OR\G\Nt\L 

\lii'- iAADE ~/. UNITED STATES OF AMERICA , ~'YfÇ RIiEI\Æ¡¡ QOGUMENTl8/~' 

BEFORE THE FEDERAL TRADE COMMISSION f .:J.19'1S- '/" 

\ 9EC 1 if iûtì
 '\ '-11 r
 ''\", ~ T(, b5 ;,.

''Q'~'"".",...ECRE1AR,( . ~~ 

In the Matter of ) 

) Polyp ore International, Inc., )

a corporation. ) 

) 

PUBLIC
 

Docket No. 9327
 

COMPLAINT COUNSEL'S POST-TRIAL REPLY BRIEF
 

ON THE REOPENED RECORD
 

RICHARD A. FEINSTEIN 

Director 

PETER 1. LEVIT AS 

Deputy Director 

Bureau of Competition 

CATHARINE MOSCA TELL! 

Assistant Director 

MORRS BLOOM 

Deputy Assistant Director 

Bureau of Competition 

Mergers II 

DECEMBER 10, 2009 

J. ROBERT ROBERTSON 

STEVEN DAHM 

BENJAMIN ORIS 

JOEL CHRISTIE 

STEPHEN ANTONIO 

CHRISTIAN H. WOOLLEY 

PRIY A VISW ANA TH 

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 

_U"f '- ., -----.--1­
TABLE OF CONTENTS
 

i. INTR 0 D U CTI 0 N -------------------------------------------------------------------------- 1 

II FACTS AND BA CKG RO UND------------------------------------------------------- 2 

a. The 1999 Contract and Negotiations for New Contract ___mmmm__m_____m_____2
 

b. t l -------- --- ------- --- ------------- ------- ---------- 5 

c. 

--- --- ---------- ---- ------------- --- ----------------- ------- ---------------- ---- ------ 7 

d. 

--------- ----------------- ------------------------------ --- ------- --- --- 7 

e. Respondent's Overstatements are Contrary to the Evidence----------------u----------8 

III. LEGAL ARGUMENT -------------------------------------------------------------------- 10 

a. Respondent's Arguments Are Related Only to SLI____mm___m_mm_______mm 10
 

b. Respondent Merely Reiterates its Previous Arguments and Relies on the
 

Evidence Introduced at the Previous Hearing--mm----------------------------------- 10 

c. The Acquisition of 
 Microporous Reduced Actual Competition in SLI---m-----m 13 

d. Respondent's Argument that Microporous was Too Small to Compete with it
 

and Entek is Contradicted by the Evidence ______________mm________________m__m_ 14
 

e. The Evidence Presented at the November Hearing Shows that the Necessary
 

Conditions for Coordinated Interaction Exist 
 in the SLI Separator Market m__m 16 

f. Power Buyers are not Present in Any Market for Flooded Lead-Acid Battery
 

Separators but Even if They were the Market has not Benefited from Their 

Presence --------------------- ----------------- ----------------------- ----------------------- -- 1 8 

I~ CON CL USI 0 N---------------------------------------------------------------------------- 25 

--., - -..--­
TABLE OF CASES AND AUTHORITIES
 

CASES 

Brown Shoe v. United States, 370 U.S. 294, 344 (1962) ............................................ 15,25
 

Chicago Bridge & Iron Company N ~ v. FTC, 534 F.3d 41O(5th Cir. 2008) ................. 19
 

FTC v. Cardinal Health, 12 F.Supp. 2d 34 (D.D.C. 1998)...............................................20
 

FTC v. CCC Holdings Inc., et a/., 605 F. Supp. 2d 26 (D. D.C. 2009) ............................ 16
 

FTC v. H.J Heinz Co., 246 F.3d 708 (D.C. Cir. 2001) .................................................... 16
 

In re B.F. Goodrich, 110 F.T.C. 207 (1988)............ ............ ..... ......... .............. .15
 

National Collegiate Athletic Ass 'n v. Board of Regents of Univ. of Oklahoma,
 

468 U.S. 85 (1984)..................... ........... ................. ............... ................. ....... ............. 24
 

United States v. Archer-Daniels-Midland Co., 781 F. Supp. 1400
 

(S.D. Iowa 1991)................................ ....................... ....... ............ ........................ 19, 23
 

United States v. Baker Hughes Inc., 731 F. Supp. 3 (D.D.C 1990).................................. 18
 

OTHER AUTHORITIES
 

4 Philip E. Areeda & Herbert Hovenkamp, Antitrust Law: an Analysis of Antitrust
 

Principles and their Application 943 (2nd ed. 2000) ............................................. 19, 21
 

1992 Horizontal Merger Guidelines... ........... ...................... ........ ......... ............. ........ ..... ..16
 

11
 

. ---------_.,
 ., 
i. INTRODUCTION
 

The record demonstrates that the acquisition reduced competition infour markets. 

