. 345-346). 

661. Microporous was owned by LOP. (pX2301 (Heglie, Dep. at 8)). In evaluating its 

investment in Microporous, IGP saw growt opportties in golf car, resere power and
 

motive power battery separator markets, and potential opportty in the automotive 

market. (PX2300 (Heglie, IHT at 21-23)). Other attbutes that IGP evaluated in makg 

its investment in Microporous included a highly engieered product, strong profitability, 

a large component of the business was afterarket, which tends to have a steady demand, 

and good cash flow 
 characteristics. (pX2300 (Heglie, IHT at 22). 

662. At the time of its acquisition of Micro porous, IGP deterined that Microporous had 

multiple growt strategies. (pX2301 (Heglie, Dep. at 22)). Dung the course ofIGP's 

ownership of Micro porous, the Microporous Board, which was comprised ofmost1yIGP 

employees or parers, wanted to grow Microporous's sales and profits. (PX2301 

(Heglie, Dep. at 24)). 

663. Because Microporous was owned by private equity companies, staing in the 1990's it 

was imperative that the company develop 
 growt strategies and expanion into the SLI market was the first place the company looked. (Gilchrst, Tr. 299). 

664. In May 2007, MiÇfoporous management presented the Microporous Board with the 

. strategic plan, which included "Protect golf car market"; "Protect position in 

European traction"; "Regai U.S. traction position"; and "Create position in SLI 

market." (pX1102 at 029 (emphasis in the origial). The board was generally 

supportve of 
 the strategic plan. (pX2301 (Heglie, Dep. at 30)); PX2300 (Heglie, IHT at 

159)). With regard to creatig a position in SLI, Mr. Heglie testified that while there 

were debates between management and the board regarding the details and execution, 

''te core tenet of 
 trng to create a position in that market, i th we agreed with." 

(PX2301 (Heglie, Dep. at 31)); PX2300 (Heglie, IHT at 160)). ­

665. At the tie Microporous was plang the Austran expansion, it had contemplated
 

expandig in the u.s. as welL. (Gaugl, Tr. 4560). When it began orderg equipment for 

the expansion, it ordered equipment for thee lines. (Gaugl, Tr. 4576). Two of those 

lies were to be built in Austra, and one was slated to be buiit inPiney Flats, Tenessee, 

(Gaugl, Tr. 4576). 

1. MPLP was Adding Capacity
 

100 
666. Microporous planed to add the fourt production line for polyethylene separators at the 

Piney Flats facility in Mayor June of2008. (Gilchrist, Tr. 311, 374-375, 457, in camera; 

Gaugl, Tr. 4560; PX0078, in camera, RX00207, in camera). 

667. Microporous ordered the long lead time items for a fourh PE line in December of2006 

with the equipment that was ordered for the lines that would eventually be installed in 

Feistrtz Austra. Long lead time items for a PE line are those pieces of equipment that
 

take from ten to twelve months to arve. (Trevathan, Tr. 3600). 

668. The equipment that Microporous purchased for the new Piney Flats PE/CellForce line 

included the mixers, the extrder, the calender, heat exchangers for the condensation unt, 

. the dryers and the pinhole detecton system. (Gaugl, Tr. 4561). Wark on the four line 

at Piney Flats began prior to the acquisition, including designng and planing work, 

hig an engineering firm, and drawing up blueprints. (Gaugl, Tr. 4575).
 

i) Secured all of 
 EnerSys's Motive Business 

669. Microporous planed to devote one full line in Austra to servng the EnerSys business in 

Europe. (Gilchrst, Tr. 401-402). 

a. Committed to build capacity in the US for EnerSys 

670. 

Ths meant that EnerS s would 

l (Axt, Tr. .. 2144, in camera). Initially EnerSys committed ever 
 plant except Richmond, Kentucky, 

which was not included because EnerSys wished to keep two supplier and because
 

CellForce could not be sleeved at that time. (Axt, Tr. 2131). 

671. 

672. 

2152, in camera)~ 

l (R00207 at 010, in camera; Axt, Tr. 2156, in camera). According to Mr. Axt, 

101 
2153, in camera). 

673. MPLP negotiated a contract with EnerSys for industrial CellForce volume related to the 

European facility as well as the expanded U.S. facility. (Trevathan, Tr. 3728 . One of the 

commtments that Microporous made to EnerSys was to l 

674. 

(Heglie, IHT at 164-165)); PXl 106 at 031). 

675. Mr. Heg1ie testified that while the contract amendment that committed Micro orous to
 

. was ' " he thought
 that Mike Gilchrst as an offcer of 
 the company had the legal authority to execute the 

agreemenq PX2300 (Heglie, IHT at 138)). 

676. The Microporous Board wanted to maita its customer position with EnerSys. (PX2301
 

(Heglie, Dep. at 38)). Fulfilling commitments to EnerSys was importt to the Board. 

(pX2301 (Heglie, Dep. at 38)). 

677. At no point did Microporous go back to EnerSys to say that it could not fufill the 

. contract. (PX2300 (Heglie, IHT at 164)). EnerSys was an important customer, as Mr. 

Heglie testified: 

Agai, our view was they were an importt customer. We wanted 

to supply them. We wanted to continue to grow with them. . We. 

would have liked management for anytng requirig capita to
 

have discussed it with the Board first, but what's done was done 

and our view was we had to figue out a way to work with it. 

(PX2300 (Heglie, IHT at 164)). 

ii) Backfill 
 supply for Nort America 

678. The "backfill" was descrbing how to refill idle or unuti1ized capacity in Microporous's 

Piney Flats, TN plant that would become available when Microporous transfered a 

porton of its U.S. business to Austra. (pX2301 Heglie, Dep. at 38-39)). 

102 
3877, in camera). 

679.. By movig production of the EnerSys European volumes to Austra, Microporous 

planed to make capacity available at Piney Flats for Nort Amercan customer. 

(Gilchrst, Tr. 402-403; Trevathan, Tr. 3763, 3774 ("(W)e would be able to go out to 

customer and bnng in incremental volume to the company and backfill that open 

capacity in Piney Flats.")). 

a. MPLP was marketing backfill Ce1IForce Capacity in 

competition with Daramic 

680. Once the Austran lines were operatig at suffcient scale, Microporous could capitalize 

on fuer effciencies and "economies in manufactung" by converng some of its
 

production at Piney Flats from F1ex-Si1 to CellForce. (Gilchrst, Tr. 373-374).
 

681. t_l was one of 
 the customers that Microporous intended to supply with motive 

power separators in connection with its "backfill" strategy. (McDonald, Tr. 3874-3876, 

in camera). 

2. MPLP owners had fuded and were willng to continue to fud MPLP 

expansion plans
 

682. In the fall and early winter of 2007, MPLP moved ahead with plans to expand. MPLP 

met several ties with a building contractor, J.A.Street, and hied them to draw plans for
 

additional PE capacity in their Piney Flats Facility. (Trevathan, Tr. 3725-3726, 3735­

3736). MPLP also met with thd par suppliers Matheson and Litz1er, concerg 

equipment purchase and instalation for the expansion lines just pnor to the merger. (Trevathan, Tr. 3726-3727). . 683. By the sumer of 
 2007, Daramc was well aware ofMPLP's expansion plan and the 

two fis began discussions concerng a potential acquisition. In an August 9, 2007 

emai1 reporting on his conversation with Mr. Bryson about a possible acquisition of 

MPLP, Mr. Heglie wrote that he ''told hi (Mr. Bryson) that we were in the early stages 

of our investment, had parered with management and were not lookig to divest, and 

are in the midst of executing on 
 our own multi-pronged expansion plan for which we 

have plenty of capita and support." (PX1105 at 002). 

i) Mandate had no impact on MPLP's existig expanion plans
 

103 
684. On November 14, 2007, thee months after Microporous and Daramc began discussing a 

potential acquisition, and three months after Microporous and EnerSys signed the 

contract amendment committng Microporous to instal a second PE line in Tennessee, 

the Microporous BOard issued "strategic mandates" to Mr. Gilchrrst to "make the 

Board's 10ng- and near-ter objectives for the Company more clear. . . as well as assist 

in the 2008 strategic financial planng process." (pX2301 (Heglie, Dep.at 64)). 

685. Mr. Heglie testified that the mandates were not 
 intended to tell Microporous management 

that there would be no fuer expansion. (pX2301 (Heglie, Dep. at 65)). Nor did the 

mandate mean the Microporous should stop the work that was doing to tr to grow the 

business. (PX2301 (Heglie, Dep. àt 65-66)). There is nothing in the mandate that 

elimiated the possibility of Micro porous movig forward in its desire to compete in the 

automotive separator market. (PX2301 (Heglie, Dep. at 
 67)). In fact, Mr. Heglie 

testified that he does not recall the Microporous Board ever communcating that 

Microporous could not compete in the automotive market. (pX2301 (Heglie, Dep. at 

68),). Mr. Heglie fuer agreed that the mandate was not the last word on possible.
 

expansion för Microporous. (pX2301 (Heglie, Dep, at 69); RX00401 at 002; PX2300 

. (Heglie, llT at 197)). 

686. After the issuance of 
 the "mandate" on November 14,2007, the Microporous Board was 

still open to the possibility of movig into the . . . PE SLI market." (pX2301 (Heglie, 

Dep. at 71 )). Moreover, the Board was "stil open to the possibility of adding new lines 

in order to move into the PE SLI market." (pX2301 (Heglie, Dep. at 72)), ; see also 

PX2300 (Heglie, llT at 183)), ("I thnk the Board's, my view, and I believe ths is tre 

of the iop par of the Board's view, is the SLI automotive market wasn't as attactive as 

other market opportties available for the company, but it was still a potential growt 

opportty. It's somethng that we continually evaluated and considered investment in
 

at different points.")). 

687. According to Mr. Heglie, the mandate did not keep Microporous from movig forward in
 

the PE SLI market where economically attactive long-ter contracts were available. 

(PX2300 (Heglie, IHT at 197)). Had "Microporous management brought the Board a 

long-term contract that the Board viewed as economically viable for an expansion into 

the PE SLI market, the Board would have still contemplated expanding." (pX2301 

(Heglie, Dep. at 72). 

688. At that tie, Exide wanted "to move forward with an SLI project for two lines (one in
 

U.S. and one in Europe) to begi supply Januar 1, 2010." (pXI102 at 024; PX2300 

(Heglie, IHT at 153-154); Trevathan, Tr.3757). Exide was "(a)lso interested in 

incremental industral volumes in Euro e." X1102 at 24; PX2300 (Heglie, llT at 153­

54)). 

104 
689. Nothing in the mandates would.have prevented MiCfoporous management from
 

continuing to work with Exide on possible expansion for the PE SLI separator market. 

(pX2301 (Heglie, Dep. at 74)). In fact, the Microporous Board was supportve of 

management's activity with Exide, "(b )ecause it could generate a fai amount of capital,
 

good retu on the investment ifit worked." (PX2300 (Heglie, IHT at 153)). 

690. Microporous management was workig in good faith with Exide and that at no point was 

it working in something other than good faith with Exide on potential expansion for PE 

SLI separators. (pX2301 (Heglie, Dep. at 75-76)). 

691. Mr. Heglie testified that growt opportities as it relates to customer development
 

would have continued to be a focus of IGP and Microporous absent the acquisition. 

(PX2300 (Heglie, IHT at 220-221)). In reaching that conclusion, Mr. Heglie had 

discussions with other Board members from IGP about where they saw Microporous 

going if 
 there was not an acquisition by Daramic. (PX2300 (Heglie, IHT at 219)). With 

regard to those discussion, Mr. Heglie provided the following testimony: 

(W)e were stil movig forward on at least a broad view of the 

investment thesis in the strategic plan. . .. evaluating growt 

. opportties with the company, trg to grow the company,
 

trg to grow the cash flow, trng to improve the margis, trng
 

to generate cash to pay down debt. 

I'm sure we would have continued attempting to move forward on 

some of these customer opportties that we had.
 

So I don't know that there was a major deviation from the original 

strtegy. . . . But, agai, it's really case-by-case, and we had plenty. 

of opportties on the radar screen, as we talked about.
 

(pX2300 (Heglie, IHT at 219-220)). 

L. Competition between Daramic and MPLP increased in the months preceding the
 

acquisition 

692. In 2007, Daramc faced growig competition from MPLP at no fewer than five of its top 

ten customers. (Roe, Tr. 1307). Ths included renewed competition from MPLP in both 

motive and automotive markets. In the automotive market, Daramc understood that 

MPLP was competing with Daramic for business at JCI, Exide, East Pen and Fiam. 

(Roe, Tr. 1303-1307). Daramc durg this perod vi~wed MPLP as a viable competitor 

for automotive separator supply. (Roe, Tr. 1307-1308; PX0922 (Roe, llT 359-361)). At 

the same tie, MPLP was competig with Daramic for motive business at EnerSys, 

Exide and East Pen. (Roe, Tr. 1303-1306). Daramic and Microporous continued to
 

compete for deep-cycle customers as well. (pX0263 at 03-04; 08). 

105 
693. The theat of increased competition with MPLP was increasing in the months preceding
 

Daramc's acquisition ofMPLP. In 2007, Daramic grew concered about the possible 

loss of automotive business to MPLP at JCI. (PX2078). At that time, Daramic was 

supplying about 55 million square meters of separators to JCI on an anual basis. (Roe, 

Tr. 1296). Daramic also understood that it was JCI's strategy to have multiple suppliers 

in each geographic region (the Amercas, Europe and Asia) 
 in order to exer pressure on 

PE suppliers. (Roe, Tr. 1296-1298; PX2078). 

694. At that time, Daramc considered MPLP to be a competitive theat for JCI's automotive 

business. (Roe, Tr. 1307). In August 2007, Mr. Roe informed Mr. Hauswa1d that "one 

likely scenano" for JCI w()u1d include MPLP taing 20-25 millon square meters of 

product in 2009 - product which to date was being supplied to JCI by Daramic. 

believed that MPLP might get an even larger 

share ofJCI's separator business beginng in 2010. (PX2078; Roe, Tr. 1301). 

(PX2078; Roe, Tr. 1301). Mr. Roe furter 

695. The increased competition along with MPLP's expansion plan were of great concer to
 

Daramcas it believed that it was facing an EBITDA loss of _
 

)without an acquisition ofMPLP. (pX0276 at 007, in camera). 

696. 

1 (PX0238 at 001; PX0922 (Roe, IHT at 362-63), in camera). Mr. Roe responded by statig that "2008 will be the most 

challengig year ever faced by Daramic." (pX0238 at 001). Mr. Roe noted that Daramc 

was "fishig 2007 on a down-swing" and was ''begiing to feel the real effects" of 

price competition and Daramic's past performance issues. (pX0238 at 001). Mr. Roe 

indicated that Daramc had to be the "price leader" and "continue to push/force price 

increases" even as the competition was lowerng prices. (pX0238 at 001). 

697. Mr. Roe also emphasized to Mr. Hauswa1d that 2008 would a uniquely difficult year for 

Daramc because ofMPLP's ongoing expansion project which was "an element we have 

not faced in many years." (PX0238 at 001). According to Mr. Roe, "unlike prior years; 

we have a tre legitimate big competitor enterg the market (M) and for sure they will 

captue volume at whatever it takes." (pX0238 at 001; PX0922 (Roe, IHT at 362-363), 

in camera; Roe, Tr. 1302-1303). 

M. The acquisition elimated capacity expansion plan 

698.- The four PE line was never installed. (Gaugl, Tr. 4560). Some of 
 the equipment for 

that line is sittg in boxes in Austra and Piney Flats. The extrder is at the supplier in a 

semfished stage, and the pinhole detector is being used in Piney Flats. (Gaugl, Tr. 

4565). 

699. . With the acquisition ofMPLP by Daramic, ''basically the caret was pulled out from 

under us" with regard to Exide's strategy of adding separator supplier to the
 

106 
marketplace. (Gillespie, Tr. 2979). Following DaramIc's acquisition ofMPLP, Exide's 

leverage for its $70 milion of separator business has been lessened. (Gillepsie, Tr. 

2979). All of Exide' s investment of tie and money into the development of MPLP as a 

supplier ofPE SLI separators ''was now up in smoke." (Gilespie, Tr. 2980). 

1. Discussions with Daranc impacted MPLP expansion plans
 

700. Mr. Heglietestified that although the mandate did not state that IGP would not invest 

capita in Microporous while it was talng to Daramic, he also stated that he "had a view 

that if we weren't going to get paid by Daranc or get compensation for the capital 

investments, that we wouldn't make them, and I believe Daranc understood that." 

(pX2300 (Heglie, IHT at 206)). 

701. Mr. Heglie testified that the opportty to do business with East 
 Penn occured around
 

the tIie of discussions with Daramic (PX2300 (Heglie, IHT at 188)). AccOrding to Mr. 

Heglie, Microporous may have put off discussions with East Penn: "(B)ased on the 

uncertainty with the Daranc transaction. . . IGP was unwiling to commit a bunch of 

capital to it without knowing if 
 we're going to be compensated for it." (PX2300 (Hegle, 

IHT at 188)). 

702. Likewise,Mr. Heglie testified that he held the same 
 view about spending capital to gain 

Exide's b~siness: "I th similar to 
 East Pen, we would, at least while those 

(Daramc/Microporous) discussions were movig forward, we would have been reluctant 

to invest additional capitaL." (pX2300 (Heglie, IHT at 190)). 

2. Acquisition elimiated the inovation competition between MPLP and
 

Daramic 

i) Inovation competition existed in deep-cycle
 

703. Daramic and Microporous competed with one another to inovate thei deep-cycle i 

batter separators. (Queshi, Tr. 2050). Daranc improved the perormance of its 

original deep-cycle separator, Daramic DC, 

J (pX0949 at 019, in camera). The new improved product became known 

as Daranc RD. (PX0949 at 019, in camera). 

704. With J, Daranc became aware that the lack of 

stiffess of the separators slowed down the hand assembly of the cells at J
 

(PX1742 at 002, in camera). A November 2006 document discussi a visit to u.s. 

Battery stated that'
 

_' (pX1742 at 001, in camera). An Apri14, 2007 Daramic Trip Report to U.S.
 

Batter reiterates that "( a) lack of stiffess in leaf separators had been an impediment to 

fuher sales by Daramic." (PX0681 at 001). That trp report states that Darancmade a 

107 
presentation to Mr. Qureshi on its t L project, a project to improve separator
 

stiffness for better handling. (PX0681 at 001; PX0682 at 001, in camera). After the 

presentation, Mr. Queshi indicated an interest in receiving separators with sodium 

silcate for added stiffess to test. (PX0681 at 002). 

705. In Apri12008, Daramc visited U.s. Batter and reviewed the results ofthe t_J 

project and deterined that the sodium silicate additive affected the capacity of the 

batter. (PX0682 at 001, in camera; Queshi, Tr. 2087-88). Dug the Daramic visit to 

U.S. Batter, Mr. Queshi suggested that Daramic use polyvnyl alcohol to improve
 

stiffess. (pX0682 at 001, in 'Camera; Queshi, Tr. 2087-88). Whle Darc pursued a 

solution to u.s. Batter's stiffess problem prior to the merger, since the merger Daramc 

has not followed up on Mr. Queshi's suggestions to improve stiffess. (Qureshi, Tr.
 

2051). 

ii) Inovation competition existed in UPS
 

706. MPLP had several techncally innovative projects underay prior to merger, including, 

but not limited to, projects 

generally Whear, Tr. 4730-4748, in camera). 

707. Daramc and Microporous were the only suppliers developing separators that elimated 

the formation of 
 black scum on the top of the acid in ups batteres. Ths scum impeded 

the visual monitorig of the acid level and batter plates in UPS batteres. In batteres 

. with automatic waterg devices, the scum caused a valve to stick resulting in the 

overfllng of 
 acid in the batter. (Brilmyer, Tr., 1852-54). 

708. Dr. Brilmyer knows of no other separator manufacuterer in Nort Amerca selling
 

separators for the flooded UPS application other than Daramic. (Bri1myer, Tr. 1850-51). 

709. Black scum results from the mixtue of oil, carbon black, lead oxide and some other 

chemicals in batteries; To address the black scum problem in batteres, Microporous 

began an R&D project called LENO, an acronym for "low ER (electrcal resistace J no 

oi1." (Bri1myer, Tr. 1836). 

710. Plang for project LENO at Microporous began in late 2006 at the approval of the

R&D steerg committee which included Mike Gilchrst and Lar Travathan, as well as 

Steve McDonald and Matt Wilhjelm. (Bri1myer, Tr. 1836). 

108 
711. At the end of 2006, EnerSys, a customer of 
 Daramic's gel batter separator, asked 

MiCfoporous to develop a competing product so that there would be a second alternative 

supplier for a DARAK-tye separator. (Bnlyer, Tr. 1839-40). DAR was 

substantially more expensive than PE separators. (Bnlmyer, Tr. 1843-44). 

712. . EnerSys commtted to MPLP that as soon as EnerSys engineerng approved their 

separator, EnerSys would move its UPS business to MPLP. (Axt, Tr. 2104; Burkert, Tr. 

2326). 

713. The LENO project additionally included the development of a gel battery separator that 

would compete with DARA, Daramic's gel battery separator. MiCfoporous planed to 

develop a gel batter separator that would compete with Daramic's DAR product, as 

well as Daramic's PE separators that were used in industral batteres, including UPS and 

telecommuncations batteres. (Bn1myer, Tr. 1864). Because DAR was a high 

cost/gh margin product compared to the gel battery separator developed by the LENO 

project team, MiCfoporous planed to take a substantial porton, ifnot all, ofDaramc's 

DAR business after the new product was available in commercial quatities. 

(Bn1myer, Tr. 1865, 1878-79, 1917; Bn1myer, Tr. 1874, in camera). 

714. Salespeople from MiCfoporous were optimistic that there was customer demand for its 

new gel batter separator in the U.S. and Europe, including at customers such as
 

t L (Bn1myer, Tr. 1868, in camera). Generally, battery


customers prefer havig more than one plant as a source for ~ 

supply securty and to obtai competitive pncing. Because t_
 

_l at only one plant in Gerany, customers were interested in another source for
 

this tye of batter. (Bnlmyer, Tr. 1869, in camera).
 

715. 

camera). 

716. At the time of 
 the acquisition, MiCfoporous had made substatial progress on the LENO 

project. EnerSys had been extensively testig a gel batter separator prototype made by 

MiCfoporous for over one year as par of a two year testing regie. To address the black 

scum problem, Microporous had developed PE separators that did not contai calcium 

stearate. In Febru 2008, just pnor to the acquisition, MiCfoporous had delivered
 

samples of a newly designed PE separator to EnerSys that solved the black scum problem 

by eliminatig calcium steaate from the separator materaL. (Bri1myer, Tr. 1856-57, 

1922-24; PX0664 at 002, in camera). 

109 
717. The manager of 
 the LENO project, Mr. Bri1myer, expected that the new products from 

the project would generate revenues from commercial sales by the end of 2008 or early 

2009. Microporous projected revenues in this time frame for both the calcium stearatefree PE separators and the new gel batter separator. (Brilmyer, Tr. 1857-58, 1881, in
 

camera). 

718. Despite the bright prospects for the new gel batter separator from the LENO project, 

after the acquisition, Daramc's management was not interested in the fuer 

development of a product to replace DAR, a ver high-margin product for Daramic. 

(Bri1myer, Tr. 1863-64). 

719. Of 
 the MPLP innovation projects, only project t_J is stil active in the, flooded 

lead-acid batter arena after havig come under Daramc's control. (Wear, Tr. 4736­

4752, in camera). 

720. Project _J was patent protected by MPLP. (Whear, Tr. 4814, in camera).
 

721. 

722. Prior to the merger Daramic had inovative project ongoing that were halted after the 

merger. (Wear, Tr. 4752-4754, in camera. Included in the abandoned rojects was 

project 

251), in camera). J (PX0913 (Wear, Dep. at 


Iii) Inovation competition existed in SLI
 

723. IGP believed CellForce had applicabilty in the automotive market because in testig, 

Microporous "thought that potentially using CellForce you could ultimately reduce the 

lead content in an automotive batter." (pX2300 (Heglie, IHT at 121)). IfCellForce 

were proven to allow for a reduced lead content in SLI batteres, it would be an attactive 

product to batter manufactuers: "Lead is a huge component of cost on a lead acid 

batter, so if you can eliminate some of that lead, you can tae cost out, of the battery 

which is ver valuable to a batter manufactuer." (pX2300 (Heglie, IHT at 121)). Mr. 

Hegle, as an IGP Board Member, continued to see value in CellForce for the automotive 

SLI market thoughout IGP's ownership of 
 Micro porous. (pX2301 (Hegle, Dep. at 

170)). 

724. At the time of the acquisition, Microporous was developing several new product ideas for
 

SLI separators. One, caled a "smar separator," (i.e., Project Eintei L allowed for the 

controlled shrng or expansion of the separator under cerain conditions. (Gilchrst,
 

Tr. 340).
 

N. Daramic Reaction to the MPLP Expansion - The MP Plan
 

110 
725. In the fall of2007, DaramIc took active steps to respond to the MPLP threat to Daramc's
 

automotive and motive power business in the US and Euro e. Mr. Roe and Mr. 

