ORIGINAL
 

UNITED STATES OF AMERICA
 

BEFORE THE FEDERA TRAE COMMISSION
 

_ '3:i..tl~~
 

-rDAru'E CO" ""~ d(\r", ,\'(1 ", ,,),. \ f\ " , Mil/I,1 """.

l ::"(/ REf'ElìfCn fìO;~¡fliìq:T:~"'\)'0 ~~,_ 

t,'" i2.J5~'7J ,- . 'C/.~\
 

AUG - 7 2009 j
 

5:El 85'8 SECRETA?,'! 

In the Matter of ) 

)

Polypore International, Inc., ) a corporation. ) 

) 

PUBLIC
 

Docket No. 9327
 

COMPLAIT COUNSEL'S POST-TRIAL REPLY BRIEF
 

RICHARD A. FEINSTEIN 

Director 

NORMAN ARSTRONG 

Acting Deputy Director 

Bureau of Competition 

CATHARI MOSCATELLI
 

Assistant Director 

MORRS BLOOM 

Deputy Assistant Director 

Bureau of Competition 

Mergers II 

August 7, 2009 

J. ROBERT ROBERTSON 

STEVEN DAHM 

BENJAMIN GRIS 

JOEL CHRISTIE 

STEPHEN ANTONIO 

CHRISTIA WOOLLEY 

PRIY A VISW ANATH 

Federal Trade Commission 

Bureau of Competition 

600 Pennsylvania Ave., N.W. 

Washington, DC 20580 

Telephone: (202) 326-2008 

Fax: (202) 326-2884 

Counsel Supporting the Complaint 
I. Introduction1
 

"The bottom line is that (Microporous) can be another Entek: building plants to 

exclusively supply EnerSys, JCI, East Penn and so forth," wrote Daramic's General Manager, 

"(w)e must do everyhing possible to stop this process." (PX0694 at 001) Daramic's Pierre 

Hauswald said, "I agree...it would be better to solve the (Microporous) case definitively." Id
 

Microporous was a "real theat" to Daramic, and so it acquired Microporous to "secure (its) 

market share," stop "price erosion," avoid lower prices, and "eliminate price competition." 

Daramic's acquisition of Micro porous, its closest and only competitor in the deep -cycle, motive 

and UPS battery-separator markets, resulted in a merger to monopoly. The acquisition also 

eliminated Microporous as a third competitor in the North American SLI separator market, 

leaving only Daramic and Entek as a duopoly. Under the law, this acquisition cannot stand. 

Often misciting the law and using citations that do not support their factual arguents, 3 

Daramic's story ignores the evidence at triaL. For example, Daramic stil insists that all 

separators (except Flex -Sil and Ace-Sil) are the same because of supposed, "supply-side" 

substitution. (RB at 11; Kahwaty, Tr. 5152, in camera) Contrary to Daramic's argument, 

on demand substitution factors - i.e., possible consumer 

responses." (Horizontal Merger Guidelines ir 1.0) (Emphasis added). Substantial evidence shows 

"(m)arket definition focuses solely 


that customers treat these markets separately: e.g., customers wil not use a polyethylene 

4 Clear proof
 separator without rubber (for antimony control) in a deep-cycle battery. that 

customers cannot easily switch, for example to an SLI separator when they need motive 

1 "CCB" refers to Complaint Counsel Post-Trial Brief; "RB" refers to Respondent's Post-Trial 

Brief; "CCFOF" and "RFOF" refer to Complaint Counsel's and Respondent's, respectively, 

Proposed Findings of 
 Fact. "CCRF" is Complaint Counsel's Rebuttl Findings. 2 PX0168 at 002; PX0935 at 001; PX0932 at 001.
 

3 We do not say so lightly. Respondent has had to resort to extreme mischaracterizations of case
 

law and the evidence. 4 PX0033 at 006, 012; Simpson, Tr. 3169-3172, in camera; Gilespie, Tr. 2933 (Using PE would 

not "make any sense"); Godber, Tr. 151-152 (would only use Flex-Sil, CellForce, or HD). 

1 

2 
separators, is that 

5 

The evidence at tral demonstrates that North American customers simply cannot grab 

any separator on the planet for use in a deep cycle, motive, or UPS battery. The Asian producers 

are not in the market. 

6 Daramic's claim that 

one could change a calendar roll and make another separator is not relevant when no other 

company has designed, tested, or manufactued a SLI separator for North America, except for 

Microporous, Daramic, and Entek. Furer lS 

qualified in deep cycle, motive, or UPS for any of 
 these customers. This marketplace reality 

means that Daramic's supply-side substitution is a fantasy and Complaint Counsel has properly 

measured market concentration. 

Moreover, Daramic's claim that Daramic HD and Microporous' Flex-Sil were not 

competitors in the deep cycle market is false. Customers uniformly agreed that Daramic's HD 

was a substitute for Daramic's Flex-Sil. (Godber, Tr. 152-153; Wallace, Tr. 1971-1972; Qureshi, 

Tr. 2004, 2063; Gilespie, Tr. 2933) Over 90% of 
 the "total market" for deep cycle batteries, 

5 See, e.g., ~Gi1espie, Tr. 2953-2954, 3041, in camera 

Godber, Tr. 299, in camera 

__; Wallace, Tr. 1951 ("nowhere to go but to" Daramic); Gagge, Tr. 2611 ("(t)here's
 

no other source"); Leister, Tr. 4028 (Entek not supplying motive separators); Douglas, Tr. 4082 

(no other supplier); Benjamin, Tr. 3522 (Daramic is the "sole supplier. That's it. Take it or leave 

it."), id. 3526 ("there is no other supplier, so you're kid of stuck). Daramic also ignores the 

evidence that Daramic now has "control" over all but the SLI separator market, in which 

Daramic has only Entek as a competitor. (See PX1104 at 001; PX0395 at 023,025-027) 6 (Weerts, Tr. 4507-4509,
 

in camera ; PX1823, in camera: CCFOF ir 928)
 

2 
Exide, U.S. Battery, and Trojan, all used Daramic HD as a competitive theat to Microporous' 

deep cycle separators.7 

The substantial reduction of competition in deep-cycle, motive, UPS, and SLI separators 

is impossible to refute. However, faced with four markets with extraordinarily high HHls and 

unequivocal evidence of high barers to entr, Daramic argues that if we use an "all PE market" 

(combining CellForce, HD, and PE of all tyes, sizes and ingredients but excluding Flex-Sil, 

that the concentration levels are just not high enough. Not tre. Even without Flex-Sil, 

Microporous' largest volume product, Daramic's own numbers from an all-PE market yield 

HHls that are far above the level in the Merger Guidelines (i! 1.51) at which "it wil be 

presumed" that the acquisition is "likely to create or enhance market power or faciltate its 

exercise."g No matter how Daramic slices the pie, its acquisition is presumptively ilegal.9 

Despite these high HHls and the high barrers to entr, Daramic claims that timely, 

likely, and suffcient entr rebuts Complaint Counsel's case because some unown Asian 

producer might enter. But, despite all the talk of Asian companies, the only evidence in the 

record is that 

7 Gilchrist, Tr. 379-380, 406-407 

(Gilchrst, Tr. 467-468, 343, 368; McDonald, Tr. 3911, 3944, 3948-3949 ("no 

other competitor" other than Daramic in deep cycle). 

8 

Daramic is wrong that acquisition of of a market does not trgger Section 7. See,
 

e.g., United States v. Pabst Brewing Co. ,384 U.S. 546,547 (1966) (holding a merger of a firm 

having 3.02% of the market, with a firm, having 1.47% of 
 the market, was a Section 7 violation); 

Stanley Works v. FTC, 469 F.2d 498,505-07 (2d Cir. 1972) (24% with 1 %). 

3 
Daramic offered no evidence from any 

non-Daramic, Asian producer - the supposed entrants. 

.10 Even Polypore's CEO, Bob Toth, admitted that the Asians were not in North 

America because their margins "aren't high enough" to be competitive. (Toth, Tr. 1404) 

Absent any evidence of entry, Daramic then claims that efficiencies are a defense to its 

massive assault on competition. But Daramic failed to show the required, "verifiable," 

"extraordinary effciencies" that would be passed through to consumers. 11 Indeed, none of their 

claimed efficiencies is even cognizable or detailed. At best, Mr. Graff said they 

(RB at 45, citing Graff, Tr. 4863, in 

camera) This is not sufficient. 

Daramic's final defense is that although Microporous was a strong, profitable company at 

the time of the acquisition, now that Daramic controls it, the "viabilty of 
 Micro porous as a stand 

alone entity is seriously in question." (RB at49) This "failing-fir" defense was never raised in 

Daramic's answer and was waived, but more importntly it is contrar to the facts. The evidence 

10 ~Haii, Tr. 2727, in camera 

(Kung, Dep. 153, 155-156 

in 

Axt, Tr. 2220, in camera.l 

FTC v. CCC Holdings Inc., et al., 60S F. Supp. 26, 72-74 (D. D.C. 2009); Heinz, 246 F.3d at 

720; FTCv. Univ. Health, Inc .,938 F.2d 1206,1218 n.24 (11th Cir. 1991) (Defense "must 

demonstrate.. . significant economies and that these economies ultimately would benefit 

competition and, hence, consumers."). 

4
 
is that Microporous was "profitable" and was "on track to improve its profitabilty." (Gilchrst,
 

Tr. 344,403; Trevathan, Tr. 3562,3659,3750) 

In the end, the complete undoing of 
 this ilegal acquisition is mandated as a matter oflaw. 

An effective remedy must restore competition to what it would have bee n but for Daramic' s 

ilegal conduct. However, Daramic claims that Complaint Counsel has to prove that a 

"complete" divestitue is necessary; otherwise it is somehow overbroad or punitive. (RB at 59­

60) This argument is a complete reru of Chicago Bridge, which rejected this precise argument 

and which Daramic fails to even cite. Notably, in Chicago Bridge, the Fifth Circuit affrmed the 

ALl's and Commission's complete divestitue ofPDM including a division that was not even at 

issue in the case. Chicago Bridge & Iron Co. N. V. v. FTC, 534 F.3d 410,441 (5th Cir. 2008). 

Here, every aspect of Micro porous is at issue - even Ace-Sil, which forms the key ingredient for 

CellForce. Thus, all ofthe stock and assets of Micro porous must be divested so that 

Microporous can compete on the same "equal footig," as it had prior to the acquisition. Id. 

This relief must include the Austran plant because that expansion was what made the 

company a world-wide competitor that could properly service its world -wide customers, like 

EnerSys and Exide. Indeed, one of Micro porous' key assets , which 

requires that the company have Microporous' 

Ace-Silline in Tennessee was also essential because Ace-Sil is an ingredient vital for the 

manufactue of CellForce, required to be manufactued both in 

In short, Microporous' world-wide scale is what put it on equal footing with 

Daramic and Entek. It hardly makes sense to let the monopolist keep it. 

Daramic argues that it should keep all of 
 Microporous ' products, contracts, and five of its 

six lines (including two in Austria) and divest merely one Daramic product -- Daramic HD -- that 

Daramic's own brief says is not a "competitive" product. (RB at 24) It makes even less sense to 

5 
give the new Microporous the least competitive product Daramic has, and one that Microporous 

never owned in the first place and hope that it can compete. This would be an absurd result. 

Northern Securities Co. v. United States, 193 U.S. 197,357 (1904), quoted by Ford Motor Co. v. 

United States, 405 U.S. 562,574, n.9 (1972) ("To permit Ford to retain" what it bought "would 

perpetute the anticompetItive effects of the acquisition"). 

In addition, the remedy sought in this case is buttessed by the strong evidence of 

monopolization and other antIcompetitive conduct by Daramic over the past decade. Daramic's 

strong-arm, "no-mercy" tactics against EnerSys and others is clear from the evidence. 

Daramic's exclusionary contracts were also a clear monopoly tactic -- making it more expensive 

for customers to take on a competitive supplier, like Microporous. (CCFOF irir 1069-1076) 

What we see here, especially in Daramic's post-acquisition behavior, is anticompetitive 

conduct that has harmed customers. If this is what Daramic does when it's being sued by the 

Federal Trade Commission, what do we expect to see if 
 this litigation ends without an adequate 

remedy? But the law requires that Daramic must be stopped and competition must be reinstated. 

To paraphrase Exide's Doug Gilespie and the Supreme Cour: that is why we are here. 

(Gilespie, Tr. 2980-2981 ("(T)hat s why you're here"); FTC v. Motion Picture Advertising Servo
 

Co., 344 U.S. 392, 394-95 (1953) (FTC's mandated role is "to stop in their incipiency acts and 

practices which, when full blown, would violate" the antitrst laws). 

12 This was Daramic's pattern of conduct. See, e.g., PX1793 at 001 

Hauswald Tr. 743, 1132-1133, in 

camera ; Bregman, Tr. 

2901-2903, in camera, 2906, in camera; PX1050, in camera 

6 

12 
II. The Correct Burden of Proof Requires Daramic to Rebut Complaint Counsel's
 

Strong Prima Facie Case 

Daramic claims that Complaint Counsel must "show 'demonstrable and substantial 

anticompetitive effects'" to prove its case. (RB at 6, ( citing New York v. Kraft General Foods, 

Inc., 926 F. Supp. 321, 359 (S.D. N.¥. 1995));13 RB 7 n.2). This is hardly a statement ofthe law. 

14 Daramic ignores the legal presumption that evidence of 
 high concentration creates. 

The law requires that Complaint Counsel establish its prima facie case by proving only 

that Daramic' s acquisition of Microporous "significantly increaser d) market concentration, 

thereby creating a presumption that the transaction is likely to substantially lessen competition." 

Chicago Bridge, 534 F.3d at 
 423; FTCv. Whole Foods Mk., Inc., 548 F.3d 1028, 1036 (D.C. 

Cir. 2008) (Brown, J.) (A prima facie Section 7 case tyically "rests on defining a market and 

showing undue concentration in that market."). As Complaint Counsel's "prima facie case 

anticipates and addresses the respondent's rebuttal evidence . . . the prima facie case is very 

compelling and significantly strengthened." Chicago Bridge, 534 F.3d at 426. Under the law, 

Daramic has a "heavy burden" to "clearly disprove futue anti-competitive effects." Id at 426. 

Even if Daramic produces evidence, "the evidence must justifY the rebuttal arguments the 

respondent espouses." Id. Daramic's rebuttl case, however, fails to rebut Complaint Counsel's
 

strong prima facie case that shows a likelihood of anti-competitive effects. 

