ORIGINAL

UNITED STATES OF AMERICA

BEFORE THE FEDERAL TRADE COMMISSION

In the Matter of

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PUBLIC DOCUMENT

Docket No. 9327

Polypore International, Inc.

a corporation.

RESPONDENT'S MEMORANDUM IN SUPPORT OF

MOTION FOR MORE DEFINITE STATEMENT OR, IN THE

AL TERNA TIVE, FOR AN ORDER REQUIRING CLARIFICATION OF THE

ALLEGATIONS OF, AND RELATED TO, COUNTS II and III OF THE COMPLAINT

Respondent Polypore International, Inc. ("Polypore," "Daramic" or "Respondent"),

pursuant to Rules 3.1I(c) and 3.22 of the Rules of Practice of the Federal Trade Commission

("Commission" or "FTC"), 16 C.F.R. §§ 3.1I(c) and 3.22, respectfully moves for a More

Definite Statement or, in the Alternative, for an Order Requiring Clarification of the Allegations

of, and Related to, Counts II and III of the Complaint. Rule 3 .11 (c) provides, in pertinent part,

that "(w)here the respondent makes a reasonable showing that it cannot frame a responsive

answer based on the allegations contained in the complaint, such respondent may move for a

more definite statement of the charges against it before filing an answer." Grant ofthis motion is

necessary in. order for Polypore completely and effectively to answer the Complaint and to plan

for discovery in this case.

Respondent must have a more definite statement or clarification of the allegations and

charges contained in Counts II and III of the Complaint because it cannot determine on the face

of the existing Complaint whether the monopolization claim, although asserted on the basis of

Section 5 of the FTC Act, is grounded (1) on the elements of the monopolization offense that

have been developed under Section 2 of the Sherman Act, (2) on unown elements of an

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unkown monopolization offense that the FTC intends to assert by way of a freestanding Section

5 claim, (3) on elements of the attempt to monopolize offense that have been developed under

Section 2 of the Sherman Act, (4) on unown elements of an unown attempt to monopolize

offense that the FTC intends to assert by way of a standalone Section 5 claim, or (5) all or some

of the above.

ARGUMENT

The charging paragraphs of Counts II and III (i!i!s 51 and 53) are worded identically.

Both charge Polypore with engaging in unfair methods of competition "through the acquisition

of Microporous, and the other conduct alleged herein." But Count III has the bold title,

"Monopolization," while Count II has the bold title, "Unfair Method of Competition." The

result is that this pleading fails to inform Polypore of what it is being charged. Pursuant to Count

III, the question is whether the FTC wil seek to prove the elements of a Sherman Act Section 2

monopolization offense or, instead, with Count II wil it seek to prove some other unspecified,

undefined, unpled and unkown but, presumably, lesser elements of a Section 5 offense?

Respondent does not and cannot know the answer to this question, yet the answer is key to how

Respondent formulates its response to the Complaint and frames its discovery plan. The content

of these paragraphs fails to explicate the headings, stating only, as noted, that unfair methods of

competition have occurred with no reference to monopolization or attempt to monopolize.

1. Despite critical judicial decisions and learned commentary, the FTC apparently

takes the position that it can fie Section 5 cases even where the alleged conduct did

not violate the Sherman or Clayton Acts.

Over thirt-five years ago, the Supreme Cour indicated in dictum that the Commission

could challenge under Section 5 practices that do "not infringe either the letter or the spirit of the

antitrust laws." FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 239 (1972). The Court,

however, affirmed the Circuit Cour's action in setting aside the FTC's order. Subsequently,

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other courts rebuffed efforts of the FTC to bring such cases i and the FTC itself in the General

Foods case rejected the argument of its complaint counsel that the predatory pricing practices at

issue violated Section 5 even though they didn't violate Sherman Section 2.2 Scholarly

comment has been in agreement with these later decisions and actions.3

More recently, however, the FTC obtained consent decrees In some "invitation to

collude" cases brought under Section 5 where there would have been no Section 1 Sherman Act

violation.4 The Commission took similar action in March 2006 in the Valassis Communications

caseS and two Commissioners thereafter stated that they would support such actions by the

C~mmission in the future.6 None of these actions has been reviewed or approved by a cour.

