0810148

UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

COMMISSIONERS: William E. Kovacic, Chairman

Pamela Jones Harbour

Jon Leibowitz

J. Thomas Rosch

 

In the Matter of )

)

CRH plc, )

a corporation, )

)

Oldcastle, Inc., ) Docket No. 9335

a corporation, )

)

Oldcastle Architectural, Inc., )

a corporation, )

)

Robert Schlegel, )

an individual, )

)

and )

)

Pavestone Company, LP, )

a limited partnership. )

 )

COMPLAINT

Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the

authority vested in it by said Act, the Federal Trade Commission, having reason to believe that

Respondents CRH plc, Oldcastle, Inc., and Oldcastle Architectural, Inc. (collectively, “Oldcastle”),

and Robert Schlegel and Pavestone Company, LP (collectively, “Pavestone”) have entered into an

acquisition agreement which, if consummated, would violate Section 7 of the Clayton Act, as

amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15

U.S.C. § 45, and it appearing to the Federal Trade Commission that a proceeding by it in respect

thereof would be in the public interest, hereby issues its complaint stating its charges as follows:
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SUMMARY

1. The proposed transaction would combine the two largest and closest competitors in

the manufacture and sale of drycast concrete hardscapes to national home centers in numerous

markets in the United States and to commercial customers in the Dallas, Houston, and San Antonio,

Texas markets. Drycast concrete hardscapes are used in landscape construction projects ranging

from residential driveways, patios, and garden walls, to athletic stadiums and arenas. They include

drycast interlocking concrete pavers (“pavers”), drycast concrete segmented retaining wall blocks

(“SRWs”), and other drycast concrete patio products (collectively, “drycast concrete hardscapes”).

Unless the proposed transaction is enjoined or otherwise prevented, the combination of Oldcastle

and Pavestone would create a dominant firm, eliminate the unique competition between these firms,

and result in higher prices and reduced quality, innovation, and services to national home centers

and, ultimately, to “Do-It-Yourself” (“DIY”) consumers across the country who purchase the

products at national home centers, as well as to Dallas, Houston, and San Antonio, Texas area

contractors, dealers, and distributors (collectively, “commercial customers”). The national home

centers include, but are not limited to, The Home Depot, Lowe’s, and Wal-Mart, which have

locations in various regions of the U.S. and which collectively sell the majority of drycast concrete

hardscapes to retail customers.

2. Drycast concrete hardscapes are distinct from other landscaping products and

materials, such as asphalt, stamped concrete, gravel, clay brick, poured concrete, natural stone, or

timbers in appearance, quality, durability, and functionality. Project designers, contractors,

manufacturers, distributors, and other industry participants see little, if any, cross-price elasticity

between drycast concrete hardscapes and other materials. Rather than substituting across

landscaping products in response to small changes in the prices of those materials, customers of

national home centers have aesthetic and performance preferences in selecting a particular

landscaping product. Similarly, when setting their retail prices for drycast concrete hardscapes,

national home centers almost exclusively monitor the drycast concrete hardscape products sold at

other national home centers, indicating that these large retailers also do not consider other products

to be close substitutes for drycast concrete hardscapes. The national home centers focus on each

other’s sales of drycast concrete hardscapes because small variations in the prices of other

landscaping products do not significantly affect the sales of drycast concrete hardscapes and because

the DIY customers of the national home centers are materially different from the customers of

commercial outlets. 

3. Drycast concrete hardscapes sold to national home centers differ from those sold to

commercial customers. Products sold to national home centers are generally lighter, lower-end

products suitable for DIY consumers to use in performing relatively small, uncomplicated home

improvement projects. In contrast to the commercial products, installation of the DIY products

requires little, if any, professional expertise. Thus, the DIY customers of the national home centers

are also different from the customers of commercial retail outlets. 

4. Drycast concrete hardscapes are heavy products, and thus costly to transport. As a

result, generally it is not cost-effective or competitively viable to transport these products farther
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than 200 miles to a national home center, or 150 miles to a commercial customer, from a

manufacturing plant.

PARTIES AND JURISDICTION

OLDCASTLE

5. Respondent CRH plc is the for-profit parent company of an international group of

companies, engaged, among other things, in the manufacture and supply of a wide range of building

materials. CRH plc is a public company incorporated and headquartered in the Republic of Ireland,

and listed on the Irish Stock Exchange, the London Stock Exchange, and the New York Stock

Exchange. CRH plc operates in over 34 countries. 

