: ) 

mniteb 6tates of amerita 

April 16, 2010 

FEDERAL TRADE COMMISSION 

Docket No. 9327 

In the Matter of 

POLYPORE INTERNATIONAL, INC., 

a corporation. 

RESPONDENT'S APPEAL BRIEF 

PUBLIC DOCUMENT 

Parker Poe Adams & Bernstein LLP 

Three Wachovia Center 

401 South Tryon Street, Suite 3000 

Charlotte, NC 28202 

(704) 372-9000 

Attorneys for Respondents. 
TABLE OF CONTENTS 

STATEMENT OF THE CASE ....................................................................................................... 1 

INTRODUCTION .............................................................................................................. 1 

STATEMENT OF FACTS ................................................................................................. 1 

SUMMARY OF THE ARGUMENT ................................................................................. 6 

QUESTIONS PRESENTED ........................................................................................................... 8 

COMMISSION STANDARD OF REVIEW .................................................................................. 8 

ARGUMENT .................................................................................................................................. 9 

I. COMPLAINT COUNSEL FAILED TO PROVE A PROPER RELEV ANT 

MARKET ................................................................................................................ 9 

A. Complaint Counsel Failed to Offer Reliable, Probative Evidence 

Sufficient to Prove Their Alleged Four Relevant Product Markets ........... 1 0 

1. Complaint Counsel failed to present competent economic 

evidence to prove a relevant product market. ................................ 11 

2. The ID selectively picks evidence to support its conclusion of 

four product markets while ignoring substantial contrary 

evidence demonstrating an all-PE product market. ....................... 16 

a. There is significant overlap among the end-uses 

outlined by the four product markets ................................. 16 

b. The ID deals with cvidcnce erroneously and 

inconsistently ..................................................................... 17 

c. The ID relies on unreliable customer testimony ................ 19 

B. Complaint Counsel Failed to Sustain Their Burden to Establish a 

Relevant Geographic Market. .................................................................... 19 

II. COMPLAINT COUNSEL FAILED TO PROVE THAT SUBSTANTIAL 

ANTICOMPETITIVE EFFECTS HAVE OCCURRED OR ARE 

REASONABLY LIKELY TO OCCUR. .............................................................. 25 

A. The ID Erred By Concluding That the Acquisition Caused 

Anticompetitive Effects in the Alleged SLI and UPS Markets ................. 25 

B. Complaint Counsel Failed to Prove Any Other Anticompetitive 

Effects In Their Alleged Markets ............................................................. .28 
C. Complaint Counsel Failed to Prove that Anticompetitive Unilateral 

Effects Have Occurred or Are Likely ........................................................ 32 

D. Complaint Counsel Failed to Prove that Anticompetitive Coordinated 

Interaction Has Occurred or Is Likely ....................................................... 38 

III. THE ACQUISITION WILL NOT HAVE ANY ADVERSE EFFECTS ON 

COMPETITION BECAUSE BARRIERS TO ENTRY ARE LOW AND 

SUBSTANTIAL CUSTOMERS HAVE SPONSORED AND 

ENCOURAGED ENTRY BY { 

} ...................................................................................................................... 41 

A. Barriers to Entry Into Battery Separator Production are Low .................. .41 

B. Substantial Customers, Including the Largest Worldwide Battery 

Producers, Have Sponsored and Encouraged Entry by { 

} .............................................................. 45 

1. { 

} ........................................................................................... 46 

2. { 

} ........................................................................................... 47 

3. { 

} ............................................................ 48 

IV. THE ORDERED RELIEF IS OVERBROAD, INAPPROPRIATE AND 

PUNITIVE ............................................................................................................ 50 

A. The Divestiture of the Feistritz Plant Is Improper, Unnecessary and 

Cannot Be Legally Justified ....................................................................... 50 

B. The Relief Order Contains Additional Provisions Which Are Not Tied 

to the Liability Found ................................................................................. 56 

CONCLUSION ................................................................................................................. 58 

11 
TABLE OF AUTHORITIES 

Cases 

BOC International LTD v. FTC, 557 F.2d 24 (2d Cir. 1997) ....................................................... 26 

Carter Prods., Inc. v. FTC, 268 F.2d 461 (9th Cir. 1959) ............................................................... 9 

Cowert v. Schweiker, 662 F.2d 731(1lth Cir. 1981) .................................................................... 14 

Cupp v. Alberto-Culver, U.S.A., 310 F. Supp. 2d 963 (W.D. Tenn. 2004) ................................. 15 

F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155 (2004) ......................................... 52 

Forsyth v. Humana, Inc., 114 F.3d 1467 (9th Cir. 1997) .............................................................. 33 

FTC v. Arch Coal, Inc., 329 F.Supp.2d 109 (D.D.C. 2004) ..................................................... 9, 10 

FTC v. Atlantic Richfield Co., 549 F.2d 289 (4th Cir. 1977) ....................................................... 26 

FTC v. Staples, Inc., 970 F.Supp. 1066 (D.D.C. 1997) .................................................................. 9 

FTC v. Swedish Match, 131 F.Supp.2d 151 (D.D.C. 2000) ......................................................... 10 

FTC v. Tenet Health Care Corp., 186 F .3d 1045 (8th Cir. 1999) ................................................. 14 

FTC v. Whole Foods Mkt., Inc., 548 F.3d 1028 (D.C. Cir. 2008) ................................................ 9 

In re Olin, No. 9196, 113 F.T.C. 400, 1990 FTC LEXIS 234, at 65 (June 13, 1990), rev. denied, 

986 F.2d 1295 (9th Cir. 1993) ................................................................................................... 54 

In the Matter ofB.F. Goodrich Co., 110 F.T.C. 207 (1988) ................................................... 42,51 

In the Matter of Chicago Bridge & Iron Co., No. 9300, 138 F.T.C. 1024(Op ofComm'n)(Dec. 

22, 2004) .......................................................................................................................... 9, 38, 51 

In the Matter of Chicago Bridge & Iron Co., No. 9300, 138 F.T.C. 1392 (initial decision)(2003), 

aff'd, 138 F.T.C. 1024 (2004) ................................................................................................... 33 

In the Matter ofSchering-Plough Corp., No. 9257 (Op ofComm'n)(Dec. 18,2003) ................. 14 

In the Matter of Trans Union Corp. No. 9255,2000 WL 257766 (F.T.C. Feb. 10,2000) ............. 8 

Int'l Tel. & Tel. Corp. v. General T. & E. Corp., 518 F.2d 913 (9th Cir. 1975) .......................... 10 

Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255 (7th Cir. 1981) ................................................. 35 

New York v. Kraft Gen. Foods, Inc., 926 F.Supp.321 (S.D.N.Y. 1995) .................................. 9, 25 

Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986) ................ 24 

Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320 (1961) ..................................................... 22 

United States v. Atlantic Richfield Co., 297 F. Supp. 1061 (S.D.N.Y. 1969) .............................. 25 

United States v. Baker Hughes, Inc., 908 F.2d 981 (D.C.Cir. 1990) ...................................... 42, 43 

United States v. Calmar, Inc. 612, F.Supp 1298 (D.N.J. 1985) .................................................... 42 

United States v. Country Lake Foods, Inc., 754 F.Supp. 669 (D.Minn. 1990) ...................... 14,23 

United States v. E.!. duPont de Nemours & Co., 353 U.S. 586 (1957) .............................. 9,56,57 

III 

-----.----~ 
United States v. Eastman Kodak Co., 63 F.3d 95(2nd Cir. 1995) ................................................ 20 

United States v. Falstaff Brewing Corp., 383 F. Supp. 1020 (D.R.I. 1974) ................................. 35 

United States v. Int'l Harvester Co., 564 F.2d 769 (7th Cir. 1977) .............................................. 35 

United States v. Oracle Corp., 331 F.Supp.2d 1098 (N.D.Cai. 2004) ................................ 9, 33, 34 

United States v. Syufy Enter., 903, F.2d 659 (9th Cir. 1990) ....................................................... 42 

United States v. Waste Management, 588 F. Supp. 498 (S.D.N.Y. 1983) ......................... 8,42,51 

Vaney v. Coleman Co., 385 F. Supp. 1337 (D.N.H. 1974) .......................................................... 35 

Other Authorities 

2B Phillip Areeda & Herbert Hovenkamp, Antitrust Law 538b (3d ed. 2007) ............... 13,15,51 

ABA Section of Antitrust Law, Mergers and Acquisitions, 3d. ed. (2008) ................ 10, 19,41,44 

U.S. Dep't of Justice & Fed. Trade Comm'n, Horizontal Merger Guidelines, 57 Fed.Reg. 41552 

(1992) .................................................. 6, 9, 10, 12, 13, 15, 18, 19,23,32,34,38,39,40,41,42 

Rules 

FTC Rule 3.54(a) ............................................................................................................................ 8 

iv 
TABLE OF ABBREVIATIONS 

The following abbreviations and citation forms are used in this Appeal Brief: 

CCFOF 

CCPTB 

CCPTRB 

ID 

IDFOF 

PX 

RFOF 

RPTB 

RPTRB 

RPTBRH 

RRCCFOF 

RX 

Complaint Counsel's Proposed Findings of Fact 

Complaint Counsel's Post-Trial Brief 

Complaint Counsel's Post-Trial Reply Brief 

Initial Decision (reference to page number) 

Finding of Fact in Initial Decision (reference to finding number) 

Complaint Counsel's Exhibit 

Respondent's Proposed Findings of Fact 

Respondent's Post-Trial Brief 

Respondent's Post-Trial Reply Brief 

Respondent's Post-Trial Brief for the Reopened Hearing 

Respondent's Reply to Complaint Counsel's Proposed Findings of 

Fact 

Respondent's Exhibit 

v 
STATEMENT OF THE CASE 

INTRODUCTION 

On February 22, 2010, Administrative Law Judge D. Michael Chappell (the "ALJ") 

issued his Initial Decision, finding that Respondent's acquisition of Microporous Products, L.P. 

("Microporous") in February 2008 violated Section 7 of the Clayton Act and Section 5 of the 

FTC Act. I In arriving at this decision, the ALJ ignored substantial evidence introduced by 

Respondent that proved the merger did not violate Section 7. He also disregarded legal and 

economic standards and tests that he himself had ruled applicable, grounded his determinations 

on the unreliable testimony of Respondent's customers and competitors and the opinions of 

Complaint Counsel's "expert" who, like the ALJ, skirted the proper standards and econometric 

analysis. Complaint Counsel's case was woefully deficient and the ID, in readily adopting 

Complaint Counsel's case, demonstrates manifest error. 

Nowhere is this error more evident than in the ALl's order divesting the Microporous 

facility in Feistritz, Austria - a facility that is outside Complaint Counsel's North American 

geographic market and which was not even in commercial operation at the time of the merger. 

The ALJ ordered divestiture of the Feistritz facility even though Complaint Counsel failed to 

show by a preponderance of the evidence that such divestiture is necessary to restore competition 

allegedly lost in North America. Much more is required under the law in this consummated 

merger. Respondent's acquisition of Micro porous does not violate Section 7 or Section 5. 

STATEMENT OF FACTS 

On February 29, 2008, Polypore International, Inc. acquired the stock of Microporous for 

approximately $76 million, $29 million in cash and $47 million in assumed debt (the 

I As noted in the ID, the allegation that a merger violates Section 7 and Section 5 "does not require an independent 

analysis." (ID 199). Therefore, this Briefrefers only to Section 7 for ease of reference. 
"Acquisition"). (RFOF 3). Due to the small value of the transaction, the parties were not 

required to make a premerger notification filing under the Hart-Scott-Rodino Antitrust 

Improvements Act of 1976. 

At the time of the Acquisition, Polypore's subsidiary, Daramic LLC ("Daramic") 

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

manufacturers, with total sales in 2007 of { },z (RFOF 227, 230, 239). Battery 

separators are placed between positively and negatively charged plates in batteries to prevent 

electrical short circuits while allowing ionic current to flow through the separators. (lDFOF 

17).3 PE separators are used in a wide variety of battery applications, including cars, trucks, 

buses, lawn mowers, golf carts, floor scrubbers, forklifts and back-up energy in critical buildings. 

On the other hand, Microporous was a small company making rubber-based separators 

out of a single facility in Piney Flats, Tennessee, with annual sales in 2007 of { }. 

(RFOF 316, 325, 332, 338). Microporous sold three products: Ace-Sil (a pure-rubber 

separator), Flex-Sil (a pure-rubber separator), and CellForce (a separator made of rubber and 

PE). (RFOF 106, 127, 160-62). Microporous did not sell pure-PE separators. (RFOF 318). Nor 

did it sell separators for use in back-up power applications. (RFOF 103, 361). In 2007, 

Microporous' sales of Flex-Sil constituted nearly { } of its total sales. (RFOF 338). 

Microporous primarily produced rubber separators - Ace-Sil and Flex-Sil - for "specialty" 

. . . 

batteries used in golf carts and floor scrubbers. (RFOF 118, 128,239, 314, 569, 734; Gilchrist, 

Tr. 299, 461-62, in camera; Hall, Tr. 2799). Ace-Sil and Flex-Sil each constitute their own 

separate product markets. (RFOF 109-26, 1335, 1340). 

2 The FTC Complaint only implicates Daramic. 

3 Separators can be made of paper, glass, wood, sintered polyvinyl chloride ("PVC"), polyethylene, rubber or 

plastic. 

2 
Daramic's PE separators did not compete with Microporous' rubber-based separators, 

and they are not economic substitutes for each other. (RFOF 120-24, 239, 248, 335, 544-550, 

1201). Daramic viewed the Acquisition as a means to diversify its product line, gain access to 

Microporous' rubber technology and enter the niche rubber market, as requested by customers. 

(RFOF 262; Hauswald, Tr. 898). 