Hauswa1d put together a project known as the l 

L (PX0258; PX0255, in camera; PX 0911 (Roe, Dep. 173-174), in camera). In 

North Amerca, Daramic identified East Penn, Douglas and Crown as customers whose 

business Daramc believed was immediately at risk ofloss to MPLP in 2008. (PX0258 at 

002). At East Penn, Daramic was concered about the potential loss of automotive and 

motive power business, while at Crown and Douglas the concer related to potential loss 

of motive power business. (PX0258 at 002; Roe, Tr. 1303-1304). These customers were 

specifically identified because Daramic understood that MPLP had submitted proposals 

to wi each of 
 these customer business. (Roe, Tr.1289-1290). 

726. Understanding the threat that MPLP posed, Daramic developed the l_l to offer
 

beneficial terms to customers wilin to enter into exclusive or near exclusive Ion ter
 

contracts with ( 

L (Roe, Tr. 1285-1286; 1291; see also

PX0258 at 001 (''Wat do we want to achieve? Secure select (Long term) agreements to 

fight the (MPLP) theat."). Under the DaramIc offered customers contracts
 

that l 

L (pX0255 at 001, in camera; Roe, Tr. 1292-1294, 1350-1354, in camera). 

Additionally, the ters offered to customers under the MP Plan fuer limited Daramic's 

l 

in camera). 

727. With the MP Plan in pocket, Daramc went to certain customers offerg beneficial 

contractual ter in order to secure their business and to prevent erosion of Daramic' s
 

customer base. (Roe, Tr. 1290-1291). In addition to beneficial pricing terms, Daramic 

offered those customers identified as at risk ofloss to MPLP guanteed deliver times, 

commtted inventory stock, rebate schedules and consignent to secure the business with 

Daric. (PX0258 at 01; Roe, Tr. 1292). Daramic entered ~ contracts with
 

t ) as per the ters of the l-l (Roe, Tr.1352,
 

in camera). 

728. Crown signed a
 l 

(Balceak, Tr. 4104, in camera; RX00994, in camera). .
 

729. The lengt of the new supply contract is unusually long for Crown, and was entered into 

at the suggestion of 
 Daraic. (Balcerak, Tr. 4105, in camera). Prior to the most recent 

contract, the term for the agreement between Crown and Daramc extended only _ _l (Balcerak, Tr. 4111, in camera). .
 

111 
730. When Crown negotiated the contract with Daramic they did not considered other 

~!luse other than MPLP, the only other f
 

_l was Entek and it had been disqualified due to quality and
 

logistical problems. (Balcerzak, Tr. 4106, in camera). 

731. 

l (Balcerak, Tr. 4116, in camera; RX00994 at 009, in camera). 

732. 

RX01519, in camera). 

733. After East Penn had entered into a thee-year contract in 2008 for most, if not all, of its 

PE separator needs, that left Microporous with virtlly "no more opportties to sell
 

much CellForce, or PE for that matter, for motive power or SLI in Nort Amerca." 

(PXOI08). 

734. 

l (Leister, Tr. 3998­ 3999, in camera); (RX1519 at 1, in camera). East Penn intended to continue to buy the 

remaing _l of its motive power separators from MPLP because East Penn wantèd
 

to have multiple suppliers for its motive power batteres. (Leister, Tr.4005, in camera). 

735. 

1 (Simpson, Tr. 3230, 3236, in camèra; PX0033 at 47). 

736. In addition to Crown, Douglas and East Penn, Daramic specifically identified varous
 

European customers who were at risk ofloss to MPLP, including Midac, Germanos, TAB 

and Nuova Brescia. (pX0258 at 002). Daramc offered the same contractual ters to 

these customers that it had offered to the Nort American customers identified in the MP 

Plan. (Roe, Tr. 1294).
 

737. Daramc then entered contracts with 1 in
 

Europe under the terms oftheMP Plan. (Roe, Tr. 1353-1354, in camera). 

738. As demonstrated by Daraic's contracting under the MP Plan, pre-merger competition 

from MPLP constrained Daraic's pricig to customers in North Amerca of automotive, 

motive and deep-cycle separtors. Because of competition from MPLP, Daramic was 

unable to pass through any price increases in 2009 to f 

112 
received no price increase in 2009 under the terms of the contract entered into under the 

MP Plan despite Daramic's aleged increases in raw material and energy costs durg 	 that 

time perod. (Roe, Tr. 1353, in camera).
 

739. Similarly, Daramc was unable to pass though any price increase to _) in 2009 

due to the pre-merger constraint that MPLP had posed at _l (Roe, Tr. 1353, in
 

camera). 

740. 

741. In contrast to the customers at theat ofloss to MPLP, Daramic was unwilln 

~ 

Roe, Tr. 1344-1345, in camera). 

742. In at least one instance, MPLP had an immediate constrainng inuence on Daramic's 

automotive s arator ricing. In late 2007, Daramic was involved in negotiations with
 

) (Roe, Tr. 1345-1346, in camera). ~
 

) automotive battery manufactuer in Europe. (Roe, Tr. 1345, in camera; 

PX0215 at 002, in camera). Whle Daramc's sales personnel were meeting customers in 

pursuit of the strategy outlined in the MP Plan, Daramic leared that ~_ 

L (Roe, Tr. 1352, in camera;

PX0215 at 004, in camera). 

743.	 Intially, Daramic had not anticipated that ~ 

(PX0215 at 002, in camera). Upon learng of
 the ~ MPLP at


Daramc believed that they faced competition for ~_) from MPLP as 

well as from Asian suppliers, specificall from An ei. X0214, in camera. Soon 

thereafter, Daramc 1eaned that" 

_l" (pX0215 at 002-003, in camera; Roe, Tr. 1348-1349, in camera). Daramic
 fuer understood that ~_ ) testing and therefore

MPLP was the "only full scale alterative to ( L (pX0215 at 002, in camera; 

Roe, Tr. 1349-1350, in camera). 

744.	 Daramc grew concered because _l would be "a key customer for (MPLP) and 

pave the way for others to follow." (PX0215 at 003, in camera). Daramc feared that a 

customer the size of (_) would be "a fantastic communcation tool for MPLP's 

Automotive products with other customers" and would thus provide credibility to MPLP. 

(Roe, Tr. 1350, in camera; PX0215 at 002, in camera). 

745.	 Daramic's worldwide VPofsales contacted Mr. Hauswald to inform hi of
 the theat to 

Daramc's position at f_l (PX0215 at 002, in camera). Daramc believed that
 

113 

l 
MPLP had "made a very persuasive pricing proposal" for _l business, and that
 

the "competitive theat (was) rea1." (PX0215 at 002, in camera). In response to the 

MPLPtheat, Mr. Roe sou t and received approval from Mr. Hauswa1d to offer to 

~ X0215 at 001-002, in camera; Roe, Tr. 1350-.
 

1351, in camera. 

PX0215 at 002, in camera). Additionally, Daramic offered to 

L just as it was doing for customers identified under 

l. (PX0215 at 002, in camera). 

746. Whle Daramc was constrained from increasing prices to cerain customers by MPLP'g 

pre-merger competition, in the post-acquisition environment, Daramc was unconstraied 

by the terms of the t~ith regards to separators sold by MPLP to the ver same
 

customers. Thus, w~l received no price increase in 2009 for PE and HD 

separators ~hased from Daramc under the terms of the l did
 

receive a t_ l price increase on all Flex -Sil. separators it purchases from Daramc in
 

2009. (PX0950 at 015, in camera). .
 

747. . The MP Plan also detailed Daramic's proposed reaction if 	 the favorable terms offered 

under the MP Plan did not induce cutomers to sign long ter contracts with Daramc. 

Under the MP Plan, Daramc planed on punshig those customers that intended to 

switch some of their business to MPLP, indicating that as a "last resort we play hard - no 

agreement - no supply." (PX0258 at 01; Roe, Tr. 1291-1292). Indeed, soon after the 

creation of the MP Plan, Mr. Roe informed Mr. Hauswa1d and othl:S at Daramc that 

~ 

) (PX0214, in
 

camera). Shortly thereafter, the message of 
 hard ball had clearly made it to Daramc's 

saes team, as one ofDaramic's Euro ean sales ersonne1 who was
 

1. Po1ypore Board documents analyzing the acquisition 
 predict unlateral 

antiCQmpetitive effects 

748. As chairan of 
 the board, Mr. Graffs role in the Microporous acquisition was to 

"encourage management to do dilgence and come forward with a recommendation of 

how they wanted to procee." (Graff Tr. 4855). Those responsible for the due diligence 

were people from Daramc assisted by Po1ypore employees. (Graff, Tr. 4865, in camera). 

Mr. Graff, along with the other Po1ypore board members, was responsible for approving 

the Microporous acquisition. (Graff Tr. 4865, in camera). 

749. 

114 
(Graff, Tr. 4879-80, in camera). 

750. 

(PX0738 at 004, in camera). t 

~aff, Tr. 4872, in camera).
 

_l (Graff, Tr. 4873, in camera).
 

751. 

752. 

753. 

010, in camera). , 

754. 

Tr. 4880, in camera). 

755. 

in camera, with PX0203 at 080-089, in camera). 

115 
camera). 

756. 

camera; RX01097 at 002, in camera). 

757. 

758. 

J (pX0823, in camera; Roe Tr. 1225; Graff Tr. 4885-88, in camera). Daramic 

assembles its budget based on cerain assumptions with regard to volume and pncing and 

includes a three year long ter plan. (Roe, Tr. 1226-1227). The assumptions that 

Daramic incorporates into the budget are Daraic's best estimate of 
 what is going to 

happen in the upcoming year with respect to volume and pncing of the separators that 

Daraic sells. (Roe, Tr. 1226-1230). These assumptions are specifically laid out in the 

budget so that the Po1ypre board can understand how the budgetar figues were 

prepared. (Roe, Tr. 1226-1227).
 

759. Daraic did not know whether the l_J would successfuly maitain customers at
 

nsk ofloss to MPLP. Despite 1aunchi the l J, Daraic's 2008 budget
 

included the assum tion that 

J (pX0823 at 002, 008, in camera; Graff Tr. 4887-88, 

in camera). Ths is the same volume that Daramic was projecting on losing in the l.
 

.J. (Roe, Tr. 1370, in camera).
 

760. The 2008 budget also included Daramic's long ran e plans coveng the tie enod of
 

2008 to 2010. (pX0823 at 007-012, in camera. l 

J (PX0919 (Rey, IHT at
 

298), in camera). In its long range plans, using its best estimates of 
 what was likely to 

occur in the comig thee years, Daramc's mana ement assumed that 

116 
761. 

in camera). 

762. When Daramic presented the 2008 budget to the board for approval in December 2007, 

Daramc also provided a comparson of 
 how the long range plan would look with and 

without the MPLP acquisition. (pX0823 at 013-014, in camera). With an acquisition of 

MPLP, Daramc's underlying sales assum tions chan ed dramatically. Daramc assumed 

that with an acquisitionofMPLP, 

camera). 

763. Po1ypore's board approved Daramc's 2008 budget. (Roe, Tr. 1382, in camera). 

i) Daramic acquired MPLP to avoid market share loss and EBITDA
 

loss 

764. 

I (PX0203


at 088, in camera; PX0738 at 010, in camera; see also PX0275 at 012, in camera). 

Daramc also believed, and Mr. Hauswald also reported to the Po1ypore Board, that a 

(PX0203 at 088, in camera; PX0738 at 010, in camera). 

765. Mr. Hauswald gave the presentation entitled "Project Titan" regardig the acquisition of 

MiCfoporous to the Polypore Board in October 2007. (PX0203 at 080-089, in camera; 

Hauswald, Tr. 776, 778-79, in camera; PX0951 at 004, in camera). Mr. Hauswa1d 

confied that he put together a financial model of what the world would look like with 

117 
the acquisition and without the acquisition and had thenumbers checked to make sure 

were accurate. (Hauswald, Tr. 778-79, in camera; PX0203 at84, in camera). Mr. 

Hauswa1d himself prepared the presentation at the direction of 


they Mr. To~ Tr. 

900-901, in camera). The model showed that Daramic would receive _l
 

additional EBITDA between 2008 and 2012 with the acquisition. (PX0203 at 84, in 

camera) 

766. The Project Tita 
 Board presentation revealed that the im act on Daramic LRP EBITDA 

without the a uisition would be a
 

L (pX0203 at 86, in camera; Hauswa1d, Tr. 783, in camera). 

camera; Hauswa1d, Tr. 783, in camera). 

767. Mr. Hauswald's s eaker notes for the October 2007 Project Titan Board presentation 

showed, 

L (PX0174 at 003, in camera,

Hauswa1d, Tr. 788-89, in camera). Mr. Hauswald confrmed that Daramic wil 

768. Mr. Hauswa1d also acknowledged that Daramic would
 

L (Hauswa1d, Tr. 789, in camera; PX0174 at 003, in camera). Mr. Hauswald fuer confirmed that Daiamc was rojecting that ~uisition it t 

_l (Hauswald, Tr. 789, in camera; PX0174 at 003, in camera). He also


agreed that if Daramc did not purchase Microporous, it would have to _ 

L (Hauswald, Tr. 791, in camera; PX0174 at 

003, in camera). 

769. Daramic believed that absent the acquisition, it would have to lower prices and build low 

cost facilties to compete on price with MPLP. The October Board presentation speaker 

notes, which were reviewed by Pol ore Board members Mr. Graff and Mr. Toth, stated 

under the heading, 

118 
770. ~nted to the Board that a benefit of the acquisition was to t_ . 

_J by avoiding the loss of share to an expanding Microporous.
 

(Hauswa1d, Tr.784, in camera; PX0203 at 086, in camera). Microporous had 

1 (pX0462 at 005, in camera; PX0738 at 013, in 

camera; PX0463 at 002, in camera). Daramc expected 

in camera). 

771. Mr. Hauswald also presented to the Po1ypore Board that a business nsk with a 

Microporous acquisition was customer reaction and that they might star legal action 

agaist Daramic, which they did. (pX0203 at 088, in camera; Hauswa1d Tr. 785-86, in 

camera). 

772. Prior to the acquisition, Daramic projected profit and loss scenaros with and without the 

acquisition of 
 Microporous. (PX0051, PX0095 at 001-002, in camera). 

002, in camera). 

ii) Daramic acquired MPLP in order to raise prices
 

773. Mr. Hauswa1d explaied to the Pol iiisition, Daramc would
 be able to institute a 1
 

products which would result in 1 (Hauswald, Tr.
 

782,819-20, in camera; PX0203 at 84, in camera; PX0738 at 006-007, in camera; 

PX0463 at 008, in camera; PX0464 at 004). 

774. The Po1ypre Board documents also stated that Daramic planed to 

(pX0203 at 085, in camera; PX0738 at 006, 007, in camera; PX0463 at 005, 008, in 

camera; PX0464 at 004, in camera). Mr. Hauswa1d acknowledged that 

119 
iii) Daramic acquied MPLP to avoid capacity expanion
 

775. 

2. Po1ypore Board approved the acquisition based on the due diligence
 

team's findigs as stated in the Board Documents 

776. 

L (PX0742 at 001, in camera; Toth, Tr. 1476-1477, in camera). At the meeting, Mr. Toth first provided a sumar of 
 the strategic rationale for 

the transaction and the key financial projections. (Toth, Tr. 1477, in camera; PX0742 at 

001, in camera). Based on the management team's presentation and recommendation, 

the Board member then unanously adopted a resolution to acquie Microporous. 

(Toth, Tr. 1477, in camera; PX0742 at 001 in camera). 

777. When the 
 Board voted for the resolution approvig the Microporous purchase, it was 

relying on the ter sheet that was attached. PX0742 at 001, in camera; Toth, Tr. 1607,
 

in camera). The ten sheet includes t L (Toth, Tr. 1607,
 

in camera; PX0742 at 007, in camera). The Board's resolution stated that t 

L (pX0742 at 001, in camera). The presentations analyzed at the prior meetings 

included the fiancial data presented in the Board documents, above, that t 

L (PX0203 at 080-089, in camera; PX0738, in camera; PX0463, in 

camera; PX0464, iii camera). t 

778. 

(PX0742 at 003, 007; Graff, Tr. 4892, in camera). 

779. 

(pX0742 atOOl, in camera). 

120 
3. MPLP recognzed that Daramic's offer to acquire it eliminated 

competition 

780. . On August 9, 2007, Eric Heglie and Phillip Bryson met "to have an intial discussion ... . 

concerng a potential acquisition." (pXl104 at 002). While Mr. Bryson is in-house 

counsel for Po1ypore, he descrbed his fuction to Microporous "as probably less that 

the 'business.'" (PX1 104 at 001; see also 

PX1105 at 001 ("Phillp (Bryson) gave me his background. He is their general counsel 

but also leads their corporate development work.")). With regard to Mr. Bryson's role on 

(sic) 50% on legal duties and the rest as par of 


the Microporous acquisition, Mr. Gilchrst reported to Jeff Webb, an IGP member of 
 the

Microporous board, that Microporous might consider a response "to Bryson's not so 

veiled 'threats' about the coming 'war' between us if they don't acquire MPLP ;" 

(pXll12 at 002). 

781. In preparation for the meeting between Mr. Heglie and Mr. Bryson, Mike Gilchrst
 

emai1ed Mr. Heglie suggestig that Mr. Heglie stress that MPLP "be valued at what its 

immediate significant growt opportties offer;" and that "IGP (is) committed to 

growt and infusing necessar capital for MPLP to execute its growt plans." (PX1104 

at 001). In addition, 
 Mr. Gilchrst suggested that Mr. Heglie stress the following: 

Any offer must take into account the signficant strategic 

implications of 
 what Daramic gains by owning MPLP: 

o Tota control of deep-cycle markets (no competitor)
 

o Total control of industral markets (no competitor)
 

o Regains complete upper hand in automotive with no new competitor being
 

introduced 

o Control of CellForce
 

o Control of new developments in our chemstr
 

(pX1104 at 001; PX11 06 at 040). 

782. Mr. Gilchrst's emai1 to Mr. Heglie concluded that Daramic's attempt to purchase
 

Microporous "is a 'strategic' play on Daramic's par and not based on curent financials 

but the prospects of tang Daramc' s most dangerous competitor out of play." (PXII04 

at 001). 

783. On the evenng of August 9,2007, the same day that he met with Mr. Bryon, Mr. Heglie 

documented the conversation the two had that day, ''while fresh in (his) mid." (pX1105 

at 001). In an emai1 to Mr. Gilchrst, Mr. Heglie reported that Po1ypore's Phillp Bryson 

stated that Daramc management saw "benefits in pricig/market share consolidation. . . . 

" (pX1105 at 001). Mr. Heglie fuer reported that Mr. Bryson said that "one of their 

strategic goals is to get bigger in golf car market, and that we can either battle it out or 

combine to achieve that." (pX1105 at 001). 

121 
784. Daramc was well aware of 
 Micro porous' expansion plan durng the intial discussions 

concerng a potential acquisition. In August 9, 2007 emai1 reporting on his converation 

with Mr. Bryson about a possible acquisition ofMicroporousi Mr. Heglie wrote that he 

"told hi (Mr. Bryson) that we were in the early stages of our investment, had parered 

with management and were not lookig to divest, and are in the midst of executing on our 

own multi-pronged expansion plan for which we have plenty of capital and support." 

(pXII05 at 002). 

785. . In preparing for a follòw-up meeting scheduled for Augut 21, 2007 between Michael 

Gilchrst and Daramic, IGP and Microporous spent the weekend of August 18 and 19, 

working on information sheets for Mr. Gilchrst to present verbally to Daramic. 

(pX0069; PXLL 08; PXLL 09). Accrding to Mr. Heigle, the theme of the discussion 

"obviously being that in 4-5 years we will be competing more head-on with Daramc in 

their key markets and will be a much more diversified business than we are today." 

(pX0069 at 001). Moreover, Mr. Heglie believed that at the meeting Microporous should 

play up our differentiated technology via CellForce and its 

dervatives. I th if we can make Daramic feel that we are not
 

only going to attack their markets, but also do it with proprietar 

technology that has signficant benefits over their existing 

products, it wil make our case that much stronger. 

(PXII08 at 001). 

786. The Augut 20, 2007 revised information sheet that Microporous was to share verbally 

with Daramic included the "Current Situation: MPLP is spending capital to execute a 

thee-phase capacity expansion plan which includes facilty constrction and five (5) new 

Ce1lForce and/or polyethylene process lines." (pXII09 at 002 (emphasis in original)). 

The information sheet also included "End of Year 2010 Financial Estiate:
 

Incremental estimated EBITDA growt from present to End-of- Year 2010: $13,500,000. 

Of the $13,500,000 in incrementa growth, approximately 90% will be replacing Daramic 

existing business." (PXII09 at 002 (emphasis in original)). The incrementa growt that 

Microporous is expecting by 2010 tracks closely to the I ofEBITDA loss 

in 2010 that Daramic reported to the Polyp 
 Directors as the impact on its 

long range plan if it did not acquire Microporous. (PX0203 at 086, in camera). 

ore Board of 


787. The August 20, 2007 revised information sheet also included "Strate2Ic Implications to 

be Considered: 

-Daramc will have the benefit of existing differentiated technologies 

(F1ex-Si1, Ace-Si1,and CellForce). 

- Daramc will have complete control of 100% of the deep-cycle markets. 

-Daramc will have complete control of:;97% of the Industral markets for 

motive power. 

122 
.Daramic wil have complete control of 100% of the industral flooded 

resere power markets.
 

.Daramic wil dissolve the threat ofMPLP in automotive SLI as no new 

competitor will be introduced into the maket with a secured position." 

(PX1109 at 003 (emphasis in original)). 

i) MPLP and Daramic found assignent 
 ,of contracts irelevant 

because customers had no options 

788. In an August 2007 email from Mr. Gilchrst to Mr. Heglie regarding EnerSys's reaction
 

to a potential acquisition of Microporous by Daramc, Mr. Gilchrst wrote: 

EnerSys, as well as others, wil be frstrated by this acquisition.
 

Ou contract with EnerSys alows only for the fact that EnerSys 

canot be compelled to assign the contract to a competitor buying 

MPLP. The reality is that this means basically nothing as there are 

not other choices from which to source industral separators but 

MPLP and Daramc - Amer-Sil is not an option. The reality is that 

everone would be strck with Daramc -like it or not. Ths lack 

of assignent does not dimsh our value to Daramc. 

(pX1104 at 001). 

789. In late Januar 2008, with the closing for the acquisition just a month away, IGP was
 

concered that it needed to make assignents of 
 the Trojan and Daramic contracts postclosing issues, because it feared that Daramic's general counel, Phillp Bryson, would 

refuse to close without knowig what the customers would say. (pXl125 at 001). Jeff 

Webb ofIGP and Mike Gilchrst agreed that Mr. Gilchrst should broach the subject with 

Piere Hauswald because he "will 
 best understad the practical business issue of both 

EnerSys and Trojan havig nowhere else to go and wil probably be the most agreeable to 

dealing with assignents after closing." (pX1125 at 001). Mr. Hauswa1d agreed with
 

this assessment. (PX0079). 

4. The acquisition resulted in anti 
 competitive price increases 

790. "Daramic's acquisition of Micro porous led to price increases." (Simpson, Tr. 3165). 

791. ''Te most straightforward method oflooking to see whether an acquisition or a merger 

led to higher prices is to compare pricing before and pricing after the acquisition, . . . 

(T)here are other factors that also affect price, and one has to control for these factors. . 

." (Simpson, Tr. 3209-3210, in camera).
 

123 
792. The empircal industral organization literatue uses one of 
 two approaches to evaluate 

post merger price increases. (Simpson, Tr. 3210, in camera). Whle econometrcs is 

often used to implement these two approaches, the analysis here did not require the use of 

econometrcs. (Simpson, Tr. 3366-3367, in camera). The fist approach examnes the . 

residual price change after accounting for the other factors that might affect market price. 

(Simpson, Tr. 3210, in camera). The second approach, called the dífference-indifferences approach, uses prices in a market that is free of the 
 effects of the acquisition 

but subject to the same supply and demand shocks as the market where the acquisition 

occured to control for other factors that might affect price in the acquisition market. 

(Simpson, Tr. 3210- 3211, in camera). 

793. Dr. Simpson testified that four factors could lead to higher prices in a market: increasing 

demand for the product, changes in productivity, increasing input costs, and increasing 

market power. (Simpson, Tr. 3212, in camera. Dr. Sim sonnoted ~ 

794. 

4511, in camera). 

795. For example, Daramic's raw materal and energy inputs are based on crde oiL. (PX2068
 

at 001). Several price indices can be used to estiate changes in the price of these raw 

materal and energy inputs. (PX2068 at 001). The U.S. Bureau of Labor Statistics 

publishes price indices for crde petroleu - domestic producton and fuels and related 

products and power on its website. (Sim soli, Tr. 3215-3216, 3217, in camera). 

796. The price index for crude petroleum - domestic production was 252.6 in November 2007; 

ths price index was 150.6 in November 2008. X0033 at 045 (Sim son R ort), in 

camera). Dr. Sim son concluded that t 

l. (Simpson, Tr. 3218, in camera).
 

797. 

