PUBLIC VERSION

UNITED STATES OF AMERICA

BEFORE FEDERAL TRADE COMMISSION

__________________________________________

)

In the Matter of )

)

CHICAGO BRIDGE & IRON COMPANY N.V., )

)

a foreign corporation, )

)

CHICAGO BRIDGE & IRON COMPANY, )

)

a corporation, ) Docket No. 9300

)

and )

)

PITT-DES-MOINES, INC., )

)

a corporation. )

__________________________________________)

RESPONDENTS' CORRECTED POST-TRIAL BRIEF

CHI:1167887.2
Table of Contents

Page

i 

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

I. APPLICABLE LEGAL STANDARDS .................................................................................5

A. COMPLAINT COUNSEL BEARS THE BURDEN OF PROOF IN A 

SECTION 7 CASE. ....................................................................................................5

B. THE D.C. CIRCUIT'S TEST IN BAKER HUGHES IS THE ACCEPTED 

METHOD FOR ANALYZING SECTION 7 CLAIMS. ............................................6

1. Complaint Counsel must initially establish a prima facie case of a 

violation of Section 7.........................................................................................6

2. If Complaint Counsel makes a prima facie case, Respondents are required 

to make a "showing" that the prima facie case does not accurately predict 

the effect of the Acquisition on competition. ....................................................8

a. Evidence that Complaint Counsel's concentration statistics are 

misleading rebuts a prima facie case. .........................................................8

b. Evidence of actual or potential entry or the existence of low entry 

barriers rebuts a prima facie case. ..............................................................9

c. Evidence of customer sophistication rebuts a prima facie case. ..............10

d. Evidence of unique economic circumstances rebuts a prima facie 

case. ..........................................................................................................10

e. Evidence that the effect of the acquisition would have less than a risk 

of a substantial lessening of competition rebuts a prima facie case.........11

f. Post-Acquisition evidence is highly relevant to determining the 

validity of a prima facie case....................................................................11

3. A showing of entry or other relevant evidence shifts the burden to 

Complaint Counsel to show that entry will not constrain prices at or near 

pre-Acquisition levels, or to otherwise prove that its concentration 

statistics accurately predict a substantial lessening of competition. ................12

C. THIS CASE IS FACTUALLY AND LEGALLY SIMILAR TO BAKER 

HUGHES...................................................................................................................14

II. COMPLAINT COUNSEL HAS FAILED TO MAKE A PRIMA FACIE CASE. ..............16

A. COMPLAINT COUNSEL'S CONCENTRATION STATISTICS CANNOT 

BE USED TO PREDICT FUTURE COMPETITION. ............................................16
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ii 

B. COMPLAINT COUNSEL'S CHOICE OF 1990 AS THE MEASURING 

DATE FOR ITS CONCENTRATION STATISTICS IS ARBITRARY AND 

SUBJECT TO MANIPULATION............................................................................17

III. RESPONDENTS HAVE SUCCESSFULLY REBUTTED ANY PRIMA FACIE CASE 

IN THE MARKET FOR LNG TANKS AND FACILITIES. ..............................................19

A. ACTUAL ENTRY HAS OCCURRED IN THE LNG MARKETS. THE NEW 

ENTRANTS ARE ACTIVE, EXPERIENCED, QUALIFIED, AND 

SUCCESSFUL..........................................................................................................20

1. Skanska/Whessoe is active in the U.S. market, and has the necessary 

experience and qualifications to be successful. ...............................................21

a. Skanska/Whessoe has made significant efforts to enter the U.S. and 

North American markets. .........................................................................21

b. Skanska/Whessoe is a capable, experienced, and qualified LNG 

contractor..................................................................................................23

2. TKK/AT&V is active in the U.S. market and has the necessary 

experience and qualifications to be successful. ...............................................28

a. TKK/AT&V has made significant efforts to enter the U.S. and North 

American markets.....................................................................................28

b. TKK/AT&V is a capable, experienced, and qualified LNG 

contractor..................................................................................................32

3. Technigaz/Zachry is active in the U.S. market and has the necessary 

experience and qualifications to be successful. ...............................................35

a. Technigaz/Zachry has made significant efforts to enter the U.S. and 

North American markets. .........................................................................35

b. Technigaz/Zachry is a capable, experienced, and qualified LNG 

contractor..................................................................................................38

4. Daewoo/S&B is active in the U.S. market and has the necessary 

experience and qualifications to be successful. ...............................................41

5. Tractebel is poised to enter the U.S. market for LNG facilities. .....................43

6. IHI is poised to enter the U.S. market for LNG facilities................................44

7. MHI is poised to enter the U.S. market for LNG facilities..............................45
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B. SIGNIFICANT ENTRY BARRIERS DO NOT EXIST IN THE LNG 

MARKETS................................................................................................................46

1. Double and full-containment tanks, which are plentiful internationally, 

are the wave of the future in the U.S. ..............................................................47

2. Specific evidence supports the conclusion that entry barriers do not exist 

in the LNG markets. ........................................................................................50

a. Reputation is not a barrier to entry in the LNG markets. .........................50

b. U.S. construction standards are not barriers to entry in the LNG 

markets. ....................................................................................................50

c. Engineering is not a barrier to entry in the LNG markets. .......................51

d. Procurement of raw materials is not a barrier to entry in the LNG 

markets. ....................................................................................................51

e. Fabrication is not a barrier to entry in the LNG markets. ........................52

f. Setup and logistics do not present entry barriers to the LNG markets.....53

g. The assembling of a labor force is not a barrier to entry in the LNG 

markets. ....................................................................................................53

h. Welding is not a barrier to entry in the LNG markets..............................54

i. Steel erection and rigging is not a barrier to entry in the LNG 

markets. ....................................................................................................55

j. FERC is not a barrier to entry in the LNG markets..................................56

k. Bonding is not a barrier to entry in the LNG markets..............................57

l. Subcontracting is not a barrier to entry in the LNG markets. ..................58

m. "Learning by doing" is not a barrier to entry in the LNG markets...........58

n. The U.S. political climate is not a barrier to entry in the LNG 

markets. ....................................................................................................59

o. Weather is not a barrier to entry in the U.S. LNG markets......................59

p. Communications and infrastructure are not a barrier to entry in the 

LNG markets. ...........................................................................................59
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3. The Trinidad bid contest shows that entry barriers do not exist in the 

LNG markets. ..................................................................................................59

C. CUSTOMERS IN THE LNG MARKETS ARE SOPHISTICATED. .....................61

D. EVIDENCE SHOWS THAT ENTRY IN THE LNG MARKETS IS 

SUFFICIENT. ...........................................................................................................64

1. CB&I is aware of new entrants and fears their ability to compete..................65

2. Post-Acquisition transactions show that CB&I's behavior has been 

constrained by new entrants.............................................................................71

a. Dynegy is satisfied with prices received by foreign competitors.............71

b. [xxxxxxxxxxxxxxxxxxxxxxxxxxx] .........................................................74

c. The Trinidad bid contest is a natural experiment showing that the 

new entrants will be successful at competitive prices..............................76

d. Enron received a band of tight pricing for a recent job in the 

Bahamas. ..................................................................................................77

e. [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx].....................................................78

3. Most current customers are not concerned about the effect of the 

Acquisition.......................................................................................................78

E. RESPONDENTS' WITNESSES HAVE PROVIDED MORE CREDIBLE 

EVIDENCE THAN COMPLAINT COUNSEL'S WITNESSES.............................80

1. Many of Complaint Counsel's witnesses expressed views based on a 

single, irrelevant project: Memphis 1994. ......................................................83

2. Many of Complaint Counsel's witnesses are CB&I's competitors. .................85

F. SUMMARY: DISMISSAL OF THIS CASE WITH RESPECT TO THE LNG 

MARKETS IS APPROPRIATE. ..............................................................................87

IV. RESPONDENTS HAVE SUCCESSFULLY REBUTTED COMPLAINT COUNSEL'S 

PRIMA FACIE CASE IN THE LPG MARKET..................................................................88

A. ACTUAL ENTRY HAS ALREADY OCCURRED IN THE LPG MARKET, 

AND MORE ENTRY IS FORESEEABLE..............................................................89

B. THERE ARE NO SIGNIFICANT BARRIERS TO ENTRY IN THE LPG 

MARKET..................................................................................................................90
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1. Reputation is not an entry barrier to the LPG market......................................91

2. Transportation costs are not entry barriers to the LPG market........................92

3. Assembling of a labor force is not an entry barrier to the LPG market...........92

4. The costs of bidding projects is not an entry barrier to the LPG market.........92

5. Engineering is not an entry barrier to the LPG market....................................93

6. Welding is not an entry barrier to the LPG market. ........................................93

7. Bonding requirements and financial size are not entry barriers to the LPG 

market. .............................................................................................................93

C. CUSTOMERS FOR LPG TANKS ARE SOPHISTICATED. .................................93

D. ENTRY IN THE LPG MARKET IS SUFFICIENT.................................................94

1. Customers are satisfied with the prices received, and are not concerned 

that the Acquisition has affected their ability to obtain competitive 

pricing. .............................................................................................................95

2. Entry has disciplined CB&I's behavior in the LPG market.............................96

E. SUMMARY: DISMISSAL OF THIS CASE WITH RESPECT TO THE LPG 

MARKETS IS APPROPRIATE. ..............................................................................97

V. RESPONDENTS HAVE SUCCESSFULLY REBUTTED COMPLAINT COUNSEL'S 

PRIMA FACIE CASE IN THE LIN/LOX MARKET. ........................................................97

A. ENTRY HAS ALREADY OCCURRED IN THE U.S. MARKET FOR 

LIN/LOX TANKS. ...................................................................................................98

1. AT&V has entered the U.S. market for LIN/LOX tanks.................................98

a. AT&V is a capable LIN/LOX tank supplier. ...........................................98

b. Many LIN/LOX tank customers have accepted AT&V as a potential 

supplier of LIN/LOX tanks. .....................................................................99

2. Matrix has entered the U.S. market for LIN/LOX tanks. ..............................103

a. Matrix is a capable LIN/LOX tank supplier...........................................103

b. Customers have accepted Matrix as a potential LIN/LOX tank 

supplier. ..................................................................................................104
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3. CB&T has entered the U.S. market for LIN/LOX tanks. ..............................105

a. CB&T is a capable LIN/LOX tank supplier...........................................105

b. Customers have begun to accept CB&T as a potential LIN/LOX tank 

supplier. ..................................................................................................107

B. THERE ARE NO SIGNIFICANT ENTRY BARRIERS TO THE LIN/LOX 

TANK MARKET....................................................................................................107

1. Subcontracting is not an entry barrier to the LIN/LOX tank market.............108

2. Welding is not an entry barrier to the LIN/LOX tank market. ......................108

3. Assembling of sales staff and engineering forces is not an entry barrier to 

the LIN/LOX tank market. ............................................................................108

C. CUSTOMERS FOR LIN/LOX TANKS ARE SOPHISTICATED........................109

D. ENTRY IN THE LIN/LOX TANK MARKET IS SUFFICIENT. .........................110

1. Customers receiving pricing after the Acquisition are satisfied with prices 

received..........................................................................................................111

a. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx........111

b. [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxx].....................................................................................113

c. BOC received a good price for its Midland project. ..............................114

d. Other market participants do not believe the Acquisition has 

substantially lessened competition. ........................................................114

2. Entry in the LIN/LOX market has constrained CB&I's behavior..................115

E. SUMMARY: APPLICABLE LAW REQUIRES DISMISSAL OF THE 

COMPLAINT AS IT RELATES TO THE LIN/LOX MARKET. .........................118

VI. RESPONDENTS HAVE SUCCESSFULLY REBUTTED COMPLAINT COUNSEL'S 

PRIMA FACIE CASE IN THE TVC MARKET. ..............................................................119

A. DEMAND IN THE TVC MARKET IS SO DE MINIMIS THAT IT IS NOT A 

LINE OF COMMERCE THAT HAS BEEN SUBSTANTIALLY AFFECTED 

BY THE ACQUISITION. ......................................................................................120

B. CB&I IS NOT A PLAYER IN THE TVC MARKET............................................121
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C. BARRIERS TO ENTRY IN THE TVC MARKET COULD BE OVERCOME 

WITH MENTORING. ............................................................................................122

D. ANY COMPETITIVE PROBLEM CAN BE SOLVED WITH A REMEDY 

OTHER THAN A BREAKUP OF CB&I...............................................................123

E. SUMMARY: THE COMPLAINT AS IT RELATES TO THE TVC MARKET 

MUST BE DISMISSED. ........................................................................................125

VII. COMPLAINT COUNSEL HAS NOT MET ITS BURDEN TO SHOW THAT ANTICOMPETITIVE EFFECT IN ANY MARKET IS LIKELY..............................................125

A. BUDGET PRICING DOES NOT CONSTITUTE EVIDENCE OF POSTACQUISITION PRICE INCREASES....................................................................126

B. COMPLAINT COUNSEL HAS FAILED TO SHOW THAT PRICES IN THE 

RELEVANT MARKETS HAVE INCREASED. ...................................................129

C. THERE HAVE BEEN NO STRUCTURAL CHANGES IN THE 

COMPETITIVE LANDSCAPE WHICH FACILITATE EXERCISE OF 

MARKET POWER, NOR HAS CB&I EXERCISED MARKET POWER...........130

D. ECONOMIC THEORY DOES NOT SUPPORT A CONCLUSION THAT 

THE ACQUISITION SUBSTANTIALLY THREATENED TO LESSEN 

COMPETITION IN ANY RELEVANT MARKET..............................................131

1. Application of critical loss theory shows that the Acquisition does not 

threaten to substantially lessen competition in any of the relevant 

markets...........................................................................................................132

2. Auction theory does not support Complaint Counsel's position that the 

Acquisition of PDM EC assets threatens to substantially lLessen 

competition in any of the relevant product markets. .....................................136

3. Application of probability theory does not show tha t the Acquisition 

threatens to substantially lessen competition in any relevant product 

market. ...........................................................................................................137

VIII. THE ACQUISITION CANNOT SUBSTANTIALLY LESSEN COMPETITION IN A 

RELEVANT MARKET BECAUSE PDM WOULD HAVE LIQUIDATED THE EC 

DIVISION ABSENT THE ACQUISITION.......................................................................138

A. THERE WAS A GRAVE PROBABILITY THAT PDM WOULD HAVE 

SHUT DOWN AND LIQUIDATED THE EC DIVISION IF CB&I HAD NOT 

CONSUMMATED THE ACQUISITION..............................................................139
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1. PDM was irrevocably committed to a course of selling all of its divisions 

to unlock the liquidity of a thinly traded company whose dominant 

shareholder was aging....................................................................................139

2. It was highly unlikely that there would have been another purchaser for 

the PDM EC division at a price greater than liquidation value. ....................146

a. There were no financial buyers for the EC division. ..............................146

b. There were no strategic buyers for the EC division. ..............................147

3. The liquidation of Graver constitutes a natural experiment which supports 

the evidence that PDM EC would have been liquidated. ..............................152

B. EXITING OF THE PDM ASSETS VIA LIQUIDATION IS RELEVANT 

BECAUSE PDM EC WOULD NOT HAVE BEEN A COMPETITOR TO 

CB&I EVEN IF CB&I HAD NOT PURCHASED THE PDM EC DIVISION.....153

C. EVEN IF PDM EC HAD BEEN SOLD AS A GOING CONCERN, IT 

WOULD NOT HAVE BEEN THE SAME COMPETITIVE FORCE THAT IT 

WAS PRIOR TO THE ACQUISITION, MEANING THAT THE 

CONSEQUENCE OF THE LOSS OF PDM EC AS A COMPETITOR IS NOT 

AS GREAT. ............................................................................................................156

IX. EVEN IF THE ACQUISITION HAS CREATED AN ISSUE REGARDING 

COMPETITION, A BREAKUP OF CB&I IS NOT AN APPROPRIATE REMEDY......158

A. COMPLAINT COUNSEL IS REQUIRED UNDER THE LAW TO SHOW 

THAT ITS PROPOSED RELIEF IS APPROPRIATE. .........................................158

1. Complaint Counsel has a burden to present evidence regarding its 

proposed remedy............................................................................................158

2. Section 7 does not require Complaint Counsel's proposed remedy when 

other, more suitable remedies are available...................................................160

B. COMPLAINT COUNSEL HAS NOT MET ITS BURDEN OF PROOF WITH 

RESPECT TO REMEDY. ......................................................................................162

C. EVIDENCE SUGGESTS THAT COMPLAINT COUNSEL'S PROPOSED 

REMEDY WILL NOT CREATE COMPETITION, AND THAT IT WILL 

HARM CONSUMERS. ..........................................................................................165
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ix 

1. Evidence shows that provisions in CB&I's contracts would make 

Complaint Counsel's proposed breakup unworkable.....................................166

2. Evidence shows that Complaint Counsel's proposed breakup remedy 

would create two companies incapable of competing for jobs in the 

relevant product areas. ...................................................................................166

3. Evidence shows that Complaint Counsel's proposed breakup remedy 

would disrupt projects already in progress. ...................................................169

4. Evidence shows that Complaint Counsel's proposed breakup remedy 

would leave two companies without sufficient resources or personnel to 

service their customers. .................................................................................169

5. Evidence shows that Complaint Counsel's proposed breakup remedy 

would affect several hundred pending projects. ............................................170

6. Expert economic testimony supports the conclusion that divestiture is not 

necessary and is ill-advised because it will not result in two lowest 

companies. .....................................................................................................170

D. SHOULD THE COURT FIND LIABILITY, OTHER REMEDIES 

SUPPORTED BY THE EVIDENCE ARE STILL AVAILABLE.........................171

E. CB&I HAS OFFERED A SOLUTION TO ANY COMPETITIVE ISSUE 

ASSOCIATED WITH THE TVC MARKET.........................................................172

F. SUMMARY: A BREAKUP OF CB&I IS NOT APPROPRIATE IN THIS 

CASE. .....................................................................................................................172
x 

TABLE OF AUTHORITIES

FEDERAL CASES 

Advo, Inc. v. Philadelphia Newspapers, Inc., 854 F. Supp. 367 (E.D. Pa. 1994)..............10

Associated Press v. United States, 326 U.S. 1 (1945) .....................................................159

Blue Cross & Blue Shield United v. Marshfield Clinic, 883 F. Supp. 1247 (W.D. 

Wis. 1995)..................................................................................................................158

Brunswick Corp. v. Pueblo Bowl-o-Mat, Inc., 429 U.S. 477 (1977) ...............................165

California v. Sutter Health System, 130 F. Supp. 1109 (N.D. Cal. 2001) .......................154

Citizen Publishing Co. v. U.S., 394 U.S. 131 (1969).......................................................154

FTC v. Great Lakes Chemical Co., 528 F. Supp. 84 (N.D. Ill. 1981) .................................8

FTC v. National Tea Co., 603 F.2d 694 (8th Cir. 1979)....................................................11

FTC v. PPG Indus., Inc., 798 F.2d 1500 (D.C. Cir. 1986) ................................................14

FTC v. University Health, Inc., 938 F.2d 1206 (N.D. Cal. 1991)..............................6, 8, 13

 

Ford Motor Co. v. United States, 405 U.S. 562 (1972)...........................................160, 168

Fruehauf Corp. v. FTC, 603 F.2d 345 (2d Cir. 1979) ...................................................5, 15

In re Heublein, Inc., 96 F.T.C. 385 (1980) ..........................................................................9

In the Matter of Olin Corporation, 113 F.T.C. 400 (§V) (1990).....................................154

International Distributing Ctrs., Inc. v. Walsh Trucking, 812 F.2d 786 (2d Cir 

1987) ..............................................................................................................................9

International Salt Co. v. United States, 332 U.S. 392 (1947)..........................................161

Kaiser Aluminum & Chemical Corp. v. FTC, 652 F.2d 1324 (7th Cir. 1981).............10, 12

Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255 (7th Cir. 1981)..................................11, 12

McGahee v. N. Propane Gas Co., 858 F.2d 1487 (11th Cir. 1988)...................................10

New York v. Kraft General Foods, Inc., 926 F. Supp. 321 (S.D.N.Y. 1995) ..............14, 15
xi 

New York v. Microsoft Corp., 224 F. Supp. 2d 76 (D.D.C. 2002)...................165, 167, 172

Olin Corp. v. F.T.C., 986 F.2d 1295 (9th Cir. 1993) .........................................................14

Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421 (9th Cir.1995) ...............................10

U.S. v. Culbro Corp., 504 F. Supp. 661 (S.D.N.Y. 1981) ...............................................154

United States v. American Tobacco Co., 221 U.S. 106 (1911)........................................162

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

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

United States v. Calmar Inc., 612 F. Supp. 1298 (D.N.J. 1985)..........................................8

United States v. Connecticut National Bank, 418 U.S. 656 (1974) .....................................5

United States v. E.I. DuPont de Nemours, 353 U.S. 586 (1961) .................................6, 161

United States v. E.I. DuPont de Nemours, F.Supp. 1 (D.C. N.D. Ill. 1959) .........................

United States v. General Dynamics Corp., 415 U.S. 486 (1974) ................7, 8, 11, 12, 160

United States v. Gillette Co., 828 F. Supp. 78 (D.D.C. 1993) .............................................9

United States v. International Harvester Co., 564 F.2d 769 (7th Cir. 1977) ..............11, 12

United States v. M.P.M., Inc., 397 F. Supp. 78 (D. Colo. 1975) .........................................8

United States v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001) ...............................159, 167, 168

United States v. Microsoft Corp., 97 F. Supp. 2d 59 (D.D.C. 2000) ...............................166

United States v. Syufy Enterprises, 903 F.3d 659 (9th Cir. 1990) .......................................7

United States v. Ward Banking Co., 376 U.S. 327 (1964)...............................................159

United States v. Waste Mgmt., Inc., 743 F.2d 976 (2d Cir. 1984) .................................7, 10

FEDERAL STATUTES 

15 U.S.C. § 18 ...............................................................................................................5, 11
xii 

MISCELLANEOUS 

In the Matter of Ekco Products Co., No. 8122, 65 F.T.C. 1163 (June 30, 1964) ............162

In the Matter of Retail Credit Company, No. 8920, 92 FTC 1 (July 7, 1978).........161, 172

In the Matter of The Grand Union Company, et al., No. 9121, 102 F.T.C. 812 

(July 18, 1983) ...........................................................................................................162

James R. Atwood, Information from Abroad: Who Bears the Burden in an 

Antitrust Investigation? 65 Antitrust L.J. 227, 238 ...............................................13, 14

Kwoka and Warren-Boulton, "Efficiencies, Failing Firms, and Alternatives to 

Merger: A Policy Synthesis," 31 Antitrust Bull. 431, 450 (Summer 1986)...............154
1

INTRODUCTION

On February 7, 2001, Chicago Bridge & Iron ("CB&I") acquired the Engineered 

Construction and Water Divisions of Pitt-Des Moines, Inc. ("PDM") for approximately $80 

million. The Federal Trade Commission, through Complaint Counsel, has been investigating 

and litigating this Acquisition since the year 2000. In October of 2001, Complaint Counsel 

instituted a Section 7 proceeding seeking to break up CB&I into two separate companies. The 

burdens of proof in a Section 7 proceeding are settled law. In order to succeed in its attempt, 

Complaint Counsel must make a prima facie case that the Acquisition has substantially affected 

competition in the relevant markets. At that point, Respondents are given the opportunity to 

rebut the prima facie case in a number of ways; they must make a showing consistent with the 

strength of Complaint Counsel's prima facie case. Once Respondents make this showing, 

Complaint Counsel bear the burden of proving that the Acquisition will result in a substantial 

lessening of competition. The ultimate burden of persuasion never leaves the government.

This case is the first consummated merger case to be tried in a decade. As a 

result, the Court has unique evidence available to it in assessing the probable impact of the 

Acquisition in the relevant markets -- nearly two years of activity in the markets at issue. This 

evidence constitutes a natural market experiment to test what competition is like without PDM, 

an extremely valuable tool for predicting how the Acquisition will affect competition in future 

years. As discussed extensively below, such evidence is dispositive in this case.

In a Section 7 case, it is well-settled that Complaint Counsel bears the ultimate 

burden of proof at all times. Under controlling law, Complaint Counsel must first make a prima 

facie case in each of the four product markets by showing evidence of post-Acquisition market 

concentration. If Complaint Counsel demonstrates its prima facie case, Respondents must make 
1167887 2 

a showing that the prima facie case is not predictive of future competitive harm. Once

Respondents make that showing, it is Complaint Counsel's burden to present additional evidence 

in support of its case.

Complaint Counsel has relied primarily on market concentration statistics to 

establish its prima facie case. These statistics purport to analyze market concentration in markets 

that are uniformly characterized by low and sporadic demand, with rapidly increasing and 

decreasing market shares over time. Use of pre-Acquisition statistics completely ignores the 

avalanche of new entrants that have entered the relevant markets since the Acquisition and that 

have captured a majority share of post-Acquisition market share in some of these markets. 

Because these statistics are volatile, shifting, and subject to easy manipulation, and because they 

fail to account for these new entrants, they are not remotely predictive of future competitive 

effects. As a result, they cannot be used to establish a prima facie case.

Even if Complaint Counsel has established a prima facie case, Respondents have 

presented compelling rebuttal evidence. Respondents have shown that entry has actually

occurred in three of the four product markets at issue. These new entrants are experienced, 

qualified companies who have spent enormous resources to enter these markets, have been

successful in gaining significant market share, and plan on being successful in these markets in 

the future. Respondents have also presented evidence that entry barriers in all four product 

markets are low, and that additional future entry is likely if demand for the product actually 

exists. Further, Respondents have shown that the customers in these product markets are 

generally large, sophisticated companies with significant ability to create competition in the 

relevant markets.
1167887 3 

In the face of this powerful rebuttal evidence, Complaint Counsel bears the heavy 

burden of presenting additional evidence showing that the Acquisition is likely to have an

anticompetitive effect in the relevant markets. They have not done so, nor is it surprising that 

they have been unable to do so. Although Complaint Counsel has tried to show that entry in the 

relevant markets has not succeeded in constraining CB&I's pricing, the evidence conclusively 

demonstrates that customers who have participated in the relevant markets after the Acquisition 

have received pricing that is equal to or better than pricing received pre-Acquisition. The 

evidence also shows that current customers in three of the four product markets have seen no 

evidence of anticompetitive effect on the part of CB&I, and that many customers are

unconcerned about the effect of the Acquisition on future competition. To circumvent this 

evidence, Complaint Counsel relies on speculation and conjecture to claim that CB&I has raised 

post-Acquisition prices in the relevant markets. However the evidence presented -- much of it 

from Complaint Counsel's own witnesses -- undercuts the validity of the claim.

Even if Complaint Counsel was able to meet its burden to present additional 

evidence regarding anticompetitive effects, it should not prevail. In order to properly evaluate 

whether a Section 7 violation has occurred, it is necessary to look at the markets as they would 

have existed today absent the Acquisition. If the Acquisition had never occurred, PDM EC 

would not have been an independent company operating in the relevant markets. Rather, PDM 

EC would have been liquidated, and its assets would have exited the market. Because this 

scenario is essentially the same as the one that exists today, it strains credulity to assert that the 

Acquisition has substantially affected competition in the relevant markets.

Alternatively, if this Court finds that the Acquisition is likely to substantially limit 

competition in the relevant markets, Complaint Counsel would not be entitled to the remedy it 
1167887 4 

seeks. Throughout this litigation, Complaint Counsel has advocated a draconian breakup remedy 

-- not just disgorging assets related to the relevant markets but instead splitting CB&I into two 

separate companies. Despite their continued insistence on such a remedy, Complaint Counsel 

presented no credible evidence that such a remedy was warranted by the facts or desired by 

customers. Nor did Complaint Counsel show that such a remedy could restore allegedly lost 

competition. In fact, the evidence demonstrates that a breakup remedy would not only fail to 

enhance competition in the relevant markets, but that such a remedy would actually harm

customers by disrupting current projects, raising CB&I's costs, and diminishing CB&I's customer 

acceptance in some of the relevant markets. The evidence demonstrates that it would have 

exactly the opposite of the stated goal of the FTC -- to promote competition for the benefit of 

customers.

As set forth fully below, Complaint Counsel has failed to carry its burden in this 

case on many levels. Accordingly, the Complaint should be dismissed with prejudice. 
1167887 5 

I. APPLICABLE LEGAL STANDARDS

A.

B. COMPLAINT COUNSEL BEARS THE BURDEN OF PROOF IN A 

SECTION 7 CASE.

Complaint Counsel alleges that the Acquisition violates Section 7 of the Clayton 

Act, which proscribes acquisitions where the effect of such an acquisition "may be substantially 

to lessen competition, or to tend to create a monopoly." 15 U.S.C. § 18. Complaint Counsel has 

the initial burden of proving a Section 7 violation, and the ultimate burden of persuasion in a 

Section 7 case "remains with the government at all times." United States v. Baker Hughes Inc., 

908 F.2d 981, 983 (D.C. Cir. 1990); see also United States v. Connecticut Nat'l Bank, 418 U.S. 

656, 669 (1974); New York v. Kraft Gen. Foods, Inc., 926 F. Supp. 321, 358-59 (S.D.N.Y. 1995).

This burden is not a trivial one. Complaint Counsel must show that the

Acquisition is reasonably likely to have "demonstrable and substantial anticompetitive effects." 

Kraft Foods, 926 F. Supp. at 359 (emphasis added). A "mere possibility" of anticompetitive 

effect is not enough to win a Section 7 case; there must be a "reasonable probability" of such an 

effect. Id. (citing Fruehauf Corp. v. F.T.C., 603 F.2d 345, 351 (2d Cir. 1979)). As one court 

explained, a showing of "reasonable probability" is required because Section 7 "deals in

'probability,' not 'ephemeral possibilities.'" Id. (quoting United States v. Marine

Bancorporation, Inc., 418 U.S. 602, 622-23 (1974)). 

Complaint Counsel must also prove that the commerce affected by the

Acquisition is substantial. United States v. Baker Hughes, Inc., 731 F. Supp. 3, 9 (D.D.C. 1990). 

A showing of a "substantial" anticompetitive effect is required of the government in a Section 7 

case. For example, in Baker Hughes, the district court noted that "[t]he miniscule size of the 

market creates problems for the government's case, because one element of a Section 7 violation 
1167887 6 

is that '[t]he market must be substantial.'" Id. (citing United States v. Dupont & Co., 353 U.S. 

586, 595 (1957)).

C. THE D.C. CIRCUIT'S TEST IN BAKER HUGHES IS THE

ACCEPTED METHOD FOR ANALYZING SECTION 7 CLAIMS.

The seminal modern case on Section 7 and the burdens it assigns to litigants is the 

D.C. Circuit's decision in Baker Hughes. In analyzing the legal framework of a Section 7 case, 

the D.C. Circuit laid out the relevant legal analysis:

The basic outline of a section 7 horizontal acquisition case is 

familiar. By showing that a transaction will lead to undue

concentration in the market for a particular geographic area, the 

government establishes a presumption that the transaction will 

substantially lessen competition. The burden of producing

evidence to rebut this presumption then shifts to the defendant. If 

the defendant successfully rebuts the presumption, the burden of 

producing additional evidence of anticompetitive effect shifts to 

the government, and merges with the ultimate burden of

persuasion, which remains with the government at all times.

908 F.2d at 983 (citations omitted).1

1. Complaint Counsel must initially establish a prima facie case 

of a violation of Section 7.

Baker Hughes requires Complaint Counsel to first establish a prima facie case. 

908 F.2d at 982-83. The most common method for Complaint Counsel to establish a prima facie 

case is to show that the acquisition at issue "would produce 'a firm controlling an undue 

percentage share of the relevant market, and [would] result[ ] in a significant increase in the 

concentration of firms in that market.'" F.T.C. v. University Health, Inc., 938 F.2d at 1206, 1218 

(11th cir. 1991) (citing authority including Baker Hughes, 908 F.2d at 982). If the government 

makes this showing, the burden shifts to Respondents to rebut the evidence of statistical 

 

1

It is worth noting that Justices Clarence Thomas and Ruth Bader Ginsburg both sat on the panel that 

decided Baker Hughes. Justice Thomas wrote the opinion.
1167887 7 

concentration with evidence that suggests the statistics are not predictive of future competitive 

harm. Id. 

A prima facie case based on concentration statistics alone is a thin case and may 

be misleading. The Supreme Court has instructed lower courts to look beyond market share 

statistics, because "only a further examination of the particular market -- its structure, history and 

probable future -- can provide the appropriate setting for judging the probable anticompetitive 

effect of the merger." United States v. General Dynamics Corp., 415 U.S. 486, 498 (1974) 

(internal citations and quote marks omitted). The Court noted that such statistics "were not 

conclusive indicators of anticompetitive effect" and that "[e]vidence of past production does not 

as a matter of logic, necessarily give a proper picture of a company's future ability to compete." 

Id. at 498. Appellate courts have also viewed market concentration statistics with a skeptical 

eye. The Baker Hughes court observed that "[e]vidence of market concentration simply provides 

a convenient starting point for a broader inquiry into future competitiveness. . . ." 908 F.2d at 

984. That court explicitly noted that while the government can make a prima facie case using 

such statistics, it could not rest on those statistics because doing so would "grossly inflate the 

role of statistics in actions brought under Section 7." Id. at 992. It added that "[t]he HerfindahlHirschman Index cannot guarantee litigation victories." Id. See also United States v. Syufy 

Enters., 903 F.2d 659, 665 n.6 (9th Cir. 1990) (holding that "evidence of a high market share 

does not require a district court to conclude that there is an antitrust violation."). Courts have 

recognized that market share statistics can often be "misleading as to actual future competitive 

effect" and that in such cases, market share statistics are insufficient to void a merger. United 

States v. Waste Mgmt., Inc., 743 F.2d 976, 982 (2d Cir. 1984) (citations omitted).
1167887 8 

Trial courts hearing evidence of market concentration statistics have also

recognized the limited utility of such evidence, holding that such statistics were not conclusive 

and that "the focus of a proceeding such as this should not be on numbers, but rather on

commercial realities." FTC v. Great Lakes Chem. Co., 528 F. Supp. 84, 90 (N.D. Ill. 1981) 

(citing General Dynamics); see also United States v. Calmar, Inc., 612 F. Supp. 1298, 1301 

(D.N.J. 1985); United States v. M.P.M., Inc., 397 F. Supp. 78, 90 (D. Colo. 1975). Here, the 

facts as judged at the time of the trial are different from these suggested by the concentration 

statistics.

2. If Complaint Counsel makes a prima facie case, Respondents 

are required to make a "showing" that the prima facie case 

does not accurately predict the effect of the Acquisition on 

competition.

If Complaint Counsel makes a prima facie case in a relevant product market, the 

burden shifts to Respondents to rebut it by making a "showing" that the prima facie case 

inaccurately predicts the relevant transaction's probable effect on future competition. Baker 

Hughes, 908 F.2d at 991. The required strength of Respondents' showing depends on the prima 

facie case presented: "The more compelling the prima facie case, the more evidence the 

defendant must present to rebut it successfully." Id. Respondents may present various types of 

evidence in order to rebut a prima facie case. E.g., Baker Hughes, 908 F.2d at 985-86; FTC v. 

University Health, Inc., 938 F.2d 1206, 1218 (N.D. Cal. 1991). In fact, this is a "foundation of 

section 7 doctrine[.]" Id. at 984.

a. Evidence that Complaint Counsel's concentration

statistics are misleading rebuts a prima facie case.

Evidence showing that market concentration statistics are misleading rebuts a

prima facie case. For example, in Baker Hughes, the district court accepted respondents' 

argument that market share statistics were misleading because they were "volatile and shifting" 
1167887 9 

and "easily skewed." 908 F.2d at 986. The fact that the products at issue "were esoteric" and 

that the markets were small led the district court to believe that market concentration statistics 

did not accurately predict future competitive strength. See id.

b. Evidence of actual or potential entry or the existence of 

low entry barriers rebuts a prima facie case.

Evidence regarding actual or potential entry rebuts a prima facie case. See Baker 

Hughes, 908 F.2d at 988. For example, in Baker Hughes, respondents presented evidence that 

two companies had entered the U.S. market immediately prior to the challenged acquisition and 

that those companies were "poised for future expansion." Id. at 988-89. However, a showing of 

actual entry is not even necessary. Even the mere threat of entry can rebut a prima facie case. 

See id. For example, in Baker Hughes, the court found that an acquisition was not unlawful 

because "a number of firms competing in Canada and other countries had not penetrated the U.S. 

market, but could be expected to do so if [the acquisition led to higher prices]." Id. In fact,

Baker Hughes expressly recognized that the "mere threat" of entry could rebut a prima facie case 

because "these firms would exert pressure on the United States . . . market even if they never 

actually entered the market." Id.

Another way that evidence related to entry can rebut a prima facie case is where 

the evidence demonstrates the absence of entry barriers to the relevant markets. Baker Hughes, 

908 F.2d at 989. For example, the Baker Hughes court found that developing a sales and service 

network was not an entry barrier because costs associated with developing such a network were 

small. Id. Other courts who have examined the definition of an "entry barrier" have found that 

experience, investment of time, and investment of money are generally not barriers to entry. 

E.g., In re Heublein, Inc., 96 F.T.C. 385, 590-91 (1980); United States v. Gillette Co., 828 F. 

Supp. 78, 85 (D.D.C. 1993); International Distrib. Ctrs., Inc. v. Walsh Trucking, 812 F.2d 786, 
1167887 10 

792-93 (2d Cir. 1987). Similarly, courts have held that locational disadvantages and business 

and management competence are not entry barriers because they can be overcome over time. 

U.S. v. Waste Mgmt., Inc., 743 F.2d 976, 983 (2d Cir. 1984); Advo, Inc. v. Philadelphia 

Newspapers, Inc., 854 F. Supp. 367, 375 (E.D. Pa. 1994). 