Against this backdrop, Complaint Counsel argued that there were four distinct product 

markets: SLI, motive, UPS and deep-cycle,4 ignoring Polypore's substantial evidence that the 

product market in this case is but one single all-PE separator market. Battery separators can be, 

and are, substituted for each other among each of the four end-uses outlined by the rD. (RFOF 

69-78, 1185-1188, 769). Testimony by separator manufacturers and customers proved that a 

separator used for UPS also can be used in a motive application, and that a separator used for 

SLI also can be used in a deep-cycle application. (RFOF 72, 1185-1188, 769). This is because 

the only real difference between separators is their thickness. Thus, a separator for a UPS 

application may be as thin as 11 mils,s a size that easily fits into SLI applications. (RFOF 65, 

67). Similarly, an 11 mil separator for an industrial application is just as functionally effective in 

a car battery as a 10 mil separator used for most SLI applications. (RFOF 67, 71). 

Making separators is not "rocket science." The same manufacturer using the same 

machines can make PE separators for all applications. The raw materials and process are the 

same. The only differences emerge when the PE sheets pass through large calender rolls carved 

with profile patterns that can be adjusted for thickness. (RFOF 151-154, 939-940). Calender 

4 Definitions for "SLI," "motive," "UPS" and "deep-cycle" appear in the ID. (IDFOF 19,25,32,35). Separators 

used in motive and UPS applications are part of a larger category of "industrial" application separators (IDFOF 23), 

and separators used in UPS applications are also part of a larger category of separators used in "reserve power" 

batteries. (IDFOF35). 

5 A "mil" is one-thousandth of an inch. (Whear, Tr. 4688-89). 

3 
rolls can be, and are, swapped out of the PE separator machinery in a matter of hours, meaning 

that separator manufacturers making separators for SLI applications can easily make separators 

for industrial applications, and vice versa. (RFOF 151-56).6 

Producers of PE separators sell globally. (RFOF 186-202,203-223,493, 985). In 2008, 

Daramic exported { } of its product from North America. (RFOF 188). Entek, a powerful 

U.S.-based competitor in the PE separator industry, with plants located in Oregon and England 

and with PE separator sales in 2007 { }, exported { } of its product from 

North America. (RFOF 194-95, 926; RRCCFOF 172; RX00119 at 007). { 

} (RFOF 932-937, 1353). Likewise, Microporous 

sold separators to customers across the globe from its only facility in Piney Flats, Tennessee. 

(Gilchrist, Tr. 540-41). Microporous exported over { } 

(RFOF 192, 1146). Asian PE separator manufacturers like { } and the 

{ } supply separators to customers around the world, induding 

South America, Italy and Korea, from single manufacturing facilities. (RFOF 199, 1049, 1109). 

The PE separator market is dominated by extremely large, highly sophisticated global 

customers, induding (a) Johnson Controls Inc. ("lCI"), the largest battery manufacturing 

company in the world, mainly focusing on the production of batteries for SLI applications 

({ } of worldwide SLI battery sales), with sales of $38 billion in 2008, (b) Exide 

Technologies, Inc. ("Exide"), the second largest battery manufacturer in the world, sold 

approximately $3.7 billion worth of batteries in 2008, (c) EnerSys, the world's largest 

6 This ease with which a separator manufacturer may switch from making separators for SLI batteries to separators 

for industrial batteries - evidence important to understanding why { } and other manufacturers are able to 

easily enter Complaint Counsel's motive market - was ignored by the ALJ, undermining the ID's conclusions 

regarding market shares and entry. 

4 
manufacturer of batteries for industrial applications ({ } of worldwide industrial battery 

sales) with sales in excess of $2 billion in 2008 and (d) Trojan Battery Company ("Trojan"), a 

global manufacturer of batteries for deep-cycle applications, with sales in 2008 of { 

}. (RFOF 218, 438, 516, 606). These customers are "power buyers," or at least buyers 

with substantial options and leverage, who can and have constrained prices, subsidized entry, and 

facilitated incumbent expansion. Nothing as a result of the Acquisition has changed this power. 

Indeed, Daramic's share declined following the Acquisition. (RFOF 306-11). Since the 

Acquisition, Daramic { 

}. (RFOF 948-950, 1549). In 

addition, { 

}. (RFOF 948-950, 

963-972,981,991, 1549). 

Although largely ignored by the ALl, Entek has grown substantially, making it a strong, 

competitive force in the PE separator market and a significant actor in each of the ALl's 

incorrectly defined markets. It primarily produces separators for SLI applications, but can also 

make separators for other applications. In the past, Entek has produced significant volumes of 

separators used in other applications, including industrial and deep-cycle applications. At the 

time of the hearing, { 

} 

(RX00114; RFOF 943-44, 963-72). Because of { 

}, and { 

5 
}, Entek is an influential market competitor sufficient to constrain efforts to 

raise prices as a result of the Acquisition. (RFOF 969). 

Although the Acquisition closed more than two years ago, Complaint Counsel failed to 

produce any evidence that competition in fact has been lessened. (RFOF 306-11, 946, 1152, 

1300, 1384, 1549). Rather, the evidence shows that Daramic has lost sales, that competition in 

the separator industry is robust and that customers have the ability to obtain substantial volume 

of product from other competitors. In short, no anticompetitive effects resulted from the 

Acquisition, and none is likely. 

SUMMARY OF THE ARGUMENT 

In the modem era of antitrust cases, when mergers should be evaluated usmg the 

economic principles set forth in the Merger Guidelines, this ID is characterized by a wholesale 

lack of economic analysis, serious internal inconsistencies, and erroneous interpretation of the 

facts. This is even more striking given that this is a consummated merger. The ID's flaws build 

on one another, eventually concluding, without substantiation, that the geographic market is 

North America and, to compound the error, that a plant in Austria that was not operational must 

be divested to restore competition in North America. 

Complaint Counsel presented no quantitative economic evidence to prove their alleged 

relevant product or geographic markets. Remarkably, Complaint Counsel's economic expert 

admitted that he did not perform a thorough, rigorous analysis of the merger and conceded that 

he had failed to perform a SSNIP test. Even though the ID acknowledges that application of 

economic evidence is the best way to define the relevant market, it ignores this well-established 

principle. Instead, the ID adopts Complaint Counsel's expert testimony that focuses on "soft" 

qualitative factors, and relies on unreliable testimony of Complaint Counsel's witnesses, to find 

its four product markets and its North American geographic market. The ALJ fails to consider or 

6 

.-.-. ----------.~~~-
rej ects outright competent, often uncontroverted, evidence which contradicts the ID' s findings 

and conclusions, and in doing so, has effectively relieved Complaint Counsel of their burden of 

proof. The weight of the evidence shows that the proper product market is an all-PE separator 

market and that the proper geographic market is the world. 

After finding improper product and geographic markets, the ID incorrectly finds that the 

merger led to anti competitive effects. In considering the market shares and concentration levels 

post-Acquisition, the ID selectively picks facts which support its conclusions and ignores 

contrary facts and evidence. Complaint Counsel failed to present evidence to prove that 

anticompetitive unilateral effects have occurred or are likely to occur, or that anti competitive 

coordinated interaction has occurred or is likely to occur. 

Even if Complaint Counsel had sustained their burdens of proof, Respondent presented 

evidence that rebutted Complaint Counsel's case. The ID ignores evidence showing that the 

industry is dominated by powerful buyers who can, and do, constrain pricing and forestall any 

theoretical anticompetitive practices, evidence of power that continued to build even during the 

hearing and at the re-opened hearing in November 2009. (RFOF 1441, 1447; RPTB 21-24; 

RPTBRH 24-29). The evidence also demonstrates that these "power buyers" have supported 

new entry and incumbent expansion in order to promote competition in the marketplace. (RFOF 

1114-22, 1455; RPTB 35-44). The ID erred by ignoring the strength of these buyers and by 

failing to find that they would offset any competition allegedly lost as a result of the Acquisition, 

including the substantial amount of business Daramic has lost to other firms following the 

Acquisition. 

The most egregious error inthe ID is the inclusion of Microporous' Feistritz facility as 

part of the divestiture relief. In ordering this relief, the ID ignores the well-established principle 

7 

--------------------
that complete divestiture of all assets is required only if it is necessary to restore competition in 

the relevant market. United States v. Waste Management, 588 F. Supp. 498, 514 (S.D.N.Y. 

1983), rev'd on other grounds, 743 F.2d 976 (2d Cir. 1984). Complaint Counsel failed to show 

that the Feistritz plant affects competition in North America, or that divestiture of the Feistritz 

facility is necessary to restore any competition in North America. Testimony by customers and 

competitors made it clear that the Feistritz plant, which w.as not in operation at the time of the 

Acquisition, is not necessary to compete effectively in North America since it makes no sales in 

North America. Given this evidence, divestiture of the Feistritz plant is improper, punitive and 

cannot be sustained. 

QUESTIONS PRESENTED 

1. Did Complaint Counsel fail to prove a proper relevant product and geographic 

market? 

2. Did Complaint Counsel fail to prove that anti competitive effects have occurred or 

are reasonably likely to occur in the relevant product and geographic market? 

3. Does substantial· evidence regarding power buyers and entry demonstrate that no 

anticompetitive effects are likely to result from the Acquisition? 

4. Did Complaint Counsel fail to prove that the Acquisition gave Respondent 

monopoly power or a dangerous probability of achieving or maintaining 

monopoly power in their alleged North American motive, UPS and deep-cycle 

markets? 

5. Assuming arguendo the existence of liability, is the ordered relief, including the 

ordered divestiture of the Feistritz plant, inconsistent with the evidence and 

applicable legal standards and, therefore, overbroad, inappropriate and punitive? 

COMMISSION STANDARD OF REVIEW 

The Commission's standard of review is de novo, exercising "all the powers which it 

could have exercised if it had made the initial decision." FTC Rule 3.54(a); In the Matter of 

Trans Union Corp. No. 9255,2000 WL 257766 (F.T.C. Feb. 10,2000). The Initial Decision, and 

the findings contained therein, must be supported by a "preponderance of the evidence." In the 

8 
Matter of Chicago Bridge & Iron Co., No. 9300, 138 F.T.C. 1024, 1027 nA (Op of 

Comm'n)(Dec. 22, 2004); see also Carter Prods., Inc. v. FTC, 268 F.2d 461,487 (9th Cir. 1959). 

ARGUMENT 

I. COMPLAINT COUNSEL FAILED TO PROVE A PROPER RELEVANT 

MARKET. 

The definition of the relevant market is a critical requirement in antitrust cases. FTC v. 

Staples, Inc., 970 F.Supp. 1066, 1073 (D.D.C. 1997); see also United States v. Oracle Corp., 331 

F.Supp.2d 1098, 1110 (N.D.Cal. 2004). The proper definition of a relevant market is a 

"necessary predicate" to a Section 7 claim. See United States v. E.!. duPont de Nemours & Co., 

353 U.S. 586, 593 (1957). Complaint Counsel bear the burden of proving the relevant product 

and geographic market. New York v. Kraft Gen. Foods, Inc., 926 F.Supp.321, 358-59 

(S.D.N.Y. 1995). "[A] failure of proof in any respect means the transaction should not be 

[unwound]." FTC v. Arch Coal, Inc., 329 F.Supp.2d 109, 116 (D.D.C. 2004).7 Here, after 

twenty-four days of hearing, Complaint Counsel failed to meet their burden. 

To facilitate the analysis of a relevant market, "the [DOl] and the FTC developed ... the 

SSNIP ('small but significant non-transitory increase in price') test" in the 1992 Horizontal 

Merger Guidelines.s FTC v. Whole Foods Mkt., Inc., 548 F.3d 1028, 1038 (D.C. Cir. 2008). 

Pursuant to the Guidelines, a product market is defined as "a product or group of products such 

that a hypothetical profit-maximizing firm that was the only present and future seller of those 

7 Because the FTC is challenging a consummated merger here, its burden is substantial. See Interview with Timothy 

Muris, Global Competition Review, Dec. 21, 2004 ("the FTC has to face a very high hurdle to bring a consummated 

merger case. If the merged entity has been operating for a while, it's not enough to assert that the transaction was 

anticompetitive - you have to prove it."). 

8 The FTC and DOJ are currently working to revise the Merger Guidelines to expand the use of economic evidence 

in considering the legality of a merger. The driving force behind the effort is to "accurately reflect the best 

economic and legal reasoning" in the Agencies' merger analysis and to reflect "changes during ... seventeen years 

in economic learning." Christine A. Varney, Presentation at Merger Guidelines Workshop, September 22, 2009, p. 

3, available at http://www.justice.gov/atr/publie/speeches/250238.htm. 

9 
products ('monopolist') likely would impose at least a 'small but significant and nontransitory' 

increase in price." u.s. Dep't of Justice & Fed. Trade Comm'n, Horizontal Merger Guidelines, 

57 Fed.Reg. 41552, §1.11 (1992)(hereinafter "Guidelines"). Indeed, the Guidelines' SSNIP test 

incorporates the concepts of reasonable interchangeability of use and cross-elasticity of demand. 

Whole Foods, 548 F.3d at 1038; Arch Coal, 329 F.Supp.2d at 120 (Guidelines "set forth a 

framework for considering the issues of interchangeability and cross-elasticity of demand"); 

ABA Section of Antitrust Law, Mergers and Acquisitions, 3d. ed., at 66-67 ("ABA 

Mergers")(2008)("the case law's emphasis on both reasonable interchangeability and crosselasticity of demand is subsumed by the Merger Guidelines within [its] "hypothetical 

monopolist" analytical tool"). 

Complaint Counsel failed to present any competent evidence of cross-elasticity of 

demand, the SSNIP test or other relevant economic analysis. To overcome this lack of economic 

evidence, the ALJ reaches 46 years into the past to rely on Brown Shoe "practical indicia" and 

other anecdotal evidence. 9 With the Guidelines currently being updated, it is astonishing that the 

case presented by Complaint Counsel and adopted in the ID is not even remotely grounded in the 

sound economic principles reflected in the current Guidelines. 

A. Complaint Counsel Failed to Offer Reliable, Probative Evidence Sufficient to 

Prove Their Alleged Four Relevant Product Markets. 

9 The ALJ's use of Brown Shoe's "practical indicia" disregards that practical indicia should be used only "to 

augment the assessment of interchangeability and cross-elasticity of demand when detennining the relevant 

product market" (Arch Coal, 329 F.Supp.2d at 120 (emphasis added)), and not to define the relevant product 

market without analyzing interchangeability and cross-elasticity of demand pursuant to the current Merger 

Guidelines. See Int'l Tel. & Tel. Corp. v. General T. & E. Corp., 518 F.2d 913,932 (9th Cir. 1975)(clarifying that 

the practical indicia described in Brown Shoe were meant to be used as "practical aids"); see also FTC v. Swedish 

Match, 131 F.Supp.2d 151, 159(D.D.C. 2000). 