6. Respondent Oldcastle, Inc. is CRH plc’s U.S. agent, and is wholly owned by CRH

plc. Oldcastle, Inc. is a for-profit corporation, with North American operations in all 50 states, the

District of Columbia, and four Canadian provinces. Oldcastle, Inc. is organized, existing, and doing

business under and by virtue of the laws of Delaware, with its headquarters and principal place of

business at 375 Northridge Road, Suite 350, Atlanta, Georgia 30350. 

7. Respondent Oldcastle Architectural, Inc. (“Oldcastle Architectural”) is wholly owned

by Oldcastle, Inc., and is an indirect subsidiary of CRH plc. Oldcastle Architectural is the Oldcastle

entity engaged in the manufacture and sale of drycast concrete hardscapes in North America, and

the Oldcastle entity that is party to the acquisition agreement here. Oldcastle Architectural is a forprofit corporation, with North American operations in 38 states, the District of Columbia, and two

Canadian provinces. It is organized, existing, and doing business under and by virtue of the laws

of Delaware, with its headquarters and principal place of business at 375 Northridge Road, Suite

250, Atlanta, Georgia 30350.

8. Oldcastle and its relevant operating entities are, and at all relevant times have been,

engaged in activities in or affecting “commerce” as defined in Section 1 of the Clayton Act, as

amended, 15 U.S.C. § 12, and Section 4 of the Federal Trade Commission Act, as amended, 15

U.S.C. § 44.

PAVESTONE

9. Respondent Robert Schlegel, an individual, is the ultimate parent of the Pavestone

companies, including Pavestone Company, LP, which are organized as limited liability companies

and limited partnerships, the interests and assets of which Oldcastle proposes to acquire. Mr.

Schlegel is doing business at 4835 LBJ Freeway, Suite 700, Dallas, Texas 75244.

10. Respondent Pavestone Company, LP is a limited partnership organized and existing

under the laws of Texas. Its headquarters and principal place of business are located at 4835 LBJ

Freeway, Suite 700, Dallas, Texas 75244. Pavestone operates in approximately 40 states and the

District of Columbia.
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11. Pavestone and its relevant operating subsidiaries are, and at all relevant times have

been, engaged in activities in or affecting “commerce” as defined in Section 1 of the Clayton Act,

as amended, 15 U.S.C. § 12, and Section 4 of the Federal Trade Commission Act, as amended, 15

U.S.C. § 44.

THE PROPOSED ACQUISITION

12. Pursuant to an agreement dated March 11, 2008, Oldcastle Architectural, Inc. intends

to acquire the interests and assets of Pavestone for more than $540 million, including cash, an earnout, and stock. 

AFFECTED MARKETS

13. Drycast concrete hardscapes manufacturers bid annually to supply national home

centers, across different regions in the United States. An individual manufacturer’s bid price is

determined both by head-to-head competition among the drycast concrete manufacturers and by

local retail competition among national home centers in each bid area. For this reason, the relevant

geographic markets within which to assess the competitive effects of the acquisition range from

areas as small as individual metropolitan areas to as large as individual states.

14. Oldcastle and Pavestone supply national home centers in 40 overlapping states and

the District of Columbia. Contained within this area are approximately 300 Metropolitan Statistical

Areas (“MSAs”). The acquisition thus would affect national home centers in 40 states and the

District of Columbia, and smaller areas contained therein.

15. The acquisition also would affect commercial paver and SRW customers in the areas

of Dallas, Houston, and San Antonio, Texas.

CONCENTRATION

16. Oldcastle and Pavestone together account for approximately 90 percent of drycast

concrete hardscape sales to national home centers in the United States, and over 75 percent of

drycast concrete hardscape sales to commercial customers in the state of Texas. While individual

market shares in any particular MSA or state vary, Respondents have significant combined market

shares in all relevant geographic markets.