By contrast, typical entry barriers include trade secrets, patents, licenses, barriers 

to customers changing suppliers, and capital outlays to start a brand new business. McGahee v. 

N. Propane Gas Co., 858 F.2d 1487, 1495 (11th Cir. 1988). Entry barriers must be more than 

mere hurdles or inconveniences. As one court noted, "[t]o justify a finding that a defendant has 

the power to control prices, entry barriers must be significant -- they must be capable of

constraining the normal operation of the market to the extent that the problem is unlikely to be 

self-correcting." Rebel Oil Co. v. Atlantic Richfield Co., 51 F.3d 1421, 1439 (9th Cir.1995).

c. Evidence of customer sophistication rebuts a prima

facie case.

Evidence of customer sophistication rebuts a prima facie case. Baker Hughes, 

908 F.2d at 986. For example, the Baker Hughes court found that no violation of Section 7 

occurred, in part because the sophistication of customers "was likely to promote competition 

even in a highly concentrated market." Id. In so holding, it noted that the products at issue cost 

at least several hundred thousand dollars each, that customers in the market closely examine 

available options, and that customers typically insist on receiving multiple confidential bids for 

each order. Id. 

d. Evidence of unique economic circumstances rebuts a

prima facie case.

Evidence of unique economic circumstances rebuts a prima facie case. Id. (citing 

United States v. General Dynamics Corp., 415 U.S. 486 (1974); Baker Hughes, 908 F.2d at 983; 

Kaiser Aluminum, 652 F.2d at 1340 & n.12)). For example, the fact that the acquired company's 
1167887 11 

market position was deteriorating both before and after an acquisition can rebut a prima facie 

case. Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255, 276 (7th Cir. 1981). Similarly, weak 

market position of the acquiring company can rebut a prima facie case. FTC v. National Tea 

Co., 603 F.2d 694, 699-700. (8th Cir. 1979). Financial weakness of the acquired company can 

also rebut a prima facie case. United States v. International Harvester Co., 564 F.2d 769, 776-79 

(7th Cir. 1977). 

e. Evidence that the effect of the acquisition would have 

less than a risk of a substantial lessening of competition 

rebuts a prima facie case. 

Evidence that an acquisition would have less than a risk of a substantial lessening 

of competition rebuts a prima facie case. Section 7 itself proscribes acquisitions that "may be 

substantially to lessen competition, or to tend to create a monopoly." 15 U.S.C. § 18 (emphasis 

added). For that reason, an acquisition that results in only trivial price increases or a loss of 

competition in a de minimis market does not violate Section 7. In Baker Hughes, the district 

court noted that "[t]he minuscule size of the market creates problems for the government's case, 

because one element of a Section 7 violation is that '[t]he market must be substantial.'" 731 F. 

Supp. at 9 (citing United States v. Dupont & Co., 353 U.S. 586, 595 (1957)). To read Section 7 

as proscribing an acquisition that triggered only a trivial price increase or only a loss of

competition in a de minimis market would be to ignore the substantiality requirement of the 

statute. 

f. Post-Acquisition evidence is highly relevant to

determining the validity of a prima facie case.

In attempting to predict whether a challenged acquisition will have an anticompetitive effect, review of post-acquisition evidence is often helpful. Courts have held that 

"[p]ost-acquisition evidence is admissible since the probability of anticompetitive effects is 
1167887 12 

judged at the time of trial." Lektro-Vend Corp. v. Vendo Co., 660 F.2d 255, 276 (7th Cir. 1981). 

The court observed that:

[P]ost-acquisition evidence favorable to a defendant can be an 

important indicator of the probability of the anticompetitive effects

where the evidence is such that it could not reflect a deliberate 

manipulation by the merged companies temporarily to avoid

anticompetitive activity, and could not reasonably be construed as 

representing less active market competition than would otherwise 

have occurred without the questioned acquisition.

Id. (emphasis added). Such evidence can only be discounted when it is shown to have been 

manipulated by the party presenting it. See United States v. General Dynamics, 415 U.S. 486, 

505 (1974).

3. A showing of entry or other relevant evidence shifts the burden 

to Complaint Counsel to show that entry will not constrain 

prices at or near pre-Acquisition levels, or to otherwise prove 

that its concentration statistics accurately predict a substantial 

lessening of competition.

Once Respondents rebut Complaint Counsel's prima facie case, the burden of 

producing additional evidence of anticompetitive effect shifts to the government, and merges 

with the ultimate burden of persuasion. This burden remains with the government at all times. 

Baker Hughes, 908 F.2d at 983 (citing Kaiser Aluminum & Chem. Corp. v. FTC, 652 F.2d 1324, 

1340 & n.12 (7th Cir. 1981)). An example of the type of "additional evidence" Complaint 

Counsel must produce to sustain its case is evidence that substantial barriers to entry into the 

relevant market exist. University Health, Inc., 938 F.2d at 1220. One scholar has explained:

In a merger proceeding the government has the burden, as part of 

its prima facie case, properly to define the relevant market and to 

demonstrate at a minimum that the merger will result in an undue 

increase of concentration in that market. As the Merger Guidelines 

indicate, this will require inclusion of the reasonable import

capabilities of foreign competitors, absent special circumstances 

such as trade quotas. We are in a global economy, and the U.S. 

legal system places considerable trust in the workings of the free 

market. It is appropriate, therefore, that the government have this 
1167887 13 

burden when it challenges transactions between domestic

competitors that face strong foreign competitors which have access 

to our domestic markets.

James R. Atwood, Information from Abroad: Who Bears the Burden in an Antitrust Investigation, 

65 Antitrust L.J. 227, 238 (1996).

In its closing argument, Complaint Counsel contended that Respondents must 

show that "entry is not only timely but that these entrants would be able to be profitable at preacquisition prices." (Robertson, Tr. 8185). This position was flatly rejected by Baker Hughes as 

a "novel and unduly onerous standard." Id. at 987. In Baker Hughes, the government asserted 

that supposed ease of entry can only rebut the government's prima facie case by "clearly showing 

that entry will be both quick and effective at preventing supracompetitive pricing." Id. 

(emphasis added). The Baker Hughes court rejected this argument because it "would require of 

defendants a degree of clairvoyance alien to section 7, which, as noted above, deals with

probabilities, not certainties." Id. It observed that the government's argument essentially 

imposed upon the acquiring party the burden to "disprove future anticompetitive effects," which 

would mean that respondents would be required to prove the ultimate issue. Id. at 990. The 

court noted that such a standard would be a "depart[ure] from settled principles." Id.

In an effort to shirk its burden during closing argument, Complaint Counsel cited 

the Merger Guidelines ("Guidelines") language stating that "the Agency assesses whether entry 

would be timely, likely and sufficient either to deter or to counteract the competitive effects of 

concern." See 1992 HORIZONTAL MERGER GUIDELINES § 0.2, available at 

http://www.ftc.gov/bc/docs/horizmer.htm. This reliance is misplaced for two reasons: First, 

while the Guidelines instruct the Agency to assess the "sufficiency" of entry in determining 

whether an action is necessary, it does not address which party bears the burden of proof
1167887 14 

concerning any item of evidence in an actual court proceeding. In fact, the Guidelines do not 

even address the issue of burden in a judicial or administrative proceeding. 

Second, Complaint Counsel's interpretation of the Guidelines would vitiate Baker 

Hughes' holding that "the ultimate burden of persuasion" belongs to the government "at all 

times." 908 F.2d at 983. Such an interpretation of the Guidelines cannot prevail because the 

Guidelines are not law, are not binding on courts or the Commission, and cannot provide the 

basis to contradict well-settled principles of governing law. E.g., New York v. Kraft Gen. Foods, 

Inc., 926 F. Supp. 321, 359 n.9 (S.D.N.Y. 1995) (internal citations omitted); see also, e.g., FTC 

v. PPG Indus., Inc., 798 F.2d 1500, 1503 n.4 (D.C. Cir. 1986); Fruehauf Corp. v. FTC, 603 F.2d 

345, 353-54 (2d Cir. 1979); Olin Corp. v. F.T.C., 986 F.2d 1295, 1300 (9th Cir. 1993). As the 

Kraft court noted, "the Merger Guidelines are helpful in providing an analytical framework for 

evaluating an acquisition, but they are not binding upon the court." 926 F. Supp. at 359 n.9. 

D. THIS CASE IS FACTUALLY AND LEGALLY SIMILAR TO

BAKER HUGHES.

Beyond its pronouncement of the legal standards applicable here, Baker Hughes is 

instructive because its holding addresses a set of facts and legal arguments very similar to those 

at issue in this case. As the following summary demonstrates, these similarities are striking:

• In Baker Hughes, the court examined the market for hydraulic drilling rigs. 

These rigs were assembled and made to suit each purchaser's needs and 

specifications. 731 F. Supp. at 8. The instant case deals with a variety of 

large field-erected tanks and structures, all of which are custom made to suit 

each purchaser's needs. (See Harris, Tr. 7166-67) (FOF 7.46).

• In Baker Hughes, the customers at issue sought bids from several suppliers 

and placed great emphasis upon a supplier's reputation for quality and service. 

731 F. Supp. at 7. In this case, customers generally seek competitive bids 

from several suppliers for each of the products at issue. (E.g., Eyermann, Tr. 

6993; Patterson, Tr. 456-57; N. Kelley, Tr. 7082-83). 

• In Baker Hughes, the acquiring party considered itself to be an industry

leader. 731 F. Supp. at 8. In this case, CB&I considers itself to be an industry 
1167887 15 

leader in the product markets at issue, with the exception of thermal vacuum 

chambers. (E.g. CX 832).

• Baker Hughes addressed a very thin product market. The overall size of the 

market ranged from 18 to 42 sales per year. 731 F. Supp. at 9. The case at 

bar also involves thin markets, far thinner in fact than those in Baker Hughes. 

For example, in the two years since the Acquisition, only one LNG Tank, one 

LPG tank, five LIN/LOX tanks and zero thermal vacuum chambers have been 

sold. (See Part VI, supra). The other markets at issue are far thinner. (See

Parts III, IV, V, supra.)

• In Baker Hughes, the acquiring company was a "substantial business, doing 

business in many regions, including Europe, Africa, Asia, and Latin

America." 731 F. Supp. at 9. Similarly, CB&I is a global business, with 

operations in many different countries. (Glenn, Tr., 4057-58).

• The Baker Hughes court examined acquiring and acquired companies that 

were both "already successfully established in the U.S., whose individual or 

combined shares measured over a period of years have Clayton Act

significance." 731 F. Supp. at 9. Similarly, CB&I and PDM had a significant 

portion of pre-Acquisition market share in the relevant markets. 

• In Baker Hughes, the acquiring and acquired companies followed each other's 

pricing closely. 731 F. Supp. at 9. In this case, prior to the Acquisition, 

CB&I and PDM followed each other's activities in the relevant markets. (See, 

e.g., Simpson, Tr. 3773) (FOF 7.242).

• In Baker Hughes, competitors were global companies competing with the 

respondent on a world-wide basis. 731 F. Supp. at 9. As discussed

extensively below, CB&I now competes in the U.S. with the same companies 

it competes with worldwide on a daily basis, particularly in the LNG markets. 

(See Part III, supra).

• Baker Hughes addressed the significance of failed past entry attempts. See 

731 F. Supp. at 11. Similarly, the significance of foreign efforts to enter the 

LNG market in Memphis is at issue in this case. 

• Baker Hughes addressed the legal significance of recent foreign entry and the 

threat of future entry. 731 F. Supp. at 11. These are also issues in the instant 

case. Foreign entrants have entered the U.S. LNG markets, and more

companies are threatening to do so in the future. (See Part III, supra).

• Finally, Baker Hughes also addressed whether the government or the

respondent bore the burden of proof regarding sufficiency of entry. See Baker 

Hughes, 908 F.2d at 983. As discussed above, this case presents the very 

same question.
1167887 16 

In short, Baker Hughes provides the structural framework to analyze this Section 

7 case. It addressed many of the legal and factual questions at issue in this case. As set forth 

below, Baker Hughes compels dismissals of the Complaint as to all four product markets.

II. COMPLAINT COUNSEL HAS FAILED TO MAKE A PRIMA FACIE

CASE.

Complaint Counsel bases its prima facie case in each market on evidence of 

market concentration using statistics dating back to 1990. (See, e.g., Simpson, Tr. 3704-05) 

(FOF 7.237). For many reasons, market concentration statistics are unhelpful in analyzing the 

effect of this Acquisition and thus fail to establish a prima facie case.

A. COMPLAINT COUNSEL'S CONCENTRATION STATISTICS

CANNOT BE USED TO PREDICT FUTURE COMPETITION.

Dr. Barry Harris, Respondents' expert, explained that market concentration

statistics are useful only if predictive of the future:

The reason you would ever do any market share analysis as you go 

forward is to try to get a notion of what the world will look like 

going forward. It's not just, oh, I found a high number, that makes 

things bad. Market shares and concentration can be useful if they 

help you predict as you go forward.

(Harris, Tr. 7227) (FOF 7.116) (emphasis added). In this case, market shares and concentration 

statistics that measure past market strength are not predictive of current market conditions for 

several reasons:

First, new competitors have entered the U.S. market since the Acquisition. (See

Harris, Tr. 7219-21). (FOF 7.108). As discussed in Part III, supra, strong new competitors have 

emerged in the LNG markets and Complaint Counsel's historical market concentration statistics 

do not account for them. Such statistics also do not take into account recent changes in

competitiveness of certain companies. For example, Complaint Counsel's LIN/LOX statistics do 
1167887 17 

not reflect the fact that AT&V has won all three of the jobs it has competed on against CB&I, 

Praxair's spinoff of CB&I in the mid-1990s, and the exit of Graver from that market in 1999. 

(See Harris, Tr. 7307-08, 7311-12) (FOF 7.127, 7.130).

Second, since the Acquisition, LNG demand in the U.S. has generally shifted 

from single-containment to double- and full-containment tanks. (Harris, Tr. 7219-21). (FOF 

7.108). This shift has changed the competitive abilities of CB&I relative to new entrants. 

Because foreign companies are more experienced in building full and double-containment tanks, 

they can be expected to have advantages relative to CB&I which Complaint Counsel's historical 

market concentration statistics do not measure. (See Harris, Tr. 7227) (FOF 7.115). Complaint 

Counsel's economist, Dr. Simpson, did not account for these changes in his market share 

analysis, which is significant because it affects Dr. Simpson's HHI analysis. (Harris, Tr. 7221-

22) (FOF 7.114). Further, Dr. Harris noted that, since the Acquisition, CB&I has won only 17-

18 percent of the dollar amounts awarded in the four markets combined. (Harris, Tr. 7223). 

(FOF 7.78). For these reasons, Complaint Counsel's structural analysis is not useful. (Harris, Tr. 

7227-29) (FOF 7.115).

Third, in some cases, the market concentration statistics and other economic 

evidence presented by Complaint Counsel were misleading because they contained products 

different that the relevant products. For example, the LIN/LOX market included certain spheres. 

Because spheres serve different functions, and are constructed in a different manner, it is 

inappropriate to include spheres in this market. (See Harris, Tr. 7301-02) (FOF 7.123). 

B. COMPLAINT COUNSEL'S CHOICE OF 1990 AS THE

MEASURING DATE FOR ITS CONCENTRATION STATISTICS 

IS ARBITRARY AND SUBJECT TO MANIPULATION.

Even if market concentration statistics were somehow found to be helpful in this 

case, the statistics as presented by Complaint Counsel are flawed. Complaint Counsel chose to 
1167887 18 

calculate statistics in all four markets using data from the same starting point -- 1990 to the date 

of the Acquisition. Complaint Counsel's expert witness, Dr. John Simpson, acknowledged on 

cross-examination that he had no principled basis for choosing this date, other than the fact that 

1990 was the earliest date he had available. (Simpson, Tr. 3704-05).

Although Respondents believe use of HHIs are not helpful in this case and are

arbitrary, a more accurate basis for selecting a starting point for an HHI calculation is to select a 

date around which significant market changes occurred, such as rapidly rising or falling market 

shares. The validity of this approach has been recognized by a leading antitrust commentator 

relied on by Dr. Simpson (See Simpson Tr. 3044-45) (FOF 7.237). Under the less arbitrary 

approach suggested by Professor Areeda, 1995 or 1996 is a more appropriate measuring date 

because, beginning at that time, CB&I's large LNG and LPG market share fall to zero over a sixyear period. (Simpson, Tr. 3744). There is no rational basis for selecting twelve years of data 

for purposes of concentration statistics as compared to fifteen or five. Sales in these markets are 

sporadic, and a single sale can represent a large percent of market share in any given year. Thus, 

as the Merger Guidelines note, "[t]ypically, annual data are used, but where individual sales are 

large and infrequent so that annual data may be unrepresentative, the Agency may measure 

market shares over a longer period of time." Merger Guidelines, §1.41. Nowhere do the 

Guidelines suggest going back twelve years. 

For example, the arbitrary nature of the HHIs is underscored by the fact that 

choosing a different date achieves a completely different result; picking a different starting point 

of 1995 or 1996, vastly different concentration statistics emerge. CB&I did not build an LNG or 

LPG tank between 1995 and the date of the Acquisition, resulting in a change of zero in the 

HHIs in those markets, and the HHI in the LIN/LOX market is lowered. (See, e.g., Simpson, 
1167887 19 

Tr. 3744) (FOF 7.236). In the thermal vacuum chamber market, CB&I has not built a thermal 

vacuum chamber since 1984. (Scorsone, Tr. 5055) (FOF 7.235). Thus, choosing to calculate 

HHIs beginning in 1996 results in an HHI change of zero in three of the four markets. Under 

Baker Hughes and the Section 1.5 Merger Guidelines, an acquisition resulting in zero change in 

the HHI fails to establish a prima facie case. In the LIN/LOX market, even Dr. Simpson

admitted that CB&I's sale by Praxair in 1997 was a significant competitive change, a fact which 

would justify beginning the HHI calculation in 1997 after the date of the sale. (See Simpson, Tr. 

3753) (FOF 7.236). 

In short, using a 1996 start date for an HHI calculation would result in zero 

change in three of the four markets at issue in this case. To the extent that this Court finds HHI 

analysis to be helpful, using a 1996 date is supported by antitrust theory and the evidence in this 

case, and should be the preferred method should the Court decide that any HHI data is relevant in 

this case, as opposed to Complaint Counsel's 1990 starting point, which is arbitrary and appears 

chosen to manipulate the HHI results.

III. RESPONDENTS HAVE SUCCESSFULLY REBUTTED ANY PRIMA

FACIE CASE IN THE MARKET FOR LNG TANKS AND FACILITIES.

A liquefied natural gas ("LNG") tank is designed to contain natural gas in liquid 

form. (Glenn, Tr. 4066; Price, Tr. 530) (FOF 3.5). There are various types of LNG tanks 

including single-containment, double-containment and full-containment tanks. (Scorsone, Tr. 

4919; Glenn, Tr. 4108). 

As set forth above, Complaint Counsel has failed to prove a prima facie case in 

the LNG markets. Assuming arguendo the existence of a prima facie case, Respondents have 

successfully rebutted it in several different ways. Evidence shows that timely entry has occurred 

and that new entrants are large, multinational corporations that have LNG experience and the 
1167887 20 

respect of U.S. customers. These new entrants do not face significant entry barriers in the U.S. 

Their presence in the market has successfully constrained CB&I's behavior in these markets and 

allowed customers to receive competitive pricing on post-Acquisition projects. Evidence also 

shows that current customers for LNG facilities are sophisticated consumers whose recent 

involvement in the market is credible and relevant and stands in sharp contrast to the stale, 

uninformed, and biased testimony presented by Complaint Counsel.

Increased demand for LNG in the U.S. has encouraged this recent entry. Over the 

past 30 years, U.S. demand for LNG facilities has been exceedingly small. World LNG demand 

came from international markets, such as Japan and Korea. (E.g., Scorsone, Tr. 4859) (FOF 

3.53). Demand for LNG in the U.S. has recently increased because of rising gas prices.2 Glenn, 

Tr. 4091) (FOF 3.55). Increased demand has caused foreign LNG tank contractors with

extensive international experience to enter in the U.S. market. [xxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxx] 

A. ACTUAL ENTRY HAS OCCURRED IN THE LNG MARKETS. 

THE NEW ENTRANTS ARE ACTIVE, EXPERIENCED, 

QUALIFIED, AND SUCCESSFUL.

Respondents have presented unrebutted evidence of actual entry in the market for 

facilities involving field-erected LNG tanks. The presence of these companies in the U.S. 

market rebuts Complaint Counsel's prima facie case. See Baker Hughes, 908 F.2d at 984. Four 

major international entities have entered the market in the last two years. They are controlled by 

large, multinational corporations, have extensive assets, and are committed to the U.S. market. 

 

2

Increased demand is concentrated in the area of LNG import terminals, not peakshaving facilities. The 

LNG peakshaving market is very sporadic. (E.g., Kistenmacher, Tr. 884) (FOF 3.670). The only current known 

future LNG peakshaving project in the future is the Yankee Gas facility in Connecticut. (See generally

Andrukiewicz, Tr. 6439-40) (FOF 3.337). The only other LNG peakshaving customer who testified in this case 

does not plan to purchase a new peakshaving facility until at least 2006. (Hall, Tr. 1832-33) (FOF 3.650). 
1167887 21 

Further, these entrants have successfully wrested LNG work from CB&I. This evidence of entry 

is far more compelling than that presented by the successful respondents in Baker Hughes. Id. at 

988 (prima facie case rebutted by evidence that two companies entered the U.S. market for a 

particular type of heavy machinery, and were "poised for future expansion"). 

In addition, three other large foreign companies are poised to enter the U.S. 

market and in fact have already made efforts to enter. Like the new entrants already in the U.S. 

market, they have extensive experience in LNG internationally and are respected by U.S.

customers.

1. Skanska/Whessoe is active in the U.S. market, and has the 

necessary experience and qualifications to be successful.

a. Skanska/Whessoe has made significant efforts to enter 

the U.S. and North American markets.

Skanska AB ("Skanska") is one of the world's largest construction groups and is a 

well-established Swedish based civil contractor that has operated internationally for more than 

50 years. (RX 839 at 4; RX 870 at 25) (FOF 3.57). In terms of revenue, Skanska is the largest 

contractor in the world. Skanska has a significant presence in the U.S. In fact, it is one of the 

three largest contractors in the U.S. (RX 737) (FOF 3.57). In August of 2000, Skanska acquired 

Whessoe International ("Whessoe"), which is a 200-year-old engineering and construction firm 

with a well-established reputation in the international LNG business. (RX 770 at 33, RX 908 at 

1) (FOF 3.57-3.58).

Skanska/Whessoe has already been successful in the LNG markets. In 2001, 

Skanska won the bidding to be the EPC contractor for Dynegy's Hackberry project, the largest 

such project in U.S. history. (Puckett, Tr. 4547) (FOF 3.68). Skanska beat several other major 

international engineering and construction firms, including CB&I. (See Puckett, Tr. 4545-46) 

(FOF 3.240). Dynegy chose Skanska because it had a demonstrated track record on similar 
1167887 22 

projects internationally, committed to executing the project in the U.S. on Dynegy's planned 

schedule, and provided favorable commercial terms to Dynegy. (See Puckett, Tr. 4548-49) (FOF 

3.244, 3.272). Skanska has teamed with Black & Veatch, a leading contractor in the field of 

process design and engineering. (See Price, Tr. 600; Puckett, Tr. 4548) (FOF 3.273). Skanska's 

subsidiary, Whessoe, bid to construct the tank portion of the Hackberry project. [xxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx.] Jolly, Tr.

4691, 4760) (FOF 3.68).

Skanska/Whessoe's involvement in the U.S. LNG market extends beyond

Dynegy; it is pursuing other U.S. LNG opportunities, it has been actively courting current U.S. 

LNG customers and introducing them to its capabilities, and has provided pricing to U.S. 

customers for LNG facilities. For example, it has provided preliminary information (including 

pricing) to Yankee Gas regarding its planned LNG peakshaving facility and is currently being 

considered by Yankee Gas as a potential tank constructor. (See Andrukiewicz, Tr. 6445-46) 

(FOF 3.69, 3.342). xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (FOF 3.70, 3.473).

Skanska/Whessoe and Black & Veatch representatives have also recently called 

on Freeport LNG to discuss serving as the contractor for that planned project. These

representatives provided written information regarding the capabilities of the "alliance" between 

Black & Veatch and Skanska/Whessoe. (Eyermann, Tr. 6981-83, 6992) (FOF 3.65, 3.72, 3.576, 

3.662). In these documents, Black & Veatch touted its alliance with Skanska/Whessoe as a 

selling point. The fact that Skanska and Black & Veatch have formed a relationship has led 

customers such as Freeport LNG to believe that Skanska is a serious competitor in the U.S. 

market. (Eyermann, Tr. 6986-87, 6992) (FOF 3.65). Freeport LNG is not the only target of 
1167887 23 

Skanska/Whessoe's marketing efforts; they have spoken with owners [xxxxxxxx] regarding LNG 

activities in the U.S. [(xxxxxxxxxxxxxx)] (FOF 3.424).

Skanska/Whessoe has also been active in LNG activities elsewhere in North

America. In 2001, after the Acquisition, Skanska/Whessoe bid on an LNG facility for Enron in 

the Bahamas. Enron solicited a bid from Skanska/Whessoe for this project because of

Skanska/Whessoe's interest, and because of its proven track record with respect to LNG tanks. 

(Carling, Tr. 4480-81) (FOF 3.443). 

b. Skanska/Whessoe is a capable, experienced, and

qualified LNG contractor.

Past and current U.S. customers for LNG facilities believe that Skanska/Whessoe 

is a major competitor in the LNG markets. For example, Dynegy -- a company that recently 

went through an extended vendor pre-qualification process for LNG tanks and facilities -- had 

the opportunity to carefully examine the qualifications and capabilities of Skanska/Whessoe. In 

connection with its Hackberry project, Dynegy interviewed Skanska and found that it was 

qualified to be an EPC contractor. (Puckett, Tr. 4550, 4547) (FOF 3.68, 3.264, 3.267). In fact, 

Dynegy selected Skanska over several other major EPC candidates, including CB&I. (Puckett, 

Tr. 4545-46) (FOF 3.263).

With respect to the tank portion of the Hackberry project, Dynegy interviewed 

Skanska/Whessoe during its pre-qualification process. (Puckett, Tr. 4552-54) (FOF 3.277). 

During this process, Dynegy examined previous LNG tank projects performed by

Skanska/Whessoe (the Dabhol, India project), and learned that they were well-done. (Puckett, 

Tr. 4565) (FOF 3.272). As a result of its due diligence, Dynegy was satisfied that

Skanska/Whessoe had the necessary reputation and ability to perform the fabrication, field 

erection and construction of LNG tanks for this project. (Puckett, Tr. 4557-58) (FOF 3.278, 
1167887 24 

3.279, 3.280, 3.281). Accordingly, Dynegy sought a bid from Skanska/Whessoe for this project. 

(Puckett, Tr. 4552) (FOF 3.283). 

Dynegy is not the only U.S. customer familiar with Skanska/Whessoe. Prior to its 

financial troubles, Enron had worked with Skanska/Whessoe on a variety of LNG projects. 

Enron saw Skanska as a very large, international, Scandanavian engineering and construction 

company with operations in the United States, and one of the larger contractors for steel

structures in the U.S. (Carling, Tr. 4466) (FOF 3.84). According to Larry Izzo, the former CEO 

of Enron Engineering and Construction, Skanska is "clearly one of the largest contractors in the 

world, one of the top builders in the United States." (Izzo, Tr. 6496, 6505) (FOF 3.79). 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx].

Unlike most of Complaint Counsel's witnesses, Enron has had direct contact with 

Skanska and/or Whessoe in recent years. According to Nigel Carling, who was involved with 

the Dabhol project, Whessoe did an "excellent" job. (E.g., Carling, Tr. 4464-65) (FOF 3.91). 

Specifically, Whessoe and its fellow contractors were responsive and competent in controlling 

the local labor force. (Carling, Tr. 4459-60; see also Izzo, Tr. 6487) (FOF 3.91, 3.92). This 

performance was especially impressive to Enron because: 1) the Dabhol project was located far 

from a pre-existing organized labor force; and 2) the local politics in the area presented

difficulties for the contractor on-site. (Carling, Tr. 4456) (FOF 3.90).3 Under these conditions, 

Whessoe completed the Dabhol project in record time. (Izzo, Tr. 6487) (FOF 3.92).

Based on Whessoe's performance at Dabhol and its subsequent acquisition by 

Skanska, Enron permitted Skanska/Whessoe to bid on an LNG import terminal in the Bahamas 

during late 2001. In explaining this decision, Nigel Carling noted that Skanska "has significant 

 

3 According to Enron, the Dabhol job was more difficult to construct than, for example, the doublecontainment tank built by PDM at Penuelas, Puerto Rico. The increased difficulty lay in the remoteness of the 

Indian facility and the quality of the labor force. (Carling, Tr. 4473-74) (FOF 3.91).
1167887 25 

financial strength and brings the logistical experience." (Carling, Tr. 4481) (FOF 3.84). Carling 

would prequalify Skanska/Whessoe for future LNG projects in the U.S. (Carling, Tr. 4485) 

(FOF 3.84). Similarly, based on Larry Izzo's experience with Skanska/Whessoe in Dabhol, 

Calpine plans to prequalify Skanska/Whessoe for its Humboldt Bay EPC and LNG tank jobs. 

(Izzo, Tr. 6494-95, 6498-500) (FOF 3.79, 3.246, 3.403). Calpine believes that Skanska/Whessoe 

has the experience and the balance sheet necessary to construct a large LNG project in the U.S. 

(Izzo, Tr. 6495) (FOF 3.403).

Other U.S. customers hold similar views of Skanska/Whessoe. For example, the 

management of Freeport LNG knows that Skanska/Whessoe is "a very big construction

company," that Whessoe has built LNG tanks in Dabhol, India, Trinidad, and Greece, and that 

Whessoe did a "very good" job on the Dabhol project. (Eyermann, Tr. 6980-81) (FOF 3.72). 

Freeport LNG sees Skanska/Whessoe as a very serious competitor in the U.S, especially since it 

has already teamed up with a process engineering company. (Eyermann, Tr. 6986-87, 6992) 

(FOF 3.65). Freeport LNG plans to solicit bids from Skanska/Whessoe for the Freeport LNG 

project. (Eyermann, Tr. 6993) (FOF 3.80). The fact that Skanska/Whessoe has not previously 

built an LNG tank in the U.S. does not concern customers such as Freeport LNG. As Volker 

Eyermann explained, if Whessoe "can build an LNG tank in India with Indian labor or in

Trinidad with Trinidadian labor, they should be able to do that in America with local labor." 

(Eyermann, Tr. 6993-94) (FOF 3.81).

Other U.S. customers have approached Skanska/Whessoe regarding future LNG 

projects located in the U.S. CHI Engineering, a consultant for the Yankee Gas project, 

requested information and pricing from Skanska/Whessoe for the LNG tank portion of its 

preliminary engineering report. (Andrukiewicz, Tr. 6445) (FOF 3.341, 3.342). Yankee Gas 
1167887 26 

plans to consider pre-qualifying Skanska/Whessoe for this job. (Andrukiewicz, Tr. 6452-54) 

(FOF 3.357). Similarly, [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx.]

Some of the largest energy producers in the U.S. believe that Skanska/Whessoe is 

an LNG contractor capable of building these facilities in the U.S. at a competitive price. For 

example, El Paso has "pre-qualified" Skanska/Whessoe for LNG projects in Mexico -- close to 

the U.S. border. (Bryngelson, Tr. 6125-26) (FOF 3.83, 3.374). The fact that Skanska/Whessoe 

is prequalified means that it is viewed to have sufficient financial stability and technical

capabilities to execute the project. El Paso's conclusions are informed by consultations with 

Halliburton/KBR, a leading LNG engineering firm. (Bryngelson, Tr. 6128-29) (FOF 3.381). El 

Paso would also prequalify Skanska/Whessoe to build LNG tanks in the U.S. and believes that 

Skanska/Whessoe could build those tanks at a competitive price. (Bryngelson, Tr. 6131-32) 

(FOF 3.382). Further, El Paso is not concerned that Skanska/Whessoe had not built an LNG 

tank in the U.S. previously, because "the actual construction of the tank, it would be the same in 

the U.S. as it would be in an international location, by and large." (Bryngelson, Tr. 6141).

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxx.] 
1167887 27 

Complaint Counsel's own witnesses support the view that Skanska/Whessoe is a 

capable tank contractor. Clay Hall (of Memphis Light, Water, and Gas) acknowledged that as of 

1994 or 1995, Whessoe had significant international experience in building LNG tanks and that 

it had the capability to engineer an LNG tank. (Hall, Tr. 1805, 1845) (FOF 3.85) Similarly,

[xxxxxxxxxxxxxxxxx] of [xxxxxxxxxxxxxxxxxxxxxxxxxxxxx] acknowledged that Whessoe has 

an acceptable reputation worldwide. [xxxxxxxxxxxxxx] (FOF 3.86). 

Perhaps most tellingly, competitors see Skanska/Whessoe as a formidable

adversary in the U.S. market. [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] Dr. Harris also agrees with [xxxxxxxxxxx]

assessment. He believes that because Skanska/Whessoe now has both "brains and brawn," it has 

been accepted as a bidder and the EPC for Dynegy, and is viewed by customers as a good 

supplier, it is a good competitor. (Harris, Tr. 4239-40). 
1167887 28 

2. TKK/AT&V is active in the U.S. market and has the necessary 

experience and qualifications to be successful.

a. TKK/AT&V has made significant efforts to enter the 

U.S. and North American markets.

Established in 1941, Toyo Kanetsu K.K ("TKK"), is a Japanese constructor of 

low temperature and cryogenic tanks. (RX 872 at 2) (FOF 3.99). TKK has successfully 

constructed some of the largest above-ground storage tanks in the world and is recognized as a 

leader in tank construction. (RX 872, at 5; RX 186, at TWC 000084) (FOF 3.99). TKK has 

completed over 200 low temperature tanks throughout the world, including 72 LNG tanks in 

locations such as Malaysia, Brunei, Oman, Nigeria, Australia, Indonesia, Algeria, and Korea. 

(RX 772 at 2-21; RX 818) (FOF 3.100). TKK is the "world's leader" in constructing doublecontainment and full-containment LNG tanks; it has built more of these tanks than anyone else in 

the world. (Cutts, Tr. 2572-73) (FOF 3.101).

American Tank & Vessel, Inc. ("AT&V") is an engineering and construction firm 

based in Mobile, Alabama with extensive experience in the engineering, design, and fabrication 

of tanks, vessels and spheres. (RX 818; RX 31 at 9; Carling, Tr. 4489) (FOF 3.102). AT&V has 

engineering and fabrication facilities throughout the southern U.S., and owns a wide variety of 

equipment necessary for tank construction. (RX 31) (FOF 3.103). AT&V maintains global 

operations in Mexico, Argentina, Brazil, Ecuador, Trinidad, Philippines, Indonesia, and

Thailand; it has worked on "hundreds and hundreds" of projects overseas. (RX 31 at 19; Cutts, 

Tr. 2476-77) (FOF 3.104).

In November 2001, AT&V entered into an agreement with TKK to jointly supply 

large-scale LNG tanks to the U.S. market. (RX 250; RX 818; Cutts, Tr. 2437-38) (FOF 3.105). 

TKK and AT&V have also "developed an understanding and general relationship" to jointly 

pursue projects outside of North America. (Cutts, Tr. 2444) (FOF 3.105). TKK will carry the 
1167887 29 

lead responsibility for doing the engineering and design work for LNG tanks. (Cutts, Tr. 2327) 

(FOF 3.105). TKK will provide a track record, engineering expertise, management expertise, 

and welding technology to the TKK/AT&V partnership to build large cryogenic tanks in the U.S. 

(Cutts, Tr. 2376-77) (FOF 3.106). AT&V will provide field labor and field erection services. 

(Cutts, Tr. 2328) (FOF 3.105).

TKK and AT&V have already begun to put plans into action. TKK personnel 

have come to AT&V's offices to train employees. (Cutts, Tr. 2441) (FOF 3.109). TKK has 

already trained AT&V employees on estimating, scheduling, construction techniques, welding, 

operation of welding equipment, and coordinating. (See Cutts, Tr. 2324-26) (FOF 3.109). TKK 

is also assisting AT&V in developing technical specifications for LNG tanks. (Cutts, Tr. 2564-

65) (FOF 3.111). TKK plans to train AT&V employees in the welding technology and

fabrication necessary for an LNG tank. (Cutts, Tr. 2326, 2442, 2565-66) (FOF 3.110, 3.111). 

AT&V has expended capital associated with the TKK/AT&V joint venture in 

connection with estimating, drafting, design, coordinating, bidding, and "all sorts of

miscellaneous things." (Cutts, Tr. 2341-42) (FOF 3.109). It has already undertaken steps to 

research, design, and perform, "such as thermal performance, steps associated with scheduling, 

welding technology, and general construction sequencing" for LNG tanks. (Cutts, Tr. 2440) 

(FOF 3.108). Further, employees of AT&V have experience building LNG tanks in the U.S., 

and AT&V itself has the research and development to develop 9 percent nickel welding

techniques. (Cutts, Tr. 2463-64) (FOF 3.108). AT&V also has fabrication facilities that are 

sufficient and fabricate LNG tanks in the U.S. (Cutts, Tr. 2457) (FOF 3.108).