10 
Although he acknowledges the proper standards set forth above (ID 204-10), the ALJ 

fails to hold Complaint Counsel to their burden. Instead of offering economic evidence, 

Complaint Counsel offered only anecdotal evidence to support their contention that there are 

four distinct relevant product markets. Complaint Counsel's economic expert, Dr. John Simpson 

("Simpson"), did nothing more than repeat testimony by other witnesses in the case. (ID 213): 

Much more is required of Complaint Counsel. 

1. Complaint Counsel failed to present competent economic evidence to 

prove a relevant product market. 

Complaint Counsel relied heavily on Simpson even though his product market testimony 

was riddled with defects. Simpson did not perform any quantitative analysis; he displayed 

substantial lack of familiarity with the products; he misapplied the proper standards and failed to 

follow proper methodologies; he failed to account for the fact that products he assigned to one 

use category are also used in other end-uses; and he relied excessively on an array of biased 

customer testimony. (RFOF 1177-78, 1181-86, 1190-92). Simply put, Simpson's analysis was 

backwards - he first arrived at a conclusion and then strained to find support for it, an error noted 

by the ALl (ID 212-13). Strikingly, although at times criticizing Simpson's work, the ALJ 

nevertheless relied heavily on it for his findings and conclusions. Simpson's opinions should not 

have been credited at all by the ALJ, and the fact that the ID is based extensively on them is 

error. 

At the outset, Simpson conceded that he failed to perform a thorough quantitative or 

SSNIP analysis: 

Q. So you didn't do a rigorous analysis based upon pricing data from 

companies, right? 

A. I - by "rigorous analysis," I didn't do, like, a large-scale econometric 

analysis. 

11 

-------------------
Q. Okay. You'll agree with me you didn't do that; you didn't do an 

econometric analysis here, right? 

A. Correct. 

(Simpson, Tr. 3327, in camera). When questioned by the ALJ, Simpson admitted that he did not 

formally estimate cross-elasticities of demand, (Simpson, Tr. 3474, 3481-82, in camera), a 

surprising admission when considering Complaint Counsel's burden and the fact that at the time 

of the hearing, the merger had been consummated for over 15 months. 

To correctly apply the SSNIP test, the Merger Guidelines require that the analysis of the 

product market begin with each product of the merging companies "narrowly defined": 

[T]he Agency will begin with each product (narrowly defined) produced or 

sold by each merging firm and ask what would happen if a hypothetical 

monopolist of that product imposed at least a 'small but significant and 

nontransitory' increase in price, but the terms of sale of all other products 

remained constant. 

(Guidelines §1.11 (emphasis added)). Simpson agreed that it is necessary to start with the 

product narrowly defined, (Simpson, Tr. 3294, in camera) and claimed that he did so. (Simpson, 

Tr. 3170; Simpson, Tr. 3294-95, in camera). However, Simpson ultimately admitted that he did 

not begin by looking at the products narrowly defined. Instead, Simpson began by looking at 

Complaint Counsel's alleged markets (deep-cycle, motive, UPS and SLI) and asking whether a 

hypothetical monopolist of each type of battery separator in North America could profitably 

increase price by 5%. (PX0033 at 005 (emphasis added), in camera; Simpson, Tr. 3291-92, 

3294-95, in camera). Simpson's error is significant because, among other things, it assumes 

away the need to determine whether and to what extent PE separators are in the same product 

12 
market as rubber-based separators, contrary to the approach set by the Guidelines, which 

Simpson himself admitted was the correct method to follow. 1o 

Simpson also admitted that separators are used in more than one of his product 

categories. (Simpson, Tr. 3308, in camera). Simpson acknowledged that CellForce is used in 

both deep-cycle and motive applications. (Simpson, Tr. 3302-03, in camera). Although Simpson 

testified that the alleged deep-cycle market only includes separators that contain rubber and does 

not include pure-PE separators (Simpson, Tr. 3308, 3310-11, in camera), he eventually admitted 

that East Penn and Crown use pure-PE separators for deep-cycle applications. (Simpson, Tr. 

3309, in camera; Leister Tr. at 3978-80; Balcerzak, Tr. 4093-95). 

The fact that Simpson admits that the same battery separators can be used for different 

end-use applications (Simpson, Tr. at 3308, in camera), but does not account for this "dual 

usage" in analyzing his product markets, reveals a basic flaw of his approach. Simpson's 

product markets are not distinct markets as required by the Guidelines. (Simpson, Tr. 3306-m~, 

in camera). 

Rather than relying on economic analysis, Simpson relied on questionable testimony of 

customersll such as EnerSys, Exide and Trojan, who were complainants in this case and 

demonstrated a lack of impartiality. See,~, ID 218, 220, 224. This reliance occurred even 

though the ALJ criticized Simpson and Complaint Counsel for failing to identify the customer 

testimony that was considered (ID 213) and despite strong legal authority warning against such 

10 Simpson's testimony demonstrated a lack of familiarity with the products, which made it difficult to analyze 

narrowly-defined products. For example, Simpson did not know the dimensions or all of the end-use applications of 

separators in his product markets. (Simpson, Tr. 3296-3302, 3470-71, in camera). Similarly, Simpson did not know 

whether the proper market should be a reserve power market rather than a UPS market, since he did not analyze a 

reserve power market. (Simpson, Tr. 3299-3300, in camera). 

II "[F]or each of the alleged markets, 'the main thing [that Dr. Simpson] was relying on in implementing the 

hypothetical monopolist test was the statements by the buyers that they had very little options to substitute, and 

hence, that the demand curve was very inelastic.'" (ID 213)(emphasis added). 

13 
reliance. 2B Phillip Areeda & Herbert Hovenkamp, Antitrust Law ("Areeda & Hovenkamp") ~ 

538b (3d ed. 2007); FTC v. Tenet Health Care Corp., 186 F.3d 1045, 1054 (8th Cir. 1999) ("We 

question the district court's reliance on the testimony of [customers] ... that [they] would 

unhesitatingly accept a price increase. . .. Without necessarily being disingenuous or selfserving or both, the testimony is at least contrary to the [customers'] economic interests and this 

is suspect."); United States v. Country Lake Foods, Inc., 754 F.Supp. 669, 675-76 (D. Minn. 

1990); Oracle, 331 F.Supp.2d. at 1131, 1158. Simpson's, and ultimately the ALl's, heavy 

reliance on customer testimony is inappropriate. Through cross-examination, Respondent 

demonstrated that each of Complaint Counsel's witnesses from EnerSys, Exide and Trojan were 

biased and antagonistic to Respondent, to the point that each had initiated or had threatened to 

initiate litigation against Respondent. (RFOF 654-55, 725-33, 756-64, 1541). No credit should 

have been given to these witnesses' testimony. 12 

The ALl was not oblivious to Simpson's errors. The ID criticized Simpson's work in 

numerous respects, and he completely rejected Simpson's critical loss analysis: "Simpson ... 

did not provide sufficient quantitative evidence for the magnitude of the actual loss, or sufficient 

methodology for calculating the actual loss." (ID 212-213). Notwithstanding the many flaws in 

Simpson's work, the ALl accepted Simpson's testimony. For example, relying on Simpson's 

opinion, the ALl put Microporous' Flex-Sil and CellForce' along with Daramic's HD13 in the 

alleged deep-cycle market while citing no cvidence discussing whether a 5% price increase 011 

Flex-Sil would produce substitution to CellForce or HD, or the reverse. In fact, the evidence 

12 The ALJ also erred by not making specific findings on credibility of Complaint Counsel's witnesses, as he should 

have. In the Matter of Schering-Plough Corp., No. 9257 at 8, n. 14(Op of Comm'n)(Dec. 18, 2003); Cowert v. 

Schwcikcr, 662 F.2d 731,735 (lith Cir. 1981). 

13 Daramic HD is a PE separator made with a liquid latex additive. (IDFOF 41). 

14 
demonstrates that a 5% increase in Flex-Sil would not result in substitution. See infra at 28-30. 

Similarly, the ALl placed Darak, Daramic-CL 14 and CellForce in the alleged UPS market 

without discussing any evidence about the effect of any 5% price increases. In addition, the ALl 

overlooked evidence of supply-side substitution, although acknowledging that it "may properly 

be considered in defining a product market." (ID 206). The uncontroverted evidence at trial 

demonstrated that Entek formerly produced non-SLI separators (RFOF 681, 684) and could 

easily do so again. See infra at 42-43. 

Ironically, the one expert who did provide competent economic analysis of the merger -

Respondent's expert, Dr. Henry Kahwaty - was completely ignored by the ALl. Kahwaty, who 

testified that the merger did not violate Section 7 of the Clayton Act, actually followed the 

Guidelines. 

• Kahwaty performed a proper SSNIP analysis to conclude that the relevant product 

market is an all-PE market. (RFOF 1336-37).15 

• Applying the SSNIP test, Kahwaty first concluded that Ace-Sil constitutes its own 

product market. (Kahwaty, Tr. 5112-13, in camera). 

• Focusing on the Guidelines' methodology, Kahwaty's economic testimony flUiher 

concluded that imposition of a SSNIP on Flex-Sil would not cause a significant 

switch to CellForce, HD or a pure-PE product. (Kahwaty, Tr. 5114-19, 5566, in 

camera). 16 

14 Daramic-CL is a PE separator made with cleaner oil. (RFOF 89). 

15 Although the AU states that fmding an all-PE market "would not have disproved narrower product submarkets 

that could themselves amount to relevant markets" (ID 224), such a statement is a matter of semantics. Speaking in 

terms of submarkets is "superfluous and confusing in an antitrust case, where the courts correctly search for a 

'relevant market.'" 2B Areeda & Hovenkamp, ~533. The same analysis is undertaken to determine the relevant 

market, whether it is a larger product market or a smaller submarket. Id. at 254-57; see also Cupp v. Alberto-Culver, 

U.S.A., 310 F.Supp.2d 963, 970 (W.D. Tenn. 2004). 

16 This economic conclusion is supported by the fact that Trojan (Microporous' largest Flex-Sil customer) could use, 

at most, 25% CellForce separators and 75% Flex-Sil. See infra at 29. Accordingly, application of a SSNIP on the 

Flex-Sil separator price would not cause Trojan to switch substantially either to CeUForce or HD. (Kahwaty, Tr. 

5115-16, in camera). 

15 
• Kahwaty explained that Simpson's critical loss analysis erred in concluding that 

HD controlled the price of Flex-Sil without using any empirical analysis to 

support that conclusion. (Kahwaty, Tr. 5127-31, in camera). By contrast, 

Kahwaty's critical loss and SSNIP analysis, using empirical data, showed that 

Flex-Sil belongs in its own product market. (Kahwaty, Tr. 5119-31, in camera). 

Ultimately, the ID fails for its heavy reliance on Simpson's opinion, which is not 

grounded on economic analysis but on "soft" qualitative facts elicited from the power buyers 

who have demonstrated a dislike of Daramic and an agenda which includes seeking complete 

divestiture regardless ofthe merits. 

2. The ID selectively picks evidence to support its conclusion of four product 

markets while ignoring substantial contrary evidence demonstrating an allPE product market. 

Rather than relying on quantitative evidence, the ALl relied on 46-year old Brown Shoe's 

"practical indicia" and anecdotal evidence. As has been noted, the ALl ignored a huge amount 

of probative evidence showing that the end-use "buckets" urged by Complaint Counsel do not 

constitute separate markets. The ID is replete with inconsistencies, and Simpson and the ALl 

selectively picked among the evidence, relying on unreliable testimony, to reach their 

conclusions. 

a. There is significant overlap among the end-uses outlined by the 

four product markets. 

The record is replete with evidence demonstrating that battery separators {!!!!.. substituted 

for each other among the four end-uses outlined by Complaint Counsel and that these four enduses do not constitute separate markets. The following are uncontroverted examples, which the 

ALl ignored: 

• Daramic's AU profile with a 12 mil backweb thickness is used by one customer in 

a stationary application and another customer in an SLI application. (RFOF 70). 

• AT&T uses Daramic' s flat-sheet profile in a stationary application, and Concorde 

uses it in an SLI application. (RFOF 71). 

16 
· { 

}. (RFOF 72-73; Seibert, Tr. 4188, in 

camera). 

• Separators with a 12 mil backweb are used in automobiles (SLI), golf carts (deepcycle) and telecom batteries (stationary). (RFOF 74). 

· { 

}. (RFOF 77). 

• Crown uses pure-PE separators in SLI, motive and deep-cycle (floor scrubber and 

marine) applications. (Balcerzak, Tr. 4093-95). 

In addition, the ALJ found that CellForce is used in all four applications outlined by the 

alleged product markets (ID 214, 216, 220, 222) and that HD is used in at least two of the four 

alleged markets (deep-cycle and motive). (ID 214, 217). The reality is that customers can use, 

and do use, the same separator for more than one application described by Complaint Counsel's 

four alleged product markets. 

b. The ID deals with evidence erroneously and inconsistently. 

The ID treats similar evidence in a totally inconsistent manner. For example, the ALJ 

finds that SLI separators are a separate product market, in part, because they have "distinct and 

relatively low prices." (ID 223). However, the ALJ fails to find that Flex-Sil is a separate 

product market despite the fact that it has distinct and relatively high prices. (ID 227-30; RFOF 

124, 1200). The ALJ also fails to acknowledge Simpson's concession that Ace-Sil is a separate 

market. (PX2251 at 001, in camera; Simpson, Tr. 3321, in camera). These positions are 

irreconcilable. 

17 
Further, the ID cites "Daramic's documents" which purportedly analyze the alleged 

separator markets. (ID 218-24).17 However, almost all of the cited documents are Microporous 

documents that were created long before the Acquisition. The only cited document from after 

the merger (PX0395) was created by Mike Gilchrist, Microporous' former CEO, whose 

testimony was shown to be biased and not credible. 18 Additionally, the ALJ's reference to 

PX0395 proves that Daramic views UPS separators as part of a broader market segment of 

reserve power, which is part of a larger "industrial" market segment. (ID 245; PX0395-019). 