17. Each of the relevant geographic markets is highly concentrated with Oldcastle and

Pavestone typically the largest suppliers and each other’s closest competitor for the provision of

drycast concrete hardscapes to national home centers and the provision of pavers and SRWs to

Texas commercial customers. Post-acquisition, Oldcastle would have a dominant market share in

each of the relevant geographic markets. In fact, across the numerous overlap markets, Oldcastle’s

post-acquisition market share and the increase in concentration resulting from the acquisition would

be well above the level at which the acquisition is presumptively unlawful.
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THE ACQUISITION WOULD SUBSTANTIALLY 

LESSEN COMPETITION IN NATIONAL HOME CENTER MARKETS

18. Oldcastle and Pavestone are the largest and closest competitors in the manufacture

and sale of drycast concrete hardscapes to national home centers. Oldcastle and Pavestone compete

head-to-head in numerous markets for national home center business. As the only two nationalscale suppliers of drycast concrete hardscapes, they are able to leverage their economies of scale to

offer lower prices than smaller drycast concrete hardscapes suppliers. Oldcastle and Pavestone also

provide national home centers with a broad range of drycast concrete hardscapes, offer a large

number of exclusive and innovative products, and provide price discounts and other advertising and

marketing allowances based on national volumes. In addition, Oldcastle and Pavestone provide an

array of support services to national home centers, including, among other things, full category

management, marketing aids, and customer training. 

19. The head-to-head competition between Oldcastle and Pavestone in the relevant

markets has resulted in lower prices to national home centers, and ultimately, consumers. The

proposed acquisition would eliminate this direct price competition and likely would result in higher

prices, lower quality, and fewer innovative products to national home centers and consumers.

20. The presence of Oldcastle or Pavestone in a specific region – even if they do not bid

against each other – has a constraining effect on prices. National home centers regularly monitor

and compare retail prices at other national home centers in the same geographic area to ensure that

their drycast concrete hardscapes prices are competitive. For example, if one national home center

sees that its retail prices for drycast concrete hardscapes are higher than prices at another national

home center, it will pressure its drycast concrete hardscapes manufacturer to lower the

manufacturer’s prices so the national home center can remain competitive. The retail competition

between national home centers thus provides leverage for national home centers to negotiate lower

prices and better products from their drycast concrete hardscapes suppliers. Similarly, drycast

concrete hardscapes manufacturers regularly monitor retail prices at national home centers when

setting their bid prices to any individual national home center.

21. Post-acquisition, regional drycast concrete hardscapes manufacturers could not

replace the lost competition between Oldcastle and Pavestone. These manufacturers have varied

ability to supply the breadth of drycast concrete hardscapes required by national home centers, but

they cannot and do not provide the geographic coverage that Oldcastle and Pavestone provide, and

generally they lack the scale necessary to support the services offered by Oldcastle and Pavestone.

Critically, none of the regional manufacturers can or do offer price rebates based on national

volumes competitive with those currently offered by Oldcastle and Pavestone.

22. Prior to the announcement of the acquisition, both Oldcastle and Pavestone planned

to build new plants in certain markets where the two currently compete, but where one or the other

lacked optimally-located plant operations. The additional plants likely would have enhanced

competition and led to lower prices for drycast concrete hardscapes to national home centers in these

geographic areas. If the acquisition is consummated, Oldcastle and Pavestone would no longer have

the same incentives to pursue these pro-competitive expansion plans, and national home centers and
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consumers would lose the benefit of this enhanced competition between Oldcastle and Pavestone

– competition that likely would have resulted in lower prices.

23. The acquisition, combining the operations of the two largest suppliers and closest

competitors of drycast concrete hardscapes to national home centers in the United States, would

result in a dominant provider of drycast concrete hardscapes to national home centers in numerous

markets. The elimination of the unique competition between Pavestone and Oldcastle would allow

Oldcastle, post-acquisition, unilaterally to increase prices of drycast concrete hardscapes and would

result in reduced quality, innovation, and service to national home centers and their customers.

THE ACQUISITION WOULD SUBSTANTIALLY 

LESSEN COMPETITION IN TEXAS COMMERCIAL MARKETS

24. The acquisition also would create a dominant firm in the commercial markets for

drycast concrete hardscapes in the Dallas, Houston, and San Antonio, Texas metropolitan areas.

25. Commercial customers are contractors that install drycast concrete hardscapes in

construction projects, and dealers and distributors. Drycast concrete hardscapes manufacturers

compete on price, quality, innovation, and service for commercial business.

26. Drycast concrete hardscapes sold to commercial customers largely differ from drycast

concrete hardscapes sold to retail customers. Commercial-grade products are meant to be installed

by professional contractors and, as such, generally require greater expertise to install than do the

retail products purchased from national home centers by DIY homeowners. For example, patio

products such as stepping stones are relatively rarely sold to commercial customers, while

specialized pavers or SRWs used to construct a driveway or an engineered wall generally are not

available at national home centers.