Part of AT&V's goal in building a relationship with TKK for LNG projects is to 

provide stability: "stability requires you to sometimes do things at break even or modest
1167887 30 

profitability or almost none at all. . . ." (Cutts, Tr. 2461) (FOF 3.107). For example, TKK has a 

greater ability to obtain bonding at higher amounts than AT&V for LNG projects. (Cutts, Tr. 

2556-57) (FOF 3.107). Customers have been satisfied that TKK is large enough to provide a 

financial guarantee for an LNG project. (Cutts, Tr. 2557-58) (FOF 3.107).

TKK and AT&V have already been making plans to work together on a specific 

LNG project. As discussed more fully below, TKK/AT&V bid on the Dynegy project, and have 

made plans to execute the project if they are successful. (See Cutts, Tr. 2468-69) (FOF 3.115, 

3.116). TKK will have lead engineering responsibility for the entire project. (Cutts, Tr. 2484-

85) (FOF 3.118). Engineering will be done in Japan and electronically transmitted to AT&V. 

(Cutts, Tr. 2473) (FOF 3.118). Fabrication will take place either in Japan or the U.S., depending 

on where the materials are purchased. (Cutts, Tr. 2473-74) (FOF 3.119). Dywidag,

headquartered in Germany with operations in the U.S., will perform the necessary concrete work. 

(Cutts, Tr. 2358-59, 2471-72) (FOF 3.116). Dywidag will also handle civil engineering and civil 

construction coordination. (Cutts, Tr. 2484-85) (FOF 3.116). Japanese laborers will not

participate in tank erection; AT&V and Dywidag personnel will handle this task. (Cutts, Tr. 

2472-73) (FOF 3.118). TKK will provide four to eight on-site staff to supervise the process. 

(Cutts, Tr. 2444, 2476) (FOF 3.118).

The TKK/AT&V consortium has been active in the U.S. market for LNG

facilities. AT&V has taken steps to provide LNG construction services to customers including 

"[m]arketing, research, staffing, equipment, procurement and bidding." (Cutts, Tr. 2437) (FOF 

3.112). Marketing efforts include "[b]asic publicized marketing in the sense of some literature 

available, education of some of our sales force and literally calling on customers to introduce 

ourselves and explain to them what we do." (Cutts, Tr. 2439) (FOF 3.112). AT&V emphasizes 
1167887 31 

its relationship with TKK with respect to its LNG marketing effort. (Cutts, Tr. 2439) (FOF 

3.112). In fact, AT&V and TKK jointly make sales calls to customers. (Cutts, Tr. 2440) (FOF 

3.113).

Like Skanska/Whessoe, TKK/AT&V was pre-qualified by Dynegy and submitted 

a bid to Dynegy for the Hackberry project. (Puckett, Tr. 4552-54). The TKK/AT&V partnership 

has bid on a total of three LNG projects during the past year, and has submitted budget pricing 

for three other projects. (Cutts, Tr. 2447, 2464-65) (FOF 3.114). TKK/AT&V has also provided 

pricing to Williams for a proposed expansion of the Cove Point LNG facility. (RX 185) (FOF 

3.120). With respect to this expansion, Williams has plans to add between four and six new 

LNG tanks to the Cove Point facility. (Scorsone, Tr. 4987-88) (FOF 3.428). It has hired 

Halliburton/KBR to do a feasibility study for this expansion. (Scorsone, Tr. 4987-88) (FOF 

3.429).

TKK/AT&V has also been pursuing other opportunities in the U.S. For example, 

representatives from TKK and AT&V (W.T. Cutts) contacted Freeport LNG to discuss the 

consortium's capabilities and to discuss contracting strategies. (Eyermann, Tr. 7000-01) (FOF 

3.121). They indicated that AT&V has the "welder base" and "quality welders" to handle the 

Freeport project. (Eyermann, Tr. 7001-02) (FOF 3.130). Further evidence of the consortium's 

effort to enter the U.S. market is its effort to secure a U.S.-based process firm. AT&V, with 

Dywidag and TKK, recently approached Linde to form an alliance to build import terminals and 

peak-shaving plants. (Kistenmacher, Tr. 902-03, 915) (FOF 3.113).

TKK/AT&V has also been active elsewhere in North America. In conjunction 

with AT&V, TKK recently won a bid for a field-erected LNG tank in Trinidad. (Carling, Tr. 

4488-89) (FOF 3.122, 3.326). CB&I is aware of this:
1167887 32 

Q. And how are you familiar with that? 

A. Recently CB&I lost a project there for another -- for a fourth tank at 

Trinidad to TKK and ATV, and CB&I is also in the final stages of 

constructing what was the third tank at Trinidad for Bechtel and for 

that facility. 

Q. Sir, did CBI submit a bid to Bechtel for the fourth tank at the facility?

A. Yes. 

Q. And do you know whose CBI's competition was?

A. Yes. It was TKK and ATV. 

(Scorsone, Tr. 4949-50) (FOF 3.325, 3.326).

b. TKK/AT&V is a capable, experienced, and qualified

LNG contractor.

Past and current U.S. customers for LNG facilities believe that TKK/AT&V is a 

major competitor. For example, Dynegy -- during its extensive pre-qualification process --

conducted due diligence regarding LNG tank vendors, including interviews with TKK/AT&V 

representatives. Dynegy solicited bids from TKK/AT&V because it was satisfied that it could 

build the necessary tanks. (Puckett, Tr. 4552-54) (FOF 3.277, 3.278). The fact that TKK/AT&V 

had not built an LNG tank in the U.S. was not relevant to Dynegy because

AT&V has built a number of tanks. The key to us was the design 

of the tank, having somebody who definitely had capabilities to 

design the tank, and then whoever they team up with, if they chose 

to team up, does that company have the ability to execute the 

construction of the tank, and we were comfortable that the TKKAT&V combination and also Dywidag, a German firm who is a 

piece of that group -- don't ask me how to spell Dywidag -- had the 

capability to execute and construct a tank here in the U.S.

(Puckett, Tr. 4584-85) (FOF 3.123).

Other U.S. customers active in the post-Acquisition North American LNG market 

believe that TKK/AT&V is viable. They are aware that TKK has a proven track record in places 
1167887 33 

such as Indonesia, Egypt and Ras Laffan. (Carling, Tr. 4488, 4522; see also Izzo, Tr. 6499) 

(FOF 3.127). They are also familiar with AT&V as a tank maker in the U.S. and know it to 

employ many ex-CB&I workers. (Carling, Tr. 4489) (FOF 3.127). For example, Nigel Carling 

believes that TKK/AT&V can be competitive in the U.S. because of its success in remote 

locations such as Indonesia. (Carling, Tr. 4522-23) (FOF 3.127). As further support for the 

viability of TKK/AT&V in the U.S., Carling pointed to its recent win in Trinidad. (Carling, Tr. 

4488-89) (FOF 3.122). Carling would prequalify TKK/AT&V for a future LNG tank job in the 

U.S. (Carling, Tr. 4485-87, 4489, 4491) (FOF 3.127).

U.S. customers with LNG projects on the drawing board have similar views. For 

example, Calpine knows that AT&V has capabilities to build LNG tanks and is known as a 

capable tank contractor with cryogenic capabilities. (Izzo, Tr. 6499) (FOF 3.127). Calpine 

believes that TKK/AT&V has the experience and the balance sheet necessary to construct a large 

LNG project and plans to prequalify it for the Humboldt Bay EPC and LNG tank jobs (Izzo, Tr. 

6495) (FOF 3.129). Similarly, Freeport LNG is aware that TKK has successfully built LNG 

tanks in Japan and other countries and that TKK is "flexible enough to work in different 

countries . . . and can adapt to the locations and can successfully complete a project." 

(Eyermann, Tr. 7000) (FOF 3.130). Freeport LNG and its predecessor Cheniere Energy has 

received a variety of documents and materials from the TKK/AT&V consortium and met with its 

representatives regarding the Freeport LNG project. (Eyermann, Tr. 7002-04) (FOF 3.130). 

Based on this information, Freeport LNG believes that "TKK is a very qualified supplier, and 

ATV is a good partner in the United States" and that "they are very strong competitors." 

(Eyermann, Tr. 7004-05) (FOF 3.130). Although TKK and AT&V have never constructed a 
1167887 34 

field-erected LNG tank in the U.S., Freeport LNG plans to solicit bids from TKK/AT&V for 

this. (Eyermann, Tr. 7005) (FOF 3.130).

Other U.S. customers and competitors with North American LNG projects also 

believe that TKK is a viable competitor. For example, El Paso has pre-qualified TKK for LNG 

projects in Altamira and Rosarito, Mexico. (Bryngelson, Tr. 6125-26) (FOF 3.372, 3.374). The 

fact that TKK is prequalified means that El Paso believes it has sufficient financial stability and 

technical capabilities to execute the project. (Bryngelson, Tr. 6128-29) (FOF 3.374). KBR, a 

leading LNG engineering firm, has determined that TKK is technically capable to execute these 

projects. (Bryngelson, Tr. 6129) (FOF 3,379). El Paso would also prequalify TKK to build 

tanks in the U.S. and believes that it has the capability to build LNG tanks in the U.S. at a 

competitive price. (Bryngelson, Tr. 6131-32) (FOF 3.381). [xxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]

Several of Complaint Counsel's own witnesses view TKK as a viable competitor 

in the U.S. Errol Rapp of Bechtel noted that TKK has experience in constructing LNG storage 

tanks internationally and that Bechtel would consider prequalifying TKK for an LNG project in 

the U.S. (Rapp, Tr. 1309, 1316, 1326) (FOF 3.128). Similarly, Clay Hall of MLGW permitted 

TKK to bid on an LNG project in 1994 because he believed it was capable of building fielderected LNG tanks in the U.S. (See Hall, Tr. 1805, 1849-50) (FOF 3.132) MLGW would 

consider soliciting a bid from TKK/AT&V if and when it requires an additional LNG facility. 

(Hall, Tr. 1854) (FOF 3.657). [xxxxxxxxxxxxxx] of [xxx] has acknowledged that TKK has a 

good reputation worldwide. [xxxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxx). 
1167887 35 

Respondents' expert, Dr. Harris, also believes that TKK/AT&V is a viable entrant 

because of TKK's good reputation worldwide in the LNG field and because of its success in 

Trinidad. (Harris, Tr. 7241-42) (FOF 7.98).

3. Technigaz/Zachry is active in the U.S. market and has the 

necessary experience and qualifications to be successful.

a. Technigaz/Zachry has made significant efforts to enter 

the U.S. and North American markets.

Technigaz, a subsidiary of Saipem Corporation, is an international company with 

extensive LNG experience. Technigaz and Saipem have revenues of more than $3 billion and 

employ about 20,000 people. (Jolly, Tr. 4439) (FOF 3.144). Technigaz has experience in the 

construction of LNG tanks worldwide. (RX 43 at ZCC 000005.) (FOF 3.144). It is currently 

building LNG projects in Portugal, Spain, Egypt, and Nigeria and has a proven track record of 

designing and managing the construction of LNG tanks. (E.g., Carling, Tr. 4487) (FOF 3.185). 

In particular, Technigaz has expertise in LNG tanks involving concrete outer tanks and 9 percent 

nickel steel inner tanks or liners. (Jolly, Tr. 4439) (FOF 3.148). Technigaz has built three fullcontainment tanks in Qatar and is currently building eight full-containment LNG tanks [xx 

xxxxxxxxxxxxxxxxxxxxxxx]. (Jolly, Tr. 4439-40, 4732) (FOF 3.150). Taking this experience 

into account, Technigaz believes it is the "largest contractor today in full-containment tanks 

worldwide." (Jolly, Tr. 4689, 4725.) (FOF 3.151). 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 
1167887 36 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]. Customers and 

competitors in the U.S. market for LNG facilities view Zachry as one of the larger construction 

companies in the U.S. with experience in construction practices, management of labor forces, 

pricing structures, and completing jobs. (Carling, Tr. 4487) (FOF 3.185). Zachry has access to 

licensed engineers and well-trained, experienced local field labor in the U.S. (Price, Tr. 656-57, 

Rapp, Tr. 1325) (FOF 3.161, 3.184). In addition, Zachry has experience working with customers 

for LNG facilities on other projects. For example, Zachry has built several power plants for 

Calpine. Calpine believes that Zachry is a "competent American contractor who could team with 

an LNG design company to build a tank." (Izzo, Tr. 6499) (FOF 3.181). Consistent with these 

facts, Zachry holds itself out as a top-notch contractor. [xxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx.] 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
1167887 37 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] 

Technigaz/Zachry has made significant efforts to enter the U.S. LNG market. For 

example, it approached Dynegy to introduce their capabilities and ask for a chance to bid on the 

Dynegy project. The alliance eventually prepared a bid package for this project, [xxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxx]. (Puckett, Tr. 4549; Fahel, Tr. 1684-85 see also Jolly, Tr. 4690) (FOF 

3.173, 3.271, 3.295). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxx] 

The alliance's interest in the U.S. market goes far beyond Dynegy; it is currently 

involved with many other LNG opportunities in the U.S. [xxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] Technigaz has also called on Freeport
1167887 38 

LNG to discuss the alliance's capabilities and to express interest in its LNG project. (See [xxxxx 

xxxxxxxxxxxxxxxxxxx] 1668; Eyermann, Tr. 6994-96) (FOF 3.174, 3.175, 3.394). Technigaz's 

sales representative provided literature to Freeport LNG regarding the alliance's capabilities, 

indicating that "Technigaz is keenly interested in working" on this project. (Eyermann, Tr. 6996-

98). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] 

b. Technigaz/Zachry is a capable, experienced, and

qualified LNG contractor.

U.S. customers view Technigaz/Zachry as a viable competitor in the U.S. For 

example, Dynegy interviewed Technigaz/Zachry as part of the pre-qualification procedure. 

(Puckett, Tr. 4552-54) (FOF 3.277). Dynegy sought a bid from Technigaz/Zachry for the LNG 

tanks because it believed the alliance had the reputation and ability to do the requisite

fabrication, field erection and construction of the LNG tanks. (Puckett, Tr. 4552, 4554, 4557-58) 

(FOF 3.279, 3.280, 3.281).. Other U.S. customers with LNG projects on the drawing board have 

similar views. For example, Freeport LNG knows that Technigaz has a reputation for building 

LNG projects around the world and that Technigaz was recently awarded projects in Egypt and 

Portugal. (Eyermann, Tr. 6994-95). Freeport LNG also knows that Zachry is a "big contractor 

in Texas" that focuses in concrete work and that it has joined forces with Technigaz to compete 
1167887 39 

in the U.S. market. (Eyermann, Tr. 6995). Freeport LNG believes that "Technigaz is keenly 

interested in working" on the Freeport LNG project. (Eyermann, Tr. 6996-98) (FOF 3.175). 

Although the Technigaz alliance has never built an LNG facility in the U.S., Eyermann considers 

the alliance to be viable and plans to solicit bids from it for the Freeport project. (Eyermann, Tr. 

6998-99) (FOF 3.182). 

Similarly, Calpine plans to consider prequalifying the alliance for its Humboldt 

Bay facility. (Izzo, Tr. 6496, 6501) (FOF 3.404). Calpine is familiar with Technigaz's record of 

building LNG facilities around the world and with Zachry's abilities as a U.S. contractor. 

Calpine believes that the alliance has the experience and the balance sheet necessary to construct 

a large LNG project. (Izzo, Tr. 6495, 6501, 6505) (FOF 3.403). In connection with its planned 

peakshaving facility, Yankee Gas has received preliminary information, including pricing, from 

Technigaz and will consider prequalifying Technigaz for this project. (Andrukiewicz, Tr. 6445-

46, 6453) (FOF 3.342, 3.357). 

Other U.S. customers have invited Technigaz/Zachry to bid on LNG projects in 

North America and believe that the alliance can be competitive on U.S. projects as well. For 

example, Bechtel believes that the alliance can effectively compete for LNG jobs in the U.S., and 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (Rapp, Tr. 1325; [xxxx

xxxxxx]) (FOF 3.184, 3.334). xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxx]4

 

4 Rapp was one of Complaint Counsel's witnesses. Additional witnesses called by Complaint Counsel have 

acknowledged that Technigaz has a good reputation worldwide. [(xxxxxxxxxxxxxxxxxx)] (FOF 3.186). 
1167887 40 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] Those involved in that project

believe that Technigaz/Zachry can be competitive on LNG projects in the U.S., and would 

prequalify the alliance for such projects. (Carling, Tr. 4485-87, 4489) (FOF 3.185). Nigel 

Carling explained that Zachry is one of the powerhouse contractors in the United States, and that 

building a tank is a relatively straightforward exercise when compared with other aspects of 

construction. (Carling, Tr. 4526) (FOF 3.185). Despite the fact that Technigaz/Zachry has not 

built an LNG tank in the U.S., Carling would consider using them for a U.S. LNG job because 

"[b]uilding a tank is like any other construction job, it's all about the logistics of managing the 

job, managing the quality, managing the safety, managing the regulations and managing the 

unions." (Carling, Tr. 4526) (FOF 3.185, 3.509).

El Paso has pre-qualified Technigaz for LNG projects in Altamira and Rosarito, 

Mexico, because it believes that it has sufficient financial stability and technical capabilities to 

execute the project. (Bryngelson, Tr. 6125-26, 6128-29) (FOF 3.180). El Paso's consultant, 

KBR has determined that Technigaz is technically capable to execute these projects. 

(Bryngelson, Tr. 6129) (FOF 3.180). Further, El Paso would prequalify Technigaz to build tanks 

in the U.S. and believes that it can build LNG tanks in the U.S. at a competitive price. 

(Bryngelson, Tr. 6131-32) (FOF 3.180).

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 
1167887 41 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]

These customer relationships have informed Dr. Harris' view of

Technigaz/Zachry as a competitor. Dr. Harris sees Technigaz/Zachry as a viable entrant because 

it has worldwide expertise in LNG, a clear intent to enter the U.S. market, vast experience in 

concrete construction, and perhaps most importantly, good reputations among customers. 

(Harris, Tr. 7242-43) (FOF 7.99).

4. Daewoo/S&B is active in the U.S. market and has the necessary 

experience and qualifications to be successful.

Daewoo Engineering & Construction Co., Ltd. ("Daewoo") of South Korea boasts 

revenues exceeding $2.3 billion. (RX 736, at 6) (FOF 3.195). Daewoo is a world leader in the 

construction of full-containment LNG tanks. (RX 873 at 3) (FOF 3.196). Since 1990, Daewoo 

has acted as a turnkey constructor for at least 12 LNG tanks for LNG projects in Korea and 

Nigeria and has worked for owners such as Korea Gas Corporation and Shell Petroleum

Development Co. (RX 760 at 10, 29; RX 873 at 3-6) (FOF 3.196). 

S&B Engineers and Constructors, Ltd. ("S&B") is an engineering and contracting 

firm with corporate headquarters located in Houston. (RX 873 at 61) (FOF 3.197). S&B offers a 

wide range of services including feasibility studies, engineering, procurement, field construction, 

and plant start-up. (RX 873 at 61) (FOF 3.197). S&B has formed alliances with various 

international companies to perform projects in the Asia-Pacific and India. (RX 873 at 61-63) 

(FOF 3.197). S&B's clients for the design and construc tion of process plants include Phillips, 

Shell USA, Arco Chemical, Conoco, and Chevron. (RX 873 at 61) (FOF 3.198).
1167887 42 

In mid-2002, Daewoo and S&B publicly announced a joint effort to pursue LNG 

receiving terminals in North America. (RX 10) (FOF 3.198) (state of mind). They also told the 

public that S&B, Daewoo, and specialized LNG consultants have formed teaming agreements to 

provide a complete range of services for LNG projects throughout North America, including fast 

track regulatory and insurance approvals, financial guidance, developmental and detailed

engineering, material procurement, and construction and commissioning services. (RX 10) (FOF 

3.198) (state of mind). According to the alliance, S&B's project execution, construction

management skills and knowledge of the U.S. EPC market, along with Daewoo's international 

experience in LNG technology, form a strong competitor in the North American LNG market. 

(RX 10) (state of mind) (FOF 3.198).

Dynegy viewed Daewoo/S&B as qualified to bid on the LNG tanks for Dynegy's 

Hackberry project although they were not given a bid package because Dynegy already had 

enough qualified bidders. (Puckett, Tr. 4553) (FOF 3.284). The alliance has also approached 

Freeport LNG to discuss its capabilities and contracting strategy. In fact, Daewoo/S&B has 

already established a substantive relationship with Freeport LNG, as Daewoo is providing

technical assistance regarding Freeport LNG's FERC application. (Eyermann, Tr. 7008) (FOF 

3.203, 3.206). Daewoo/S&B has also had discussions with [xx] regarding U.S. LNG projects. 

[xxxxxxxxxxxxxxxxxxx] 

Customers recognize Daewoo/S&B as a viable supplier of LNG facilities in the 

U.S. As discussed above, Dynegy found the alliance to be a capable supplier. (Puckett, Tr. 

4553) (FOF 3.204). Similarly, Freeport LNG was pleased with Daewoo's performance on the 

FERC application process and plans to solicit a bid from the alliance for future LNG tanks, in 

part because Daewoo is a "pioneer" in the LNG storage industry. (Eyermann, Tr. 7010-11, 7014) 
1167887 43 

(FOF 3.206). Further, [xxxxxxxxxxxx] believe that Daewoo has the technical capabilities and 

skills to construct LNG tanks and import terminals in the U.S. and would consider Daewoo as a 

potential bidder on their LNG projects. [xxxxxxxxxxxxxxxxxxxxxxxxx]; Bryngelson, Tr. 6145-

46) (FOF 3.205, 3.209). 

Complaint Counsel's own witnesses acknowledge the viability of this alliance. 

Errol Rapp, of Bechtel, believes that S&B is a qualified company that could construct an LNG 

tank in the U.S. if partnered with an experienced foreign LNG tank company. (Rapp, Tr. 1327) 

(FOF 3.208). Similarly, [xxxxxxxxxx] of [xxxxx] noted that Daewoo has a good reputation 

worldwide. [xxxxxxxxxxxx] (FOF 3.207). Economic testimony supports these customers' 

views. Dr. Harris noted that Daewoo/S&B is a potential new entrant with the ability to constrain 

CB&I's prices. (See Harris, Tr. 7245-47) (FOF 7.100).

5. Tractebel is poised to enter the U.S. market for LNG facilities.

Tractebel is a very large Belgian company involved in building, owning and 

operating LNG facilities. (Glenn, Tr. 4094) (FOF 3.215). Tractebel is a subsidiary of SUEZ, a 

French-Belgium conglomerate that provides energy, water, waste and communication services to 

municipal, residential, and industrial customers. (RX 874 at 1; RX 389 at CBI065924) (FOF 

3.212). In 2001, SUEZ had revenues of $36.5 billion. (RX 389 at CBI065924) (FOF 3.212). 

Tractebel contributed $19.36 billion to SUEZ's 2001 revenue. (RX 389 at CBI065924) (FOF 

3.212). Tractebel is able to design and build LNG facilities. (RX 389 at CBI065921) (FOF 

3.212). It recently acquired, and now operates, the United States' first LNG import terminal in 

Everett, Massachusetts. ((RX 389 at CBI065921; Glenn, Tr. 4150) (FOF 3.212). Tractebel also 

recently acquired international LNG tank constructor Entrepose. (Scorsone, Tr. 4998) (FOF 

3.213). Tractebel is often a direct competitor of CB&I for LNG terminals around the world. 

(Glenn, Tr. 4150-51) (FOF 3.215).
1167887 44 

Tractebel has recently become involved in the North American LNG market. In 

late 2001, Tractebel approached Enron regarding an LNG facility in the Bahamas. Based on 

Tractebel's past record in building LNG facilities, and its interest in the project, Enron permitted 

Tractebel to bid on the project. (Carling, Tr. 4480-81) (FOF 3.443). Post-Acquisition customers 

believe that Tractebel is a willing and viable player in the North American LNG market. In fact, 

Tractebel representatives have told Nigel Carling that it is interested in U.S. LNG projects. 

(Carling, Tr. 4514) (FOF 3.216). Based on his experience and Tractebel's interest, Carling 

would prequalify Tractebel for a future U.S. LNG job. (Carling, Tr. 4485-87, 4489, 4491) (FOF 

3.216.

Other customers see Tractebel as a competitive force in the U.S. and North

American markets.5 El Paso has pre-qualified Entrepose/Tractebel for Mexican LNG projects in 

Altamira and Rosarito because it has, in El Paso's view, sufficient financial stability and

technical capabilities to execute the project. In fact, KBR has specifically examined Tractebel's 

technical capabilities and found them to be sufficient. (See Bryngelson, Tr. 6125-26, 6129-30) 

(FOF 3.317, 3.379). El Paso would prequalify Tractebel/Entrepose to build tanks in the U.S. and 

believes that they have the capability to do so at a competitive price. (Bryngelson, Tr. 6131-32) 

(FOF 3.381). Economic testimony also supports these customers' views. Dr. Harris noted that 

Tractebel is a potential new entrant with the ability to constrain CB&I's prices. (See Harris, Tr. 

7245-47) (FOF 7.100).

6. IHI is poised to enter the U.S. market for LNG facilities.

Ishikawajima-Harima Heavy Industries, Co., Ltd. ("IHI") is rated as the world's 

leading constructor of LNG receiving terminals; its LNG storage tanks are currently operating at 

 

5 Competitors also share this view. [xxxxxxxxx xxxxxxxxx xxxxxxxxx xx x xxxxxxxxx xxxxxxxxxx xx xxx 

xxx xxxxxxxxxxxx xxxxxxx xxxxxxx xxx xxxxx xxxxxxxxxxxx] 
1167887 45 

all LNG terminals in Japan. IHI is capable of constructing double and full-containment LNG 

tanks. (RX 764 at 6, 22) (FOF 3.223). Recently, IHI has begun to enter the U.S. market. 

Representatives of IHI have discussed its capabilities with Freeport LNG and have provided 

extensive literature regarding its capabilities. (Eyermann, Tr. 7015-16; RX 931 (FOF 3.225) 

U.S.-based customers recognize IHI as a company with experience in constructing LNG storage 

tanks on an international scale. (Rapp, Tr. 1309, 1316) (FOF 3226). Volker Eyermann of 

Freeport LNG is aware that IHI has built 23 LNG terminals in Japan, with each terminal

containing between four and six LNG tanks. (Eyermann, Tr. 7015-16) (FOF 3.225). [xxxxxx] 

also familiar with IHI and believes that it can construct LNG tanks and import terminals in the 

U.S. [xxxxxxxxxxxxxxxxxxxxxxxx] (FOF 3.224) 

Customers consider IHI to be a potential competitor in the U.S. [xxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (FOF 

3.224) Freeport LNG also considers IHI as a potential supplier for its LNG tanks. However, 

because IHI does not yet have a local partner, Freeport LNG would require IHI to team up with 

an American partner -- the type of partner that TKK, Technigaz, and Daewoo, for example, have 

already found. (See, e.g., Eyermann, Tr. 6995, 7004-05, 7014) (FOF 3.224). Economic 

testimony also supports customers' views of IHI. Dr. Harris noted that IHI is a potential new 

entrant with the ability to constrain CB&I's prices. (See Harris, Tr. 7245-47) (FOF 7.100).

7. MHI is poised to enter the U.S. market for LNG facilities.

Mitsubishi Heavy Industries ("MHI") is well-renowned for its LNG cryogenic 

technology; it has an excellent history of performance in the design and production of

transportation and storage facilities. (RX 767 at 16) (FOF 3.217). MHI has been active in the 

field of cryogenic storage tanks for many decades, and is capable of constructing singlecontainment and full-containment tanks. (RX 767; RX 875 at 2) (FOF 3.217). MHI has built a 
1167887 46 

variety of LNG tanks, including a full-containment LNG tank for Oasaka Gas Co., Ltd. in 2000, 

the world's largest class membrane LNG tank for Toho Gas Co., Ltd. in 2001, and three fullcontainment tanks at Ras Laffan, Qatar. (RX 875 at 5-7, 9) (FOF 3.217).

Customers are aware of MHI as an international player in the LNG industry. 

Errol Rapp, of Bechtel, noted that MHI has experience in constructing LNG storage tanks on an 

international scale. (Rapp, Tr. 1309, 1316) (FOF 3.220). Nigel Carling, formerly of Enron, 

knows that MHI is "one of the big players" in Japan, and has built tanks in Ras Laffan, Qatar, 

Taiwan, and Indonesia. (Carling, Tr. 4492) (FOF 3.221). In recent years, MHI has entered the 

North American LNG market. El Paso has pre-qualified MHI for Mexican LNG projects in 

Altamira and Rosarito because it has the financial stability and technical capabilities to execute 

these projects. Notably, El Paso's technical adviser -- KBR -- has found MHI to be technical 

capable. (Bryngelson, Tr. 6125-26, 6128-29) (FOF 3.219). El Paso would prequalify MHI to 

build tanks in the U.S. and believes that MHI can do so at a competitive price. (Bryngelson, Tr. 

6131-32) (FOF 3.219). Similarly, [xxxxxxxxxx] that MHI has the technical capabilities and 

skills to construct LNG tanks and import terminals in the U.S. and will consider MHI as a 

potential bidder on its various LNG projects. [xxxxxxxxxxxxxxxxxxxxxxxxx] (FOF 3.218). 

Nigel Carling, formerly of Enron, would also consider using MHI as an LNG tank contractor in 

the U.S. if it had a domestic partner. (Carling, Tr. 4492) (FOF 3.221). Economic testimony also 

supports these customers' views. Dr. Harris noted that MHI is a potential new entrant able to 

constrain CB&I's prices. (See Harris, Tr. 7245-47).

B. SIGNIFICANT ENTRY BARRIERS DO NOT EXIST IN THE LNG 

MARKETS.

Under Baker Hughes, a respondent can rebut a prima facie case by showing "ease 

of entry." See 908 F.2d at 983-84. In this case, it is undisputed that four large multinational 
1167887 47 

corporations have formed alliances with U.S.-based contractors and have entered the market

within two years of the Acquisition. Skanska/Whessoe entered in early 2001, when it bid on the 

Dynegy project. (Price, Tr. 603, 653-54) (FOF 3.662). TKK/AT&V entered in November of 

2001, when it announced its intention to do so. (RX 818; Cutts, Tr. 2437-38). 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]. Daewoo/S&B entered in March 

of 2002, when it announced its intention to enter the market. (See RX 10) (state of mind) (FOF 

3.196).6 

Complaint Counsel has alleged that foreign competitors cannot provide sufficient 

competition in the LNG markets because they face cost disadvantages it and its economist often 

referred to as "entry barriers." They have advanced two different forms of entry barriers. First, 

they argue that CB&I enjoys a special advantage with respect to single containment LNG tanks, 

as opposed to full or double containment tanks. Second, they argue that CB&I has specific 

advantages over its competitors, regardless of containment type. These so-called entry barriers 

simply do not exist. Any advantage that CB&I may have on single-containment tanks is largely 

irrelevant, as most LNG tanks that will be built in the U.S. will use double or full-containment 

systems. Further, even if some single-containment tanks survive this trend, CB&I does not enjoy 

major competitive advantages that would prevent new entrants from successfully competing in 

the U.S. 

1. Double and full-containment tanks, which are plentiful

internationally, are the wave of the future in the U.S.

Historically, single-containment LNG tanks have been constructed in the U.S. 

CB&I and PDM have never constructed a double or full-containment tank in the continental 

 

6 Although the Merger Guidelines are not binding on this Court, Respondents note that they classify entry as 

"timely" if it occurs or will occur within two years of the acquisition in question. 
1167887 48 

U.S., nor has any other company. While a full or double-containment LNG tank has never been 

built in the continental U.S., such tanks are commonly built elsewhere in the world. (Scorsone, 

Tr. 4919-20) (FOF 3.7). However, recent trends in the U.S. LNG market suggest that double and 

full-containment LNG tanks are the wave of the future in the industry. (Izzo, Tr. 6491-92; 

Glenn. Tr. 4112-13; Scorsone, Tr. 4921-22) (FOF 3.11). Most current LNG projects in the U.S. 

involve either double or full-containment tanks. [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] 

[x. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxx

x. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxx

 * * *

x xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

x xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

(xxxxxxxxxxxxxxxxxxxxxx] see also, e.g., Cutts, Tr. 2501) (FOF 3.164). This prediction is 

supported by the evidence. Dynegy's LNG import terminal will include three full-containment 

LNG tanks. (Puckett, Tr. 4540-41) (FOF 3.257). Freeport LNG's planned import terminal will 

involve a 160,000 cubic meter double-containment LNG tank. (Eyermann, Tr. 6968) (FOF 

3.386). Calpine is currently planning to build a $250 million double or full-containment LNG 

tank in California. (Izzo, Tr. 6474-75, 6493) (FOF 3.399). [xxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx].

Yankee Gas currently plans to use double containment tanks for its peakshaving facility in 

Waterbury, Connecticut. (See [xxxxxxxxxxxxxxxxxxxxx]; Andrukiewicz, Tr. 6441, 6443) (FOF 

3.344).
1167887 49 

This trend is not without explanation. Applicable codes and regulations (NFPA 

59A) require a builder to leave a certain amount of land around an LNG tank. This spacing 

requirement is less stringent for double and full-containment tanks, allowing for construction on 

smaller parcels of land. Space considerations were one of the factors which led Dynegy to select 

full-containment tanks and to rule out the use of single-containment tanks. (Puckett, Tr. 4541-

42, 4585) (FOF 3.260). Similarly, Freeport LNG plans to build a double-containment tank 

because of its own safety concerns and because it will have to acquire less land. In fact, Freeport 

LNG searched the entire state of Texas to find a parcel of land that would accommodate a singlecontainment tank, but was unsuccessful. (Eyermann, Tr. 6969-71) (FOF 3.387). According to 

Volker Eyermann of Freeport LNG, it is "difficult to find enough land to build a singlecontainment tank. . . . If you build -- try to find a new site, you are going to have a hard time 

finding one that will allow you to construct a single-containment tank." (Eyermann, Tr. 7054-

55; see also Scorsone, Tr. 4922, 4988) (FOF 3.11, 3.387).

Other factors have contributed to this changing trend in the U.S. market. Tank 

security is one factor. (E.g., Puckett, Tr. 4586-87) (FOF 3.260). Tank safety is another factor. 

Some owners have moved to double and full-containment tanks in part because they are

recognized as safer. (Glenn, Tr. 4112-13; Hall, Tr. 1842-43) (FOF 3.12). CB&I's competitors 

have also recognized this fact:

The trend is to reduce the risk, which means full and double 

containment is becoming more popular. The trends start outside of 

the API subcommittees on tanks and vessels, associated with

seismic impact, all the way over to just customer concern for 

terrorism and things like that.

(Cutts, Tr. 2573; see also Cutts, Tr. 2498-2500) (FOF 3.13). Regulators are increasingly 

expected to mandate use of double or full-containment tanks. (FOF 3.13) 
1167887 50 

To be sure, some single-containment tanks are still being planned in the U.S. 

Expansions of the Cove Point, Lake Charles, and Elba Island facilities will all involve singlecontainment LNG tanks. (J. Kelly, Tr. 6260; Bryngelson, Tr. 6214) (FOF 3.469, 3.484). 

Because these tanks involve expansions of existing facilities with single-containment tanks, 

construction of new single-containment tanks is "grandfathered." (Eyermann, Tr. 7054) (FOF 

3.14).

2. Specific evidence supports the conclusion that entry barriers 

do not exist in the LNG markets.

a. Reputation is not a barrier to entry in the LNG

markets.

Reputation is not a barrier to entry. As discussed in Section A, infra, new entrants 

have the necessary reputation to construct LNG tanks and facilities in the U.S. Most current 

customers are familiar with many (if not all) of these entrants and would permit them to bid on 

future LNG projects in the U.S. 

b. U.S. construction standards are not barriers to entry in 

the LNG markets.

Complaint Counsel has argued that foreign companies cannot effectively compete 

in the U.S. LNG market because they are unfamiliar with applicable codes and standards, such as 

American Petroleum Institute ("API") standards. This argument misses the mark for two

reasons. First, standards applicable to building LNG facilities in the U.S. are often used 

internationally. (Scorsone, Tr. 4924-25; Rano, Tr. 5950, 5891; Bryngelson, Tr. 6147) (FOF 

3.512, 3.513). Second, new entrants in the U.S., such as Technigaz, TKK, and Skanska/Whessoe 

have all built LNG tanks overseas to API and other standards used in the U.S. (Scorsone, Tr. 

4926-27; Rano, Tr. 5890-91; Rapp, Tr. 1332; Carling, Tr. 4463, 4479; Izzo, Tr. 6488) (FOF 

3.515, 3.516). 
1167887 51 

c. Engineering is not a barrier to entry in the LNG

markets.

Complaint Counsel argues engineering capability is an entry barrier. This

argument lacks merit, as new entrants already possess engineering capabilities necessary to 

design LNG facilities. (See Harris, Tr. 7249-51). Further, this knowledge is not particularly 

secret; engineering of an LNG tank does not differ much from engineering of any cylindrical 

flat-bottom tank. (Scorsone, Tr. 4886-87; Rano, Tr. 5894-95) (FOF 3.28, 3.29). In fact, CB&I 

itself does not have a team of LNG-only tank engineers. Engineers that would work on an LNG 

project also design foundations and structural steel components on many other structures. 

(Glenn, Tr. 4114-15; Scorsone, Tr. 4887-88) (FOF 3.29).

d. Procurement of raw materials is not a barrier to entry 

in the LNG markets.

Complaint Counsel has argued that CB&I has superior access to raw materials for 

LNG projects in the U.S. This claim lacks merit, as the procurement process is simple and does 

not provide any advantage to CB&I over its foreign competitors. (Scorsone, Tr. 4892; [xxxxxxx 

xxxxxxxxxxxxxxxx] (FOF 3.548, 3.549). 9 percent nickel steel, the most specialized of the raw 

materials needed for LNG tanks, is not even available in the U.S; it is internationally sourced. 