Respondent's "new" evidence and repeated legal arguments address only one: SLI. 

Respondent offers no new evidence or legal argument about the markets for motive, 

deep-cycle, or UPS separators. A finding that competition has been reduced by the 

acquisition of Microporous in anyone of those markets requires a divestiture of all of the 

former Microporous. Respondent provides no legal argument and cites no new facts 

related to monopolization. 

Respondent's brief does no more than restate its previous arguments about the 

SLI market. Indeed entire sections of 
 Respondent's legal argument in its brief go without 

any reference at all to its proffered "new" evidence, but rather entirely refer to its 

previous findings of fact. Respondent does not discuss any of its proffers in its papers 

because it has failed to prove them. Instead, Respondent talks about the process of 

negotiating with Exide. This is self-serving testimonial evidence regarding contentious 

negotiations between Daramic and Exide. The validity and trstworthiness of 

Respondent's one-sided statements in ongoing negotiations should be given little or no 

weight. The statements are solely intended to further Respondent's negotiation and 

litigation posture in its unesolved dispute with Exide. These statements are a distraction 

from the simple fact that Respondent failed to prove its proffers. 

The record from both hearings demonstrates that Microporous was an actual 

competitor in SLI. (Complaint Counsel's Revised Post Trial Brief at 26-28). Prior to the 

acquisition Microporous bid for JCI's business, East Penn's business, and had an f 

l. Id. Competition from Microporous caused prices to falL. Id. The facts 

, ~_.,uu. ------_., 
developed in the second hearing demonstrate that the acquisition of Microporous by 

Daramic reduced actual competition in SLI.1 When Microporous was competing for SLI 

business, f l. (RXOOOn at
 

56, in camera). Without Microporous, f l can get for a comparable 

separator in 2010 is f l. (RX01668 at 002, in camera; Seibert, Tr. 5656, in camera). 

This is powerful post transaction evidence that the acquisition reduced competition in 

SLI. 

II. FACTS AND BACKGROUND
 

a. The 1999 Contract and Negotiations for New ~ontract 

Respondent argues that the negotiation between Daramic and Exide shows that 

Exide is a power-buyer and that the SLI market is competitive. The evidence contradicts 

these arguments. To begin with, within one month of its f 

J, Exide 

conceded to f 

l. (RX01665 at 004, in camera; RX01669 at 002, in 

camera). Second, Daramic was never wiling to f 

l. (RXO 1669 at 002, in camera (Ex 
 ide

proposed f 

J); Gilespie, 

i Respondent's assertion that Complaint Counsel does not dispute "that competition in the production and 

sale of 
battery separators in North America is healthy and vigorous" is false. The acquisition of 

Microporous reduced competition in all four markets, including SLI, where competition between Daramic 

and Entek is anemic. Indeed Daramic is reducing SLI capacity in the market. However Complaint Counsel 

does agree that North America is the proper geographic market in which to analyze the competitive effects 

of the merger. 

2 

,-- .., -------,­
Tr. 5808-5810, in camera; see also CCFOF 13212). Third, Daramic's proposed f 

l. (Gilespie, Tr. 5807-5808, in camera; see also CCFOF 1326-1327). 

Fourth, all of Daramic' s proposed f 

l. (CCFOF 1316-1322).
 

Other f l related requests from Exide have met a similar fate, highlighting 

where the strength in the negotiation lies. For example, f 

l. (RXO 1665 at 002, in camera;
 

RX1250 at 001, in camera; RX01668 at 002, in camera). Daramic refused to provide 

Exide with f 

l. (RX01668 at 002, in camera; RX01687, in 

camera). Second, Exide sought to have f 

l. (RX01665 at 002, in camera). Daramic refused to agree to this f 

l. 

2 Complaint Counsel refers to its findings of 
 fact in this brief 
 as "CCFOF," Respondent's findings of 

findings of fact as "RFOF," and Complaint Counsel's reply findings as "CCRF," 

3 

_.. --_. -., .. --------rn 
(RX01668 at 002, in camera). Third, Exide sought a f 

l. (RX01668 at 002, in camera).
 

Exide had requested that Daramic f
 

l. (RX01714 at 003, in 

camera; RXOl720 at 039, in camera). Similarly, Daramic never agreed to Exide's 

request for t 

l. (RX1714, in camera). In fact, contrary to Mr. Toth's 

testimony that Daramic offered Exide f 

l. (RX1714, in camera). In addition, f 

l. (RX01665 at 002-003, in 

camera). Both of 
 those alleged "demands" were dropped by Exide in its most recent 

contract offer to Daramic. (RX01687, in camera). 

Respondent has argued that it has offered f l to Exide. 