124 
798. The Difference in Difference methodology is an empirical approach. (Simpson, Tr. 3473, 

in camera). The cour in Evanston/orthwestern Hospital accepted the Difference in 

Difference methodology Dr. Simpson employed in this case. (Simpson, Tr. 3473, in 

camera). 

799. 

L (Simpson, Tr. 3221, in camera). Daramic was concerned that Crown Battery, 

Douglas Battery, and East Pen Battery would shift their purchases to Microporous. 

(Roe, Tr. 1287-1289; PX0258 at 002). To prevent this, in the Fall of2007, Daramc 

offered these fis long-term contracts under its MP plan that limited their price 

increases in 2009. (Roe, Tr. 1293; PX0258 at 001). Dr. Simpson stated that l 

l. (Simpson, Tr. 3221-3222, in camera; PX0033 at 025, in camera). 

800. 

. Tr. 3464, in camera; PX0033 at 024, 
 in camera). 

801. 

3221-3222, in camera). l
 

L (RX00945 at 097, in camera, (Roe, Tr. 1352-53, in camera)). 

Daramic increased the price for PE battery separators to East Penn by 5 percent in 2009. 

(Roe, Tr. 1222).
 

802. Other fis, which were not offered 10n -ter contracts under the l
 

much larger price increases. t 

125 
f
 

38, in camera; PX0950 at 014, in camera).
 

803. 

1 (Gilespie, Tr. 3001-3002, in camera; see e.g., PX2052 at 003, in camera). 

804. Subsequent to DaraIc's ac uisition ofMPLP, Daramc has f
 

J (Gillespie, Tr. 3002, in camera).
 

805. Daramic's post-acquisition supply proposals to Exide are 

proposals have f 

1 (Gilles ie, Tr. 3047, in camera. Exide's analysis shows 

(Gillespie, Tr. 3047, in camera). Daramic's pricing 


camera). 

806. 

. Tr. 4285, in camera; RX00542). 

807. 

808. Mr. Hauswald sent an email to Mr. McDonald ex 1aini
 

Daramc organzation f 

1 (pX0617; McDonald, Tr. 3885-3886 in camera). 

O. Daramic Used its Enhanced Market Power to Extract Monopoly Rents in 2008
 

and 2009 

809. 

Tr. 4284, in camera). 

126 
810.
 

811. The :fal price increases associated with the Fall 2008 proposed price increases vary by
 

customer; for instance, Daramic did not increase prices for PE batter separators to
 

l 1 (RX00945 at 097, in camera; (Roe, Tr. 1352­

53). Daramic increased the price for PE battery separators to East Penn by 5 percent. 

(Roe, Tr. 1222).
 

812. 

813. rice of both PE batte se artors and Ce1IForce battery
 

814. sarators from Daramic under a contract that took effect l. 

1 (PX0950 at 72, in camera). Daraic increased the price ofPE batter separators to Exide 1 (R00945 at 091, 

in camera; (Giles ie, Tr. 3000, in camera)). Daramic increased the price of _ 

1 (Gillespie, Tr. 3000, in camera). 

815. In 2008, Daramic increased the price of Cell Force batter separators to Bulldog by 10 

percent. (Benjam, Tr. 3521-3522).
 

816. 

127 
VII. Entr into the Batter Separator Markets at Issue would not be Timely, Likely and
 

Sufficient 

A. General
 

817. Dr. Simpson explained tht "Microporous possessed varous tagible and intagible
 

assets that made it the competitor that it was." (Simpson, Tr. 3205, in camera). Dr. 

Simpson testified: "The tagible assets included things such as a product that worked, a
 

techncal workforce that could troubleshoot and innovate, a business force that was 

effective at selling the product. It included a factory in the United States and . . . a soonto-be-opened factory in Europe." (Simpson, Tr. 3205-3206, in camera). Dr. Simpson 

also cited qualification by customers as an addition tangible asset that Microporous 

possessed. (Simpson, Tr. 3206, in camera). Finally, Dr. Simpson noted that 

Micröporous possessed such intangible assets 
 as a favorable reputation with customer 

and the benefit oflearng by doing through having produced the product for a number of
 

years. (Simpson, Tr. 3206, in camera). 

818. Dr. Simpson noted that some of these assets needed to be acquired sequentially - "you 

can't test a product until you develop a product and you can't get learng by doing until 

you're actually producig the product and figuring out though producing it how to make 

it more effciently." (Simpson, Tr. 3206, in camera). Dr. Simpson noted that one could 

assess the overall time requied to obtai these tagible and intangible assets either by
 

suming up the ties to obtain the ones 
 that could not be obtaied simultaeously or by 

examg past instaces where a fi entered a market. (Simpson, Tr. 3207-3208, in 

camera). Dr. Simpson noted that both approaches show that entr would tae at least
 

several years. (Simpson, Tr. 3207-3208, in camera, 3395, in camera). 

819. Learg by doing is present in the manufactue and sale of 
 batter separators. (PX0033 at 010, in camera; PX0131 at 054; PX0265 
 'at 011, in camera; PX0092 at 001; Simpson, 

Tr.3263). Learg-by-doing is accumulated over multiple year. (pX0033 at 010, in 

camera; PX0131 at 054; PX0265 at 011, in camera; PX0092 at 001; Simpson, Tr. 3207, 

in camera, 3213, in camera; PXI715). 

820. Manufactung know how is accumulated over multiple years. (pX0131 at 054, 056, 064; 

PX0092 at 001). 

821. On average it takes an experenced PE line builder approximately 18 months to install 
 a 

PE separator line in 
 an existig facility. (Gaugl, Tr. 4543). But that time may range up 

to 20 months. (Gaugl Tr. 4543). 

822. Dr. Simpson testified that Daramc could fuher extend the tie a fi needs to enter by
 

using exclusive contracts to deprive that firm of sales. (Simpson, Tr. 3209, in camera). 

128 
823. Barers to entr include a significant capital investment, sophisticated production
 

processes, extensive customer relationships, patent protected technology and high 

customer switchig costs. (Gilchrst, Tr. 604-05; RX00741 at 015).
 

824. 

(Kung, Dep. at 100), in camera). 

825. Prior to designg and staring up the line for MiCfoporous in Tennessee, Mr. Gaugl had
 

previously designed and stared up four other PE battery separator lines - two for Global 

. Industres in South Korea; one for Batou in the province of inner Mongolia in China; and 

1 for Jungfer in Jungfer's Feistrtz, Austra facilty. (Gaugl, Tr. 4532-34). By the time 

Mr. Gaugl became responsible for designng the MiCfoporous line in Piney Flats, 

Tenessee, he had seven years of experience setting up PE production lines. (Gaugl, Tr. 

4543). 

826. According to Mr. Gaugl, the eighteen months include: about two months to do the 

generic layout of the lines and the specification of 
 the main equipment; about ten months 

to obtai the long lead tie items; approximately four months to install the equipment;
 

and about two months to star-up and debug the lines. (Gaugl, Tr. 4543-44). 

827. The, on average, 1 8-month project of settng up a PE batter separator line ends at the 24­

hour test fW. (Gaugl, Tr. 4595). In the 24-hour test, the line must demonstrate that it is 

capable of 
 producing in spec materal at a cern throughput. (Gaugl, Tr. 4539). The 

24-hour test is to demonstrate the technical capabilties of the line. It has nothng to do 

with whether one is able to make a commercial product at a competitive cost. (pX0905 

(Gaugl, Dep. at 43-44). 

828. Debuggig of 
 new lines continue well afer the 24-hour test. (Gaugl, Tr. 4594-95). 

Passing the 24-hour test ru does not mean that a new PE line wil operate without 

problems. (Gaugl, Tr. 4595). Problems that occur after the 24-hour test are not always 

obvious at the time of the 24-hour test. (Gaug1, Tr. 4595).
 

B. Building and operatig a PE line is a long and diffcult process 

829. 

(pX0907 (Kung, Dep. at 9-10), in camera). 

830. 

129 
camera). 

831. 

1 (PX0907 (Kung, Dep. at 101), in camera). 

832. 

1 (PX0907 (Kung, Dep. at 98-100), in camera). Mr. Kung is not aware of any unversities that teach students how to develop PE separator 

production lines. (pX0907 (Kung, Dep. at 98-99), in camera). 

833. 

l. (PX0907 (Kung, Dep. at 28-29), in camera). 

834. 

(pX0907 (Kung, Dep. at 46), in camera). 

835. 

l (PX0907 (Kung, Dep. at 132), in 

camera). For example, one PE line at r 1 pieces of equipment. If one
 

machie is not workig, the other.1 ''won't fuction right" and production yields will 

falL. (pX0907 (Kung, Dep. at 134-135), in camera). 

836. Batter separator manufactug involves "ver complicated technology," and the process
 

ofPE production "is one ofthe most complicated processes in (the) membrane industr." 

(pX0907 (Kung, Dep. at 39-40), in camera). Good engieers are ''ver, very important. 

That is the only way to surve" as a PE separator business. (pX0907 (Kung, Dep. at 39). 

A good engineerig team is necessar to reduce PE separator manufactug costs. 

(PX0907 (Kung, Dep. at 39-40), in camera). 

130 
837. 

106, in camera). 

838. The PE production process is a "very narrow field ( of experse) in the industr." Only a 

limited number of people in the world have the necessar experence to oversee a project 

involvig installation of a new PE line. (pX0907 (Kung, Dep. at 102), in camera). 

839. Curently, only two "major players" remain in the world, with respect to PE separator 

manufactug: Daramc and Entek. (PX0907 (Kung, Dep. at 40), in camera). 

I (PX0907 (Kung, Dep. at 39-40), in camera). 

840. 

Dep. at 107), in camera). 

841. An individual PE line with anual production capacity of 

_I to 
 operate profitably. (pX0907 (Kung, Dep. at 47), in camera). "If you don't


have big volume, you are not going to make any profit." (PX0907 (Kung, Dep. at 47), in 

camera). 

842. 

843. Durg the 2008 strke at Daramc's Owensboro, Kentucky manufactug plant, Daramc
 

brought its own management and employees over from Europe to help ru the 

Owensboro manufactung lines. Notwithstandig the use of experenced peronnel to 

ru the production lines, the separators produèed on those lines durng the stre had 

"quaity issues" and the "number of defects rose signficantly." (Gilespie, Tr. 2986­

2992). 

844. For example, durng the Owensboro stre, Daramc provided wavy separator rolls to 

Exide. (Gilespie, Tr. 2987-2988; PX1407). Exide was dissatisfied with the wavy 

separators but had no other qualified source of supply. (Gilespie, Tr. 2988-2990). Exide 

had no option but to use the wavy separators or face shuttng down battery manufactug 

. operations. (Gillespie, Tr. 2989-2990). Using the wavy separators was a "big deal" for 

131 
Exide in ters of manufactuability because the wavy separators caused varations in
 

Exide's productivity level costing Exide more money to run the product. (Gilespie, Tr. 

2988-2989). 

845. Exide leared first hand lessons from DaramIc's Owenboro stre. The strke . . 

demonstrated to Exide that manufactug separators taes more than tung a switch, as 

experenced Daramc employees were unable to ru their own product, with thei own 

designs, without encounterg considerable quality problems. (Gilespie, Tr. 2992-2993). 

846. Dug the Owensboro strie, EnerSys also received poor quality separators from 

Daramic. A lot of materal was out of specifications in a varety of ways. (Burkert, Tr. 

2332). EnerSys had no choice but to accept the poor quality material, since it did not 

know how long it would take Daramc to replace it. (Burkert, Tr. 2332). These qualty 

issues cost EnerSys money in terms of efficiency losses at the plants and wil eventually 

show up in higher waranty returns on batteries. (Burker, Tr. 2339). EnerSys estimates 

that these issues cost it $1,4 milion in costs which was approximately $3.2 millon in 

revenues. (Burkert, Tr. 2339). 

1. MPLP entr into PE at Piney Flats took many years 

847. The development of 
 the CellForce producttook many years. (Gilchrst, Tr. 323). 

CelIForce was initially developed by MiCfoporous in 1995-1996 and the first sam 1es 

were given to Trojan 
 in 1996-1997. (Gilchrst, Tr. 316-17,324-25). 

l (pX 2235 at 004, in camera). Begig in early 2001, MPLP began producing CellForce on a production line at its Piney Flats facility. 

(Gilchrst, Tr. 321-322). 

848. Peter Gaugl built the PE/CellForce line for the former MiCfoporous in Piney Flats, 

Tennessee in 2000. (Gaug1, Tr. 4534). At the time he built the line in Tennessee, Mr. 

Gaugl was employed by Jungfer as a project engieer responsible for designg and 

stag up polyethylene batter separator lines for other companes. (Gaugl Tr. 4532).
 

Mr. Gaugl incorporated the lessons from previous lines he designed and stared up when 

designng and starg up later PE batter separator lines. (Gaugl, Tr. 4587.). 

849. 

at 52-53), in camera). 

850. Even with all his experence, Mr. Gaugl testified that the Piney Flats lie encountered a 

number of problems that he only discovered after he had completed the proj ect and went 

back to Austra. (Gaugl, Tr. 4588, 4595). The Piney Flats line 
 that Gaugl installed had 

132 
machine failures because the ui ment was underdesigned. (Gaugl, Tr. 4590). t.
 

J (PX0905 (Gaugl, Dep. at 40), in camera). In some cases the problems with the Piney Flats line were identified 

months after the 24-hour test ru. (Gaugl, Tr. 4594-95). 

851. 

J (pX0905 (Gaugl, Dep. at 39), in camera). Most ofthe 

problems Mr. Gaug1 encountered at the installation in Piney Flats for Microporous were 

new problems that Mr. Gaug1 had not encountered at any of the other installations he was 

involved in. (Gaugl Tr. 4600).
 

852. For example, the Piney Flats line had electrcal problems that were not obvious at the 

time of 
 the 24-hour test. (Gaugl, Tr. 4595). And while the line was producing good 

materal when it was working, the electrcal failures prevented the line, at times, from 

producing any material at alL. (Gaugl, Tr. 4595). 

853. Some ofthe problems that Mr. Gaugl discovered with the new line installed at Piney 

. Flats occurred afer the one year waranty period given to Microporous by Jungfer. 

(Gaugl, Tr. 4596-97, 4599). 

854. The new line at Piney Flats also encountered problems with the extraction system that 

caused the PE materal to wre, which only appeared after the line was operatig on a 

day-to-day basis, and after the waranty perod. (Gaugl, Tr. 4597, 4599). Wried 

materal is a problem for batter producers. (Gaugl, Tr. 4597). It is also a problem for 

Microporous, because wred PE materal results in scrap materal. (Gaugl, Tr. 4597). 

Scrap materal 
 leads to higher production costs because the PE line has less thoughput. 

(Gaugl, Tr. 4598-99). 

855. The line Mr. Gaugl instaled at Piney Flats had a solvent recovery problem, which he 

leared about two or thee years after operating the new PE line. (G~lUgl, Tr. 4599). 

That resulted in a higher solvent loss than acceptable by the envionmental authorities. 

(Gaugl, Tr. 4599). 

856. 

(pX0905 (Gaugl, Dep. at 43), in camera). 

857. Beginnng in early 2001, Microporous began producing CellForce on the new 

production line at its Piney Flats facility. (Gilchrst, Tr. 321-22). The deteration of 

whether the PE material from a new PE production line is "in-spec"does not include 

133 
testing the separator in a batter. (Gaugl, Tr. 4620). The battery maker makes the 

decision about testing a separator in a batter. (Gaugl, Tr. 4620). 

858. Interested customers tested the product from Microporous's new PE/CellForce line
 

before purchasing commercial quantities. It took more than a year for Hawker/EnerSys, 

the fit CellForce customer to complete its testing and approval process and began
 

buying commercial quantities. Trojan, the second Ce1IForce customer, began buyig 

commercial quantities in 2002. (Gilchrst, Tr. 321-23, 325). 

859. The CellForce approval process at Trojan, the second CellForce customer, was delayed 

by one year due to shrage issues with the product. (Gilchrst, Tr.358-361). Trojan 

began testing CellForce in mid-1999 and qualified it in March 2001, but experienced 

shrnkage issues with the product and stopped orderg it until at least May 2002. Trojan 

began buyig commercial quatities of Cell Force in 2002 for deep-cycle applications. 

(Gilchrst, Tr. 321-323, 325; PX0450 at 005). 

860. Microporous began makg profits on its investment in CellForce in 2004, which was 

thee years after it began selling commercial quantities of Cell Force to Hawker/EnerSys, 

its first customer. (Gilchrst, Tr. 393). 

2. MPLP expansion in Austra took longer than two years as well 

861. Plang for and developing a new separator plant in a new countr takes more than two 

years. The expansion underaken by Microporous was diffcult and requied "a ver
 

signficant effort" by Microporous. (Trevathan, Tr. 3650-3660). Microporous began 

plang to build a new plant in Europe in early 1999. (Gilchrst, Tr. 329-30). 

862. Discussions with Exide concerng Microporous expanding to meet its requirements had 

begu prior to the negotiations with JCI concerng that expansion opportty. 

(Trevathan, Tr. 3609). 

863. "At the time discussions with JCI terated, (Microporous) had had several meetings
 

with Exide, and we had provided a copy of an MOD for signatue, and the ters of the
 

MOD involved expansion to supply suffcient volume or a volume that equated to 

roughy 22 millon square meters, that would require an expanion simlar in size and 

scope as what we were discussing withJCL" (Trevathan, Tr. 3610). 

864. Micròporous's Austran expansion was still ongoing at the tie it was acquired by 

Daramc on Februar 29,2008. (Gilchrst, Tr.300). The acquisition by Daramc did not 

change the tig in which the Austran facility would begi producing product. (Gaugl, 

Tr. 4626). 

865. The expansion in Austra resulted in two additional lines; one for EnerSys, and the 

second for producig mainly automotive separators. (Gaugl, Tr. 4559-60). Each of the 

two lines had approximately 11 millon square meters of capacity. (Gaugl, Tr. 4533; 

134 
building an 11 milion square meter line is 

approximately $9 milion. (Gaugl, Tr. 4547). 

gilchrst, Tr. 312-313). The cost of 


866. The Austran expansion was a greenfield project in which Mr. Gaug1 was responsible for. 

the detailed design of the equipment, the installation and the starp. (Gaugl, Tr. 4536­

37). 

867. The process for manufactug PE separators is "a complicated yet continuous 
 process." 

(PX0611 at 003). The process requires 15 to 18 different pieces of 
 equipment. (Gaugl,

Tr.4610). One canot call a machine supplier and order a complete PE batter separator 

l~e. (Gaugl, Tr. 4610-11).
 

868. Before he ordered the equipment for MiCfoporous's Austran expansion, Mr. Gaugl had
 

to design the specifications of 
 the equipment for the line. (Gaugl, Tr. 4608-09). Mr. 

Gaugl designed the equipment to be installed in Austra in 2005. (Gaugl, Tr. 4609). 

869. For the MiCfoporous expanion in Austra, Mr. Gaugl designed all the connection points 

and controls between the individual machines and drew up blueprits specifyng how the 

varous components would be connected together. (Gaugl, Tr. 4610). 

870. 

PX0905 (Gaugl, Dep. at 128-29), in camera). 

871. One ofthe reasons for choosing Austra for the expansion was so that MiCfoporous could 

hie former Jungfer employees that were familiar with PE batter separator production. 

(Gaugl, Tr. 4606). Hiring skilled employees can shorten the star-up period for a new PE 

battery separator production facilty 
 by six months. (Gaugl, Tr. 4606). Mr. Gaugl 

. testified that hirig skilled employees gave Microporous a jump sta and cut down the 

star-up perod by a few months. (Gaugl, Tr. 4606). 

872. Microporous had ordered the long lead time items for its new lines in December of2006 

including the equipment for a thd PE line. These long lead tie items for a PE line are 

those pieces of equipment that tae from ten to twelve months to arve. (Trevathan, Tr. 

3600). The long lead tie items included the drers, extrders, and the calender systems. 

(Trevathan, Tr. 3600). 

873. The constrction of 
 the plant building began in Februar 2007. Prior to the constrction, 

. MiCfoporous spent 9-10 months obtag approvals for the plant from local goverent
 

authorities and envionmenta agencies. Additionally, it spent tie obtaining financial 

incentives from the Austran goverent. (Gilchrst, Tr. 329-31). After the building was 

completed, the manufactug equipment was installed and tested. In the first week of 

March 2008 (i.e., the week after the acquisition); one of 
 the two production lines became 

operational. (Gilchrst, Tr. 334-335).
 

135 
874. The 
 Austran facility began producing commercial product in March 2008, over two 

years after Microporous began the plans for such an expansion. (Gaugl, Tr. 4603; 

PX0611). However, the Austran facility did not reach optimum effciency and did not 

operate on a regular schedule until June 2008. (Gaugl, Tr. 4603). 

875. In its Austran expansion, Microporous implemented the modifications it made at Piney
 

Flats in order to avoid the problems it had earlier encountered at Piney Flats. (Gaugl, Tr. 

4601). Notwithstanding the modifications it made to the Austran facilty to avoid the 

problems it previously encountered at Piney Flats, the Austran facility had problems 

producing separators as late as September 2008. (Gaugl, Tr. 4622-23). 

876. Mr. Gaugl testified that as of Januar 2009, the Austran facilty was stil going though a 

learg cure: "You go through a learng cure all the tie, so it's continuous 

improvement." (Gaugl, Tr. 4605). According to Mr. Gaugl, PE batter separator 
 plants 

make continuous improvements in effciency and quality. (Gaug1, Tr. 4605). APE 

battery separator producer that has gone through several steps of continuous 

improvement wil be definitely better than a firm just starg up into the production of 

PE batter separators. (Gaugl, Tr. 4605). 

3. Development of a new separator is a lengty, and not always successful 

process 

877. Daramic development ofHD took much longer than two year. (pX0950 at 064). 

Daramic began testing different additives for its new deep-cycle separator as early as 

1999. (Wear, Tr. 4777-4778). But it was not unti12005 that Daramic made its fist 

commercial sales. (Wear, Tr. 4778). 

878. In the late 1990s, U.S. Battery had discussions with Daramic about Daramic developing
 

a deep-cycle battery separator. (Qureshi, Tr. 2014-15). U.S. Batter engaged Daramic in 

these discussions because U.s. Battery was looking for a lower cost separator and there 

was no other competition to Microporous. (Qureshi, Tr. 2017-18). Nawaz Queshi 

helped Daramc develop a deep-cycle batter separator. (Queshi, Tr. 2015). He gave 

some techncal suggestions, and built test battenes for Daramic that contaed Daramc 

separators and F1ex-Si1 separators, which both Daramc and U.S. Batter tested at their 

own facilities. (Queshi, Tr. 2015-16, 2017-18). 

879. In its interal documents, Daramic has recognzed U.S. Batter as "a key development
 

parer in approving both DC and HD separators." (pX0326 at 001; see also PX0681 at 

001 ("a valuable parer in the qualification ofDaramc products in the past- notably 

Daramic Dè and Daramic HD.") 

880. Amer-Si1 spent more than five years attempting to develop a new motive separator only 

to see the project faiL. Amer-Si1 attempted to develop a PVC separator known as 

Amers1eeve that potentially could be used in sleeve form. (PX0916 (Dauwe, Dep. at 46­

136 
47)). 

_l (PX0916 (Dauwe, Dep. at 157-158)~in camera). Despite the many year of
 

effort, the Amersleeve project was not a success. Amer-Si1 discontiued work on the 

Amers1eeve project in 2008 because the separator did not work and no customers were 

interested in purchasing it. (PX0916 (Dauwe, Dep. at 47)). 

C. Customer switching times are barers to entr
 

1. General
 

881. The testing requirements to gain customer approvals add signficantly to the amount of 

tie it takes to enter any of 
 the markets for PE s arators. In 2006, Mr. Hauswald 

expressed t 

882. Batter manufactuers generally provide customers with a waranty against materal, 

workmanship and manufactung defects for a period oftime, e.g., five years. If a batter 

has a bad component such as a separator, the waranty may require the manufactuer to 

replace the defective batter with a new battery. (Benjamin, Tr. 3505).
 

883. Typically, separator customers do not purchase a new separator product until they have
 

tested, validated and approved the separator. Mr. Seiber in an emai1 to Mr. Whear said 

"skipping qualification steps always makes me a little nerVous; in par because I have had 

the unpleasant experience of approving quality claims that amounted to hundreds of . thousands of dollars." (PX0320). .
 

884. Even when a batter manufactuer switches the backweb thckness of a separator, new 

testing and qualfication is required. (Leister, Tr. 4025). 

885. Based on Microporous's experence in selling its Ce1IForce product, ths interal 

customer process can take four to five years. (Gilchrst, Tr. 618). 

886. At EnerSys the process for testing and validating a new separator product involves 

prelimar materal tests of separator samples, which are tyically made in a laboratory, 

and fial tests of production samples in actual batteres. The prelimar tests involve 

testing the separator materal in puncte, shrnkage and electrcal resistance tests, as well 

as analyzng its britteness and composition, i.e., parcularly oiL. (Gagge, Tr. 2484-85, 2487). If the separator samples pass these prelimiar tests, EnerSys will request the 

potential supplier to provide production samples, i.e., separators made on the supplier's 

production line. (Gagge, Tr. 2484-86).
 