(See Izzo, Tr. 6503) (FOF 3.548). All competitors must buy this steel in Japan or Europe. 

[xxxxxxxxxxxxxxxxxxxxxxxx]; Cutts, Tr. 2474-75; see also Bryngelson, Tr. 6153) (FOF 3.548, 

3.561). For example:

[xxxxxxxxxxxxxx: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxx: xxxxxxxxxxxxxxxxxxxx
1167887 52 

xxxxxxxxxxxxxx: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxx: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxx: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxx

xxxxxxxxxxx: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxx] Like its competitors, CB&I purchases 9 percent nickel steel

overseas because a credible source of this nickel steel is not available in the U.S. For its most 

recent LNG projects, CB&I purchased this nickel steel from Japan or Europe. (Glenn, Tr. 4116-

17; Scorsone, Tr. 4891; Rano, Tr. 5896-97) (FOF 3.547). Prior to the Acquisition, PDM also 

purchased 9 percent nickel steel from European mills. (Scorsone, Tr. 4890-91) (FOF 3.31). 

e. Fabrication is not a barrier to entry in the LNG

markets. 

Complaint Counsel argues that CB&I's access to fabrication facilities in the U.S. 

provides it with a competitive advantage. This argument lacks merit for two reasons: First, steel 

fabrication generally takes place at or near the producing mill, which in the case of LNG tanks is 

located overseas. Because CB&I has no fabrication facilities overseas, they have no advantage 

relative to competitors. (Rano, Tr. 5899; Bryngelson, Tr. 6153; Izzo, Tr. 6503) (FOF 3.561, 

3.562, 3.563). In fact, CB&I and PDM often purchased prefabricated 9 percent steel for LNG 

projects in the U.S., as opposed to using its own fabrication shops. (Glenn, Tr. 4118-19; 

Scorsone, Tr. 4893-95; see also Harris, Tr. 7249-51) (FOF 3.36). Second, even if CB&I were 
1167887 53 

able to use its fabrication shops, it would gain only a minor advantage because fabrication is 

simple and not a major part of LNG tank construction. (See [xxxxxxxxxxxxx]; Glenn, Tr. 4117, 

4119; Rano, Tr. 5898; Glenn, Tr. 4117) (FOF 3.564)]. 

f. Setup and logistics do not present entry barriers to the 

LNG markets.

After fabrication is completed, the next step in constructing an LNG tank is to 

bring all of the equipment to the job site. This set of tasks does not present an entry barrier. In 

the U.S., where equipment rental and spare parts are widely available, this task is relatively easy. 

(Rano, Tr. 5900-01) (FOF 3.37). 

g. The assembling of a labor force is not a barrier to entry 

in the LNG markets.

Complaint Counsel contends that CB&I has an advantage in procuring labor in 

the U.S. relative to foreign competitors. They argue that foreign companies would incur 

increased costs by importing labor from other countries and that foreign companies somehow 

lack the ability to recruit U.S. labor. This is wrong for three reasons: First, LNG tank 

competitors use exclusively local labor in areas with a skilled labor pool. (Scorsone, Tr. 4921; 

Rano, Tr. 5906-07, 5909, 5916-17; see also Bryngelson, Tr. 6150) (FOF 3.552, 3.553, 3.557). 

Using local labor reduces the need to pay room and board expenses for out-of-town workers. 

(Rano, Tr. 5909-10) (FOF 3.554). 

Second, the process used to recruit local labor in the U.S. is not particularly 

difficult; in fact, it is easier to recruit local labor in the U.S. than in other countries because the 

U.S. has a highly skilled labor pool. (Rano, Tr. 5908-09, 5972-73) (FOF 3.555). Foreign 

entrants have demonstrated their ability to build LNG tanks with local labor worldwide. This 

suggests that they should be able to do the same in the U.S. (E.g., Carling, Tr. 4461-62; Rapp, 

Tr. 1310, 1337-38) (FOF 3.558). 
1167887 54 

Third, all competitors will have equal access to U.S. laborers. The fact that CB&I 

has U.S. field crews provides no advantage, as those workers are paid on an hourly basis and free 

to work for other tank constructors. (Rano, Tr. 5952-53) (FOF 3.550, 3.552). Further, CB&I 

does not plan to use a large contingent of core field workers for future U.S. LNG projects. The 

bulk of the labor force will be locally recruited. (Rano, Tr. 5917-18, 5952-53) (FOF 3.39). Like 

foreign companies, CB&I will need to pay transportation, room, and board costs for its key 

management and supervision. Like foreign companies, CB&I will hire the great majority of its 

laborers from the local labor pool and will pay them consistent with applicable regulations in the 

area. (See Rano, Tr. 5906-07) (FOF 3.556). In fact, some customers expect CB&I to be at a 

disadvantage because it uses large numbers of traveling field crews. (See, e.g., Bryngelson, Tr. 

6150) (FOF 3.556). 

h. Welding is not a barrier to entry in the LNG markets.

Complaint Counsel has repeatedly asserted throughout this litigation that welding 

skills are a barrier to entry. The evidence presented at trial undercuts this position. Welding 

processes used on an LNG tank are not specific to those types of tanks. They are also used for 

LPG tanks, water tanks, and oil tanks. (Rano, Tr. 5931) (FOF 3.48). Further, welding 9 percent 

nickel steel is not particularly difficult or special. It involves the exact same processes and 

techniques used to weld carbon steel and is much easier to weld than stainless steel or aluminum. 

(Rano, Tr. 5872-73, 5947) (FOF 3.532).7

CB&I has no special access to experienced welders; it does not have permanent 

salaried welders on its payroll. It is unnecessary to find such welders, because new welders can 

 

7 Gerald Glenn noted that 9 percent nickel welding is a little more sophisticated in that the metallurgy would 

take a different kind of welding rod and a little different technique. (Glenn, Tr. 4120-21) (FOF 3.532). Similarly, 

Luke Scorsone noted that although the welding techniques used on a cryogenic tank can differ than those used for an 

ambient temperature tank, the welding processes used are the same. (Scorsone, Tr. 4899) (FOF 3.532).
1167887 55 

be easily trained to weld 9 percent nickel steel. (Glenn, Tr. 4121; Rano, Tr. 5936-37; see also

Rano, Tr. 5932-33, 5935-36) (FOF 3.533, 3.534, 3.536).8 

In fact, due to re-certification requirements and a quick training process, it is 

easier to train new welders than to find experienced 9 percent nickel welders. (Rano, Tr. 5931-

32, 5937, 5942-44, 5947-48; see also Carling, Tr. 4462) (FOF 3.529, 3.532, 3.536). The U.S. 

labor pool is highly skilled, and contains the skills sets necessary to weld 9 percent nickel steel. 

(Glenn, Tr. 4121-22) (FOF 3.534). Moreover, newly trained welders can deliver quality welding 

services. (Rano, Tr. 5918; Carling, Tr. 4459) (FOF 3.538, 3.539). Further, new entrants have 

necessary welding technology and experience and can pass it along to the local workforce. (See

Carling, Tr. 4459, 4462; [xxxxxxxxxxxxxxx]; Bryngelson, Tr. 6152) (FOF 3.530, 3.538, 3.539).

i. Steel erection and rigging is not a barrier to entry in the 

LNG markets.

A company constructing an LNG tank must perform steel erection and rigging, 

which is the practice of attaching cables, slings, and ropes to pieces of steel and hoisting them 

into position. (Scorsone, Tr. 4897-98) (FOF 3.46). These skills are not entry barriers, as they 

are necessary for construction of any field-erected cylindrical tank as well as many other types of 

structures. These skills are easily found in any labor pool or developed through training. (Rano, 

Tr. 5945) (FOF 3.51). While erection equipment is necessary for this task it is not necessary to 

own such equipment. In fact, CB&I prefers not to own this equipment, because it is cheaper to 

rent it. (Glenn, Tr. 4122) (FOF 3.38). 

 

8 Welding supervisors need not have experience welding 9 percent nickel steel to work on an LNG tank. In 

Bonny Island the four welding supervisors did not have prior experience in welding 9 percent nickel steel. 

Similarly, supervisors on LNG projects in Indonesia, Das Island, and Spain did not have experience in working with 

nickel steel. (Rano, Tr. 6031-32) (FOF 3.535).
1167887 56 

j. FERC is not a barrier to entry in the LNG markets.

Owners generally must receive approval from the Federal Energy Regulatory

Commission ("FERC") in order to build an LNG import terminal in the U.S. (E.g., Scorsone, Tr. 

4930) (FOF 3.519).9 Complaint Counsel has contended that new entrants cannot compete in the 

U.S. because they are not familiar with FERC requirements. This argument lacks merit. Tank 

contractors are not responsible for coordinating FERC filings; owners are responsible for this 

function. Tank contractors only provide technical data to assist in this filing. (E.g., Carling, Tr. 

4480; Izzo, Tr. 6492-93; Eyermann, Tr. 6975; Cutts, Tr. 2500; Bryngelson, Tr. 6148; see also

Scorsone, Tr. 4931) (FOF 3.406, 3.520, 3.522, 3.524). Many owners have experience with 

FERC permitting issues, such as El Paso, CMS, Williams, and Tractebel. (Bryngelson, Tr. 6149) 

(FOF 3.523). Further, tank contractors do not participate in most of the FERC application 

process, consists of preparing 13 so-called "resource reports." (See Eyermann, Tr. 6972) (FOF 

3.523). Only Resource Report Number 13 involves tank contractor input. (Eyermann, Tr. 6972-

75; see also Scorsone, Tr. 4931) (FOF 3.521). Owners have many sources of input for these 

reports. (Eyermann, Tr. 6973-74) (FOF 3.389). In fact, two recent entrants have provided this 

support to LNG customers. Daewoo/S&B has provided this assistance to Freeport LNG. 

(Eyermann, Tr. 6974-76, 7048-49) (FOF 3.392, 3.525). Dynegy has successfully obtained FERC 

approval for its technical application with Skanska/Whessoe's assistance. (Puckett, Tr. 4551-52; 

see also RX 926) (FOF 3.311, 3.525). 

 

9 Owners who build peakshaving facilities do not have to gain approval from FERC if the facility does not 

involve interstate commerce. (See Scorsone, Tr. 4930). For example, the Memphis peakshaving facility was not 

subject to FERC regulation, nor does MLGW expect any future projects to be subject to FERC regulation. (Hall, Tr. 

1842-43) (FOF 3.519). 
1167887 57 

k. Bonding is not a barrier to entry in the LNG markets.

Complaint Counsel incorrectly argues that bonding is a barrier to entry. All of the 

new entrants are large, sophisticated companies with strong financials. [xxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] Similarly, 

Rob Bryngelson of El Paso noted that all of the companies on its prequalification list, including 

Skanska/Whessoe, Technigaz, and TKK, have the necessary financial capabilities to stand

behind their projects. (See Bryngelson, Tr. 6125-26, 6128) (FOF 3.371). CB&I is a smaller 

company than many of the new foreign entrants, making it more difficult to compete in the world 

LNG markets. (See Glenn, Tr. 4222-23) (FOF 3.230). 

In fact, the Acquisition actually allowed CB&I to become a larger, more

financially secure company. 10 Prior to the Acquisition, CB&I was struggling in terms of letters 

of credit, financing, and insurance premiums. (See Glenn, Tr. 4080) (FOF 9.21). This created 

competitive problems for CB&I in the LNG markets. LNG owners evaluate the financial size of 

an LNG tank contractor, because they need to have comfort that it "has the financial resources 

and can deploy the materials, the skilled labor and equipment to construct the project without the 

risk of the contractor defaulting on the contract." (Scorsone, Tr. 4939). To guard against 

default, owners seek financial guarantees from contractors; the size of an LNG tank company 

bears directly on the customer's willingness to accept a financial guarantee. (Scorsone, Tr. 4939-

40). 

 

10 CB&I also engineered the Acquisition in an attempt to achieve efficiencies. Specifically, CB&I thought it 

could probably eliminate some fabrication capability, construction equipment and tools, salespeople, and sales 

offices. (Glenn, Tr. 4080-81). Through the combination of best practices, CB&I thought it could come up with a 

better, less expensive product. (Glenn, Tr. 4081). Some of these efficiencies have occurred since the Acquisition. 

(Glenn, Tr. 4084-84).
1167887 58 

l. Subcontracting is not a barrier to entry in the LNG

markets.

Complaint Counsel argues that new entrants will incur higher costs than CB&I 

because they will need to subcontract more phases of the project. This argument is unsupported 

by the evidence. All LNG tank builders subcontract out portions of an LNG tank job. 

(Bryngelson, Tr. 6143) (FOF 3.542). For example, CB&I subcontracted the foundation and 

concrete work for a recent project to a contractor with no prior LNG experience. (Rano, Tr. 

5950-51) (FOF 3.43). In fact, CB&I has never self-performed the construction of concrete walls 

for field-erected LNG tanks; it has always subcontracted this function to "competent concrete 

people." (Rano, Tr. 5923-24) (FOF 3.546).11 Further, there is no evidence that CB&I would 

need to subcontract fewer functions than foreign companies. For example, with respect to 

fabrication, all companies operating in the U.S. would need to subcontract out steel fabrication to 

a facility in Europe or Japan. (See Subsection III.B.2.d, infra). Even if such evidence existed, 

subcontracting does not always raise costs. In fact, subcontracting can result in lower prices 

because it reduces overhead costs and may take advantage of certain efficiencies possessed by 

the subcontractor. (Bryngelson, Tr. 6143-44; Cutts, Tr. 2472; see also Harris, Tr. 7253-54) (FOF 

3.543).

m. "Learning by doing" is not a barrier to entry in the 

LNG markets.

Complaint Counsel argues that new entrants will have cost disadvantages

associated with "learning by doing." (E.g., Simpson, Tr. 3235-38). This argument is misplaced, 

as the new entrants are worldwide tank producers who can and have competed in the U.S. 

(Harris, Tr. 7251-52) (FOF 7.93). As discussed extensively infra, each one has completed LNG 

 

11 The concrete subcontract on a full containment, field-erected LNG tank is "significant," and can amount to 

40 percent of the value of the work. (Rano, Tr. 5923).
1167887 59 

projects around the globe, often with local partners with no prior experience in the LNG

industry.

n. The U.S. political climate is not a barrier to entry in the 

LNG markets.

The political situation in a particular country can affect the ability of a contractor 

to construct a field-erected LNG facility. In the U.S., this does not pose an entry barrier because 

"laws are stated and understood and applied equally." (Rano, Tr. 5974-76) (FOF 3.568).

o. Weather is not a barrier to entry in the U.S. LNG

markets. 

Weather in a particular country can affect the ability of a contractor to construct a 

field-erected LNG facility. Because U.S. weather is relatively temperate, weather patterns do not 

pose a barrier to entry. (Rano, Tr. 5978-79) (FOF 3.569). 

p. Communications and infrastructure are not a barrier to 

entry in the LNG markets.

Available communications and infrastructure can affect the ability of a contractor 

to construct a field-erected LNG facility. Communication is important for many reasons, such as 

problem solving and informing management of developments. Because of the developed

communication infrastructure in the U.S., it is easier to construct LNG facilities in the U.S. than 

in other, less developed parts of the world. Accordingly, the communications and infrastructure 

system in the U.S. is not an entry barrier. (Rano, Tr. 5986-87) (FOF 3.570). 

3. The Trinidad bid contest shows that entry barriers do not exist 

in the LNG markets.

Neither Dr. Simpson nor Complaint Counsel has conducted any experiments to 

validate their allegations regarding entry barriers. The recent bidding contest in Trinidad

provides a natural market experiment that sheds light on whether such entry barriers actually 

exist.
1167887 60 

In the fall of 2002, TKK/AT&V won a project to build a single-containment tank 

for Atlantic LNG in Trinidad by undercutting CB&I's price by approximately 5 percent. (Glenn, 

Tr. 4095, 4105; Carling, Tr. 4488-89) (FOF 3.326, 3.327, 3.329). This project was managed by 

Bechtel on behalf of Atlantic LNG in three phases. (Rapp, Tr. 1286; Glenn, Tr. 4138-39) (FOF 

3.316). The original tanks were constructed by Whessoe; CB&I won and executed the

subsequent LNG tank expansion. (Rapp, Tr. 1286; Glenn, Tr. 4139) (FOF 3.316).12 CB&I 

executed its portion of the project within the last two or three years; it is currently on site 

completing the tanks. (Rapp, Tr. 1287; Glenn, Tr. 4139) (FOF 3.332). CB&I bid on the next 

phase of this project. However, it was not the low bidder. (Carling, Tr. 4488-89; Glenn, Tr. 

4105, 4140; Scorsone, Tr. 4950, 4953-54) (FOF 3.330).

The Fall 2002 award to TKK of the third phase provides valuable information 

regarding the ability of TKK/AT&V and other new entrants to compete with CB&I on an equal 

footing. First, analysis of projects in the Western Hemisphere is relevant because jobs near the 

U.S. provide information that is useful to determine whether or not suppliers can sell in the U.S. 

(Harris, Tr. 7218-19) (FOF 7.103). Second, as discussed below, the recent Trinidad award 

provides insight on the existence of entry barriers in the U.S., because CB&I has many of the 

same advantages in Trinidad that it is alleged to have in the U.S.: 

• CB&I's prior experience in Trinidad -- CB&I had extensive prior

experience working in Trinidad. In fact, CB&I was in the process of

completing an LNG tank on the same site. (Scorsone, Tr. 4954-56; see also

Simpson, Tr. 3852) (FOF 7.218). Despite this "advantage," CB&I lost the 

job. 

• Familiarity with Trinidad subcontractors -- Complaint Counsel has argued 

that CB&I's familiarity with subcontractors in the U.S. gives it a competitive 

advantage. Trinidad shows this advantage is not meaningful because, in

Trinidad, CB&I also had extensive experience in dealing with Trinidadian 

 

12 CB&I believes that this facility supplies natural gas to the U.S. market. (Glenn, Tr. 4104-05)..
1167887 61 

local subcontractors. (Scorsone, Tr. 4956) (FOF 3.332). This "advantage" 

was not enough to win the job for CB&I. 

• CB&I's access to workforce in Trinidad -- Complaint Counsel argues that 

CB&I's familiarity with local labor gives it a competitive advantage. 

However, in Trinidad CB&I had a strong local following among the Trinidad 

labor force, and CB&I had knowledge of that labor force because CB&I was 

currently employing many local workers at the time this contest took place. 

(See Scorsone, Tr. 4954-56) (FOF 3.332). Despite this "advantage," CB&I 

lost the job.

• Familiarity with local regulations -- Complaint Counsel argues that CB&I 

enjoys advantages over competitors because it is more familiar with U.S. 

regulations. However, in Trinidad, CB&I was very familiar with the local 

regulations, especially because it was currently working in the country. (See

Scorsone, Tr. 4956) (FOF 3.332). Despite this recent familiarity, CB&I could 

not win the job. 

• No prior experience in location -- Complaint Counsel argues that a company 

without prior experience in the U.S. cannot compete with CB&I. However, 

despite the fact that CB&I had already built LNG tanks in Trinidad on a site

only yards from where the new LNG tank will be built, it lost the bid contest 

to a company with no prior experience working in Trinidad. (RX 838). 

CB&I's alleged advantages in Trinidad simulate its alleged advantages in the U.S. 

and the alleged disadvantages of the new entrants in the U.S. As such, it is a natural market 

experiment disproving Complaint Counsel's entry barrier and cost disadvantage assertions.

C. CUSTOMERS IN THE LNG MARKETS ARE SOPHISTICATED.

Under Baker Hughes, Respondents may also rebut a prima facie case by

presenting evidence that customers are sophisticated and able to fend for themselves. See United 

States v. Baker Hughes, 908 F.2d at 986 ("The court's consideration of [factors including the 

sophisticated nature of consumers] was not only appropriate, but imperative, because in this case 

these factors significantly affected the probability that the acquisition would have

anticompetitive effects"). Most current customers for LNG facilities are massive global energy 

companies who have created specific parameters for their bidding or the negotiation processes, 
1167887 62 

have engaged in careful examination of contractors' qualifications, and use the services of

specialized consultants to assist them on matters of technology and pricing. Further, those 

current LNG customers are large, multinational corporations with extensive experience in the 

LNG field.

Under Baker Hughes, one indicium of sophistication is an insistence on taking 

multiple confidential bids. 731 F. Supp. at 11. Many customers for LNG tanks accept

confidential bids from multiple bidders in a sophisticated bidding process. In some cases, 

owners bifurcate the bidding process. For example, Dynegy insisted on competitively bidding 

the EPC portion of its project separately from the tank portion. (Puckett, Tr. 4543-44, 4550) 

(FOF 3.68, 3.265). Other owners plan to solicit multiple bids from tank vendors. (E.g., 

Eyermann, Tr. 7018, 7022-23; Izzo, Tr. 6494-95) (FOF 3.395, 3.403). In some cases, owners 

choose to enter into a sole source arrangement with one contractor. Owners choosing this 

approach engage in extensive negotiations and have been in control of negotiations. For 

example, [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]

In many cases, customers have carefully examined bidder qualifications, tending 

to show that these customers are sophisticated. For example, Dynegy recently conducted an 

extensive pre-qualification process. The process involved, for example, face to face interviews 

and investigations regarding performance on prior projects. (See Puckett, Tr. 4554) (FOF 3.277). 

To assist it in the process of selecting a tank manufacturer, Dynegy has worked with Black & 
1167887 63 

Veatch -- a contractor that holds itself out as being a leader in LNG gas processing. Other 

customers have examined abilities of new entrants, such as Freeport LNG and BP. (See 

Eyermann, Tr. 6981-83, 6994-96, 7000-01, 7008, 7015-16; Sawchuck, Tr. 6062-63) (FOF 3.394, 

3.423).

Further, owners often hire consultants with experience in the industry and access 

to pricing information for LNG tanks. For example, El Paso retained KBR to assist it in the bid 

evaluation process. KBR is the "leading EPC contractor dealing with owner issues, front-end 

engineering studies, specifications development, taking the bids, construction terminals." 

(Scorsone, Tr. 4941). It assists owners in evaluating tank bids, has access to historical pricing 

information of LNG tanks and can determine whether LNG tank prices are reasonable based on 

this pricing. (Scorsone, Tr. 4940). Similarly, [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] Other 

consultants, such as Project Technical Liaison Associates ("PTL"), also have access to historical 

pricing information. (See Scorsone, Tr. 4941)..

Most LNG customers are large, international corporations with extensive

experience in the LNG field. For example, Bechtel employs approximately 50,000 employees 

worldwide, and is regarded as a "world-class construction firm, engineering construction

company." (Rapp, Tr. 1303-04) (FOF 3.316). Bechtel has engineered and constructed LNG 

facilities in a variety of locations, including Alaska, Indonesia, and Algeria. (Rapp, Tr. 1286) 

(FOF 3.231). Similarly, Enron (before its demise) was a world leader in LNG, developing 

projects in India, Puerto Rico, and the Bahamas for years. (Carling, Tr. 4448) (FOF 3.571). [xx

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xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]
1167887 64 

D. EVIDENCE SHOWS THAT ENTRY IN THE LNG MARKETS IS 

SUFFICIENT.

As discussed in Part II, supra, Complaint Counsel's prima facie case in the LNG 

markets is very weak. See Baker Hughes, 908 F.2d at 986. Accordingly, Respondents need only 

make a minimal showing to rebut this case. See Baker Hughes, 908 F.2d at 983. Despite this 

slight burden, Respondents have presented compelling evidence that new entry will constrain 

CB&I's pricing in the LNG markets. Accordingly, Complaint Counsel must present additional 

evidence showing that lessening of competition is likely, including evidence regarding the 

sufficiency of entry outlined by Respondents. See Baker Hughes, 908 F.2d at 984-86. 

Although it is not Respondent's burden to do so, it has presented evidence

demonstrating that new entry has created competition sufficient to ensure that the Acquisition 

will not have an anticompetitive effect. The evidence shows that CB&I is aware of (and fears) 

the new entrants in the LNG market, that customers receiving post-Acquisition pricing are 

satisfied with that pricing, and that current customers for LNG facilities are not concerned by the 

Acquisition. 

In attempting to meet its burden, Respondents expect Complaint Counsel to argue 

that none of the new entrants could replace PDM as a competitor on its own. This is simply not 

the standard. New entrants need not replicate PDM for entry to be sufficient because there are 

different ways of providing the same service, and the entrants can collectively prevent CB&I 

from exercising market power. (Harris, Tr. 7255-56) (FOF 7.92). Consistent with this view, Dr. 

Harris believes that new entrants can compete or are already competing in the market and that 

they are preventing CB&I from unilaterally exercising market power. (Harris, Tr. 7244-45) 

(FOF 7.93). As Dr. Harris noted, "there's no harm to competition from the acquisition in the 

LNG market" because the new entry has created competition that is "quite robust." As Dr. Harris 
1167887 65 

notes, "[t]here are numerous, numerous bidders and the testimony as I understand it is that prices 

have not gone up." (Harris, Tr. 7194-95) (FOF 7.90). Further, customers have "numerous 

options" to CB&I in the LNG market. (Harris, Tr. 7194-95) (FOF 7.89, 7.90).

1. CB&I is aware of new entrants and fears their ability to

compete.

CB&I is well-aware of new entrants in the U.S. market and fears this new

competition. CB&I's state of mind regarding this issue was called into question by Complaint 

Counsel's expert witness -- Dr. Simpson. In attempting to show that the Acquisition lessened 

competition, Dr. Simpson relied on a "critical loss" analysis. CB&I's state of mind is a critical 

part of such an analysis, because the important question is whether CB&I will behave in a certain 

manner. (Harris, Tr. 7260-61; Simpson, Tr. 3865) (FOF 7.79, 7.245). 

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1167887 66 

CB&I is very familiar with Skanska/Whessoe. It has competed against

Skanska/Whessoe in various international locations and regards them as an extremely formidable 

competitor. (Glenn, Tr. 4093; Scorsone, Tr. 4863-64) (FOF 3.95). CB&I knows that Skanska is 

one of the largest engineering construction companies in the U.S. and around the world. (Glenn, 

Tr. 4093 (state of mind); Scorsone, Tr. 4852) (FOF 3.97). CB&I also is aware that

Skanska/Whessoe is marketing itself to several U.S. LNG customers and that customers such as 

Dynegy take Skanska/Whessoe seriously. (Glenn, Tr. 4094, 4221; see also Scorsone, Tr. 4863) 

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CB&I also considers TKK/AT&V to be a formidable competitor in the U.S. 

market. (See, e.g., Glenn, Tr. 4102; Scorsone, Tr. 4856, 4861) (state of mind) (FOF 3.135). 

CB&I has competed against TKK around the world in the LNG market. (See Scorsone, Tr. 

4850, 4856, 4860; Glenn, Tr. 4092-93) (FOF 3.136). PDM and CB&I have worked with TKK in 

the past. For example, in the 1970's, PDM had a licensing agreement with TKK under which 

PDM transferred LNG construction technology to TKK in exchange for royalties. (Scorsone, Tr. 

4857) (FOF 3.137). CB&I perceives that AT&V/TKK are "very serious about capturing work in 

the United States and in North American for . . . LNG storage projects." (Scorsone, Tr. 4856) 

(FOF 3.135). CB&I fears this alliance because AT&V is a current competitor in other markets 

and has a good reputation in the industry. (See Glenn, Tr. 4103; Scorsone, Tr. 4866) (state of 

mind) (FOF 3.138). 
1167887 67 

CB&I has been told by the customer that [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

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xxxxxxxxxxxxxxxxxx] (See also Scorsone, Tr. 4950) (FOF 3.236). CB&I believes that AT&V 

was involved with this project because TKK and AT&V had recently formed a joint venture to 

tackle these types of projects and because AT&V had connections in Trinidad. (Scorsone, Tr. 

5224) (FOF 3.325). CB&I saw the Trinidad job as winnable because it had a number of

advantages. It was the incumbent contractor, was already employing local laborers, had a good 

understanding of the local labor force, and had done a good job for the owner. (Scorsone, Tr. 

4954-56) (FOF 3.332). CB&I believed that its scheduling was on time and that its safety record 

was excellent. (Glenn, Tr. 4139-40; see also Scorsone, Tr. 4957-58) (FOF 3.323). As a 

consequence of these tangible advantages, CB&I attempted to raise its margin by 5-6 percent on 

the most recent Trinidad bid. (JX 11) (FOF 3.330).

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xxxxxxxxxxxxxxxxxxxxxxxxxxxx] (Glenn, Tr. 4140) (state of mind) (FOF 3.333). CB&I 

learned from Bechtel that "[t]he price that TKK and ATV was awarded was greater than 5 

percent or more under the price that CB&I submitted for the project." (Scorsone, Tr. 4950-52) 

(FOF 3.327). TKK was able to overcome CB&I's advantage of already being on site. This 

information leads CB&I to believe that TKK/AT&V can compete for projects on a costcompetitive basis in North America, including the U.S. (Scorsone, Tr. 4951-54) (FOF 3.336). 

The fact that AT&V has never built an LNG tank in the U.S. does not give CB&I comfort, 

because AT&V has "always been willing to push itself into new areas" such as pressure spheres 

and LOX/LIN tanks." (Scorsone, Tr. 4867) (FOF 3.139). Similarly, TKK's 1994 Memphis loss 
1167887 68 

does not change CB&I's view of TKK/AT&V, because it occurred well before they had "planted 

their flag" in the U.S. (Scorsone, Tr. 5014) (FOF 3.507).

CB&I knows Technigaz as a global competitor in the world LNG market. 

(Glenn, Tr. 4093, 4095) (FOF 3.189). Recently, Technigaz was acquired by Saipam, making it 

one of the largest engineering construction companies in the world, many times the size of 

CB&I. (Glenn, Tr. 4093) (FOF 3.143). CB&I has much respect for Zachry and knows it to be a 

San Antonio-based general contractor that is "low-cost driven" and has broad capabilities in the 

industrial and heavy civil industry. (Glenn, Tr. 4095; Scorsone, Tr. 4865) (FOF 3.160, 3.190). 

CB&I has seen Technigaz/Zachry's press release describing the alliance and

believes it to be a serious signal that Technigaz/Zachry intends to compete hard in the U.S. (See

Scorsone, Tr. 4854-55; RX 306) (FOF 3.192). In particular, CB&I is concerned about

Technigaz/Zachry's expertise in concrete, which will be necessary for many of the upcoming 

U.S. LNG projects. CB&I also knows that Technigaz/Zachry has hired a former CB&I salesman 

to assist in marketing. While Zachry has never built an LNG tank, it has experience in the 

general contracting and heavy civil industries, which includes concrete placement, logistics 

management, and direct craft hire, and it understands the various types of cultures of owners 

with sophisticated projects. (Scorsone, Tr. 4855, 4868) (FOF 3.160). [xxxxxxxxxxxxxxxx 

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66) (state of mind) (FOF 3.192, 3.193). 

CB&I executives saw a press release announcing the Daewoo/S&B alliance. 

(Scorsone, Tr. 4857-58; RX 10) (FOF 3.210). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (See Glenn, Tr. 4223) (state of mind) (FOF 3.211). 

Specifically, CB&I perceives the Daewoo/S&B alliance to be "formidable, tough, experienced, 
1167887 69 

worldly competition." (Scorsone, Tr. 4858; see also Scorsone, Tr. 4862) (FOF 3.210). CB&I 

has experience competing against Daewoo in the LNG markets, and is aware of Daewoo's 

extensive LNG construction records worldwide. [xxxxxxxxxxxxxxxxxxxxxxxxxxxx

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CB&I has evaluated competition for specific U.S. LNG projects and expects 

significant competition for each project. For example, CB&I expects Skanska/Whessoe and 

Technigaz/Zachry to compete on the Yankee Gas peakshaver because Yankee Gas has indicated 

a preference for a double concrete tank. While Skanska/Whessoe and Technigaz/Zachry have 

expertise in this area, CB&I does not. (E.g., Glenn, Tr. 4141; Scorsone, Tr. 4988-89) (FOF 

3.346). CB&I does not execute its own concrete work, nor does it have a double concrete wall 

full-containment LNG tank design. (Glenn, Tr. 4141; Scorsone, Tr. 4989) (FOF 3.346).

CB&I also expects stiff competition for the Freeport LNG job. CB&I is aware 

that Freeport LNG has hired Technip to handle preliminary engineering and Daewoo/S&B to 

handle tank designs for a FERC application. (Glenn, Tr. 4105, 4142; see also Scorsone, Tr. 

4991) (FOF 3.393). CB&I believes its potential competitors for this project include 

Skanska/Whessoe, Technigaz-Zachry, TKK/AT&V, Daewoo/S&B, MHI, and IHI. (Glenn, Tr. 

4145; Scorsone, Tr. 4990-91) (state of mind) (FOF 3.396). CB&I perceives competition for 

other U.S. LNG projects as well. For example, CB&I expects Skanska/Whessoe, TKK/AT&V, 

and possibly Technigaz/Zachry to compete for an expansion of Cove Point. (Glenn, Tr. 4148 

(state of mind); Scorsone, Tr. 4988) (FOF 3.433). Similarly, CB&I believes that

Skanska/Whessoe, Daewoo/S&B, MHI and IHI will compete for the Calpine job in California. 

(Glenn, Tr. 4102, 4147) (state of mind).
1167887 70 

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CB&I also expects tough fights from these competitors on other LNG projects in 

North America. El Paso is considering several potential LNG projects including a project in 

Rosarito, Mexico. El Paso ha s hired KBR as the FEED contractor and would, in all likelihood, 

be the EPC contractor. (Glenn, Tr. 4146) (FOF 3.378). CB&I believes that Skanska/Whessoe, 

TKK, Technigaz/Zachry, MHI, and IHI will compete for the tank portion of this project, as well 

as other projects being developed by El Paso in Mexico. (Glenn, Tr. 4146; Scorsone, Tr. 4992-

93) (state of mind) (FOF 3.372). Marathon owns an LNG project in Baja California that is being 

built to service the U.S. (Glenn, Tr. 4151) (FOF 3.434). CB&I approached Marathon about 

being the overall contractor for the entire terminal. (Glenn, Tr. 4151) (FOF 3.435). Marathon 

told CB&I that it did not think CB&I had the financial capacity and bonding capability to handle 

the $500 to $700 million project. (Glenn, Tr. 4151) (state of mind) (FOF 3.437). At this point, 
1167887 71 

CB&I believes that KBR will be the EPC contractor for this project. (Glenn, Tr. 4151-52) (state 

of mind) (FOF 3.438).

Finally, prior to its financial difficulties, Enron planned an LNG import facility in 

the Bahamas to serve southern Florida via sub-sea pipeline. (Glenn, Tr. 4149; Scorsone, Tr. 

4997) (FOF 3.442). CB&I submitted pricing to Enron around the time it went into bankruptcy. 

(Glenn, Tr. 4149-50) (FOF 3.442). At that time, CB&I believed Skanska/Whessoe and TKK 

were competitors for the project. (Glenn, Tr. 4150) (state of mind) (FOF 3.443). Enron sold this 

project to Tractebel. (Scorsone, Tr. 4998) (FOF 3.446). CB&I expects Tractebel to build the 

project utilizing its own forces. (Glenn, Tr. 4151; see also Scorsone, Tr. 4998) (state of mind) 

(FOF 3.446).

2. Post-Acquisition transactions show that CB&I's behavior has 

been constrained by new entrants.

Current customers for LNG facilities are satisfied with the firm, fixed pricing they 

have received since the Acquisition. 13 This fact, combined with other post-Acquisition 

transactions occurring in the LNG market, shows that CB&I has been constrained by new entry. 

Each instance is discussed below:

a. Dynegy is satisfied with prices received by foreign 

competitors.

The Dynegy project is going forward. Dynegy "will award the tank very soon and 

. . . as part of that process they will award the tank and then will begin the EPC project after the 

first of the year." (Price, Tr. 619-20) (FOF 3.310). In 2002, Dynegy accepted bids from 

 

13 Because it cannot present favorable evidence regarding firm, fixed price bids, Complaint Counsel relies 

instead on "budget pricing" or "budget estimates." For numerous reasons, budget pricing cannot be used as an 

accurate depiction of what customers have been paying, or will pay in the future, for LNG projects. This issue is 

fully addressed in Section VIIA, supra.
1167887 72 

Skanska/Whessoe, Technigaz/Zachry, and TKK/AT&V and was satisfied with the bids received. 

(Puckett, Tr. 4556, 4587-88) (FOF 3.287, 3.309). 

Q. And at this point in the process, speaking for Dynegy now, you are 

satisfied with those bids at this time?

A. Yes. 

(Puckett, Tr. 4587-88) (FOF 3.309). 

Complaint Counsel makes much of the fact that CB&I did not initially bid on the 

Dynegy LNG tanks, arguing that: 1) CB&I's refusal to bid on these tanks was an exercise of

market power; and 2) the fact that CB&I was not present in the Dynegy bidding process rendered 

the bids received useless in assessing the competitive impact of the Acquisition. These

arguments ignore the facts surrounding CB&I's activities with respect to this project. These facts 

are briefly discussed below:

CB&I did submit a proposal to become the EPC contractor for the Hackberry 

project. (Glenn, Tr. 4128-29) (FOF 3.270). Dynegy notified CB&I that it had not been chosen 

as EPC contractor, and that Skanska/Whessoe won the job. (Glenn, Tr. 4129; RX 142) (FOF 

3.272). Skanska/Whessoe hired Black & Veatch to evaluate bids for the tank portion of the 

project. (Glenn, Tr. 4130) (FOF 3.273). Dynegy offered CB&I the opportunity to bid on the 

tank portion of the project, asking CB&I to submit its drawings, technical information and firm 

price to Black & Veatch, a competitor, for evaluation. (Glenn, Tr. 4130-31) (FOF 3.297). 