13 Judge Wood in Kraft goes further to explain that the market shares (less than 15% for both 

firms combined) were insuffcient to create a "presumption that the (a)cquisition violates Section 

7." 926 F. Supp. at 363.


14 Daramic claims that Complaint Counsel must show that the merger actually resulted in 

increased prices and lower output, RB at 23, an assertion contrary to law, including Daramic's 

cited cases. In Forsyth, cited by Daramic, the cour stated was addressing a case in which the
 

plaintiff attempted to show monopoly power through direct evidence. Forsyth v. Humana, Inc. , 

114 F.3d 1467, 1475-76 (9th Cir. 1997) (emphasis added). The cour explained that one can 

prove monopoly power through circumstantial evidence of the defendant's dominant share in a 

market. 1d (emphasis added).
 

7 
Moreover, Daramic is wrong that Complaint Counsel must "show that the alleged 

violation affected a substantial volume of commerce." (RB at 6) The Commission has 

unequivocally held that "the volume or size of commerce affected by an acquisition is not a 

factor in determining the legality of a horizontal merger." Chicago Bridge, 138 F.T.C. at 1098­

99 and n. 315; FTC v. Food Town Stores, 539 F.2d 1339, 1345 (4th Cir. 1976) ("The fact thatthe 

markets in which the firms compete may be small is irrelevant under the Clayton Act, and does 

not affect the legality of 
 the merger."). The Commission in Chicago Bridge also rejected the 

very interpretation of Baker Hughes which Daramic relies on here for its proposition that the 

entire market must meet some minimum market size. Chicago Bridge, 138 FTC at 1098-1099 

("cours have consistently held that the volume or size of commerce affected by an acquisition is 

not a factor in determining the legality of a horizontal merger "), affd, 534 F.3d at 433 (size of 

Thermal Vacuum Chamber market was not relevant).15 

III. Complaint Counsel Has Proven a Strong Prima Facie Case
 

A. The Acquisition Led to Undue Concentration in Four Product Markets:
 

Deep-Cycle, Motive, SLI, and UPS Battery Separators for Flooded Batteries. 

Complaint Counsel has proven the existence of four relevant product markets: deepcycle, motive, UPS, and SLI separators for flooded lead acid batteries. (CCB at 12-28) 

Daramic, however, claims that all of 
 these markets (with the exception of one product, Flex-Sil) 

are really one product because of 
 what Daramic calls "supply-side substitution." (RB at 10-11) 

Daramic is wrong as a matter oflaw and fact. As the Merger Guidelines states emphatically: 

15 Two market sizes affected by this merger include 

(PX0033 at 041, in camera, CCFOF irir 273, 305) These markets are substantially greater than in Chicago Bridge, where the 

four combined markets had average annual sales of only $23 milion, and Baker Hughes in 

which total sales over a three year period amounted to about $10 milion. In re Chicago Bridge 

& Iron Co., et al. , Complaint Counsel's Answer and Cross Appeal Brief 
 at p. 26, available at 

wwwjìc.gov/OS/ADJPRO/d9300, Us. v. Baker Hughes, Inc., 731. F. Supp. 3, 9 and n.6 (D.D.C. 

1990). See also FTC v. Whole Foods Mkt., Inc., 548 F.3d 1028, 1035 (D.C. Cir. 2008) (each
 

market consisted ofa few grocery stores). 

8 
"Market definition focuses solely 
 on demand substitution factors - i.e., possible consumer 

responses." (Merger Guidelines, ~ 1.0 (emphasis added)) The relevant issue - cross-elasticity of 

demand - refers to the "responsiveness of the sales of one product to price changes of the other." 

United States v. E.1. du Pont de Nemours & Co., 351 U.S. 377, 400 (1956); Staples, 970 F. Supp. 

at 1074 ("whether two products can be used for the same purose, and if so, whether and to what 

extent purchasers are wiling to substitute one for the other." (internal quotations omitted); see 

also 2B Philip Areeda et al., Antitrst Law ir 562a, at 371 (3d ed. 2007) ("(A)ctual shifts 

between two products in response to - or even without - changes in their relative prices indicate 

a single market."). "(T)he determination of the relevant market in the end is 'a matter of 

business reality - ( ) of how the market is perceived by those who strve for profit in it.'" FTC v. 

Cardinal Health, 12 F. Supp. 2d 34, 46 (D.D.C. 1998) (citations omitted). The uncontroverted 

evidence shows that customers regard these products as separate products. ( See CCB at 12-28; 

CCFOF irir 63-77 and 92-99 (deep-cycle), 111-120 (motive), 134-142 (UPS), 148-158 (SLI)) 

Daramic also faults Complaint Counsel as having failed to apply hypothetical monopolist 

and smallestmarket principles. (RB at 8-9) This is not tre. 

(PX0033 at 005-007, in camera) 

Daramic then ignores its own advocacy for smaller markets in arguing that PE, 

CellForce, and HD should be included in some kind of 
 huge "all PE separator market." (RB at 

9) Not surrisingly, Daramic (and its expert) failed to perform any SSNIP test for such a market. 

While two PE separators may share one characteristic such as thickness, if they differ in other 

characteristics, such as having different compositions, they may belong in different product 

9 
markets, depending on their use. By merely identifying particular overlaps in thickness or 

profie between products, Daramic does not show that a customer would actually switch from 

one product to another based on an increase in price or for any other reason. 

In this case, the concentration levels here are very high. Moreover, as was the case in 

Chicago Bridge, this "acquisition eliminated. .. substantial direct competition and left (Daramic) 

with an 'undue' percentage share of each market." In re Chicago Bridge & Iron Co., et al. , 138 

FTC 1024, 1053 (2004). As in Chicago Bridge, this "provides an independent reason for finding 

a strong prima facie case of 
 presumptive liability." Id. 

1. The Evidence Does Not Require an "Al PE" Separator Market, as Endorsed by
 

Daramic. 

Daramic's theory of an all PE market (excluding Flex -Sil, Ace-Sil and Darak) relies on 

two theories: (i) a claimed, "supply-side substitution" argument, and (ii) substitution based on 

overlapping product characteristics. Complaint counsel has demonstrated that both of these 

theories are wrong. (RB at 10-11) 

a) There is No Supply-side Substitution.
 

Supply-side substitution is not relevant to market defiiition because even if a producer 

could manufactue a different separator easily, the customers must be wiling to purchase that 

separator in order for it to be in the same market. See, e.g., Rebel Oil Co. v. Atlantic Richfield 

Co., 51 F.3d 1421, 1436 (9th Cir. 1995) (full service and self-service gasoline stations sell the 

same gasoline and can switch from one to the other easily, so belong in the same market). The 

evidence at tral showed that customers wil not substitute products made for one product market 

with those from another. (See, e.g., CCFOF irir 26-32,85-91). The separators require extensive 

design and testing for their use in each market. (See CCFOF irir 928, 931_ 

CCFOF irir 896-903 

) 

10 
Daramic argues that Asian manufactuers and Entek may be uncommitted entrants. Not 

tre. An uncommitted entrant must be "capable of makig such quick and uncommitted supply
 

responses that they likely influenced the market premerger, would influence it post-merger, and 

accordingly are considered as market participants at both times." Merger Guidelines § 1.0. 

Entek did not influence the motive market prior to the merger. (CCFOF ir 462,465, 472; 

Kahwaty Tr. 5385) Entek also has not influenced the motive power market ~or any of 

Daramic's pricing in the marketl after the merger. (CCFOF ir 468) 

(CCFOF irir 464, 928, 931; Gilespie Tr. 3038-3039) 

. (Kahwaty, Tr. 5391, in camera) 

Tellingly, 

(Weerts, Tr. 4507, in camera, 4509, in camera) 

b) No Realistic Substitution Opportunities Exist Between Separators in
 

Different Product Markets. 

Daramic's theory misrepresents the numerous differences between separators in these 

product markets and that the products are stil suffciently differentiated such that Daramic 

discriminates in its prices of products for the four relevant markets. (CCFOF irir 33-55) A 

separator's suitability for a paricular product market depends on numerous factors including its 

composition, thickness, and profile, and whether a glass mat is added - all of which also 

determine its price. (pX0582 at 042-050) 

11 
The mere fact that polyethylene is an ingredient in certain separators does not make them 

interchangeable. Daramic' s findings and documents distinguish separators based on their entire 

compositions, not just their inclusion of polyethylene. ( See, e.g., RFOF ir 15 (defining battery 

separators as "products of 
 various compositions"); RFOF irir 87-96 (describing the compositions 

of Daramic's pre-acquisition separator products); Whear, Tr. 4821-4822, in camera 

4783,4803-4806 (different separators have many 

different qualities); PX0582 at 042-050 (same)) 

Composition alone also does not determine a separator's suitability for a particular 

product market. While certain separators may have the same composition, they are suffciently 

differentiated by other characteristics permtting Daramic to differentiate them significantly by 

pnce. 

(PX0395 at 041, in camera) 

(PX0395 at 040, in camera) 

Daramic's argument for an all PE market rests on a theory that all products of a paricular 

thickness must be in the same market. (RB at 11) This argument perpetuates Daramic' s false 

premise that the backweb thicknesses of separators in these markets "overlap significantly." (RB 

at 9) At tral, no witness could come forward to say that any of 
 the supposed, overlapping 

thicknesses that Daramic's attorneys asked about were "tyical" at all. ( E.g., Whear, Tr. 4765
 

(he would have to "speculate")) The undisputed evidence, moreover, was to the contrary. For 

example, over 99% of SLI separators are less than 10 mils, and no deep-cycle separators are less 

than 12 mils. (Roe, Tr. 1312-1315; Hauswald, Tr. 678-679)16
 

16 Backweb thicknesses are not relevant, as each separator has numerous properties, but 

nonetheless it became a theme in Daramic's case that no witness could substantiate on cross. _ 

(Kahwaty, Tr. 5438-5444, 5445, in camera) Id. at 

12 
Daramic's data shows that the products are sufficiently differentiated in other ways that 

Daramic can discriminate in the prices for separators between each of 
 Complaint Counsel's 

product markets.
 

(CCRF ir 71) 

(CCRF ir 73) _
 

(CCRF ir 74) 

In the end, Daramic never attempts to prove its initial premise, that a correct application 

of the hypothetical monopolist test wil show the existence of a single PE separator market. (See 

RB at 9) 17 It makes more sense to aggregate the markets at the Ie vel at which customers simply 

wil not switch on the basis of 
 price. (See Simpson Report, PX0033 at 005-007, in camera) 

5445, in camera. 

(Id. at 5443, in camera)

Daramic suggests that Complaint Counsel should have included PVC and AGM separators in 

the market definitions. AGM separators are not used in flooded lead acid batteries, and _ 

See (CCFOF irir 92­

96,121-125, 129-130) _ (Kahwaty Tr. 5449-5450, in camera
 

) 

13 
(1) SLI, Deep-cycle and UPS Separators Are Not Substitutes
 

for Motive Separators. 

Motive battery separators are a relevant product market. (CCB at 20-23) Daramic would 

combine the motive separator market into its "all-PE" market (including automotive and golf 

cart) because of some claimed, slight overlap in thickness and/or profie. The products for 

motive, however, differ significantly and are priced as a separate market. 

(PX0395 at 

032, in camera) 

(PX00395 at 041, in camera) 

(PX0395 at 

041, in camera) Also, motive separators are so much thicker than other separators that Daramic 

allocates a separate par of its plant capacity for them. (CCFOF ir 113) 

Most importntly, motive battery manufacturers have no alternative to Daramic's motive 

battery separators in response to a five percent price increase in Daramic's motive separators. 

(CCFOF irirI26-132) 

(See CCFOF irir 284) Daramic's only competitive constraint in 

motive power separators prior to the merger was Microporous. (CCFOF irir 465-468,472-491) 

The acquisition of Micro porous was thus a merger to monopoly in the motive market. (CCFOF 

~ir 461) By eliminating the competition between Daramic and Microporous, the acquisition 

enabled Daramic to increase prices on motive power separators. (CCFOF ir~ 461, 470-471) 

In addition to this market concentration, there is substantial evidence bolstering 

Complaint Counsel's prima facie case. Daramic and Microporous closely monitored each 

other's activities in the motive market. (See, e.g., (CCFOF irir 287)) Customers were also able to 

play one firm off against the other in order to obtain lower prices for motive power separators. 

(CCFOF irir 465-467,472-478) The acquisition eliminated this substantial competition and left 

14 
Daramic with an undue percentage of 
 the motive market, 100%. (Craig, Tr. 2611 ("(t)here's no 

other source"); Leister, Tr. 4028 (Entek not supplying motive separators); Douglas, Tr. 4082 (no 

other supplier; no reason to go overseas to find another source, even with a 5% price increase); 

Benjamin, Tr. 3522 (Daramic is the "sole supplier. That's it. Take it or leave it."), id. 3526 

("there is no other supplier"); Gilchrst, Tr. 342). Competitive harm is clear here. 

(2) UPS Separators Constitute a Product Market.
 

Again, Daramic's disagreement with a UPS separator market is based on an alleged 

overlap in the products used for the UPS market and used in the other product markets, and 

again, Daramic provides no evidence that a particular product used in UPS is also used in the 

other markets. (R at 10) UPS battery separators are a relevant product market in which
 

Microporous was actually competing prior to the acquisition. 18 (CCB at 23-25) The evidence 

shows that UPS separators have distinct characteristics, (CCFOF irir 135-146), and are 

considered a separate market in the industr. (CCFOF ir~ 134, 501) Daramic's pricing also 

shows it recognizes a separate market for UPS separators. For example, Daramic 

(See PX1450, in camera showing 

CCFOF ir 1113 

Also, if all 
 12 mil separators are the same, as Daramic argues, 

(See Exhibit PX01450, in 

camera showing Instead, 

(Id, in camera) Following the acquisition, 

18 Because Daramic did not produce the figues for these sales, we cannot determine 

Microporous' market share, except to say it was small and was quickly moving up to a large 

percentage with EnerSys. 

15 
UPS battery manufactuers do not have any alternative to Daramic's UPS battery separators. 

(CCFOF irir 126-132) 

(3) Motive, UPS, and Deep-cycle Separators are Not
 

Substitutes for SLI Battery Separators. 