27. Oldcastle has a commercial class of product, its Belgard line, which it markets as

substantially different from its drycast concrete hardscapes sold through national home centers.

Pavestone also markets its commercial-grade products separately from its retail-grade products.

Respondents earn markedly higher margins on sales to commercial customers than those earned on

sales to national home centers.

28. Drycast concrete hardscapes manufacturers for the commercial channel of trade need

not supply the breadth of drycast concrete hardscapes required by national home centers. Some

smaller manufacturers produce either pavers or SRWs, but not both. Because commercial customers

buy drycast concrete hardscapes for specific projects, a contractor may purchase pavers from one

supplier for one project, and SRWs from another supplier for another project.

29. Drycast concrete hardscapes are rarely transported beyond 150 miles to commercial

customers from the plants where they are manufactured. Manufacturers with plants closer to

construction sites have a significant competitive advantage in bidding on jobs. As a result, the

service area for commercial sales is approximately a 150 mile radius from each drycast concrete

hardscapes plant.
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30. Oldcastle and Pavestone are each significantly larger than other manufacturers of

drycast concrete hardscapes in Texas. They possess the broadest product lines of the firms that

serve Texas, and they are geographically well-located to serve customers in and around the Dallas,

Houston, and San Antonio, Texas metropolitan areas. The merger would create a monopoly in

drycast concrete pavers in Dallas, leave only two competitors in San Antonio, and leave only three

in Houston. The merger would leave only three SRW manufacturer competitors in Dallas and San

Antonio, and leave only four remaining competitors in Houston. In each geographic area for each

product, Oldcastle and Pavestone would be the dominant supplier.

31. Post-acquisition, without Pavestone’s competition, Oldcastle would be able

unilaterally to increase prices and reduce quality, innovation, and service to commercial customers

in relevant geographic areas in the Dallas, Houston, and San Antonio, Texas areas.

ENTRY WOULD NOT MITIGATE 

THE ANTICOMPETITIVE EFFECTS OF THE ACQUISITION

32. Post-acquisition, entry or expansion into the manufacture and sale of drycast concrete

hardscapes to national home centers would not be timely, likely, and sufficient in scope to deter or

negate the anticompetitive effects of the proposed acquisition.

33. Several factors render sufficient entry into the national home center markets timeconsuming, costly, and unlikely to occur. These factors include the need for a super-regional

network of manufacturing plants to compete for sales to national home centers; the need for a new

entrant to overcome costs to the national home center of displacing an incumbent vendor, including

the loss or reduction of national discounts; and the need to provide the category management, instore services, product standardization, quality control, exclusive products, and frequent product

innovation required by national home centers.

34. Post-acquisition, entry or expansion into the manufacture and sale of pavers and

SRWs to Texas commercial customers would not be timely, likely, and sufficient in scope to deter

or negate the anticompetitive effects of the proposed acquisition.

35. Several factors render sufficient entry into the Texas commercial markets timeconsuming, costly, and unlikely to occur. To enter the Dallas, Houston, or San Antonio areas, an

entrant would need to overcome the challenges of competing with Respondents’ economies of scale

in production and distribution, establishing relationships with dealers, distributors, and contractors,

developing a reputation with customers as a reliable and high-quality producer, and marketing its

products to architects and engineers who specify which products to install in their projects. Timely

entry is especially unlikely because there already is sufficient capacity to meet commercial demand

in the Texas commercial markets today.
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VIOLATIONS

COUNT I – ILLEGAL ACQUISITION

36. The allegations of Paragraphs 1 through 35 above are incorporated by reference as

though fully set forth.

37. The acquisition, if consummated, would substantially lessen competition in the

affected markets in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and

Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45.

COUNT II – ILLEGAL ACQUISITION AGREEMENT

38. The allegations of Paragraphs 1 through 35 above are incorporated by reference as

though fully set forth.

39. Respondents Oldcastle and Pavestone, through the agreement described in Paragraph

12 above, have engaged in unfair methods of competition in or affecting competition in violation

of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45.