137 
887. After receiving production samples from a potential separator supplier, EnerSys builds 

test batteres with the new separators. These test batteres undergo performance and 

batter life tests. The performance tests essentially analyze whether the batter with the
 

new separator will generate the electrcal curent specified for the batter. The batter
 

life tests are time-consuming because they are designed to deterine whether the battery 

will perorm well for the duration of the battery's waranty perod. These tests involve 

placig the test batteres in a box which has an elevated temperatue. (Gagge, Tr. 2484­

2487,2488-89). The elevated temperatue helps age the battery. (Gagge, Tr. 2489). 

888. Qualifyg a separator to meet the performance specifications is not the only step that is 

required before the separator can be sold in commercial batteres. (Gillespie, Tr. 2935­

2936). After a separator is qualified, a batter manufactuer must make sure the separator 

is ruable in the batter manufactug facilities. (Gilespie, Tr. 2936; see also Gagge, 

Tr. 2488). Use of a new separator requires the batter manufactuer to understad and 

tweak the battery manufactung machies to be able to ru a different tye of product. 

(Gilespie, Tr. 2936). 

i) Testing for motive and UPS
 

889. Testig for traction batteries takes up to 3 years. (Wear, Tr. 4798; PX0568; see also 

Whear, Tr. 4813, in camera; PX0564, in camera). 

890. Testing for motive power and stationar is a very long-ter process that takes about two 

years to complete. (Wear, Tr. 4801, (PX0842 "Testig industral cells is a ver long 

ter process (~2 years). . .")). When C&D began testing HD for use in motive batteres, 

Daramic understood that it would take two year to qualify the separator at C&D. 

(pX0806 at 003). 

891. Motive batter separators undergo cycle testing for a perod of2.5 years atEnerSys. 

thee 

years, a six-month development cycle for production tooling, et cetera, and then the two 

(Gagge, Tr. 2490). From beginnng to end the testing process takes "upwards of 


and a half years of 
 testing would follow." (Gagge, Tr. 2492). 

892. Even though EnerSys had experience with CellForce though its acquisition of 
 Hawker, it 

still took a long time to approve CellForce in the remainder ofEnerSys's facilties. (Axt, 

Tr. 2127-28). Mr. Axt explained that this is because 

each plant uses different profiles of polyethylene or of CellF orce, so you 

just -- there's a long development perod and approval perod to get 

qualified. It's just not because you use the product in one facility it's. 

already approved in another. 

(Axt, Tr. 2128). 

138 
a. PVC testing takes two years 

893. Amer-Sil's PVC separators are not currently 
 being tested by any batter manufactuer for 

use in North Amercan batter manufactug plants. 
 (PX0916 (Dauwe, Dep. at 132)). If a North American batter manufactuer decided to begi testing Amer-Sil's PVC 

separators for use in Nort Amerca, the separators would not be in use for at least two 

years time as testing and qualification of Amer-Sil's PVC separators typically takes two 

year or longer. (PX0916 (Dauwe, Dep. at 163-164))
 

894. If _l obtains the 
 appropriate calender roll, it would tae _l
 

before EnerSys could begin ordering product from them. (Burker, Tr. 2362, in camera; 

Gagge, Tr. 2498-2499, in camera). It is not possible to accelerate the testig. (Gagge, 

Tr. 2508-2509, in camera). EnerSys is curently in discussions with l 

(Gagge, Tr. 2515-16, in camera). If
 

l could actuly supply EnerSys with product. (Burkert,
 

Tr. 2360, in camera; see also Gagge, Tr. 2500, in camera). 

895. Exide expects testig of 
 motive power and stationar separators to take a minimum of 

two years. (Gilespie, Tr. 2973-2974; RX00013 at 009; PX1090 at 004 (Exide timeline 

indicatig a 26 month timeframefor industral product validation and testig). 

2. Deep-cycle testing
 

896. Life-cycle tests are conducted a few different ways. The Battery Council Interational 

sets testig standards for the rate of discharge. Life-cycle testing in the lab involves 

putting the batter on a discharge machie in a laboratory that rus automatically so that 

the batteres cycle every day. (Godber, Tr. 159-60). Because you barely get more than a 

cycle in a given day, it taes a while to for the batter to reach the end of its life of six or 

seven hundred cycles. (Godber, Tr. 159). 

897. Testig and qualification of deep-cycle batter separators tyically taes beteen 18 and 

24 months. (Gillespie, Tr. 2934). Exide manufactues deep-cycle batteres at its Salina 

and Bristol manufactug plants. (Gilespie, Tr. 2999, in camera). Qualification of 

Daramc's HD separators took; well over a year for use Exide's Salina facility. (Gilespie, 

Tr.2935). HD separators only received approval a year or so later for use in Exide's 

Bristol manufactrig facilty. (Gilespie, Tr. 2935). 

898. Trojan tests separators for use in their batteres in order to understand the life-cycle 

characterstics due to origial equipment waranty requirements and to protect their 

brand. (Godber,Tr. 158).
 

139 
899. In addition to life-cycle testing in the lab, Trojan wil conduct field testing. (Godber, Tr. . 

159). In field testing, Trojan wil build a batter with a parcular separator and then will
 

go to a golf course and put the batteries in the golf cars at the course and follow the 

batteries durng the course of their life. . (Godber, Tr. 160). A field test for a separator 

generally is a two-year time frame to understand how the battery is going to perorm in 

the field. (Godber, Tr. 163). On a severe hilly course, field testig may be done in 18 

months because the discharge of the battery wil be faster and the battery wil degrade 

sooner. (Godber, Tr. 163). 

900. Because field testing is expensive, Trojan does not typically ru field testig aid 

laboratory testing concurently. (Godber, Tr. 164). Laboratory testing is tyically 

perormed before field testig to see if the laboratory numbers are,good enough to mert 

the more expensive field testing. (Godber, Tr. 164). 

901. Trojan began testing the CellForce separator in June of 1999 for approval for a lower 

capacity golf car, the T -605, and for a marne batter line. (Godber, Tr. 166). These two 

product lines were for aftenarket products. (Godber, Tr. 166). The field test was staed 

after the life-cycle testig began, once Trojan began seeing good results in the lab. The , 

qualification process finished in March of2001. (Godber, Tr. 166-67). 

902. Notwthstanding the extensive testing on CellForce, Trojan ran into a shrage problem 

., with CellForce on the mare product lines, shortly after it began sellng the product. 

(Godber, Tr. 167-68). Trojan had not sold many batteries at the point it discovered the 

problem and decided to pull products with Ce1IForce separators from the market. 

(Godber, Tr. 168). MiCfoporous was able to resolve the shrnkage problem, and after 

some additional testing, Trojan reapproved the CellForce for the mare line in 2003. 

(Godber, Tr. 168-69). 

903. Trojan has tested CellForce for afterarket floor scrbber, scissor lift and boom lift 

batteres; the testing for those applications ran around 20 to 22 month. (Godber, Tr. 

169-70). 

904. Daramic's decision to switch HD production to Piney Flats from Owensboro was made in
 

the spring of2008. Yet qualification ofHD materal made in Piney Flats took until the 

sprig of2009 to be achieved. (Trevathan, Tr. 3715-16). Even with the trained work 

force that was sent from Owensboro to train the Piney Flats staff how to establish the line 

and make the product the qualification took a year. (Trevathan, Tr. 3716). 

3. SLI testing
 

905. Exide's testing ofMPLP's PE SLI separators was scheduled to take 18-24 months to 

complete. (Gilespie, Tr. 2973; RX00013 at 009 (test sequence for automotive separators 

"expected to tae 9 months for life cycle and 1 year for field test"); PX1090). 

140 
i) Daramc documents recogne long testing time
 

906. While Daramic was actively trg to grow HD's market share, Daramic also understood
 

that battery manufactuers would requie testing and qualification of the new separator 

before HD was widely accepted for commercial use. (PX0262 at 003). Daramic 

expected customer qualification of HD for use in deep-cycle batteries to take 18 months 

of testig or longer. (PX0262 at 003).
 

907. Daramc recognzed that testing separators in deep-cycle applications at Trojan would 

take approximately two years. In a May 24, 2006 emai1 responding to the anouncement 

that Trojan was adding another de -c cle batte 1ant, Piere Hauswald wrote Bob
 

Toth, t 

908. 

) for Daramicin sales to large customers. (R01497 at 001, in camera). According to Mr. Roe; the 
 costs associated with switchig suppliers 

is "much highet' for customers purchasing industral (motive or stationar) separators 

than it is for customer purchasing automotive separators. (PX0482 at 003). 

D. The PE separator manufactng process is complicated and requires special know 

how 

909. The equipment needed to manufactue polyethylene separators includes an extrder, 

extractor, calender rolls, mixer, drer and bulk handling equipment. (Gilchrst, Tr. 591­

593). 

910. The manufactug process for separators is highy automated. For example, 

Microporous has only two or thee people monitorig the equipment on each of its 

production lines. (Gilchrst, Tr. 601-602). Consequently, labor is not a huge constituent 

of the cost of makng a batter separator. (Gilchrst, Tr. 601). 

911. Because different product formulas require different conditions of 
 the die which lead to 

extraction, the employees working on the production lines for separators have unque 

skills. To meet customer product specifications, the employees on the lines must know 

141 
how to set the proper conditions of pressure, temperatue and speed on the equipment. 

(Gilchrst, Tr. 394-395). 

912. Manufactuers of 
 separators have special know-how obtained in a 1earg-by-doing 

fashion. For example, Microporous "leared a lot oflessons, painfu11essons, expensive 

lessons" when intially manufactung CellForce at Piney Flats. These "expensive 

lessons" were incorporated into its new production lines in Feistrtz. (Gilchrst, Tr. 395­

396). 

913. Microporous's manufactug lines for CellForce use PE technology that it obtaied from 

Jungfer. (Gilchrst, Tr. 563). Depending on the type of calender rolls attached to the 

line, these manufactg lines can produce separators for either SLI applications or 

industral applications. (Gilchrst, Tr. 562, 569-570).
 

1. Lack of experence is a barer to entr:
 

914. Customers are unikely to sponsor en by firms without appropriate flooded lead acid 

separator experence. f 

camera). 

915. f L (PX0265 at 012, in camera). EnerSys believes that
 

a viable supplier needs to be a reputable company with fiancial stability, techncal 

inovation, research capabilties, customer service and support. (Gagge, Tr. 2484).
 

916. Reputation is an important component 
 for entr into any Nort Amercan PE market. 

EnerSys was willing to tr MPLP's Ce1IForce product only after acquirng Hawker and 

learg from its European operations about MPLP's reputation and stellar customer
 

focus. (Axt, Tr. 2127).
 

917. Customer care about their separator suppliers' reputations for financial stability, 

technical experse, manufactug capabilties, and leadership capabilities. (Axt, Tr. 

2107-2108). Techncal experse is importt for inovation, weekly support, and 

monthly support. (Axt, Tr. 2110; see also Hauswald, Tr. 784-785, in camera).. 

918. MPLP had a very good reputation in the marketplace. (Gillespie, Tr. 3127). 

E. Entek is not likely to enter the deep-cycle, motive or UPS markets
 

142 
919. Dr. Simpson noted that _1 does not curently make deep-cycle or motive batter 

separators and thus would need f 1 before it could have a signficant effect 

on these markets as a supplier. (Simpson, Tr. 3195-3196, in camera). Specifically, Dr. 

Simpson explained that to enter the deep-cycle batter separator market at a level 

suffcient to restore the pre-acquisition competitive environment, _1 would need to 

develop a reliable product, modify its production line, get qualified by customers, and 

then gain the learng by doing necessar to be effcient. (Simpson, Tr. 3408, in 

camera). 

920. Entek is unikely to develop a separator for the deepcycle market becauseit was 

unsuccessful in developing a competitive product for this market in 1996. (Gilchrst, Tr. 

363). Moreover, Entek's separators are based 
 on polyethylene materal which is iner and 

has no effect on inhbiting the antimony transfer process. (Gilchrst, Tr. 365, 389-390). 

921. Entek is unikely to develop separators for motive batteries because in the past it has 

refused to supply separators for this application despite a request to do so by Bulldog 

Batteres. (Benjamin, Tr. 3519). Based on its conversation with Entek about a supply
 

relationship, Bulldog Batteres concluded that Entek was simply not interested in 

supplyig industral battery applications with separators. After Entek told Bulldog 

Batteries that it was "not interested in gettng into the industraL. We don't want to 

manufactue the material that you're using, and we're quite happy with the market that 

we have. So, we're going to stay there." Bullodog took Entek off its supplier list and no 

longer pursued them as a supplier of motive batter separators. (Benjamin, Tr. 3520­

3521). Entek has never approached Bulldog Battey in al effort to supply its motive 

separator needs. (Benjamin, Tr. 3521). 

922. Entek has chosen to focus,sole1y on the SLI separator market. Its only industral 

separators are UPS gel-type separators, a legacy product made solely for C&D Dynasty. 

(Gilchrst, Tr. 429-30). Entek does not have a signficant position in the motive market. 

(pX0402 at 009-011). 

923. Exide undertands that _1 does not curently manufactue motive power or
 

stationar separators. (Gilespie, Tr. 3037, in camera). Mr. Giles ie testified that he 

believed that l 

1 (Gillespie,Tr. 3037-3038, in camera). 

924. In the past, Exide repeatedly asked f_1 for quotations on Exide's industral (motive 

and stationar) separator business, and "the answer 
 was continually, no, no, no." 

(Gilespie, Tr. 3129, in camera). Ony in November 2008 did, f 

1 (Gillespie, Tr. 3129, ili camera;Weers, Tr. 4509, in camera; PX1902 at 001, in camera). According to Mr. Gilespie, from Exide's 

143 
perspective, the 

(Gillespie, Tr. 3129-3130, in camera). Exide does not believe that is 

enthusiastic about manufacturing industrial separators. (Gillespie, Tr. 3040, in camera). 

925. To date, {_} has not provided Exide a pricing estimate for potential supply of motive 

. Tr. . W Tr. 4507-4509, in 

The fact that 

for Exide. (Gillespie, Tr. 3130,3136-3137, in 

926. 

927. {_} has also indicated to Exide that there will be an issue of black scum with any 

industrial (motive or stationary) separators that {_} might provide to Exide. 

(Gillespie, Tr. 3129-3130, in camera; PX1902 at 001, in camera). This is a "big issue" 

for Exide, because regardless of the pricing, without a resolution to the black scum issue 

"I can't put the separator in the batteries". (Gillespie, Tr. 3130, 3134-3135, in camera). 

Exide does not have black scum issues on the separators that it purchases from Daramic, 

so this would only be an issue if Exide tried to purchase industrial separators from 

{_} (Gillespie, Tr. 3136, in camera). 

928. Exide will {. 

} In 

929. EnerSys has continued to seek an alternative to Daramic since the 

February of2008. Mr. Burkert met a ve of 

BCI Conference in 2008, and provided 

in hopes of engaging discussions. (Burkert, Tr. 2351-52, in camera). 

144 
EnerSys never received a t J (Burker, Tr. 2352, in


camera). When Mr. Burkert approached an t J representative in another industr conference in Europe, he got the impression t J wanted no par of
 him. (Burker,

Tr. 2353, in camera). 

930. Mr. Burkert felt that while _l was polite to him, it was not interested in doing 

business with EnerSys. (Burkert, Tr. 2353, in camera; see also Gagge, Tr. 2500-2501, in 

camera). As a result of 
 these conversations, EnerSys wil not be placing any orders with 

t_J (Burkert, Tr. 2357, in camera).
 

931. If EnerSys received preproduction samples of _J materal today, it would do ._
 

-l preliminar testing. (Gagge, Tr. 2522, in camera). If
 those samples worked EnerSys would get production sam 1es and test those on the motive side for _ 

J (Gagge, Tr. 2522, in camera). 

932. JCI pursued discussions with Entek about
 

t
 

r
 

camera).
 

F. Amer-Si1 is unikely to enter any of the Nort Amercan markets for PE or deep-


cycle separators 

933. 

(Dauwe, Dep. at 94), in camera). 

934. Mr. Burkert met with _J at the Bei Conference in 2008. (Buriært, Tr. 2356, in 

camera). Mr. Burkert met with _J represen~ain at thei headquaer in 

t J and came away with the belief that _J had no intention of
 

enterng the market for PE separators. (Burkert, Tr. 2355-56, in c~s a result of
 

these conversations, EnerSys will not be placing any order with _J (Burkert,
 

Tr. 2357, in camera). 

145 
G. Regional separator manufactuers are not likely to begin supplying batter 

manufactuers in Nort Amerca 

935. Exide believes that supply from t L would car signficant risks. These
 

companes are unable to provide the quality, reliability and technology that Exide 

requires from a separator supplier. For example, t 

L which is "pretty bad" according to Mr. Gillespie. (Gilespie, Tr.3027, in
 

camera; RX00306 at 004, in camera). t L have the
 

technological capabilities to manuface six millimeter backweb separators. The ver 

fact that these companies lack the technological capabilties to produce the most common 

PE SLI separators is of concern to Exide. (Gilespie; Tr. 3025-3026, in camera). 

Additionally, Mr. Gillespie's experence shows that it is ver risky to attempt to 

(Gilespie, Tr. 3025-3026, in camera). 

936. 

H. None of 
 the _l manufactuers will be a signficant supplier to Exide in the 

next two years 

937. Exide has "extensively look around the world" for alterative supplier of automotive 

batter separators. (Gilespie, Tr. 2962). Exide's search for alterate suppliers has
 

included the hiring of a third pary to help fid potential suppliers in Asia, issuig a 

request for proposal (RFP), and trps by Exide personnel around the world. (Gillespie, 

Tr. 2962, 3022-3023, in camera). 

938. Exide identified the _l most promising Asian su her that could potentially supply
 

PE SLI separators to Exide in the futue; t L (Gillespie, Tr.
 

3023, 3041, in camera). Exide has conducted some preliminar tests on swatches of 

material produced by the _l Asian suppliers it identified as potential suppliers. 

Based on that testing, Exide narowed the list down to _l (Gilespie, Tr. 3023, in
 

camera). 

939. Exide has not found any manufactuer in t L that could make
 

the motive and stationar separators that Exide needs for its flooded lead acid batteres. 

(Gilespie, Tr. 3041, 3049, in camera). 

146 
940. 

builds. (Gilespie, Tr. 3023-3024, in camera). Exide has to l _
 

l fo~er


_l samples before it could determine whether the material would work for
 

Exide, expecting it L Exide has some indication on whether it
 

could be put into production. (Gillespie, Tr. 3024, 3041, in camera). 

941.	 Even if the _l samples qualify for use at Exide, there are many other issues that 

Exide would have to overcome before using l L Gil sie, Tr. 3024­

3025, in camera). l 

(Gillepsie, Tr. 3024-3025, in camera). 

942. Exide is also reluctant to bu 

considers it a risk that l 

L Exide considers l 

L as adding risk to the supply chain. (Gillespie, Tr. 3024-3025, in camera). 

943. Additionally, Exide is concerned that l 

L (Gilespie, Tr. 3024-3025, in camera). 

944. Exide does not believe 
 that it wil be buying l 

_l in the next two years. (Gilespie, Tr. 3025, in camera)..
 

945. 

L for supply of 
 separators. (Gillespie, Tr. 3029,:3031, in camera).

BFR will not be a supplier to EnerSys in the next two years 

946.	 Dr. Simpson explained that _l would not be considered a market paricipant in any 

of the four Nort Amercan markets at issue. (Simpson, Tr. 3461-3462, in camera). 

947.	 Mr. Hall has had some converations about the possibility ofBFR su~ 

power separators to all, Tr. 2849-2850, in camera). t_
 

l X0907 ung, Dep. at 262), in camera). t l; such
 

discussions wil not tae place until a separator has been qualified. (Hall, Tr. 2881-2882, 

in camera; PX0907 Kung, D . at 291, in camera . However, Mr. Hall has 

communcated to l 

147 
948. 

949. 

L (Axt, Tr. 2218, in camera; see also Gagge, Tr. 2499, in camera). Even if L had the appropriate calender roll, it 

would still be L before _l could begin orderg product
 

from them. (Burkert, Tr. 2362, in camera; Gagge, Tr. 2498-2499, in camera). _ 

L (Gagge, Tr. 2508-2509, in camera). 

950. BFR has not had l L (Hall, Tr. 2880­

2881, in camera). BFR has neither designed nor manufactued a PE/Rubber separator. 

(PX0907 (Kung, Dep. at 283, in camera)). 

1. Epoch and Baotou are less likely to supply to Exide in Nort Amerca than BFR
 

951. In DaramIc's discussions with _l Daramic leared th~l was having 

financial diffculties. Daramc had multiple meetings with -l discuss possible
 

business ventues. (pX0903 (Thuet, Dep. at 58-60, in camera). After the most recent 

meetings between Daramc and l-i in l L Daramc felt that -ll
 

was chasing Daramic in order to get into a parership with Daramc because l-


was having financial issues. (Thuet, Tr. 4413-414, in camera). . 

952. 

. at 113, 123),in camera). l 

L (pX0907 (Kung, Dep. at 132), in camera). 

148 
953. Exide believes that supply from l J would car significant risks.
 

(Gilespie, Tr. 3027, in camera; RX00306 at 004, in camera). These companes are 

unable to provide the qualty, reliability and technology that Exide requires from a 

separator supplier. (Gilespie, Tr. 3027, in camera; RX00306 at 004,in camera). For example, l J which is ''prett bad" according

to Mr. Gillespie. (Gilespie, Tr. 3027, in camera; RX00306 at 004, in camera). t_ 

J have the technological capabilities to manufactue six milimeter backweb separators. The ver fact that these companes lack the technological 

. capabilities to produce the most common PE SLI separators is of concer to Exide. 

(Gilespie, Tr. 3025-3026, in camera). Additionally, 
 Mr. Gilespie's experence shows

. that it is very risky to attempt to l 

J (Gilespie, Tr. 3025-3026, in camera).
 

J. NSG is not an option for supply ofPE separators to customers in Nort Amerca 

954. NSG is a separator manufacter located in Japan. (Gillespie, Tr. 2963). In July 2006, 

NSG expressed interest in supplyig PE separators to Exide, noting that the opportty 

was "most interestig to NSG, and be assued we wil tae ths most serously."
 

(PX1073 at 001). 

955. Subsequently, NSG refused to quote on Exide's RFP due ofNSG's new relationship with 

Daramc, despite previous assurances that it wanted to bid on Exide's PE business. 

(Gilespie, Tr. 2963-2964; PX1079 at 001-003). In July 2007, NSG informed Exide that 

it had sold the majority interest of its Tianjin, China facility to Daramic, and suggested 

that Exide contact Daramic for a quote on supply 
 from Tianjin because according to 

NSG, "Daramic has the management authority to decide product mix and customer 

pricing." (pX1079 at 003). NSG also informed Exide that it did not have the capacity to 

serce new PE separator customers from its manufactug facility in Japan. (pX1079 at 

003). Subsequently, NSG has not approached Exide about possible supply ofPE 

separators. (Gillespie, Tr. 2965). 

K. Asian entr would not be suffcient to replace MPLP
 

. 956. Mr. Gilchrst explaied, aside froni Daramic and Entek, there were no other competitors
 

that "could actually do what Microporous was doing in SLI" agaist Daramic and Entek. 

(Gilchrst, Tr. 423-434). 

957. Asian manufactuers do not have the same engieerng know how gained from learg
 

and doing as Nort Amercan companes like Daramic and Microporous. l 

149 
PX0217 at 2-3, in camera (Trip report descrbing l -)). 

958. No Asian suppliers have ever supplied PE separators to Nort Amerca. (Roe, Tr. 1236). 

959. BFR and Global Industral are regional separator firms that have not aspired to become a 

global separator manufactuer on the order of magntude of Daramic, Entek or 

Microporous. (Gilchrst, Tr. 308,424). 

960. None of the l_ separator suppliers that Exide has evaluated are on equal footing
 

competitively with what Exide knew MPLP to be before it was acquired by Daramc. 

. (Gilespie, Tr. 3028-3030, in camera). MPLP was better situted than all of 
 the potential

su liers in ters of 

(Gillespie, Tr. 3028-3036, in camera). 

961. Accordig to Exide, _ is not on equal footing with MPLP. (Gillespie, Tr. 3033­

3034, in camera). 

962. The lengt of 
 the supply chai is an important reason why MPLP was advantaged over 

any Asian suppliers. A lengty supply chain involves risk. With MPLP's US facility 

being only a "stone's thow" from Exide Bristol facilty, MPLP was capable of 
 providing 

a ver short supply chain, thereby signficantly reducing risks from supply disrptions. 

(Gillespie, Tr. 3029-3036, in camera). MPLP was also capable of 
 providing technical support in a matter of 
 hours to address any issues that might arse in real tie. When 

Exide contemplates local supply, disruptions are dealt with in "hours and days" as 

opposed to months when dealing with a supply chain stretchig halfway around the 

world. Ths potentially amounts to 
 the difference between shutting a plant down for an 

hour or for a month. (Gillespie, Tr. 3035-3036, in camera). 