Most recently, in January of this year, the Commission in a 3-2 vote anounced in the

Negotiated Data Solutions ("N-Data") case that it has authority to bring antitrust-type cases

under Section 5 as unfair methods of competition where the conduct does not violate either the

Sherman or Clayton Acts.7 Since the current FTC has decided that it can bring such cases, even

i Boise Cascade Corp. v. FTC, 637 F.2d 573 (9th Cir. 1980); Offcial Airline Guides, Inc. v. FTC, 630 F.2d 920 (2d Cir.

1980), cert. denied, 450 U.S. 917 (1981); E. I. du Pont de Nemours & Co. v. FTC ("£thy!"), 729 F.2d 128 (2d Cir. 1984).

2 In re General Foods Corp., 103 F.T.C. 204 (1984).

3 E.g., 2 Philip Areeda & Herbert Hovenkamp, Antitrust Law ir 302(h) (2006) ("Apar from possible historical

anachronisms in the application of those statutes, the Sherman And Clayton Acts are broad enough to cover any anti-competitive

agreement or monopolistic situation that ought to be attacked whether 'completely full blown or not."'); Richard A. Posner, The

Federal Trade Commission: A Retrospective, 72 Antitrust LJ. 761, 766 (2005) ("It used to be thought that 'unfair methods of

competition' swept further than the practices forbidden by the Sherman and Clayton Acts, and you find this point repeated

occasionally even today, but it is no longer tenable.")

4 1 ABA Section of Antitrust Law, Antitrust Law Developments 654-56 (6th ed. 2007).

5 In the matter of 

Val ass is Communications, Inc., FTC File No. 0510008 (March 16,2006).

6 Commissioner J. Thomas Rosch, "Perspectives on Three Recent Votes: The Closing of the Adelphia

Communications Investigation, the Issuance of the Valassis Complaint & the Weyerhaeuser Amicus Brief," The National

Economic Research Associates 2006 Antitrust & Trade Regulation Seminar (July 6, 2006); In the matter of Rambus, Inc., Docket

No. 9302. Concurring Opinion of Commissioner Jon Leibowitz, 4, 11 (August 2, 2006).

7 In the Matter of Negotiated Data Solutions LLC, File No. 051 0094, Analysis of Proposed Consent Order to Aid

Public Comment ("Analysis to Aid Public Comment") 3-4 (January 23,2008) and Statement of the Federal Trade Commission 1-

2 and footnote 5 (Januar 23,2008). However, Chairman Majoras, in her dissenting statement, noted that "(t)he majority has not

identified a meaningful limiting principle that indicates when an action. . . wil be considered an 'unfair method of competition.'"

Dissenting Statement of Chairman Majoras 4.

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if it has not ariculated what the elements of such Section 5 claims would be, one of the questions

raised is whether it has done that here.

2. The allegations of the Complaint are confusing and unclear and require

clarifcation.

For purposes of assessing the allegations of the Complaint, it is necessar to recall the

elements of the Sherman Act Section 2 offenses of monopolization and attempt to monopolize.

The elements of the offense of monopolization are (1) "possession of monopoly power in the

relevant market" and (2) "wilful acquisition or maintenance of that power as distinguished from

growth or development as a consequence of a superior product, business acumen, or historic

accident." Verizon Communications, Inc. v. Law Offces of Curtis V. Trinko, LLP, 540 U.S. 398,

407, 124 S.Ct. 872, 878-79 (2004) (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-

71,86 S.Ct. 1698 (1966)). "(T)o demonstrate attempted monopolization a plaintiff must prove

(1) that the defendant has engaged in predatory or anti competitive conduct with (2) a specific

intent to monopolize and (3) a dangerous probability of achieving monopoly power." Spectrum

Sports, Inc. v. McQuilan, 506 U.S. 447, 456, 113 S.Ct. 884, 890-91 (1993).