NOTICE

Notice is hereby given that the fifteenth day of June, 2009, at 10:00 a.m., is hereby fixed as

the time, and the Federal Trade Commission offices, 600 Pennsylvania Avenue, N.W., Room 532,

Washington, D.C. 20580, as the place when and where a hearing will be had before an

Administrative Law Judge of the Federal Trade Commission, on the charges set forth in this

complaint, at which time and place you will have the right under the Federal Trade Commission and

Clayton Acts to appear and show cause why an order should not be entered requiring you to cease

and desist from the violations of law charged in this complaint.

You are notified that the opportunity is afforded you to file with the Federal Trade

Commission an answer to this complaint on or before the fourteenth (14th) day after service of it

upon you. An answer in which the allegations of the complaint are contested shall contain a concise

statement of the facts constituting each ground of defense, and specific admission, denial, or

explanation of each fact alleged in the complaint or, if you are without knowledge thereof, a

statement to that effect. Allegations of the complaint not thus answered shall be deemed to have

been admitted.

If you elect not to contest the allegations of fact set forth in the complaint, the answer shall

consist of a statement that you admit all of the material facts to be true. Such an answer shall

constitute a waiver of hearings as to the facts alleged in the complaint and, together with the

complaint, will provide a record basis on which the Commission shall issue a final decision

containing appropriate findings and conclusions and a final order disposing of the proceeding. In

such answer, you may, however, reserve the right to submit proposed findings of fact and
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conclusions of law under § 3.46 of the Federal Trade Commission’s Rules of Practice for

Adjudicative Proceedings.

Failure to answer within the time above provided shall be deemed to constitute a waiver of

your right to appear and contest the allegations of the complaint and to authorize the Commission,

without further notice to you, to find the facts to be as alleged in the complaint and to enter a final

decision containing appropriate findings and conclusions and a final order disposing of the

proceeding.

The Administrative Law Judge will schedule an initial prehearing scheduling conference to

be held not later than 10 days after the answer is filed by the last answering Respondent in the

complaint. Unless otherwise directed by the Administrative Law Judge, the scheduling conference

and further proceedings will take place at the Federal Trade Commission, 600 Pennsylvania Avenue,

N.W., Room 532, Washington, D.C. 20580. Rule 3.21(a) requires a meeting of the parties’ counsel

as early as practicable before the prehearing scheduling conference, but in any event no later than

five days after the answer is filed by the last answering Respondent. Rule 3.31(b) obligates counsel

for each party, within five days of receiving a Respondent’s answer, to make certain initial

disclosures without awaiting a formal discovery request.

NOTICE OF CONTEMPLATED RELIEF

Should the Federal Trade Commission conclude from the record developed in any

adjudicative proceedings in this matter that Oldcastle’s acquisition of the interests and assets of

Pavestone violates Section 7 of the Clayton Act, as amended, or Section 5 of the Federal Trade

Commission Act, as amended, the Federal Trade Commission may order such relief against

Respondents as is supported by the record and is necessary and appropriate, including, but not

limited to:

1. If the acquisition is consummated, divestiture or reconstitution of all associated and

necessary assets, in a manner that restores two or more distinct and separate, viable, and independent

businesses in the relevant markets, with the ability to offer such products and services as Oldcastle

and Pavestone were offering and planning to offer prior to the acquisition;

2. A prohibition against any transaction between Oldcastle and Pavestone that combines

their manufacturing and sales of (a) drycast concrete hardscapes to national home centers in the

United States; (b) drycast concrete pavers to commercial customers in the Dallas, Houston, and San

Antonio, Texas areas; and (c) drycast concrete SRWs to commercial customers in the Dallas,

Houston, and San Antonio, Texas areas, except as may be approved by the Federal Trade

Commission;

3. A requirement that, for a period of time, Oldcastle and Pavestone provide prior notice

to the Federal Trade Commission of acquisitions, mergers, consolidations, or any other

combinations of their manufacturing and sales of drycast concrete hardscapes businesses in the

relevant markets with any company manufacturing and selling drycast concrete hardscapes in the

relevant markets;
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4. A requirement to file periodic compliance reports with the Federal Trade

Commission; and

5. Any other relief appropriate to correct or remedy the anticompetitive effects of the

acquisition or to ensure the creation of one or more viable, competitive, independent entities to

compete against the combined Oldcastle-Pavestone in the relevant markets.

IN WITNESS WHEREOF, the Federal Trade Commission has caused this complaint to

be signed by its Secretary and its official seal to be hereto affixed, at Washington, D.C. this

fourteenth day of January, 2009.

By the Commission.

Donald S. Clark

Secretary

SEAL