Nowhere does the document indicate that Daramic views UPS separators as a distinct market. 

The ALJ's finding that Daramic documents support the alleged product markets is erroneous. 

Daramic's documents confirm that Daramic tracks sales by PE and non-PE separators. 

For example, Daramic's worldwide market studies and other analyses focus on an all-PE market, 

not markets of SLI, motive, UPS and deep-cycle. (RFOF 186; PX0207 at 64-72, in camera; 

RX01558 at 025, in camera; RX01305 at 007, in camera). In addition, Daramic's financial 

documents analyze the separator market in terms of PE versus non-PE separators. (PX1688 at 

001, in camera; RX01265 at 010, in camera; RX00696 at 007, in camera). Moreover, other 

competitors and customers view the industry in terms of an all-PE separator market as well. 

(RX00115 at 006-008, in camera; RX00220 at 006-007, in camera; RX00144 at 008, in 

camera). 

Substantial evidence, ignored by the ALl, demonstrates that the industry consistently 

focuses on PE and non-PE separators, rather than Complaint Counsel's four alleged markets. 

17 Interestingly, the ID fails to cite any specific documents in support of a deep-cycle market but merely cites to 

Simpson, who summarily concludes that "company documents" support a deep-cycle market. (ID 216). 

18 Gilchrist evidenced a dislike for Respondent and his testimony shifted considerably during this proceeding to 

advance his personal interests. (Gilchrist, Tr. 469-71, in camera, 521-23, in camera, 531-33). 

18 
c. The ID relies on unreliable customer testimony. 

The ID improperly relies on customer testimony in support of finding four relevant 

product markets, primarily testimony of Exide and EnerSys witnesses (Gillespie, Axt, Burkert, 

Gagge and Craig). These witnesses testified, having been heavily prepared by Complaint 

Counsel (Axt, Tr. 2230; Burkert, Tr. 2369-76; Gagge, Tr. 2543-47; RX00192 at 001-002), with 

barely-masked hostility toward Daramic. The subjective customer testimony cited by the ID is 

unreliable and should not have been credited by the ALJ. See supra at 13-14. 

Complaint Counsel failed to sustain their burden to prove a relevant product market. 

Their case was not based on objective economic analysis as contemplated by the Guidelines but 

on a selectively chosen set of subjective documents, suspect testimony and "practical indicia," 

while ignoring contrary evidence. The ALJ ignored the solid economic case presented by 

Respondent's expert, whose testimony confirmed that application of the Guidelines produces an 

all-PE separator market. 

B. Complaint Counsel Failed to Sustain Their Burden to Establish a Relevant 

Geographic Market. 

Proof of a relevant geographic market is also "a necessary precondition to assessment" of 

the effect of the merger (ID 232), and Complaint Counsel bear the burden of proof. Here, 

Complaint Counsel failed to meet their burden. Instead of presenting economic evidence, 

Complaint Counsel's geographic market case is based on the unreliable testimony of Simpson, 

who merely parrots the testimony of biased witnesses. The ALJ's acceptance of Complaint 

Counsel's North American geographic market is error. 

The ID lists certain standards that are supposed to be used to determine the geographic 

market, including cross-elasticities of demand and supply, the Guidelines and "other indicia," 

including the Elzinga-Hogarty test. (ID 234-37). As noted by the ALJ and Complaint Counsel, 

19 
the Guidelines provide the appropriate methodology for determining the geographic market. (ID 

235, 238-39("Complaint Counsel stresses the Merger Guidelines' application to geographic 

markets" and that under those Guidelines, a SSNIP test should be used to define the geographic 

market); Guidelines ~1.0; see also ABA Mergers at 119 (2008)(the Guidelines, which have been 

"increasingly relied on" to define the relevant geographic market, incorporate the question of 

where "the purchaser can practicably turn for supplies")). Yet, while all appear to agree that the 

Guidelines apply here, the ALJ misses that Complaint Counsel wholly failed to present a SSNIP 

analysis and, as a result, failed to sustain their burden. 

While Complaint Counsel's case relied heavily on the suspect testimony of their 

economist, Simpson admitted that he did not perform a thorough, rigorous economic analysis. 

(Simpson, Tr. 3327, 3474, 3481-82). Complaint Counsel and Simpson failed to offer any 

quantitative analysis to support the geographic market adopted by the ALJ. For example, the ID 

concludes that the analysis of the geographic market should include consideration of the ability 

to price discriminate and the potential for arbitrage to defeat such price discrimination. (ID 235-

36). Yet, the ID fails to acknowledge that Complaint Counsel failed to offer evidence of such 

price discrimination or an inability to defeat it with arbitrage. While Simpson testified that 

DaramiC engaged in price discrimination in selling its products worldwide (Simpson, Tr. 3217-

18, in camera), he admitted that he did not do any "rigorous analysis" of pricing in different 

areas of the world (RFOF 1206), and Complaint Counsel presented no evidence at all that 

Daramic's costs are uniform throughout the world. United States v. Eastman Kodak Co., 63 F.3d 

95, 106-07 (2d Cir. 1995). In fact, the uncontroverted evidence shows that { 

}. (Riney, Tr. 4958-59, in camera). Recognizing the flawed 

nature of Simpson's work, the ALJ himself notes that Simpson's testimony concerning price 

20 
discrimination is defective because it is "less precise[]" than the concept of price discrimination 

"generally used by economists." (ID 240). Even after acknowledging this defect, the ALJ 

nevertheless adopted Simpson's opinions as the basis of his ID. 

Complaint Counsel made no effort to show that any alleged price discrimination could 

not be defeated by arbitrage, which is fundamentally a question of price. Simpson even admitted 

that he did not perform an arbitrage analysis. (RFOF 1203-04). On the other hand, 

Respondent's expert testified convincingly that arbitrage could defeat any price discrimination. 

(Kahwaty, Tr. 5164-65, in camera). Rather than consider this economic analysis, the ALJ 

summarily concludes - erroneously - that price discrimination would "not likely be defeated by 

arbitrage" based on nonmeasurable qualitative factors of product differentiation and alleged 

customer preference for "local supply." (ID 240). 

Even here, as to consideration of these "soft" qualitative factors, the ID fails. The ID 

cites nothing more than unreliable testimony of customers and third parties regarding supposed 

preference for local supply and barriers to foreign manufacturers. (ID 240-42). A thorough 

review of the evidence demonstrates that local supply is not a necessary predicate for 

competition. 

• Larry Burkert from EnerSys testified that local supply is not necessary. (Burkert, 

Tr. 2385-86). 

• Jim Douglas from Douglas Battery testified that Douglas does not need local 

supply and actually prefers obtaining products on consignment warehousing from 

Daramic. (RFOF 837). 

• Exide has { 

}. 

(RFOF 1529-32; Gillespie, Tr. 2991-2992). The evidence demonstrates that 

separators do not expire like a carton of milk or a crate of eggs, as shown by 

{ }. (RFOF 1531-32). 

21 
Perhaps most telling, though, about the lack of merit to this local supply argument is the 

fact that prior to the merger, Entek, Daramic and Microporous each sold separators to customers 

either thousands of miles away or outside of the country itself. 

. { 

}. (RFOF 784, 926). Entek exported { 

Oregon. (RFOF 195). 

} of its separators from 

• Daramic, which has plants in Indiana and Kentucky, supplied East Penn and 

EnerSys, both of whom are located in Pennsylvania, (RFOF 215, 233; RX00207) 

and exported { } of its separators from North America. (RFOF 188). 

• Microporous supplied EnerSys' European and Chinese plants from its Piney Flats 

plant for years. (Burkert, Tr. 2377, 2379). 

In a striking exchange, the ALJ questioned Gilchrist at the hearing, asking if a customer 

in Europe cares whether the separators come from Italy, China or Piney Flats Tennessee, to 

which Gilchrist answered "If it meets your specifications and terms, no, probably not." 

(Gilchrist, Tr. 594). All of this evidence was ignored by the ALJ in the ID. The reality is that 

North American customers have lived without local supply for decades without any adverse 

competitive effects. 

Similarly, the evidence shows that barriers to foreign producers are insubstantial. See 

Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327 (1961). Although the ID discusses 

value-added taxes as a barrier, the analysis is based on the self-serving testimony of James Kung, 

who is a { } and a competitor, and JCI witnesses, as well as very 

old pricing information that cannot have any relevance to a merger occurring in 2008. (ID 241). 

The ID further notes that "suppliers in other regions do not yet produce ... certain categories of 

separators, including motive and UPS separators." (ID 242). This is incorrect. { 

22 
}. 

(RFOF 687, 690-92, 695, 1017). 

The ALl's inconsistent treatment is further exemplified by his failure to consider other 

relevant evidence. The ID notes that other "relevant evidence" includes evidence that buyers 

"have considered shifting ... purchases to another location." (ID 235). As discussed in section 

III,B, the evidence shows that customers have considered shifting purchases to Asian and 

European suppliers { }. (RFOF 500, 598-600, 685-

698, 789). Although the ALl notes that this evidence is relevant, he ignores it. 

What makes the ID's reliance on "soft" criteria even more surprising is the ALl's 

acceptance and treatment of the Elzinga-Hogarty test as an appropriate test used by a number of 

courts and the Commission for defining a proper geographic market. (ID 237-38). This test 

provides that "exports or imports greater than 10% suggest that the market examined is not a 

relevant market." (ID 238, quoting Country Lake Foods, 754 F. Supp. at 672, n.2). The 

evidence in this case shows that over 10% of product made in North America is exported. 

(RFOF 188, 192, 195). In fact, in 2008, Daramic exported { } of its North American 

production, and Entek exported { } of its production from North America. (RFOF 188, 

195). Microporous exported over { }. (RFOF 192). Thus, 

under this test accepted by the ALl, North America is too narrow to be the proper geographic 

market, an error fatal to the ID and the ALl's conclusions. The ID circumvents this inconvenient 

truth by citing the Elzinga-Hogarty test approvingly and then ignoring it. 

As opposed to the total lack of economic analysis in Complaint Counsel's case, the 

analysis presented by Respondent, through Kahwaty, conformed to the criteria of the Guidelines. 

Using pr()per economic analysis, Kahwaty found that { 

23 
}. (Kahwaty, Tr. 5169-70, in camera). 

Kahwaty testified that { 

} (RFOF 1356-57).19 Based on sound economic analysis, Kahwaty concluded that the 

North American market urged by Complaint Counsel was too narrow. (Kahwaty, Tr. 5072, 

5163-64, in camera). As Kahwaty explained: 

If prices charged by North American PE plants increased, but prices charged by 

Asian PE plants did not, I would expect a large fraction of the North American 

plants' non-NAFTA volumes to switch to suppliers located outside of North 

America. (RX00945-060). 

Kahwaty further explained: 

If the North American plants were to increase their prices by 5 percent while 

prices for plants located elsewhere were held constant, customers in South 

America and elsewhere would choose to switch suppliers from North America. 

(RX00945-059). 

During his analysis, Kahwaty also found that the export figures of Daramic and Entek from 

North America, discussed above, are { .}. (RFOF 

1351; Kahwaty, Tr. 5169-70, in camera). Based on his economic analysis, Kahwaty concluded 

that the proper geographic market is worldwide. (RFOF 1349). 

Grounded in anecdote rather than economic standards, the geographic market case 

presented by Complaint Counsel was wholly inadequate. 

19 The ID cites testimony of Simpson at trial that criticized these cost numbers, stating that they were Daramic costs 

rather than "the cost for what independent rivals would have in Asia." (ID 243). There is no foundation forthis 

statement and no reason otherwise to believe Daramic's production costs in Thailand could not be properly used for 

this purpose. Indeed, the case offered by Complaint Counsel is subject to the observation made by the court in 

Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 219 (D.C. Cir. 1986) about a defect in the 

plaintiff's geographic market case there: "Plaintiffs did not offer evidence that if, prices were appreciably raised or 

volume appreciably curtailed in some areas, supply from other sources would not promptly restore the original price 

and volume." 

24 

-----------
II. COMPLAINT COUNSEL FAILED TO PROVE THAT SUBSTANTIAL 

ANTICOMPETITIVE EFFECTS HAVE OCCURRED OR ARE REASONABLY 

LIKEL Y TO OCCUR. 

To prevail on a Section 7 claim, Complaint Counsel must prove the acquisition is 

"reasonably likely to have 'u~m-onstraDle and substantial anticompetitive effects'" in the relevant 

market. Kraft Gen. Foods, 926 F. Supp. at 358-59(quoting United States v. Atlantic Richfield 

Co., 297 F. Supp. 1061, 1066 (S.D.N.Y. 1969)). The "mere possibility" of an anticompetitive 

effect is not sufficient; the likelihood of such an anti competitive effect must be reasonably 

probable. Id. at 359. Indeed, as noted above, where the merger, as here, was consummated over 

two years ago, Complaint Counsel must show that anticompetitive effects have actually 

occurred. Complaint Counsel have plainly failed to meet this burden and the ID, finding that 

burden to have been met, is in error. 

A. The ID Erred By Concluding That the Acquisition Caused Anticompetitive 

Effects in the Alleged SLI and UPS Markets. 

The AL], s findings in the ID concerning market share and concentration, which are of 

course predicated on the earlier erroneous findings on the relevant markets, are for similar 

reasons in error. The ALJ, by relying on Simpson's defective work and ignoring evidence 

introduced by Respondent, erred while concluding that Complaint Counsel proved that the 

merger had anticompetitive effects. 

The ID finds that Microporous was a competitor in the alleged SLI market. (ID 259). 

This was not the case. Microporous did not commercially sell SLI separators at the time of the 

merger and had no commitments from any customer to purchase SLI separators. In fact, 

Microporous had not been successful in producing a pure-PE product for SLI applications .. 

While one commercial run ofpure-PE product was produced for JCI in late-2003 into early-2004 

for SLI application, JCI ultimately did not purchase those separators. (RFOF 336). The product 

25 
was subsequently sold to Voltmaster in 2004 in a one-time sale with Microporous having no 

intention of making any future sales. (RFOF 336). 