963. Exide typically compensates for the risk of a lengthy supply chain by seeking cost 

savings from offshore suppliers. Exide has a general rule that it wil only outsource 

supply offshore if it ca get the outsourced product for than local
 

supply. The l_ compensates Exide for the "risk or headache that
 

. you have to g~g that supply chain." (Gilespie, Tr. 3036, in 

camera). The Asian suppliers t 

964. MPLP had some of 
 the lowest defect rates on thei s arators in contrast to the _ 

(Gilespie, Tr. 

965. The from a manufactug


operations perpectve. It has bee Mr. Gillespie's experence that the _ 

150 
than US separator manufacturers. 

(Gillespie, Tr. 3031-3032, in camera). According to Mr. Gilespie, the majority of 

separators manufactued in Asia are manufactured for the Chinese market, l 

966. EnerSys does not consider l- to be on the same footing as MPLP was prior to the
 

acquisition. As Mr. Burkert testified, "I th they're both shaky at best as far as 

options." (Burkert, Tr. 2363, in camera). In addition, l. is not a domestic supplier,
 

which raises concers about having stock, interptions in shipments, weather delays and
 

other interptions in sUIJP1y. (Burkert, Tr. 2365, in camera).
 

967. Asian firms do not compare favorably to the former MiCfoporous~
 

EnerSys (Axt, Tr.
 (Axt, Tr. 2221, in camera). Microporous's motive product was approved at

2222, in camera). Because are located in _ techncal visits are 

more difficult and time consuming, as well as additional transportation costs and times, 

duties, and extra invento . Axt Tr. 2223 in camera . 

968. 

969. EnerSys believes that an importt engineer at is likely to 

retie soon. (Burkert, Tr. 2363, in camera). L has the experise in makng 

separators and settg up lines. ti is a risky supplier without _ because 

without hi there will be nobody of his caliber to handle techncii issues. (Burkert, Tr. 2364, in camera). . 

970. EnerSys does not consider l_ to be on the same footing as MPLP was prior to the 

acquisition. As Mr. Burkert"'ed, "1 th they are shaky at best as far as options." 

(Burkert, Tr. 2363,2366, in camera). In addition, l_ has languge barer issues, 

the same logistics concern, is unable even to estimate what its prices will be, and is 

unable to locate a manufactuer of calender rolls on its own. (Burkert, Tr. 2366, in 

camera). 

971. EnerSys does not believe that there is anybody who is on an equal footig with the preacquisition MiCfoporous or Daraic today, and there wil not be any entity that will be 

the equivalent of 
 the pre-acquisition MiCfoporous or Daraic two years from now. 

Burkert, Tr. 2366-67, in camera). 

151 
972. In general, Asian PE producers to serice batter manufactuers in
 

Europe and Nort America. (PX0907 (Kung, Dep. at 87), in camera). l
 

(PX0907 (Kung, Dep. at 87, in camera)). 

973. Scale economies are a "major issue" that differentiates 

. With 
 mass production on its "very big" PE lines, l
 

(Kung, Dep. at 189, in camera)).
 

974. 

975. 

(pX0907 (Kung, Dep. at 110, in camera)). In addition, l was not
 

organzed, and it had an old PE line in a dirt facili. X0907 (Kung, Dep. at 110, in 

camera)). Mr. Kung has bee to
 

(pX0907 (Kung, Dep. at 119, in camera)). 

976. several years ago about purchasing them. (pX0907
 

such time, Mr. Kung examined their fiancials and 

saw they were . (pX0907 (Kung, Dep. at 119-20, in camera)). 

(Kung, Dep. at 120, in camera)). At 


977. l (PX0907 (Kung, Dep. at 42~ in
 

camera)). l_ does not have suffcient quantity and quality on its engineerng team
 

to meet the stadards of Amercan PE separator companes. (pX0907 (Kung, Dêp. at 49­

50, in camera)). 

978. Mr. Kung knows a lot about the capabilities and operations of l_. (pX0907 (Kung, 

Dep. at 51-53, 279, in camera)l. He built their PE line, and he maitais contact with the 

engieers that he traied at 

Dep. at 42-43,51-53, in camera)). 

979. 

(pX0907 (Kung, Dep. at 278, in camera)). 

980. Most Chese batter manufactuers are "ver smal" and their PE separator order 

volumes are similarly very small. (PX0907 (Kung dep. at 69-71, in camera)). The 

manufactug costs involved in serg smaller customers and makng multiple tooling
 

152 
changes make it disadvantageous for a new entrant to constrct a high-volume (e.g., 20 

milion sq. meter anual production capacity) PE line in China. (pX0907 (Kung, Dep. at 

116-117, in camera)). 

981. Asian manufactuers of separators for SLI batteres supply their local markets only. 

(Gilchrst, Tr. 307-08,430). Man of their roduction lines i.e., those designed by
 James Kung) are . (Gilchrst, Tr.

390-91,505, in camera. 

982. EnerSys made several attempts to contact a company 

by mail, emai1, and phone, to deterine its interest in supplyig EnerSys, but never 

received any response from the company. (Burkert, Tr. 2359, in camera). EnerSys wil 

not be doing business with _ (Burker, Tr. 2360, in camera). 

1. 

983. 

2771-2776, in camera). 

984. 

985. j 

f 

j 

f 

Tr. 2772, in camera). 

986. 

153 
(Hall, Tr. 2776-2777, in camera). 

i) Daramic documents recognze that barers to entr exist
 

987. 

9S8. Mr. Graff, chairan of 
 the board of Polyp ore, was a member of the Warburg Pincus team 

that conducted the due di1i ence to deterine whether to invest in Pol ore. Graff Tr.
 

4851 . 

(Graff Tr. 4900; PX0746 at 002, in camera). 

989. In order to get money to fud the acquisition of 
 Polyp ore, Mr. Graff and other managig 

directors from Warburg Pincus went to bans and varous credit rating agencies such 
 as 

Stadard & Poors and Moodys. (Graff Tr. 4900-01, in camera). At the presentations 

made to the credit rating agencies, Mr. Graff and the other Warburg directors are 

attbuted with providing the "Sponsor Remarks and Investment Considerations" where
 

they stated that "High barers to entr due to signficant upfront capital costs, 

industr/techncal experse, and high customer switching costs" are among the
 

"( fJavorab1e market dynamcs" that should be considered. (pX0982 at 002, 008; PX1720 

at 002, 008; PX1722 at 002, 006). 

990. Similar to Warburg Pincus's fidings priorto its investment into Po1ypore, IGP 

deterined that flooded lead acid batter separator markets are charactered by high 

barers to entr. A document prepared by IGP prior to its investent in Microporous
 

gives an "Executive Sumar of Micro porous's including an assessment ofits . 

stengths. (PX1124; PX2300 (Heglie, IHT at 119), in camera). Under "strengt," the 

document states 

High barers to entrlhgh switching costs
 

~ Major capital costs and know-how required to enter the market. . . . . 

154 
): Limited market size detracts potential entrants. . . . . 

): It generally takes 1-2 years within the lead acid batter industr to
 

complete the design-in, full testing and final acceptace of a new separator 

into a battery. 

(pX1124 at 001). 

991. Po1ypore's CEO recognzes that barers to entr exist in Daramic's business. t 

The 

e-mail was sent on Februar 26, 2007 at 11 :26 pm. (pX1715 at 001-003, in camera; 

Toth, Tr. 1459, in camera). 

992. 

,(PXI715 at 002, in camera; Toth, Tr. 1464, in camera). 

993. Mr. Toth responded to Mr. Dossan on Febru 27,2007. (PXI715 at 001, in camera)~ 

Mr. Toth stated that that he was meetig with his staff 
 that morng and would provide 

(pX1715 at 001, in camera; Toth, Tr. 1467-68, in camera). 

994. That same day, Po1ypore held a senor leadership team ("SL T') meetig. Mr. Toth's
 

~da for the SLT meeting aret 

__: ''Be clear that price was out in front and consistent with cost escalation
 

.. . no more price erosion;" "Barers to entr - 'technology' - global scale/infrastrctue, 

low-cost, grades/product development, and low cost %, but fuctional." (Toth, Tr.
 

~85 at 001). Mr. Toth testified that he 

-- (Toth, Tr. 1463-65, in camera).
 

995. Po1ypore had a deck with the title "Intial Public Offerg" which Po1ypore used with a 

varety of 
 investors in June 2007. (Toth, Tr. 1424-25; PX3015, in camera). Investors 

were able to look at ths deck, and Mr. Toth understood that it was ver important to be 

as accurate as possible to investors. (Tofu, Tr. 1427-28). t 

(Toth, Tr. 1428-29; PX3015 at 017, in camera). 

155 
996.
 

(Hauswa1d, Tr. 805~


in camera; PX0194 at 025, in camera). In addition, the report found that the value of 

(Hauswa1d, Tr. 805:17-20; PX0194 at 025, in camera). 

2. MPLP also recognzed barers to entr 

997. Mr. Heglie testified that high barers to entr and the size of the market are importt to 

IGP because "the fewer competitors in a market, the higher potential profitability is." 

(PX2300 (Heglie, IHT at 126-27), in camera). Likewise, he testified that the long tie it 

taes to design in and test a product is an important consideration to IGP because "it 

would delay. . . a new competitor to get into the market." (PX2300 (Heglie, IHT at 

127), in camera). 

998. IGP viewed Microporous's Ce1IForce as proprietar and differentiated. (PX2300 

(Heglie, IHT at 119), in camera; PX1124 at 001). Microporous' s patent protection for 

CellForce until 2019, and Microporous' s signficant know-how and process intellectual 

propery in the production of all its products, was viewed by IGP as one of 
 the company's 

strengt when it evaluated acquiring the company. (pX1124 at 001).
 

999. Mièroporous's management believed that its signficant capital investment and strong 

employee base creates formidable barers to entr into the markets in which it competed.
 

(Trevathan, Tr. 3665; RX00741 at 048-049). 

i) Risk of acquisition by Daramc is a barer to entr.
 

1000. Even if a customer sponsors entr into 
 one of the PE separator markets, it stil faces the 

risk that the entrant could be acquired by Daramc. With Respect to NSG ("Nippon"), 

EnerSys related its own experence in ths regard: 

156 
(Axt, Tr. 2305, in camera). 

1001. Daramic is involved in a joint ventue with NSG with regards to a PE separator 

manufactug plant in Tianjin, China. (Thuet, Tr. 4324). Dararic holds 60% of the 

capital in the Tianjin joint ventue. (Thuet, Tr. 4324). Along with the majority 

ownership in the Tianjin joint ventue, Daramic has the final decision on the pricing of 

PE separators that are manufactued in the Tianjin facility. (Thuet, Tr. 4402). 

1002. Daramic continues to seek new acquisitions in Asia in order to grow its market share in 

the Asian market. Daramic curently has an option to buy the remainig 40% of the 

Tianjinjoint ventue from NSG. (Thuet, Tr. 4402). Daramic has also pursued 

discussions with 

(Thuet, Tr. 4410, in camera). Daramc has also attempted to gain fuer market share inAsia 

4410-4411, in camera). 

n) IP and Proprieta Technology are barer to entr
 

1003. In order to have the compettive advantage of meetig the widest range of customer 

needs, Daramic has patents and know-how, product customization, techncal support, 

sales, support, and batter experse. (Hauswa1d, Tr. 825-26, in camera; PX0194 at 036, in camera). . 

1004. Daramc claims that the Jungfer process is a Daramc trade secret. (Hauswa1d, Tr. 1153). 

(Hauswa1d, Tr. 1153-54; PX2241 at 7, in camera). Daramic

consi ers every aspect of the technology and equipment that Daramc bought from 

Jungfer to 
 be a Daramc trade secret. (Hauswald, Tr. 1155). 

1005. 

camera; Hauswald, Tr. 831-32, in camera). 

1006. Daramic owns 18 active patents, which is more than any other batter separtor 

manufactuer. (PX2074).
 

1007. Daramic has a patent on HD. (Gilchrst, Tr. 382; PX2166). 

1008. Microporous has a patent on CellForce, a batter separator which can be used for deepcycle, industral and SLI batter applications. The patent relates to the ingredients used 

to make the separator. (Gilchrst, Tr. 335; PX2161). The CellForce patent is valid until 

2017 or 2018. (Gilchrst, Tr. 382). The validity ofthe CellForce patent has never been 

157 
challenged in patent litigation. (pX0920 (Gilchrst, IHT 40), in camera). CellForce is 

still a patent protected techno10gN, and its specific formulation is intellectual propery 

that MPLP, and now Daramic, protect. (Trevathan, Tr. 3716-3717). 

iii) Batter separator manufactung equipment and experenced
 

personnel are not readily available 

1009. 

camera). 

1010. The Technology for Producing PE Separators is ConfidentiaL Microporous considers the 

specifications it gives its machie suppliers proprietar to Microporous. (Gaugl, Tr. 

4612; PX0905 (Gaug1, Dep. at 77), in camera). Microporous had its machine suppliers 

sign non-disclosure agreements that prevent the machie suppliers from givig the 

specifications of 
 the machines that it was orderng to Microporous's competitors. (Gaugl, 

Tr. 4612). 

1011. 

(PX0590 (Gaugl, Arb. Dep. at 158-59 in camera)). 

1012. Daramc protects its PE line equipment specifications and considers these specifications 

Daramc's intellectu proper. (PX0924 (Jenen, Dep. at 24-25, in camera)). 

1013. Whle he worked for Jungfer, Peter Gaugl considered the Jungfer PE batter separator 

process to be confidentiaL. (Gaugl, Tr. 4630; PX0590 (Gaugl, Arb. Dep. at 158-59, in 

camera)). 

1014. 

1015. Mr. Gaugl testified that the manufactug process for makg PE separators "is not 

available to everybody." (Gaugl, Tr. 4547). However, he did identify James Kung, two 

former Jungfer employees - Dr. Winer and Mr. Duya - and "cerai people at Daramc 

as well as at Entek" that he believed could put together and design a line. (Gaugl, Tr. 

4642). 

158 
1016. Daramic planed to install a Jungfer style line for its planed Brazilian expansion. 

(PX0653 at 002; PX0924 (Jensen, Dep. at 112, in camera)). Even though Mr. Jensen's 

duties included purchasing and installng production line equipment, Daramc intended to . 

have Dr. Winkler the former head of Jungfer, order, install and star-up the line. 

(pX0653 at 002). . 

(pX0924 (Jensen, Dep. at 114, in camera)). 

1017. ~ ~~ ­

1018. 

(pX0907 (Kung, Dep. at 92, in camera)). 

1019. Daramic Purchased Jungfer in 2001, acquirg its two production lines in Austra at the 

time. (PX0924 (Jensen, Dep. at 7, in camera)). Daramc operated those lines in Austra 

until 2005 when both were transfered to Prachinbur, Thailand as par of the Rama II 

project. (pX0924 (Jensen, Dep. at 7-8, 12, in camera)). 

1020. 

PX0924 (Jensen, Dep. at 45, in camera)). 

1021. When Daramic decided to relocate the Jungfer lines from Austra to Thailand, it sent 

former Jungfer personnel from Austra who were familiar with the equipment and had 

. experence settg up PE lines of 
 that tye. (pX0924 (Jensen, Dep. at 20, in camera)). 

21, in camera)). 

1022. 

1023. The process Mr. Gaugl instaled at Pine Flats for Micro orous was basically the Jungfer 

process. (Gaugl, Tr. 4627). 

159 
1025. 

1026. . 

1027. 

003, in camera). 

1028. 

1029. 

(PX2238, in camera). 

3. Scale is required for sufficient entr
 

1030. For entr to be suffcient, it must replace the competition lost though the merger or 

acquisition. (Simpson, Tr. 3204, in camera; Merger Guidelines §3.4). Dr. Simpson 

explained that since this acquisition eliminated Microporous as a competitor, suffcient 

160 
entr would need to replace Microporous as a competitor to be suffcient. (Simpson, Tr. 

3205, in camera). 

1031. At a July 2007 corporate strategy worksho 

the Daramic ou concluded that" 

1032. Daramic's manufactung facility in Thailand is far and away the largest PE batter 

separator manufactg facility in Asia with four manufactung lines and a total 

production capacity approaching 80 millon square meters a year. (Thuet, Tr. 4320-4023, 

4425). Daramc's Thai facility also has the two largest PE separator manufactung lines 

in Asia. (Thuet, Tr. 4400).
 

1033. 

(PX0919 (Riey, IHT at 420-421, in camera)). 

1035. 

(RX01497 at 01-02, in camera). 

1036. 

161 
L. Batter manufactuers are 
 not likely to vercally integrate into separator 

manufactug 

1037. It is not practcal for battery manufactuers to manufactue their own separators. 

Manufactuers such as Bulldog Batter do not have the know-how needed to manufactue 

separators, including knowledge of 
 the compounds used and the methodologies for
 

controlling porosity and cug the separator material. Additionally, a single
 

manufactuer such as Bulldog Batter does not have sufficient volume requirements to 

ru a separator line. Finally, the equipment and tooling needed to manufactue separators . ;
 would require a big investment which would be diffcult to justify. (Benjamn, Tr. 3527­

3529).
 

1038. Customers' statements reflect the barers to entry. East Pen has never considered 

investig capital in an Asian supplier ofPE. (Leister, Tr. 4036). East Pen does not have
 

any curent plans to sponsor the entr of a new batter separator manufactuer. (Leister,
 

Tr. 4037-4038). 
 Nor does East Pen have any plans to invest capital in a batter 

separator manufactuer or to vercally integrate and manufactue separators in-house.
 

(Leister, Tr. 4038).
 

1039. Since the acquisition, Trojan has looked into vertcally integrating into the manufacte 

of deep-cycle batter separators and detered that it was not feasible due to the cost 

and resources requied to ru a batter separator manufactung facility. (Godber, Tr.
 

229-30). The equipment would cost approximately $8 millon and because the process is
 

unque, Trojan would need the right personnel to set up and ru the facilty, which it does
 

not have. (Godber, Tr. 230-31). 

1040. 

(Craig, Tr. 264, in camera; Burkert, 

TR. 2363; 2365, in camera).. . e Mr. Craig has spoken to other industr CEOs about
 

the possibilty of verical integration,
 

EnerSyswou1d not put money in to t
 

Tr. 2463, in camera).
 

1041. J CI has not considered building its own PE separator manufactung lines to manufactue 

separators for interal use. (Hall, Tr. 2703). Nor does JCI have the competency to build 

and ru a separator manufactung line on its own. (Hall, Tr. 2703). 

1042. Exide is not interested in verticaly integrating into the separator industr by makg 

separators for interal use. (Gillespie, Tr. 2983-2984). In the past, Exide had 

manufactued separators, but got out of that business because it was not a "core 

competency" for Exide. (Gillespie, Tr. 2983-2984). Subsequently, Exide has "never had 

any intention of going back into that business." (Gillespie, Tr. 2983). 

162 
1043. Exide has never considered entering a joint venture with any separator manufactuer. 

(Gilespie, Tr. 2984). Nor is Exide interested in investing money into a batter separator 

manufacturer. (Gilespie, Tr. 2984-2985). Exide's work with MPLP included an 

obligation for MPLP to shoulder the capital costs related to supply of 
 Exide. (Gilespie, 

Tr. 3088). 

VII. Respondent has no failng firm defense.
 

1044. Microporous was not a failing firm. MiCfoporous was 
 a profitable company. (Trevathan, 

Tr. 3652). Prior to the acquisition, MiCfoporous was profitable and growig its business 

as the result of the addition of a new plant. Mr. Gilchrst, Microporous's CEO descrbed 

the firm's near ter business prospects as "all upside potential for us." (Gilchrst, Tr. 

403). 

1045. At the time of the acquisition, MiCfoporous had multiple offers for backfilling its 

CellForce production line at Piney Flats, including offers from C&D Dynasty for a UPS 

application, EnerSys, Trojan, Crown Batter and East Pen. (Gilchrst Tr.397-98, 402­

403,467, in camera; RX00207). The contract with EnerSys/Hawker filled one line at 

Feistrtz, while Microporous was makng "a very concentrated effort" to sell PE 

separators from the seoond Feistritz line to several SLI batter manufactuers. In addition 

to Exide and Johnson Controls, there were 35-40 smaller SLI batter manufactuers in
 

Europe many of 
 whom were good customer prospects because they liked MiCfoporous's 

PE technology which was based on Jungfer's technology. Some of these manufactuers 

had formerly purchased separators from Jungfer when it was still in business~ (Gilchrst 

Tr.344-347). 

1046. 

. . ~
 (RX00207, in camera). EnerSys is a signficant customer, with approxiately

f 

2151, in camera). 

1047. 

1048. There was a restrctung plan with MPLP to address the deteroratig margins 

(Trevathan, Tr. 3773-3774; RX00283). 

1049. IGP never "serously enterned" a sell to other potential buyers. (pX2300 (Heglie, IHT 

at 217-18)). According to Mr. Heglie, "with the magntude of 
 what we had going on with 

the company and the demands on management time, we thought it was unrealistic to 

163 
bring any kind of 
 buyers that weren't already familiar with the company or its markets 

into a process." (pX2300 (Heglie, IHT at 
 217-18)). 

1050. 

(pX0911 (Roe, Dep, 226-227, in camera);. Roe, Tr. 1211-1212). 

IX. Effciencies
 

1051. 

Kahwaty l
 

5249-5250, in camera).
 

1052. 

(pX0033 at 11, in camera; PX0950 at 59-60, in camera; PX0912 (Riey, Dep. 53, 54, 71, 

77), in camera). 

1053. 

(PX0950 at 060, in camera). Daric last updated its interogatories on March 17,2009. (pX0952, in camera). 

1054. 

1055. 

164 
1056.
 

1057. Daramic never discussed with Trojan potential cost savigs from its acquisition of 

Microporous. (Godber, Tr. 220). . Daramic has not offered to pass on any cost savings 

from its acquisition of 
 Microporous to Trojan. (Godber, Tr. 221). 

X. Monopolization
 

A. Existig Market Power
 

1058. 

1. 

1059. Exide curently 
 pays Daramic for automotive separators in 

Nort Amerca. (Gillespie, Tr. 3018-3020, 3059, in camera). 

1060. As early as Januar 2007, Exide approached Daramic and indicated that itwou1d 

l 

1061. 

1 (Gillespie, Tr. 3018-3020, in camera; PX1026 at 001-002, in .camera). . 

165 
1063. 

Tr. 2901, 
 in camera). Mr. Gilespie viewed this proposal as ~ 

3020, in camera). 

1064. Mr. Bregman subsequently informed Mr. Hauswa1d that Exide would ~ 

J (PXI050, in camera; Bregman Tr. 2901-2902, in camera). 

1065. 

(Bregman, Tr. 2902, in camera). 

1066. 

J (PX1040 at 002, in camera; see also PX1085 at 002 (discussing 

engieerig conclusion that fully replacing Daramic material with alternative separator 

. materal is not possible; "there is signficant volume that can not be replaced withi the 

two year time frame available" before the contract expired)). 

1067. Exide believes that negotiations with Daramc are 

Giles ie, Tr. 3002, in camera . From 2005 to the present, Exide
 

(Giles ie, Tr. 3000, in camera). Cumulatively, ths means t 

_J (Gilespie, Tr. 3000, in camera). 
 Exide does not feel that it has many

negotiatig levers when 
 dealing with Daramic. (Gilespie, Tr. 3066-3067). Exide lacks 

pressure points in negotiations with Daramic and therefore is unable to exert its wil on 

Daramc to get price decreases as it is able to do with many other suppliers. (Gilespie, 

Tr.3097':3098). 

1068. 

(Gillespie, Tr. 2999, in camera; see also PX2050 at 038-039, 

166 
in camera; PX2052 at 005-006, in camera). Daramic has t 

Tr. 2999, in camera). 

2. 

1069. Daramic responded to Exide's 2007 RFP by quoting pi;ces for t 

L (Gilespie, Tr. 3011, in camera; PX1028, in camera). Exide found it ver unusua that t 

L (Gillespie, Tr. 3017-3018, in camera). 

1070. 

L (Gillespie, Tr. 3011-3012, in camera; PX1028 at 041-046,058-060, in camera). Under Daramic's 

ayment ters, credit limit and other ters t
 

L (Gilespie, Tr. 3016, in camera; PX1028 at 058-059, in camera). 

1071. 

3142, in camera). For example, under Daramic's proposal, Exide's tota 

Daramic for golf car separators would t 

L (Gillespie, Tr. 

spend at 

L (Gillespie, Tr. 3139-3140, in camera). 

1072. By L Daramic strctued it's pricing proposal to 

Exide to prevent them from tang advantage of the benefits of multi-sourcing. If Exide chose to purchase l L
 ~ a penalty of approximately. 

_l (PX1036 at 002, in camera). Whereas, Exide analysis indicated that if
 

it was able to multi-source L of its separator needs, Exide could actually save
 

upwards of
 

167 
1 

1074.
 

(PX0228 at 02, in camera; PX0922 (Roe IHT, 237), in camera; Roe, Tr. 1361-1363, in 

camera). 

1075. 

1076. 

1077. 

1775-1776, in camera). 

1078. 

1 (Roe, Tr. 1786-1787, in camera). Despite ths belief 
 that ,1 Daramic indicated to Exide that it expected
 

prices to t 1 and offered to limit Exide's
 

_i in retu for a contract extension coverig 100% of 
 Exide's business. (pX0261

at 003, in camera; Roe, Tr. 1786, in camera). Most of 
 the remaining cost savings offered 

to Exide were sim 1y ro osals to 

002-007, in camera; Roe, Tr. 1788, in camera). 