Because of its concerns regarding Black & Veatch's competitive position relative to it, CB&I 

initially refused to bid. (Glenn, Tr. 4411; RX 143) (FOF 3.300, 3.301).14 In February of 2002, 

Dynegy again asked CB&I to submit a bid for the tanks. To accommodate CB&I's security 

 

14 Luke Scorsone testified that this was a most unusual situation. He has never encountered a situation where 

one of the competitors was the EPC contractor taking bids on the tank, and also competing to bid on the tank. 

(Scorsone, Tr. 4948) (FOF 3.286). Scorsone believes this arrangement is highly unusual, and Dynegy was the 

(continued. . . ) only project in which Scorsone ever encountered it. (Scorsone, Tr. 4948-49) (FOF 3.286).
1167887 73 

concerns, Dynegy invited CB&I to submit its bid directly to Dynegy, rather than Black & 

Veatch. (Puckett, Tr. 4578; Glenn, Tr. 4134-35; RX 144) (FOF 3.302).

Internally, CB&I decided that if Dynegy would accept and evaluate its bid

directly, it would submit a tank bid. (Glenn, Tr. 4136) (FOF 3.303). Within two to three weeks 

of receiving Dynegy's invitation, CB&I indicated interest in submitting a bid for the LNG tanks. 

(Glenn, Tr. 4136-37; see also Puckett, Tr. 4559) (FOF 3.303). Puckett's response was a surprise: 

"Mr. Puckett responded that they had received three bids for the tank and that they were satisfied 

with the pricing and conditions on those three bids and that they therefore did not need nor 

would they accept a bid from CB&I." (Glenn, Tr. 4137; see also Puckett, Tr. 4559-60). Mr. 

Puckett's testimony is corroborative:

Q: And did you tell them that you were satisfied with the bids that you had 

and that their bid was not necessary at that time?

A. We told them that we had received three bids, that we were satisfied with 

the three bids, and that they were just too late in the process to come back 

in. 

(Puckett, Tr. 4559-60) (FOF 3.304). In an effort to get Dynegy to reconsider, Gerald Glenn 

contacted Dynegy's CEO, Chuck Watson. (Glenn, Tr. 4137) (FOF 3.305). Based on his 

conversation with Mr. Watson, 15 Mr. Glenn concluded that Dynegy would not permit CB&I to 

bid on the project. Accordingly, CB&I did not submit a bid. (Glenn, Tr. 4138; see also Puckett, 

Tr. 4573) (FOF 3.305).

In addition, expert testimony presented by Respondents shows that the Dynegy 

bidding is relevant, especially to rebut the "critical loss" theory of Complaint Counsel's expert --

Dr. Simpson. Dr. Harris pointed out that, if CB&I truly was the low cost supplier, they should 

 

15 Glenn testified that "Mr. Watson reiterated the fact that Dynegy was perfectly happy with the three bids 

that they had and that it simply was not necessary. His organization had concluded that they had everything they 

needed to proceed with the project and that they just didn't need a bid from CB&I." (Glenn, Tr. 4137) (state of 

mind) (FOF 3.305).
1167887 74 

have been able to win this job. Critical loss theory, as applied by Complaint Counsel's own 

expert witness, suggests that the loss of this job cost CB&I $21 million. Dr. Harris concluded 

that this was not a plausible result if CB&I truly had good information regarding its competitors' 

costs. (Harris, Tr. 7263-65). (FOF 7.82).

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[xxxxx] understanding regarding its contracting options is consistent with

CB&I's. The tradeoff between time and money is often one that CB&I's customers examine 

when deciding whether to enter into a sole-source arrangement. An owner may choose to solesource because it does not have the in-house staff available to manage a bid process or because 

its schedule does not allow sufficient time for such a process. (Glenn, Tr. 4124; see also

Scorsone, Tr. 4959) (FOF 3.462, 3.463). Conversely, an owner may solicit bids because of a 

company policy or a loose schedule. (Glenn, Tr. 4124) (FOF 3.463). In the end, the owner 

decides what format the contracting process will take. Owners often choose to sole-source 
1167887 75 

contracts even if they have competitive alternatives. (Glenn, Tr. 4125; Scorsone, Tr. 4959) (FOF 

3.461, 3.464).

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c. The Trinidad bid contest is a natural experiment

showing that the new entrants will be successful at

competitive prices.

The bid contest in Trinidad shows that CB&I is being disciplined by foreign 

competition in North America. Dr. Harris came to this conclusion after reviewing the facts 

surrounding this contest. Dr. Harris noted that CB&I's pricing on this project was "roughly 5 

percent higher than their pricing had been on the earlier Trinidad project," after adjusting for 

inflation and other factors. (Harris, Tr. 7350-51) (FOF 7.103). He also noted testimony

suggesting that "the winning price here was roughly 5 percent lower than the CB&I price." 

(Harris, Tr. 7350-51) (FOF 7.103). Dr. Harris explained that CB&I's loss of the Trinidad job to a 

competitor with a 5 percent lower price shows that prices for LNG tanks have not changed since 
1167887 77 

the Acquisition. (Harris, Tr. 7350-51) (FOF 7.103). He also pointed out that TKK's ability to 

win this project from CB&I "tells you something about the ability of the other companies to 

compete and to compete with a cost structure similar or better than CB&I." (Harris, Tr. 7350-

51). 

d. Enron received a band of tight pricing for a recent job 

in the Bahamas.

Further evidence of vibrant competition in post-Acquisition bidding can be found 

less than 100 miles from U.S. shores. In late 2001, Enron received firm, fixed price bids for an 

LNG import terminal in the Bahamas. Enron planned this project to serve energy needs of South 

Florida. (Carling, Tr. 4881; Glenn, Tr. 4149) (FOF 3.442). Enron received three bids for this 

project, from Tractebel, Skanska/Whessoe, and CB&I. The bids were within 7-10 percent of 

each other. Tractebel was the low bidder, followed by Skanska. CB&I was third. (Carling, Tr. 

4481-82) (FOF 3.445).

Nigel Carling, who was directly involved with this project, does not believe that 

the Acquisition has "adversely affected [his] ability to get a competitively priced LNG tank." 

(Carling, Tr. 4494) (FOF 3.253). In fact, he believes that competition has increased as a result of 

the Acquisition because foreign companies are "trying to break into the U.S." According to 

Carling, these foreign companies have "excellent credentials, having been able to put together 

competitive pricing." (Carling, Tr. 4494) (FOF 3.253). "There's no reason to believe they can't 

be competitive in the U.S." (Carling, Tr. 4495) (FOF 3.253). Carling explained, "[s]o in actual 

fact where you had a field of two, you've now got a field of at least four, maybe even five. So 

that increases competition, which means the prices are going to come down." (Carling, Tr. 4495) 

(FOF 3.253).
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3. Most current customers are not concerned about the effect of 

the Acquisition.

Other current customers for LNG facilities in the U.S. and North America are 

unconcerned with the effect of the Acquisition. They believe that existing competition is 

sufficient to keep prices low. For example, Freeport LNG plans to seek bids from Technigaz, 

TKK, CB&I, Daewoo, Skanska/Whessoe, and IHI for its upcoming project. (Eyermann, Tr. 

7018, 7022-23) (FOF 3.395). Freeport LNG has determined that it will need four or five bidders 

to receive a good price for its LNG tanks. (Eyermann, Tr. 7023-24) (FOF 3.397). As Volker 

Eyermann explained, more bidders are not necessary because most LNG tank construction costs 

are fixed:

They all will have to go to the Texas labor market . . . and the labor 

rates are whatever they are in the Freeport area. And they cannot 

do a lot of - a lot of maneuvering with the concrete price. A cubic 

meter of concrete is what it costs, So, most of these things are 

really fixed.
1167887 79 

(Eyermann, Tr. 7024) (FOF 3.397). Freeport LNG "is comfortable with the options that it 

currently has available for builders of field-erected LNG tanks for the Freeport project." 

(Eyermann, Tr. 7019) (FOF 3.398).16

Other current U.S. customers agree. Larry Izzo testified that Calpine needs four 

bidders to "get a very good competitive bid" and that Skanska/Whessoe, Technigaz/Zachry, 

TKK/AT&V, and CB&I are qualified to provide such bids. (Izzo, Tr. 6494-95) (FOF 3.405). 

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Like Calpine, [xx] and Freeport LNG, El Paso does not believe that the

Acquisition has affected LNG tank prices or harmed competition in any way. (Bryngelson, Tr. 

6155) (FOF 3.251). El Paso's Rule 3.33 representative noted that the LNG business is

"international" and that "no one participant controls the market." (Bryngelson, Tr. 6159-60) 

 

16 During Mr. Eyermann's cross-examination, Complaint Counsel made much of the fact that Mr. Eyermann 

had not seen pricing from previous LNG projects, such as the Memphis peakshaving project bid in the mid-1990s. 

As discussed in Part III-E, infra, Respondents contend that knowledge regarding these aged projects is not relevant. 

Mr. Eyermann further explained that, because the price of an LNG tank depends on the size, the location, the 

foundation, labor rates, labor efficiencies, material costs, and owner specifications, it is difficult to compare prices of 

LNG tanks that sit in different locations. (Eyermann, Tr. 7071-72). Accordingly it is not relevant to have pricing on 

past projects, such as Memphis, because the projects are not comparable. (Eyermann, Tr. 7072).
1167887 80 

(FOF 3.251). Further, El Paso does not believe that CB&I has any competitive advantage over 

other companies in providing turnkey LNG facility services: "It's a very competitive global 

market and we haven't seen them exert dominance in any of our bid -- our one bid process to date 

or any other information I have from KBR or any of the four advisers." (Bryngelson, Tr. 6146) 

(FOF 3.251).

Even Complaint Counsel's own witnesses, to some degree, agree that the

Acquisition has not substantially harmed competition. For example, Errol Rapp of Bechtel 

believes that Bechtel can get a "reasonable price" as a result of bidding between CB&I and 

Technigaz for U.S. LNG projects and that Technigaz/Zachry can effectively compete for LNG 

jobs in the U.S. (Rapp, Tr. 1325, 1333-34) (FOF 3.184, 3.249). Similarly, Clay Hall of MLGW 

agreed that he has seen no evidence to date that CB&I has the ability to control a market as a 

result of the Acquisition. (Hall, Tr. 1858-59) (FOF 3.255). Further, Hall believes it is possible 

that there may be more competition for LNG tanks in the U.S. today as compared to 1994-95. 

(Hall, Tr. 1860-1861) (FOF 3.255). 

E. RESPONDENTS' WITNESSES HAVE PROVIDED MORE

CREDIBLE EVIDENCE THAN COMPLAINT COUNSEL'S

WITNESSES.

Respondents presented numerous customers, both live and via deposition, who 

have been directly involved in the post-Acquisition LNG market. Each of these witnesses has 

knowledge regarding the current market and the competitors who participate in that market. 

Many of these witnesses work for companies with a strong incentive to complain about an 

acquisition that has affected their ability to obtain LNG tanks, as such tanks often cost hundreds 

of millions of dollars. These witnesses have not complained. Instead, they have testified that the 

Acquisition has not substantially lessened competition and that it may have actually improved 

competition. 
1167887 81 

By contrast, Complaint Counsel presented a variety of witnesses who generally 

lack foundation for their views, as they are unfamiliar with current LNG market developments. 

In particular, they lack knowledge regarding experience and capabilities of new entrants. For 

example, Eckhard Blaumueller has not been involved in the purchase or construction of an LNG 

facility since 1973 -- a time when LNG tanks were built of aluminum, rather than 9 percent 

nickel steel. (Blaumueller, Tr. 286) (FOF 3.642). Mr. Blaumueller retired from Peoples' Energy 

Resources Corporation in December of 2001. Since then, he has not been involved in, or done 

research regarding, the LNG industry. (Blaumueller, Tr. 279, 325, 329) (FOF 3.643). Further, 

he has no current knowledge regarding any foreign LNG tank suppliers or their efforts to enter 

the U.S. market. (Blaumueller, Tr. 321, 332-35) (FOF 3.644, 3.645).

Clay Hall of MLGW also lacks current information regarding the LNG industry. 

MLGW searched for LNG tank builders in 1994. Since that time, neither Mr. Hall nor MLGW 

have conducted such a search. (Hall, Tr. 1843-45) (FOF 3.653). MLGW has not received firm 

bids on such a tank since 1994, nor does it plan to purchase another until at least 2006. (Hall, Tr. 

1832-33) (FOF 3.650). Further, Mr. Hall was not familiar in any significant way with LNG 

import terminals, current competition for LNG tanks in the U.S. today, or pricing submitted by 

any foreign company for an LNG tank in the U.S. over the last five years. (Hall, Tr. 1854-57) 

(FOF 3.652, 3.653).

Other witnesses involved in the Memphis project admit to having virtually no 

current knowledge regarding the LNG markets. Robert Davis of Air Products acknowledged that 

Memphis was the "sole reference point" for his testimony. (Davis, Tr. 3204) (FOF 3.668). Mr. 

Davis has no responsibility for LNG in his current position, has not had experience with the 

construction of an LNG tank since 1974, lacks knowledge regarding companies that are
1167887 82 

constructing LNG tanks in the U.S. or worldwide, and is not familiar in any specific way with 

LNG import terminals. (Davis, Tr. 3177-79, 3187-88) (FOF 3.666, 3.668). Similarly, Dr. Hans 

Kistenmacher of Linde has not bid on a peakshaving facility since Memphis. (Kistenmacher, Tr. 

890) (FOF 3.671). He has been involved with "very, very few LNG tanks," and his experience is 

limited to the bidding of those tanks. (Kistenmacher, Tr. 888; see also Kistenmacher, Tr. 887) 

(FOF 3.669, 3.671). Specifically, Dr. Kistenmacher is unfamiliar with the activities of

TKK/AT&V, Technigaz/Zachry, Daewoo/S&B, or Skanska/Whessoe in the U.S. market for 

LNG facilities. (Kistenmacher, Tr. 937, 941-42) (FOF 3.672).

Even Complaint Counsel's witnesses with current involvement in the LNG

industry know very little. For example, Brian Price of Black & Veatch has not received any 

fixed, firm price bids from CB&I or PDM on an LNG tank since 1990. (Price, Tr. 644) (FOF 

3.665). Although Black & Veatch is a subcontractor on the Dynegy job and has access to the bid 

pricing for that job, Price himself has not seen that pricing. (Price, Tr. 609-10, 625) (FOF 3.314, 

3.660). Price was also unaware that Dynegy itself was satisfied with that pricing:

Q. Are you familiar, sir, since you claim to be a person who communicates 

with the client, that they are satisfied with the bids that they have for the 

tanks? Are you familiar with that? 

A. No. 

* * *

Q. Are you familiar or do you have knowledge based on your

communications with the client that they have found the budget pricing on 

the tanks to be within their estimated price range? 

A. No. 

Q. You're not familiar with that?

A. No. 
1167887 83 

(Price, Tr. 641; see also Price, Tr. 667) (FOF 3.664). [xxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (Outtrim, Tr.

763) (FOF 3.692). 

1. Many of Complaint Counsel's witnesses expressed views based 

on a single, irrelevant project: Memphis 1994.

Throughout this litigation, Complaint Counsel has vehemently argued that new 

competition will not constrain CB&I's prices in the way PDM did pre-Acquisition. They assert 

that the costs of foreign entrants will be higher than CB&I's, permitting CB&I to implement a 

price increase. As support for this conclusion, Complaint Counsel relies heavily on bidding 

results from the 1994 Memphis project. CB&I won that project over several other bidders, 

including two bidders that had foreign participation. Complaint Counsel's heavy reliance on the 

results of this project is overly simplistic, ignores key facts surrounding that bid contest, and 

ignores market changes that have occurred since that time. As Baker Hughes noted, failed entry 

in the past does not imply failed entry in the future. Id. at 987 n.9. Complaint Counsel's reliance 

on Memphis is flawed for many reasons: 

First, the bidders involved in the Memphis project are different than the bidders 

currently involved in the market. Complaint Counsel makes much of the fact that Whessoe was 

involved in the 1994 Memphis project. However, Whessoe was not a bidder in 1994, it was a 

small subcontractor. Further, Whessoe was a far different company in 1994. It did not have an 

office in the U.S. at that time, nor was it owned by a company with the financial size and muscle 

possessed by Skanska/Whessoe. (Kistenmacher, Tr. 939) (FOF 3.681). In addition, the joint 

venture involving Whessoe submitted a $15 million tank price for this project, only $1 million of 

which was attributable to Whessoe itself. The remaining $14 million consisted of a bid from 

Titan Constructors for construction and field-erection. (Kistenmacher, Tr. 900, 938) (FOF 3.498, 
1167887 84 

3.679). Titan is not a current entrant in the LNG market, nor is there a shred of evidence 

suggesting that any current entrant would incur the same costs, or require the same profit margin 

that Titan did at Memphis. 

Second, the willingness of foreign bidders to participate in the Memphis project is 

far less than the willingness of current entrants to participate in the market. Complaint Counsel's 

own witnesses acknowledge that Whessoe was reluctant to bid on the Memphis project in 1994. 

(Kistenmacher, Tr. 939-40) (FOF 3.497). Dr. Kistenmacher "had difficulties" getting Whessoe 

to provide the engineering quotation for the project. (Kistenmacher, Tr. 940) (FOF 3.497). 

Whessoe requested to be paid for its quote because it did not want to take the risk of bidding. 

(Kistenmacher, Tr. 940) (FOF 3.497).

Third, unlike the current entrants in the U.S. LNG markets, the foreign bidders 

involved in Memphis did not have a prior relationship with its joint venturers. For example, 

Brian Price noted that TKK's participation in the Memphis project was a "one-shot deal in 1994". 

(Price, Tr. 650) (FOF 3.508). By contrast, current market entrants have all announced their entry 

into the U.S. market and have made efforts to win work in several areas of the U.S. (See Section 

III, infra). 

Fourth, to the extent Complaint Counsel has used the Memphis bidding contest to 

show that PDM and CB&I both had lower costs than their competitors, such an effort is 

misplaced. PDM's bid was disqualified because it did not comply with MLGW's bid

requirements. (Davis, Tr. 3196; Hall, Tr. 1823-24) (FOF 3.505). In fact, PDM's bid had 

approximately 157 shortcomings that were out of line with the request for proposal. (Hall, Tr. 

1823-24) (FOF 3.505). Because of these differences, it is difficult to accurately compare PDM's 
1167887 85 

bid to CB&I's bid on this project because the two bids were "not quoted on the same item." 

(Hall, Tr. 1839-40) (FOF 3.505).

Fifth, Complaint Counsel's effort to show that foreign bidders had higher tank 

prices has failed. In many cases, it is not possible to determine tank prices associated with each 

bid. Although MLGW requested a specific breakout of the price for the LNG tank, both PDM 

and Lotepro ignored this requirement. (RX 888) (FOF 3.502). Further, attempting to provide a 

tank-only price for this project is difficult. (Scorsone, Tr. 5011-12) (FOF 3.506). The evidence 

reflects this difficulty. One Black & Veatch document pegs CB&I's tank price at $10.5 million, 

while another puts it at $13.5 million. (Compare RX 888 to CX 1571) (FOF 3.502). The same 

documents also compare tank prices secured by Black & Veatch; a similar discrepancy can be 

found. One document estimates the tank price at $13 million, while another estimates it at $16.7 

million. (Compare RX 888 to CX 1571) (FOF 3.502). 

Sixth, and perhaps most importantly, there is no evidence to support the view that 

a bidding contest from 1994 will shed light on bidding contests a decade later. Differences 

between 1994 and 2003 are numerous. For example, technologies have changed, financial

conditions are different, and the types of LNG projects built today are larger and more complex. 

To rely solely on evidence of Memphis, without examining current market conditions, is

extraordinarily myopic. 

2. Many of Complaint Counsel's witnesses are CB&I's 

competitors.

Brian Price of Black & Veatch offered wide-ranging views on his perceptions of 

competition in the market and the ability of foreign companies to effectively compete in the U.S. 

Mr. Price's testimony should be given little or no weight, as he has a personal stake in the 

outcome of this litigation. Black & Veatch is a head-to-head competitor of CB&I on
1167887 86 

peakshaving facilities. In fact, CB&I's liquefaction process competes with a process patented by 

Price himself. (Price, Tr. 641) (FOF 3.659). Black & Veatch competed against CB&I on the 

Memphis peakshaving job, and is currently competing against CB&I for the Yankee Gas job. 

(See Price, Tr. 548, 555, 651-53) (FOF 3.362, 3.495, 3.662).

Mr. Price's testimony cannot be squared with the facts. While Mr. Price

expressed concerns regarding the ability of Skanska/Whessoe and other foreign companies to 

compete in the U.S., Mr. Price never bothered to share those concerns with anyone at Dynegy, 

even though he professed to be part of Black & Veatch's activities for that project. Further, 

Black & Veatch itself touted the "alliance" between Black & Veatch and Skanska/Whessoe to 

U.S. LNG customers as a positive development. In a letter to Freeport LNG, Bill Minton, 

Technology Manager of Gas Processing, advertised that "Black & Veatch recently formed an 

alliance with Whessoe who is one of only two LNG storage tank contractors operating in the 

Western Hemisphere." (RX 935) (state of mind) (FOF 3.65).17

Complaint Counsel presented other witnesses who competed with CB&I in

Memphis. Robert Davis and his employer, Air Products, have competed with CB&I for

liquefaction units, and lost the Memphis contest to CB&I. (Davis, Tr. 3188, 3204) (FOF 3.667). 

Dr. Hans Kistenmacher of Linde also competes against CB&I in the sale of liquefaction units; he 

also lost the Memphis bidding contest to CB&I. (Kistenmacher, Tr. 885, 890, 934). 

Complaint Counsel also presented other competitor witnesses. Patricia Outtrim of 

Project Technical Liaison Associates is also a current competitor of CB&I's. She owns part of a 

company called Cryocrete, which is in a position to compete with CB&I in the LNG markets. 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

 

17 Price is familiar with this alliance. He acknowledged that Skanska/Whessoe and Black & Veatch have 

offices in the same building in Houston. (Price, Tr. 659-60).
1167887 87 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] 

(Outtrim, Tr. 787) (FOF 3.690). 

F. SUMMARY: DISMISSAL OF THIS CASE WITH RESPECT TO 

THE LNG MARKETS IS APPROPRIATE.

Applicable law compels dismissal of this action with respect to the LNG markets. 

As discussed in Part II, supra, Complaint Counsel's prima facie case is very weak because its 

market concentration statistics are "volatile and shifting" and "easily skewed." Baker Hughes, 

908 F.2d at 986. Accordingly, Respondents need not present an extensive showing. Id. at 991. 

Nevertheless, Respondents have presented evidence on numerous fronts to rebut Complaint 

Counsel's case. New entry in the U.S. market is far more extensive than the entry discussed in 

Baker Hughes. See id. at 988. Further, Respondents have proven that entry barriers to the LNG 

markets do not exist. Complaint Counsel's proffered entry barriers are unsupported by the 

evidence, and in any event are not recognized as entry barriers under the law. This ease of entry 

strongly suggests that future entry will occur if the market requires it. See id. at 989. 

Respondents have also shown that customers are sophisticated in the same ways that the Baker 

Hughes customers were, and that this sophistication is "likely to promote competition even in a

highly concentrated market." Id.

While not required to do so, Respondents have presented compelling evidence 

regarding the sufficiency of entry in the LNG market. Customers who have received postAcquisition pricing are satisfied with prices received and choices available to them, and the 

evidence demonstrates that new entrants are severely disciplining CB&I's activities in the LNG 

markets. In light of this evidence, there is no conceivable way that Complaint Counsel can carry 

its ultimate burden of persuasion in this case. Accordingly, the Complaint as it relates to the 

LNG markets must be dismissed. 
1167887 88 

IV. RESPONDENTS HAVE SUCCESSFULLY REBUTTED COMPLAINT

COUNSEL'S PRIMA FACIE CASE IN THE LPG MARKET.

Liquefied petroleum gas ("LPG") is an umbrella term referring to butanes and 

propanes. (Cutts, Tr. 2436) (FOF 4.2). A field-erected LPG tank stores liquefied petroleum 

gases at low temperatures -- approximately minus 50 degrees Fahrenheit. (E.g., N. Kelley, Tr. 

7096-97) (FOF 4.1). The purpose of an LPG terminal is to store liquid petroleum gases that 

would have been stripped out of natural gas and may be sold as independent gases. (G. Glenn, 

Tr. 4072-73) (FOF 4.2). Typical owners of LPG terminals are owners of pipelines intended for 

distribution of propane, natural gas, or trucked to other outlets. (G. Glenn, Tr. 4073-74).

Over the past 13 years, demand for field-erected LPG tanks has been virtually 

nonexistent. (Harris, Tr. 7281-85, 7299-7300) (FOF 4.10-4.13). During that time, only eight 

projects have been built. (RX 947) (FOF 4.11). LPG tanks are a very small part of CB&I's 

business, and were a very small part of PDM's business prior to the Acquisition. From 1993 to 

the Acquisition, CB&I had built no LPG tanks and has built only one since the Acquisition, 

worth $1-$3 million. (RX 947; Scorsone, Tr. 5039, 5042; G. Glenn, Tr. 4089, 4156) (FOF 4.12, 

4.14). Since 1992, PDM had constructed only three tanks in the U.S. (RX 947).

As noted in Part II, supra, Complaint Counsel has not established a prima facie 

case in the LPG market. The lack of demand makes it virtually impossible to extract meaningful 

data from market concentration statistics. See Baker Hughes, 731 F. Supp. 3, 9 (D.D.C. 1990). 

Assuming arguendo the existence of a prima facie case, Respondents have successfully rebutted 

it for two reasons. First, CB&I's LPG market share plunged to zero beginning in 1995 through 

the Acquisition, yielding an HHI change of zero. Second, two entrants -- AT&V and Matrix --

have recently begun to compete for LPG jobs in the U.S. Both AT&V and Matrix are well 

regarded by customers in this market. Because entry barriers in this market are low, it is 
1167887 89 

reasonable to expect additional companies to enter the market if sufficient demand for LPG tanks 

exists. Evidence shows that this entry and potential entry threat has constrained CB&I's

behavior, and that customers are receiving competitive prices on LPG tanks. 

A. ACTUAL ENTRY HAS ALREADY OCCURRED IN THE LPG

MARKET, AND MORE ENTRY IS FORESEEABLE.

AT&V has recently entered the market for LPG tanks. It recently bid on and won 

an LPG project for ITC and also bid on a project for ABB Lummus. (N. Kelley, Tr. 7086; 

Scorsone, Tr. 5040) (FOF 4.35, 4.67). AT&V's activities in the LPG market are not limited to

these two projects. In recent years, AT&V has successfully completed three different LPG 

projects. (Cutts, Tr. 2436-37) (FOF 4.20). It built LPG tanks in 1996 (in Equatorial Guinea) and 

an LPG tank (in the U.S.) in 1994. (CX 396, 397) (FOF 4.18). AT&V has also built LPG 

spheres and pressure vessels over the past two years; these products can serve as substitutes for a 

field-erected LPG tank. (CX 396, CX 397; see also Scorsone, Tr. 5170-71) (FOF 4.19, 4.21). 

AT&V's LPG customers have been satisfied with AT&V's work, and AT&V intends to pursue 

LPG opportunities in the future. (Cutts, Tr. 2455-56) (FOF 4.22). 

AT&V was permitted to bid on the Deer Park LPG project because it was a "good 

reputable contractor[] that ha[s] the capability of building the tank." (N. Kelley, Tr. 7083-84) 

(FOF 4.34). Previously, AT&V had successfully built several other stainless steel tanks for ITC, 

similar to the Deer Park project. (N. Kelley, Tr. 7085-86) (FOF 4.36). AT&V won this project, 

beating out Matrix and CB&I, because it had the best price. (N. Kelley, Tr. 7086, 7088) (FOF 

4.35-4.37). AT&V successfully completed construction of this LPG tank. ITC was satisfied 

with AT&V's performance with respect to the tank's design. It was completed on time,

according to ITC's plans, and without any major defects or problems. (N. Kelley, Tr. 7088-89, 
1167887 90 

7130-31) (FOF 4.38, 4.42). ITC believes AT&V has an excellent reputation, and will consider 

AT&V for its next LPG tank. (N. Kelley, Tr. 7090, 7130-31). 

Matrix has also entered the U.S. LPG market. Along with AT&V and CB&I, 

Matrix bid on ITC's Deer Park LPG tank. ITC permitted Matrix to bid on the Deer Park project 

because they were "good reputable contractors that have the capability of building the tank." (N. 

Kelley, Tr. 7083-84) (FOF 4.34). ITC perceives Matrix as "a large contractor, and quite 

capable." (N. Kelley, Tr. 7085) (FOF 4.44). ITC's confidence in Matrix is growing, because 

they have done a good job on a variety of tank repairs. (N. Kelley, Tr. 7109) (FOF 4.45-4.46). 

For its next LPG project, ITC will solicit a bid from Matrix. (N. Kelley, Tr. 7090).

Chattanooga Boiler & Tank ("CB&T") has not yet entered the U.S. market. 

However, it is poised to enter this market if and when demand for these products exists. CB&T 

has built a variety of ambient temperature storage tanks, and has the capability to design and 

construct low-temperature tanks, as discussed in connection with the LIN/LOX market. (See

Part V, supra). CB&T is interested in pursuing these jobs in the future. (Stetzler, Tr. 6365).

B. THERE ARE NO SIGNIFICANT BARRIERS TO ENTRY IN THE 

LPG MARKET.

Evidence demonstrates that significant entry barriers to the LPG market do not 

exist. Under Baker Hughes, a respondent has many available ways in which to rebut a prima 

facie case. One way is to show evidence regarding "ease of entry." See 908 F.2d at 983-84. In 

this case, it is undisputed that AT&V and Matrix have entered the market. Using Complaint 

Counsel's own Guidelines, this constitutes timely entry. 18 Further, Respondents have presented 

compelling evidence that entry barriers are low, and that entry of other companies is possible. 

 

18 Although the Merger Guidelines are not binding on this Court, Respondents note that they classify entry as 

"timely" if it occurs or will occur within two years of the acquisition in question. (See 1992 Horizontal Merger 

Guidelines, RX 844 at 20)
1167887 91 

Morse Tank ("Morse"), a relatively small tank builder based in Washington State, successfully 

entered the market in 1994 when it built a large LPG tank for Texaco in Ferndale, Washington. 

Morse completed this "highly visible" project for Texaco in a timely manner and to Texaco's 

great satisfaction. (Crider, Tr. 6714-16; see also Maw, Tr. 6560-63, 6586) (FOF 4.84, 4.86, 

4.87). Further, Morse made a significant profit on this job -- over $1 million. (Maw, Tr. 6586, 

6690).

The story of Morse's successful entry shows "ease of entry" in the LPG market, 

which squarely rebuts Complaint Counsel's prima facie case. Baker Hughes, 908 F.2d at 984. 

Further, customers support Respondents' contentions regarding ease of entry. According to 

customers, any tank builder with experience in building API 620 and API 650 tanks has the 

ability to build LPG tanks. (N. Kelley, Tr. 7091-92) (FOF 4.127). The construction of an LPG 

tank requires the same type of equipment used for standard flat-bottom tanks -- welding 

machines, cranes, and rigging equipment. Further, the same people that build API 650 tanks also 

build API 620 tanks. (N. Kelley, Tr. 7091-92) (FOF 4.127). The same skills are used to build an 

API 650 as an API 620 tank. All you have to do is read the code, find out what the differences 

are, use the right metal and the right welding rods, the right welding procedures, and anybody 

can build either tank." (N. Kelley, Tr. 7103) (FOF 4.120). The fact that entry is easy in the 

market makes it unlikely that the Acquisition will have any anti-competitive effects. (See Harris, 

Tr. 7285-97, 7300).

1. Reputation is not an entry barrier to the LPG market.

Complaint Counsel has argued that reputation is a barrier to entry. This is wrong. 

Prior to constructing the Ferndale facility, Morse had never constructed an LPG tank before. In 

fact, Morse told Texaco that it had no LPG experience. Nonetheless, Texaco asked Morse to bid 

the Ferndale project. (Maw, Tr. 6550) (FOF 4.90). Lack of experience was not a concern for 
1167887 92 

Texaco because companies hire people to do the job; Morse's personnel sold the project. (Crider, 

Tr. 6713-14).

2. Transportation costs are not entry barriers to the LPG market.

Complaint Counsel has argued that transportation costs can present a barrier to 

entry in the LPG tank market, and have asserted that Morse only won this job because it was 

close to Ferndale. Any advantage Morse had with respect to location is minimal. The fact that 

Morse hired local field labor was not an advantage, as union regulations called for all contractors 

to pay a set amount in wages and subsistence. (Maw, Tr. 6563-54) (FOF 4.99). To the extent 

transportation costs provided an advantage, it amounted to about $70,000 -- a little over 1 

percent of the price of the LPG tank. (Maw, Tr. 6564-65; see also N. Kelley, Tr. at 7121).

3. Assembling of a labor force is not an entry barrier to the LPG 

market.

Complaint Counsel has argued that assembling a labor force is an entry barrier. 

The Morse case study shows this to be wrong. In 1994, Morse had about 20 salaried employees, 

including two engineers. Morse hired no additional salaried employees to fabricate or construct 

the Ferndale LPG tank, nor did it acquire special equipment, methods personnel, or procedures 

for fabricating the LPG tank. (Maw, Tr. 6557, 6567, 6572) (FOF 4.96, 4.98). In order to obtain 

the necessary field crews, Morse contracted with union employees through a collective

bargaining agreement; hiring non-union field crews was not an option. (Maw, Tr. 6552) (FOF 

4.100). Morse won this job without adding any additional salaried employees and despite 

incurring the high cost of hiring union labor. (Maw, Tr. 6551-52, 6553-56). 

4. The costs of bidding projects is not an entry barrier to the LPG 

market.

Complaint Counsel has argued that the cost of bidding is an entry barrier. This is 

not the case. In connection with the Ferndale project, Morse submitted a bid package. In so 
1167887 93 

doing, Morse did not incur any additional expenses than it does on any other tank project. 

Further, no additional salaried employees were hired to prepare the bid. (Maw, Tr. 6556-57).

5. Engineering is not an entry barrier to the LPG market.

Complaint Counsel has argued that the ability to engineer an LPG tank is an entry 

barrier. Based on the lessons learned from Morse, this is incorrect. As part of its Ferndale bid 

package, Morse submitted a preliminary design. Duane McMahan, a professional engineering 

consultant, was hired to perform the design work. After submitting its bid, Morse hired Pressure 

Sciences, Inc. to consult in the final design. (Maw, Tr. 6557-60).

6. Welding is not an entry barrier to the LPG market. 

Complaint Counsel incorrectly argues that access to welding procedures and 

equipment is an entry barrier. This is wrong. The Ferndale LPG tank was welded under Morse's 

supervision. Morse developed in-house special procedures required for the LPG tank, which 

cost about $2,000 to develop. Once Texaco approved these procedures, Morse individually 

trained its welders on these procedures. This training required about one-half hour per person 

over the course of two days. (Maw, Tr. 6569-72) (FOF 4.49, 4.95). 

7. Bonding requirements and financial size are not entry barriers 

to the LPG market.

Complaint Counsel contends that bonding capacity and financial capacity are 

barriers to entry. This is not the case. In 1994, Morse's total annual sales were about $12-14 

million. (Maw, Tr. 6551) (FOF 4.72). This relatively small financial size did not affect Morse's 

ability to win and construct the project.

C. CUSTOMERS FOR LPG TANKS ARE SOPHISTICATED.

Current customers in this market are sophisticated. ITC is the only recent

customer to testify in this case. ITC owns 10 field-erected low temperature tanks. (See N. 
1167887 94 

Kelley, Tr. 7093-94) (FOF 4.27). During his 25 years at ITC, Mr. Kelley has procured LPG 

tanks over 23 of those 25 years. Tank procurement is Mr. Kelley's area of responsibility. (N. 

Kelley, Tr. 7079-80). Mr. Kelley regularly sorts confidential bids from multiple tank suppliers. 

(N. Kelley, Tr. 4.159, 4.160).

D. ENTRY IN THE LPG MARKET IS SUFFICIENT.

As discussed in Part II, supra, Complaint Counsel's prima facie case in the LPG 

markets is nonexistent. See Baker Hughes, 908 F.2d at 986. Accordingly, Respondents need not 

make any showing. Assuming the existence of a prima facie case, Respondents have rebutted it 

with strong evidence that entry in the U.S. market will constrain CB&I's pricing in the LPG 

market. Accordingly, Complaint Counsel must present additional evidence showing that

lessening of competition is likely, including evidence regarding the sufficiency of entry outlined 

by Respondents. See Baker Hughes, 908 F.2d at 983. 

Although Respondents have no burden to do so, they have presented evidence that 

entry in the LPG markets is sufficient. Respondents' expert, Dr. Harris, does "not believe that 

the acquisition of the PDM assets by CB&I has harmed competition or reduced competition in 

the market for the sale of LPG tanks . . . in the United States." (Harris, Tr. 7281) (FOF 7.117). 

Dr. Harris noted that competition in this market has been nearly nonexistent since 1992, and that 

prices have not risen since the Acquisition. (Harris, Tr. 7281-85, 7299-7300) (FOF 4.10, 4.11). 

Evidence supports Dr. Harris' conclusions. Customers in this market are satisfied with the prices 

received on recent LPG projects, and have no concerns that the Acquisition has affected their 

ability to obtain LPG tanks at competitive prices. Further, entry in the LPG market has 

disciplined CB&I's behavior. 
1167887 95 

1. Customers are satisfied with the prices received, and are not 

concerned that the Acquisition has affected their ability to 

obtain competitive pricing.