The ID dismisses this undisputed evidence by claiming that Microporous was "a 

substantial factor" nevertheless in the alleged SLI market at the time of the merger. Here, again, 

close scrutiny of the record demonstrates that this conclusion is erroneous. 

First, as noted above, while Microporous did approach JCI in 2003 regarding this subject, 

it failed to produce an acceptable product. Microporous' discussions with JCI ended in 2007. 

(RFOF 377, 474, 489). The record is clear that Microporous had no potential here and therefore 

could not be a "factor" let alone substantial. 

Second, although Exide and Microporous had had some discussions regarding the supply 

of separators for SLI applications, those discussions were never serious. The discussions 

between Exide and Microporous began in 2004 and at the time of the merger, four years later, 

there was still no agreement between the parties for the supply of such separators. (RFOF 382, 

417-19,580; RX00748). The contention that absent the merger, Exide somehow would have 

bought SLI separators from Microporous is pure fantasy. FTC v. Atlantic Richfield Co., 549 

F.2d 289,296-98 (4th Cir. 1977); BOC International LTD v. FTC, 557 F.2d 241 (2d Cir. 1997). 

• Although Exide entered into a non-binding MOD with Microporous for the sale of 

SLI separators by its own terms, it had expired on August 31, 2007. (RFOF 382). 

• Exide did not sign and return the non-binding MOD to Microporous until late 

September of2007, after it had expired. (RFOF 382). 

• Through the fall 2007, no progress was made on an agreement with Exide. 

(RFOF 382; Trevathan, Tr. 3612, 3626, 3724). Although two meetings took place 

in early 2008, no agreement was reached, and Microporous did not believe it 

would ever supply Exide. (RFOF 417-19,580). 

26 

.~---~--- .. ------ ------
Steve McDonald, Microporous' Director of Sales and Marketing, described the state of the 

Microporous-Exide discussions in February 2008 in an email weeks before the merger: "That 

and a $1.50 will buy you a cup of coffee." (RX285). 

Third, Microporous had had brief discussions with East Penn regarding separators for 

SLI application but those discussions never went beyond preliminary stages. (RFOF 383). 

Fourth, the ID ignores substantial evidence that Microporous' Board of Directors, 

worried about Microporous' financial situation and, questioning Gilchrist's financial acumen 

(PX2301 (Heglie, Dep. 91-93, 149-53», mandated that Microporous not begin producing 

separators for SLI applications. (RX00401 at 001; PX2300 (Heglie, IHT 194-95». The Board 

directed Microporous to leverage its existing strengths in rubber technology and products, and 

not become just another player in the crowded PE market. (RX0040 1). 

These facts demonstrate that Microporous was not "a substantial factor" in the alleged 

SLI market. Simply because some Daramic personnel may have made certain assumptions on a 

worst-case scenario basis in consideration of the merger does not elevate Microporous to a 

participant in this alleged market or alter the factual reality set forth by Microporous' Board. 

The ALJ made similar errors in finding Microporous "a substantial factor" in the alleged 

UPS market. At the time of the merger, Microporous did not have a product that was 

commercially viable. (RFOF 355-65; RPTB 20). Even at the time of the hearing, the LENO 

samples - the ALJ's presumed entrant - were still undergoing testing. (RFOF 361). Moreover, 

while the ALJ concludes that "[fJollowing the acquisition, there is no potential entrant to 

constrain Daramic in the UPS market" (ID 258), the ALJ fails to note that Microporous offered 

no constraint prior to the merger. 

27 
Significantly, the ALl fails to acknowledge that Project LENO, even if found 

commercially viable, would have no impact in the alleged North America market. LENO was 

intended to be a replacement for Darak. (RFOF 356-57). But Darak has never been sold for use 

in flooded lead acid batteries in North America. (RRCCFOF 514). Any product that might have 

been produced by the LENO project (which would include white PE) was intended to be used in 

"Stationary [flooded lead acid] batteries in Europe . .. [and] Gel batteries in the US and Europe 

for UPS and wheelchair." (RRCCFOF 514). Gel batteries, though, are different than flooded 

lead acid batteries and not part of Complaint Counsel's alleged market. (RFOF 24; CCFOF 16-

19). If LENO became a successful product,20 Microporous intended for it to be competitive with 

Darak in flooded lead acid batteries in Europe, not North America. (RRCCFOF 514). Thus, 

LENO (and white PE) had no impact on competition for flooded lead acid battery separators in 

North America. (RRCCFOF 514). The ALl's conclusion to the contrary cannot be sustained. 

The ALl's inconsistent treatment of the evidence is error and cannot stand. Finding that 

Microporous was a participant in the SLI and UPS markets, even though it had no sales or 

prospects (see supra at 25, 27), but dismissing Entek as an uncommitted entrant in anything but 

the SLI market is error. The record shows that { 

}. (RFOF 588-

89,681-84,943,962; Weerts, Tr. 4490, in camera). Entek is an uncommitted entrant. 

B. Complaint Counsel Failed to Prove Any Other Anticompetitive Effects In 

Their Alleged Markets. 

20 The ID fails to recognize substantial evidence which demonstrates that the LENO project was unsuccessful. 

(RRCCFOF 514; RFOF 360,364). 

28 
The ID contains findings purporting to show that customers viewed Daramic' s HD as a 

competitor to Microporous' Flex-Sil in the alleged deep-cycle market, that they threatened to 

switch to HD unless Microporous constrained its Flex-Sil pricing, and that the Acquisition 

represented a "merger to monopoly." (ID 77-91, 246-48). Despite this rhetoric, actual customer 

conduct proves that HD was not competitive with Flex-Sil. 

First, the ID neglects the fact that Flex-Sil remained the dominant separator 

notwithstanding that it cost { } more than HD. (RPTB 12). The ID also ignores the fact that 

HD was not qualified for use in original equipment by Trojan, U.S. Battery or Exide (RFOF 872, 

746, 548), US Battery only uses Flex-Sil in its premium battery line (RFOF 121) and that 

Microporous did not consider HD to be a threat to its deep-cycle business. (McDonald, Tr. 

3820). Daramic had failed to compete with Flex-Sil in the alleged deep-cycle market (2007 sales 

of HD were a mere { } out of Daramic's total separator sales worldwide of { 

D. (RXOI119, in camera; RX01418, in camera). 

Flex-Sil has unique properties that differentiate it from other battery separators such that 

it is, in fact, its own product market. (RFOF 117-126, 1200-01). Witness after witness testified 

that Flex-Sil is considered the industry standard and is demanded by battery customers due to its 

superior performance and product life. (RFOF 1200). It is for this reason that Flex-Sil 

constituted { } of Microporous' sales to Trojan in 2007 (RX01120, in camera; McDonald Tr. 

3853-55, in camera) and more than { } of Microporous' total sales (McDonald, Tr. 3857, in 

camera; RX01120, in camera). In short, customers have been unwilling to switch from Flex-Sil 

to HD despite significant cost savings, and HD was never an effective competitor to Flex-Sil. 

The ID claims that Trojan threatened to switch to HD in order to obtain price reductions 

on Flex-Sil. (IDFOF 529, 535-36, 538-39, 541). Despite that threat, Trojan decided that Flex29 

----------------------- -- --- - -------
Sil would continue to constitute 75% of its separator purchases, with HD and CellForce 

amounting only to 25%. (IDFOF 546).21 The ID ignores this significant evidence. Similarly, 

the ID ignores evidence from u.S. Battery that Flex-Sil still constitutes 90% of u.S. Battery's 

deep-cycle separator purchases notwithstanding the fact that it was priced twice as much as HD. 

(RFOF 124, 864-65). It is startling that the ALl ignores this evidence in light of the fact that 

{ 

}. (RXOI120, in camera) 

{ }. 

The ID claims that Exide, { 

}, "used HD as leverage" to obtain price breaks on FlexSil. (IDFOF 522-23, 525-28; RX01120, in camera). But, the ID ignores the testimony of 

McDonald that Microporous never took HD as a serious threat. (McDonald, Tr. 3818). Trojan's 

long-standing relationship with Microporous was determinative. (RX00641, RX00772). 

Significantly, the ID also ignores the fact that even though { 

} (RX00677, in camera; 

PX0489), { 

}. (RFOF 545-550; RX00677, in camera) { 

}. (RFOF 537, 541, 545, 547; 

RX00677, in camera). This is an inconvenient fact that the ID never addresses and which shows 

that HD was not a competitive factor with Flex-Sil. Kahwaty demonstrates this point as well 

with a SSNIP test showing that Flex-Sil belongs in its own product market, but his testimony 

was ignored. (Kahwaty, Tr. 5119-5131, in camera). 

21 Godber of Trojan actually testified that Trojan could use only a maximum 21 % of HD and/or CellForce 

separators. (Godber, Tr. 176). 

30 

-----~-----
In a further attempt to support its conclusion of anti competitive effects, the ID asserts that 

Daramic had a post-Acquisition strategy to sell Flex-Sil rather than HD and that Daramic refused 

to honor Microporous' promises to Trojan. (ID 91-95). However, these findings fail to take into 

account the evidence submitted regarding Daramic's proper business justification and intent. 

For example, US Battery developed a "new" battery and assumed that Daramic would be 

able to provide HD separators for it despite the fact that no one at US Battery checked with 

Daramic to ensure that the proper HD product could be made. (Qureshi, Tr. 2093-94). The 

evidence showed that Daramic had significant difficulty running HD through its process for this 

specific application (Roe, Tr. 1312-13; McDonald, Tr. 3823-24), which the ID acknowledges 

(IDFOF 566, 571). The ALJ makes no finding otherwise. As for Exide, the ID notes an internal 

Daramic discussion regarding Exide purchasing Flex-Sil (IDFOF 568-69) but fails to put the 

discussion in the proper context of the production problems caused by labor strife at Daramic's 

Owensboro's facility (Hauswald, Tr. 1074-75) and fails to account for the language barriers 

encountered by Hauswald, whose native language is French. (Hauswald, Tr. 740). 

As to the claimed anticompetitive behavior with Trojan, the findings show that the 

contract under discussion at the time of the acquisition had not been finalized (IDFOF 552, 554); 

that the price increases proposed by Daramic became the subject of negotiations with Trojan 

(IDFOF 559); that { 

} (refuting Complaint Counsel's claim in the case that Daramic 

demanded long term commitments from its customers) (RFOF 759); and that { 

}. (IDFOF 560). 

These facts and the ALJ's own findings demonstrate the "power" tactics utilized by Trojan 

during post-Acquisition negotiations with Daramic, and do not support any conclusion that this 

31 

~~~~---.--------
situation involved the one-sided imposition of onerous terms and conditions by Dararnic on 

Trojan. 

The ID fares no better in claiming anticompetitive effects in a motive market. (IDFOF 

384, 385, 386, 562, 777-79, 1273, 1366). Microporous' sales of Cell Force in 2007 in North 

America totaled a mere { }. (RFOF 339-40; RXOl120, in camera). Microporous had 

no competitive influence on Crown or Douglas Battery, as Douglas Battery had not had any 

discussions with Microporous since 2004 and Crown never even considered using Microporous 

separators in industrial batteries in 2008. (RFOF 814, 828, 832, 838). East Penn had not 

qualified Microporous separators and { 

-

}. (RFOF 779, 782). Nor did Microporous have any competitive effect with respect 

to Exide. See supra at 26. 

Contrary to the conclusions drawn in the ID, the evidence demonstrates that no 

anticompetitive effects have been shown in any of Complaint Counsel's alleged markets.22 

C. Complaint Counsel Failed to Prove that Anticompetitive Unilateral Effects 

Have Occurred or Are Likely. 

Even if Complaint Counsel had proved their markets, "[M]arket share and concentration 

data provide only the starting point for analyzing the competitive impact of a merger .... [The 

government] also will assess the other market factors that pertain to competitive effects .... " 

(ID 244, quoting Guidelines §2.1). As the ID notes, two types of anticompetitive effects must be 

considered: unilateral effects and coordinated interaction. (ID 260). Neither was established by 

a preponderance of the evidence. 

22 Contrary to the findings in the ID, the arguments and reasoning set forth in this section, and elsewhere in the 

Brief, demonstrate that Respondent did not acquire, as a result of the merger, monopoly power or a dangerous 

probability of achieving or maintaining monopoly power in Complaint Counsel's alleged North American motive, 

UPS and deep-cycle markets. For these reasons, the ID's fmdings on these issues in Count III are error. 

32 
The Guidelines describe the unilateral effects theory as follows: "A merger between 

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

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

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

market are "accounted for by consumers who regard the products of the merging firms as their 

first and second choices, and ... repositioning of the non-parties' product lines to replace the 

localized competition lost through the merger [is] unlikely." Id. The court in United States v. 

Oracle Corp. described four factors as preconditions for a unilateral effects claim in such a 

product setting: (1) the products are differentiated; (2) the products "controlled by the merging 

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

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

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

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

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

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

market were competitive" and it must show that such increased prices are accompanied by 

"lower output." In the Matter of Chicago Bridge & Iron Co., No. 9300, 138 F.T.C. 1392, 1033 

(initial decision)(2003), aff'd, 138 F.T.C. 1024 (2004); Forsyth v. Humana, Inc., 114 F.3d 1467, 

1476 (9th Cir. 1997). 

Here, Complaint Counsel failed to present any evidence to support a theory that Daramic, 

as a result of the Acquisition, has exercised or could exercise market power to increase prices 

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

33 

~~~~-----------------~--- ----- ----
1366-72). In fact, the evidence demonstrates that Daramic lacks market power and that the 

Acquisition did nothing to change that: 

(1) Microporous had a total pre-Acquisition market share of only { } in the North 

American all-PE market. In short, Microporous had no market power that could have been 

transferred to Daramic. (RFOF 338-39; RXOOl14, RXOll19, RXOOl15). 

(2) Microporous' strong market position was in the alleged deep-cycle market with 

its Flex-Sil product. Respondent acquired Microporous due to its strength in the niche rubber 

market, an area where Daramic had been unable to establish itself with HD and other products. 