3. Daramic believes it had pricing power
 

168 
1079. Ever quarer, Mr. Toth does an internal call for people inside the company, which is 

designed to be a motivational message to the organization. (Toth, Tr. 1439, in camera). 

A document from the March 2006 conference call with Mr. Toth's handwrtten notes 

entitled "Bob Toth Talking Points - 4QN ear-end 05 Interal Call," states: "Specifically, 

we will continue demonstrating pricing power in the market, not only to stay ahead of 

rising costs, but to captue the value we brig to our customers." (PX0938 at 002; Toth, 

Tr. 1439-1440). With corrections and additions in Mr. Toth's handwrting, this bullet 

point goes on to say, "I have a fudamental belief that we are woefully underalued in 

everg we do, so there should be some upside given our scale and the cerainty of 

supply that we brig to the market." (PX0938 at 002; Toth, Tr. 1440-1441; see also 

PX0831 at 003 "Pricing power to captue the value we bring to customers;" Toth, Tr. 

1447). 

1080. Simlarly, a docuent entitled "Internal Call Agenda: March 16, 2006" contais openig 

remarks and a scrpt for a call. (PX0832 at 002-011; Toth, Tr. 1448). Agai, the scrpt 

states that Daramc will "expand its solid market leaderhip" because it ''wil continue 

demonstatig pricing power in the market regardless of movements in materal and 

energy costs." (PX0832 at 004). 

1081. Mr. Hauswa1d noted feedback from Mr. Toth l 

_l (Hauswald, Tr. 1182-83, in camera; PX0093 at 101, in camera). Mr.
 

Hauswa1d's l 

Hauswa1d, Tr. 1182-1183, in camera). 

1082. 

in camera).
 

1083.
 

1084. Exide lacks buyer power despite its large size. Exide is the fit or second largest batter 

manufactuer in the world in each market that it paricipates in. (Gillespie, Tr. 2930). 

Exide purchases a little over 70 milion dollars of 
 batter separators anually. (Gilespie, 

Tr. 2929).
 

169
 

" 
1085. EnerSys does not consider itse1fto be a power buyer in the markets for separators. 

(Craig, Tr. 2565). As Mr. Craig points out, EnerSys's purchases from Daramic in 2008 

were approximately $13 millon. (Craig, Tr. 2565). EnerSys estimates that DaramIc's 

revenues were approximately $348 million in 2008. (Craig, Tr. 2565). Thus EnerSys . 

purchases make up approxiately 3.6 or 3.7 percent ofDaramc's sales. (Craig, Tr. 

2565). In contrast, 50% of 
 EnerSys's revenues, or $1 bilion dollars, depends on 

EnerSys's receipt of a steady supply of separators from Daramic. (Craig, Tr. 2557). 

1086. In response to questions about who has the "upper hand" in negotiations between 

Daramc and EnerSys, Mr. Craig testified that Daramc has the strengt in the 

negotiations, 

They clearly have the upper hand because ths is not a competitive market. 

There's only one source available to us. 

(Craig, Tr. 2567, in camera). 

1087. "In October of2006, Daramc was able to force EnerSys to sign a contract because as Mr. 

Craig explained, ''tey knew that we had no other options, they knew that we had no 

other choices at that tie but Daramc. They knew that if 
 they tued us off shut us off, 

that it would have a catastrophic impact on our business. They had all the cards in their 

hand." (Craig, Tr. 2596-97). EnerSys has no options but to purchase from Daramc 

today. (Craig, Tr. 2611). 

1088. 

l (PX0784; Riney, Tr. 5012, in camera). 

B. In 2007, Daramc solicited Microporous's agreement to not ~ter the SLI 

separator market in exchange for Daramic's deep-cycle technology 

170 
1. Market conditions were favorable for using exclusive contracts to 

impede entry. 

1089. l (Simpson, Tr. 3209, in camera). 

1090. 

1091. Daramic strategy for maintaining its duopoly with Entek in North Amerca and Wester 

. Europe is to execute long-ter supply agreements with customers in those markets. 

(PX0171 at 004). 

1092. 

328, in camera). 

1093. 

l (Simpson, Tr. 3227, in camera;


PX0265 at 004, in camera; PX0595, PX0835 at 003, in camera). t 

171 
3228, in camera). 

1094. 

Tr. 3229, in camera). 

2. Market share discounts can have simlar effects as exclusive contracts.
 

1095. Dr. Simpson used a hypothetical example to show how offering a market share discount 

to customers can have an exclusive effect. (Simpson, Tr. 3256-3261). In the 

hypothetical example, Daramic offers to sell a customer 100 percent of its needs at some 

per-unit price (lP) and offers to sell ths customer 75 percent of 
 its needs ataper-unt price that is 14 percent higher (1. 
 14P). (Simpson, Tr. 3256). If 
 the customer 
 buys the last 25 percent of its requirements from Daramic, the effective per unt price for these . 

unts is 1P. (Simpson, Tr. 3258). However, if the customer buys the last 25 percent of its 

requirements from another fi at a price ofP, its effective per unt price for ths last 25 

percent is 1.42P since ths customer must pay a 14 percent penalty on the 75 percent of its 

requirements that it still obtais from Daramic. (Simpson, Tr. 3259). If 
 the entrant were 

to tr to absorb the cost of ths penalty, so that the customer pays an effective price of P
 

for the last 25 percent of its requiements, it would need to set a price equal to 0.58P. 

(Simpson, Tr. 3259 - 3260). 

1096. Daramic sued Microporous when it began building its F eistrtz, Austra plant over a 

non-compete agreement origially between Microporous and Jungfer related to 

. MiCloporous' s purchase in 1999 of Jungfer' s PE technology and production equipment. 

Subsequent to the purchase, Daramc acquired the remaining assets of Jungfer and 

. became a par to the non-compete. (Gilchrst, Tr. 391-92). 

1097. On August 2, 2007, under the guise of a ''mediation' meetig about the then pending 

arbitration proceeding, Daramic and MiCloporous business people met to discuss 

''possible cooperative scenaros beteen our two companes where both sides would 

benefit.". (PX1103 at 001). It was Mr. Gichrst's impression that Daramic was ver 

concered that it would lose in the arbitration process. and that MiCloporous would soon 

enter the SLI market in Europe. (Gilchrst, Tr. 431-32). 

1098. Durg ths meetig at Daramc's Charlotte headquaers on August 2,2007, Pierre
 

Hauswald and Tucker Roe offered to settle a lawsuit over a non-compete agreeent 

affectig the SLI separator market in Europe by giving Daramic's deep-cycle technology 

172 
to MiCfoporous in exchange for its agreement to stay out of the SLI separator market. 

The offer was made to Mr. Gilchrst, Lar Trevathan of 
 Microporous and an attorney 

representing Microporous. (Gilchrst, Tr., 426-27, 431-32,575-76; Trevathan, Tr. 3707­

3708; PX0077, in camera; PX1 103 at 001). 

1099. Microporous' s Michael Gilchrst reported back that at the meeting Daramc "offered us 

basically all of their industral business!!! . . . All of that was prefaced by them for us 

stayig out of automotive. Amazng conversation." (pX1103 at 001). In reportng the 

meetig to Mr. Heglie, Mr. Gilchrst stted that "Daramc is defiitely looking for a 

solution that keeps us out of automotive and/or takes us completely 
 out of the game." 

(pX1103 at 002). 

1100. At its Board of 
 Director's meeting two weeks later, Microporous management reported 

. the August 2 meeting to the full board. (PX1106 at 035). The handout for the board 

meetig discusses Daramc's offer to give Microporous its deep-cycle and industral 

business "all in exchange for MPLP not parcipating in SLI markets." (pX1106 at 035 

(emphasis in origial)). Mr. Heglie testified that he was reasonably cerain that the Board 

discussed Daramic's proposal, but that he did not recall anytg specific outside of what 

was wrtten in the Board presentation. (PX2301 (Heglie, Dep. at 81), in camera). He 

fuer testified that Daramic's offer '''all in exchange for MPLP not paricipating in SLI
 

markets,'" does not appear to be limted to a geographic area. (PX2301 (Heglie, Dep. at 

81), in camera). 

C. Darc's Latest Effort to Block the MPLP Expansion - the MP Plan
 

(See CCFOF725-747) 

D. Exclusionar effectS on MPLP.
 

1101. 

l (PX0033 at 025, in camera, 030, in camera). This delay imposed costs on Microporous. (PX1215). 

1102. Michael Gilchrst, Microporous's President at the tie, later wrote Mr. Axt: "We 

(Microporous J are tag a signficant hit with the altered dates as our intial profitability 

and retu on our ca ita is thown off 
 by alost a year later due to Daramc." 

(PX1215). 

PX0089, in camera). 

173 
1 

1103.
 

(Simpson, Tr. 3230, in camera; PX0033 at 046, in camera). 

E. Daramc did not need to use exclusive contracts to attain effciencies. 

1104. 

1106. Some customers purchase separators pursuat to a wrtten contract, while others purchase 

separators without a wrtten contract. (Gilchrst, Tr. 614). Most MPLP customer did 

. not have actual supply contracts with MPLP. (Trevathan, Tr. 3773). Some customers in 

fact "contrbuted over one millon dollars in sales without contracts." (Trevathan, Tr. 

3775). 

1107. Executing long ter supply agreements with its batter manufactuer customers is one.of
 

Daramc's primar strategies for achievig its income goals. (PXOI71 at 002-003 

("Daramic 3-Year Strategy)). 

i) Hard Ball:
 

1108. The approach of playing hard ball with a customer and threateng to supply all or 

nothg was a favored tactic at Daramc. Daramic took ths approach with JCI durg 
 the 

2004 contractual negotiations, theatenng to terate supply to JCI in Europe if a
 

contract was not signed. (Hall, Tr. 2677-2678; PX0820at 014). 

174 
1109. Mr. Roe discussed the very same concept of an all or nothng relationship with regards to 

supply to C&D Battery when C&D's business was at risk ofloss to MPLP in 2006. 

(PX0806 at 003; see also PX2060 at 001 (Daramic discussion of 
 playing hard ball and 

stopping" consignent to C&D when faced with competition from MPLP in 2003)). 

When C&D continued to tae a wait and see approach towards iong ter contracting
 

with Daramic, Mr. Hauswald instrcted to Mr. Roe to 

111 O.Mr. Toth also suggested p1ayig hard ball with. EnerSys when it refued to contract with 

Daramic just prior to the 2006 force majeure. (PX0456 at 001). In each instance where 

Daramic theatened or discussed the possibility of cuttng off supply to a customer, the 

reason for Daramc to theaten all or nothg supply was to lock up business from MPLP. 

(pX1793 at 002, in camera; PX0456 at 001). 

F. EnerSys Story
 

1111. EnerSys is one of the largest industral batter manufactuers in the world, with plants in 

.Nort America, Europe, and Asja. (Axt, Tr. 2108; PX1204 at 002-003, in camera). 

1112. EnerSys produces batteres for both motive and UPS applications. (Axt, Tr. 2097, 2099­

2100,2114: Gagge, Tr. 2482, 2490-2491; PX 1204 at 002, in camera) EnerSys produces 

about 38 percent of 
 the motive batteres in the Nort American market. (Axt, Tr. 2129). 

1113. EnerSys manufactues motive power batteries in Nort Amerca at facilties in 

Richmond, Kentucky; Ooltewah, Tenessee; and Monterey, Mexico. (Axt, Tr. 2099­

2100). It makes UPS batteries in Nort America at the Monterrey, Mexico plant and a facilty in Hays, Kansas. (Axt, Tr. 2100). . 

1114. 

also (R00208; RX00209, in cam~ra; Axt, Tr. 2122, 2134, in camera). 

1115. The expiration 
 date for the EnerSys/aramc agreement was ). (RX00964 

at 001, in camera; Axt, Tr. 2122-2123, 2134, in camera). Dung ths perod, EnerSys 

). (pX1200 at 002, in camera; Axt, Tr. 2118,2125-2127,2141-2142, in 

175 
1116. In late 2005 and early 2006, EnerSys t 

in camera; Gilchrst, Tr. 309-310,416, in camera). 

1117. Daramc decided that it should fight ths theat because "( w) e have a leverage sayig that 

it is all or nothg, at least in the US, when our contract will be over (April 07)." PX0694 

at 001. 

1118. 

l. (PX1200 at 001-005, in camera; Axt, Tr. 2140,2145, in 

L (pX1200, in camera; RX00206, in camera; Axt Tr. 2148-2149, in camera). 

b. 

camera). 

1119. The overall goal of Micro orous L was "to figue out a plan to


get a facility in Europe l." (Gilchrst, Tr. 310, in


camera). 

1120. 

2148-2149, in camera). 

1121. Durg early 2006, EnerSys was also in negotiations with Daramic concerg the futue 

re1ationshi between the companes. Daramic t 

l. (Axt, Tr. 2118, 2164, in camera). Piere Hauswald and

Tucker Roe visited EnerSys in Januar 2006 

l. (pX1289 at 001, in camera; Axt, Tr. 2160-2161, in camera). 

1122. Mr. Roe followed up on the Januar discussions by submitting 
 a wrtten proposal to 

EnerSys on Febru 26,2006. (PX1289 at 001-003, in camera). The proposal 

t 

176 
camera). 

1123. Mr. Axt compared the cOmpeting proposals from Daramc and Microporous, and
 

l 

1124. 

1125. In May 2006, l l. (Axt, Tr. 2256,
 

in camera; PX1200 at 004, in camera). 

1126. On May 17,2006, Tucker Roe of 
 Daramic l 

(pX1201 at 002, in camera; Axt, Tr. 2251-2252). 

1127. EnerSys decided in June 2006 that it would move forward with Microporous. Mr. Axt 

scheduled a meetig with Daramc offcials in Charlotte, Nort Carolina, because he ''felt 

it important to tell them face to face" that EnerSys had decided to reject Daramic's 

proposal. (Axt, Tr. 2252-2253). 

1128. At that meetig, which took place on July 6,2006, EnerSys informed Daramic that
 

ceai battery plants then supplied by Daramic would, beginng in 2007, be transfered
 

to Microporous. S ecifically, l 

2128-2129,2148,2159, in camera). 

1129. Mr. Roe related ths news to Daramc management by emaI1 dated July 7,2006. He 

concludes his interal communcation ths way: ''Needless to say, ths is not acceptable 

and we wil respond accordingly." (PX0986 at 001). 

1130. Daramic management then evaluated varous strategies for blockig Microporous from 

proceeing with its expansion plan for Austra. One scheme was to l 

L at the new plant. (PX0246, in camera; Hauswald, Tr. 831-832, in camera). 

177 
1131. 

camera; Hauswa1d, Tr. 831, in camera). 

1132. 

camera). 

1133. 

l Reading, Pennsylvana. (pX1204 at 001, in camera; PX1205; Axt, Tr. 2255-2256, 2260, in camera). 

1134. 

(pX1204 at 001-003, in camera; Axt, Tr. 2255-2256, 2257, 2260, in camera). 

1135. Daramc gave EnerSys a deadline to respond of August 31,2006. (PXI205; Axt, Tr. 

2259, in camera). The deadline was later extended to September 15, 2006. (PXI205). 

1136. 

camera). 

1137. EnerSys sought assurances from Microporous that the Austran plant was stil "on taget" 

to begin production in the fist quarer of2008. (Axt, Tr. 2180, in camera; PXI206). 

MiCloporous provided the desired assurances. (pXI206; Axt, Tr. 2180-2181, in camera). 

1138. The September 15 deadline passed without a formal response from EnerSys. When 

informed of this development, Po1ypore CEO Rober Toth decided that Daramic "should 

pull our offer and force a decision. Unless I don't know or understand somethg, we 

should play hardball here." (pX0456 at 001). 

1139. 

.l (pX0694 at 001; PX1211 at 001, in camera; PX0456 at 001). 

l. (pX0258 at 001; PX0257 at 001, in 
 camera). (See also PX0694 at 001; PX0852 at 001,

178 
in camera (" _J.")).
 

1141. On October 6,20'06, Daramic uneashed its hardball strategy. Daramc notified EnerSys 

by letter that eveni a Frida that Daraic would not 

J. (Axt, Tr. 2146-2147, in camera; PX1207; PX1208). "(E)ffective imediately EnerSys wil receive most likely 10 to 20%, if 

possible up to 50% of 
 your normal materal requirements for the next six to eight weeks." 

(PX1207). This cut back in supply would apply to EnerSys batter plants in both Europe 

and the United States. (pX1207; PX1208). 

1142. Daraic represented to EnerSys that ths disruption in supply was necessar because of a 

förce majeure event outside ofDaramic's coIitrol. Specifically, "an extensive fire in the 

production facility of (Daraic's ) 
 key raw materal supplier" would, going forward, 

"severely limt the amount of 
 raw materal available to Daraic." (PX1207). 

1143. EnerSys investigated Daraic's claim, and deterined that the assered force majeure 

was a sha.. . (i) f 

.J (Axt, Tr. 2206, in camera; ~ also Hauswa1d, Tr. 1136, in camera). (ü) EnerSys contacted its second PE supplier, 

Microporous. On October 9, 2006, Microporous reported that in the United States no 

allocation was planed and that "U.S. supply positions are whole." (PX1209). (iü) Mr. 

Craig contacted the CEOs of several other battery manufacturers, including East Pen, 

Trojan, and Exîde. Each executive reported that his company had not been informed that 

there was a product shortage; fuher, these companes had not been informed that there 

would be a curailment of supply. (Craig, Tr. 2558). 

1144. Although letters concerng the force majeure were later 
 received by a number of
 

Daramic's customer, Tucker Roe from Daraic "told most of them we wil do 

everyg possible to supply 100% of their curent demand." (PX0487; see also 

PX1048). However, he stated: "For EnerSys, the allocationis 10%." (PX0487). 

1145. In November 2006, a senior level Entek executive had a conversation with Mr. Hauswa1d 

ofDaraic at the European lead acid batter conference. (PX1808). In that 

conversation, Mr. Hauswald inormed the Entek representative that Daramic was "takg 

steps against (MPLP)" with regards to MPLP's European expanion plans. (PX1808). 

1146. After the acquisition of 
 Micro porous, Mr. Hauswald and Mr. Roe of Daramic to1dt. 

1147. The CEO ofEnerSys, John Craig, called the CEO ofDaramic, Bob Toth, shorty 
 after the 

force majeure anouncement. (Craig, Tr. 2556). Their conversation confirmed that the 

prospective curtailment was a ploy aimed at forcing EnerSys to enter into a new long 

179 
ter contract for the majority of its 
 requirements. Specifically, Mr. Toth theatened that 

Daramic was "going to stop shipping product to you (EnerSys) with two weeks if you 

don't sign a long-ter contract. Correction. 10 to 20 percent in the next two weeks."
 

(Craig, Tr. 2556-2559). Mr. Craig viewed the t 

_1 (Craig, Tr. 2562-2563,2570, in camera). 

1148. When it informed Exide, a competitor of 
 EnerSys, of 
 the force majeure event on 

October 6, 2006, Daramic pledged to continue supplyig Exide with "80% to 90%, and if 

possible up to 100%" of its normal requirements in the following weeks. (PX1048). 

1149. Durng the force majeure perod, Daramic ''teated Exide ver well," and "did a very 

good job" of supplyig the separators Exide needed at that time. (Gillespie, Tr. 2985, 

3095-3096.) Nobody from Daramic told Exide that their supply would be cut off or that 

Daramic would not sell to them durg the force majeUre. (Gilespie, Tr. 2985, 3155; 

. PX1 048). 

1150. Microporous was "never affected by the same (limited PE supply) conditions" as . 

Daramic claimed to be durg October 2006, even 
 though both companes obtained their PE stock for 
 makng separators from Ticona. (Gilchrst, Tr. 414-415; Trevathan, Tr. 

3655). 

1151. 

1. (Axt, Tr. 2182, in camera). No alterative source of supply was available to EnerSys. (Craig, Tr. 2557, 2598). After exhausting its 

separator inventories, EnerSys would be forced to shut down production at its plants. 

One half of 
 the company's total revenues, or about $1 bilion in batter sales, were at 

risk. (Craig, Tr. 2561, 2598-2599). In addition, 

(Axt, Tr. 2182, in camera; Craig, Tr. 2561). 

1152. Mr. Craig concluded that he had no choice but to accede to the Daraic demand. (Craig, 

Tr. 2562-2563). He instrcted a senior manager at EnerSys ''to get involved with ths, get 

the contract worked out, do what we can, let's get so we don't shut ourselves down." 

(Craig, Tr. 2558). 

1153. After a short perod of negotiations, EnerSys and Daraic t
 

1. (Axt, Tr. 2193, in camera; PX1211, in camera; PX1224, in camera). EnerSys agreed to buy separators from Daramc exclusively for its 

North American and Chiese batter plants though May 2009, and for its Italian plant 

though December 2009. (Axt, Tr. 2114-2115). 

1154. Daraic l 

2206-2207, in camera). When ( 

_1, Daramic l 

~, in camera; PX1211 at 002, in camera H
 

180 
1. The Impact of the Contract Extension with Daramic
 

2128-2129,2148,2159, in camera; PX1259, in camera). 

1156. 

.1 (Simpson, Tr. 3230-3231, in camera). Without suffcient volume commitments, Microporous could not fully utilze its capacity when the 

new lines it was building became operationaL. (Gilchrst, Tr. 454). 

1157. The force majeure event "delayed several pieces of 
 business that Microporous was going 

to be granted, the timng of the Mexico business for our backfill, the tig of Italy. The
 

Italian plant for EnerSys was also delayed and pars of the Tennessee business for 

EnerSys (were) delayed as well." (Gilchrst, Tr. 413). 

1158. With the potential for supplying signficant PE volumes to EnerSys pushed out to June 

2009 and beyond, Microporous needed to find additional customer order to fill up its 

two new lines starng in March 2008, paricularly the second PE line. (pX0089 at 002 

("The revenue gap wil be over $4,500,000 (approximately 2,800,000 square meters) that 

wil be open until the backfill with EnerSys US can commence in 2009 (approximately 

fifteen month)." ; Gilchrst, Tr. 454, in camera t 

1159. To be competitive agaist Daramic in motive, stationar and SLI applications, MPLP 

needed to operate its lines at an effcient scale. (Gilchrst, Tr. 422-424; RX00401 at 002 

("(T)he filling of these Austran lines with solid, profitable business is an absolute 

requirement for the continued success and fiancial health ofMPLP.")). 

1160. 

l Daramc's pncing. (Simpson, Tr.


3232-3233, in camera). Daramic recognzed these economic realities. (Simpson, Tr. 

3233, in camera; PX0241 at 001-002, in camera. Microporous recognzed thèm as well. 

Gilchrst, Tr. 508-509, in camera ( 

1161. At the same tie that Daramc was theatenng to withold separators from EnerSys due
 

to Ticona's European force majeure, Daramic also increased the pressure on C&D, whom 

181 
it was also in contractual negotiations with, by informing C&D that they too might get 

less than 50% their separator needs. (Roe, Tr. 1804). 

1162. Less than one month later, Mr. Roe informed Mr. Hauswald that if a contract with C&D 

was not wrapped up withn two weeks time, "we wil play hard-ball and force them to 

accept 100% or nothg." (PX0806 at 003). 

1163. Daraiic specfically intended to exclude Microporous from the relevant markets. In
 

October 2005, Mr. Hauswa1d informed Mr. Nasisi, the former General Manager of 

Daramic, that he believed Microporous was going to build a PE line for EnerSys in 

Europe. (PX0694 at 002). 

1164. After receivig ths "bad news," Mr. Nasisi wared Mr. Hauswald that Microporous
 

could grow to be "another Entek," and therefore Daramic "must do everyng possible to 

stop ths (expansion)." (pX0694 at 001). See also (pX0751 at 001, in camera ( 

1165. Mr. Hauswald understood that using "all or nothg" theats to prevent Microporous from 

gainig business at EnerSys might be effective in the short ter, but in the long term, 

Daramic needed to "solve the (Microporous) case defitively." (PX0694 at 001). l
 

1 (PX0171-008; PX0751 at 001, in camera). 

1166. Daramic employed the MP Plan as the next step in its strategy to marginalize 

. Microporous and exclude it from the relevant markets. See (CCFOF 725-747). Entek 

believed that, based on a conversation between Mr. Hauswald and the head ofEntek's 

European operations, Daramc's successful extorton of a long-term contract from 

EnerSys after the force majeure was intentionally designed to remove the economic 

justification for Microporous's investment in a new PE facility in Austra. (PX1808). 

XI. Hollingswort & V ose
 

1167. Hollingswort & Vose ("H&V") manufactues absorptive glass mat ("AGM") separators 

for sealed lead-acid batteres. (pX0094 at 001, in camera). It is the domiant AGM 

producer in Nort Amerca, and is one of 
 the largest AGM manufactlers worldwide. 

(pX0035 at 004; Roe, Tr. 1745; PX0011, in camera; RX01101 at 004). 

1168. 

182 
1169. In 1999, Exide Technologies ("Exide") owned and operated a PE separator
 

manufactung facility in Corydon, Indiana. (pX0726; PX0925 (porter, Dep. at 35); 

PX0917 (Cullen, Dep. at 11, in camera). Exide manufactued separators at Corydon for 

some of its Nort American battery plants. (Gillespie, Tr. 2983-84). 