These terms are not concessions at all, as they are contained in the current North 

American Supply Agreement. t 

4 

- --.. ----- -,­
l. (RX01668 at 002, in camera; RXOl720, in camera; RX01714 at 003-004, 

in camera). The North American Supply Agreement is the same f 

l. (CCFOF 1270, 1326-1327). 

With respect to Respondent's claims that the negotiations demonstrate 

f 

l. (See Gilespie, Tr. 5826-5828, 5838, 5867­

5868, in camera f 

l. 

b. f l 

Respondent argues that the f l from Exide shows that Exide is 

a power-buyer and that the SLI market is competitive. Yet the facts show that it is 

Daramic that wields the power. f 

l. (CCFOF 1283-1290, 1328-1333). f 

l. (CCFOF 

1337-1339). f 

l. (CCFOF 1328-1331). Indeed Daramic is using the f 

5 

., ----~----_i 
l.
 

Respondent argues that it was wiling to f
 

l. (CCFOF 1267-1268,
 

1271; Gilespie, Tr. 5795-5796, 5803-5805, in camera). Even ifit were a concession, 

Daramic has reneged on a previous agreement between the two companies to f 

l. (CCFOF 1337-1339). 

Significantly, Daramic has linked any f 

l. (CCFOF 1343). 

Daramic also f 

l. (CCFOF 1334-1336). f
 

l. (CCFOF 1256-1257). 

These facts demonstrate that Exide holds no power over Daramic at alL. 

Moreover, these facts demonstrate that the SLI market is not competitive, since, if the 

6 

--_.-----,- --------',.­
market were competitive, Daramic would simply f 

l. 

c. t 

Respondent argues that the facts show that f 

l. First, to this day Exide has not made any decision to move f l its
 

SLI separator purchases for f l to another supplier. (CCFOF 1252­

1257, 1278-1280). The evidence shows that f 

l. (CCFOF 1254). 

The evidence also shows that f 

l. (CCFOF 1272). Mr. Gilespie testified that f 

l. (CCFOF 1255-1256). 

d. f 

Respondent argues that its decision to f l is evidence 

that Exide is exerting power in the current negotiations. However, the evidence at the 

hearing was that f 

l. (CCFOF 1292, 1294-1295, 1297­

1302). Most strikingly, Daramic analyzed various f 

l. (RX01692 at 2, in camera; see also 

,
 

7 
CCFOF 1304-1306). Thus Exide's behavior has had no impact on f 

l. 

e. Respondent's Overstatements are Contrary to the Evidence 

Respondent's hyperbolic assertions about its negotiations with Exide are 

unsupported and frequently contradicted by record evidence. For example, Respondent 

asserts that powerful buyers f 

l (Respondent's
 

Post Reopened Hearing Briefat 1 ("Respondent's Brier')). Complaint Counsel has 

searched the November 12 hearing record and exhibits in vain for any mention of any 

such f l. The only evidence offered at all on the issue was (1) when Mr.
 

Gilespie was asked by Complaint Counsel whether Exide is f 

l and he responded that "(t)he simple answer is 'no.'" 

(Gilespie, Tr. 5832, in camera); and (2) when Mr. Gilespie testified that the f 

l (Gilespie, Tr. 5823, in
 

camera). 

Respondent's brief 
 is rife with such inaccuracies. Respondent insists that it wil 

f l (Respondent's 

Brief at 2). f
 

l. (CCFOF 1252-1257, 1305). f l 

because there is no other supplier, now that Microporous was swallowed up by Daramic. 

Respondent also insists that Exide "admits" that it has placed purchase orders for 

, f l of product. (Respondent's Brief at 2, 4, and 12). In fact, Mr. Gilespie
 

8 

-i 
specifically denied that the amount ordered is f l worth of separators. (Gilespie, 

Tr. 5861-5862, in camera). The only evidence of 
 this "admission" cited by Respondent 

is the hearsay statement of Mr. Seibert, which merely reflects his own state of mind. 

(Seibert, Tr. 5677-5678, in camera). Mr. Seibert's state of mind is not relevant to 

f l.3 

Significantly, the record evidence shows that Daramic has only agreed to f 

l worth of separators to Exide. (Gilespie, Tr. 5799, in camera). More 

directly the evidence also shows that Exide is not f 

J. (Gilespie, Tr. 5832, in camera).
 

Respondent argues repeatedly that f 

l. 

(Respondent's Brief at 2, 10, and 11). This supposed threat is actually a document in 

evidence. That letter does not say anything about f 

l (RX01681-001, in camera). Mr.
 

Gilespie also testified that Exide f 

l (Gilespie, Tr. 5839, in camera (emphasis added)).
 