SLI battery separators are a relevant product market. (CCB at 25-28) SLI requires 

separators with parcular characteristics, including higher resistance to punctung and lower 

electrcal resistance. (CCFOF irir 149-150) SLI separators are also much thinner than those in 

other product markets ­

(CCRF ir 65) The 

documents overwhelmingly show that the market participants analyze their competition 

separately for this product market. (CCFOF ir 148) 

Daramic's supply-side substitution arguent again does not apply to the SLI market. SLI 

separators do not have the characteristics required by separators in the other product markets, are 

much thinner separators, and sell for much lower prices than the separators in the other product 

markets. (PX0582 at 043-044; Roe, Tr. 1313-1315 (in North America, average SLI separator 

price is $0.70 versus $1.50-$2.90 for Daramic HD for deep-cycle and $1.90-$3.00 for motive)) 

(4) There is No Substitution From Deep Cycle Separators.
 

The evidence ofthe deep-cycle battery market does not support Daramic's theory that 

PE+rubber separators for deep-cycle belong in the same product market with other PE 

separators. (RB at 9-11 ) North American battery customers wil not use a PE separator without 

a rubber additive for antimony suppression for deep-cycle applications. ( See CCFOF irir 85-91) 

Daramic itself considers only rubber and PE+rubber separators to be suitable for this application. 

(PXI791-00 1) For deep-cycle separators, customers would not switch to other tyes of PE 

separators in response to a SSNIP in deep-cycle separators. (CCFOF irir 103-109) PE+rubber 

separators for deep-cycle are already sold at quite a premium over products in the other separator 

16 
markets. (See, e.g., CCRF ir 73 

; PX0395 at 041, in camera 

) With
 

this price differential, customers have not substituted to other PE separators. (CCFOF iiir 103­

107) Even the severe shortage of deep-cycle separators durg the 2008 strke at Darmic' s
 

Owensboro plant did not induce customers to substitute to pure PE separators or any other tye 

of separator. (CCFOF irir i 08-1 09) With the acquisition, Daramic now controls the only three 

products for use in North America for deep-cycle: Flex-Sil, Daramic HD, and CellForce. 

(CCFOF irir 258-273) 

In addition to the high change in HHIs in the deep-cycle market, substantial evidence 

bolsters Complaint Counsel's prima facie case. _ 

(See, e.g., Hauswald, Tr. 834­

835, in camera) Customers were also able to play one firm off against the other in order to 

obtain lower prices. (CCFOF irir 395-421) In the end, the acquisition eliminated this substantial 

competition and left Daramic with a monopoly in the deep-cycle separator market. 

2. Flex-Sil is One of Three Products in the Deep-Cycle Product Market. 

The only products in this market are Flex-Sil, Daramic HD, and CellForce, all Daramic 

products after the merger. (CCFOF irir 99-107; see CCB at 14-19) Complaint counsel has 

proven a product market for deep-cycle battery separators. ( See CCB at 13-20) Daramic's only 

argument that it does not have a monopoly in the deep-cycle market is that it disapproves of 

Complaint Counsel's market definition. (RB at 18) Yet, no other company makes separators for 

deep-cycle but Daramic. (See CCFOF irir 99-107; CCB at 14-19) 

17 
Daramic argues that Flex-Sil constitutes its own product market because it is unique. 

(RB at 12) Daramic fuer argues that customers' continued purchases ofFlex-Sil, despite its 

higher cost, indicates that it is not in the same product market. ( Id. at 12) Even assuming these 

facts are correct, Daramic has the law wrong. Hackv. The Presidents and Fellows a/Yale 

College, 237 F.3d 81,86 (2d Cir. 2000) (an admittedly unique product, a Yale education, is not 

its own product market); SPAHR v. Leegin Creative Leather Products ,2008 WL 3914461, at 

*11 (B.D. Tenn. Aug. 20, 2008) (For a single product to constitute its own market, it must be "so 

unique that there are no substitutes reasonably interchangeable with them in the market."). 

"Cours have repeatedly rejëcted efforts to define markets by price variances or product 

quality variances." Murrow Furniture Galleries, Inc. v. Thomasvile Furniture Industries, Inc. , 

889 F .2d 524, 528 (4th Cir. 1989). "(T)he relevant product market is defined by the (reasonable 

interchangeability of use or the cross-elasticity of demand between the product itself and 

substitutes for it.)" Id. The du Pont (cellophane) case is directly on point. United States v. E. 1. 

du Pont de Nemours & Co. (Hdu Pont") ,351 U.S. 377 (1955). There, the Government argued
 

that cellophane constitutes a product market separate from other wrapping materials because 

cellophane was three times as expensive as other materials like wrapping paper. (Id at 380) The 

Cour disagreed and held that in determining the market, "it is the use or uses to which the 

commodity is put that control." (Id. at 395-396) Thus, although cellophane cost three times as 

much as some other wrapping materials and had superior characteristics, they all belonged in the 

same product market in the Cour's view because the were functionally interchangeable and 

because du Pont lowered its prices for cellophane in order to compete with these lower priced 

products. (Id. at 401) 

Similarly here, Flex-Sil's unique characteristics do not place it in its own product market. 

Flex-Sil is functionally interchangeable with Daramic HD and CellForce - all of these are used 

18 
in the deep-cycle market for golf cart, scrubber, and scissor lift batteries. ( See, e.g., PX1791 at 

001 (Daramic's own brochure marketing all three products for golf cart batteries); CCB at 13-20) 

Daramic specifically introduced HD to compete in deep-cycle with Flex-SiL. (CCFOF irir 356­

357) Customers consider Daramic HD and Flex-Sil to be Substitutes. (See CCFOF irir 375-384) 

In fact, customers offer the two products in the same batteries, sold under the same name, for the 

same price. (CCFOF irir 376,378) Daramic is also wrong that customers wil not use Daramic 

HD for their higher end, OE batteries, and thus do not consider the products in the same market. 

RB, at 13; see Wallace, Tr. 1934-1935, 1939; CCFOF irir 100, 432-433 

As in du Pont, while Flex-Sil may sell for a higher price, this does not mean it cannot be 

in the same product market. Rather, as in du Pont, the products compete because the price of
 

Flex-Sil was constrained by Daramic HD. (CCFOF irir 330-334,395-430); du Pont, 351 U.S. at 

401. 

(Gilchrist, Tr. 379-380, 406-407, 526, in camera; 

Gil~spie, Tr. 2947-2950 

-

2951-2953 ._ .­

Because "(s)ensitivity to price change, not price differential, is usually regarded 

as a proper element to measure cross-elasticity of demand," Flex-Sil and HD belong in the same 

product market. American Crystal Sugar Co. v. Cuban-American Sugar Co. ,259 F.2d 524,530 

(2d Cir. 1958) ( citing Du Pont, 351 U.S. at 395) (finding that cane and beet sugar constitute a 

single product market despite price differentials). 

Daramic argues that because customers have not already substituted all of their sales 

from Flex-Sil to the lower priced HD they would not switch in response to a SSNIP in Flex-Sil. 

Here, the evidence undisputedly shows that buyers shift purchases from Flex-Sil to HD, and have 

considered shifting additional purchases, and that Microporous reduced its price on all Flex-Sil 

19 
sale to some customers to prevent buyer substitution to HD. (CCFOF irir 395-424) As Mr. 

Gilchrst testified: 

(Gilchrst, Tr. 526, in camera) The evidence therefore indicates that customers would shift 

enough purchases from Flex-Sil to HD in response to a SSNlP to defeat the price increase, the 

proper question in a hypothetical monopolist test. 

(PX0033 at 005-009, in camera, 012-018, in camera (Simpson Report); c.f. 

Kahwaty, Tr. 5331-5332, in camera 

cf 

Wallace, Tr. 1977-1979; Qureshi, Tr. 2044, 2090 (U.S. Battery wanted to switch up to 50% with 

HD but Daramic refused)) 

B. Geographic Market
 

Daramic advocates for a global geographic market. Yet, Daramic cannot avoid the facts: 

it analyzes its own markets in terms of a North American geogrphic mar ket, price discriminates 

between markets, provides local supply to North American customers that prefer and often 

demand local supply, and its continued price increases have not caused any North American 

customers to switch to supplies from any foreign producers. (See CCB at 28-33) 

(Roe, Tr. 1799, In 

camera; CCFOF irir 164-169) Price discrimination is thus not just possible, but ongoing. In such 

a market, the Merger Guidelines advocate looking at particular locations where a hypothetical 

monopolist would profitably and separately impose a SSNlP. (Merger Guidelines, § 1.22) As 

Dr. Simpson concluded, a hypothetical monopolist could impose such a price increase on buyers 

in North America. (Simpson, Tr. 3183) 

20 
Daramic's claim that imports from Asia might defeat price discriination is unsupported.
 

Daramic's significant price discrimination has not led to any importtion by North American 

customer. 

_19 

(CCFOF irir 192, 213, 234, 252); see also Kahwaty Tr. 5288­

5289, in camera ) 

Absent evidence of any possible other source for supply, Daramic argues that it would be 

"economically feasible" for North American customers to import separators from DaramIc's 

Thailand facility to North America. (RB at 16) Would Daramic really sell product from its own 

Thailand facility knowing it was being used to undercut its own prices in North America? This 

has never happened and makes no sense. 

Daramic then says that some purchasers overseas buy from Nort America. (RB at 15) 

However, whether customers overseas buy from a non-local supplier is irrelevant. The issue is, 

whether North American customers, would in fact switch to a distant supplier in response to a 

SSNIP price increase in its local supply. ( See Merger Guidelines § 1.21 (considering whether 

buyers have in fact shifted purchases in response to changes in price)) 

(Seibert, Tr. 4267, in 

19 ~Hall, Tr. 2727, in camera Hall, Tr., 2734-2736, in 

camera, 2745, in camera ; PX0907, in 

camera (Kung, Dep.153, 155-156
 176 ); Gilespie, Tr. 3025-3029, in camera 

21 
camera; Weerts, Tr. 4500, in camera; CCFOF ir~ 170-198,937-939) 

IV. Daramic Has Not Shown That Anti-Competitive Effects Are Unliely.
 

In thee markets, Daramic's acquisition led to monopoly. "No merger threatens to injure 

competition more than one that immediately changes a market from competitive to 

monopolized." (Areeda, Para. 911a) Daramic does not even attempt to rebut the presumption 

that anti-competitive effects are likely in these markets. (RB at 30-51 (Daramic's Rebuttal 

Case)) Although Complaint Counsel is "not required to prove that anticompetitive effects have 

in fact occured," CBI Initial Decision at 114, the evidence demonstrtes actual anti-competitive 

effects have and are likely to continue to result from the acquisition. 

A. Post-acquisition, There is Evidence of 
 Likely Coordinated Anti-competitive 

Effects in the SLI Market 

In the SLI market, the acquisition leaves Daramic and Entek as the only two competitors 

in Nort America. There is a strong "presumption of collusion in a merger to duopoly." Heinz, 

246 F.3d at 725. "The combination of a concentrated market and barrers to entr is a recipe for 

price coordination," or the coordination of markets or customers. Id. (citing University Health, 

938 F.2d at 1218 n.24); CCC Holdings, 605 F. Supp. at 64-65. It is Daramic's burden to rebut 

this presumption by showing the existence of "'strctural market barers to collusion' that are 

unique to the (relevant markets)." Id. at 60; Heinz, 246 F.3d at 723. 

First, Daramic did not even attempt to rebut this presumption of coordination and offered 

no evidence of strctual barers to coordination. (RB at 21-22) Daramic merely points to a
 

single contract (JCI) that Entek won from Daramic pre-acquisition and to claimed "power 

buyers." Id. There is no evidence that these characteristics are "so much greater in the 

(separator) industr than in other industries that they rebut the normal presumption." Heinz, 


F.3d at 724. Daramic's failure to rebut the presumption of coordination means that the 

presumption stands. In addition, the evidence in this case shows that Daramic's theory of 

22
 

246 
"power buyers" is fictitious. 

(PX265 at 008) 

Although Complaint Counsel need not do so, there is ample evidence of a higher 

likelihood of coordination in the SLI separator market. Prior to Microporous entering into SLI, 

(Hall, Tr. 2666-2667, 2692). 

(Hall Tr. 2873-2874, in camera, 

RX00044 at 002, in camera). This is far more evidence than the Cours in Heinz and CCC relied 

upon to find coordination likely. Heinz, 246 F.3d at 723; CCC Holdings, 605 F. Supp. at 64-66. 

Price competition was eliminated by the acquisition. There is no evi dence that the 

separator industr wil not retu to its former (Hall, 

Tr. 2873,2874, in camera); CCC Holdings, 605 F. Supp. at 65 (A duopoly is more likely to 

focus on "existing customers, rather than engaging in price wars"). Daramic has provided no 

evidence that "strctual barrers to coordination" have arsen, that did not exist in the past, to 

make the likelihood of a retu to such a duopoly environment likely.
 

B. The Evidence Shows Actual and Likely Unilateral Effects.
 

Daramic's documents from 2003 through the date of 
 the acquisition uniformly show that 

its intent in acquiring Microporous was to eliminate it as a competitor. See (CCB at 42-44) 

(PX0275 at 

017, in camera; see 
 also CCFOFirir764-772; 760-763 

23
 
(PX0275 at 014, 

in camera 

; see also CCFOF irir 773-779) A part's 

intent should be considered when predicting the probable futue effect of a merger. Brown Shoe 

v. United States, 370 U.S. 294, 329 nA8 (1962); Areeda ir964a (2d ed. 2006). 

Daramic ignores this evidence and suggests that price increases had nothing to do with 

the acquisition. Not tre.
 

( See CCFOF irir 809-816; CCB at 44-45) Daramic's only 

explanation is that its price increases were justified by its cost increases. (RB at 26) 

( See exhibits cited by Daramic (RX00631; RX00677, in camera; RX01189; 

RX01323, in camera; RX01604, in camera; RX01605, in camera; PX1450, in camera))_ 

(CCFOF irir 760-763, 765-772; PX0203 at 086, 088, in camera) 

By eliminating the existence of an independent supplier in the market, the acquisition has 

eliminated the opportity for customers to negotiate prices and constrain Daramic's demands.
 

(CCFOF irir 166,168,292-284,298; see Simpson, Tr. 3194-3195, in camera) 

(See CCFOF irir 434­

443, 748) For example, Trojan had used Daramic HD as competitive leverage to achieve an 

agreement from Microporous for a 2009 price increase of2.5% for Flex-Sil and 1.5% for 

CellForce. (PXI664; CCRF irir 748, 759) Daramic expressed that it was "prepared to stand 

behind the commitments that (Microporous) made to (Trojan) before this acquisition " 

24
 
(PXI666)
 

(CCFOF ir 439; CCRF ir 759) 

(CCFOF irir 421,434, 436, 438) Trojan 

441) Therefore, Trojan was 

441; Godber, Tr. 236-237, in camera) 

(Godber, Tr. 247-248, in camera, 238, in camera; CCFOF 443) 

(CCFOF irir 437, 

(CCFOF 

(CCFOF ir 444)
 

(CCFOF ir 445)
 

Also, as an exercise of its monopoly position, Daramic has had a consistent strategy .
 