(RFOF 108,262-63).23 As discussed herein, Flex-Sil had no competition in that alleged market, 

and the Acquisition had no effect on competition. The ID erred by concluding otherwise. 

(3) Entek's actions demonstrate Daramic's lack of market power. (RFOF 306-309, 

946-951).{ 

}. (RFOF 472, 

475,946). Further, Entek's influence is not limited to { }. { 

}. (RFOF 943-44, 946, 

964-66, 968, 1092-93, 1220). This testimony shows that Entek { 

}. Guidelines §2.21; Oracle, 331 F.Supp.2d at 1117-

18. 

23 The ID purports to base its decision on a "review of the evidence evincing Daramic' s intentions in pursuing the 

acquisition of Microporous." (ID 244). However, the ID is again wide of the mark. The ALJ ignores the evidence 

that the Acquisition resulted from a desire of Respondent to "broaden [its] portfolio into two niche markets we do 

not supply today." (RFOF 262). This point was made clear in the testimony of Messrs. Graff and Toth, Directors of 

Respondent, which testimony remains unrefuted by Complaint Counsel. (Graff, Tr. 4877, in camera; Toth, Tr. 

1504). The ID's reliance on outdated documents or statements made by employees whose experience lies in sales or 

plant operations, (Hauswald, Tr. 872, in camera, 958), not acquisitions, simply is not probative of Respondent's 

intent - an intent expressed only through its Board - in acquiring Microporous. 

34 

------------ ------------------
(4) The evidence demonstrates that Daramic's profits and market share have declined 

following the Acquisition. Indeed, its market share has declined largely as a result of vigorous 

competition with Entek { }. 

(RFOF 278, 283, 291, 306, 946, 959, 1287, 1362, 1369; 1549)?4 

(5) As discussed herein, the presence of power buyers, including JCI, EnerSys and 

Exide, would constrain any exercise of market power by Daramic, Entek or other suppliers. 

The ALJ criticizes Complaint Counsel by noting that the evidence they presented on this 

issue "did not always differentiate the specific relevant market to which it related." (ID 261). 

Despite this criticism, the ALJ summarily concluded, "[I]t is clear that the acquisition has 

probable anticompetitive effects." Id. (emphasis added). 

The ID's analysis of potential unilateral effects, however, is fundamentally flawed. For 

example, the ID erred by finding adverse unilateral effects in the alleged SLI market. (IDFOF 

723-24. The Guidelines point out that for purposes of unilateral effects, consumers must "regard 

the products of the merging firms as their first and second choices." Guidelines §2.211. 

Incredibly, the ID promotes Microporous to the status of the "second best supplier" for purposes 

of applying its unilateral effects analysis even though Microporous did not sel1 SLT separators. 

Acknowledging the fact that Microporous did not sell SLI separators, the ID notes that Entek and 

Daramic were the only two sellers in this alleged market in 2007. (IDFOF 439). The ID fails to 

explain how a non-seller can be recognized as the "second best supplier" in order to find adverse 

unilateral effects. 

24Such evidence supports the fact that there have been no anticompetitive effects post-acquisition. See, e.g., United 

States v. Int'l Harvester Co., 564 F.2d 769 (7th Cir. 1977) (post-acquisition evidence showed no anticompetitive 

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

defendant's profits and market shares declined); Vaney v. Coleman Co., 385 F. Supp. l337 (D.N.H. 1974) (postacquisition evidence showed that defendant lost market share); United States v. Falstaff Brewing Corp., 383 F. 

Supp. 1020 (D.R.I. 1974) (evidence showed decline in market share and profits). 

35 
Additionally, the ID finds harmful, unilateral effects regarding Exide and unidentified 

"smaller battery manufacturers." (IDFOF 723-24). In support of this finding, it states that Exide 

"believed that it could obtain better pricing with an additional supplier competing for its 

business." (IDFOF 723). What Exide may have "believed" is not an adequate competitive 

effects amilysis. Oracle, 331 F.Supp.2d at 1167-68. Further, the ID fails to identify the "smaller 

battery manufacturers," quantify their separator needs, or analyze whether Microporous could 

have satisfied those needs. Without this analysis, the ID's conclusion regarding these unknown 

companies cannot stand. 

The ID further attempts to support its finding of adverse unilateral effects by citing 

alleged price increases that Daramic sought or imposed following the Acquisition. (ID 261-63; 

IDFOF 897-901, 903-904, 906, 908, 911-915). Under scrutiny, however, the ID's findings say 

nothing since they state only that Daramic sought rather than achieved a price increase (IDFOF 

901, 903), that Daramic announced a price increase without indicating whether the customer 

rejected it (IDFOF 912-915), or that the announcement was of an input cost surcharge (IDFOF 

906,911), which the ID acknowledged is not a concern. (ID 262; IDFOF 921). Moreover, some 

of the ID's findings are defective since they state that a customer "received" a price increase 

without indicating whether it actually went into effect. (IDFOF 897-900). The ID's analysis of 

post-Acquisition price increases does not hold up to close examination. 

Moreover, the evidence fails to demonstrate that any such increases occurred as the result 

of increased market power gained from the Acquisition. The ID acknowledges that there are 

innocent price increases and that Complaint Counsel has the burden of demonstrating that any 

price increases are not innocent. (ID 262, 266). In an attempt to distinguish innocent price 

increases from anti competitive ones, Complaint Counsel relied on Simpson's testimony. 

36 
However, Simpson's analysis was defective - to the point that the ALJ would not rely on part of 

it - and Complaint Counsel failed to present any competent evidence to show that price increases 

were not innocent. (ID 212-13). 

Simpson began by noting that econometric analysis is the preferred method to determine 

whether there have been any culpable post-acquisition price increases. (RFOF 1373). However, 

Simpson failed to perform any such analysis. Id. Instead, he attempted to utilize two other 

methods: (1) a "difference-in-differences" approach using a control group of three customers 

{ }; and, (2) an attempt to compare price increases with 

increases in input costs. Simpson's "difference-in-differences" analysis collapsed. (RFOF 1374-

75). Not surprisingly, the ID draws no conclusions based on Simpson's difference-in-differences 

approach. 

Simpson's input cost method fared no better. First, Simpson did not look at Daramic's 

actual costs, but at certain cost indices that he obtained from the Bureau of Labor Statistics. 

(Kahwaty, Tr. 5558-59, in camera). Second, Simpson's cost analysis was invalid because he 

used an improper index. He sought to use an index that would reflect cost of ultra-high 

molecular weight polyethylene. However, the index he actually used was for plastic products 

such as plastic pipes and plastic components for furniture. That index is not for a plastic resin 

and, therefore, has no relationship to the raw material that Daramic purchased. (RFOF 1377).25 

Accepting the defects in Simpson's cost analysis, the ID abandons it as well. 

Third, the ID refers to a price index for crude oil. (IDFOF 921-22). However, the ALJ 

relies on this index without any quantitative analysis showing the extent to which Daramic's total 

25 In addition, Simpson considered the wrong timeframe when analyzing the indices. { 

}, which led to a prejudiced conclusion that Daramic's input costs do not justify its 

price increase. (Riney, Tr. 4936-37, in camera; Seibert, Tr. 4189-90, in camera; Simpson, Tr. 3217-18, in camera). 

37 
costs might be related to an index for a single input. Rather than utilizing quantitative analysis 

that can withstand scrutiny, the ID bases its conclusion on the unproven assumption that such a 

relationship exists between this generic index and Daramic' s total costs. 

In short, the ID fails to demonstrate on the basis of reliable evidence and analysis that any 

actual post-AGquisition price increases resulted from Daramic's market power following the 

Acquisition. Complaint Counsel failed to present any quantitative evidence to support this 

theory of anticompetitive unilateral effects. In Chicago Bridge, the FTC's attempt to show postacquisition price increases was rejected as "unreliable" and "speculative." 138 F.T.C. at 1552 

(Initial Decision). The evidence presented by Complaint Counsel in this case was similarly 

unreliable and speculative, and Complaint Counsel's attempts to show anti competitive postAcquisition price increases should also be rejected. 

D. Complaint Counsel Failed to Prove that Anticompetitive Coordinated 

Interaction Has Occurred or Is Likely. 

The ID also errs in concluding that coordinated interaction has been adequately 

demonstrated. Indeed, the findings of theoretical effects are disproven by actual events which 

demonstrate convincingly a lack of potential for successful coordination. Here again, as with 

other parts of the analysis in this consummated merger, the facts of what has transpired are 

ignored in the ID. 

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

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

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

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

coordinated status quo and diminish the risk of deviations .... It may be relatively more difficult 

for firms to coordinate on multiple dimensions of competition in markets with complex product 

38 
characteristics or terms of trade." U.S. Dep't of Justice & Federal Trade Comm'n, Commentary 

on the Horizontal Merger Guidelines, at 18-19 (2006). The evidence in this case fails to prov~ 

any of these factors. 

The ID's finding of a "strong presumption" that there will be coordinated anti competitive 

conduct involving Daramic and Entek in the alleged SLI market is based on unreliable evidence. 

Indeed, the ALJ was unable to find any such coordination since the Acquisition. (ID 265-66). 

The evidence shows that Entek and Daramic have engaged in vigorous competition. In 2007, 

{ 

{ 

}. (RFOF 306, 946). In 2009, 

}. (RFOF 1549). These uncontroverted facts belie the ID's finding of coordinated 

interaction. 

Avoiding the inconvenient facts which show spirited· competition, the ID relies on a 

assortment of unreliable evidence. Citing to outdated, general observations, the ID claims that 

Daramic and Entek did not compete vigorously before the Acquisition. (ID 266). This hardly 

amounts to evidence of "terms of coordination" that would permit the firms to "detect 

deviations" and punish them. 

The ID mentions that { 

}. (IDFOF 

735, 740; ID 284). However, the ID fails to consider evidence demonstrating that { 

}. { 

}. (Kahwaty, Tr. 5091, in camera). This evidence demonstrates that 

39 
{ 

}. (ld.). Simpson ignored this evidence, as did the ALl 

Moreover, the evidence predominantly weighs against coordination, especially when the 

principles of the Guidelines are followed. First, given the diversity and heterogeneity of the 

products in this industry, it would be extremely difficult for firms to "reach terms of 

coordination" as required by the Guidelines. Guidelines §2.11. Further, the Guidelines note that 

firm heterogeneity, including "differences in vertical integration," certainly a factor here with 

{ }, weighs against the likelihood of 

coordination. (Guidelines §2.11; RFOF 1114). Although the Guidelines note that "express 

collusion" in the past may signal the likelihood of future coordination Guidelines §2.1, 

Complaint Counsel did not present any evidence of express collusion. 

Not only have Complaint Counsel failed to prove that Daramic and Entek could reach 

terms of coordination, but there is also no evidence they would be able to detect or punish 

deviations. (RFOF 1240-41, 1369). In fact, the evidence showed that { 

}. (RFOF 

1369). { 

}. (Kahwaty, Tr. 

5182-83, in camera). Simpson { 

}, which undercuts the basis of his opinion, and the 

ID's conclusion, regarding coordinated interaction. (Simpson, Tr. 3391, in camera). 

Finally, a major factor weighing against coordination is that the customers purchase 

separators through large, multi-year contracts that are negotiated one-on-one. (RFOF 241, 243). 

40 
As the Guidelines explain, "Where large buyers ... engage in long-term contracting, so that the 

sales covered by such contracts can be large relative to the total output of a firm in the market, 

firms may have the incentive to deviate." Guidelines §2.ll. The reality of this industry 

demonstrates exactly that - large customers negotiate one-on-one with separator suppliers for 

long-term contracts. This reality is illustrated by the recent negotiations between { 

}, and by the negotiations between { } and { }, 

among others. (RFOF 478, 760-61, 1447, 1505-28). The ID errs in finding coordinated 

interaction has occurred or is likely in the face of this conflicting evidence. 

III. THE ACQUISITION WILL NOT HAVE ANY ADVERSE EFFECTS ON 

COMPETITION BECAUSE BARRIERS TO ENTRY ARE LOW AND 

SUBSTANTIAL CUSTOMERS HAVE SPONSORED AND ENCOURAGED 

ENTRY BY { }. 

Even if Complaint Counsel had made a prima facie case, Respondent rebutted that case 

by showing that entry conditions into battery separator production are low and that major 

customers in the industry have sponsored new entry, have transferred their purchases from 

Daramic to other suppliers or are actively developing Asian sources of supply. It is accepted that 

"power buyers," as here, can "subsidize new entry or incumbent expansion in order to increase 

market output or lessen the likelihood of seller coordination." ABA Mergers at 196, n.27. 

Indeed, the actions of the major customers in this industry show that they are capable of 

protecting their own interests and that competition has been protected as well. The ID erred it?-

ignoring this evidence. 

A. Barriers to Entry Into Battery Separator Production are Low. 

The Guidelines provide that "[a] merger is not likely to create or enhance market power 

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

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

41 
premerger levels. Such entry likely will deter an anti competitive merger in its incipiency, or 

deter or counteract the competitive effects of concern." Guidelines §3.0. "In the absence of 

significant [entry] barriers, a company probably cannot maintain supracompetitive prices for any 

length oftime." United States v. Baker Hughes, Inc., 908 F.2d 981,987 (D.C.Cir. 1990). 

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

or is threatened to be actual entry by certain firms; (2) that barriers to entry into the particular 

industry are low; (3) that expansion by previously existing firms either has occurred or is likely 

to occur; and (4) that the mere threat of entry may operate to foster competitive conditions in a 

market. Commentary on the Horizontal Merger Guidelines at 37; Baker Hughes, 908 F.2d at 

987-89; United States v. Syufy Enter., 903 F.2d 659, 666-67 (9th Cir. 1990); Waste 

Management, 743 F.2d at 981-84; United States v. Calmar, Inc., 612 F.Supp 1298 (D.N.J. 1985). 

The ID found that entry would not be sufficient to offset the anti competitive effects of the 

merger. (lD 270-88). The ALl erred, however, by failing to consider substantial competent 

evidence of actions already taken which demonstrate the threat of actual entry and expansion by 

existing firms. 