3 Respondent relies heavily on hearsay statements that it claims were made by either Mr. Gilespie, Mr. 

Ulsh, and Messrs Seibert and Toth. (Respondent's Briefat 1,6,7,8,9, 10, 1 i, 12, 15, 16, and 17; RFOF 

1507,1519,1525,1540,1547,1558-1560, 1563-1567, 1570-1572, 1576, 1582-1594, 1596-1600, 1610, 

1614-1615, 1619). Because of Complaint Counsel's standing objection, Respondent stipulated that these 

hearsay statements were offered only for Respondent's state of mind. These statements cannot be credited 

for the truth of the matter asserted (e.g. that Daramic had to t L
 

Respondent's Brief at 8, or that t 

¡d.). These statements are only relevant if the assertions made by the out 

of court declarants are true. Respondent's state of mind is not relevant to the proffers or to any of the 

issues in this case. 

9 
Respondent curiously characterizes Exide' s consistent refusal to f 

l (Respondent's Brief at 10). Yet Respondent's own brief concedes 

that Exide l 

l. (Respondent's Brief 
 at 10).


III. LEGAL ARGUMENT
 

a. Respondent's Arguments Are Related Only to SLI 

The record demonstrates that the acquisition reduced competition infour markets. 

Respondent's "new" evidence and repeated legal arguments address only one: SLI. 

Respondent offers no new evidence or legal argument about the markets for motive, 

deep-cycle, or UPS separators. A finding that competition has been reduced by the 

acquisition of Microporous in anyone of those markets requires a divestiture of all of the 

former Microporous. Moreover, it is striking that Respondent provides no arguments and 

cites no facts related to the monopolization counts. 

b. Respondent Merely Reiterates its Previous Arguments and Relies 

on Evidence Introduced at the Previous Hearing 

Respondent's brief does no more than restate its previous arguments about the 

SLI market. Indeed entire sections of 
 Respondent's legal argument in its brief go without 

any reference at all to its proffered "new" evidence, but rather entirely refer to its 

previous findings of fact. (See Sections A and B of Respondent's Brief at 18-21). 

Section A of Respondent's brief has only one cite to "new" evidence, pointing only to 

Mr. Gilespie's testimony that l l. (Respondent's Brief at
 

18). This is not a "new" fact at all. (See Gilespie, Tr. 2965; 3021-3022, in camera). 

10 
Nor was this a fact in any of Respondent's proffers. The remainder of 
 Respondent's cites 

are to its previous findings. (Respondent's Brief at 18.) Section B of Respondent's Brief
 

is devoid of any cite to a new fact, except the bare and baseless assertion that it adduced 

evidence at both hearings that "competition is intense in the North American SLI 

segment. "
 

Respondent openly admits that it is reiterating its previous arguments in its Brief. 

Respondent begins by arguing that "(a)s was established by the evidence presented at the 

initial hearing...." (Respondent's Brief 
 at 1). Respondent goes on to admit that "(a)s set 

forth fully in Respondent's Initial Post-Trial briefing..." and that it "has presented much 

legal and factual information regarding the coordinated interaction issue in its (earlier 

pleadings)" and simply re-summarizes those arguments in its brief. (!d. at 18, 22). 

The recitation of the "new" facts in Respondent's brief is no more than a onesided description of an on-going negotiation between Daramic and Exide. Respondent's 

characterization of this negotiation depends on a finding that Mr. Gilespie is not 

credible, while Respondent's witnesses are credible. 

Respondent urges three grounds for finding Mr. Gilespie is not credible, none of 

which hold up under scrutiny: t 

l. Contrary to
 

Respondent's innuendos, Mr. Gilespie testified truthfully in every instance. 

f 

11 
l. (CCFOF 1261-1262). f 

l. (CCFOF 1264). f 

l. (CCFOF 1268). f 

l. (CCFOF 

1269). Furthermore, Exide's behavior with regard to the t l was
 

consistent with past dealings between Daramic and Exide. (CCFOF 1273). 

Respondent then argues that Mr. Gilespie's testimony that Exide is in a better 

position f l than in prior years is not credible because, it
 

argues, Exide has less "positive free cash flow" than prior years. (RFOF 1548). Yet all 

ofMr. Gilespie's statements about Exide's financial ability are true and are corroborated 

by Exide's fiscal second quarter results. (CCRF 1548). These results showed that that 

Exide's cash position actually increased 
 by 57% in the fiscal second quarter from $69.5 

milion to $109.2 milion, and that gross margins increased from 17.7% to 20.6% versus 

the prior year. (RXOl726 at 005-006,009). Exide's second quarter results showed that 

Exide actually "generated positive free cash flow" in the quarter, while at the same time 

funding capital investments and restructuring to the tune of $70.7 milion. (RXO 1726 at 

004, 006). f 

l. (Gillespie, Tr. 5844, in camera; RXOl726 at 005-006, 009). 

12 
Respondent also alleges that Mr. Gilespie's testimony on November 12,2009 

contradicted his prior testimony in May about Exide's work l 

l. This allegation is also contradicted by the facts. Mr. Gilespie's 

November testimony that Exide has f 

l. (Gilespie, Tr.
 