(CCFOF 

ir450; PX0617 at 001-002, in camera) For example, 

(PX1741 at 003, in camera; Qureshi, Tr. 2042; CCFOF 

irir 446-449) Daramic also 

(CCFOF irir 453-456) 

(PX0441 at 001-002, in
 

25 
camera; CCFOF ir 450) Mr. McDonald, Daramic's Sales Manager for the America explicitly 

stated that Daramic should . These actions 

do not indicate the presence of 
 "power buyers," a defense throughout Daramic's brief. Rather, 

North American customers are captive to Daramic's pricing and supply decisions. 

In addition, inovation competition has been eliminated post-acquisition. For example, in
 

the UPS market, Daramic has disbanded the R&D group working on project LENO and slowed 

work on that project. (CCFOF ir 525) 

(See, e.g., CCFOF irir 

720-722) 

Daramic also argues that the acquisition of Microporous, with a share of 

Daramic's claimed total PE market in North America canot have anticompetitive effects. (RB 

at 24-25) Daramic is wrong that acquisition of of a market cannot have anti 
 competitive

effects. See, e.g., Pabst Brewing, 384 U.S. at 547 (rmding a merger of firm having 3.02% of the 

market with firm having 1.47% of 
 the market was sufficient to find a section 7 violatio n); United 

States v. Aluminum Co. of Am. ,377 U.S. 271, 278, 280 (1964) (27.8% with 1.3%); FTCv. 

PepsiCo, Inc., 477 F.2d 24, 25, 27 (2d Cir. 1973) (16.3% with 0.3%); Stanley Works, 469 F.2d at 

505-07 (24% with 1%),z°
 

Finally, Daramic claims that a post-acquisition loss of the JCI contract in SLI shows it 

lacks market power. Not tre.
 

20 Again, Daramic makes an incorrect citation in arguing that the Merger Guidelines support its 

theory that Microporous' share of its total PE market wil not allow Daramic to impose 

unilateral effects - the section cited refers to the percentage of 
 the market controlled by the 

merged entity, not the acquired entity. See Horizontal Merger Guidelines, § 2.0.
 

Mathematically, an acquisition of a competitor with greater than .5% market share by a 50% 

market share holder would stil trgger an adverse presumption under the Horizontal Merger 

Guidelines, §1.51(c) and n. 18 (i.e., 2ab = 2(.5)(50) = 50). 

26
 
(RX00072, in 

camera (contract, June 4, 2007), CCFOF ir 600) If anything, Daramic's JCI loss shows what can 

happen when three competitors are competing vigorously. 

V. Microporous Was an Actual Competitor in the UPS and SLI Markets. 

Daramic is incorrect when it asserts that this case involves Microporous' potential 

competition in the UPS and SLI market. (RB at 20) Microporous was an actual competitor in
 

UPS and was selling into the market at the time of 
 the acquisition. (CCFOF ir 501-505) The 

undisputed evidence is that Microporous was a very real competitor and had made sales for over 

a year and a half 
 to C&D prior to the acquisition. (CCFOF ir 505) Moreover, Microporous also 

had an agreement with EnerSys that EnerSys would move its UPS business to Microporous. 

(CCFOF irir 515,517-518, 712, Axt, Tr. 2104; Burkert, Tr. 2326) Thus, Microporous competed 

in the UPS market for flooded lead acid batteries in North America (not gel batteries as Daramic 

asserts). PX0663-003 

(CCFOF ir 521) 

Given the pre-acquisiton agreement with EnerSys, Microporous would have had 40% of 

the UPS separator market, after completion of 
 testing. (Gilchrist, Tr. 398-399; Axt, Tr. 2104) 

Daramic had the only other product used in the UPS market. (CCFOF irir 145-146) Regardless of 

the precise HHI change, (see CCB at 24), the acquisition eliminated the only other competitor in 

the UPS separator market, a quintessential Section 7 violation. (See Areeda, ir 911a (''No merger 

threatens to injure competition more than one that immediately changes a mark et from 

competitive to monopolized.")) 

21 Microporous gave samples to EnerSys at its Kansas facility for testing in its Nort American 

UPS batteries (not solely to EnerSys in Europe as Daramic asserts). CCFOF irir 515,517. 

27
 

21 
In addition to this market concentration, there is substantial evidence bolstering 

Complaint Counsel's prima facie case. For example, 

(CCFOF irir 503-504,516-518) Now, customers are stuck with Daramic alone. 

(CCFOF irir 506-507) The acquisition eliminated this substantial competition and left Daramic 

with an undue percentage of the UPS separator market, 100%. (CCFOF irir 292, 506-507) 

Customers simply have no other choice but Daramic. (CCFOF ir~ 588,591-592,601) 

Prior to the acquisition, Daramic, Entek, and Microporous were the only companies with 

active sales ofSLI separators. (CCFOF ir 295; Gilchrst, Tr. 307-308, 313, 341-342) To be 

clear, Microporous had manufactured and sold SLI separators in North America and, at the time 

of the acquisition, marketed itself to be a competitor in that market. (Gilchrst, Tr. 307-308, 313, 

341-342) Microporous was definitely going to sell SLI separators out of Feistrtz (Gaugl, Tr.
 

4626) and was also going to sell SLI from Tennessee. It had already been approved as an SLI 

separator producer by JCI and had agreed to produce SLI separators for Exide in North America 

and in Europe. (Gilchrst, Tr. 562 (JCI had even approved CellForce as an SLI separator);
 

Gilespie, Tr. 2976 ("We had (the) full intention that we were going to be buying Microporous 

separators in 2010")) Microporous would also have produced SLI separators for East Penn, but 

for the acquisition. (Trevathan, Tr. 3722-3723 (Phase II for East Penn was "discontinued 

because of the acquisition of Micro porous by Daramic"); Leister, Tr. 4009-4010,4016-4018 

(East Penn was in discussions with Microporous to purchase SLI separators and viewed 

Microporous as a "viable" supplier)) 

Neverteless, a firm need not have made a sale in order to be an actual competitor in a 

market. Rather, once the decision to enter the market has been made, a qualified firm that is 

preparing to make its first bid or its first sale must be counted as an actual competitor. (Antitrst 

28
 
Law, Antitrst Law, Areeda & Hovenkamp ("Areeda"), Vol. N, ir 912a (2006)) The Areeda 

treatise explains: 

The acquisition by an already dominant firm of a new or nascent rival can be just 

as anticompetitive as a merger to monopoly. If 
 the rival has already made its first 

sale in the monopolist's market the merger is clearly "horizontal." If the rival has 

not yet made its first sale, the tendency is to call the acquisition a "potential 

competition" or nonhorizontal merger. But the distinction between "actual" and 

"potential" competition is readily exaggerated. For example, a firm that has 

submitted bids against the dominant firm but lost is clearly an "actual" 

competitor, perhaps even forcing the dominant firm to lower its bid in the face of 

a rival bidder. But even the firm that is preparing to make its first bid or its first 

sale must be counted as an "actual" rival once the entr decision has been made. 

N Areeda & Hovenkamp, Antitrst Law ir 912a (2006) (emphasis added). 

Thus, even a firm that never makes a sale but causes a competitor to lower prices, as 

Microporous did in all these markets, is an actual, not a potential, competitor. See United States 

v.Marine Bancorp. Inc., 418 US 602, 625 n.24 (1974). 

Daramic argues that the acquisition does not increase concentration in the SLI market due 

to the merger on the basis that Microporous was not a potential competitor in the SLI market. 

Yet, Microporous was an actual competitor in the SLI separator market, and besides Daramic 

(Gilchrst, Tr. 423-424) 

Microporous had sold SLI separators and had "submitted bids" in the SLI separator 

market just prior to the acquisition, and was impacting competition in the market - Microporous 

was therefore "clearly" an actual competitor in the SLI market. (CCFOF irir 624-630, 725-747) 

(See Areeda, § 912a) Directly on point is El Paso Natural Gas . As the U.S. Supreme Cour 

explained in Marine Bancorp. , the acquired fir in EL Paso was not merely a potential 

competitor, but an actual competitor, where it bid on business, "compel( ed) the acquiring firm to 

make significant price and delivery concessions in order to retain that customer." 418 U.S. at 625 

n. 24, explaining El Paso Natural Gas, 376 U.S. at 659. That is exactly what happened here.
 

29
 
Indeed, Microporous was no less a competitor than Chicago Bridge was in thermal vacuum 

chambers even though it had not sold on in years. (Chicago Bridge cite JR) 

Microporous had an existing PE separator line in Piney Flats on which it produced SLI 

separators which were qualified by JCI and which East Penn considered buying. (CCFOF irir 

627 -628) Microporous' Board supported expanding in the SLI market and adding SLI 

production capacity, particularly ifthe company was able to secure a contract for those sales. 

(CCFOF irir 527,614) 

(PX0203 at 088, in camera) 

(PX0463 at 003, in camera) 

(PX0738 at 017, in camera; CCFOF ir 

769) 

(CCFOF irir 725-727, 728) 

Thus, contrary to its brief, Daramic reacted to Microporous as a real threat in SLI. All 

thee competitors in the North America SLI market "closely monitored each other's activities" in 

the market. (CCFOF ir 527,547,549) Prior to Microporous' entr into the SLI market, 

however, there had been a lack of competition between the duopoly ofEntek and Daramic. 

(Roe, Tr. 1281; Hall, Tr. 2667-2668,2692; 2873-2874, RX00044 at 002, in camera)

- . .. _.
 

(Weerts, Tr. 4517, in camera) The acquisition eliminated the third competitor and 

30
 
left Daramic and Entek with their previous, non-competitive duopoly in the SLI separator market 

in North America. 

VI. Daramic Has Not Rebutted Complaint Counsel's Strong Showing ofa Section 7
 

Violation 

"Once Complaint Counsel has established a prima facie case, the burden shifts to the 

respondent to establish that the case inaccurately predicts the probable effects of 
 the merger." 

Here, Complaint Counsel's evidence is paricularly strong and requires Daramic to present a 

strong rebuttl case. Chicago Bridge, 534 F .3d at 426. 

Daramic does not dispute that the markets in this case were highly concentrated prior to 

the merger. (RB at 28 ("SLI, Motive and UPS ... markets were substantiall y concentrated"); RB 

at 17-18 (no allegation of paricipants other than Daramic or Microporous in deep-cycle)) 

Daramic's defenses, rather, are 1) entr by other firms; 2) efficiencies; and 3) that Microporous 

would have been too weak to be a viable competitor. 

VII. High Barriers to Entry Strengthen Complaint Counsel's Prima Facie Case
 

Daramic asserts that entr barrers are low. (RB 31) It is wrong. "(E)vidence of 
 high 

entr barrers. . . strengthens the conclusions to be drawn from Complaint Counsel's showing of 

high concentration levels." Chicago Bridge, 138 F.T.C. at 1065-1066. Daramic's assertion that 

entr barrers are low, (RB at 31-32), is contradicted by all of their own pre-merger documentary 

evidence, unbiased by this litigation. ( See CCB at 35-37) Daramic's own documents and 

testimony overwhelmingly demonstrate the significant barers to entr of the deep-cycle, UPS, 

motive, and SLI separators markets in North America. (See CCB at 35-37) Daramic repeatedly 

told the financial community and its investors, to whom it understood it had a high duty of 

candor, that its flooded lead acid separator business had high entr barrers. (CCFOF ir 988-990) 

Owners of 
 both Daramic and Microporous also concluded that barrers to entr were high. 

(CCFOF irir 989-990; PXL124 at 001) 

31 
Numerous entr barrers exist here: capital requirements to achieve the scale necessary 

for profitable entr, long testing times, customer desire for local supply, access to customers tied
 

into exclusive contracts, reputation, and know how and intellectual propert. ( See CCFOF irir 

817-1036; CCB at 35-37) Daramic's Opening Brief addresses none of its own admissions. 

Scale and capital investment required by entrants is also a significant barer to entr.
 

(CCFOF irir 1030-1043) 

(PX0265 at 004, in camera; see also PX1124 at 001 (Microporous owners
 

also admitting that major capital costs are a barrer to entr)) No other supplier has the scale to
 

compete in North America. (Gilchrst Tr. 42 

) 

Customers look for a separator suppliers' reputation for financial stability, technical 

inovation and expertise, research capabilities, customer service and support, and manufactug 

and leadership capabilities. (CCFOF irir 915,917) 

(pX0265 at 011, in camera; 

CCFOF ir 915) Microporous had a very good reputation in the marketplace. (CCFOF ir 918) 

"Experience, learning effects" also pose a somewhat large barrer to entr. (PX0265 at 

011; see also CCFOF irir 1009-1029) Daramic acknowledges that those who operate the 

particular lines and paricular equipment have specialized knowledge. (See CCFOF irir 909-912; 

RFOF irir 181-185) Indeed, when Daramic had a strke, it could not operate its own plant with 

management personneL. (Gilespie, Tr. 2989, 2992 (showing wavy separators)) 

32
 
Patents also serve as a barrer in these markets. Rubber patents and patents for clean oil 

are examples. (See, e.g., PX2164 (two rubber-PE patents); Whear, Tr. 4807 /2 Research and 

development and testing of a new product could take many years, preventing entry in the deep ­

cycle market. See PX2181, PX2182 at 084 (Daramic dropped DC after years of development). 

In sum, these high barers to entr make it more likely that the high concentrations in the 

four relevant markets wil 
 lead to anti-competitive effects. These are exactly the kinds of 

barrers to entr that were upheld in Chicago Bridge and apply with equal force here. Chicago 

Bridge, 534 F.3d at 437-440. 

VIII. Daramic Has Not Shown That Entry is Timely, Likely, and Suffcient Given the
 

Signifcant Entry Barriers.
 

Despite Complaint Counsel's substantial evidence of 
 high barrers to entr, Daramic 

asserts that entr wil be timely, likely and suffcient. (RB at 31-33) 

A. Entry Wi1 Not Be Timely.
 

Daramic argues that entr wil be timely. (RB at 31-33) It wil not. (CCFOF irir 818, 

821, 826-880) Curent separator manufactuers require 16 to 22 months simply to set up a new 

line producing separators for a market in which they already compete. 23 None of the timelines 

pointed to by Daramic account for testing when entering a new product market. Testing in the 

SLI, motive, deep-cycle, and UPS markets all require an additional 18 to 40 months before a 

customer wil agree to purchase the products. (CCFOF irir 889-892; 896-908) Daramic is also 

flat wrong that 

(RB at 35) (Unsupported by any evidence) 

22 While Daramic argues that another additive exists that works for this purose, it points to no 

evidence that the additive has ever been tested or would work as intended. 