The sufficiency of entry here need be measured only by whether a new entrant - one of 

Microporous' scale - would replace the competition allegedly lost. At the time of the 

Acquisition, Microporous operated only one line capable of producing pure-PE separators in 

Piney Flats, with a total capacity of 11 msm. (Gaugl, Tr. 4546-47, 4533-34). Thus, within the 

confines of the relevant all-PE market, sufficient new entry need only replace this one PE line in 

North America. In the Matter ofB.F. Goodrich Co., 110 F.T.C. 207, 345 (1988); RFOF 1250-

51; Guidelines §3.4. 

42 
Entry, of course, need not be de novo in order to counteract anticompetitive effects, and 

there was abundant evidence that Asian separator manufacturers, who are aggressive 

competitors, could enter North America by building a single PE line to sufficiently replace the 

capacity allegedly lost. (RFOF 1106-07, 1109, 1250-51). Several Asian separator manufacturers 

are considered on par with their North American counterparts in terms of quality, technology and 

capability. (RFOF 977-1052). Asian products have been globally approved and qualified by 

North American battery makers. (RFOF 789, 1074-75, 1029, 993, 989). In fact, { 

}. (RFOF 597-600, 789, 990, 991, 1024-1026, 1028-

1030). 

In addition, potential expansion or repositioning of { } is another form of 

entry to be considered. See Baker Hughes, 908 F.3d at 988-89; Guidelines §2.212. The 

evidence shows that { 

}. (RFOF 1112-1113, 932, 938, 934, 943-

45,969,947). Entek formerly supplied industrial separators to North American customers, and it 

could easily do so again. (RFOF 681, 684, 968). In fact, { 

}. (Weerts, Tr. 4490, in camera). As noted 

below, { }. (RFOF 681). 

Additionally, the evidence demonstrates that { 

43 
}. 

(RX00676; PX2174; RFOF 1078, 1092-93). Entek's ability and capacity are sufficient to curtail 

any alleged anticompetitive effects of the merger. (RFOF 943-45). 

The competent evidence demonstrates that entry into North America can be made by a 

separator manufacturer on a timely basis. (RPTB 30-35; RRCCFOF 874).26 { 

} have all developed and constructed new production lines in { } or 

less. (Gaugl, Tr. 4543; RFOF 1070, 1061-1088). Even Kung admitted that { 

}. (RFOF 1074). 

The capital expenditure is modest (see RRCCFOF 823), and the equipment and technology 

needed to set up a new PE line is not proprietary and is generally known and available in the 

industry. (RRCCFOF 823, 830; Gaugl, Tr. 4545-48). Indeed, the evidence demonstrates that 

"mushroom" PE separator manufacturers of the same relative size of Microporous' output pop 

up around the world (RFOF 1050), refuting the ID's finding of barriers due to technology or 

required expertise. The evidence demonstrates that separator manufacturers around the globe 

compete with Daramic (RRCCFOF 840), and the assertion that Asian separator manufacturers do 

not produce a quality product is belied by { 

}. (RFOF 

685-94, 978-79). 

Nor is customer testing or qualification a barrier. The evidence demonstrates that the 

total time required to test a separator depends on the customer, can be conducted concurrently 

26 The ID erroneously relies in large part on the testimony of James Kung with respect to the timing of entry. (ID 

155-58, 278-82). However, Kung's testimony is suspect because he is in the business of building PE lines and 

benefits from making such construction sound complicated. (PX0907(Kung, Dep. 26-27». Moreover, Kung's 

testimony has been shown to be untruthful and cannot be relied upon as evidence of the timeliness of entry. 

(RRCCFOF 952). 

44 
with other testing and can occur in a matter of months. (RRCCFOF 885, 892). For example, 

Nawaz Qureshi, the Vice President of Engineering and Technology at U.S. Battery, testified that 

a motive separator can be qualified in less than a year. (Qureshi, Tr. 2067-68). Even EnerSys' 

Larry Axt, a buyer of industrial separators, conceded that qualifying an alternate supplier takes 

less than a year. (RRCCFOF 886)?7 Simply stated, the evidence demonstrates that barriers to 

entry are low. 

B. Substantial Customers, Including the Largest Worldwide Battery Producers, 

Have Sponsored and Encouraged Entry by { 

}. 

High entry barriers do not exist here for another-reason: large, powerful buyers have the 

ability and interest to sponsor entry of separator manufacturers. "[L]arge, sophisticated buyers 

can counteract potentially anticompetitive post-merger behavior by encouraging entry. A 'power 

buyer' may subsidize new entry or incumbent expansion in order to increase market output or 

lessen the likelihood of seller coordination. The power buyer itself may become a seller via 

vertical integration with an existing producer." ABA Mergers at 196, n.27. 

The behavior of "power buyers" in this industry (including lCI, EnerSys and Exide) is 

strong evidence of their ability to forestall anti competitive practices and sponsor entry, and the 

ID erred by not finding that their conduct would offset any lost competition. (ID 288-92). The 

ID summarily dismisses Respondent's power buyer defense, stating that in the SLI market there 

is only one alternative supplier, and that there are no alternatives in the deep-cycle, motive and 

UPS markets. (ID 291). The ID's analysis, however, ignores substantial evidence of alternative 

actual or potential suppliers (discussed above) and the aggressive behavior of the power buyers 

in the industry. 

27 The timing needed to begin supplying UPS and SLI separators is of little significance since Microporous was not 

a participant in those applications. 

45 
1. { 

}. 

JeI is the largest battery manufacturer in the world, with over { } leadacid automotive battery market. JeI produced more than 120 million lead acid batteries in 2008 

with sales over $38 billion. (RFOF 438). { 

} (RX00040 at 05-08, in camera). JeI has 

been able to do this effectively: 

· { }. (RFOF 475-79). 

• { }. 

(RFOF 480). 

• Daramic supplied separators to JeI until December 31, 2008. (RFOF 459). Since 

January 1, 2009, { }. 

(RX00072, in camera; Hall, Tr. 2747-48, in camera). 

· { 

}. (RFOF 482-84,950,961). 

· { } (RFOF 

306). 

JeI has demonstrated the ease of { 

} (Hall, Tr. 2715-2716,2747, in camera; RX00053, in camera; RX00052, in camera; 

RX00072, in camera). In addition to { 

46 

}, (RFOF 475-77), { 

}. (RFOF 491). { 

} (RX00055; Hall, Tr. 
2838-2839, in camera). { 

}. (Hall, Tr. 2820-2821, in camera). 

2. { 

}. 

Like JeI, EnerSys has the ability to manage the competitive marketplace for battery 

separators. Its power is such that it "rallied" its other "power buyer" competitors to oppose the 

acquisition of Microporous by Respondent despite the fact that there has been no impact on its 

own business. (RFOF 711, 726). The evidence makes it abundantly clear that EnerSys' 

purchase of separators has not been affected by the Acquisition and that it has the ability to 

promote the entry of other suppliers, and, thus avoid any anti competitive effects of the merger. 

As the largest manufacturer of industrial batteries in the world, EnerSys has repeatedly 

demonstrated its position of strength in dealings with its suppliers, including Daramic. (RFOF 

624). EnerSys describes its own negotiation strategy as employing { 

} (RFOF 625). EnerSys' strong negotiating position has been demonstrated on many 

occaSIOns: 

· { } (Seibert Tr. 4195, 4213-

17, in camera; RX831; RX773; RX606; RX1549; RX590; RX768 in camera; 

Burkert Tr. 2434, 2436, 2438, 2464-65, in camera; RX768, in camera; RXI032; 

Axt, Tr. 2215-16, in camera; PX2264 in camera). 

· { } (RX 964 at 002, in camera). 

· { } (RFOF 678-79). 

Utilizing its position of strength, EnerSys has also considered { 

} (RFOF 681-

47 
712), and { 

}. (RFOF 711). 

· { 

}. (RFOF 681-84). 

· { 

}. (RFOF 685). 

· { } (RFOF 686). { 

} (RX00023, 

in camera; RX00059 in camera). 

· { }. (RFOF 686-89). 

· { 

}. (RFOF 691-694). 

These actions show EnerSys has the power and leverage sufficient to sponsor and 

promote entry into the North American separator industry such that the merger of Microporous 

and Daramic has had, and will have, no anticompetitive effects. 

3. { 

}. 

Exide is either the largest or second largest battery manufacturer in the world. (RFOF 

210). Exide sold almost $3.7 billion worth of automotive, truck, motorcycles, recreational 

vehicles, golf cart, boats, forklift and network batteries in fiscal 2008 and { 

} (RXOl186 at 006-007, 027, 057; Gillespie, Tr. 

2929-30). Exide has consistently been able to use its size and leverage to "manage" its suppliers. 

48 
Exide's power is demonstrated by the fact that even though it entered into a { 

}. (PX0726; 

PX0728; PX0835, in camera; RX00976, in camera; RX00977, in camera; RX01517, in camera; 

RX00342 at 033, in camera; RX01281, in camera; RX00979, in camera; RX01282; RX01283; 

RX01284; RX01285; RX00537, in camera; RX00019, in camera; Gillespie, Tr. 2985, 3070-73, 

3095, 3100-3103, 3112, in camera). Exide admits that even with a contract with defined terms, it 

uses any point "not clearly stated in the contract interpretation as leverage points" against 

Daramic. (Gillespie, Tr. 3069-71). 

Exide's power is further evidenced by the fact that { 

}. (RFOF 1529, 1541). { 

}. (RFOF 1529-40). Exide took these actions { 

}. See 

ALJ's Order on Complaint Counsel's Motion for Official Notice (Feb. 16,2010). Exide's conduct 

demonstrates its power - { }, 

even after the Acquisition. 

{ 

49 
}. (Gillespie, Tr. 3124-3126, in camera). Indeed, { 

} (Gillespie, Tr. 3122-23, in camera). { 

}. (RFOF 599). { 

} (Gillespie, Tr. 3022-24, 3041, in 

camera), and it { 

}. (Gillespie, Tr. 3034, in camera). 

In sum, entry barriers into battery separator production are insignificant. With { 

}, Entek has the { } to become a major 

producer of non-SLI separators. The evidence presented here also shows that substantial 

customers have been and are in the process of { 

}. As shown here, { 

}. All of 

these factors show that competition in the battery separator industry has not been adversely 

affected by the Acquisition and there is no probability of its being adversely affected. 

IV. THE ORDERED RELIEF IS OVERBROAD, INAPPROPRIATE AND PUNITIVE. 

A. The Divestiture of the Feistritz Plant Is Improper, Unnecessary and Cannot 

Be Legally Justified. 

The ALJ's order requiring the divestiture of the Feistritz plant - a facility outside of the 

ALJ's geographic market - is improper and, under this record, punitive. The plant was not 

operational at the time of the Acquisition and made no sales into North America. In addition, 

50 
Complaint Counsel failed to prove that this foreign facility had any effect on competition in the 

United States. The ALl erred by ordering the divestiture of the Feistritz facility since that relief 

is overbroad and not necessary to restore the competition allegedly lost in North America. 

Complete divestiture of all acquired assets is not required unless necessary to restore the 

competition lost in the relevant market. See, e.g., Waste Management, 588 F.Supp. at 514. The 

ID, however, fails to follow this precept and the fundamental principle that the antitrust remedy 

restore the competition that was allegedly lost as a result of the Acquisition. See Chicago 

Bridge & Co., 138 F.T.C. at 1160 (Op ofComm'n). Relief is intended to "restore competition to 

the state in which it existed prior to, and would have continued to exist but for, the illegal 

merger." In the Matter ofB.F. Goodrich Co., 110 F.T.C. at 345. 

The ID's remedy is fatally flawed because it fails to analyze whether a complete 

divestiture of the North American business would remedy any competition allegedly lost in 

North America. Indeed, Complaint Counsel failed to present competent evidence to prove that a 

divestiture of facilities in Europe, built to serve customers in Europe, is necessary to restore the 

competition allegedly lost in North America. This is fatal to the ALl's findings as to remedy. 

As discussed below, complete divestiture is not required either by law or by the circumstances of 

this case because a partial divestiture would restore any competition allegedly lost. (RFOF 

1401-1405). 

The ID ultimately found that the divestiture of foreign assets is governed by the standard 

articulated by the Commission in Chicago Bridge: "foreign assets [need be divested] only to the 

extent they are necessary for an acquirer to compete in the Relevant Markets.,,28 (ID 334). The 

ALl, though, found that the relevant geographic market here is North America, not Europe or the 

28 Preoccupied with their focus on "complete divestiture," Complaint Counsel cite Chicago Bridge but fail to 

disclose that total divestiture was not required there, as noted by the ID. (CCPTB 70-71). 

51 
world, and found no impact by foreign suppliers on North America?9 (IDFOF 332-41, 343-53). 

The ALl specifically found: 

• Neither Daramic nor Entek are aware of any occasions where Asian PE producers 

have sold separators in North America. (IDFOF 346, 349). 

• Amer-Sil does not currently sell separators in North America and { 

}. (IDFOF 350, 353). 

• The ALl finds that "BFR cannot, at present, sell separators in North America at 

competitive prices" and that { } price quote to EnerSys was "substantially 

higher" than Daramic's price for a similar PE profile. (IDFOF 332, 342). 

• The ALJ explains that "[t]he chief barrier to separator imports into North America 

is ... the lack of competitiveness of BFR ... and other foreign separator 

suppliers in this region." (ID 241)(emphasis added). 

Given his own findings that foreign producers do not compete in the relevant market, the 

ID fails to explain why divestiture of foreign assets is necessary for an acquirer to compete in the 

relevant market. The ID' s treatment of this issue is remarkable. In a single paragraph out of 347 

total pages, the ALl dismissively decides that divestiture of the Feistritz plant "is necessary ... 

to enable an acquirer to compete in that market." (ID 334). The factors cited by the ALJ in 

support of his conclusion merely parrot the defective arguments of Complaint Counsel: (1) that 

it is important to battery makers that a separator producer be able to supply product on a "global 

basis;" (2) that "local supply" of separators is also important to battery manufacturers; (3) that 

this factor prompted Microporous to develop its European plant; and (4) that "the scale of 

production provided by multiple plants is important to customers." (ID 334-35). The factors fail 

29 Even if, as Respondent has urged, the relevant market were determined to be global, the area in which the FTC 

has jurisdiction to ensure competitive conditions is the United States, not the world. Accordingly, the proper legal 

standard governing divestiture here is whether divestiture of the Feistritz plant is necessary for an acquirer to 

compete in the United States. "[C]onduct, whether at home or abroad can be reached by our antitrust laws when it 

affects competition within the United States or export competition from the United States." IB Areeda & 

Hovenkamp, ~270b; F. Hoffmann-La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 165 (2004)("[O]ur courts have 

long held that application of our antitrust laws to foreign anticompetitive conduct is nonetheless reasonable, and 

hence consistent with principles of prescriptive comity, insofar as they retlect a legislative effort to redress domestic 

antitrust injury that foreign anticompetitive conduct has caused.") (emphasis in original). 