ITC was satisfied with the price that it received on the Deer Park LPG tank. (N. 

Kelley, Tr. 7088-89) (FOF 4.38, 4.55). As Norman Kelley noted, "AT&V beat the socks off of 

CB&I. AT&V can definitely do it cheaper." (N. Kelley, Tr. 7137) (FOF 4.56). Mr. Kelley 

observed that the competition provided by AT&V, Matrix, and CB&I gives ITC the competition 

that it needs to obtain a competitive price. ITC does not need to research additional tank 

suppliers in order to find additional competition. (N. Kelley, Tr. 7091, 7134) (FOF 4.60, 4.61). 

Further, ITC does not believe that the Acquisition has hindered ITC's ability to obtain

competitive pricing for LPG tanks. (N. Kelley, Tr. 7092, 7135, 7137) (FOF 4.56, 4.58). The 

following quote is illustrative:

Q. And just to sort of sum up, do you believe that the merger between CB&I 

and PDM has had the -- has hindered ITC's ability in any way to 

obtaining any of those types of products at a competitive price? 

A. No. I don't think it's hurt us in any way.

(N. Kelley, Tr. 7135; see also N. Kelley, Tr. 7090-91, 7137-38) (FOF 4.62, 4.55-4.62). In fact, 

Mr. Kelley noted that CB&I has trouble competing in the LPG tank market because of its large 

overhead costs. (N. Kelley, Tr. 7122).

Complaint Counsel's evidence is not to the contrary. Amy Warren of Fluor was 

Complaint Counsel's only witness regarding the LPG market. While Ms. Warren and Fluor were 

involved in a project involving LPG tanks, they were not responsible for selecting a tank 

supplier. Sea-3, the customer, had that responsibility. Ms. Warren had virtually no information 

regarding pre-Acquisition competition. She did not know whether Fluor received a lower price 

as a result of Sea-3's bidding process, nor could she say whether the prices received on Sea-3 

projects were competitive. (Warren, Tr. 2299-2300, 2302, 2303-07) (FOF 4.158). Ms. Warren 
1167887 96 

has no knowledge regarding post-Acquisition competition. She has not been involved in buying 

an LPG tank since 1998. She has no knowledge regarding any field-erected LPG tanks currently 

planned by anyone anywhere, nor does she have current knowledge regarding companies that 

currently have the ability to construct LPG tanks. She has no knowledge regarding which 

companies are currently prequalified by Fluor, or which companies Fluor would prequalify in the 

future. (Warren, Tr. 2309, 2318).

2. Entry has disciplined CB&I's behavior in the LPG market.

CB&I perceives competition from AT&V, Matrix, TKK/ATV, Skanska Whessoe, 

Technigaz/Zachry, and any other flat bottom tank manufacturer. (Scorsone, Tr. at 4850) (FOF 

4.64). CB&I does not believe it can impose a price increase in this product area without losing 

work to competitors. (Scorsone, Tr. 5043) (FOF 4.70). Recent events have confirmed this view. 

CB&I last won a LPG project in 2001 for ABB Lummus, involving a $1.5 million LPG tank. 

(Scorsone, Tr. 5039) (FOF 4.66). CB&I competed against Wyatt and AT&V. 

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(Scorsone, Tr. 5039-43) (FOF 4.68, 4.69). After these efforts, CB&I won the job. (See RX 947) 

(FOF 4.14, 4.15). Based on this experience, CB&I perceives intense competition in this market, 

and believes that price increases will lead to lost work. (Scorsone, Tr. 5043).
1167887 97 

E. SUMMARY: DISMISSAL OF THIS CASE WITH RESPECT TO 

THE LPG MARKETS IS APPROPRIATE.

Applicable law compels dismissal of this action with respect to the LPG market. 

As discussed in Part II, supra, Complaint Counsel's prima facie case is virtually nonexistent. 

Accordingly, Respondents need not present an extensive showing. Baker Hughes, 908 F.2d at 

991. Nevertheless, Respondents have presented evidence on numerous fronts to rebut Complaint 

Counsel's case. Respondents have proven that actual entry has occurred, that entry barriers are 

nonexistent, that potential entrants are eyeing the market, and that customers in this market are 

sophisticated. See Baker Hughes, 908 F.2d at 988-89. Further, while not required to do so, 

Respondents have presented compelling evidence regarding the sufficiency of entry in this 

market. Current customers are satisfied with prices received and choices available to them, and 

evidence shows that new entrants are severely disciplining CB&I's activities. Complaint

Counsel has not carried its ultimate burden of persuasion in this case. Accordingly, the 

Complaint as it relates to the LPG market must be dismissed. 

V. RESPONDENTS HAVE SUCCESSFULLY REBUTTED COMPLAINT

COUNSEL'S PRIMA FACIE CASE IN THE LIN/LOX MARKET.

Field-erected LIN/LOX/LAR tanks store liquid nitrogen, liquid oxygen, and 

liquid argon at cryogenic temperatures. (Patterson, Tr. 340-41; V. Kelley, Tr. 4596; Stetzler, Tr. 

6312) (FOF 5.1). These tanks consist of an outer carbon steel shell and an inner tank, with 

insulation between the two shells. (Stetzler, Tr. 6312; Kistenmacher Tr. 833-34) (FOF 5.3). The 

outer shell is generally made from A-36 carbon steel, while the inner shell of a LIN/LOX/LAR 

tank is generally made from 304 stainless steel. (Stetzler, Tr. 6315) (FOF 5.4). 

The market for field-erected LIN/LOX tanks in the U.S. is extremely small and in 

decline. The average price of a LIN/LOX tank is approximately $1 million. (Scorsone, Tr. 

5016). In the two years since the Acquisition, the total value of all commerce in this market has 
1167887 98 

been just $5.8 million. (See, e.g., Harris, Tr. 7308). Only five such tanks have been awarded 

during this time: Midland, North Carolina (BOC); Hillsboro, Oregon (BOC); Freeport, Texas 

(Air Liquide); New Johnsonville, Tennessee (MG Industries); and Kirkland, New Mexico

(Praxair). (Scorsone, Tr. 5017) (FOF 5.77). Because of this low demand and the relatively small 

size of these tanks, LIN/LOX tanks are a very small part of CB&I's business. (E.g., Glenn, Tr. 

4088; Scorsone, Tr. 5016-17) (FOF 5.20, 5.21). Since the Acquisition, CB&I has won only two 

of five projects awarded, resulting in a total of less than $5 million in revenue. (See Scorsone, 

Tr. 5015-16; Glenn, Tr. 4088) (FOF 5.20).

Respondents have successfully rebutted Complaint Counsel's prima facie case. 

The evidence shows that entry in this market has been timely, and that current entrants are 

qualified, capable, and respected by many of the small number of U.S. LIN/LOX tank customers. 

Evidence also shows that entry to this market is easy, that current customers for these projects 

are sophisticated, and that entry is sufficient to constrain CB&I's pricing in this market. 

A. ENTRY HAS ALREADY OCCURRED IN THE U.S. MARKET FOR 

LIN/LOX TANKS.

1. AT&V has entered the U.S. market for LIN/LOX tanks.

a. AT&V is a capable LIN/LOX tank supplier.

AT&V is a maker of cryogenic storage tanks. (Cutts, Tr. 2393) (FOF 5.26-5.30). 

AT&V has all the necessary equipment and personnel to build field-erected LIN/LOX tanks. It 

has developed a "clean bay" facility dedicated to the fabrication of stainless steel for cryogenic 

projects. (Cutts, Tr. 2331-32) (FOF 5.29). It also employs engineers and other employees 

experienced in designing and constructing LIN/LOX tanks, including former CB&I and Graver 

employees. (Cutts, Tr. 2426-27, 2454, 2570-71) (FOF 5.222). AT&V has developed standards 

and spent time on engineering, testing cryogenic materials, and preparing LIN/LOX marketing 
1167887 99 

plans. (Cutts, Tr. 2501-02, 2503-04) (FOF 5.33). AT&V has a good reputation for quality and 

schedule. AT&V's quality in construction (as measured by ATV's extremely low x-ray rejection 

rate) is far superior to CB&I and other U.S. tank vendors. (Cutts, Tr. 2491-93) (FOF 5.38). 

AT&V also has one of the best completion schedules in the industry. Last year, it completed 163 

of 164 projects on time. (Cutts, Tr. 2510-12) (FOF 5.39). 

AT&V is committed to pursuing LIN/LOX tanks in the U.S.; it believes that it has 

an advantage over CB&I and can sell those tanks at a lower price. (Cutts, Tr. 2332, 2572) (FOF 

5.35). Prior to entering the market, AT&V spent an initial $50,000 on marketing to LIN/LOX 

purchasers. (Cutts, Tr. 2429-30, 2502) (FOF 5.36). After this initial effort, AT&V won and 

constructed two LIN/LOX tanks for BOC in Midland, North Carolina. (Cutts, Tr. 2330, 2435-

36) (FOF 5.31). While AT&V did not make a significant profit on this job, it viewed this 

opportunity as a long-term investment in the market. (Cutts, Tr. 2429-30) (FOF 5.36). AT&V 

continues to pursue LIN/LOX work in the U.S. (Cutts, Tr. 2533) (FOF 5.35, 5.37). It has 

submitted budget pricing to approximately six customers, and has been prequalified by several 

customers. (Cutts, Tr. 2452-53; see also Cutts, Tr. 2550-52) (FOF 5.35).

b. Many LIN/LOX tank customers have accepted AT&V 

as a potential supplier of LIN/LOX tanks.

AT&V is becoming an accepted supplier of LIN/LOX tanks. In fact, AT&V has 

bid on three of the four LIN/LOX tanks competitively bid since the Acquisition and has won all 

three bid contests, beating out CB&I all three times. (Scorsone, Tr. 5017-18) (FOF 5.78). BOC, 

AT&V's first LIN/LOX customer, was extremely satisfied with the price it paid and AT&V's 

performance on the Midland, North Carolina job. (V. Kelley, Tr. 5287, see also V. Kelley, Tr. 

4600-01) (FOF 5.96, 5.97). In actuality, BOC "was quite satisfied [with ATV] in all aspects." 

(V. Kelley, Tr. 5287) (FOF 5.97). Specifically, BOC praised AT&V for being proactive in 
1167887 100 

solving problems as they arose on the job site, as well as its turnover package and schedule 

execution. (V. Kelley, Tr. 5268, 5283-84, 5287-89).19 BOC believes that AT&V has "certainly 

distinguished themselves as being capable LIN/LOX tank providers." (V. Kelley, Tr. 5281-82; 

see also V. Kelley, Tr. 5285) (FOF 5.113). Further, BOC would hire AT&V again on its next 

LIN/LOX project. (V. Kelley, Tr. 4601, 5289-90) (FOF 5.113). In fact, BOC Edwards has 

already selected AT&V to construct a LIN tank in Oregon because AT&V had the low bid. (V. 

Kelley, Tr. 5291-92; see also Cutts, Tr. 2419).

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19 The testimony of BOC is corroborated by the testimony of AT&V. After the construction of the Midland 

project, BOC told AT&V that their "quality was exceptional, the schedule was good, and that the safety was 

exceptional." (Cutts, Tr. 2453) (FOF 5.32). AT&V believes that BOC has spoken to other LIN/LOX tank 

customers and recommended AT&V's construction abilities. AT&V believes that Air Liquide was influenced by a 

positive reference from BOC. (Cutts, Tr. 2453-54, 2504-06, 2523) (FOF 5.115).
1167887 101 

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(xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] Evidence also shows that CB&I found Air Liquide 

to be a very difficult customer during the bidding of this project, and CB&I generally has found 

Air Liquide to be a relatively "difficult and demanding customer." (Scorsone, Tr. 5035-36) 

(FOF 5.136). Air Liquide tends to ask for more appurtenances, require specific standards for 

their piping systems, and at times has difficulty defining project scope. (Scorsone, Tr. 5037) 

(FOF 5.137). These difficulties extended to the Freeport project. CB&I's salespeople were 

frustrated with Air Liquide because it was unable to define the exact scope of the project. (See

Scorsone, Tr. 5037-38) (FOF 5.139). Although CB&I requested a meeting with Air Liquide to 

discuss project details to ensure that CB&I was bidding properly, this meeting never occurred. 

(See Scorsone, Tr. 5038) (FOF 5.139).

Third, there is no evidence that other customers will [xxxxxxxxxxxxxxxxxxxx

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1167887 102 

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Three other customers have not yet solicited bids from AT&V. 20 However, these 

customers are willing to consider AT&V as a supplier. For example, Air Products would 

 

20 Each of the six major customers, with the exception of Praxair, testified in this case. Complaint Counsel 

planned to call Michael Poli of Praxair on November 14, 2002. Complaint Counsel informed Respondents that

morning that Mr. Poli would not testify. There is no evidence in the record regarding whether Praxair would, or 

would not, accept AT&V as a supplier. PDM entered into a three-year alliance agreement for domestic non-union 

cryogenic tank projects with Praxair in 1998, which provided open book pricing with a 4 percent margin. PDM 

would also be given preferential treatment on union cryogenic tanks or for tanks built outside of the U.S. (RX 87; 

Scorsone Tr. 5018-19) (FOF 5.166). In 2001, PDM and Praxair agreed to renew the agreement for another three 

years. The agreement was assumed by CB&I after the Acquisition. (Scorsone, Tr. 5018-19) (FOF 5.166). Under 

the agreement, Praxair cannot award a LIN/LOX tank to anyone else if it is a merit-built or non-union built project. 

(Scorsone, Tr. 5018-19) (FOF 5.166).
1167887 103 

consider prequalifying AT&V, and has no reason to believe they would not qualify. (Hilgar, Tr. 

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Evidence regarding Linde Process Plants is less clear. Hans Kistenmacher

characterized AT&V's reputation for building LIN/LOX tanks as "poor," because it has only 

completed one LIN/LOX tank job. (Kistenmacher, Tr. 862). However, Linde has not yet 

assessed AT&V's capabilities and experience in the market. (Fan, Tr. 1018). Despite its 

concerns, Linde has accepted budget pricing from AT&V for LIN/LOX projects on the Gulf 

Coast and in New Mexico. (Kistenmacher, Tr. 854, 857-58) (FOF 5.178). While AT&V's low 

price has caused some concerns for Linde, there has been pressure within Linde to use AT&V 

because "the low price make it very interesting." (Fan, Tr. 1016-18) (FOF 5.178). 

2. Matrix has entered the U.S. market for LIN/LOX tanks.

a. Matrix is a capable LIN/LOX tank supplier.

Matrix Services Corporation ("Matrix") is based in Tulsa, Oklahoma. It is an 

accomplished tank construction company with average annual revenues over $200 million. (RX 

135 at 6). Matrix began pursuing LIN/LOX opportunities in 1998 and has experience bidding on 

projects for Praxair, Air Products, and Linde (formerly known as Lotepro). (RX 135 at 8-9) 

(FOF 5.47-5.55). Matrix has produced promotional materials to advertise its capabilities as 

builders of cryogenic tanks in an effort to win more cryogenic projects. (RX 137). 

Matrix has entered the market for field-erected LIN/LOX tanks, and has the 

capability to build those tanks. It has hired employees with experience in building cryogenic 

storage tanks, including a project manager, foreman, and field crew. (Newmeister, Tr. 2188) 
1167887 104 

(FOF 5.43). It has also tested materials, established welding procedures, and created engineering 

standards. (Newmeister, Tr. 2213-14) (FOF 5.44). These moves have allowed Matrix to 

increase customer confidence in its qualifications and demonstrate to buyers that it can meet the 

requisite API specifications. (Newmeister, Tr. 2189-90).

Matrix has already constructed field-erected LIN/LOX tanks. It has built four 

tanks for Air Products and Praxair in a variety of locations, including Tennessee, Delaware, and 

Indiana. (Newmeister, Tr. 2173, 2173-74, 2176-77) (FOF 5.47-5.50). Matrix has continued to 

participate in this market, post-Acquisition. As of August 2002, Matrix had three outstanding 

bids on LIN/LOX tanks for two different customers. (Newmeister, Tr. 2178) (FOF 5.52). [xxx 

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xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]; Scorsone, Tr. 5032) (FOF 5.149). 

Further, Matrix plans to continue bidding on LIN/LOX tanks. It believes that it is a competitive 

force in the LIN/LOX market, and that it can compete with CB&I. (Newmeister, Tr. 2166-67).

b. Customers have accepted Matrix as a potential 

LIN/LOX tank supplier.

All six LIN/LOX tank customers agree that Matrix is a viable supplier. Praxair 

has used Matrix in the past, and was satisfied with their work. (Newmeister, Tr. 2176-77) (FOF 

5.46). Similarly, Air Products awarded Matrix a LIN/LOX project in 1997 as the low bidder. 

Matrix successfully completed the project, and Air Products would seek a bid from them in the 

future. (Hilgar, Tr. 1511-13; see also Newmeister, Tr. 2174) (FOF 5.45). [xxxxxxxxxxxxxxxx 

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1167887 105 

(FOF 5.149). Air Liquide also believes that Matrix is a qualified supplier. It has accepted 

LIN/LOX bids from them in the past, and would consider hiring Matrix on future jobs. 

(Kamrath, Tr. 2005-06) (FOF 5.53). Despite their lack of recent activity in the market, Linde is 

familiar with Matrix. Linde believes that Matrix is a qualified tank supplier, and has accepted 

bids and budget pricing from Matrix "many" times. For example, Linde recently sought pricing 

from Matrix for jobs in the Gulf Coast area and in New Mexico. (Kistenmacher, Tr. 857-58; 

Fan, Tr. 1018).21

3. CB&T has entered the U.S. market for LIN/LOX tanks.

a. CB&T is a capable LIN/LOX tank supplier.

Chattanooga Boiler & Tank ("CB&T") builds API 650 storage tanks, API 620 

storage tanks, and low pressure tanks. (Stetzler, Tr. 6308-09) (FOF 5.56). For CB&T, 

construction of a field-erected LIN/LOX tank is not particularly difficult; there is no question 

that CB&T has the ability to design and build those tanks. (Stetzler, Tr. 6312-13) (FOF 5.58). 

CB&T has all the necessary equipment to build them. CB&T has its own fabrication facility 

with all the necessary equipment to fabricate a LIN/LOX tank. (Stetzler, Tr. 6314-16, 6384-85) 

(FOF 5.59, 5.63). It also acquired "quite a bit of . . . equipment" from Graver -- a former 

competitor in the LIN/LOX tank market -- when it went out of business in 1999. (See Stetzler, 

Tr. 6317-19) (FOF 5.59). 

CB&T has the personnel necessary to construct LIN/LOX tanks. CB&T employs 

individuals with LIN/LOX tank experience, including salespeople, project managers,

boilermaker superintendents, and boilermakers. (Stetzler, Tr. 6314-16, 6319-21, 6324-27) (FOF 

5.59-5.65). CB&T has the requisite field crews and welders to construct LIN/LOX tanks. In 

 

21 Linde has never used Matrix because it believes "their price for the non-union tank was always high." 

However, their prices on union jobs may be a "different story." (Fan, Tr. 1019).
1167887 106 

fact, it has superior quality field crews with productivity as good as or better than most of its 

competitors. It enjoys a high retention rate, a good safety record, and a good record for quality 

work. (See Stetzler, Tr. 6323-29) (FOF 5.62, 5.66). Many CB&T field workers have experience 

working for CB&I and PDM. In fact, 30-40 percent of CB&T's field workers have worked for 

CB&I or PDM at some point. (Stetzler, Tr. 6322) (FOF 5.61). CB&T has also hired two former 

Graver employees and opened an office in Houston in order to expand into the oil and LIN/LOX 

markets. (Stetzler, Tr. 6318-19) (FOF 5.59). Rex Robinson was a senior Graver project 

manager with experience in building LIN/LOX tanks and dealing with LIN/LOX tank customers. 

(Stetzler, Tr. 6317-19; see also RX 273 (FOF 5.59). Robinson now works for CB&T as 

Manager of Texas Operations. (Stetzler, Tr. 6320) (FOF 5.59). Robinson's past experience as a 

LIN/LOX project manager and familiarity with LIN/LOX sales has enabled CB&T to use much 

of Graver's experience with LIN/LOX tanks in order to promote CB&T's experience in the 

cryogenic tank market. (Stetzler, Tr. 6319-20) (FOF 5.59.

CB&T's prior experience has prepared it well for the LIN/LOX tank market. It 

has constructed tanks and structures significantly more difficult to build than LIN/LOX tanks. 

(Stetzler, Tr. 6337-39) (FOF 5.56). For example, CB&T has constructed shop-erected LNG 

tanks for customers such as Lotepro and Nikkiso. (Stetzler, Tr. 6331-34). This experience is 

directly relevant to field-erected LIN/LOX tanks, because the ability to fabricate components in a 

clean environment and the ability to weld materials of certain quality are skills used in

fabrication of both types of tanks. (Stetzler, Tr. 6336-37) (FOF 5.57). CB&T is also familiar 

with API standards and has a bonding capacity of tens of millions of dollars, more than sufficient 

to build LIN/LOX tanks. (Stetzler, Tr. 6385-87, 6391) (FOF 5.56, 5.64).
1167887 107 

CB&T has made efforts to enter the LIN/LOX market. It bid on a LIN/LOX tank 

for BOC in North Carolina. It also submitted a budgetary proposal to MG Industries for the New 

Johnsonville project. (Stetzler, Tr. 6351) (FOF 5.70). CBT believes that the Acquisition has 

created an opportunity for it to become involved in the LIN/LOX market, and CB&T plans to 

take advantage of that opportunity in the future. (See Stetzler, Tr. 6367-68) (FOF 5.68). CB&T 

believes that it has competitive advantages over CB&I, because it is a smaller, more responsive 

company with a lower overhead structure. (Stetzler, Tr. 6369). (FOF 5.66, 5.67).

b. Customers have begun to accept CB&T as a potential 

LIN/LOX tank supplier.

Customers know that CB&T has made efforts to enter the LIN/LOX market and 

would consider using CB&T in the future. [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] Similarly, in 2000, BOC accepted a bid 

from CB&T for its Midland project. (V. Kelley, Tr. 4598-99) (FOF 5.87). Air Products has had 

some involvement with CB&T in the past, and would consider prequalifying it for a field-erected 

LIN/LOX tank job in the future. Air Products has no reason to believe that they would not 

qualify as a bidder. (Hilgar, Tr. 1509-11, 1513).

B. THERE ARE NO SIGNIFICANT ENTRY BARRIERS TO THE

LIN/LOX TANK MARKET.

There are no significant entry barriers to the LIN/LOX market. As discussed 

above, Matrix has successfully built LIN/LOX tanks for Praxair and Air Products, and was able 

to enter without any prior experience. In 2001, AT&V and CB&T entered the LIN/LOX market, 

bidding on a job for BOC. In fact, AT&V has won all three jobs it has bid on since the 
1167887 108 

Acquisition despite having no prior experience. As this entry occurred within two years of the 

Acquisition, there should be no dispute that entry is "timely" in this market. (See 1922

Horizontal Merger Guidelines, RX 844 at 11-21). With respect to potential future entry, 

companies capable of building standard flat-bottom storage tanks are capable of building fielderected LIN/LOX tanks. (Hilgar, Tr. 1520-21 (FOF 5.221).

1. Subcontracting is not an entry barrier to the LIN/LOX tank 

market.

Complaint Counsel has argued that subcontracting is an entry barrier. For the 

reasons discussed in Part III, supra, this argument is generally flawed. Further, LIN/LOX tank 

construction does not require a significant number of subcontractors. For example, AT&V used 

only three subcontractors for BOC's Midland job. (Cutts, Tr. 2521-22) (FOF 5.219, 5.220). 

2. Welding is not an entry barrier to the LIN/LOX tank market.

Complaint Counsel has argued that welding is an entry barrier. The evidence 

presented is to the contrary. For example, AT&V was able to hire experienced welders merely 

by placing newspaper ads. (Cutts, Tr. 2427-28) (FOF 5.221). Further, AT&V's welding systems 

were sufficient to successfully construct LIN/LOX tanks for BOC. (Cutts, Tr. 2565) (FOF 5.31).

3. Assembling of sales staff and engineering forces is not an entry 

barrier to the LIN/LOX tank market.

The ability to hire necessary sales staff and engineers is not an entry barrier. 

AT&V's current sales staff enabled it to sell the LIN/LOX projects to BOC and Air Liquide. 

(Cutts, Tr. 2568-69) (FOF 5.222). Further, AT&V has developed its own technical

specifications for LIN/LOX tanks which enabled AT&V to successfully construct a LIN/LOX 

tank to BOC's satisfaction. (Cutts, Tr. 2563-64) (FOF 5.29).
1167887 109 

C. CUSTOMERS FOR LIN/LOX TANKS ARE SOPHISTICATED.

Evidence demonstrates that LIN/LOX tank customers are sophisticated

consumers. For example, BOC is a sophisticated customer. It has been the most active tank 

purchaser since the Acquisition, building two tanks in Midland, North Carolina and planning 

another in Hillsboro, Oregon. (V. Kelley, Tr. 4599-4601) (FOF 5.87, 5.116). BOC has the 

expertise to develop new suppliers of LIN/LOX tanks. For example, BOC hired engineering 

consultants to assist it and AT&V in working through the Midland project. (V. Kelley, Tr. 4619-

20) (FOF 5.81). BOC has also purchased a number of LIN/LOX tanks in the past, and develops 

budgets for LIN/LOX tank purchases as part of the planning process. (See Kelley, Tr. 4622).

MG Industries is also a sophisticated customer. MG has experience purchasing 

LIN/LOX tanks in the past; it purchased 14 such tanks during the 1990s. (Patterson, Tr. 478-79) 

(FOF 5.82). MG has a demonstrated ability to manipulate vendors to secure good tank prices. 

For example, during the 1990s, MG would often drive tank costs down by informing vendors 

that they were higher-priced (even though they were not). These tactics created additional 

competition. (See Patterson, Tr. 350) (FOF 5.82).

Air Liquide is also a sophisticated customer. Air Liquide is a U.S. subsidiary of a 

large French corporation. (See Kamrath, Tr. 1979-80) (FOF 5.83). It has purchased LIN/LOX 

tanks in the past, both domestically and overseas. (See Kamrath, Tr. 1983-85) (FOF 5.83). [xx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxx] (Kamrath, Tr. 2235-36) (FOF 5.83). [xxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]

Air Products is a sophisticated customer. Air Products purchased several fielderected LIN/LOX tanks during the 1990s, both in the U.S. and overseas. (Hilgar, Tr. 1390-91) 
1167887 110 

(FOF 5.84). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxx] (See, e.g., [xxxxxxxxx], Tr. 488-89) (FOF 5.55).

Although not a current customer, Linde is certainly sophisticated. Linde is a U.S. 

subsidiary of a large German corporation. (See Kistenmacher, Tr. 822-23; 830) (FOF 3.85). 

Linde has extensive experience with LIN/LOX experience in the U.S. and overseas. 

(Kistenmacher, Tr. 830) (FOF 5.85). In the past, Linde was also involved in other projects 

involving cryogenic tanks, such as the LNG peakshaving facility at Memphis. (Kistenmacher, 

Tr. 884, 886) (FOF 3.673).

Praxair is a sophisticated customer. At one time, Praxair owned CB&I in its 

entirety. (See Glenn, Tr. 4062-63) (FOF 5.86). Praxair has also negotiated a sole-source 

arrangement with PDM (and later with CB&I) that was designed before the Acquisition ever 

took place, presumably to obtain a lower overall price on LIN/LOX tanks. (See Scorsone, Tr. 

5018-19) (FOF 5.166). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (See Patterson, Tr. 488-89) 

(FOF 5.55). 

D. ENTRY IN THE LIN/LOX TANK MARKET IS SUFFICIENT.

As discussed in Part II, supra, Complaint Counsel has failed to make its prima 

facie case. Assuming the existence of a prima facie case, the case is weak at best. Respondents 

need not make a strong showing to rebut it. See Baker Hughes, 908 F.2d at 986. Nevertheless, 

Respondents have rebutted it with strong evidence that entry in the U.S. market will constrain 

CB&I's pricing in the LIN/LOX market. Accordingly, Complaint Counsel must present 

additional evidence showing that lessening of competition is likely, including evidence regarding 

the sufficiency of entry outlined by Respondents. See id. at 983.
1167887 111 

Although Respondents are under no duty to do so, they have presented evidence 

regarding sufficiency of entry. Since the Acquisition, five LIN/LOX tank projects have been 

awarded -- two by BOC, one by Air Liquide, one by MG Industries, and one by Praxair. Of 

these, four were competitively bid. Results of these bid contests demonstrate that the

Acquisition has not substantially lessened competition in the LIN/LOX market. To the contrary, 

evidence shows that customers have received competitive bids on post-Acquisition projects and 

that CB&I's behavior has been constrained by its competitors. (See, e.g., Harris, Tr. 7302, 7324) 

(FOF 7.124, 7.127). 

1. Customers receiving pricing after the Acquisition are satisfied 

with prices received.

a. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx. 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxxxxxxxxx

xxxxx). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxxxxxx). [xxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxxxx 

xxxxx). xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx). [xxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx22xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxxxx).

 

22

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxx]
1167887 112 

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx]. [xxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxx) 

(xxxxxxxxxx). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxxx 

xx).23 (xxxxxxxxxxxxxxxx). 

[xxxxxxxx [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx [xxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxx] (xxxxxxxxxxxxxxxxxxxxxxxx). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxx). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxxxxxxxxx

xxxxx).

The facts surrounding this project support Dr. Harris' views regarding competition 

in the LIN/LOX market. [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] 

(xxxxxxxxxxxx). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

 

23 Had he done so, he would have learned that CB&T gave him a budgetary quote, not a fixed, firm price. 

(See Stetzler, Tr. 6351) (FOF 5.70).
1167887 113 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (Harris, Tr. 7390-91).

b. [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

[xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxx] (xxxxxxxxxxxxxxxxxxxxxxxxxxxxx). [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxxxxxxxxxx). [xxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

x xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

x. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

x. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxx

x. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxx

(xxxxxxxxxxxxxxxxxxxxxxxxxxx). This data confirms Dr. Harris' analysis of competition and 

debunks Complaint Counsel's argument that CB&I has cost advantages in this market. (Harris, 

Tr. 7389-90) (FOF 7.126). The bid amounts were also significant in supporting Dr. Harris' 

conclusion regarding competition, because it showed that Matrix was a viable competitor to 

CB&I and that AT&V could effectively discipline CB&I's pricing. (See Harris, Tr. 7322-23, 

7385) (FOF 7.127).
1167887 114 

c. BOC received a good price for its Midland project.

BOC was extremely satisfied with AT&V's price at Midland, primarily because it 

was less than the amount BOC budgeted for the tank. (V. Kelley, Tr. 4601, 5272) (FOF 5.96). 

Kelley believes that BOC can get a competitive price for a LIN/LOX tank with just two bidders. 

(V. Kelley, Tr. 5285) (FOF 5.94). While BOC would, to some extent, prefer more bids rather 

than less, it does not want an unlimited number of bids. Excess bids flood the process and some 

contractors would choose not to bid because there were too many bidders. (V. Kelley, Tr. 4674-

75) (FOF 5.94). Further, CB&I's loss on this project led Dr. Harris to conclude that competition 

was not affected by the Acquisition because CB&I bid on the projects at a negative margin and 

still lost. This contradicts claims that CB&I has cost advantages in this market. (Harris, Tr. 

7319-21).

d. Other market participants do not believe the

Acquisition has substantially lessened competition.

Other market participants believe that the Acquisition has not affected the ability 

to purchase LIN/LOX tanks at a competitive price. Joseph Hilgar observed that Air Products has 

more potential bidders for prequalification today than it had in the past, and that it has a 

sufficient competition to ensure that it will receive reasonable prices on its next project. (Hilgar, 

Tr. 1540-41) (FOF 5.169). Similarly, Jerry Stetzler of CB&T, based on his experience in the 

tank market, believes that prices for LIN/LOX tanks will not be affected by the Acquisition 

because there are enough suppliers to ensure competitive prices for these tanks. (Stetzler, Tr. 

6366) (FOF 5.215). In fact, CB&T sees the merger as creating an opportunity to compete in this 

market. CB&T bid on BOC's Midland job to capitalize on that opportunity. (Stetzler, Tr. 6368) 

(FOF 5.69). CB&T has competitive advantages over CB&I. It is a small company better able to 
1167887 115 

respond to certain jobs. It has a lower overhead structure, and can respond to immediate market 

conditions more quickly and efficiently than CB&I. (Stetzler, Tr. 6369) (FOF 5.67).

Linde Process Plants has expressed some concerns regarding the effect of the 

Acquisition on the LIN/LOX tank market. However, Linde does not have recent experience in 

this market; it has not purchased a tank since 1999. (Kistenmacher, Tr. 927-28) (FOF 5.176). 

Further, Linde is not familiar with pricing of any LIN/LOX tanks purchased since the

Acquisition, nor has it seen any evidence that CB&I has raised its prices on LIN/LOX tanks 

post-Acquisition. (Kistenmacher, Tr. 931-32; Fan, Tr. 1006) (FOF 5.181, 5.185).

2. Entry in the LIN/LOX market has constrained CB&I's

behavior.

CB&I perceives current competition in LIN/LOX as "very intense," and does not 

believe that CB&I can implement a price increase post-Acquisition. (Scorsone, Tr. 4881-82, 

5038-39) (FOF 5.212, 5.213, 5.216). CB&I believes that if it increases prices on field-erected 

LIN/LOX tanks, it will lose work to its competitors. In fact, CB&I sees a need to cut its prices in 

order to remain competitive in this market. (See Scorsone, Tr. 5030-31) (FOF 5.217). Other 

evidence corroborates Mr. Scorsone's view of the market and shows that CB&I has been

disciplined by AT&V, Matrix and CB&T. The following e-mail is illustrative:

To follow-up on LOX/LIN competitors, I just spoke to BOC and 

they have awarded the Midland, NC to ATV out of Houston. BOC 

says . . . ATV has picked up Graver and Brown Minny people over 

the last couple of years with the experience to do the work. Our 

final price to BOC was $1,520,000 at 2% profit and they bought 

the tank for approximately $1,325,000 which is about 2% below 

our total flat cost. 

(RX 273) (FOF 5.72, 5.213). From this information, CB&I concluded that AT&V had a "very 

strong commitment to entering into this market and that they made the proper new move to gain 
1167887 116 

experience in the market" and that they have lower costs than CB&I. (Scorsone, Tr. 5026) (FOF 

5.40, 5.72). 

In fact, after CB&I learned that CB&I lost the LIN/LOX project for BOC in 

Midland, North Carolina to AT&V despite bidding at a margin level of negative 5 percent, a 

company document concluded CB&I has "a very hard time competing on these [LIN/LOX] 

tanks." (RX 208) (state of mind) (See also Scorsone, Tr. 5029-30) (FOF 5.212). Company 

documents show that CB&I was learning about its new LIN/LOX competitors, stating that 

CB&T may "have picked up Rex Robinson who ran the LOX/LIN group for Graver and has 

been in the business for many, many years. Lud says that along with Rex, CBT has picked up 

enough other engineering project management and field people from Graver to give them

'credibility' in this market." (RX 273) (FOF 5.59, 5.73). This information warned CB&I that 

CB&T planned to enter the market. (Scorsone, Tr. 5026-28) (state of mind) (FOF 5.59, 5.72, 

5.73). RX 273 also contained recent intelligence that Matrix was also entering this market: "I 

also asked about Matrix, as I knew they had build [sic] the Kingsport, TN for them in 1999. He 

says they did a good job for Air Products and they definitely consider them a player in the 

market . . . Based on this, it appears that Air Products considers CBT and Matrix viable 

competitors in the LOX/LIN tank market." (RX 273) (FOF 5.54). Because Air Products is a 

sophisticated customer, and because they are apparently considering these companies, CB&I 

believes that they are real competitors. CB&I makes pricing decisions on LIN/LOX tanks with 

this in mind. (Scorsone, Tr. 5028-29) (state of mind) (FOF 5.72, 5.216, 5.217).

In connection with the New Johnsonville job, CB&I realized that it had

competition and acted accordingly. MG made CB&I aware that there was competition for the 

New Johnsonville tank. [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 
1167887 117 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxxxxxxx)

(FOF 5.153). Awareness of this competition caused CB&I to drop its price. Originally, CB&I 

submitted a bid with a 4 percent margin. (Scorsone, Tr. 5022-23) (FOF 5.151). MG "said that 

[CB&I's] price was a little high. There was another tank that he wanted to award. He asked for a 

combined price from us, and we subsequently submitted that price and reduced our margin on 

the job." (Scorsone, Tr. 5023) (FOF 5.151). CB&I cut its margin to approximately .5 percent 

and won the job. CB&I cut its margin because it was threatened by competition. (Scorsone, Tr. 

5023-24) (FOF 5.151, 5.152). 

Evidence regarding Air Liquide's Freeport project further corroborates CB&I's 

state of mind. CB&I originally bid on this job at a 2 percent margin. (Scorsone, Tr. 5032-33; 

see also RX 627 at 2) (FOF 5.128). Steve Knott -- a CB&I sales executive -- related a 

conversation with an Air Liquide purchasing employee who informed CB&I that they were "in a 

'competitive situation' (Scorsone, Tr. 5033-34; RX 627 at 2) (FOF 5.129). To deal with this 

competitive situation, Mr. Knott proposed the following:

We would like to contract for this work. In order to avoid a loss of 

this work to the competition, we should be prepared to cut the 

Florida margin to 1% and but leave the Texas margin the same as a 

first response to their pressure. In the end, in order to get both 

jobs, it may be necessary to go to 0% margin on both. That would 

be as low as we would go on this work unless you and I talk again. 