3034-3036, in camera). f
 

l. (Gilespie, Tr. 3024-3025, in camera).
 

c. The Acquisition of Microporous Reduced Actual Competition in 

SLI 

Microporous was an actual competitor in SLI. (Complaint Counsel's Revised 

Post Trial Brief at 26-28). Microporous bid for JCI's business, f 

l. (Id.) Competition from Microporous caused prices to
 

fall. (!d.)
 

The "new" facts demonstrate that the acquisition of 
 Micro porous by Daramic 

redUced actual competition in SLI. In 2007, when an independent Microporous was busy 

competing in the market for SLI battery separators, f 

13 
l. (Gilchrist,
 

Tr. 423, 466-467, in camera; Roe, Tr. 1685-1686, in camera; Hall, Tr. 2884, in camera; 

RX00072, in camera). f 

l. (RX00072 at 56, in camera). Today, after the competitive influence 

of Micro porous has been lost, the best offer f 

l. 

(RX01668 at 002, in camera; Seibert, Tr. 5656, in camera). 

Accordingly, the evidence demonstrates that in the North American market for 

SLI separators there has been an increase in prices of more than f 

l. (RX00072 at 56, in camera; RXO 1668 at 002, in camera; 

Seibert, Tr. 5656, in camera). This is powerful post transaction evidence that the 

acquisition reduced actual competition in the market for flooded lead-acid SLI battery 

separators. 

d. Respondent's Argument that Microporous was Too Small to 

Compete with it and Entek is Contradicted by the Evidence 

Respondent's unsupported assertion that Microporous was too small to compete 

with it and Entek is contradicted by its RFOF 1558, 1612, and 1614 showing that it was 

f l. According to Mr. Toth, 

Respondent seriously considered f l and,
 

therefore, seriously considered competing in North America with f 

l. (Toth, Tr. 5772, in camera). While Respondent is now managing 

14 
industry capacity4 by idling its Owensboro facility, Microporous planned to add 

capacity. In fact, Microporous planned to add 22 milion square meters of capacity, 

precisely what it would have needed to f l. (CCFOF 609,
 

863; see also CCRF 1529 H 

J)).5 Moreover, even ifMicroporous competed with only one 11 milion square 

meter line, it would stil be capable of f 

l.
 

In view of f
 

L 

Respondent's unsupported assertion that Micròporous would be unable to compete with it 

and Entek in SLI is speculation that is contradicted by the actual facts. Nevertheless, 

Daramic fails to cite any law for the proposition that the Clayton Act was not designed to 

protect even small competitors. But indeed, as Brown Shoe warns us, "we cannot fail to 

recognize Congress' desire to promote competition through the protection of 
 viable, 

small, locally owned businesses." Brown Shoe Co. v. United States, 370 U.S. 294, 344 

(1962). Microporous may have been small, but it sure struck Daramic with fear, and 

customers have suffered from the loss of 
 Microporous's competition. 

4 Respondent complains about the economic climate and claims that excess capacity wil lead to more 

robust competition. It is useful to note the ruling of the Commission in In re B.F. Goodrich, 110 FTC. 

207 (1988). "The probative value of performance evidence is also limited by its susceptibility to transitory 

economic conditions, such as a recession. For example, the fact that profits are low in an industry with 

excess capacity does not necessarily mean that industry pricing is competitive." Id. at 130. The 

Commission continued later, discussing evidence regarding the price competition which took place during 

a recession, "(t)here is no guarantee that the price competition that respondents have identified wil 

continue, (when) industry demand is expanding again, and PVC producers are once again operating at 

relatively high capacity levels." Id. at 134. There is no legitimate conclusion to be drawn based upon 

limited effects which may occur during the severe recession we find ourselves in today.

5 Respondent's assertion at page 18 of its brief that "no installation steps had been taken" by Microporous 

for the new line is contradicted by the facts. Microporous took a number of steps to install the new line. 

(CCRF 375). 

15 
e. The Evidence Presented at the November Hearing Shows that the 

Necessary Conditions for Coordinated Interaction Exist in the SLI 

Separator Market 

In the SLI market, in which Entek is now Daramic's only competitor, there is also 

a strong presumption of coordinated effects. Merger law "rests upon the theory that, 

where rivals are few, firms wil be able to coordinate their behavior, either by overt 

collusion or implicit understanding, in order to restrict output and achieve profits above 

competitive levels." FTC v. HJ. Heinz Co., 246 F.3d 708, 715 (D.C. Cir. 2001). 

"Because the FTC has established a prima facie case, the burden is on (Respondent) to 

demonstrate 'structural barriers,' unique to this industr, that are sufficient to defeat the 

'ordinary presumption'" of coordination in such a "highly concentrated market." FTC v. 