23 See RXO 1 045 (Microporous time 
 line showing design of lines in F eistritz beginning in July 

2006); CCFOF ir 874 (Feistritz operating on a regular schedule in June 2008); CCRF ir 259_ 

; RX00147 at 001 

33 
B. DaramIc Has Not Shown That Entry Is Likely.
 

Daramic argues that entr wil occur either by an Asian manufactuer, Entek, or through
 

sponsorship by an unidentified battery separator customer. 

Chicago Bridge, 534 F.3d at 430. 

(See CCB 38-41) 

1. Entek is Not liely to Enter the Deep-Cycle, Motive or UPS Markets 

(CCFOF irir 919-923) 

(See, e.g., CCFOF ir 931) 

(CCFOF irir 906-907) At this point, there is no evidence that Entek is even 

contemplating such a move. 

(CCFOF 924-925)
 

(CCFOF 926)
 

34
 
Chicago Bridge, 534 F.3d 

at 430. 

-_.. .

­

(Gilespie, Tr. 3037, in camera) 

(CCFOF irir 929-930) 

(CCFOF ir 932 (citing PX1515 at 006)) 

2. Entry By an Asian Separator Manufacturer is Unlikely. 

Daramic claims that Asian manufactuers may enter the four product markets in Nort 

America. (RB at 32-33) 

In order to provide a defense, Daramic 

must demonstrate that entr by these manufactuers would be profitable at pre-merger prices, and 

that they could secure such prices. Merger Guidelines § 3.3; Chicago Bridge, 534 F.3d at 430. 

(RB at 32), 

(PX0265 at 016, in camera) 

(See CCRF 995) 

35 
See id
 

See id
 

(RX01497 at 001­

002, in camera) Moreover, 

(Roe, Tr. 1812-1813; Weerts, Tr. 4501, in camera, 4512, in camera) 

Moreover, any evidence of foreign entr must be "responsive to the localized sales 

opportities," i.e., in North America. (Merger Guidelines at § 3.4) While proposing numerous 

findings of fact regarding Asian battery manufactuers, 

24 (See, e.g., CCRF irir 977-1051) 

Id Such evidence does not show that such manufactuers could successfully enter the North 

American market. 

RX00061, 

(pX0907, in 

camera (Kung, Dep. 262-263)); 

(id., in camera at 153-156 

RFOF irir 1020, 1022. 

36 
(Axt, Tr. 2220, in camera; 

see also CCFOF irir 947-949,966; CCRF ir 991) 

3. Entry By Customers is Unlikely. 

Daramic's repeated mantra that the relevant product markets have "power buyers" is 

unsupported. (See CCRF ir 478; PX0265 at 008, in camera
 

Even according to Daramic's documents, it is the 

(See 

id.; PX0265 at 004 and 007-008, in camera; PX0204 at 001) Daramic's negotiations and 

contracts with customers confirm that, in fact, Daramic has (CCRF ir 478; 

PX0265 at 011, in camera ) 

(See CCFOF irir 1037-1043) 

C. Eutry Wil Not Be Sufficient.
 

Any entr will not be sufficient to overcome the anti-competitive effects of the 

acquisition. Daramic argues that a suffcient entrant only needs to supply the separators made by 

one small PE production line in North America, rather than the five to six lines Microporous had. 

(RB at 32) Entr, however, "must be able to restore competitive pricing" by permitting the new 

entrant to "compete on the same playing field as (Daramic)." Coca-Cola, 117 F.T.C. at 953, 

960; Chicago Bridge, 534 F.3d at 430. That is what Microporous was doing, and that is what 

Daramic feared. Microporous was competing aggressively in all of the relevant product markets. 

(CCFOF irir 324-747) Entr suffcient to restore competition in all these markets must restore 

this cpmpetitive environment. Daramic has not shown that any competitor is likely to enter the 

37
 
Nort American market and compete on an equal playing field as Microporous had. (CCB at 39­

41) 

IX. Daramic Has Not Shown That Effciencies Justify the Anti-Competitive Merger 

Daramic argues an efficiencies defense. (RB at 44) Due to the high concentration in the 

relevant markets, Daramic would need to show "extraordinar effciencies" to prevent the 

merger from being anti-competitive. Merger Guidelines, § 4 ("When the potential adverse 

competitive effect of a merger is likely to be paricularly large, extraordinarily great cognizable 

efficiencies would be necessar"); see also Heinz, 246 F.3d at 720 ("the high market
 

concentration levels present in this case require, in rebuttal, proof of extraordinary efficiencies, 

which the appellees failed to supply."). Daramic has failed to do so. Even Daramic's expert did 

not argue an effciencies defense. (Kahwaty, Tr. 5249-5250, in camera) 

In addition, efficiencies claims cannot be "vague or speculative." Merger Guidelines, § 

4. But a claim of "approximately (RB at 45), is by its very 

language both vague and speculative. Indeed, the Cour excluded evidence on this point because 

Daramic failed to produce specific information on this claim. (CCFOF ir 1056) These 

unverifiable efficiencies should not be considered. See Horizontal Merger Guidelines § 4 

(Because efficiencies "are diffcult to verify and quantify," respondent must provide proof 

sufficient to verify "the likelihood and magnitude of each asserted effciency, how and when 

each would be achieved (and any costs of doing so), how each would enhance the merged firm's 

ability and incentive to compete, and why each would be merger-specific.") 

Even ifDaramic's evidence of 
 the existence of effciencies were sufficient, the defense 

stil fails.
 (RB at 

45-46) Such savings are not a cognizable effciency in a merger analysis. See Kahwaty, Tr. 

5253-5254, in camera _ 

38 
; accord 4A Philip Areeda et al., Antitrst Law, par. 975i (2006) ("there 

seems little room for a defense alleging size economies in procurement"); FTC v. Staples, Inc ., 

970 F. Supp. 1066, 1090 (D. D.C. 1997) (Rejecting defense); Arch Coal, 329 F. Supp. 2d at 152. 

The asserted efficiencies also must be "merger-specific," i.e., "they must be efficiencies 

that cannot be achieved by either company alone, because, if they can, the merger's asserted 

benefits can be achieved without the concomitant loss of a competitor." Heinz, 246 F.3d at 721­

722; see also Merger Guidelines § 4. Daramic's claims of effciencies by improving the 

production techniques at Feistrtz and Piney Flats are not "merger -specific." Daramic does not 

explain why Microporous could not have achieved these efficiencies itself, without the 

acquisition. (See, e.g., Hauswald, Tr. 1166 (stating that people are available on the market to 

help improve production effciencies)) Thus, Daramic has not proven that these effciencies are 

merger specific. See Heinz, 246 F.3d at 722 (holding that Heinz failed to explain why its 

claimed effciencies could not be achieved without the merger). There is also no evidence that 

customers here benefitted from these efficiencies 25 or that they have completely countered the 

anti-competitive effects of the acquisition. See CCC Holdings, 605 F. Supp. at 72-74; Univ.
 

Health, 938 F.2d 1218 n.24; Heinz, 246 F.3d at 720. 

"Cognizable efficiencies (in a merger analysis) are assessed net of costs produced by the 

merger or incured in achieving those effciencies." Merger Guidelines, § 4. 

(CCFOF irir 1053, 1051­

25 Efficiencies did not result in
 

(See CCRF ir 560) 

39 
1057 (lack of effciencies evidence)) In sum, Daramic' s efficiency defense wholly fails to rebut 

Complaint Counsel's strong prima facie showing of anti-competitive effects. 

X. Daramic's Rebuttal Related to Microporous' Viabilty Also Fails 

Daramic admits it does not argue a failing firm defense. However, Daramic argues that 

Microporous' financial condition indicates that it might have failed. (RB at 47 -52) But there is 

no reason why this defense should not follow the requirements of a failing firm defense, and 

Daramic cannot prove it. Chicago Bridge, 138 F.T.C. at 1366-68. 26 In particular, Daramic 

cannot prove that no other entity would buy Microporous. Id.; Arch Coal, 329 F. Supp. at 156. 

(RB 47-49) 

(CCFOF irir 1045-1046) 

Microporous also felt it would have no problem filling the SLI line with demand from some of 

the numerous battery manufacturers in Europe. (Gilchrst, Tr. 344-347) 

(CCFOF ir 1047)
 

Daramic's argues that Microporous had low margins.
 

See PX1450, in camera 

26 To the extent Daramic's arguent relies on Arch Coal, its should be noted that the court there 

emphasized that "fmancial weakness" is probably the weakest ground of all for justifying a 

merget' and "certainly cannot be the primary justification for permittng one." FTC v. Arch 

Coal, 329 F. Supp. 109. 154 (D.D.C. 2004), quotingFTCv. Warner Comm., Inc., 742 F.3d 1156, 

1164 (9th Cir. 1984). Notably, the cour required a showing that an alternative buyer was not 

available, which is in accord with Chicago Bridge. Arch Coal, 329 F. Supp. at 156; Chicago 

Bridge, 138 F.T.C. at 1367-1368. 

40 
(RB at 35) 

(Gilchrst, Tr. 344,403,507; Trevathan 3562,3569,3750) 

(RFOF ir 422) Daramic's' margins are not 

tyicaL. Perhaps Daramic has simply become accustomed to the anti-competitive pricing it 

achieves due to a lack of competition in the product markets.27
 

Finally, the documents cited by Daramic also do not support a "financially frail" 

Microporous, as Daramic claims. The documents merely show that Microporous' investors were 

interested in tring to improve financial performance - not the company's viability. The 

investors were also takng steps to improve the company's production efficiency, to provide 

better financial performance. ( See, e.g., RX00244) 

(Gilchrst, 

Tr. 344,403,507, in camera; Trevathan, Tr. 3659, 3750)
 

Nevertheless, it seems strange that Microporous has, in Daramic's view, performed 

below par only after Daramic got its hands on it. 

(RX01227 at 021-022, in camera) This is exactly the kind of case in 

_ (PX0395 at 040-041, in camera)
 

41 
which such post-acquisition evidence proffered by Daramic should not be given any credence. 

Chicago Bridge, 534 F.3d at 435 (Explaining that post-acquisition evidence that can be 

controlled by defendant should be given little weight); Hasp. Corp. of Am. v. FTC , 807 F.2d 

1381, 1384 (7th Cir. 1986) ("Post-acquisition evidence that is subject to manipulation by the 

part seeking to use it is entitled to little or no weight."). 

Daramic also does not explain why only it can operate Microporous profitably. If 

Daramic is right that battery manufactuers wil sponsor a new entrant ( RB at 35-37), it would 

seem logical that they would support an independent Microporous, which is the only qualified 

vendor in North America that would not need years of design, testing, and qual ification. In
 

short, Daramic's so-called defense makes no sense and is not supported by the law. In any case, 

if Microporous was in any way weakened by the economy (or more likely by Darmic), it is even 

more imperative that it be given back all of the assets that it once had, so that it has the same 

chance of success that it had before. 

XI. Daramic's Monopoliation and Attempted Monopoliation
 

Complaint Counsel's post-tral brief extensively laid out the evidence adduced at tral of 

Daramic's monopolization and attempted monopolization, (CCB at 50-63), and uneasonable 

restraints of trade, (CCB at 63-68), in violation of 
 the Sherman Act § 2. The evidence 

throughout the tral showed that Daramic wielded power over its customers, including 

theatening to cut off supply in order to obtain long-term exclusive contracts. Such behavior is 

not indicative of a competitive market. 

A. Daramic Possessed Monopoly Power.
 

Cours "tyically examine market strctue in search of circumstantial evidence of 

monopoly power." United States v. Microsoft, 253, F.3d 34,51 (D.C. Cir. 2001). "Under this 

strctual approach, monopoly power may be inferred from a firm's possession of a dominant 

42
 
43
 
justifications for Daramic's conduct. 

(Axt, Tr. 2146, in camera) In response, Daramic decided to "play hard ball." 

(PX0456 at 001-002) Using as pretext a materials shortage in Europe which did not affect U.S. 

materials supply, Daramic notified EnerSys that it would supply it with only 10-20% of its 

separator requirements, while promising to provide other North American customers with 90­

100%. (PXI207; PX0487) Daramic made this threat even though, contractually, it was required 

to maintain three to four weeks of inventory for EnerSys. (pX0480 at 001) When EnerSys 

expressed alarm at the low allocation, Daramic simply responded that the low allocation was 

"based on demand vs supply." (PXI208) This was obviously untre, because Daramic fuly
 

supplied other customers in North America and covered whatever shortge it had. ( See CCB at 

56-57; CCFOF irir 1111-1116) 

(Axt, Tr. 2128­

2129,2146, in camera, 2148, 2166; see also CCFOF ir 1156) 

(CCFOF ir 1151; 

PX1266 (EnerSys tred to buy Darak to substitute but was told it had a 6 week lead time). 

(PX1211 at 

002, in camera) Daramic "held a gu" to its head, EnerSys signed the contract, the force 

majeure just "went away," and EnerSys had all the supply it needed. (Craig, Tr. 2562 -2563, 

44 
2570)
 

(Axt, Tr.
 

2148, in camera; see also CCFOF irir 1158, 1160) 

(See CCFOF irir 1156-1160) Daramic used its 

monopoly power in motive separators to extract an exclusive contract with EnerSys which 

directly prevented EnerSys from switching to a lower priced competitor. 

Directly on point is Microsoft. In that case, Microsoft understood that Apple needed 

continued support of its Mac Office suite of applications, used by 90% of Mac OS users. 

Microsoft, 253 F.3d at 73. Microsoft's Chairan Bil Gates wanted Apple to use Microsoft's 

Internet Explorer web browser in all of 
 its computers, but Apple at the time installed Netscape as 

its default browser. Id. In order to coerce Apple to use Internet Explorer, Mr. Gates called
 

Apple's CEO and threatened to cancel futue support of 
 Mac Offce. Id. Shortly thereafter, 

Microsoft and Apple reached an agreement pursuant to which Microsoft would continue 

supporting Mac Office for five years, and Apple agreed to install Microsoft's browser, Internet 

Explorer, on its computers and encourage its use. Id. The cour held that Microsoft's dealings
 

with Apple violated the Sherman Act by excluding Netscape's browser with no pro -competitive 

justification. 