(RX 627 at 2) (FOF 5.130). In response, CB&I lowered its margins to zero percent on both 

tanks. (Scorsone, Tr. 5033-36) (FOF 5.130). Despite this move, CB&I lost the Freeport job to 

AT&V. (Scorsone, Tr. 5034-35) (FOF 5.130). The AT&V/Air Liquide dispute has not affected 

CB&I's state of mind regarding AT&V, because "CBI was confused by the specifications and 

requirements for the final bidding, and I imagine ATV was as well. ATV is dealing with these 

issues. They may have taken a rather harsher contractual position with Air Liquide and maybe 
1167887 118 

decided, maybe rightly so, that this is a project that they shouldn't be pursuing." (Scorsone, Tr. 

5038) (FOF 5.131, 5.136). 

Other pricing contests have given CB&I additional evidence regarding the

viability of its competitors. CB&I submitted budget pricing for a BOC LIN/LOX project in 

Oregon. (Scorsone, Tr. 5031) (FOF 5.116). CB&I never had an opportunity to submit a firm 

fixed bid to BOC for this project because it was awarded to AT&V. (Scorsone, Tr. 5031) (FOF 

5.120). Since AT&V has been awarded a second LIN/LOX tank by BOC, CB&I has concluded 

that BOC is pleased with AT&V's performance as a LIN/LOX tank supplier. (Scorsone, Tr. 

5032) (state of mind) (FOF 5.121). 

E. SUMMARY: APPLICABLE LAW REQUIRES DISMISSAL OF

THE COMPLAINT AS IT RELATES TO THE LIN/LOX MARKET.

Applicable law compels dismissal of this action with respect to the LIN/LOX 

market. As discussed in Part II, supra, Complaint Counsel's prima facie case is weak. 

Accordingly, Respondents need not present a strong showing to rebut it. Baker Hughes, 908 

F.2d at 991. Nevertheless, Respondents have presented evidence on numerous fronts to rebut 

Complaint Counsel's case. Respondents have proven that actual entry has occurred in this 

market, that entry barriers are nonexistent, and that customers in this market are sophisticated 

enough to receive good pricing with a minimum of competition. See id. at 988-89. Further, 

while not required to do so, Respondents have presented compelling evidence regarding the 

sufficiency of entry in the LIN/LOX market. Most current customers are generally satisfied with 

prices received and choices available to them, and the evidence demonstrates that new entrants 

are severely disciplining CB&I's activities in this market. Complaint Counsel cannot carry its 

ultimate burden of persuasion in this case. Accordingly, the Complaint as it relates to the 

LIN/LOX market must be dismissed. 
1167887 119 

VI. RESPONDENTS HAVE SUCCESSFULLY REBUTTED COMPLAINT 

COUNSEL'S PRIMA FACIE CASE IN THE TVC MARKET.

A field-erected thermal vacuum chamber ("TVC") is a stainless steel pressure 

vessel used to test satellites and satellite components prior to launch. (Gill, Tr. 179-83; Neary, 

Tr. 1423-24) (FOF 6.1). TVC's simulate the atmospheric and thermal conditions found in space. 

(Gill, Tr. 183; Proulx, Tr. 1722-23; Thompson, Tr. 2039-40; Higgins, Tr. 1264) (FOF 6.2). A 

TVC has two basic components. First, a TVC has a large vacuum envelope (or chamber) 

constructed of stainless steel shaped roughly like a horizontal cylinder with a front door that may 

swing on a hinge or slide laterally on a rail. (Scully, Tr. 1098-99) (FOF 6.4). Second, a TVC 

contains a "thermal vacuum system," which is the process equipment that goes inside a thermal 

vacuum chamber to simulate extreme heat and cold. (Higgins, Tr. 1263) (FOF 6.5). The thermal 

vacuum system includes one or more shrouds, vacuum insulated pipe, and cryo pumps or other 

pumping equipment, which are all controlled by a thermal control unit. (Higgins, Tr. 1263) 

(FOF 6.5). CB&I is not capable of designing or building the thermal vacuum system portion of a 

TVC. (Scully, Tr. 1225) (FOF 6.53, 6.56).

Complaint Counsel has failed to make a prima facie case with respect to the TVC 

market. The market concentration statistics on which it relies are virtually meaningless, as they 

were generated using a total of two data points over an eleven-year period -- one of those two 

data points was for a project never built -- and cannot dislodge the fact that CB&I has not built a 

field-erected TVC since the first Reagan administration. The failure of market concentration 

statistics to provide any meaningful information regarding the competitiveness of the TVC

market is a symptom of a greater problem -- there is virtually no demand for thermal vacuum 

chambers. Because of a lack of demand, there is no way that the Acquisition could have 

substantially affected competition in this case. Even if Complaint Counsel did make a prima 
1167887 120 

facie case, Respondents have effectively rebutted it. The evidence demonstrates that CB&I is 

not a player in the TVC market (as it has not built a TVC since 1984), and that entry barriers in 

this market are low. Further, even if the Acquisition has caused any problem in this market, 

available remedies short of a breakup would encourage competition without damaging customers 

in this market or other markets.

A. DEMAND IN THE TVC MARKET IS SO DE MINIMIS THAT IT IS 

NOT A LINE OF COMMERCE THAT HAS BEEN

SUBSTANTIALLY AFFECTED BY THE ACQUISITION.

Complaint Counsel has failed to carry their burden in the TVC market. This socalled "market" is extremely thin. (See, e.g., Harris, Tr. 7325) (FOF 6.11). Complaint Counsel 

presented extensive evidence regarding TVCs. From this evidence, two major points arise: 

First, the only TVC built in the U.S. since 1992 was the C-1 project built by PDM and Chart 

Industries for Hughes in 1997. (See CX 1048). Second, only one TVC is being contemplated by 

customers in the next ten years. For example, [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (FOF 6.14). The Spectrum Astro project, 

discussed extensively during this trial, has been scrapped due to "government action." 

(Thompson, Tr. 2097, 2103) (FOF 6.15). Overall, demand is decreasing for field-erected TVCs 

because of: 1) consolidation in the aerospace business; 2) the miniaturization of electronic 

components in satellites; and 3) the change in the economy since the 1990s. (Scully, Tr. 1199-

1204) (FOF 6.12). This decline in demand is expected to last at least a few years. (Scully, Tr. 

1205-06) (FOF 6.13).

Given the miniscule demand, Complaint Counsel has not met its burden of proof 

because it has failed to show that the commerce affected in the TVC market is substantial. 

United States v. Baker Hughes, Inc., 731 F. Supp. 3, 9 (D.D.C. 1990). In Baker Hughes, the 
1167887 121 

district court noted that "[t]he minuscule size of the market creates problems for the

government's case, because one element of a Section 7 violation is that '[t]he market must be 

substantial.'" Id. (citing United States v. Dupont & Co., 353 U.S. 586, 595 (1957)). The size of 

the Baker Hughes market is instructive; the district court was concerned about a market in which 

20-45 items were purchased each year. 908 F.2d at 986. As noted above, one TVC is purchased 

approximately every five to ten years, making this market less than 1 percent of the size of the 

Baker Hughes market. To call this a substantial effect on commerce would be to read the word 

"substantial" out of Section 7 itself. Second, as discussed in Part II, supra, Complaint Counsel's 

market concentration statistics are virtually meaningless. Over an 11-year period, the statistics 

as presented by Complaint Counsel's expert witness contain two data points. (E.g., Simpson, Tr. 

3493). There can be no inference drawn from this analysis, other than that market concentration 

statistics are meaningless. 

B. CB&I IS NOT A PLAYER IN THE TVC MARKET.

Even if the TVC market were a viable line of commerce, there is no evidence that 

the Acquisition has substantially lessened competition. Indeed, there is a substantial question 

whether CB&I would have the necessary expertise to construct TVCs absent the Acquisition. 

(Scully, Tr. 1214) (FOF 6.36). CB&I is not particularly experienced as a fabricator of TVCs. It 

last constructed a TVC in 1984. (Scully, Tr. 1187-89, 1193; Scorsone, Tr. 5055-56; Higgins, Tr. 

1276-77; Glenn, Tr. 4089, 4160) (FOF 6.26). On its second-to-last TVC job in 1981, the 

chamber was so flawed that it was never put into operation. (Thompson, Tr. 2113; Scully, Tr. 

1188) (FOF 6.45). Importantly, CB&I has never constructed a mailbox-shaped TVC -- the type 

that customers currently prefer. (Higgins, Tr. 1277-78; Scully, Tr. 1193, 1192-93; Scorsone, Tr. 

5056; Neary Tr. 1467) (FOF 6.27). Mailbox-shaped TVCs are much more difficult to design and 
1167887 122 

more costly to build than traditionally-shaped TVCs. (Scully, Tr. 1106-07; Higgins, Tr. 1277; 

Neary, Tr. 1467) (FOF 6.28)..

In the future, CB&I will not continue to invest in marketing for TVC

opportunities, nor will it actively engage and pursue these projects. (Scorsone, Tr. 5053) (FOF 

6.62). Preparing TVC bids is expensive and these projects often do not end up being built. 

(Scorsone, Tr. 5054) (FOF 6.59). CB&I has taken steps to cut spending on its marketing in the 

TVC business, including reassigning Dave Lacey to a project construction role. (Scorsone, Tr. 

5053-54) (FOF 6.63). The number of CB&I's employees with relevant TVC experience is 

dwindling as they age, and they are not being replaced as they retire. Likewise, PDM did not 

replace aging employees with TVC experience. (Scorsone, Tr. 5054-55) (FOF 6.60). Currently, 

CB&I does not have an engineering staff that is dedicated solely to building TVCs. (Scorsone, 

Tr. 4887) (FOF 6.61).

C. BARRIERS TO ENTRY IN THE TVC MARKET COULD BE

OVERCOME WITH MENTORING.

With some training and instruction, U.S. companies such as Matrix, Nooter, and 

Puget Sound Fabricators can build field-erected TVCs. (Scully, Tr. 1229-30) (FOF 6.108). 

Market participants believe that access to a cost-free license to the combined TVC technological 

know-how of CB&I and PDM would assist these companies in entering the market. (Scully, Tr. 

1228-30; Higgins, Tr. 1275-76; Proulx, Tr. 1755; Cutts, Tr. 2391-92) (FOF 6.106). Market 

participants also believe that it would further help competition if CB&I were to mentor a 

company like Matrix, Nooter or PSF on CB&I's next field-erected TVC project by integrating 

that company's engineering, fabrication and field-erection crews into the entire process. (Scully, 

Tr. 1230-31; Higgins, Tr. 1275-76) (FOF 6.107). In fact, the newly-mentored company could 

have more current experience in constructing a field-erected TVC than CB&I, as CB&I has not 
1167887 123 

actually built one since 1984. (Scully, Tr. 1231) (FOF 6.107). Customers would consider using 

a TVC supplier that had gained its experience by working as a joint venture partner with CB&I 

on each phase of the construction process of a TVC project. (Proulx, Tr. 1756-57) (FOF 6.109).

D. ANY COMPETITIVE PROBLEM CAN BE SOLVED WITH A

REMEDY OTHER THAN A BREAKUP OF CB&I.

Respondents contend that the Acquisition has not substantially affected

competition in TVC market. This market is virtually nonexistent, and CB&I is not a player in 

the market. To the extent this Court finds a competitive problem in this market, CB&I has 

prepared a package of behavioral constraints in the form of a proposed Consent Decree. (Glenn, 

Tr. 4162-66; RX 925) (FOF 6.99). The terms of this offer are as follows: First, CB&I promises 

to build TVCs for the government at cost. (Glenn, Tr. 4165) (FOF 6.100). In addition, CB&I 

will build TVCs for commercial customers on a cost-plus-four-percent profit basis, or at any 

other profit deemed reasonable by the Court. (Glenn, Tr. 4165) (FOF 6.101). Second, CB&I 

will mentor another vendor as part of CB&I's next TVC project, involving the other vendor in all 

phases of design and construction. Third, CB&I will license all of it's Red Book TVC

engineering standards and any necessary additional licenses on a royalty-free basis, as well as 

provide training for fabrication, procurement, design, field installation, and welding procedures. 

(Glenn, Tr. 4165-67) (FOF 6.102, 6.103). Fourth, CB&I would agree to not act as an EPC 

contractor for any TVC project for seven years, and to not purchase any company owning

thermal shroud technology. (Glenn, Tr. 4166) (FOF 6.105). 

Customers and competitors believe tha t this package would improve competition. 

CB&I's offer to provide free technology to all interested parties would assist companies such as 

Matrix and Puget Sound Fabricators in competing for TVCs. (Scully, Tr. 1229-30) (FOF 6.108). 

For example, Kent Higgins of Chart Industries noted that transfer of this technology to a 
1167887 124 

company such as Matrix would help Matrix become a properly qualified field fabricator of 

TVCs. (Higgins, Tr. 1275-76) (FOF 6.107). Similarly, Greg Proulx of Boeing agreed that 

competition would benefit if CB&I licensed this technology to others. (Proulx, Tr. 1755) (FOF 

6.106).

Similarly, CB&I's offer to provide free mentoring to companies such as Matrix, 

Nooter or PSF on CB&I's next TVC project by integrating that company's engineering, 

fabrication and field-erection crews into the entire process has met with approval. (Scully, Tr. 

1230-31; Higgins, Tr. 1275076) (FOF 6.107). In fact, the newly-mentored company would 

possibly have more current experience in constructing a TVC than CB&I had as a competitor 

prior to the Acquisition. (Scully, Tr. 1231) (FOF 6.107). Importantly, customers would consider 

using such a newly-trained supplier. For example, Boeing would consider using a TVC supplier 

that had gained experience by working as a joint venture partner with CB&I on each phase of the 

construction process of a TVC project. (Proulx, Tr. 1756-57) (FOF 6.109).

CB&I's offer to provide TVCs at a 4 percent margin has also met with approval 

from competitors and customers. Ron Scully of XL noted that customers receiving this deal 

would be getting a good price. (Scully, Tr. 1231-32) (FOF 6.110). Patrick Neary of TRW also 

acknowledged that 4 percent is a "good deal," and that CB&I would be acting responsibly in 

making this offer. (Neary, Tr. 1482) (FOF 6.110, 6.111). Competitors also agree. John Gill of 

Howard Fabrication stated that if a customer purchased a TVC for a 4 percent fixed margin, it 

would be getting a good value. (Gill, Tr. 261) (FOF 6.110).

CB&I's sale of XL and its offer to refrain from purchasing another technology 

supplier has also been well received. Boeing believes that CB&I's sale of XL benefits

competition in the TVC market. (Proulx, Tr. 1757-58) (FOF 6.112). John Gill of Howard agrees 
1167887 125 

that this sale is "better for business," and that it would help competition if CB&I were to promise 

not to purchase another company such as XL for a period of five to seven years. (Gill, Tr. 258-

60) (FOF 6.112).

E. SUMMARY: THE COMPLAINT AS IT RELATES TO THE TVC 

MARKET MUST BE DISMISSED.

Dismissal of the Complaint as it relates to TVCs is required. Because there is no 

substantial market for TVCs, Complaint Counsel cannot, under any circumstances, make a prima 

facie case. Complaint Counsel's effort to do so emphatically drives home this point. As 

discussed above, its market concentration statistics contain two data points in 11 years; one of 

those points relates to a project that will never be built. Accordingly, Respondents need not 

make any showing. Assuming arguendo that Complaint Counsel has established a prima facie 

case, Respondents have presented compelling evidence that CB&I is not a player in the market, 

that there is a significant question as to whether it could even participate in this market, and that 

entry barriers to this market are minimal. Even if, despite all this evidence, this Court finds a 

competitive problem in the TVC market, CB&I has prepared a remedy package that will resolve 

any concerns without imposing the draconian remedy advanced by Complaint Counsel.

VII. COMPLAINT COUNSEL HAS NOT MET ITS BURDEN TO SHOW

THAT ANTI-COMPETITIVE EFFECT IN ANY MARKET IS LIKELY.

Under Baker Hughes, "[i]f the defendant successfully rebuts the presumption, the 

burden of producing additional evidence of anticompetitive effect shifts to the government, and 

merges with the ultimate burden of persuasion, which remains with the government at all times." 

Baker Hughes, 908 F.2d at 983. It has not done so. Although not required to do so, Respondents 

have presented extensive evidence regarding the sufficiency of entry in the relevant markets. In 

an effort to carry its burden in the face of this evidence, Complaint Counsel has pointed to 

budget pricing as evidence of post-Acquisition anticompetitive effects. Complaint Counsel has 
1167887 126 

also alleged that CB&I has implemented price increases in the relevant products postAcquisition, and that the Acquisition has created opportunities for use of market power. Finally, 

in an effort to support its claims of anticompetitive effects, Complaint Counsel presented 

extensive expert testimony. As discussed below, these efforts are misguided and insufficient to 

carry Complaint Counsel's ultimate burden of persuasion. 

A. BUDGET PRICING DOES NOT CONSTITUTE EVIDENCE OF

POST-ACQUISITION PRICE INCREASES.

 Complaint Counsel relied heavily on "budget pricing" to demonstrate that CB&I 

has raised its post-Acquisition prices in the relevant markets. (E.g., Robertson, Tr. 8218-19). 

Such reliance is misplaced, as it ignores the nature and the accuracy of budget prices. Evidence 

presented at trial conclusively demonstrates that "budget pricing" is not reflective or predictive of 

firm, fixed price bids that customers have received or will receive in the future. Customers 

simply do not purchase products based on budget prices. For example, Jerry Stetzler of CB&T 

explained that a budget price is "not anything you are submitting a bid that you are going to 

select a contract from" (Stetzler, Tr. 6380) (FOF 7.9). Nigel Carling, formerly of Enron, 

testified similarly and added that a firm, fixed price (unlike a budget price) is based on detailed 

designs. The company providing a firm, fixed price is expected to "stand up to their price and do 

the work for that price." (Carling, Tr. 4472) (FOF 7.3).

When a company such as CB&I gives a customer a budget price, it does so 

without information regarding many aspects of the particular job. For example, the following 

information is not usually made available by the customer to a tank vendor at the budget pricing 

stage:

• An actual design of the tank or structure to be built. (Scorsone, Tr. 4999; 

Hall, Tr. 1868) (FOF 7.15). 
1167887 127 

• The actual construction schedule. (Scorsone, Tr. 5000-01) (FOF 7.20, 

7.21).

• Whether the construction schedule will be a regular work week or require

overtime. (Scorsone, Tr. 5000).

• Actual pricing provided by subcontractors. (Scorsone, Tr. 5000) (FOF

7.17)

• The exact location of the project at issue, including information regarding 

site conditions. (Scorsone, Tr. 5001-02; Stetzler, Tr. 6351-53) (FOF 7.22, 

7.24)

• Intelligence regarding competitors. (See Hall, Tr. 1869-70).

These unknowns make it impossible to provide pricing with any level of precision. Further, such 

precision is not required or even desired at the early stages of a project characterized by budget 

pricing. Complaint Counsel's own witnesses have recognized this fact. For example, Brian Price 

of Black & Veatch explained that "we would certainly expect early on getting budget pricing that 

they would be more conservative. At that point we're not looking for the lowest number we 

could conceive of." (Price, Tr. 604) (FOF 7.4). 

Other customers recognize that budget prices do not accurately represent the price 

that they will pay for a project. For example, Michael Patterson of MG Industries noted that 

with respect to formulating budget pricing, a company is "not going to put a lot of time or effort 

into it." (Patterson, Tr. 374) (FOF 7.25). Patterson also compared budget pricing to fixed, firm 

price bids, explaining that "those are two different kinds of numbers. One is what you pay for a 

tank. The other is just putting a quick number together for you." (Patterson, Tr. 374) (FOF 

7.12). Similarly, Hans Kistenmacher referred to budget prices as an "orientation," or "numbers 

that are being used maybe by a client to set up an investment budget." (Kistenmacher, Tr. 925) 

(FOF 7.2). 
1167887 128 

Customers recognize that budget pricing is often a "guess." For example, Clay 

Hall referred to budget pricing that he received from CB&I in 2002 as a "scientific wild assed 

guess," accurate only to within plus or minus forty percent. (Hall, Tr. 1863-65) (FOF 7.7). 

Nigel Carling provided similar testimony: 

A budget price is typically based on preliminary knowledge, on 

preliminary designs, and is basically used just to get an

appreciation of how much a job might cost at the beginning of a 

job, because as an owner you don't want to spend too much money 

pursuing something that's going to be too expensive so you require 

a budget price just to get an approximate idea of what it might cost. 

The firm price is based on very detailed designs, very detailed 

information about the project, and you expect the person providing 

that price to stand up to their price and to do the work for that price 

so he commits to that price. The budget is just a best-efforts, 

almost a guestimate in some cases. 

(Carling, Tr. 4472) (FOF 7.1, 7.2, 7.9) (emphasis added).

In addition, reliance on budget pricing is flawed because such pricing is usually 

the first round of numbers provided by competitors. During a bidding process, competitors learn 

about the existence of one another, and adjust their prices accordingly. Customers often assist 

competitors in learning this information. For example, Michael Patterson of MG Industries

regularly contacts suppliers in an attempt to play them off each other. (See Patterson, Tr. 362-

63) (FOF 7.10). Similarly, Clay Hall of MLGW pointed out that budget pricing does not take the 

competitive situation into account. (See Hall, Tr. 1869-70) (FOF 7.10). The evidence shows that 

the more rounds of bidding and/or pricing that occur, the lower the prices go. For example, in 

connection with the [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (FOF

4.69). 

Despite these inherent inaccuracies with budget pricing, Complaint Counsel relies 

heavily on this evidence, focusing on a line item in CB&I's internal budget price worksheets 
1167887 129 

called "margin." Complaint Counsel attempts to compare margins on post-Acquisition budget 

prices to margins on fixed, firm price bids given several years prior to the Acquisition. (See

Robertson, Tr. 8218-19). This attempted analysis fundamentally ignores the purpose of a margin 

calculation. Margin is not designed, especially at the budget pricing stage, to predict profits or 

losses. Margin calculations are prepared for internal use only, and in the case of budget pricing 

cover the many contingencies and unknown risk factors that always exist at the early stages of a 

project. (See Price, Tr. 608-09; Simpson, Tr. 5366; Scorsone, Tr. 5252) (FOF 7.26). When the 

number of contingencies and risk factors is great, the margins on budget prices are high. 

(Scorsone, Tr. 5003) (FOF 7.26). In short, high budget prices are an indication of high risk jobs, 

not of anti-competitive effects, as Complaint Counsel contends. 

B. COMPLAINT COUNSEL HAS FAILED TO SHOW THAT PRICES 

IN THE RELEVANT MARKETS HAVE INCREASED.

In attempting to carry its burden of proof, Complaint Counsel did not present 

evidence showing that actual transaction prices in the relevant product markets have gone up. 

Complaint Counsel never presented this evidence, because it simply does not exist. Iin fact, the 

evidence is squarely to the contrary. Respondents' expert, Dr. Harris, reviewed pricing in the 

relevant markets post-Acquisition and found that it has not risen since the Acquisition. In 

support of his conclusion, Dr. Harris pointed to the LNG bid contest in Trinidad and recent 

activity in the LIN/LOX market. He also noted that most customers who have received pricing 

post-Acquisition were satisfied with prices received.

Instead, Complaint Counsel has attempted to piece together documents to develop 

a story of increased prices. These efforts have failed. For example, Complaint Counsel argues 

that PDM increased its price to Williams in connection with the Cove Point expansion in

November 2000 in anticipation of the Acquisition. However, there is not a shred of evidence 
1167887 130 

supporting that assertion, only speculation and conjecture. Similarly, Complaint Counsel also 

makes much of price changes associated with the Spectrum Astro TVC that was recently

cancelled. These changes have nothing to do with competition; or the Acquisition. (Scorsone, 

Tr. 5048-49; Scully, Tr. 1123-24) (FOF 6.188). Notably, Spectrum Astro did not testify to a 

belief that the Acquisition caused a higher price for its proposed job. In several instances, such 

as alleged price increases in connection with the proposed Spectrum Astro and Boeing thermal 

vacuum chamber, the customer never paid the allegedly higher price. A price never paid is not a 

relevant price increase in a Section 7 case. 

C. THERE HAVE BEEN NO STRUCTURAL CHANGES IN THE

COMPETITIVE LANDSCAPE WHICH FACILITATE EXERCISE 

OF MARKET POWER, NOR HAS CB&I EXERCISED MARKET 

POWER.

In an attempt to carry its burden, Complaint Counsel argues that the Acquisition 

has facilitated coordinated interaction, a claim that is meritless. CB&I has not engaged in 

coordinated interaction or in any exercise of market power, nor has the Acquisition created an 

opportunity or a heightened ability to do so. This is evident from Complaint Counsel's own 

Merger Guidelines, which provide that:24 

A merger may diminish competition by enabling the firms 

selling in the relevant market more likely, more

successfully, or more completely to engage in coordinated 

interaction that harms consumers.

Merger Guidelines, Section 2.1 (emphasis added). The use of the term "more" is highly relevant. 

In order for an acquisition to potentially diminish competition, it must be more likely that an 

exercise of collusion or market power would occur in its wake. The conditions in this industry 

are not conducive to coordinated interaction, and coordinated interaction has not been made 

 

24 As discussed in Part II, supra, the Merger Guidelines are not controlling. In this case, they provide an 

illustration of how Complaint Counsel's case is flawed.
1167887 131 

more likely the Acquisition. No one company is likely to have an ability to exercise market 

power. The Merger Guidelines recognize that impediments to exercising market power include 

product heterogeneity, inability to access incomplete information about rivals' businesses, and 

differences in vertical integration. These characteristics are hallmarks of the industrial tank 

business. It is undisputed that each of the relevant products is designed and built on a custom 

basis. Further, competitors in this industry have highly imperfect knowledge regarding each 

other's pricing, a fact recognized by both expert economists. (See Simpson, Tr. 3073, 3771; 

Harris, Tr. 7264, 7273, 7358-59) (FOF 7.82, 7.83). There are also differences in vertical 

integration among the various competitors in this industry, making exercise of market power 

more difficult. The Acquisition has done nothing to change these industry characteristics. 

Further, this is not a market that is replete with a history of bid rigging or coordination, unlike 

the paving contracting industry or bidding on school milk contracts. Customers have testified 

that they have gained very competitive pricing from bidding to just two or three firms. These are 

not the types of conditions in which coordinated interaction is likely to occur.

D. ECONOMIC THEORY DOES NOT SUPPORT A CONCLUSION 

THAT THE ACQUISITION SUBSTANTIALLY THREATENED TO 

LESSEN COMPETITION IN ANY RELEVANT MARKET.

This Court heard extensive economic testimony from Drs. John Simpson and 

Barry Harris, expert economists presented by Complaint Counsel and Respondents, respectively. 

While these gentlemen testified for eleven days, their testimony boils down to three basic 

economic theories which were applied by Dr. Simpson and criticized by Dr. Harris. Each theory 

is discussed below. 
1167887 132 

1. Application of critical loss theory shows that the Acquisition 

does not threaten to substantially lessen competition in any of 

the relevant markets.

While Dr. Simpson attempted to apply critical loss theory to define the scope of 

the relevant product markets in this case, Dr. Harris used it to assist the Court in determining 

whether the Acquisition can be expected to have any anticompetitive effects. (Simpson, Tr. 

3525; Harris, Tr. 7256) (FOF 7.59, 7.60). Critical loss theory holds that the greater the 

percentage of a company's price represented by fixed costs, the less that company can afford to 

lose business in order to obtain revenue to cover those costs. (Simpson, Tr. 3529-30). 

Economists have developed a formula establishing what percent of business lost represents a 

company's critical loss at various price increase points. (See Simpson, Tr. 3529-30) For 

example, if a company attempted a price increase of five percent, and that price increase is 

expected to result in a loss of business greater than the maximum critical loss identified by the 

formula, the company would not be expected to attempt a price increase. (See Simpson, Tr.

3529-30). The two critical components of critical loss analysis are the state of mind of the 

company being analyzed and whether that company believes it can impose a price increase 

without losing sales exceeding its critical loss. (See Simpson 3865; Harris Tr. 7260-61).

The first step in a critical loss analysis is to calculate the contribution margin, 

which is the difference between fixed and average variable costs, stated as a percentage of price. 

(Harris, Tr. 7249) (FOF 7.63) In evaluating CB&I's conduct, Dr. Simpson assumed that its 

variable contribution margin was no greater than 15 percent. (Simpson, Tr. 3017) (FOF 7.67). 

In formulating this estimate, Dr. Simpson assumed that engineering, drafting, fabrication, project 

management and field-erection components of CB&I's price are entirely variable. (Simpson, Tr. 

3003-17; CX 1641) (FOF 7.67) When the contribution margin is 15 percent, the critical loss 

formula identifies a critical loss of 25 percent. This means that CB&I could afford to lose up to 
1167887 133 

25 percent of its business in each relevant market after a 5 percent price increase in each relevant 

market before any of these increases would become unprofitable. With a 15 percent contribution 

margin, a loss in excess of 25 percent would exceed CB&I's critical loss and make the imposition 

of a 5 percent price increase unprofitable for CB&I. (Simpson, Tr. 3003-17; CX-1641; see

Harris, Tr. 7342) (FOF 7.78).

Dr. Simpson's assumptions are flawed. Engineering, drafting, fabrication, project 

management and field erection are not entirely variable costs. Each item has a cost that CB&I 

carries on its books regardless of whether or not a project is built. (Scorsone, Tr. 4902-17; 

Harris, Tr. 7341-42) (FOF 7.68, 7.71). For all products except for LNG tanks, engineering, 

drafting, fabrication and project management costs are almost entirely fixed. Further,

approximately 20 to 30 percent of field construction costs are fixed costs. (Scorsone, Tr. 4902-

17) (FOF 7.72).25 

In determining whether a cost is variable, it is relevant to consider how the 

company actually treats these costs, not how they should be treated or would be treated by an 

economist. In this case, whether CB&I's costs are variable depends on whether CB&I would 

vary the number of engineers, draftsmen, fabrication personnel, project management personnel 

and field erection personnel, as well as associated property and equipment, based on a decline in 

sales. (Simpson, Tr. 3870-72) (FOF 7.246). Dr. Simpson himself acknowledged that whether a 

cost is variable or not depends on how that cost would be varied in response to a loss of the 

amount of sales equal to the critical loss. (Simpson, Tr. 3870-72) (FOF 7.247). 

 

25 Although costs of the fabrication shop are carried whether or not CB&I subcontracts fabrication,

fabrication can be considered a variable cost for U.S. LNG projects because fabrication is so frequently

subcontracted to overseas mills that make the nine percent nickel steel used in constructing LNG tanks. (Scorsone, 

Tr. 4891). Fabrication is not so easily subcontracted for the other relevant products. 
1167887 134 

The evidence shows that CB&I would not vary the number of personnel or the 

amount of equipment or property in the above categories if it lost 25, 50, or even 100 percent of 

its work in the four relevant product areas. (Glenn, Tr. 4159-60; Scorsone, Tr. 4902-17). 

Moreover, CB&I's executives have explained why this is the case. Sales in all four of the 

relevant products are small. There are no CB&I employees who work only on the relevant 

products. All employees are trained to work on a wide variety of products, allowing CB&I to 

have a more flexible workforce, able to deal with both high and low demand for products. 

(Glenn, Tr. 4058; Scorsone, Tr. 4887; CX 497 at 363 (Leventry Dep.)) (FOF 7.75). 

The actual critical loss in this case is small. If costs are properly accounted for as 

fixed, consistent with the above facts, the applicable contribution margin would be 30 to 33 

percent. (Harris, Tr. 7341-44, 7900) (FOF 7.68, 7.69). This means that CB&I can now only 

afford to lose 12-13 percent of its business as a consequence of attempting a 5 percent price 

increase. Because CB&I would lose more than 25 percent of its business in any of the relevant 

product markets by losing just one sale in a given year or two-year period, the real question is 

whether CB&I believes it will lose 12-13 percent of its sales if it raises prices by 5 percent, 

because if it believes so, it will not attempt a price increase. (See Harris, Tr. 7266) (FOF 7.79). 

To answer this question, it is important to understand the state of mind of the company that 

would be seeking to impose this price increase. Both expert economists agree tha t state-of-mind 

evidence is relevant. (Simpson, Tr. 3865; Harris, Tr. 7260-61) (FOF 7.79, 7.69, 7.245, 7.246). 

Dr. Simpson acknowledged that CB&I's critical loss was unchanged by the Acquisition. (See 

Simpson, Tr. 3820) (FOF 7.248). For his economic theory to be correct, CB&I's state of mind 

must have changed post-Acquisition, because -- as Dr. Simpson admits -- CB&I would not have 

attempted a price increase prior to the Acquisition. (Simpson, Tr. 3865) (FOF 7.245). 
1167887 135 

The evidence demonstrates that CB&I's state of mind would preclude any price 

increase in the relevant markets. This state of mind is informed by current market developments. 

CB&I is aware that Dynegy was satisfied with pricing received from new entrants, and that TKK 

beat CB&I by 5 percent, despite CB&I's advantage in that region. (See Part III, supra). Given 

this knowledge, CB&I knows that it cannot successfully impose a price increase for LNG tanks 

without losing business. (Glenn, Tr. 4093-4109 (state of mind); Scorsone, Tr. 4872) (FOF 

3.453). Similarly, CB&I has lost all three jobs it has bid against AT&V in the LIN/LOX market 

since the Acquisition and has specifically noted in a company e-mail that "we are having a really 

hard time competing for these types of tanks." (See RX 208, discussed at Part V, supra). CB&I 

perceives that it cannot impose a price increase in the LIN/LOX market, and that it must sharpen 

its pencils for future pricing in that market. (Scorsone, Tr. 4881-82, 5030) (FOF 5.216, 5.217). 

In the LPG market, CB&I bid on the only post-Acquisition job available and was in last place in 

the initial bidding round. CB&I won this job only after cutting its costs and margin levels. (See

Part IV, supra). Simply put, CB&I does not possess a state of mind which would lead it to 

believe it can impose a price increase in any relevant market.26

In short, Dr. Simpson makes critical errors in calculating critical loss, and ignores 

the overwhelming evidence of CB&I's state of mind which indicates that, applying the critical 

loss formula, CB&I will be constrained in the future from attempting price increases in the 

relevant markets.

 

26 Nor can CB&I get away with a price increase in the thermal vacuum chamber market because it has 

voluntarily restricted itself to seeking no more than a four percent margin on jobs performed for the private sector 

and a zero percent margin for jobs performed for the government. See Part VI, supra.
1167887 136 

2. Auction theory does not support Complaint Counsel's position 

that the Acquisition of PDM EC assets threatens to

substantially lessen competition in any of the relevant product 

markets.

Dr. Simpson also argues that "auction" or "bid model" theory predicts that

competition will be substantially reduced in the relevant markets as a consequence of CB&I's 

acquisition. Dr. Simpson posits that PDM and CB&I were low cost bidders relative to other 

actual and potential entrants, and that the exit of PDM from the market leads CB&I to believe it 

can impose a price increase. (See Simpson, Tr. 3077, 3085-90). As discussed above, critical loss 

theory rebuts this analysis. Further, there is no evidence that PDM and CB&I were the two 

lowest cost suppliers in the industry. Dr. Simpson conducted no study to ascertain whether this 

was in fact true. In fact, the evidence presented shows that AT&V is the low-cost producer in 

the LIN/LOX and LPG market, and that AT&V/TKK is possibly the low-cost supplier in the 

LNG market. (E.g., RX 208; RX 627 (state of mind); N. Kelley, Tr. 7088; see also Part III, 

supra).

Furthermore, the markets at issue are not oral auction markets as at a live auction 

where the auctioneer tells the participating bidders what price they have to beat. (See Simpson, 

Tr. 3767). The evidence is to the contrary. Competitors in the relevant markets rarely know the 

prices of the competition, as customers generally do not provide this information. (E.g., 

Patterson, Tr. 359-64; Scorsone, Tr. 5010; Jolly, Tr. 4761-62; Simpson, Tr. 3073, 3771) (FOF 

7.87-88). To the extent this information is available, it is provided by customers in the hopes of 

gaining leverage. In fact, in some cases, customers provide incorrect pricing information to gain 

concessions from suppliers. (See, e.g., Patterson, Tr. 359-60) (FOF 7.87, 7.88). In the context of 

sealed or closed bid auctions where there is imperfect information, a company's state of mind 
1167887 137 

will determine whether it will attempt a price increase, and the evidence concerning state of mind 

is overwhelming that CB&I would not attempt a price increase.

As a matter of economic theory, bid model theory does not support Dr. Simpson's 

conclusions. Dr. Simpson cited two articles in support of his application of the theory. 

However, he has not read the articles in their entirety, nor has he checked the underlying 

calculations for accuracy. (Simpson, Tr. 3831-38) (FOF 7.206). If Dr. Simpson had read the 

Dalkir article that he cited, he might have noted that, in the worst cases, only modest price 

increases of less than 5 percent are predicted by the model as a consequence of mergers in bid 

model industries where there is sealed bidding and imperfect information. Dalkir, et al., Mergers 

in Symmetric and Asymmetric Noncooperative Auction Markets: The Effects on Prices and 

Efficiency, 2000 Int'l J. of Industrial Organization 18, p. 397. (See also Simpson, Tr. 3842). Bid 

model theory simply does not predict that the Acquisition will substantially lessen competition in 

the relevant markets because the relevant markets involve closed or sealed bidding situations 

with imperfect information and, in fact, disinformation spread by customers. 

3. Application of probability theory does not show that the

Acquisition threatens to substantially lessen competition in any 

relevant product market.