52 
to support the ALl's conclusion, however, because they have no relevance to protection of 

competition in the United States. 

The ID contains fact findings to the effect that both EnerSys and Exide had more 

business in Europe than in the United States and, therefore, they wanted Microporous to develop 

a European plant. (IDFOF 1276-79). Even if that is true, these findings say nothing about, and 

provide no support for, the necessity of the Feistritz plant to enable Microporous (or a newly 

constituted entity ("NewCo")) to supply EnerSys and Exide in the United States - the 

competition area for which the FTC has jurisdiction in this case. Further, the ID contains no 

findings to the effect that Microporous (or NewCo) could not compete effectively in North 

America without the Feistritz plant. 

Indeed, Gilchrist admitted during the hearing that the Feistritz plant was not necessary 

for Microporous to be viable, and that Microporous for years had manufactured and shipped 

separators out of Piney Flats to Europe and Asia. (Gilchrist, Tr. at 511, 540-41). In addition, 

testimony from EnerSys made it clear that the Feistritz plant was not necessary. Larry Burkert, 

EnerSys' Senior Procurement Manager, testified as follows: 

Q: And it's not your testimony -let me make sure I understand. It's not your 

testimony, sir, that you have to have a plant in Europe, a PE separator plant in 

Europe, and a PE separator plant in North America, is it? 

A: No. It's preferred. It would be my preference. 

Q:. But that's not - that's not a requirement for doing business with someone 

from EnerSys' point of view; right? 

A: No. 

(Burkert, Tr. 2385). Likewise, when discussing potential supply with Amer-Sil, EnerSys 

informed Amer-Sil that it did not need to have a plant in both North America and Europe. 

(Burkert, Tr. 2386). 

53 
Even Complaint Counsel argued that prior to the Acquisition, when it had a single plant, 

Microporous was a "maverick," "a strong, worldwide competitor," and "a worldwide, 

competitive threat." (CCPTB 2, 69). The assertion that Microporous competed effectively in 

North America and around the world before the Feistritz plant came online was a fundamental 

part of Complaint Counsel's case.3D The ALJ fails to reconcile the inconsistency that 

Microporous, without Feistritz, was a worldwide competitive threat but NewCo could not 

achieve that status without Feistritz. 

Moreover, the ALJ's reliance on "local supply" to support divestiture of Microporous is 

illusory. Divestiture of only the Piney Flats plant would provide NewCo with the same "local 

supply" in the United StateslNorth America that Microporous had at the time of the merger. 

Feistritz divestiture would do nothing to provide local supply in the United States, the area for 

which the FTC has jurisdiction to protect competition. Of course, Microporous' development of 

the Feistritz plant was for the purpose of providing "local supply" - but in Europe. In short, as 

regards the issue of Feistritz divestiture, the ID is defective since the evidence upon which it 

relies and the analysis it provides are non-probative. 

The ID gives little attention to Respondent's argument. In concluding that "broad 

divestiture" ensures that NewCo will have "a real chance at competitive success,,,3l the ID fails 

30 The ID cites the testimony of EnerSys' Mr. Axt, that he would not "commit additional volume for a manufacturer 

with only one operation." (IDFOF 1276; Axt, Tr. 2143, in camera). This questionable testimony of a single 

customer (a complainant in this case) hardly supports the proposition that Microporous could not compete 

effectively in North America without Feistritz. This testimony is rightly viewed as "questionable" for two reasons. 

First, EnerSys began transferring business to Microporous in 2006, long before Feistritz was operational (RFOF 

620) and, second, EnerSys had earlier told Amer-Sil, another separator producer, that it did not need to have a plant 

both in North America and Europe. (Burkert, Tr. 2386, in camera). In any event, the proper standard regarding this 

issue is not whether every customer is satisfied with the relief ordered but whether, as the AU put it, Feistritz 

divestiture is "necessary for an acquirer to compete in the Relevant Markets." In addition, the finding noted by the 

AU fails to include any claim that Microporous could not have provided additional supply security for EnerSys by 

warehousing additional invcntory rather than constructing a complete, second production facility. 

31 Quoting from In re Olin, No. 9196,113 F.T.C. 400,1990 FTC LEXIS 234, at 65 (June 13, 1990), rev. denied, 986 

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

54 
to consider that Feistritz was a financial drain on Microporous and that Feistritz was not 

importantto Microporous' North American business. It notes Respondent's points that (1) at the 

time of the acquisition, Microporous had no orders for the second line at Feistritz and that the 

Exide MOU had expired; (2) the Feistritz plant was operating at less than full capacity; (3) but 

for the transfer of the Daramic production previously at its Potenza plant, the production level at 

Feistritz would be about { } and (4) projected net income at Feistritz for 2009 was 

{ }. (ID 335-36). The ID, however, fails to address any of this evidence. 

At the time of the Acquisition, Microporous was financially unstable, and the Feistritz 

plant only increased its precarious financial situation. (RRCCFOF 1198). Microporous had a 

tremendous debt of approximately $46,139,000. Id. Had it been operational, Feistritz would 

have been a significant financial drain on Microporous. Id. If Feistritz were operating as a standalone entity, it would have had a projected net income for 2009 of { }. Id. 

It is not clear how operating a plant which is losing money would provide NewCo a "real chance 

at competitive success." 

Moreover, neither the Piney Flats nor Feistritz plant was operating at full capacity at the 

time of the Acquisition. Microporous had one operating plant III Piney Flats with three 

production lines: one line each for Ace-Sil, Flex-Sil and CellForce. { } of production from 

the CellForce line was being exported to EnerSys in Europe (RFOF 1146), and Microporous 

planned to shift that production to Feistritz. (Trevathan, Tr. 3762-63). At the time of the 

hearing, Microporous' Piney Flats lines were operating at 35-40% of capacity. (RFOF 425). To 

the extent that the opening of the Feistritz plant resulted in available capacity in Piney Flats, 

there was no evidence introduced by Complaint Counsel that Microporous was able to use that 

capacity. Trevathan did not identify any new business in the U.S. that made use of any freed-up 

55 
capacity, and Gilchrist was unable to identify even one customer pertinent to such new business. 

(Trevathan, Tr. 3623; Gilchrist, Tr. 503; RFOF 1148). EnerSys, { 

}. (Craig, Tr. 2639, in camera). 

The evidence demonstrates that Microporous did not add to its customer base with the 

anticipated transfer of { } of its production to Feistritz, and if anything, such a transfer would 

have made its already shaky financial situation worse. (RFOF 1146). 

Moreover, even if the evidence had shown that additional capacity was needed in Piney 

Flats to supply customers in North America and to restore competition allegedly lost, which it 

does not, the ID failed to consider divestiture of the PE "line in boxes" as an alternative to 

divestiture of the Feistritz plant. Such divestiture, which the ALl has also included in his relief, 

would add an entirely new production line at Piney Flats if additional capacity there were 

somehow deemed necessary. 

While these facts strongly suggest that the ALl's divestiture package will be wholly 

nonviable in the asset marketplace, the ID concludes that "it is neither necessary, nor appropriate 

to speculate as to the viability of a divestiture package." (ID 336). Given these facts and the 

requirement that divestiture occur at no minimum price, the divestiture order constitutes punitive 

relief, which is specifically prohibited by judicial and FTC precedent.32 This level of treatment 

inevitably evokes due process concerns and is totally indefensible.33 

B. The Relief Order Contains Additional Provisions Which Are Not Tied to the 

Liability Found. 

32 E.!. duPont de Nemours, 366 U.S. at 326; In re Grand Union Co., 102 F.T.C. 812 (1983). 

33 Section V(B)(1) of the Order requires Respondent to maintain a Microporous work force equal to the force in 

place as of the Acquisition. This requirement is out of "sync" with the facts since the Microporous work force long 

since has dropped below its level as of February 29, 2008, due to efficiencies Daramic has implemented and to the 

economic downturn. The Order should only require that the work force be maintained from the date of the Order 

until the date of divestiture. The Order, again, is punitive in its current scope. 

56 
Other provisions of the relief order are also not legally justifiable, as they are not tied to 

the liability found in the ID. Importantly, the primary basis for liability against Respondent isa 

Section 7 merger claim. The ALJ found no liability on Complaint Counsel's monopolization 

claim. Therefore, any ordered remedy must be related to the finding-of an illegal merger.

34 

Yet, it is apparent from the ID that the remedy is not restricted to the alleged illegal 

merger. For example, the definition of "Terminable Contract(sY' includes contracts entered into 

by Daramic with customers prior to the Acquisition, provided that those contracts are "in effect 

at any time between the date the Order becomes final and the Effective Date of Divestiture." (ID 

358). Such a far-reaching provision allows customers to terminate agreements with Daramic 

even though the contracts were entered into before Daramic purportedly gained any market 

power through the Acquisition. This is not rational, and certainly cannot be justified, especially 

when the ALJ found in favor of Respondent on the monopolization claims. 

Additionally, Section II(C)(4) of the Order requires Respondent to grant to NewCo a 

"Shared Intellectual Property License." The definitions of "Retained Asset(s)," "Shared 

Intellectual Property" and "Shared Intellectual Property License" produce the result that 

Respondent would be required to grant N ewCo a license to use intellectual property that was 

owned and used by PolyporelDaramic well in advance of the Acquisition. "Shared Intellectual 

Property" is defined to include intellectual property that is a "Retained Asset," which, in tum, is 

defined as any property that was "owned, created, developed, leased or operated by Polypore 

prior to the Acquisition." Any such requirement that Polypore must license to NewCo its own, 

"pure" IP would be manifestly punitive and should not be allowed. E.I. du Pont de Nemours, 

366 U.S. at 326 ("Courts are not authorized in civil proceedings to punish antitrust violators, and 

34 For purposes of this discussion, Respondent concedes that the relief ordered for Count II relates to the liability 

found for that claim. 

57 
relief must not be punitive."); In re Grand Union Co., 102 F.T.C. 812 (1983)("The Supreme 

Court ... has ruled that punitive relief is inappropriate in a civil antitrust proceeding."). 

CONCLUSION 

For the reasons set forth above, Respondent respectfully submits that Complaint 

Counsel's Complaint should be dismissed with prejudice, and that judgment should be rendered 

in Respondent's favor. 

58 
Dated: April 23, 2010 Respectfully Submitted, 

William L. Rikard, Jr. 

Eric D. Welsh 

PARKER POE ADAMS & BE 

401 South Tryon Street, Suite 3000 

Charlotte, NC 28202 

Telephone: (704) 372-9000 

Facsimile: (704) 335-9689 

williamrikard@parkerpoe.com 

ericwelsh@parkerpoe.com 

John F. Graybeal 

PARKER POE ADAMS & BERNSTEIN LLP 

150 Fayetteville Street 

Raleigh, NC 27602 

Telephone: (919) 835-4599 

Facsimile: (919) 828-0564 

johngraybeal@parkerpoe.com 

Attorneys for Respondent 
UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSION 

COMMISSIONERS: 

In the Matter of 

Jon Leibowitz, Chairman 

Julie Brill 

William E. Kovacic 

Edith Ramirez 

J. Thomas Rosch 

POL YPORE INTERNATIONAL, INC., 

a corporation. 

) 

) 

) 

) 

) 

) 

Docket No. 9327 

PUBLIC DOCUMENT 

PROPOSED ORDER 

Upon consideration of the Briefs submitted by Respondent and Complaint Counsel, the 

arguments of counsel for the parties before this Commission in Open Session, and the record in 

this matter, it is hereby ordered that: 

1. Count I of the Complaint is dismissed with prejudice; and 

2. The Commission finds that Respondent did not acquire, as a result of the merger, 

monopoly power or a dangerous probability of achieving or maintaining 

monopoly power in Complaint Counsel's alleged North American deep-cycle, 

motive and UPS battery separator markets. 

Dated: -------

The Commission 
CERTIFICATE OF SERVICE 

I hereby certify that on April 23, 2010, I caused to be filed via hand delivery and 

electronic mail delivery an original and twelve (12) copies of the foregoing Respondent's 

Appeal Brief (Public Version), and that the electronic copy is a true and correct copy of the 

paper original and that a paper copy with an original signature is being filed with: 

Donald S. Clark, Secretary 

Office of the Secretary 

Federal Trade Commission 

600 Pennsylvania Avenue, NW, Rm. H-135 

Washington, DC 20580 

secretary@ftc.gov 

I hereby certify that on April 23, 2010, I caused to be served one copy via electronic mail 

delivery and two copies via overnight delivery of the foregoing Respondent's Appeal Brief 

(Public Version) upon: 

The Honorable D. Michael Chappell 

Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Avenue, NW 

Washington, DC 20580 

oalj@ftc.gov 

I hereby certify that on Apri123, 2010, I caused to be served via first-class mail delivery 

and electronic mail delivery a copy of the foregoing Respondent's Appeal Brief (Public 

Version) upon: 

J. Robert Robertson, Esq. 

Federal Trade Commission 

600 Pennsylvania Avenue, NW 

Washington, DC 20580 

rrobertson@ftc.gov 

Steven Dahm, Esq. 

Federal Trade Commission 

600 Pennsylvania Avenue, NW 

Washington, DC 20580 

sdahm@ftc.gov 

Adam C. Shearer 

Parker Poe Adams & Bernstein LLP 

Three Wachovia Center 

401 South Tryon Street, Suite 3000 

Charlotte, NC 28202 

Telephone: (704) 335-9050 

Facsimile: (704) 334-4706