CCC Holdings Inc., et a/., 605 F. Supp. 2d 26, 60 (D. D.C. 2009) quoting Heinz, 246 

F.3d at 725; see also Merger Guidelines, 2.1 (Coordinated Interaction). 

Even in the November hearing Respondent has offered nothing to defeat this 

presumption and did not even try to show any "structural barriers" to coordination. 

Rather, Respondent argues that because f 

L that this somehow shows that competition between 

Daramic and Entek is fierce. Yet, neither the law, nor economics, nor the facts support 

such a theory. First, the evidence does not show any effort at all t 

16 
l. Third, as Dr. Simpson explained the risks of
 

coordination increase with concentration, and the acquisition of Microporous increased 

concentration. (PX0033 at 020-021, in camera). 

l 

l (Hall, Tr. 2666-2667, 2692). Absent Microporous, Daramic and Entek had 

been f 

l. (Hall, Tr. 2873-2874, in camera, RX00044 at 

002, in camera). f 

l. (Hall, Tr. 2873-2874, in camera). Now 

that Microporous is gone, the market wil return to the unhealthy state it was in prior to 

the entry of Microporous. 

Daramic's argument that competition in the SLI market is vigorous requires 

evidence that f 

l. (CCFOF 1326-1327). f 

l and has no idea what such a l l would be. (CCFOF 

1312-1315). Daramic has never offered a f 

l. (CCFOF 1316-1320, 1325). The evidence demonstrates that the 

17 
market price in the SLI separator market has increased by more than f 

l. (RX00072 at 56, in camera; RX01668 at 002, in camera; 

Seibert, Tr. 5656, in camera n 

J). In short,
 

f l add to the strong presumption that a merger 

from three to two in the SLI market wil lead to anticompetitive effects. Daramic has
 

simply failed to rebut this presumption and the additional evidence that supports it. 

f. Power Buyers are Not Present in Any Market for Flooded Lead-


Acid Battery Separators but Even if 
 They Were the Market Has 

Not Benefited from Their Presence 

In Baker Hughes, the court said that the sophisticated buyers' ability to "closely 

examine available options and typically insist on receiving multiple confìdential bids for 

each order" was what is likely to promote competition, not simply the bare presence of 

large customers alone. 908 F .2d at 986 (emphasis added). In Baker Hughes' four firm 

US market, the district court noted that "( c )ustomers normally (sought) bids from two or 

three suppliers. . .." United States v. Baker Hughes Inc., 731 F. Supp. 3, 8 (D.D.C 1990). 

Here, in three out of four markets there are no options for separator customers, and in SLI 

there is but one other. (CCFOF 1251, 1255-1257, 1342). There is nothing close to the 

"multiple" options that both the district and circuit courts found critical to their analysis 

in any of the battery separator markets. Thus, Respondent's use of 
 the language from 

Baker Hughes is misplaced. 

The Fifth Circuit and this Court in Chicago Bridge addressed a situation very like 

the one the Court confronts here. There, the court noted the inapplicability of Baker 

Hughes where there is dearth of adequate supply sources which undermines the basic 

18 
premise for a power buyer argument. Chicago Bridge & Iron Company N ~ v. FTC, 534 

F.3d 410,439440 (5th Cir. 2008). The court distinguished Baker Hughes and held it 

inapplicable "where there (are not) ample available alternatives for customers in a market 

with (high) entry barriers." The court went on to note, "unlike Baker Hughes, pricing 

data for the four markets are mostly confidential from bid to bid, and thus buyers are 

generally unable to ascertain whether CB&I is imposing supracompetitive prices on any 

particular bid weakening buyers' ability to demand competitive prices." Chicago Bridge, 

534 F.3d 439-440.. In the present case, the Court is faced with an identical set of 

circumstances. Complaint Counsel has shown the high entry barriers and lack of existing 

supply options in today's separator markets. (CCFOF 817-936; 258-323). The 

elimination of 
 Microporous has served to further limit the alternatives in SLI and 

completely eliminate them in each of the three other markets. 

The foundation of a proposed defense based on a power buyer argument is the 

procompetitive impact such buyers can have, even in concentrated markets. Baker 

Hughes Inc., 908 F.2d at 986; United States v. Archer-Daniels-Midland Co., 781 F. Supp. 