Ree:ardine: allee:ations of monopoly power

Paragraphs 21 - 25 of the Complaint contain factual allegations regarding the five alleged

product markets.s Those paragraphs allege monopolies for the "deep-cycle" and "motive

separator" markets but not for the purorted automotive, UPS or PE separator markets.

Paragraph 21 alleges that post-acquisition Daramic has a monopoly in the purported deep-cycle

market and paragraph 22 alleges that Microporous and Daramic "were the only competitors in

motive separators." But paragraph 23 makes no such allegation regarding the claimed

automotive market, stating instead that Daramic and Entek compete in that market. Although

8 Poplypore disputes the markets alleged by the FTC and wil assert its defenses with respect to these allegations to the

extent necessar at the Hearing before the ALJ in this matter.

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paragraphs 24 and 38(b) state that Microporous and Daramic were the only companies sellng

separators in the alleged UPS market, elsewhere it says that they were sellng "in different

segments" of that market, and the word "monopoly" doesn't appear. As for the entire asserted PE

separator market, paragraph 25 also makes no allegation of monopoly, stating instead that

Daramic, Microporous and Entek sold the product. Similarly paragraph 38(b) and (c) allege

monopolies in the alleged deep-cycle and motive markets but not in automotive, UPS or PE

separators. Paragraph 45 alleges only "market/monopoly power" and maintenance of "market

power." These allegations fall short of the allegations of monopoly power required by Sherman

Act standards.

Respondent canot determine whether the Complaint's failure to allege monopoly power

in the alleged automotive, UPS and PE separator markets means that the Complaint attempts but

fails to allege the Sherman Act monopolization offense, whether it attempts but also fails to

allege the Sherman Act attempt to monopolize offense, or whether it attempts to allege some

freestanding Section 5 monopolization offense, the elements of which are uncertain.

The quoted language indicates that the FTC has attempted to make allegations that are

outside of those reached by the Sherman Act. E.g., the allegations relating to the UPS market

claim that Microporous and Daramic were the only sellers but then note that they were sellng

"in different segments" of the alleged market. Thus, it appears that the FTC is simultaneously

claiming a monopoly but then admitting something less by the reference to "different segments."

Further, it appears that the FTC is alleging that this is a monopoly that Section 5 would recognize

but Section 2 of the Act would not.

The same questions exist with respect to the peculiar allegations of paragraph 45 which

refer to maintenance of "market power" as opposed to monopoly power. Again, the FTC

appears to be alleging a lesser standard covered by Section 5, that does not satisfy Section 2.

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A more definite statement or clarification regarding these matters is necessary to enable

Respondent to respond to the Complaint.

Ree:ardine: allee:ations of acquisition, enhancement or maintenance of monopoly power

For all of the five markets alleged by the FTC, paragraph 39 does not allege that Polypore

"maintained" monopoly power but that it "attempted through anticompetitive means to maintain

monopoly power." (Emphasis added.) It is true that paragraph 42 alleges that "(i)n automotive,

motive, UPS and all PE markets Daramic has historically maintained monopoly power." This

claim, however, appears to be keyed to some undefined historical period antedating the events of

the Complaint and, in any event, fails to allege that this "historical maintenance" resulted from

any actions alleged in the Complaint.

The Complaint plainly fails to allege maintenance of monopoly power in the five

purported markets, instead alleging an "attempt to maintain market power." Respondent is

entitled to know whether the FTC is contending that an "attempt to maintain market power"

violates Sherman Act Section 2, or that it violates FTC Act Section 5. Respondent cannot

determine from the pleading either the statutes it is accused of violating or the elements of the

offense(s) that it is accused of violating. It needs a more definite statement or clarification

regarding these matters in order to respond to the Complaint.