1170. In 1999, Exide engaged the serces of 
 Bowles Hollowell Conner ("BHC"), a fiancial
 

advisory fi, to assist it with selling the Corydon 
 plant. (PX0724 at 002). 

1171. In June 1999, BHC contacted H&V about the possibility of acquirig the Corydon plant. 

H& V was invited to submit a proposal to purchase the assets. . (pX1368 at 001). 

1172. H&V was i l (pX0917 (Cu11en,
 . Dep. at 11)). Daramic was a competig bidder. (PX0726 at 006-008). Daramic was
 

aware that H&V was interested in the Corydon facility. (Hauswald, Tr. 640-641; 

PX0169 at 001). 

1173. On June 19, 1999, H&V received information by mail from BHC i 

1 (pX0925 (Porter, Dep. at 35)). 

1174. 

1175. Second, at the time Exide was selling the Corydon plant, 

(pX0925 (porter, Dep. at 37)). 

1176. 

1177. On July 1, 1999, H&V submitted to BHC a proposal to acquire the Corydon plant for 

$26,000,000 in cash, and to enter into a series of 
 five-year agreements to supply PE and

AGM batter separators to Exide.(pX1368 at 001-002). 

1178. 

183 
3070; (Roe, IHT at 224, in ca~ the transaction to purchase the 

Corydon facility from Exide _.l (pX2050 at 034, in camera).
 

1179. Daramic remained concerned that H&V would pursue an alterative strategy for enterng 

the PE separator 
 market. (pX0169 at 001; PX0035 at 005). 

1180. 

L (PX0169 at 001; PX2143 at 001, in camera). The core of ths arangement was a set of 
 mutual promises to stay out of one another's 

markets. (pX0169 at 001; PX0094 at 002-003, in camera; PX0035 at 005-006; PX2150 

at 001, in camera; tX1356 at 001). 

1181. Daramic's anti 
 competitive strategy is described in an interal Daramic emai1: 

"(Ever time we) meet investors they ALL ask: what about AGM? Aren't you

missing the boat? What do you do? 

Just a few words of 
 history.. 

A few years ago, H&V anounced that they want to go (in)to the PE business, and 

plan to make acquisition (it was Exide) or build their own plant. 

In order to stop them, we made an (sic) wrtten agreement with them, through a

parerhip, sayig that:. .
 

- we will work together where ever possible 

- they wil not go in the PE business 

- we will not go in the glass business (AGM)" 

(PX0169 at 001). 

1182. 

1184. 

l); Roe, Tr. at 1746, 1811 (Daramc contemplated sales opportties in 

"new markets, new terrtories" such as Easter Europe or Asia, where H& V "may have 

better representation.")). 

184 
1185. Thus, virtally all collaboration in the United States was excluded. (pX0094 at 013, in 

camera ( 

001 (virtally 

l); PX1325 at all potential customers in the Americas had 100% supply relationships with 

Daramic and/or H&V at the time the A eement was entered);PX0925 (Porter, D . at
 

95-97, in camera) H 

1186. 

)). Daramic representatives have made a small volume of sales on behalf of H& V in Brazil and India, f J over five
 

years. (PX0014, in camera; PX2145 at 001-002).. 

1187. 

1188. In Februar 2003, Daramcand H&V considered expanding the Agreement to include 

Nippon Sheet Glass (NSG), a Japanese manufactuer of AGM separators and PE 

separators (though its subsidiar, Ni on-Muki. PX1318. The three-wa alliance 

idea did not come to frition, but f
 

1189. 

.J (PX0094 at 002, in camera; RX01014; PX2150 at 001, in camera; PX0158, in camera). 

1190. 

.J (pX0923 (Hauswa1d, IHT at 286), in camera). 

1191. 

J (PX0923 (Hauswa1d, llT at 292, in camera)). 

185 
1192. The Agreement is not needed to put on customer appreciation events jointly. 
 (Roe, Tr. 1811-1812; RX00370 at 002). 

1193. 

) (pX0925 (Porter, Dep. at 107-108), in camera)). 

1194. Joint techncal collaboration .) (pX1356 at 

001) (Daramic and H&V each "will maintain (their) own intellectual property" under the 

Agreement). 

1195. To the extent that the paries to the Cross Agency Agreement exchanged any confidential 

information, it was rotected b non-disclosure rovisions and other restrctions against 

improper use, .) (PX0094 at 007-008, in
 

camera; PX1356 at 001 (noting"(a) Confidentiality Agreement exists between 

(H&V/Daramc) and each of 
 its employees" that covers exchanges between the

companes and communcations with customers in connection with activities 

contemplated by the Agreement)). 

1196. Durg the life of 
 the cross-agency agreement between Daramic and H&V, Daramc 

never paid any commissions to H&V because H&V never made any sales ofPE durg 

the course of the agreement. (Roe, Tr. 1810). 

XII. Remedy
 

A complete divestitue is required to restore the competition that the merger eliminated 

1197. Dr. Simpson testified that to restore the competition lost though Daramc's acquisition of 

Microporous, a remedy would need to recreate a firm similar to the Microporous that 

would have existed but for the acquisition. (Simpson, Tr. 3262-3263). Dr. Simpson 

stated that, at a mimum, this would require recreatig a fi with production facilities 

in both the United States and Europe, with intellectual proper comparable to that of 

Microporous, à techncal staff còmparab1e to that of 
 Micro porous, a product mix comparble to that of 
 Micro porous, and intagible assets (kowledgeable and skilled workforce, industr reputation) comparable to that of 
 Micro porous. (Simpson, Tr. 3263). 

A divestitue needs to include the former MPLP facilties and the business associated with those 

facilities to provide the scale needed to compete 

1198. 

186 
Sim son, Tr. 3418, in camera). Mr. Gilchrst 

1199. 

1200. MPLP's PE separator lines were unique. All the PE lines installed or planed were 

designed specifically to be capable of producing PE or CellForce separators. All other 

PE separator lines elsewhere in the world are only capable of producing PE. (Trevathan, 

Tr.3714). 

1201. At the time ofthe acquisition, Daramic's profit margins on HD were _l than the 

profit margins on CellForce and Flex-SiL. (Gilchrst, Tr. 467, in camera). 

1202. Daramic views global scale as critical to success. On Janua 23,2007, Mr. Toth made a 

presentation at the J.P. Morgan Anual High Yield Conference. (Toth, Tr. 1430-32; 

PX0484 at 001-002) The presentation to the J,P. Morgan meeting states that global scale 

is a "crtical success factor." The narative that accompaned the slide states: "To be the 

market leader in the lead acid separator market, you need several thngs: global scale and 

servce..." (PX0484 at 
 019; Toth, Tr. 1434; PX0483 at 013). Po1ypore's separator . 

business was "positioned for growt" because it had "multiple sites that allow us to have 

the scale and crtical mass to servce customers on a global basis." (PX0483 at 013). 

1203. Exide believes that an effective remedy in ths matter would require l 

(Gilespie, Tr. 3051-3054, in camera). 

1204. MiCfoporous believed that it was "imperative" to have an R&D and testing laboratory in 

order to be competitive. (Gilchrst, Tr. 327-328; see also Axt, Tr. 2109-2110 ("techncal 

experse" is important); Gilespie, Tr. 3051-3052, in camera (l _J)). 

187 
1205. Support of a large batter manufacturer is important because when a battery separator
 

manufactuer's customers are small companes, each time its customers order separators, 

the order is small, which affects production and efficiency costs. (pX0907 (Kung, Dep. 

at 70, in camera)). l 

camera)). 

A divestitue needs to include the former MPLP facilities in the US and Europe to attract global 

customers that seek multi-plant suppliers for global sourcing and surety of supply 

1206. 

(Gilchrst, Tr. 309-10,456-57, in camera; PX207, in camera). 

1207. 

J (Gilespie, Tr. 2969-2970; Gilespie, Tr. 3131-3132, in camera). MPLP responded positively to Exide's desire to 

have supply from one plant in the US and one in Europe. (Gilespie, Tr. 2970). 

1208. Exide's experience in Daramc's handling 
 of the stre at their Owensboro plant strke 

reinforced to Exide the need to have backup sources of separator supply in order to avoid 

supply disruptions. (Gilespie, Tr. 2992-2993). 

1209. Suffcient entr would require an entrant to have two manufactug facilities to replicate 

the redundancy and surety of supply rovided by MPLP and Daramc. As Mr. Axt noted, 

l 

.J (Axt, Tr. 2143, in camera). for EnerSys that its suppliers have more than one plant. (Axt, Tr. 2129). 

1210. Daramc emphasizes the importance of maitaining multiple sepaIator manufactg 

plants when dealing with customer. (Roe, Tr. 1318-1319). Daramc believes that 

having manufacturig facilities in varous pars of the world provides securty of supply 

to customers. (Roe, Tr. 1318-1319). Daramc views ths as a "competitive advantage." 

188 
(Hauswa1d, Tr. 722, 726-727, 807, in camera). Daramc adverises to customers that it 

can give them local supply from a global company. (Hauswa1d, Tr. 711, 722; PX0582 at 

018). 

1211. 

camera). 

1212. The reason Microporous.decided to open a second facility in Europe was twofold. A 

European facility would be close to EnerSys's European operations, and havig a second 

facility in Austra provides backup for the United States if something were to happen at 

Piney Flats. (Gaugl, Tr. 4602).
 

1213. MPLP openig a European facility actually helped it expand its business in the United 

States. (Trevathan, Tr. 3773). The Feistrtz expansion freed up CellForce capacity in the
 

US. (Trevathan,Tr. 3774). Trojan Batter was interested in ths excess capacity which 

would enable it to switch a milion 
 square meters of its F1ex-Si1 purchases to Cellorce 

for deep-cycle batteres. (Trevathan, Tr. 3740) But the priar reason for the Austran 

expanion was to service European customers from a European facility. (Trevathan, Tr. 

3709): 

1214. Trojan was ver conceed about the fact that MiCfoporous only had one manufactung 

facility. (Godber, Tr. 225). Trojan believed it was important for Microporous to have 

more than one manufactung facility for its separators so that if one facilty was damaged 

by fie or some other cause product would stil be available from another facility. 

(Godber, Tr. 225-26). "Ths scenaro (single source/single site) really scares me - if 

somethg happened to your facility TBC would be out of 
 business. We are looking to 

Amerace to come up with a plan here to miniize ths risk." (PX1660 at 002-003);
 

1215. MiCfoporous helped alleviate Trojan's concern because "now they 
 had at least dual plants and there would be some protection." (Godber, Tr. 226). 

1216. Having access to a separator supplier that has multiple plants is importt for Crown in 

ters of surety of supply in the event of a work stoppage or other disruption to supply:
 

(Balcerak, Tr. 4127). 

1217. The existig contract between Daramicand Crown contai a 

a1cerzak, Tr. 4111, in camera; RX00994 at 009, in 

189 
Allowing customers to terinate exclusive to new exclusive contracts wil enable new entr to 

gain market share and scale 

1218. Dr. Simpson noted that the,remedy should also address Daramc'suse of exclusive 

contracts by reducing the share of the market covered by Daramic's exclusive contracts. 

(Simpson, Tr. 3264). 

XII. Witness Backgrounds
 

190 
1219. Richard R. Godber is CEO and president of Trojan Battery Company in Santa Fe
 

Sprigs, Californa. (Godber, Tr. 133). Trojan Batter is the largest producer of deep-


cycle batteries in the world. Trojan Battery has been in business for 84 years and has
 

been producing deep-cycle batteres since 1952. (Godber, Tr. 133). As president and
 

CEO, Mr. Godber is responsible for the overall operation of the company, including 

strategic planng. (Godber, Tr. 134). Mr. Godber is extensively involved in 

procurement of the thee largest and most expensive par of a deep-cycle batter, the
 

lead, the plastic, and the separators. (Godber, Tr. 134). Mr. Godber personally 

negotiates the final pricing and contract terms with battery separator suppliers. (Godber, 

Tr. 135).
 

1220. Trojan has been Microporous's largest customer since it began doing business with 

Microporous a little over 20 years ago. (Godber, Tr. 156-57). At the time of 
 the acquisition of 
 Microporous by Daramc, Trojan was Microporous's largest customer. 

(Godber, Tr. 157). Microporous told Trojan that it was its largest customer. (Godber, Tr. 

157). 

1221. Michael Gilchrst was President and CEO of 
 Micro porous for about ten years at the time 

of the acquisition. Prior to becoming CEO. he was vice president of sales and marketig 

and general manager at Microporous. (Gilchrst Tr. 297-298, 301). Following the
 

acquisition, Mr. Gilchrst worked at Daramc as Vice President of Product and Global 

Strategy. Ths position gave Mr. Gilchrst a perspective on Daramic's product strategy.
 

(Gilchrst, Tr. 297; PX920 (Gilchrst, lH. Tr. 44-45)). Mr. Gilchrst had professional
 

interactions with Daramic for over twenty years. (Gilchrst, Tr. 298). 

1222. Nawaz Queshi is vice president of engineering and technology 
 at U.S. Batter 

Manufactung Company. (Qureshi, Tr. 1990). He has been involved in the batter 

industr for 42 years and has 23 years of experience in deep-cycle batteres. (Queshi,
 

Tr. 1990-91). Mr. Queshi is primarly responsible for product design and. development, 

but he also is responsible for quality control, manufactug improvement, and cutomer 

serce. (Qureshi, Tr. 1991). In designng and developing batteries for U.S. 
 Batter, Mr. . 

Qureshi is responsible for selectig and procurg bater separators. (Queshi, Tr. 

1992). In makg a decision on what battery separator to use in a paricular batter, Mr. 

Qureshi looks at the price of the battery separtor in order to select the most costeffective separator for that batter. (Queshi, Tr. 1992). 

1223" Piere Hauswa1d has been at Daramic since 1981. In 2004, he was promoted to the 

position of 
 Vice President and General Manager ofDaramc. (Hauswald, Tr. at 629­

630). Mr. Hauswa1d is the Chief 
 Operating Offcer of Daramic. (pX0923 (Hauswa1d
 

IHT at 5))~ Piere Hauswald is the Vice President and General Manager of 
 Daramic, . 

LLC, and reports to Mr. Rober Toth. (pX0582 at 011). Mr. Hauswald is the person at 

Daramc who is principally responsible for strategy and strategic planng. Market 

intelli ence is also a ar of 
 his 'ob. auswa1d Tr.630-631" X0923 auswa1d IlI at 

17)). 

191 
(PX0904 (Seiber, Dep. 

1224. Rober Toth is the Chef 
 Executive Officer of Polyp ore, Inc. (pX0582 at 011). Mr. Bob 

Toth joined Po1ypore as CEO in 2005. (Hauswa1d, Tr. 13-15). 

1225. Dr. George Brilmyer is an electrochemst formerly employed by Microporous and 

subsequently by Daramc. He resigned from Daramc in August of2008 whereupon he 

began working for Atraverda Limited, a lead-acid batter manufactuer in the U.K., as 

VP of Business Development for 
 North America. (Bri1myer, Tr. 1825-1826). Dr. 

Brilmyer worked for Jo.hnson Controls for 10 years prior to joing Microporous. 

(Bri1myer, Tr.. 1848). Prior to working for Microporous ful tie, Dr, Bri1myer consulted 

with Microporous in 1997 through 1998 working on its CellForce project. (Bri1myer, Tr. 

1900). Whle employed by Microporous, Dr. Bri1m er held the osition of 
 Director of 

Research and Deve10 ment. rilm er Tr.l 826 .
 

1226. John "Kevin" Whear is the vice president oftechno10gy for Daramc. (Wea, Tr. 4659). 

Along with product development, Mr. Whear is responsible for knowig how the 

separators Daramc sells are used, including, "applyig the right (separators) to the right 

applications, and then if the customers are having trouble utilizing our products in their 

application or problems with the batteres, . . . address(ing) those as well." (Wear, Tr. 

4661 (pX0913 at 002)). 

1227. John Craig is the Chaian, President and CEO ofEnerSys. He is responsible for all 

fuctions withn EnerSys. Mr. Craig is knowledgeable about the import and export of
 

. batteres by EnerSys. (Craig, Tr. 2549). 

1228. John Pharo Gagge, Jr. is the Senor Director of 
 Engineering and Quality Assurce at 

EnerSys and has been with the 
 company for 14 year. (Gagge, Tr. 2481). Mr. Gagge 

oversees all new product design development, troubleshooting of customer problems, 

waranty issues, designng new applications, developing batteres for new markets, 2482-83). . supplier selection and control (including separators), and quality assurance. (Gagge, Tr.

1229. Lar Michael Burkert is the Senior Procurement Manager for EnerSys and report to Mr. 

Axt. Mr. Burkert has been workig in a purchasing role at EnerSys for 13 year and 

entered his curent position in 1996. Mr. Burlært's responsibilities include support at a 

corporate level some of the factories in Nort Amerca, and then globally responsibility 

for battery separators. He is responsible for negotiatig prices with separator suppliers, 

including Daramc. Póor comig to EnerSys, Mr. Burkert worked at East Pen for two 

year. Mr. Burkert has a bachelor's degree from the Univerity of 
 Pittburgh iI
 

mechancal engieerig and a master's degree in mechancal engieerig from Pen 

State. (Burkert, Tr. 2308-2310) 

192
 
1230. Arur T. Balcerzak began working as a consultant for Crown Battery in 1984-85. 

(Balcerzak, Tr. 4090). Mr. Balcerzak joined the buyout team in 1998 and became a ~ 

nine percent owner of Crown Batter while maintaining his consultancy. (Balcerzak, Tr. 

4091- 4092).
 

1231. Crown Battery sells deep-cycle, motive power and SLI batteres. (Balcerak, Tr. 4092). 

Fifty percent of its business is motive power battery sales. 
 (Balcerzak, Tr. 4092). 

1232. Gar Jensen is curently the Director of 
 Engineerng for Daramc, with responsibilities 

for worldwide capital equipment instalation. (PX0924 (Jensen, Dep. at 5-6)). i 

. 1233. Steven McDonald became the director of sales fro MPLP in 2002. In that position he 

was in charge of 
 worldwide sales 
 fro MPLP. (McDonald, Tr. 3781). After the purchase 

by Polypore, Mr. McDonald became the director of sales for specialty products for the 

merged firm. (McDonald, Tr. 3782). And eventually Mr. McDonald was promoted to 

head of sales for the Amercas for Daramic. (McDonald, Tr. 3783). 

1234. Larr Trevathan is curently the Vice president of Operations at Daramc. He has 

responsibilties for worldwide quality and contiuous improvement as well. (Trevathan, 

Tr. 3566). Mr. Trevathan began work at Microporous in November 2004, as Vice 

President of Operations. (Trevathan, Tr. 3568-3569). As VP of operations, Mr. 

Trevathan had responsibilties for all manufactung at Piney Flats facility and had 

ultimate responsibility for purchasing. (Trevathan, Tr. 3571). After Microporous began 

its efforts at expansion, Mr. Trevathan was put in charge ofthe European an of 
 the expansion as co-managig director of 
 Microporous products GmbH. (Trevathan, Tr. 

3572). 

1235. Eric Heglie is a principal at Industrial Growt Parners ("IGP"), a private 
 equity firm that makes investments in 
 industral manufactung companies. (pX2300 (Heglie, IHT at.7­

8)). IGP purchased a controllng interest 
 in Microporous in late 2006. (pX2301 (Heglie, 

Dep. at 8))., Mr. Heglie was the priar person at IGP involved in the purchase of 

Microporous. (PX2300 (Heglie, Dep. at 8)). Mr. Heglie sered on the board of 

Microporous along with other IGP people and along with Mike Gilchrst, president of 

Microporous. (pX2300 (Heglie, IHT at 33-34)). Mr. Hegle was the priar point
 

person at IGP for the 
 Microporous investment. When Microporous management called 

in to IGP they were mostly speakg to Mr. Heglie. (pX2301 (Heglie, Dep. at 11-12)) 

1236. Mr. Don Wallace is VP of sales and marketig for U.S. Batter manufacturig in Coron~ 

Ca. He has held that position for the last eight year, and has been with the company in 

different capacities since 1993. (Wallace, Tr. 1927-1928). Mr. Walace serves on the 

board of directors for U.S. Batter. (Wallace, Tr. 1928). Mr. Wallace is in charge of 

domestic and interational sales as well as servg on the new product development 

committee where he assists in the plang and development of new batter products US 

Batter intends to bring to màrket. In his capacity as a member of ths committee he 

helps evaluate separators for new batteres. (Wallace, Tr. 1929). 

193
 
1237. US Batter had revenues of$160 millon in 2008 and $130 million in 2007. Roughy 80­

percent of US Batteres revenues are attbutable to the deep-cycle category, and 
 it spent approximately $8millon dollars last year on separators for its deep-cycle products.. 

(Wallace, Tr. 1930-1931). 

1238. Exide is the first or second largest battery manufacturer in the world in each market that it 

paricipates in. (Gilespie, Tr. 2930). Exide segments its business into two broad
 

categories - transportation 
 and industral batteries. (Gilespie, Tr. 2930). Exide's 

transportation business focuses on staring, lighting and igntion (SLI) batteries such as
 

car and trck batteries. (Gillespie, Tr. 2930). The industral business is fuer divided 

into two categories - motive power (maiy forklift batteries) and network power (backup 

battery systems). (Gilespie, Tr. 2930-2931). 

1239. Mr. Douglas Gillespie is curently employed by Exide Techno1ogiès in the roleofvice 

president of global procurement. (Gilespie, Tr. 2926). Mr. Gillespie has been employed 

by Exide since 2003. (Gillespie, Tr. 2928-2929). Mr. Gilespie has been involved in 

varous procurement roles for over 18 years. (Gilespie, Tr. 2928-2929). As head of 

procurement at Exide, Mr. Gilespie's role is to look for opportties to manage and 

reduce Exide's costs. (Gilespie, Tr. 2959). Mr. Gilespie believes that from a
 

procurement prospective, there is an inherent risk in sole-sourcing. (Gilespie, Tr. 2945). 

Mr. Gillespie has been involved in the procurement of 
 batter separators for his entie
 

employment with Exide. (Gilespie, Tr. 2928-2929). Mr. Gillespie has been involved 

with negotiations with both Daramic and MPLP on numerous occasions. (Gilespie, Tr. 

2929). Mr. Gillespie has been directly involved in managing Exide's worldwide search 

for suppliers of batter separators. (Gilespie, Tr. 2929).
 

1240. Rober Cullen is Vice President of 
 Sales and Marketing for the Batter Separator 

Business Unit of 
 Hollingswort & Vose ("H&V"). He has sered in that capacity since 

mid-year 2001, prior to which he was Director of Sales at the company. (PX0917 

(Cullen, Dep. at 11, 13), in camera). 

1241. Kevi Porter is curently Director of Glass Technology at H&V. He was the Vice 

President of 
 the Batter Separator Business Unit at H&V from Januar 1997 though 

September 2003. He then became Director of 
 Research and Development for betl the 

Battery Separator Business Unit and the Filtration Products Business Unit at H&V until 

the end of2006. At that point, he changed positions and took on his curent role as 

Director of Glass Technology. (PX0925 (porter, Dep. at 9-15), in camera). 

1242. James W. Douglas is the Executive Vice President of 
 Douglas Battery Manufactung 

Company in Winston-Salem, Nort Carolina. (Douglas, Tr. 4047-4048). Mr. Douglas is 

not diectly involved in purchasing at Douglas Battery. (Douglas, Tr. 4087). Douglas 

Batter was founded in 1921. Douglas Batter produced SLI batteres though 2005, but
 

exited that market, and now manufactues predominantly motive batteries, coal-mig 

batteres, and batteres for UPS and te1ecom. (Douglas, Tr. 4048). 

194
 
1243. Guy Dauwe is curently the Managing Director at Amer-Sil. He has held that position 

since 2006. (PX0916 (Dauwe, Dep. at 8)). As the Managig Director, Mr. Dauwe is the 

head of Amer-Si1 and is responsible for sales and marketing strategies and pricing 

strategy and policies. (PX0916 (Dauwe, Dep. at 9)). Mr. Dauwe was Amer-Si1's 

Executive Vice-President of 
 Sales and Marketing from Apri12005 until he became the 

Managing Director. (pX0916 (Dauwe, Dep. at 8-9)). 

1244. Mr. James 
 Kung has been designg and building PE separator manufactung lines for 

many years and has more experence with the process than anybody else in the world. 

(PX0907 (Kung, Dep. at 57), in camera). Mr. Kung is a member of the BFR board of 

directors, and was involved in building all four of their production lines. (PX0907 (Kung 

Dep. at 59-61), in camera). Mr. Kung 
 plans on t J PX0907 

(Kung Dep. at 92), in camera). 

1245. EnerSys is a global manufacter of 
 industral batteres. (Axt, Tr. 2097). EnerSys is
 

broken up into thee businesses: (1) motive power, consisting maiy of electrc forklift 

batteres; (2) resere power, consisting of 
 UPS battery backup, specialty battery backup, 

te1ecom and utilities; and (3) aerospace and defense, consisting maiy of 
 batteries that 

go into submarnes, tan, in addition to fighter jets and cargo aicraft. (Axt, Tr. 2097). 