Similarly here, Daramic's outrageous behavior establishes a strong prima facie case 

under Section 2. See Microsoft, 253 F.3d at 58-59. Daramic must come forward with a
 

procompetitive justification. Id at 59. But Daramic's claimed 
 justification is simply not a 

procompetitive justification its conduct "serve( d no) purose other than protecting its. . . 

45
 
monopoly." Microsoft, 253 F.3d at 67; RB at 54. 28 

(Craig, Tr. 2570; CCFOF ir 1154) Indeed, it 

was admittedly a (Gilchrst, Tr. 414, 621, in camera; CCFOF ir 1146) 

Daramic's CEO threatened to cut off supply unless EnerSys signed the contract. (Craig, Tr. 

2556-2559) Daramic's existing contract with EnerSys had required it to maintain a 3-4 week 

supply for EnerSys' use; a force maj eure should not have had any effect on EnerSys for weeks. 

competitive 

justification must be "a nonpretextual claim that its conduct is indeed a form of competition on 

the merits because it involves, for example, greater efficiency or enhanced consumer appeal"). 

Complaint Counsel's evidence therefore soundly rebuts Daramic's pretextualjustifications. 

(PX0480 at 001); see also Microsoft, 253 F.3d at 59 (holding that monopolist's pre 


( See CCFOF ir 1064 ( ~"no
 

mercy"J); CCFOF ir 1108 (theatening to cutoff supply to JCI in Europe in 2004 if a contract 

was not signed); CCFOF ir 1109_ 

29 

2. Market Share Discounts Helped Daramic Maintain Its Monopoly.
 

(RB at 53) 

28 Again, Daramic cites a case that wholly fails to support the proposition. The case cited, 

Cliftar Corp. v. Riverbend Products, Inc. , solely states that whether an allocation is fair and 

reasonable under the u.C.C. is a 
 jury question, without addressing whether it might be ilegal 

under the antitrust or any other laws. 750 F. Supp. 81,87 (W.D.N.Y. 1990). 

29 

. 

(CCFOF ir 446-460) 

46
 
(CCRF ir 591) 

(CCFOF ir 1075).30 

(See CCFOF ir 1072; CCRF ir 596) 

(CCFOF ir 1074) 

3. Exclusive Contracts
 

Complaint Counsel has shown the exclusionar effect ofDaramic's exclusive contracts. 

(See CCB at 59-61; CCFOF ir, 1155-1160) In defense ofDaramic's numerous exclusive 

contracts, Daramic does not put forth any precompetitive justification and thus fails to rebut 

Complaint Counsel's prima facie case. (RB at 53-54) Instead, Daramic argues (1) 

31 (2)
 

30 

1075; PXI028 at 059) 

31 RX00983, in 

(RX00957 at 001, in camera, and 002) a document that is 

simply not in evidence, RX00965. 

47
 
and (3) 

These arguments faiL. 

The correct legal stadard is whether the foreclosure is sufficient to impair the 

competitive effectiveness of the monopolist's rivals. United Shoe Mach. Corp. v. United States,
 

258 U.S. 451, 454-55 (1922). Daramic's exclusive contracts directly impaired the competitive 

effectiveness of 
 its rivals, most clearly, Microporous. (Id.; see CCB 60-61) 

In these product markets, new capacity was tyically built to satisfy customer demand. 

Thus, Daramic's exclusive contracts had the direct anticompetitive effect of 
 preventing 

Microporous from having the necessary purchase commitments to expand its plants. .
 

CCFOF irir 1115, 1118) 

(CCFOF ir 1155)

- - - ._.­

(CCFOF,ir 1156-1160; Simpson, Tr. 3232-3233, in camera) 

(CCRF, 1392) 

-- ( Id.) This prevented Microporous from achieving the 

commitments necessary to compete effectively. Moreover, this level offo reclosure is 

48 
significànt. Microsoft, 253 F.3d at 68 (Microsoft required internet access providers to keep
 

shipments of Nets cape's browser under 25% which was ilegal). It is disingenuous for Daramic 

to argue today that its contracts were not exclusionary because Microporous did not have the 

capacity to satisfy those contracts, ( see RB 53-54), when it was Daramic's monopoly conduct 

itself that caused Microporous not to have that capacity available. 

Finally, numerous Daramic documents indicate its intent to monopolize the North 

American motive market, and maintain its duopoly in the SLI market. ( See CCB at 62) 

(RB at 21), .
 

(RB at 53) 

XII. Daramic's Agreement With H&V Was an Unreasonable Restraint of Trade. 

As explained in Complaint Counsel's opening brief, the only issue with respect to 

Daramic's agreement not to compete with H&V is whether the agreement uneasonable restrains 

competition. (See CCB at 65) Daramic argues that it did not for thee reasons: (1) because 

Daramic and H&V were not interested in competig in each other's markets; (2) that the non 

compete was ancilary to a legitiate sales joint ventue between the paries; and (3) 

. These arguments are without merit. 

Regarding Daramic's first arguent, the weight of the evidence proves that 

its agreement not to 

compete with Daramic. (CCFOF irir 1168-1181). H& V testified that it is "always lookig for 

opportities to provide other tyes of separator (other than AGM) to the industr," including PE
 

battery separators. (PX0925 (Porter, Dep. at 37)) In addition, contemporaneous evidence proves 

that Daramic had plans to produce AGM separators prior to 
 the Agreement. (RX00366, 

(Daramic had made "3 serious efforts for entering AGM" prior to March 2000). As the result of 

49 
the agreement, Daramic has not developed its own AGM separator and has been relegated to 

having to develop a "me too" product which is not AGM in order to compete. (PX0035 at 002) 

Daramic also has been prevented from purchasing an AGM separator manufactuer to compe te 

in the market. (PXO 169 at 001) 

Similarly, Daramic's argument that its agreement was ancilar to its joint ventue for
 

sales and marketing is unsupported by the evidence. In addition, Daramic's general manager 

explained the tre, anticompetitive purpose of the agreement in an internal email: 

A few years ago, H& V announced that they want to go into the PE business, 

and plan to make an acquisition (it was Exide) or build their own plant. 

In order to stop them, we made a written agreement with them , though a 

partership, saying that: 

- we wil work together where ever possible 

- they will not go in the PE bnsiness 

- we will not go in the glass business (AGM) 

(pX0169 at 001 (emphasis added); CCFOF ir 1181) The pretextual natue of 
 the agreement is

evident. 32 The agreement 

(PX0035 at 

006; CCFOF irir 1186, 1196) 

(RB at 57-58) 

­

(PX0094 at 007-008, in camera; CCFOF ir 1195) 

(RB at 57) 

32 Similarly, Daramic repeatedly stated over a period of six years, that its purpose for acquiring 

Microporous was to eliminate competition. (CCFOF irir 646-659) 

(PX2124 at 002, in camera) 

50 
In sum, there is no justification to allow Daramic's non-compete 

to continue for the next five years, especially when the supposed H&V joint ventue has ended. 

XIII. Complaint Counsel's Proposed Relief is Proper and Designed to Ensure Effective 

Relief for Respondent's Violations 

Respondent argues that Complaint Counsel's recommendations regarding relief are 

overbroad, inappropriate and punitive. (RB at 58-70; RFOF irir 1133-1158, 1294-1301, 1399­

1414; RCOL i-ir 1541-1547) Attempting to support its arguments, Respondent misapplies or 

misstates the law on remedy and distorts the record facts. 

The Commission's long-standing benchmark for divestitue relief is that it must "restore 

competition to the state in which it existed prior to, and would have continued to exist but for, 

the ilegal merger." In re B.F. Goodrich, 110 F.T.C. 207, 345 (1988). In this case, complete and 

effective divestitue relief is needed to restore the competition that was lost as a result of 

Daramic's acquisition of Micro porous. Effective relief is also needed to prevent Daramic from 

undermining the newly-reconstituted competitor ("Newco") post-divestiture through the kinds of 

coercive tactics and ilegal conduct that enabled it to first weaken Microporous as an emerging 

competitive threat, and then eliminate it through the acquisition. Every element of Complaint 

Counsel's recommended relief is designed to restore competition, enj oin Daramic' s il legal
 

conduct and remedy the adverse effects of 
 Daramic's violations. ( See CCB at 70-78, and 

Proposed Order)
 

A. Every Element of Complaint Counsel's Recommended Divestiture Relief is 

Supported by Established Law and the Facts of this Case. 

Respondent asserts that the divestitue and ancilary relief Complaint Counsel seeks is 

overbroad. In particular, Respondent opposes divestitue of 
 the Feistrtz, Austra facility 

("Feistrtz Plant") and the entire Piney Flats, Tennessee complex, including all production lines 

for CellForce, PE, Ace-Sil and Flex-Sil separators ("Piney Flats Plant"). (R at 59, 68-70) 

51 
As the Supreme Cour has made clear, however," (c)omplete divestitue is paricularly 

appropriate where asset or stock acquisitions violate the antitrst laws." Ford Motor Co. v. U.S., 

405 U.S. 562, 573 (1972) (emphasis added). 33 Indeed, that is what the law requires. 21 U.S.C. 

§21(b). Consistent with this standard, this Cour in Chicago Bridge ordered complete divestitue 

of what CB&I acquied - both the former PDM Engineered Constrction Division, which made 

the relevant products, and its former Water Division, which made products outside the relevant 

markets. In re Chicago Bridge & Iron Co., 138 F.T.C. 1024, 1375-1376 (2003). Citing Olin, in 

which the Commission ordered divestiture of a facility that manufactued both a relevant product 

and a product outside the relevant market,34 this Cour held that divestitue of closely interrelated
 

business operations was appropriate to "ensure that the package of assets divested is sufficient to 

give its acquirer a real chance at competitive success." Id. On appeal, the Commission agreed: 

"no evidence to suggest that a smaller set of assets than those ilegally acquired by CB&I wil 

suffice to restore competition, and what we know with certainty is that this combination of assets 

has made a saleable package in the past." Chicago Bridge, 138 F.TC. 1024, 1164 (2005); aff'd 

Chicago Bridge, 534 F.3d 410 (2008). 

The pre-acquisition Microporous consisted of integrated business operations, interrelated 

production lines and other assets that together comprised an autonomous, stand -alone business 

unit. At the very least, appropriate divestitue relief should replicate the pre-acquisition
 

Microporous as completely as possible to restore the competition lost through the acquisition. 

33 See In re Fruehauf 
 Corp .,91 F.TC. 132,240 (1978) ("(A) strong presumption favors total 

divestitue. . . as the surest means of accomplishing" the objective "of restorig the acquired 

entity as a viable competitor."); In re Fruehauf 
 Corp., 90 F.TC. 891,892 n.1 (1977) ("(A) 

presumption should favor total divestitue" versus partial divestiture in merger cases, and "the 

burden rests with respondent to demonstrate that a remedy other than full divestiture would 

adequately redress any violation which is found."); In re RSR Corp. ,88 F.T.C. 800, 893 (1976), 

aff'd, RSR Corp. v. FTC , 602 F. 2d 1317 (9th Cir. 1979) ("Ordinarily, a presumption should 

favor total divestitue.").

34 Olin Corp., 113 F.T.C. 400, 619-620 (1991). 

52
 
Accordingly, Respondent must divest everything Daramic acquired, including the Feistrtz Plant 

and the entire Piney Flats Plant. Complaint Counsel's Proposed Order provides for just that. 

(CCFOF ir 1197; Proposed Order irir I.AA, 11.). 

Divestitue relief must also be effective to fully restore pre-acquisition competition, for 

"ifthe Governent proves a violation but fails to secure a remedy adequate to redress it," it has 

'''won a lawsuit and lost a cause.'" du Pont, 366 U.S. at 323-24. Accordingly, the Supreme 

Cour has instrcted that "(t)he relief 
 which can be afforded" from an ilegal acquisition "is not 

limited to the restoration of the status quo ante ... (but) must be directed to that which is
 

'necessar and appropriate in the public interest to eliminate the effects of 
 the acquisition

offensive to the statute.''' Ford Motor Co. ,405 U.S. at 573 n.8; accord Chicago Bridge, 138 

F.T.C. at 1164-1165. To ensure that the divestitue wil be effective, Complaint Counsel's 

Proposed Order provides for appropriate ancilar injunctive relief. ( E.g., Proposed Order irir
 

II.D-F, VI, VII).
 

B. Under The Relevant Remedial Standards Correctly Applied To The Facts
 

Of This Case, Complaint Counsel's Proposed Divestiture Relief Is 

Appropriate. 

Respondent makes three general arguments regarding the scope and propriety of the 

proposed remedy that distort the facts and misapply the stadards for relief. 

First, Respondent contends that appropriate relief should take into account what 

Microporous would look like today if it had not been acquired because it "was in a precarous 

financial position at the time of acquisition and its surival far from clear." (RB at 59, 64-66; 

RFOF irir 1142-1143; RCOL ir 1543). The record does not support such a claim. 35_ 

, and (Gilchrst, Tr. 344, 

35 This affrmative defense was never raised in Daramic's answer and was waived, but more 

importantly it is contrary to the facts. 

53 
403,507, in camera; Trevathan, Tr. 3562, 3659, 3750 (If 
 the Daramic deal had not happened, 

Microporous was "on track to improve... profitability"). 

(RB at 35, citing RFOF ir 300; Riney, Tr. 4962, in 

camera) Microporous certainly was not a failing company. 

However, to the extent that Microporous was profitable, but weakened, this was caused 

by Daramic's pre-acquisition and post-acquisition conduct. (CCFOF irir 1089-1094, 1101-1103). 

For several years prior to the acquisition, Daramic engaged in a relentless campaign to undercut 

and eliminate the emerging competitive threat to its battery separator business posed by 

Microporous. (CCB at 7-11,50,55-60; CCFOF irir 1089-1090, 1101-1103) 

(RX 1227 at 021-022, in camera; Riney, Tr. 5058, in camera 

In any case, Microporous relative performa.nce is 

now within Daramic's control, and any evidence related thereto must be viewed skeptically. See 

Chicago Bridge, 534 F.3d at 435 (post-acquisition evidence that can be controlled by defendant 

should be given little weight); Hosp. Corp. of Am., 807 F.2d at 1384 (same). 