1400, 1422 (S.D. Iowa 1991) That is to say, the presence of 
 powerful buyers has the 

effect of lowering the market price for the good in question. (See 4 Philip E. Areeda & 

Herbert Hovenkamp, Antitrust Law: an Analysis of Antitrust Principles and their 

Application 943 (2nd ed. 2000)). The argument, at its most potent, therefore, depends on 

a showing that the market price is kept in check, benefitting the large and small 

customers alike. Here, there is no evidence of procompetitive activity since the 

acquisition of Micro porous; in fact, just the opposite has occurred. As discussed above, 

when an independent Microporous was actively competing in the market for SLI battery 

19 
separators, f 

l. (Gilchrist, Tr. 423,466-467, in camera; Roe, Tr. 1685-1686, in camera; 

Hall, Tr. 2884, in camera; RX00072, in camera). While f 

l. (RX00072 at 56, in camera; 

RX01668 at 002, in camera; Seibert, Tr. 5656, in camera). Therefore, the evidence 

regarding the market price for the only separator market that is not a complete monopoly 

today shows an increase in prices of more than f 

l. (RX00072 at 56, in camera; RX01668 at 002, in camera; Seibert, Tr. 5656, in 

camera). This is hardly the power-buyer-induced, procompetitive impact envisioned by 

commentators or the courts. 

In Cardinal Health the court analyzed the power buyer argument and found the 

power of 
 the buyers in the relevant market insufficient to rebut the government's prima 

facie case. FTC v. Cardinal Health, 12 F.Supp. 2d 34 (D.D.C. 1998). The merging 

parties were large US drug wholesalers. The four wholesaler defendants in the case 

controlled almost 80% of 
 the wholesale pharmaceutical distribution market in the US. Id. 

at 40. The court noted three types of customers that could be at competitive risk as a 

result of the combination; small retail drug store chains, institutional customers 

(Hospitals), and independent pharmacies. Each of these consumer profies possessed 

some bargaining power in its negotiations with the defendants. Yet, the court was not 

wiling to rely on the buyers' ability to frustrate anti 
 competitive price increases in 

approving the merger. On the contrary, the court stated that although it recognized the 

20
 
evidence of significant power on the part of some buyers, it nonetheless found that 

smaller, less sophisticated customers existed alongside the more powerful buyers, making 

the relevant market "considerably fragmented." This fragmentation resulted in the 

bargaining ability of the power buyers being not fully representative of customers within 

the market, and therefore of insuffcient disciplining force for the market as a whole. Id. 

at 61. The court concluded, "(i)n the end, although this Court finds that buyer power 

does exist in whole (sic) market. . . . and is worthy of consideration, it alone cannot rebut 

the Governent's primafacie case." Id. 

Areeda and Hovenkamp considered the power buyer argument within a 

fragmented market as well: 

There is a high probability that only large buyers wil be able to 

derive the benefit of their bargaining position. Large-buyer
 

bargaining pressure wil not always lead to general reductions to 

competitive levels, and even then there wil be some time lapse 

before any such reductions occur. Also, the greater the opportnity 

for concealment, the less likely that small buyers wil derive any 

significant benefit. Thus, a common consequence of large-buyer 

bargaining pressure is likely to be recurrent and more systematic 

price discrimination in which large buyers obtain lower prices than 

smaller buyers, but adverse price effects on small buyers alone is 

suffcient to invoke (section) Ts prohibitions.
 

4 Philip E. Areeda & Herbert Hovenkamp, Antitrust Law: an Analysis of Antitrust 

Principles and their Application 943 (2nd ed. 2000). 

Each of the flooded lead-acid separator markets alleged in this case contain both 

large and small purchasers.6 Respondent has gone to considerable lengths to depict Exide 

as a powerful customer, but has failed to put on any evidence at all regarding the ability 

of its smaller customers to gain favorable pricing and service. It is noteworthy that 

6 According to Daramic's own documents, there are f 

L (See, e.g., PX0044 at 006-009). 

21 
Exide, f 

l. (Respondent's Brief at 26). f 

l (Respondent's Brief at 12). Daramic's remaining 

customers are all even smaller. 

Complaint Counsel's opposition to the Microporous acquisition is based not simply 

on the merger's affect on one customer, but on its affect on the markets for separators 

themselves. As such, no argument limited to the impact of 
 Polyp ore's acquisition of 

Microporous on just one or two customers can alleviate the anticompetitive impact 

shown, and predicted, by the evidence. 

Respondent claims that f 

l. This too is unsupported, misleading, and contradicted by the evidence. 

From well before the contract negotiations even began, f 

l. (CCFOF 1249). f 

l. (See
 

e.g., CCFOF 1337-1339). f 

. (CCFOF 1338). f 

l. 

22 

.- ., .- ., -, 
In Archer-Daniels, the court noted with approval the contracts that dominated the 

market for HFCS7, as having "meet or release" clauses which gave the customers the 

ability to shop their orders around, and play their suppliers "off one another." 781 F. 