Ree:ardine: allee:ations of attempt to monopolize

Regarding the alleged PE separator market, paragraph 44 alleges a "dangerous

probabilty that, if successful, (the conduct alleged) would give (Polypore) the abilty to lesson or

destroy competition." These words, however, are at odds with the "attempt to maintain

monopoly power" claim of paragraph 39 or the maintenance of market power concept of

paragraph 45 of the Complaint.

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The allegations relating to a "dangerous probability" capture the phrase, as noted above,

that is associated with a Sherman Act attempt to monopolize as opposed to monopolization. But

the Sherman Act standard requires more: a "dangerous probabilty of achieving monopoly

power," not a "dangerous probabilty. . . (of) lesson(ing) or destroy(ing) competition." An

allegation of a Sherman Act attempt to monopolize offense, of course, also requires the

allegation of a "specific intent to monopolize," words which are not to be found in the

Complaint.

Respondent cannot determine whether the Complaint marks an unsuccessful attempt to

allege a Sherman Act attempt to monopolize or whether it is an attempt to allege some watered

down attempt to monopolize claim that the FTC wil contend is subject to attack under Section 5

of the FTC Act.

CONCLUSION

For the foregoing reasons, Respondent Polypore respectfully requests the Court to order

the Commission to provide a more definite statement or clarification regarding the allegations

and charges contained in Counts II and III of the Complaint.

Dated: September 25, 2008 Respectfully Submitted,

Wiliam L. Rikard, Jr. ÇT /

W~L~~4~"~.~

Eric D. Welsh

PARKR POE ADAMS & BERNSTEIN LLP

Three Wachovia Center

401 South Tryon Street, Suite 3000

Charlotte, NC 28202

Telephone: (704) 372-9000

Facsimile: (704) 334-4706

williamrikard(gparkerpoe.com

ericwelsh(gparkerpoe.com

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John F. Graybeal

PARKR POE ADAMS & BERNSTEIN LLP

150 Fayettevile Street

Raleigh, NC 27602

Telephone: (919) 835-4599

Facsimile: (919) 828-0564

j ohngraybeal(gparkerpoe.com

Attorneys for Respondent

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CERTIFICATE OF SERVICE

I hereby certify that on September 25, 2008, I caused to be fied via hand delivery and

electronic mail delivery an original and one copy of the foregoing Respondent's Memorandum

in Support of Motion for a More Definite Statement or, in the Alternative, for an Order

Requiring Clarifcation of the Allegations of, and Related to, Counts II and III of the

Complaint, and that the electronic copy is a true and correct copy of the paper original and that a

paper copy with an original signature is being filed with:

Donald S. Clark, Secretary

Offce of the Secretary

Federal Trade Commission

600 Pennsylvania Avenue, NW, Rm. H-135

Washington, DC 20580

secretary(gftc.gov

I hereby certify that on September 25, 2008, I served via hand delivery and first-class

mail delivery a copy of the foregoing Respondent's Memorandum in Support of Motion for a

More Definite Statement or, in the Alternative, for an Order Requiring Clarifcation of the

Allegations of, and Related to, Counts II and III of the Complaint with:

The Honorable D. Michael Chappell

Administrative Law Judge

Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, DC 20580

I hereby certify that on September 25, 2008, I served via first-class mail delivery and

electronic mail delivery a copy of the foregoing Respondent's Memorandum in Support of

Motion for a More Definite Statement or, in the Alternative, for an Order Requiring

Clarifcation of the Allegations of, and Related to, Counts II and III of the Complaint with:

J. Robert Robertson, Esq.

Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, DC 20580

rrobertson(gftc.gov

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Steven Dahm, Esq.

Federal Trade Commission

600 Pennsylvania Avenue, NW

Washington, DC 20580

sdahm(gftc.gov

ClE-LAdam C. Shearer

Parker Poe Adams & Bernstein LLP

Three Wachovia Center

401 South Tryon Street, Suite 3000

Charlotte, NC 28202

Telephone: (704) 335-9050

Facsimile: (704) 334-4706

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