Having first weakened Microporous, then eliminated it as a competitor through the 

acquisition, Daramic is in no position to insist that this Cour make allowances for the very 

conditions Daramic helped create and is now exploiting. 36 Accordingly, Paragraph VI ofthe 

Proposed Order requires Respondent to allow customers to reopen and renegotiate or terminate, 

36 Daramic shows real chutzpah here. "Chutzpah" is when "a man who, having killed his mother 

and father, throws himself on the mercy ofthe cour because he is an orphan." Motorola Credit 

Corp. v. Uzan, 561 F.3d 123, 128 n.5 (2d Cir. 2009). 

54 
without penalty, the exclusive contracts they were forced to sign with Daramic (CCB at 77-78; 

CCFOF ir 1218), and Paragraph VII contains injunctive prohibitions designed to prevent 

Daramic from similarly undermining the viability of New co post-divestitue. 37 (CCB at 77). 

Respondent's professed concern that divestitue of 
 the Feistrtz Plant may create viability issues 

for the Newco (RB at 64-65; RFOF irir 1143-1144), wil be adequately addressed through the 

process by which the Commission superVises divestitues to ensure, among other things, that the 

acquirer wil have sufficient fmancial means to operate the Newco and maintain its competitive 

viabilty in the relevant markets?8 

Second, Respondent states that the divestiture and other relief in this case "should be 

fashioned giving consideration to post-transaction developments and market conditions at the 

time the reliefis ordered." (RCOL irir 1545-1546). It is unclear what Respondent means by this. 

Elsewhere Respondent refers to the curent economic downtu, (RB at 59-60), but fails to 

explain why relief should not be directed to make Newco stronger not weaker. The curent 

economic downtu suggests an acquirer wil 
 likely need all of the revenue potential represented 

by a Newco that fully restores Microporous' premerger stand-alone business to the same 

competitive state in which it had been. This is consistent with the common sense approach taken 

by the Commission in Chicago Bridge when it ordered divestitue of everyhing CB&I acquired, 

including the water tank assets. 

The Goodrich case is on point. In re B. F. Goodrich, 110 F.T.C. 207 (1998). In that case 

the consumated merger occured durg the period of severe economic recession in the early 

1980s. In re B.F. Goodrich, 110 F.T.C. 207 (1988). The parties in Goodrich argued that the
 

37 These provisions are similar to the kinds of provisions ordered by the district cour in Us. v.
 

Dentsply Int'l Inc. on remand from the Third Circuit, No. 99-005,2006 U.S. Dist. LEXIS 94907 

(D. DeL. 2006), and are tailored to the facts and the record in ths case. 38 See Statement of 


the Federal Trade Commission's Bureau of 
 Competition on Negotiating 

Merger Remedies (2003), available at 

htt://ww.ftc.gov/bc/bestpractices/bestpractices030401.htm. 

55 
challenged merger had no anticompetitive effects because profitability was low and there was 

substantial excess capacity due to the recession. However, the Commission held that the postmerger performance evidence resulting from "the dramatic effects of the recession" did not rebut 

the presumption of anticompetitive effects based on the structual case. Id at 343.:344. The 

Commission found that despite the recession, the manufacturers were in "a strong position to 

control the price and terms under which these materials are purchased" and "to demand prices 

resulting in high profits for themselves regardless of the conditions" of the market in which their 

customers competed. Id. Thus, the Commission ordered Goodrch to divest the plant that it had 

acquired in violation of Section 7 of the Clayton Act and Section 5 of the FTC Act. Id at 345. 

Here, too, the strctual and conduct evidence overwhelmingly support an order for complete 

divestiture of what Respondent acquired and for other appropriate relief, regardless of curent 

economic conditions. 

Finally, Respondent suggests that Complaint Counsel's proposed relief 
 is punitive. (R 

at 59-61, 68-69). However, the mere fact that effective divestitue and other relief 
 may impose 

some costs on the violator is not relevant: "(C)ours are authorized, indeed required, to decree 

relief effective to redress the violations, whatever the adverse effect of such a decree on private 

interests." du Pont, 366 U.S. at 326-27. In this case, Daramic does not explain how any of the 

relief could be considered as punitive. Indeed, the relief is necessar to undo the compet itive 

harm that Daramic deliberately caused. 

C. Every Element Of Complaint Counsel's Proposed Divestiture Remedy Is
 

Necessary To Restore Competition.
 

1. Divestiture Of 
 The Feistritz Plant Is Proper And Necessary. 

Respondent presents an aray of arguments opposing any divestitue ofthe Feistrtz Plant. 

(R at 62-66; RFOF irir 1133-1149, 1400-1401) These arguments are without merit. 

56 
Respondent's claim that the Commission canot order divestitue of the Feistrtz Plant 

because it is outside the Commission's jursdiction (R at 62-63; ir~ RFOF 1133-35) is wrong as 

a matter of law and on the facts of this case. The jursdictional scope of Section 7 of the Clayton 

Act, and the Commission's authority under that Act, 39 extend to transactions between companies 

engaged "in commerce or in any activity affecting commerce," 40 and relief for Section 7 

violations can properly reach foreign firms and assets. 41 See, e.g., U.S v. Joseph Schlitz Brewing 

Co., 253 F. Supp. 129 (N.D. Cal. 1966), aff'd per curiam, 385 U.S. 37 (1966) (upholding order 

in Section 7 Clayton action requiring divestiture by U.S. firm of 
 its interest in a Canadian firm). 

The Commission's authority under Section 5 of the FTC Act extends to unfair methods of 

competition "in or affecting commerce,,,42 and is coextensive with the outer boundares of the 

Commerce Clause. 43 Accordingly, cours have upheld the Commission's authority to order 

39 Section 7 applies to "person(s) subject to the jursdiction of 
 the Federal Trade Commission." 

15 U.S.C. § 18


40 Under the Clayton Act, commerce encompasses "trade or commerce among the several States 

and with foreign nations." 15 U.S.c. § 12.


41 Respondent's reference to the Foreign Trade Antitrst Improvements Act ("FTAIA"), 15 

U.S.C. § 6a, is inapt (RB at 63 n. 12). The FTAIA did not amend the Clayton Act, nor does it 

limit the Commission's authority under the Clayton Act to order divestitue of foreign assets in
 

an appropriate case, including the F eistrtz Plant in this case.

42 Under the FTC Act, commerce is defined to include "commerce...with foreign nations." 15 

U.S.C. § 44. 43 The extraterrtorial application ofthe Commission's authority under § 5, however, is irrelevant 

here, as the Complaint challenges Polypore's acquisition combining two U.S. firms operating in 

the U.S., and the effects of 
 its domestic conduct. Section 5(a)(3)(A) ofthe FTC Act may apply 

in cases involvingforeign conduct andforeign commerce, but it does not limit the Commission's 

authority in this case. F. Hoffann-La Roche Ltd. V. Empagran SA. ,542 U.S. 155 (2004), 

which is cited by Respondent (RB at 63 n. 12), is also inapplicable. Empagran involved an 

attempt by foreign, private plaintiffs to bring claims in the U.S. under § 1 of the Sherman Act. 

The Supreme Cour found the FT AIA barred the foreign plaintiffs' claims because the foreign 

effects were independent ofthe United States. But the Cour made it clear that the 

"government" is not precluded/rom doing so. Id, 542 U.S. at 168. 

57 
divestitue of non-U.S. assets and injunctive relief against foreign companies in cases involving 

conduct occurng outside the United States.44 

More importantly, however, Respondent misstates the essential facts relevant to the 

Commission's proper exercise of its jursdiction in this case, which involves neither a foreign 

corporation nor a foreign transaction. The Complaint challenges the acquisition by Polypore, a 

u.s. company engaged in U.S. commerce, 45 of 
 the stock of 
 Microporous, a U.S. company 

engaged in U.S. commerce.46 The Commission's authority to order Polypore to perform actions 

or to cease and desist from actions, including outside the United States, is based on its personal 

jurisdiction over Polypore and subject matter jurisdiction over the challenged acquisition under 

the Clayton and FTC Acts. Respondent even admits (Answer, at 1-3) all ofthe relevant 

jursdictional facts needed to support an order against Polyp 
 ore to divest what it acquired when it 

bought 100 percent of the stock of the Microporous Holding Company which owns Microporous 

L.P., which in tu owns Microporous GmbH in Austra, and for appropriate injunctive relief. 

Complete divestitue relief, including the Feistrtz Plant, can be accomplished through the 

Proposed Order's requirement that Polyp 
 ore divest "Microporous," defined to include its 

subsidiaries, Microporous Products L.P. and Microporous Products, GmbH (formed to hold the 

Feistrtz Plant),47 to reflect Microporous' pre-acquisition business operations and assets and postacquisition additions and improvements. (See Proposed Order i,ir I.AA., II.). 

44 See, e.g., In re Brunswick Corp. ,94 F.T.C. 1 i 74, aff'd sub nom. Yamaha Motor Co., Lid v. 

FTC, 657 F.2d 971 (8th Cir. 1981) (Commission's authority to order a U.S. company to divest its 

stockholdings in a foreign company); FTC v. My/an Laboratories, Inc. ,62 F. Supp 2d 25 

(D.D.C. 1999) (Commission's authority against foreign co-conspirator). 45 Polypore is Delaware corporation headquartered in North Carolina. (PX2L60 at 006,024) 

46 Microporous Products, L.P. is a Delaware corporation qualified to do business in Tennessee.
 

(RX01227 at 089, in camera (Stock Purchase Agreement)) 47 Respondent's claim that the Feistrtz Plant was not owned by Microporous Products L.P. is 

incorrect. (R at 62; RFOF ir 1136) The Feistrtz Plant was owned by Microporous Products
 

GmbH, which in tu was wholly owned by Microporous Products, L.P. ( See RXOI227 in 

camera, at 089,091 (Stock Purchase Agreement)) 

58 
In a related argument, Respondent contends that because the Feistrtz Plant is located 

outside the North American geographic market, it should not be divested because Complaint 

Counsel has not shown that products made there "enhanced North American (or United States) 

competitive conditions." (R at 62-63; RFOF irir 1138-1139,1141,1145-1150,1400) First, 

Respondent erroneously conflates the stadards for establishing § 7 liability (i.e., proof of a 

relevant geographic market) with the separate and distinct standards for remedy that apply once a 

violation of Section 7 of the Clayton Act has been established. As the Supreme Cour in du Pont 

made clear, "once the Governent has successfully borne the considerable burden of 

establishing a violation oflaw, all doubts as to the remedy are to be resolved in its favor." 366 

u.s. at 334. Thus, the Commission has ample authority to order complete divestitue, including 

the Feistrtz Plant, consistent with a finding of 
 violation in a Nort American geographic 

market.48 

Divestitue of 
 the Feistrtz Plant is necessar to restore the competitive scope and scale 

that Micropororis had before Daramic' s ilegal acquisition, and would have had but for 

Daramic's wrongful conduct. (CCB at 71-75) The Feistrtz Plant is critical to assurng that the 

acquirer wil have the "global footprint" demanded by large customers in the North Ame nca 

market so that Newco can compete effectively for the business of those customers against 

Daramic and Entek, both of which have a global footprit. ( See, e.g., CCFOF irir 1206-1207;
 

Hauswald, Tr. 722, 726-727,807, in camera 

48 In re Union Carbide Corp., 59 F.T.C. 614, 658-59 (1961) ("This is not to say that a finding of 

proscribed effects in all 
 lines of commerce in which the acquired corporation is engages is a 

necessary prerequisite to an order of total divestitue. The Act is violated if the forbidden effect 

or tendency occurs in any line of commerce. And once a violation has been found, the entire 

acquisition is subject to a divestment order."); RSR Corp. v. FTC, 602 F.2d 1317, 1326 n.5 (9th 

Cir. 1979) (requirg divestitue of plant not involved in the product market). 

59
 
. An effective divestitue must also restore a competitor that 

can provide customers with the securty of supply they demand. (CCB at 72; CCFOF ir 1212­

1215) The Feistritz Plant is needed to provide the acquirer with backup capacity at an alternative 

location in case of a supply disruption at the Piney Fl ats Plant. (Gilespie, Tr. 2992-2993 

(lessons from the Daramic strke); Gaugl, Tr. 4602 ("continuity of supply" important); CCFOF 

irir 1208-1209, 1216) Finally, the Feistrtz Plant is needed so that the acquirer wil have a 

suffcient scale of operations to serve the large customers 

(Gilespie, Tr., 3052-3053; Gilespie, 

Tr.2129-2131, in camera; Simpson, Tr. 3225-3226, in camera, 3229, in camera, 3233, in
 

camera (citing PX0241, in camera)) 

(Axt, Tr. 2129) 

Finally, Respondent asserts that the Feistrtz Plant should not be included in any 

divestitue because it was somehow "not par of the acquisition" insofar as it was "not in 

operation as of 
 February 29,2008." (RB at 62-63; RFOF irir 337, 1134, 1140) This argument 

grossly distorts both the facts and the case law. It is undisputed that the Feistrtz Plant was 

owned by Microporous, and the record establishes that its constrction was complete, it was 

capable of producing product, and it was less than a week away from full operational status when 

Daramic acquired Microporous. (Gilchrst, Tr. 309,334-335; Gaugl, Tr. 4601-4603,4626) 

Moreover, the cases cited by Respondent do not support its argument. Rather, the cases support 

the proposition that divestitue of a plant that becomes operational post-acquisition is proper 

where it is "the frit of 
 the acquisition," 49 as the Feistrtz Plant clearly is. See Chicago Bridge, 

49 See Reynolds Metals Company v. Federal Trade Commission , 309 F.2d 223, 230 (D.C. Cir. 

1962) (plant built after the acquisition); United States v. Carrols Dev. Corp. , 454 F. Supp. 1215, 

1222-23 (N.D.N.Y. 1978) (Deparent of Justice acted within its authority in agreeing to a 

settlement that did not include theaters constrcted after the acquisition at issue); United States v. 

Ford Motor Co. ,315 F. Supp. 372,379-380 (B.D. Mich. 1970) ("The Shreveport 
 plant was 

60 
138 F.T.C. 1165 (divesting after-acquired contracts). Ultimately, however, the operational status 

of the Feistrtz Plant is irrelevant because the acquisition was strctued as a stock deal that 

covered all assets held by Microporous Holding Company and its subsidiares, including the 

Feistrtz Plant. See (RX01227 (Stock Purchase Agreement, in camera), at 010,012,018,026­

027,100-103) Under 15 U.S.C. § 821(b), the stock must be "divested." 

2. Divestiture Of The Entire Piney Flats Plant, Including The Ace-Sil And 

Flex-Sil Lines, Is Necessary For Effective Relief. 