Supp. at 1419. In fact, it was precisely this factor that led the court to support the 

defense's power buyer claim. Id. at 1419, 1422. By having the ability to force its 

supplier to lower its offering price due to the customers' abilty to shift orders, the buyers 

wielded sufficient power to chasten the HFCS suppliers even when the concentration 

figures would suggest that the suppliers actually had market power. Id. at 1418. f 

l. Furthermore, to the extent
 

such intransigence is indicative of power in a supplier/customer relationship, it is 

important to note that Daramic has demanded f 

l. (CCFOF 1316­

1319,1325).8 f 

l. (CCFOF 

1324). One wonders how Daramic could continuously insist on f 

l. 

7 High Fructose Com Syrup. 

8 f 

. (CCFOF 1281-1282). That 
 offer was not even

considered by Daramic. (CCFOF 1303). 

23 

u__ - '1-- - "' - -- - ..,. ­ _.._---.
Finally, Respondent exerts considerable effort in attempting to causally link f 

l. (CCFOF 1292, 1294-1295, 

1297-1302). f 

l. (RX01692 at 2, in 

camera; see also CCFOF 1304-1306).9 

But the most odd thing about Daramic's argument is that it seems to think that its 

reduction of output by idling plants f 

l helps its case. But 

why should we be surprised that a monopolist is reducing output? That is what 

monopolists do to raise prices! This is classic antitrust theory. See National Collegiate 

Athletic Ass'n v. Board of Regents ofUniv. of 
 Oklahoma, 468 U.S. 85,116 (1984) ("just 

as any monopolist increases revenues by reducing output"). As the u.s. Supreme Court 

explained in Brown Shoe, 370 U.S. at 346 n72: 

"expansion through merger is more likely to reduce available 

consumer choice while providing no increase in industry capacity, 

9 t 

l. (CCFOF 1330). t 

. (RPTB at I I). 

24 

,n._ ..".. , ..,_un,.",
 . '- ., ..----------­
jobs or output. It was for these reasons, among others, Congress 

expressed its disapproval of successive acquisitions. Section 7 was 

enacted to prevent even small mergers that added to concentration 

in an industry." 

Mr. Toth's admission f 

l tells us what is 

happening here. (CCFOF 1292, 1296). Too much capacity allows prices to move down. 

Reducing output, which is now easier that Daramic controls one of its former 

competitors, Microporous, allows Daramic to keep prices higher than competitive levels. 

Thus, Daramic's evidence actually adds to Complaint Counsel's case and is not a defense 

at alL. But as Brown Shoe teaches us, this additional evidence in Complaint Counsel's 

favor goes far beyond what is necessary to undo a merger that led to only two 

competitors in SLI and only one monopolist in deep-cycle, motive, and UPS lead-acid 

battery separators. This evidence goes far beyond the threshold of "incipiency" of 

concentration that Brown Shoe established as the government's burden of 
 proof. 370 

U.S. at 346. 

iv. CONCLUSION
 

F or the reasons stated above, as is fully supported by the evidence both at the initial 

trial and the second hearing in this matter, Daramic's acquisition of 
 Micro porous and its 

anti-competitive conduct are ilegaL. The public deserves a complete remedy to restore 

competition and prevent further harm to competition. 

25
 

,.. u __ .~ ------------ .. ~ " 
Dated: December i 0, 2009 Respectfully submitted,
 

1.

Federal Trade Commission 

 KOB T ROBERTSON ~~ ~


Bureau of Competition
 

600 Pennsylvania Ave., N.W.
 

Washington, DC 20580
 

Telephone: (202) 326-2008
 

Fax:(202)326-2884
 

Counsel Supporting the Complaint 

26
 
CERTIFICATE OF SERVICE 

I hereby certify that on December 10,2009, I filed via hand delivery an original 

and two copies ofthe foregoing public version of Complaint Counsel's Reply Post-Trial 

Brief on the Reopened Record with: 

Donald S. Clark, Secretary 

Office of the Secretar 

Federal Trade Commission 

600 Pennsylvania Avenue, NW, Rm. H-135 

Washington, DC 20580 

I hereby certify that on December 10,2009, I served via electronic mail and hand 

delivery two copies ofthe foregoing public version of Complaint Counsel's Reply PostTrial Brief on the Reopened Rècord with: 

The Honorable D. Michael Chappell 

Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Avenue, NW, H-106 

Washington, DC 20580 

oali~ftc.gov 

I hereby certify that on December 10, 2009, I served via electronic mail delivery 

and first class mail two copies of the foregoing public version of Complaint Counsel's 

Reply Brief on the Reopened Record with: 

Wiliam L. Rikard, Jr., Esq. 

Eric D. Welsh, Esq. 

Parker, Poe, Adams & Bernstein, LLP 

401 South Tryon Street, Suite 3000 

Charlotte, North Carolina 28202 

williamrikard~parkerpoe.com 

ericwelsh~parkerpoe.com 

Linda Cuningham 

Federal Trade Commission 

600 Pennsylvania Avenue, NW 

Washington, DC 20580 

Telephone: (202) 326-2638 

lcunningham~ftc. gov