EnerSys is the largest industral battery manufactuer in the world, with plants in Nort 

Amerca, Europe, and Asia. (Axt, Tr. 2115-16). EnerSys produces batteres for both 

motive and U:PS applications. (Axt, Tr. 2097). EnerSys produces 38 - 40 percent of 
 the . 

motive batteres in the Nort Amercan market. (Axt, Tr. 2226). 

1246. Lar Axt has been the Vice president of Global Procurement at EnerSys for 9 years. 

(Axt, Tr. 2097). Mr. Axt is responsible for all global procurement of raw materals and 

fished goods in addition to indirect materal, and capital equipment. (Axt, Tr. 2097­

98). His responsibilities include selection of suppliers, negotiations, and supplier 

perormance management. (Axt, Tr. 2098). Mr. Axt is responsible for supporting 

EnerSys factories with separators, and he handles the selection and negotiations of 

separator suppliers. (Axt, Tr. 2097).
 

1247. Mr. Mitchell Bregman is cuently employed by Exide technologies in the role of 

president of Ex ide's industral Amercas division. (Bregman, Tr. 2898, in camera). In 

early 2007, Mr. Bregman was head of 
 Exide's Global Puchasing council; a council of 

Exide's senor purchasing people from each division who coordinated global purchasing
 

activities. (Bregman, Tr. 2898-2899, in camera). At that tie, Mr. Bregman and Mr. 

Gilespie were responsible for negotiating With Daramic on Exide's behalf. (Bregman, 

Tr. 2924-2925, in camera). 

1248. Rodger Hall is the global vice president for procurement at Johnon Controls Power 

Solutions ("JCI"). (Hall, Tr. 2662). Mr. Hall's responsibilities include the procuerent 

of all purchased materals at JCI, including the purchase ofPE separators. (Hall, Tr. 

2663-2664). Mr. Hall is also in charge of Jel's global separator strategies. (Hall, Tr. 

2664). Under Mr. Halls' leadership, JCI developed a separator sourcing 
 strategy. (Hall, Tr.2668). Mr. Hall sits on the board ofBFR. As a board member, Mr. Hall is familar 

195
 
with the cost strctue ofBFR because he reviews fiancial summares ofBFR. (Hall, 

Tr.2716). In addition to Mr. Hall, JCI has one other member of 
 the BFR board. (Hall, Tr.2716). This person acts as .l (Hall, Tr. 2847, in camera). 

196
 
UNITED STATES OF AMERICA 

BEFORE THE FEERA TRAE COMMISSION 

DOCKET NO. 9327 

IN THE MATTER OF
 

POLYPORE, INTERNATIONAL, INC.
 

COMPLAIT COUNSEL'S
 

PROPOSED CONCLUSION OF LAW 

1. The Federal Trade Commission ("FTC") has jursdiction over the subject matter of ths 

proceeding and over Respondent Po1ypore Interational, Inc. ("Daramc" or
 

. "Respondent"), puruant to Section 5 of 
 the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 45, and Sections 7 and 11 of 
 the Clayton Act, 15 D.S.C. §§ 18, 21(b). 

2. The FTC has jursdiction pursuat to Section 11 of 
 the Clayton 
 Act, 15 U.S.C. § 21, to 

bring this administrative proceeding agaist the Daramc/Microporous merger. 

3. Daramic is a corporation, as "corporation" is defined in Section 4 of the FTC Act, 15 

D.S.C. § 44. 

4. Respondent was engaged in commerce, as "commerce" is defied in Section 1 of 
 the 

Clayton Act, as amended, 15 U.S.C. § 12, and affected coIIerce, as "commerce" is .
 

defined in Section 4 of 
 the FTC Act, as amended, 15 D.S.C. § 44. 

5. Microporous was engaged in commerce, as "commerce" is defined in Section 1 of 
 the 

Clayton Act, as amended, 15 D.S.C. § 12, and affected commerce, as "commerce" is 

defined in Section 4 of 
 the FTC Act, as amended, 15 D.S.C. § 44. 

6. The FTC is vested with authority and responsibilty for enforcing, inter alia, Section 7 of 

the Clayton Act and Section 5 of 
 the FTC Act. 15 D.S.C. § 21(a) and §45(a)(2). 

7. On Februar 29,2008, Daramic acquired Microporous Products L.P., ("Microporous"). 

The acquisition of 
 Micro porous ("the Acquisition") is a transaction subject to Section 7 

of the Clayton Act, 15 D.S.C. § 18, and Section 5 of the FTC Act, 15 D.S.C. § 45.
 

8. Section 7 of the Clayton Act prohibits any acquisition of stock or assets "where in any
 

line of commerce... in any section of the countr, th~ effect of such acquisition may be 

substatially to lessen competition or to tend to create a monopoly." 15 D.S.C. § 18. 

9. Section 7 is designed to arest in its incipiency not only the substatial 
 lessening of .competition from the acquisition by one corporation of the whole or any par of the stock 

197 
of a 
 competing corporation, but also to arest in their incipiency restraits or monopolies 

in a relevant market which, as a reasonable probability, appear at the time of suit likely to 

result at the time of the acquisition by one corporation of all or any par of the stockof 

any other corporation. United States v. E.I du Pont de Nemours & Co., 353 U.S. 586, 

589 (1957). 

10. A prima facie violation of Section 7: (1) the "line 
 of commerce" or product market; 

(2) the "section of the countr or geographic market; and (3) the tranaction's probable
 

effect on concentration in the product and geographic markets. FTC v. HJ. Heinz Co., 

246 F.3d 708, 713 (D.C. Cir. 2001); FTCv. University Health, Inc., 938 F.2d 1206, 1218 

(11th Cir. 1991); United States v. Baker Hughes Inc., 908 F.2d 981 (D.c. Cir.1990). 

11. Finding a prima facie violation of Section 7 creates a rebuttble presumption of 

anti competitive effects and shift the burden of going forward with evidence to 

Respondent. Respondent have the burden of producing evidence that shows that the 

market share statistics supporting the prima facie case give an inaccurate account of the 

Acquisition's probable effects on competition. Baker Hughes, 908 F.2d at 982-83; FTC v. 

Cardinal Health, 12 F. Supp. 2d 34,54 (D.D.C.1998). 

12. The appropriate lines of commerce within which to evaluate the probable competitive 

effects of the Acquisition are separators for 
 flooded lead-acid batteres in the following 

markets: (1) deep-cycle; (2) motive; (3) Automotive ("SLI"); and (4) unterrptab1e 

power supply stationar ("UPS").
 

13. The appropriate geographic area within which to evaluate the probable competitive 

effects of 
 the Acquisition is Nort Amerca. 

14. "Market shares which companes may control by merging is one of 
 the most importt 

factors to be considered" when analyzing the likely effects of a merger. Brown Shoe Co. 

Inc., v. United States, 370 U. S. 294, 343 (1962). A merger that significantly increases. 

market shares and market concentration beyond aleady high levels is so inerently likely 

to lessen 
 competition substatially that it is presumptively unawful under Section 7 of 

the Clayton Act. United States v. Philadelphia Nat'l Bank, 374 U.S. 321, 363 (U.S.
 

1963); Baker Hughes, 908 F.2d at 982-83; PPG, 798 F.2d at 1502-03; Cardinal Health, 

12 F. Supp. 2d at 52 (''uder Section 7 of the Clayton Act, a prima facie case can be made 

if the goverent establishes that the merged entities wil have a signficant percentage
 

of the relevant market - enabling them to raise prices above competitive levels"). 

15. The Hernda-Hirschman Index ("HHI") is an appropriate measure of market 

. concentration. E.g., University Health, 938 F.2d at 1211 n.12 (HHI is "most promient 

metod" of measurg market concentration); FTCv. Staples, 970 F. Supp. 1066, 1081­

82 (D.D.C. 1997); Ivaco~ 704 F. Supp. at 1419. ' 

16. Complait Counsel established its prima facie case by showing that the Acquisition 

produces a :f controlling a percentage share and HHI concentration levels in each of
 

the four relevant markets that make the merger inerently likely to lessen competition 

198
 
substantially, which means that the merger is presumptively unawful under Section of 7 

ofthe Clayton Act. Brown Shoe, 370 U.S. at 343. 

17. Complaint Counel established that Daramic and Microporous were the number one and 

two competitors in the deep-cycle, motive, and UPS markets and that no other company 

provides effective competition. Complaint Counsel established that Microporous was at 

least the thrd best alterative for customers in the SLI market. The acquisition of 

MiCloporous by Daramc signficantly increased concentration in the relevant product 

markets in Nort Amenca, and resulted in highly concentrated markets. 

18. Having established a prima facie case, the burden of production and proof shift to the
 

defendants to rebut ths presumption of anticompetitive har. United States v. Marine 

Bancorporation, Inc., 418 U.S. 602, 631 (U.S. 1974); Heinz, 246 F.3d at 715; Baker 

Hughes, 908 F.2d at 982-83. ''Te more compelling the prima 
 facie case, the more evidence the defendant must present to rebut it successfuly." Heinz, 246 F.3d at 725 

(quoting Baker Hughes, 908 F.2d at 991). Respondent has not demonstrated that the . 

market share statistics give an inaccurate prediction of the Acquisition's probable effect 

on competition. ''To meet their burden, the defendants must show that the market-share 

statistics. . . 'give an inaccurate predction of 
 the proposed acquisition's probable effect 

on competition.'" Cardinal Health, 12 F. Supp. 2d at 54 (quoting Staples, 970 F. Supp. 

at 1083); see Baker Hughes, 908 F.2d at 991. 

19. Respondent may rebut the prima facie case by demonstrating that entr by other fis
 

would likely aver the Acquisition's probable effects on competition by acting as a 

constraint on Daramc's exercise of 
 market power. For entr to rebut the presumption of anti competitive effects, the evidence must show not merely that a firm might enter, but 

that "entr into the market would likely aver anticompetitive effects from (the J 

acquisition." Staples, 970 F. Supp. at 1086 (quoting 
 Baker Hughes, 908 F.2d at 989). 

20. Entr must be tiely, likely, and suffcient in its magntude, character and scope to deter
 

or counteract the competitive effects of a merger. Merger Guidelines § 3.0; Chicago 

Bridge & 
 Iron Co. N V. v. FTC, 534 F.3d 410,427-429 (5th Cir. 2008); see also Cardinal 

Health, 12 F. Supp. 2d at 55-58 
 (adopting "timely, likely, and suffcient" test). In order


for entr to be suffcient to restore competition, it must be entr that replaces the 

competition that existed prior to the acquisition and such entrants must be profitable at 

pre-merger prices. Even a showing of actual entr is insuffcient to alleviate concer,
 

uness that entr also indicates the likelihood of suffcient growt by the entrant to deter . 

or counteract the anticompetitive effects of 
 the merger. Chicago Bridge & Iron Co., 138 

F.T.C. 1024, 1067 (2005) (notig "new entrants and frge competitors" might not
 

replace lost competition), affd sub nom. Chicago Bridge & Iron Co. v. FTC, 534 F.3d 

410 (5th eir. 2008); see also United Tote, 768 F. Supp. at 1082 ("entr. . . would not
 

constrai anti-competitive price increases by inQ1bents"). Respondent has offered no 

evidence to satisfy these requirements, and specifically have offered no evidence that any 

alleged entrant will enter the relevant product markets in the Nort America withn two 

years, be profitable at pre-merger prices, and fully replace MiCfoporous as a competitive 

force. 

199
 
21. Respondent has not demonstrated that actual or potential entrants constrain Daramic's 

exercise of market power. Due to high barers, entr by new manufactuers or the 

expansion of existing manufactuers is not likely to avert the anti 
 competitive effects of 

the Acquisition in the relevant markets. 

22. Re,spondent has not presented an efficiencies defense in support of the merger. 

23. Respondent has not produced any signficant evidence rebuttg the presumption of a
 

violation of Section 7 of the Clayton Act and Section 5 of the FTC Act. Because 

Respondent did not produce evidence sufficient to rebut the presumption of a violation of 

Section 7 of the Clayton Act, the burden of producing furter evidence of anticompetitive 

effects did not shift to Complaint Counsel. 

24. Although Complaint Counsel is not required to prove the existence of actual 

anti competitive effects resulting from the merger, such evidence, either in the form of 

unlateral post merger price increases or coordinated interaction, negates any attempt to 

rebut the FTC's prima 
 facie case, and independently establishes a violation of Section 7
 

of the Clayton Act and Section 5 ofthe FTC Act. 

25. The Acquisition is likely to increase Daramic's ability to raise prices unilaterally in the 

relevant markets because the Acquisition elimates competition from Microporous,
 

Daramc's closest and only competitor in the deep-cycle, motive, and UPS markets, and 

eliminates a thd competitor in the SLI märket. 

26. The acquisition is likely to give rise to coordinated anticompetitive effects though tacit 

or express collusion. Section 7 of 
 the Clayton Act seeks to prohibit excessive 

concentration, and the oligopolistic price coordination it portends. Where rivals are few, 

fis will be able to coordinate their behavior, either by over collusion or implicit
 

undertanding, in order to restrct output and raise price. See Heinz, 246 F.3d at 724-25; 

University Health, 938 F.2d at 1218 Ii.24. 

27. Complaint Counsel need not show a likelihood of explicit collusion. A merger violates 

Section 7 of the Clayton Act if the remaining fis wil be more likely to engage in 

conduct that is likely to result in higher prices, even if that conduct, in itself, would be 

entirely lawf. Alcoa, 377 U.S. at 280. Section 7 seeks to prevent a market strctue that 

enances the abilty to engage in both explicit and tacit collusion. Absent extraordinar 

circumstances, a merger that results in an increase in concentration above cerain levels 

''raisers) a likelihood of 'interdependent anticompetitive conduct.'" PPG Indus., 798 F.2d 

at 1503 (quoting Gen. Dynamics, 415 U.S. at 497; see alsoFTCv. Univ. Health, Inc., 938 

F.2d 1206,1218 n. 24 (11th Cir.1991) (hgh concentration makes it "easier for fis in
 

the market to collude, expressly or tacitly, and thereby force price above or farer above 

the competitive level"). The relative lack of competitors eases coordination of actions, 

explicitly or implicitly, among the remaing few to approximate the performance of a 

monopolist. 

200
 
28. Complait Counsel has offered substantial evidence of anti 
 competitive effects resulting 

from the merger, any of which would independently mandate a finding against 

Respondent as a matter oflaw. 

29. The Acquisition violates Section 7 of the Clayton Act because "the effect of such 

acquisition may be substantially to lessen competition or to tend to create a monopoly." 

15 U.S.C. § 18. The Acquisition also constitutes an unfair method of competition in or \ 

affecting commerce in violation of 
 Section 5 of 
 the FTC Act. 15 U.S.C. § 45. 

30. Section 5 of the FTC Act prohibits ''ufair methods of competition in or affecing
 

commerce, and unfai or deceptive acts or practices in or affecting commerce." 15
 

U.S.C. § 45(a)(1) (2008). 

31. Conduct that violates Section 1 or 2 of 
 the Shenan Act is deemed to constitute an unfair 

method of competition and hence a violation of Section 5 of the FTC Act as well. FTC v. 

Cement Inst., 333 U.S. 683, 694 (1948); Fashion Originators' Guild v. FTC, 312 U.S. 

457,463-64 (1941). 

32. Prior to the Acquisition, Daramc engaged in agreements, contracts or combinations with 

other entities that constituted unfair methods of competition in violation of Section 5 of

the FTC Act. .
 

33. To meet its burden of 
 proof under Count II of the Complaint, Complaint Counsel must 

establish thee elements: 1) the existence of a contract, combination, or conspiracy among 

two or more separate entities, that 2) uneasonably restrains trade, and 3) affects intertate 

or foreign commerce. See, e.g., Law v. NCAA, 134 F.3d 1010, 1016 (10th Cir.1998). 

34. Under Section 5 of the FTC Act, Complaint Counsel makes out a prima facie case, and 

gives rise to a presumption of 
 violation, by showing: 1) Daramic's substantial market

power and the anti 
 competitive natue of the challenged restraint; or 2) tle challenged 

restrait is "inerently suspect," i.e., presumptively anticompetitive even without a 

showing of 
 market power. United States v. Visa Us.A., Inc., 344 F.3d 229, 238 (2d Cir. 

2003) (full rule of 
 reason analysis); PolyGram Holding, Inc. v. FTC, 416 F.3d 29 (D.C. 

Cir. 2004) (inherently suspect restrait).
 

. 35. Respondent may rebut this presumption of 
 violation by showig a pro-competitive 

justification for the restraint. If the restrait is not reasonably necessar to achieve the 

assered justification, or those objectives may be achieved in a less restrctive maner, the 

Respondent's effciency defense fails. Visa, 344 F.3d at 238; PolyGram, 416 F.3d at 36­

38. 

36. Daramc has not demonstrated 
 a pro-competitive justification for the challenged restraint. 

Alteratively, the anticompetitive effects of 
 the restraint outweigh the pro-competitive 

benefits of the challenged restraint. 

201
 
37. Complaint Counsel has provided substantial evidence that Daramic has substatial 

market power, and that the challenged restraint is anti 
 competitive by natue, is 

"inherently suspect," and is not reasonably necessar to achieve its claied objectives. 

38. The agreement between Daramc and H&V is a contract, combination, or conspiracy 

among two or more separate entities that uneasonably restrains trade and affects 

interstate or foreign commerce, and constitutes a violation of Section 5 of the FTC Act. 

39. Prior to the Acquisition, Daramic engaged in 
 monopolistic conduct and/or attempts to 

monopolize, which constituted unfair methods of competition in violation of Section 5 of 

the FTC Act. 

40. To meet its burden of 
 proof under Count III of the Complaint, Complait Counsel may , 

establish an offense of monopolization or attempted monopolization pattered on 

stadads ofliabilityunder Section 2 of 
 the Sheran Act. Cement Inst., 333 U.s. at 694. 

41. Complaint Counsel makes out a prima facie case of monopolization, and gives rise to a 

presumption of violation, by demonstrating two elements: 1) the possession of monopoly 

power in the relevant market and 2) the wilfu acquisition or maintenance of 
 that power 

as distinguished from growt or development as a consequence of superior product, 

business acumen, or historic accident. United States v. Grinnell Corp., 384 U.S. 563, 

570-71 (1966); see also United States v. Microsoft Corp., 253 F.3d 34, 50 (D.C. Cir. 

2001). 

42. Complait Counsel makes out a prima facie case of attempted monopoly maintenance, 

. and gives rise to a presumption of violation, by demonstrating four elements: 1) that the 

defendant possesses monopoly power, and 2) has engaged in predatory or anti 
 competitive 

conduct with 3) a specific intent to monopolize, and 4) a dangerous probability of 

maintaining monopoly power. Lorain Journal Co. v. United States, 342 U.S. 143, 154 

(1951). 

43. Monopoly power may be inferred from Daramic's possession of a dominant share of one 

or more of the relevant markets defined herein which are protected by entr barers.
 

Microsoft, 253 F.3d at 51 (citations omitted). 

44. Conduct is exclusionar when it tends to exclude one or more competitors on some basis 

other than efficiency, i.e., when it tends to impai the opportties of rivals but either 

does not fuer competition on the merts or does so in an unecessarly restrctive way. 

Aspen Skiing Co. v. Aspen Highland Skiing Corp., 472 U.S. 585,605 & n. 32 (citations 

omitted). 

45. Complait Counsel bear the intial burden to show that Respondent's conduct impairs 

the ability of one or more signficant rivals to compete effectively, and thus to constrai 

the exercise of monopoly power by the Daramc. If a prima facie case of competitive 

har is successfully established, then Respondent may proffer a pro 
 competitive 

202
 
justification for its conduct. United States v. Dentsply, 399 F.3d 181, 187 (3d Cir. 2005); 

LePage's Inc. v. 3M, 324 F.3d 141, 164 (3d Cir. 2003); Microsoft, 253 F.3d at 69. 

46. It is not necessar for Complaint Counsel to prove that a rival of 
 Respondent has been entirely excluded from the market. It is instead sufficient to show that the competitive 

vigor of a signficant rival has been impaired. Microsoft, 253 F.3d at 60; Dentsply, 399 

F.3d at 191. 

47. It is not necessar to show that the challenged agreements are completely 
 exclusive; near 

exclusivity wil suffce. United Shoe Machinery Corp. v. United States, 258 U.S. 451,
 

455 (1922); 
 Microsoft, 253 F.3d at 68; Masimo Corp. v. Tyco Health Care Group, L.P., 

2006 U.S. Dist. LEXIS 29977 (C.D. CaL. March 22,2006); R.J. Reynolds Tobacco Co. v. 

Philip Morris Inc., 60 F. Supp.2d 502,510-11 (M.D.N.C. 1999). Likewise, it is not 

necessar to show that any paricular percentage of the relevant market has 
 been 

foreclosed. Evidence of actul or likely competitive har wil suffce. Microsoft, 253 

F.3d at 70; Dentsply, 399 F.3d at 185; LePage's, 324 F.3d at 157; Conwood Co. v. United 

States Tobacco Co., 290 F.3d 768, 783 (6th Cir. 2002). 

48. Daramic specifically intended that its conduct in negotiating with, and obtaining 

exclusionar contracts from, customers would raise its competitors' costs and impair their 

abilty to constrain the exercise of market power by Daramic. Respondent's specific 

intent may be proven'by direct evidence, or infered from its egregious conduct. 

Spectrm Sports v. McQuilan, 506 U.S. 447, 454-55 (1993) ("Unfai or 
 predatory conduct may be suffcient to prove the necessar intent to monopolize."). 

49. Daramc was su,ccessfu1 in exerng monopoly power that hared competition and 
 hence 

customers. United States v. Dentsply, 399 F.3d 181, 189-191 (3d Cir. 2005) 

50. Daramc's conduct cared a dangerous probability of maitaining its monopoly power in 

the relevant markets defied herein. 

51. Cognzable effciencies are those that offer the prospect of lower prices, greater output, or 

other benefits to consumer. See, e,g., Roland Mach. Co. v. Dr~sser Indus. Inc., 749 F.2d 

380,395 (7th Cir. 1984). Respondent failed to demonstrate that its challenged acts and 

practices produced any such effciencies. 

52. Daramc's exclusionar conduct meets the standards ofliabilty for monopolization or 

attempted monopolization under Section 2 of the Sherman Act, and constitutes a 

violation of the FTC Act. 

53. Complaint Counsel met its burden of proof in support of Count I, Count II, and Count II 

of the Complaint. 

54. Divestitue is the proper remedy. 

203
 
55. Complete divestitue of all assets acquired in the Acquisition is required to restore 

competition as it existed prior to the Acquisition. The Clayton Act requires tha.t upon a 

fidig of a Section 7 violation, ''te Commission. . . shall . . . order. . . such person to 

cease and desist from such violations, and divest itself of the ... assets, held." 15 V.S.C. § 

21 (b).
 

56. Relief designed to restore competition as it existed prior to the Acquisition is appropriate. 

"In Section 7 cases, the principal purse of relief is to restore competition to the state in 

which it existed prior to, and would have cohtinued to exist but for, the ilegal merger.'" 

In the Matter ofB.F. Goodrich Co.~ 110 F.T.C. 207 at 345 (1988), (quoting In the Matter 

of RSR Corp., 88 F.T.C. 800, 893 (1976)). . 

57 . The Order entered hereinafter is necessar and appropriate to remedy the violations of 

law found to exist. 

204
 
Dated: July 17, 2009 Respectfully submitted, 

BY:&. fi ~AíJ
 

J. ROBERT ROBERTSON
 

Federal Trade Commission
 

Bureau of Competition
 

600 Pennsylvania Ave., N.W.
 

Washington, DC 20580
 

Telephone: (202) 326-2008
 

Fax: (202) 326-2884
 

Complaint Counsel
 

205
 
CERTIFICATE OF SERVICE 

I hereby certify that on July 17,2009, I filed via hand delivery an original and two 

copies of the foregoing public version of Complaint Counsel' s Post-Trial Findings of 

Fact with:
 

Donald S. Clark, Secretary 

Office of the Secretar 

Federal Trade Commission 

600 Pennsylvania Avenue, NW, Rm. H-135 

Washington, DC 20580 

I hereby certify that on J u1 y 17, 2009, I served via electronic mail and hand 

delivery two copies of the foregoing public version of Complaint Counsel's Post-Trial 

Findings of Fact with: 

The Honorable D. Michael Chappell 

Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Avenue, NW, H-106 

Washington, DC 20580 

oa1i (gftc.gov 

I hereby certify that on July 17, 2009, I served via electronic mail delivery and 

first class mail two copies of the foregoing public version of Complaint Counsel's PostTrial Findings of Fact with: 

Wiliam L. Rikard, Jr., Esq. 

Eric D. Welsh, Esq. 

Parker, Poe, Adams & Bernstein, LLP 

401 South Tryon Street, Suite 3000 

Charlotte, North Carolina 28202 

wiliamrikard (g parkerpoe. com 

ericwelsh (g parkerpoe. com 

Linda Cunning am 

Federal Trade Co 

600 Pennsylvania A venue, NW 

Washington, DC 20580 

Telephone: (202) 326-2638 

lcunningham (gftc.gov