Respondent's assertion that "Complaint Counsel cannot obtain complete divestitue 

unless it proves that such a remedy would be necessar to restore the competition allegedly lost 

through the acquisition," (RB at 61) (emphasis in original) is simply wrong. Indeed , "a strong 

presumption favors total divestitue of the unlawfully acquired entity as the surest means of 

accomplishing" the objective "of restorig the acquired entity as a viable competitor in the
 

markets in which competition has been restrained," Fruehauf, 91 F.T.C. at 240, and "the burden 

rests with respondent to demonstrate that a remedy other than full divestitue would adequately 

redress any violation which is found." Fruehauf, 90 F.T.C. at 892 n.1 (emphasis added). In this 

case, Respondent's piecemeal proposal, (RB at 60-62; 66-67; RFOF irir 1151-1156, 1403-1406), 

is facially inadequate to restore a viable competitor or effective competition in all four battery 

separator markets in which Microporous competed. 

We must emphasize that we have never sai d, contrary to Daramic' s claim, that the Ace -

Silline is not an issue in this case. Despite the fact that it Ace-Sil a small player in the UPS 

separator market, the line produces the key ingredient in Microporous' CellForce product in both 

Tennessee and in Austra.
 

constrcted by Ford but was not a frit of the acquisition"); In re Union Carbide Corp. ,59
 

F.T.C. 614, at 657 (plant built by Union Carbide "sometime after the date of 
 the acquisition."). 

61 
(PX0738 at 004, in camera) 

(RB at 61-62, 66-67) This 

cannot replace what Microporous was and what Daramic thought was such a threat to them. 

Turing the concept of 
 "complete divestitue" on its head, Respondent proposes to retain 

Microporous' Flex-Sil and Ace-Sillocated at the Piney Flats complex, and instead offers a longterm supply agreement between Daramic and the acquirer of 
 New co for the Ace-Sil dust used in 

the manufacturing process of Cell Force products. (RB at 60 & n.9) This proposal would create 

a long-term continuing entanglement between Daramic and its new competitor and very serious 

de novo concerns given Daramic's past history of soliciting arrangements with its competitors 

not to compete. (CCB at 65-68; CCFO F irir 1180-1196) As the Supreme Cour admonished in 

du Pont, "the public is entitled to the surer, cleaner remedy of divestiture," du Pont, 366 U.S. at 

329-331,334 (emphasis added); this proposal, however, is anything but "clean." 

As an alternative, Respondent proposes to divest its own HD line of products (RB at 67; 

RFOF irir 1152-1153, 1403-1406), 51 but divestitue ofa single, small product line totally 

unelated to the pre-acquisition business of the former Microporous would not, on its face, 

restore pre-acquisition competition. ( See also CCB at 74-75) It also makes no sense to give 

Newco HD when it would then have to design and test a new motive separator for 2-3 years to 

tr to re-enter the motive separator market! Not only is there no law of any kind to support such
 

50 Any divestitue in Tennessee must also include the "line in the box," which was destined for 

Tennessee and would have been installed there to service Microporous' contract with EnerSys 

but for Daramic's ilegal acquisition (CCB at 74; Gilchrist, Tr. 374; CCFOF irir 698-699). 

(Kahwaty, Tr. 5541-5542, in camera) Provided that all that Microporous had owned is divested, Complaint Counsel is not seeking 

divestitue of 
 Respondent's PE facilities, either in addition to or as a substitute for the former 

Microporous plants in Piney Flats or Feistrtz. (See RB at 60; RCOL ir 1487). 

62 

50 
52 such a a divestitue of one of the acquirers' products rather than what it actually bought, 

remedy that would allow Daramic to keep the stock, all of Microporous' products, its contracts, 

and five of 
 the six lines that Microporous had bought is "absurd." As the Supreme Cour 

explained: 

"(I)t would be a novel, not to say absurd, interpretation of the anti-trst act to hold
 

that after an unlawful combination is formed and (the acquirer) has acquired the 

power which it (has) no right to acquire, -- namely, to restrain commerce by 

suppressing competition, -- and is proceeding to use it and execute the purose for 

which the combination was formed, it must be left in possession of the power that 

it has acquired, with full freedom to exercise it. ,,53 

The proposed remedy would allow Daramic to continue occupying the former 

Microporous and the orphaned, new Microporous, which would be one sixth of its former size, 

wil need to compete against its neighbor, Daramic, just ten feet away in an adjacent building. 

How could anyone explain that a remedy gives Daramic a dominant position in all four markets, 

when it had dominance in three (SLI, motive and UPS) and had lost its dominance in one of 

those (motive) just prior to the acquisition? 54 Indeed, no one can explain how Daramic's 

proposal supports the law or is anything but absurd. The law demands a complete remedy. Not 

one that wil increase Daramic's market power. 

The record establishes that there is no parial divestitue that would restore competition 

completely. Only complete divestitue of everyhing Daramic acquired from Microporous is 

likely to restore the competition that has been lost. See (CCB at 71-75). 

52 Indeed, the Clayton Act suggests the opposite, requiring an order to "divest itself of the "stock, 

or other share capital, or assets, held" in violation of the law - not of some other propert owned 

by Daramic before the acquisition. 15 U.S.C. § 21(b).

53 Northern Securities Co., 193 U.S. at 357, quoted by Ford Motor Co., 405 U.S. at 574, n.9 ("To 

permit Ford to retain" what it bought "would perpetuate the anticompetitive effects of 
 the 

acquisition").

54 Microporous had the largest share of deep-cycle prior to the acquisition 

proposal, it would retain almost all of the deep-cycle market 

63 
D. Complaint Counsel's Proposed Anci1ary Relief Is Proper And Necessary To
 

Ensure That The Divestiture Is Effective. 

Respondent makes a sweeping assertion that other provisions for relief proposed by 

Complaint Counsel are unwaranted and punitive. (RB at 68-69). Contrary to Respondent's 

claim, however, all of the relief 
 proposed is needed to ensure that the divestitue wil be effective 

and viable, and to undo the anticompetitive effects of 
 Respondent's violations. 

The assignent of contracts to the acquirer is necessary to ensure that the Newco wil 

have a base of 
 business consistent with its ongoing operations at the time of divestitue. 

(Proposed Order irir LH, AA, DD, II). A similar provision was included in the final order in 

Chicago Bridge. 138 F.T.C. at 1165. 

The technology and other intellectual propert that Respondent must divest is limited to 

what it acquired from Microporous in the acquisition, together with an y additions and 

improvements since the acquisition. (Proposed Order iri, LAA, FF., II.A.). This requirement is 

necessary to restore competition to the state in which it would likely have continued to exist "but 

fot' the ilegal merger. Respondent must also grant the acquirer a perpetual, worldwide, royaltyfree license to use any Daramic technology that Respondent introduced into use at the former 

Microporous plants after the acquisition to ensure that those plants can continue to operate postdivestitue without disruption. (Proposed Order irir II.CA). This requirement is necessary since 

there would be no effective way to purge certain information, such as best practices, from the 

minds of personnel involved in those operations who might become employees of the acquirer in 

connection with the divestitue. It is also fair, since any changes Respondent implemented at 

either Microporous plant, including the use ofDaramic technology, were made with full 

knowledge that the Commission was investigating the acquisition. 

The requirement that Daramic must covenant not to sue the acquirer over any technology 

that it owns or licenses at the point of divestitue, including the Jungfer technology (proposed 

64
 
Order ir II.F.l.), is necessary to ensure that the Newco's ability to compete in the relevant 

markets is not impeded through Daramic's resumption of its pre -acquisition exclusionary 

conduct that weakened Microporous as a competitor. (CCFOF irir 657-659) This is also a 

reasonable measure to prevent Daramic from threatening futue infrngement actions and using
 

the settlement process as a means to eliminate competition through non-compete proposals. 

(CCFOF irir 1096-1100) "(R)espondent. . . must remember that those caught violating the Act 

must expect some fencing in." Hospital Corporation of America v. FTC, 807 F.2d 1381, 1393 

(7th Cir. 1986).
 

Daramic challenges a supposed termination of contracts. (RB at 51-55) is belied by the 

record evidence. But as explained in Complaint Counsel's Brief 
 (CCB at 77-78), Paragraph VII 

of the Proposed Order does not require across-the-board termination of customer contracts, but 

rather provides customers with the option to reopen and renegotiate or terminate the contracts 

they were forced to enter into with Daramic during a period in which it unlawfully exercised its 

market power. (CCB at 55-59; CCFOF irir 1089-1090, 1101-1103). This provision is necessary 

to prevent Daramic from continuing to reap the benefits of its unlawful conduct. (CCB at 44 -45) 

The provision in the Proposed Order is narrower than what the Commission required in the final 

order in North Texas Specialty Physicians because it does not require Respondent to terminate all 

contracts,55 but instead leaves it up to the customer to determine whether to opt for reopening. 

The potential provision of transitional services if needed by the acquirer (Proposed Order 

ir II.F.3), and the removal of impediments to the acquirer's ability to recruit and hire employees 

of "Micro porous," including non-compete agreements (Proposed Order ~ II.D.2), are also 

necessary to ensure the viability ofthe Newco immediately following divestitue. Prior to the 

55 In re North Texas Specialty Physicians , 140 F.T.C. 715, 774-76 (2005) (respondent was 

ordered to terminate all non-risk contracts with payors that it negotiated on behalf of its 

physicians); the Commission's final order on remand did not alter this requirement. 

Htt://www.ftc.gov/os/adjpro/d9312/0809120rderonremand.pdf. 

65 
acquisition, Microporous had an entire infrastrctue to provide shared services to the plants, 

including administrative, payroll, information technology and human resources, which are now 

being provided by Respondent. Accordingly, it is reasonable to require Respondent to continue 

to provide these services for a transitional period if 
 necessar. A similar provision was included 

in the final order in Chicago Bridge. 138 F.T.C. at 1166-1169. The removal of non-compete 

agreements is necessar to allow the acquirer to hire and utilze the personnel workig at the 

Microporous plants who are now employed by Respondent, and is needed to ensure the viability 

of those plants post-divestitue. Contrar to Respondent's assertion, the requirement does not 

apply to all ofRespondents employees, only to those who worked at Microporous before the 

acquisition and those who have worked in the former Microporous plants afer the acquisition. 

(proposed Order irir LEE, ILD.2.). A similar provision was included in the final order in Chicago 

Bridge. 138 F.T.C. at 1165-1166, 1173 & n.592. 

Paragraph IX of the Proposed Order prohibits Respondent from introducing any battery 

separator using cross-linked rubber for a period of two years following the divestitue. (CCB at 

78). Microporous' pre-acquisition use of cross-linked rubber technology in its battery separators 

distinguished them from Daramic's, and this technology, which was exclusively Microporous' 

before the acquisition, wil be divested pursuant to the Order. Although it would be a violation 

of the Order for Daramic to use any Microporous intellectual propert after the divestitue, much 

of the critical manufacturing technology is in the form of trade secrets, which can be particularly 

diffcult to protect, making it diffcult and costly for the acquirer to determine whether similar ' 

technology later used by Daramic was misappropriated. To assure that the viability of 
 the 

divestitue is not undermined from the outset by Daramic's introduction of a "me-too" product 

improperly based on Microporous technology, a brief 
 moratorium period of 
 two years on any 

such product introduction is reasonable. 

66 
The remaining provisions of Complaint Counsel's Proposed Order are standard reporting, 

notice, compliance monitoring and sunset provisions that are tyically required in Commission 

orders. (Proposed Order irir X-XlV); s ee Chicago Bridge, 138 F.T.C. at 1197-99; In re North 

Texas Specialty Physicians, 140 F.T.C. at 787-88.
 

E. The Proposed Relief for Daramic's Ilegal Conduct is Appropriate and
 

Necessary. 

Respondent denies that its agreement with Hollngsworth & V ose Company ("H& V 

Agreement") violated Section 5 of 
 the FTC Act, and thus asserts no relief 
 is necessary. (RB at 

55-58,69; RFOF irir 1123-1132, 1157, 1395-1398; RCOL irir 1484-1486) We disagree. The 

record establishes, and the law is clear, that Respondent's agreement with H& V was nothing 

more than an ilegal market allocation arrangement. (CCB at 63-68; CCFOF irir 1179-1196) The 

relief requested in Paragraph VII of the Proposed Order regarding the H& V Agreement is 

appropriate and tailored to the violation found, and provides appropriate fencing-in relief. ( See,
 

e.g., CCFOF irir 1098-1100) Contrary to the assertion of Respondent, the non-competition 

portion of the H& V Agreement continues to have effect because, under its terms, H& V cannot 

enter the U.S. market for five more years. (CCOF ir ir 1189, 1191) In addition, it is appropriate 

to prohibit Respondent from entering into similar agreements in the futue. See Polygram 

Holdings, Inc. v. Federal Trade Commission, 416 F.3d 29, 38-39 (D.C. Cir. 2005). 

XI. Conclusion
 

For the reasons stated above, and as fully supported by the evidence at trial, Daramic's 

acquisition of Micro porous and its anti-competitive conduct are ilegal, thus requirng a complete 

remedy to restore competition and prevent further harm to competition. 

67
 
Dated: August 7,2009 Respectfully submitted,
 

B~.~~­

J. ERT ROBERTSON
 

Federal Trade Commission 

Bureau of Competition 

600 Pennsylvana Ave., N.W. 

Washington, DC 20580
 

Telephone: (202) 326-2008
 

Fax: (202) 326-2884
 

Complaint Counsel 

68
 
CERTIFICATE OF SERVICE 

I hereby certify that on August 7,2009, I fied via hand delivery an original and 

two copies of the foregoing public version of Complaint Counsel's Post-Trial Reply Brief 

with: 

Donald S. Clark, Secretary 

Office of the Secretary 

Federal Trade Commission 

600 Pennsylvania Avenue, NW, Rm. H-135 

Washington, DC 20580 

I hereby certify that on August 7,2009, I served via electronic mail and hand 

delivery two copies of the foregoing public version of Complaint Counsel's Post-Trial 

Reply Brief with: 

The Honorable D. Michael Chappell 

Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Avenue, NW, H-106 

Washington, DC 20580 

oali (Qftc.gov 

I hereby certify that on August 7,2009,2009, I served via electronic mail delivery 

and first class mail two copies of the foregoing public version of Complaint Counsel's 

Post-Trial Reply Brief with: 

William L. Rikard, Jr, Esq. 

Eric D. Welsh, Esq. 

Parker, Poe, Adams & Bernstein, LLP 

401 South Tryon Street, Suite 3000 

Charlotte, Nort Carolina 28202 

wiliamrikard (Q parkerpoe.com 

ericwelsh (Qparkerpoe.com