Dr. Simpson also applied a probability theory in an attempt to support his

hypothesis that the Acquisition would have substantial anticompetitive effects. As Dr. Simpson 

explained it, probability theory essentially involves flipping coins. (Simpson, Tr. 3393-94). As 

Dr. Simpson applied it, probability theory determines the probability tha t, all things being equal, 

CB&I and PDM would have won all the jobs in the LNG market if other bidders were

participating on equal terms. (Simpson, Tr. 3394, 3663, 5753). Dr. Simpson thus assumes that 

the CB&I, PDM, and the seven new entrants discussed above were participating in all of the bids 

prior to the Acquisition back to 1990, and then determines what the odds are that CB&I and 
1167887 138 

PDM would have won all the jobs prior to the Acquisition, given only a 2/9 chance of winning 

those jobs. (Simpson, Tr. 3400, 3663-64). 

Dr. Simpson's analysis is seriously flawed, as he assumes that each of the seven 

new entrants discussed above were in the U.S. market between 1990 and the Acquisition. This 

simply is not the case. The evidence demonstrates that these companies entered the market in 

the past two years. With one exception, they never participated in pre-Acquisition jobs in the 

U.S. To accept Dr. Simpson's analysis would be to blindly accept market concentration statistics 

and ignore the possibility that entry could ever occur in the U.S. market. (See Simpson, Tr. 

3665; Harris, Tr. 7363-64) This would essentially read the relevance of entry out of the antitrust 

laws. Such an approach stands in stark contrast to Baker Hughes and other cases discussing the 

importance of analyzing entry in a Section 7 case.

VIII. THE ACQUISITION CANNOT SUBSTANTIALLY LESSEN

COMPETITION IN A RELEVANT MARKET BECAUSE PDM WOULD 

HAVE LIQUIDATED THE EC DIVISION ABSENT THE ACQUISITION.

The evidence shows that, absent the Acquisition, PDM would have liquidated its 

EC Division. (Scheman, Tr. 6952) (FOF 8.115). There is no evidence to suggest that PDM 

would have taken any other course. No witnesses have testified that they would have purchased 

the PDM EC Division at pricing above liquidation value, that PDM had sufficient time to find 

another willing buyer, that different marketing tactics would have found a willing buyer, or that 

the marketing tactics of PDM's experienced and qualified investment banker were improper. All 

of the contrary arguments made by Complaint Counsel are completely unsupported by the 

evidence.

In evaluating whether PDM would have liquidated the EC Division absent the 

Acquisition, this Court must evaluate two questions: First, is there a high probability that the EC 

Division would have been shut down? Second, does it have relevance to the current litigation? 
1167887 139 

The evidence, the law, the economic testimony as well as common sense require a finding that 

the assets would have been liquidated. This fact is dispositive of this case.

A. THERE WAS A GRAVE PROBABILITY THAT PDM WOULD

HAVE SHUT DOWN AND LIQUIDATED THE EC DIVISION IF 

CB&I HAD NOT CONSUMMATED THE ACQUISITION.

The evidence demonstrates that liquidation was the highly probable alternative to 

the Acquisition. Rich Byers, the Vice President of Finance of PDM during the time of the 

Acquisition, was prepared to recommend to the Board in December of 2000 that it should "sell 

PDM Water as an LBO and liquidate PDM EC" should the CB&I deal have been derailed. 

(Byers, Tr. 6769-70, 6773) (FOF 8.118). Peter Scheman, PDM's investment banker, testified 

that if "the CB&I deal had fallen apart there is a high probability that they would have liquidated 

. . . the EC business." (Scheman Tr. 6952) (FOF 8.115). This testimony is unrebutted, and 

should by itself be dispositive of whether liquidation would have occurred.

Nonetheless, in order to understand the context in which the decision to liquidate 

would have been made, it is important to understand the history and circumstances of PDM and 

what led it to the point where it was selling off all its component parts for cash. (See, e.g., 

Byers, Tr. 6731-32, 6948-49) (FOF 8.1-8.3, 8.23). It is also important to understand the state of 

the economy at the time the PDM EC division was being sold, as it explains why no other buyer 

was likely to purchase the EC division. (See, e.g., Byers, Tr. 6763-64) (FOF 8.83). 

1. PDM was irrevocably committed to a course of selling all of its 

divisions to unlock the liquidity of a thinly traded company 

whose dominant shareholder was aging.

PDM was founded in 1892 by the Jackson family. (Byers, Tr. 6731; Scorsone Tr. 

4791) (FOF 8.1). PDM has for many years been involved in various phases of steel fabrication 

and construction. (Byers, Tr. 6731). The company went public in 1965, and, by 1999, the 

founding Jackson Family owned approximately 30 percent of PDM's stock. (Byers, Tr. 6732.) 
1167887 140 

(FOF 8.1) By the 1990s, PDM operated four lines of business with five divisions: PDM Strocal, 

PDM Water, PDM EC, PDM Bridge and PDM Steel Distribution. (Byers, Tr. 6731; Scorsone, 

Tr. 4778-79). The Water and EC Divisions were closely related and shared some assets and 

personnel. (Scorsone, Tr. 4779) (FOF 8.5). The remaining divisions were wholly separate from

each other. (Byers, Tr. 6731).

By the standards of publicly traded companies, PDM was a small company. In 

fact, PDM stock was very thinly traded and was not attractive to investors, many of whom 

preferred the high-tech stocks popular in the late 1990s. On some days no shares of stock were 

traded, while on other days only 100 to 200 shares of stock moved on a given day. (Byers, Tr. 

6732-33; Scorsone, Tr. 4791-92) (FOF 8.3). Therefore, an effort to sell even a small quantity of 

stock could negatively impact share value. (Scheman, Tr. 2916-17, 6909-10) (FOF 8.11). In 

fact, PDM employees often joked that they needed to make an appointment to sell their PDM 

stock. (Scorsone, Tr. 4791).

The age of the Jackson Family's patriarch was of growing concern by the end of 

the 1990s. (Scheman, Tr. 6909-10, 2916-17) (FOF 8.11). There was substantial concern that if 

the elder Jackson passed away (he was 92 at that time), survivors would need to sell large blocks 

of stock to address tax and inheritance issues. (Scheman, Tr. 6909-10, 2916-17) (FOF 8.11). 

Such a sale could have negatively impacted shareholder value on a widespread basis. (Scheman, 

Tr. 6909-10, 2916-17) (FOF 8.11). PDM was forced to look at several strategic options to 

address these liquidity concerns, something that it did initially in a special PDM Board meeting 

in 1999. (Byers, Tr. 6740) (FOF 8.14). Options included making a significant acquisition, 

taking the company private, or selling off various parts of the business for cash. (Byers, Tr. 

6738-40; Scorsone Tr. 4791) (FOF 8.13, 8.14). After initially investigating the prospects of 
1167887 141 

taking the company private, the Board decided in June 2000 to sell off all the company's assets 

and to return cash proceeds to the stockholders. (Byers, Tr. 6741-42, 6755, 6757-58; Scheman, 

Tr. 2911, 2919, 6907) (FOF 8.16, 8.20, 8.38).

The company set about executing this plan to maximize shareholder value. 

(Byers, Tr. 6759-61) (FOF 8.24). Goldman Sachs proposed selling PDM in its entirety to 

another entity who would either operate or liquidate PDM's assets. (Byers, Tr. 6743-45; RX 23) 

(FOF 8.22, 8.26). Tanner & Company, another investment banking firm, suggested that PDM 

could obtain a higher shareholder value by selling off the company in its component parts. 

(Byers, Tr. 6754-55; Scheman, Tr. 6912) (FOF 8.33-8.34). The board ultimately embraced 

Tanner's approach and retained it as its investment advisor for the purpose of selling all of the 

company's assets. (Scheman, Tr. 2914-15, 7911-12, 6907-08; Byers, Tr. 6758) (FOF 8.30, 8.38). 

Soon thereafter, Tanner and PDM decided to sell the Water and EC divisions 

together because the two divisions shared resources. (Byers, Tr. 6754-55; Scheman, Tr. 6912, 

2926-30; RX 159 at 15; Scorsone, Tr. 4779). Tanner estimated that separating the two divisions 

for purposes of sale could cost as much as $10 million, and concluded that separation would 

negatively affect the operation of each business going forward. (Scheman, Tr. 6922-23, 2959-

60; RX 163 at 27). The other three divisions of PDM were to be sold as individual business units 

on an asset transaction basis. 

Tanner's marketing approach for the EC and Water Divisions was predicated on 

finding motivated purchasers who could quickly consummate a transaction. (Byers, Tr. 6777-78; 

Scheman, Tr. 6944-45) (FOF 8.5, 8.33, 8.34). Speed was critical, as the ultimate disposition of 

PDM was to occur approximately six months after the board authorized liquidation. (Byers, Tr. 

6761-62) (FOF 8.25, 8.39). The ultimate disposition was to be a final rollup transaction. The 
1167887 142 

last remaining division would be sold to an investment company who would, simultaneously at 

closing, resell it to a third-party purchaser while retaining the PDM corporate structure with no 

assets except for its reserves. (Byers, Tr. 6759-61) (FOF 8.24). The evidence demonstrates that 

such a transaction would be made far more difficult if the EC Division's assets were still within 

the company at the time of the final transaction. (Byers, Tr. 6759-61) (FOF 8.24). PDM and its 

investment banker were in a race against the clock to sell all of the divisions prior to that final 

transaction.

In order to ferret out motivated and interested purchasers, Tanner relied on a 

process of wide dissemination of PDM's intent to sell the company. (Scheman, Tr. 6884-85, 

6910-11, 2921-22) (FOF 8.49, 8.50). A press release was published in the Wall Street Journal

and relevant trade publications. This effort was successful. The fact that PDM EC was for sale 

was well-known throughout the industry. (Scheman, Tr. 6945-46) (FOF 8.52). As Mr. Scheman 

noted, "there is a lot of thought and strategy that goes into effectively selling a business, and it's 

not simply just throwing it out and saying it's for sale." (Scheman, Tr. 6944) (FOF 8.47). By 

using the press release to spread word of the EC division's availability, Mr. Scheman testified 

that "we still could get a very -- I think a very good barometer and some might say a better 

barometer in some respects of who was interested than cold calling." (Scheman, Tr. 6944-55).

Mr. Scheman compiled lists of the many callers who expressed interest in

purchasing one or more of PDM's divisions. (Scheman, Tr. 2922, 6911; RX 164-66) (FOF 8.53). 

Mr. Scheman evaluated the potential purchaser and determined that only one -- CB&I -- had the 

requisite ability to purchase the EC and Water Divisions at above liquidation value. (Scheman, 

Tr. 6924-26) (FOF 8.116). Accordingly, at the end of August 2000, PDM and CB&I entered 
1167887 143 

into a letter of intent to sell the EC and Water Divisions to CB&I for $94 million. (Byers, Tr. 

6764-66) (FOF 8.105). 

Although the letter of intent was signed in August 2000, the transaction did not 

close until February 7, 2001. (Byers, Tr. 6764-66) (FOF 8.105). What happened in the interim 

is very telling and important in evaluating whether PDM would have liquidated the EC division. 

PDM actually was confronted with the prospect of making that choice as a business matter and 

not in a theoretical context in response to the antitrust issues in the case. (Byers, Tr. 6769-70, 

6773) (FOF 8.118). The original letter of intent assumed a year-end 2000 closing. (Byers, Tr. 

6765) (FOF 8.105). This time would be sufficient to allow CB&I to perform its due diligence. 

However, shortly after the letter of intent was signed, it became clear that the PDM EC Division 

was having a poor year. (Byers, Tr. 6763-64) (FOF 8.83). Losses wiped out a projected $2 

million profit, leading to projected losses in the $9 million range by the end of the year. 

(Scheman, Tr. 6920-21) (FOF 8.87).27 As these facts became apparent, CB&I wanted to

renegotiate the purchase price based on the poor performance of the EC division during fiscal 

year 2000. (Byers, Tr. 6789).

In addition, after the letter of intent was signed, CB&I attempted to substitute 

stock for cash in paying for the EC and Water Divisions. (Byers, Tr. 6766-67) (FOF 8.106). 

The original letter of intent specified an all-cash transaction, critical to the strategy of delivering 

liquid assets to the shareholders. (Byers, Tr. 6766-67; Scheman, Tr. 6948-49) (FOF 8.23, 8.106). 

In fact, the inability of many companies to offer cash was a significant factor in their

disqualification by Mr. Scheman. 

 

27 Ultimately, it was determined after closing that the EC Division lost approximately $30 million in fiscal 

year 2000 on a revenue base of less than $180 million. (Scheman, Tr. 6917, 6921) (FOF 8.87). 
1167887 144 

In December of 2000, CB&I's efforts to substitute stock for nearly half of the 

purchase price reached a crisis proportion. (Byers, Tr. 6767, 6768-69) (FOF 8.108). Tanner met 

with senior PDM management, including Mr. Byers, to discuss PDM's alternatives if the CB&I 

transaction were to fall apart. (Byers, Tr. 6770, 6773) (FOF 8.118). The parties knew that the 

clock towards the ultimate disposition transaction was ticking, and that CB&I was in the best 

position of any interested party to deliver consideration in the form of cash. (Scheman, Tr. 6913-

16, 6924-26; Byers, Tr. 6773-74) (FOF 8.35, 8.36, 8.119). Tanner actually wrote down

liquidation scenarios reaching a valuation range for liquidating the company. (Byers, Tr. 6877-

78) (FOF 8.123). 

In December 2000, Mr. Byers became convinced that there would be no other 

purchaser for the EC division. (Byers, Tr. 6776-77) (FOF 8.55). He was prepared to

recommend to the board that the Water division be sold via a leveraged buyout to the

management of the Water Division, and that the PDM EC Division be liquidated out of existence 

by selling off its assets in individual pieces, should the CB&I transaction fall apart. (Byers, Tr. 

6769-70, 6773) (FOF 8.118). Mr. Scheman felt that the liquidation of the EC Division was a 

significant probability given its financial circumstances and the lending environment prevailing 

at the time. (Scheman, Tr. 6952-53, 6924-26) (FOF 8.115, 8.116). 

While PDM EC's financial performance was collapsing, so were the credit

markets. (Byers, Tr. 6763-64) (FOF 8.83). In the latter half of 2000, credit markets tightened 

substantially. (Byers, Tr. 6763-64, 6750) (FOF 8.29, 8.83). Mr. Scheman concluded that assetbased lending was not likely to deliver a purchase price in excess of liquidation value. 

(Scheman, Tr. 6924-26, 6933-37) (FOF 8.71, 8.116). Lending based on cash flow had been cut 

from multiples of three to four times cash flow to no more than two times cash flow. Based on 
1167887 145 

this development, Mr. Scheman determined that an alternative purchaser in the tank construction 

industry would not be able to finance a transaction on an all-cash basis above liquidation value. 

(Scheman, Tr. 6934-37) (FOF 8.68). 

At this point, PDM's board was forced to consider whether it wanted to proceed 

with CB&I at a reduced purchase price because of the poor performance of the EC Division and 

with consideration being paid with a significant amount of CB&I stock, or to explore alternative 

transactions. The Board convened on December 19, 2000 to consider this question. Mr. Bill

McKee, the CEO of PDM, told the Board that "there is a thin market and no other serious 

potential purchaser was identified." (RX 28 at 2) (FOF 8.122). According to the meeting 

minutes, Mr. Scheman stated "lending standards have tightened considerably in the past six 

months and that the amounts companies can borrow is down about 33%." Id. Ultimately, given 

the alternatives, and the assurances provided by CB&I in the form of an agreement to repurchase 

the stock by a date certain at a specified minimum price, PDM decided to proceed with the CB&I 

transaction. (Byers, Tr. 6775-77). The Acquisition ultimately closed on February 7, 2001 at a 

purchase price of approximately $84 million. (G. Glenn, Tr. 4079; Byers, Tr. 6789-91) (FOF 

8.103, 8.110). The $9 million reduction in the purchase price was solely related to PDM's 

financial performance. (Byers, Tr. 6788-89) (FOF 8.110). The purchase price was subsequently 

reduced even further, into the low 70s, as a result of problems with EC Venezuelan operation, 

which were not discovered until after the date of closing. (Byers, Tr. 6793-94) (FOF 8.112).

These are the real-world conditions under which PDM EC and Water were being 

sold. The only individuals who testified in this matter were participants caught in the maelstrom 

of having to move fast, having to get an all-cash transaction, having to sell an asset that was 

performing very poorly and bleeding money, and having to do it at a time when the credit 
1167887 146 

markets were significantly tightening their credit standards. The unrebutted testimony of the key 

participants, Mr. Byers and Mr. Scheman, is that there was a very high probability that PDM EC 

would have been liquidated. (Byers, Tr. 6774-75; Scheman, Tr. 6952-53) (FOF 8.115, 8.126). 

2. It was highly unlikely that there would have been another

purchaser for the PDM EC division at a price greater than 

liquidation value.

Complaint Counsel argues that another buyer would have purchased the EC

Division at a price greater than liquidation value absent the Acquisition. However, this argument 

is wholly unsupported by the evidence and is inconsistent with the detailed analysis of other 

purchasers performed by Mr. Scheman. Further, in the six months between the signing and the 

letter of intent by CB&I and the closing of the Acquisition, not one other purchaser came 

forward to declare an interest in purchasing the assets. (Byers, Tr. 6872-73) (FOF 8.122). 

Complaint Counsel suggested in its closing argument that it is CB&I's burden to 

establish that there were no other purchasers, despite the fact that it is very difficult to prove a 

negative. (Robertson, Tr. 8170-71, 8343). Regardless of who bears the burden, CB&I need not 

prove with certainty that no other purchasers existed. As Baker-Hughes noted, Section 7 cases

"deal with probabilities, not certainties." 908 F.2d at 987. Consistent with Baker-Hughes, the 

standard of proof is a preponderance of the evidence; CB&I need only show that it is more likely 

than not that another purchaser of the PDM EC assets did not exist. As discussed below, none of 

the purchasers potentially available to purchase the EC Division could have done so at greater 

than liquidation value. Mr. Scheman conducted this very analysis during the events discussed 

above and during his testimony in this case. 

a. There were no financial buyers for the EC division.

Mr. Scheman concluded that financial purchasers would not have been interested 

in purchasing the EC Division, and would have had extreme difficulty raising enough capital to 
1167887 147 

make a purchase. (Scheman, Tr. 6930) (FOF 8.61). Mr. Scheman based this conclusion on his 

many years of experience in buying and selling businesses, as well as on the facts surrounding 

the sale. (Scheman, Tr. 2910, 6906, 6941-43) (FOF 8.17-8.18). In arriving at this conclusion, 

Mr. Scheman determined that financial buyers would have been deterred by PDM EC's poor 

performance in 2000. (Scheman, Tr. 6920, 6929-31). Complaint Counsel argues that PDM was 

projected to post modest profits in fiscal years 2001-2003. However, this does not mean that 

PDM EC was not a highly damaged asset. (Scheman, Tr. 6917-18) (FOF 8.88). Mr. Scheman 

noted that a company that suffers an 80 percent drop in profits from the previous year would be 

very difficult to sell to a financial buyer. (Scheman, Tr. 6917-18) (FOF 8.88). Further, it is 

unlikely that financial buyers would give credence to PDM's profit projections, since PDM 

projected a $2 million profit in 2000 when it lost $30 million. (Scheman, Tr. 6920-21) (FOF 

8.84, 8.87).

All available evidence indicates that financial buyers would not have purchased 

the PDM EC Dvision, let alone at a price greater than liquidation value. (Scheman, Tr. 6929-31) 

(FOF 8.88). Notably, none of the major financial buyers contacted Tanner after the intention to 

sell PDM EC was made public. (Scheman, Tr. 6929) (FOF 8.61). Based on these facts, Mr. 

Scheman concluded that "the EC business was a very -- would have been a difficult and probably 

impossible sale to a financial based buyer." (Scheman, Tr. 6930).28 

b. There were no strategic buyers for the EC division.

Strategic buyers are buyers who are in the same or similar line of business and 

could potentially make use of assets in a synergistic manner. (Scheman, Tr. 6914) (FOF 8.60). 

The planned sale of the EC Division was well known throughout the industrial tank industry. 

 

28 Mr. Scheman did discuss financial buyers who did contact Tanner, and explained in great detail why they 

would not have been interested in consummating a transaction. (Scheman, Tr. 6929-30).
1167887 148 

(Scheman, Tr. 6945) (FOF 8.52). Virtually no one in the industry was interested in purchasing 

PDM. There is no evidence that any foreign tank construction company contacted Tanner to 

discuss the possibility of purchasing the EC and Water divisions. In fact, the only evidence on 

this point is to the contrary. [xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] (xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx). 

Domestic tank suppliers were similarly uninterested. For example AT&V was not interested in 

purchasing the EC division because it did not believe that PDM EC could be turned around. 

(Cutts, Tr. 2458, 2534) (FOF 8.85).

Complaint Counsel has argued that Matrix was a potential purchaser of PDM EC. 

Brad Vetal, President of Matrix, testified that his company might have been interested in making 

a purchase under the right circumstances. (Vetal, Tr. 418-19) (FOF 8.64). However, Mr. Vetal's 

tepid expression of interest is hardly enough to establish that his company would have wanted to 

or would have been able to consummate a transaction at greater than liquidation value. See 

California v. Sutter Health Sys., 130 F. Supp. 2d 1109, 1136 (N.D. Cal. 2001) (finding for 

defendant in Section 7 case because the alleged alternative purchaser suggested by the State of 

California "has offered no more than generalized expressions of interest"); U.S. v. Culbro Corp., 

504 F. Supp. 661, 668 (S.D.N.Y. 1981) (finding for defendant in Section 7 case because the 

alleged alternative purchaser suggested by the DOJ made no more than a "vague generalization 

of 'intense interest'").

The evidence shows that Mr. Vetal lacked information about PDM EC and how 

PDM wanted to sell its business. Mr. Vetal never saw the unconsolidated balance sheet of the 

EC Division, and was unaware of its recent financial losses. (Vetal, Tr. 420) (FOF 8.77, 8.78). 
1167887 149 

Knowledge of these basic financial facts would be critical to any purchaser. Further, Mr. Vetal 

was not interested in purchasing the package of assets that PDM was selling. Matrix did not 

want to purchase PDM's Water Division. (Vetal, Tr. 419) (FOF 8.64). However, PDM was 

selling the Water Division and the EC Division as a single unit. (Byers, Tr. 6754-55, 6757-58; 

Scheman, Tr. 6912) (FOF 8.33, 8.34, 8.38, 8.70). Similarly, Mr. Vetal was interested in

purchasing fabrication facilities located in Clive, Iowa and Warren, Pennsylvania as part of a 

purchase of PDM EC, but was not interested in purchasing the Provo, Utah facility. (Vetal, Tr. 

441-42) (FOF 8.69). However, the Clive and Warren fabrication facilities were controlled by the 

Water Division. The Provo facility was under the control of the EC Division. (Byers, Tr. 6781-

82) (FOF 8.69). To work with Mr. Vetal, PDM would have had to essentially liquidate the 

Water Division because it would be taking away the assets that the Water Division used to 

perform its work. PDM would not have sold the EC Division to Matrix in this manner and 

configuration. (Byers, Tr. 6780-82) (FOF 8.70). The Water Division was consistently earning a 

10 percent annual profit, even in fiscal year 2000. (Byers, Tr. 6786) (FOF 8.89). It would have 

made no sense to sell the foundering EC division and then liquidate the Water Division.

Further, the evidence shows that Matrix could not have engineered a purchase of 

PDM EC. Mr. Scheman analyzed this possibility in August of 2000 after speaking with Matrix's 

financial advisor. (See, e.g., Scheman, Tr. 6931-39) (FOF 8.67). Mr. Scheman noted that Matrix 

had stock even more illiquid than PDM's, a limited cash flow for purposes of borrowing, and was 

itself a participant in an industry severely hurt by the same economic circumstances that were 

holding down the profits of both CB&I and PDM in fiscal year 2000:

I don't see how Matrix could have financed, even in -- even in July, let alone 

February 2001, but even in July, August of 2000, I don't see how they could have 

financed a good purchase price. I don't think they had neither the earnings or 

necessarily the balance sheet to do it, number one, and number two, if they
1167887 150 

wanted to offer us stock, it didn't necessarily fit in with a plan to liquidate. At the 

time we hadn't really thought through and didn't see it -- not liquidate, fit though 

with a plan to get the money to shareholders of PDM, but more appropriately, it 

was a stock that was smaller than PDM's, so in fact it would be, from some 

perspectives, worse than owning PDM stock and would not accomplish the goals 

that we set out to accomplish, so they were, in my view, yes, it was very good that 

they were interested, but a very unlikely -- a very unlikely ability to get a job -- to 

get a transaction done.

* * *

I don't think they could have borrowed a lot of money. I don't think that their 

stock was attractive, number one, from a valuation standpoint, because you would 

have the same issue, that if you want to sell it, it becomes worth less, and number 

two, it might have done more harm than good in the overall scheme to sell the 

company, because ultimately someone would have had to have bought that stock 

from us and/or distributed it to shareholders, and so we did not view them as 

really having the financial wherewithal or I think the words we used earlier were -

- I don't think that they really had the ability -- the strength to consummate an 

attractive transaction or a competitive transaction.

* * *

I don't believe that Matrix, at the time of February 7th, could have raised $20 

million for an acquisition of EC, and the reason I say that is you would take the 

way the banks would look at it, and we go back to 416, you would take Matrix 

earning $9 million of EBITDA, you would then -- the bank would look at what is 

the new cookie, combining the two. Well, we discuss that EC lost $8 million in 

2001, so they would take $9 million, subtract $8 million, and in fact, they would 

now have EBITDA pro forma or a combined of $1 million. So I think their 

borrowing capacity might have been zero at that time. Excuse me, they would not 

have been able to borrow to finance that deal, so I highly doubt that they could 

have raised enough money to -- well, I think the only way they could have raised 

money was to look at the liquidation value themselves and see if a bank would 

finance against that, and my experience and intuition suggests that the banks 

would focus on the lowest possible value for the liquidation and would only lend 

a fraction of that.

(Scheman, Tr. 6932-33, 6937-38, 6938-39) (FOF 8.67, 8.68, 8.71). In short, the evidence 

demonstrates that Matrix was not a viable purchaser, would not have been able to finance a 

transaction above liquidation value, and was not in any event interested in purchasing the 

package of assets that PDM would have been selling as part of an EC division-only transaction. 
1167887 151 

(E.g., Scheman, Tr. 6931-32, 6934-38, 6780-82) (FOF 8.67, 8.68, 8.70). Mr. Scheman also 

discussed some smaller tank manufacturers such as Pasadena Tank, another company that had 

contacted Tanner to inquire about the availability of the EC division. (Scheman, Tr. 6939-40) 

(FOF 8.79, 8.80). As Mr. Scheman explained, Pasadena was far too small to consummate a cash 

transaction of the necessary size. (Scheman, Tr. 6940-41).

There is no evidence to contradict Mr. Scheman, who based his analysis on his 

many years of experience as an investment banker. (Scheman, Tr. 6941-43, 6945) (FOF 8.18, 

8.48). Mr. Scheman had an incentive, both because he owed a fiduciary duty to PDM

shareholders and because he was being paid a percentage of the revenues derived from the sale 

of the PDM assets, to get the highest purchase price for those assets. (Scheman, Tr. 6946-47, 

Byers, Tr. 6881-82) (FOF 8.42, 8.44). Mr. Scheman's analysis indicating that neither financial 

nor strategic buyers would have been interested in or able to consummate a transaction above 

liquidation value establishes that there were no alternative purchasers.

Complaint Counsel cannot credibly argue that PDM should have attempted to 

negotiate with one or more of the purchasers that Mr. Scheman determined to be not viable. It is 

the job of an investment banker to weed out purchasers without the ability to consummate a 

transaction at the desired price. (Scheman, Tr. 6944-45, 6948) (FOF 8.47, 8.57). There is an 

expense from negotiating a potential disposition with a purchaser that ultimately fails. 

(Scheman, Tr. 6923-24, 6916) (FOF 8.117). In addition, it would have damaged the viability of 

the assets to spend time negotiating with a potential buyer without the ability to purchase the 

assets. As discussed above, PDM simply did not have another three to six months to carefully 

assess whether another buyer would have been able to purcha se the assets above liquidation 

value. (Byers, Tr. 6773-74, 6777-78; Scheman, Tr. 6924) (FOF 8.55, 8.116, 8.119). It would 
1167887 152 

have ultimately been damaging to the shareholders and to the assets' value to engage in such a 

quixotic effort.

The above evidence is compelling, and more than meets a preponderance of the 

evidence standard. It is telling that, despite over two years of investigation and discovery, 

Complaint Counsel could not find anybody other than Mr. Vetal to testify about their interest in 

purchasing the EC Division. If there were purchasers out there, Complaint Counsel would have 

found them. Given the strong unrebutted evidence put forth by CB&I concerning the lack of 

alternative available purchasers, it would be incumbent upon Complaint Counsel to produce 

other such purchasers to establish that there were in fact other purchasers.

3. The liquidation of Graver constitutes a natural experiment 

which supports the evidence that PDM EC would have been

liquidated.

One way to test Complaint Counsel's hypothesis that there would have been

another purchaser for PDM EC is to examine what happened to other businesses similar to PDM 

EC when they were for sale. Graver was a very experienced tank manufacturer with decades of 

experience. It had constructed 40 percent of the LIN/LOX tanks built in the U.S. from 1997 to 

2001, and was marketed to be sold in 1999 and early 2000 -- at a time when the credit markets 

were much more liberal. (Simpson, Tr. 5673; Harris, Tr. 7312; Byers, Tr. 6750, 6763-64) (FOF 

8.29, 8.83). Despite Graver's valuable experience, employees, and its U.S.-based fabrication 

shop, Graver was unable to find another purchaser to buy it as a going concern. (Simpson, Tr. 

5672-74) (FOF 8.131). Accordingly, its assets were liquidated out of the market. (Simpson, Tr. 

5673, 5674; Kamrath, Tr. 1991) (FOF 8.129, 8.130). 

In analyzing the facts of this case, it is instructive to note that Graver was not able 

to find a purchaser even at a time when credit was more readily available and companies had 

more money to spend. Graver thus constitutes a natural market experiment of what would 
1167887 153 

happen if a tank construction company similar to PDM EC were to be sold. (Harris, Tr. 7335) 

(FOF 7.140). The answer to the experiment is entirely consistent with the testimony of Mr. 

Byers and Mr. Scheman in this case: liquidation of PDM EC was the only alternative to the 

Acquisition. (Byers, Tr. 6770; Scheman, Tr. 6952-53) (FOF 8.118, 8.115). 

B. EXITING OF THE PDM ASSETS VIA LIQUIDATION IS

RELEVANT BECAUSE PDM EC WOULD NOT HAVE BEEN A 

COMPETITOR TO CB&I EVEN IF CB&I HAD NOT

PURCHASED THE PDM EC DIVISION.

Both economists who testified in this case agree that, in order to determine 

whether the Acquisition has anticompetitive effects in violation of Section 7 of the Clayton Act, 

post-Acquisition Competition must be compared to competition as it would have been had the 

Acquisition not been consummated. (Simpson, Tr. 5677; Harris, Tr. 7186-87) (FOF 7.255). 

Thus, competition is not compared to what it was before the Acquisition.

In many merger cases, competition before the acquisition is the same as

competition would have been had the acquisition not taken place. The selling company typically 

either continues to operate the assets or finds another buyer. However, this is a unique case 

because PDM was irrevocably committed to selling all of the assets. (Byers, Tr. 6742, 6762-63) 

(FOF 8.20). It was not going to continue to operate the EC Division. (Byers, Tr. 6757-58) (FOF 

8.38). Thus, the only way PDM EC could have continued as a competitive force would have 

been for it to have been sold to another purchaser. (Simpson, Tr. 5675). As indicated above, 

there was no other purchaser to buy the PDM EC Division. (Scheman, Tr. 6952-53, 6924-26) 

(FOF 8.55, 8.106). Under these unique circumstances, competition if CB&I had not bought 

PDM EC is exactly the same as competition after CB&I's actual Acquisition of PDM EC. By 

itself, these facts establish that there has been no risk of substantial lessening of competition as a 

result of the Acquisition. See U.S. v. General Dynamics, 415 U.S. 486, 507 (1974) ("the effect 
1167887 154 

on competition . . . will be less if a company continues to exist even as a party to a merger than if 

it disappears entirely from the market. It is, in a sense, a 'lesser of two evils' approach. . . .").

 Complaint Counsel ignores the evidence, economics and logic by arguing that this 

Court must ignore evidence of PDM EC's likely liquidation because it does not neatly comply 

with the elements of something called the failing firm defense. However, CB&I does not assert 

the failing firm defense as it has classically been described, which requires a showing that the 

acquired company is "so depleted and the prospect of rehabilitation so remote" that it is at risk of 

"the grave possibility of business failure" and that "the company that acquires the failing 

company . . . is the only available purchaser." Citizen Publishing Co. v. U.S., 394 U.S. 131, 138 

(1969). CB&I is merely trying to show how competition would have been absent the

Acquisition. If PDM EC was liquidated instead of sold to CB&I, it would still not have been a 

competitor in these relevant markets. (Simpson, Tr. 5678).

Complaint Counsel asserts that whether the EC Division will be liquidated is 

irrelevant because PDM EC would likely have returned to some level of profitability if PDM had 

continued to operate the EC Division. It argues that, since PDM EC was not on the brink of 

insolvency or a bankruptcy filing, it fails to comply with the first prong of the Citizen Publishing

test. This argument applies a too-narrow reading of the Citizen Publishing test and ignores the 

fact that PDM was not going to continue to operate the EC Division. The question, then, is 

whether PDM would have found another buyer to operate the EC Division, because if there was 

no other buyer, "the prospect of rehabilitation was remote" and there was a "grave possibility of 

business failure" because PDM EC would have been liquidated. In this unique case, given 

PDM's uncontradicted commitment to sell or liquidate the EC Division come hell or high water, 

the second prong of the Citizen Publishing test -- whether there was another purchaser -- supplies 
1167887 155 

the answer to the first prong question as to whether there was a "grave possibility of business 

failure." Under circumstances such as those presented by this case, "the financial condition of a 

firm is neither necessary nor sufficient for a per se defense for a merger. Rather, analysis should 

. . . presume that preservation of the assets in the market, even by a leading firm, is preferable to 

exit from the market." Kwoka and Warren-Boulton, Efficiencies, Failing Firms, and

Alternatives to Merger: A Policy Synthesis, 31 Antitrust Bull. 431, 450 (Summer 1986).29

Complaint Counsel's position is form over substance and ignores the evidence in 

this case. It is not the typical case that a conglomerate, multi-division company is liquidating all 

of its assets, has to do so quickly, has to do so in a tightened lending environment, and has to sell 

the assets that are the subject of the antitrust complaint at a time when those assets are having a 

year in which they lost $30 million. The relevant question is not whether PDM EC would have 

been a viable ongoing business if PDM had continued to operate, because the evidence is 

undisputed that PDM would not have continued to operate the PDM EC Division. That fact, 

entirely unrebutted, renders superfluous Complaint Counsel's argument that CB&I must first 

establish that PDM EC would not have been viable in the long run. This is a unique

circumstance, and it requires a recognition of the unique facts of this case.

To do otherwise would allow Complaint Counsel to reap a windfall. As logic and 

economics dictate, this Court has to compare competition as it was after the Acquisition to 

 

29 Complaint Counsel has argued that a "failing firm" defense such as that proposed by Messrs. Kwoka and 

Warren-Boulton has been previously rejected by the FTC in In the Matter of Olin Corporation, 113 F.T.C. 400, 

(1990). Complaint Counsel's argument is a bit of an overstatement. In Olin the Commission held that the selling 

company FMC had not "made the decision to close the isos business in the near future" and that there was no 

evidence of an effort to find other purchasers. Id. Based on these factual findings, the Commission concluded "[i]n 

short, the facts would not support the description of the proposed defense, even if we adopted the defense, and we 

decline to do so in this case." Id. That is the full extent of the Commission's analysis, and no elaboration was 

provided. This hardly constitutes the rejection claimed by Complaint Counsel. Further, and more operatively, the 

Commission said it declined to adopt the defense "in this case" which was decided twelve years ago. It does not 

mean that the Commission would not adopt this defense in a more appropriate case, and there has been no case since 

Olin asserting the defense until this case was tried.
1167887 156 

competition as it would have been absent the Acquisition in order to determine whether the 

Acquisition threatens to substantially harm competition. Complaint Counsel would have this 

Court ignore the fact that PDM EC would not have been a competitor in the market if the 

Acquisition had not occurred. Complaint Counsel cannot escape this ineluctable fact by hiding 

among the weeds of the standards for a failing firm defense which is not directly applicable here.

C. EVEN IF PDM EC HAD BEEN SOLD AS A GOING CONCERN, IT 

WOULD NOT HAVE BEEN THE SAME COMPETITIVE FORCE 

THAT IT WAS PRIOR TO THE ACQUISITION, MEANING THAT 

THE CONSEQUENCE OF THE LOSS OF PDM EC AS A

COMPETITOR IS NOT AS GREAT.

Even if this Court finds that there was a possibility that PDM EC would have 

been purchased as a going concern by another purchaser (a conclusion Respondents maintain is 

firmly inconsistent with the evidence), this Court must still consider whether PDM EC would 

have been an effective competitor under that new ownership. This analytical focus is required by 

the economic analysis agreed upon by both Dr. Simpson and Dr. Harris, which maintains that 

competition as it has been after the Acquisition has to be compared to competition as it would 

have been had CB&I not purchased PDM EC, and not compared to competition as it was prior to 

the Acquisition. (See Section VII, infra). Because PDM EC was not going to continue to be 

operated by PDM in any event, the proper analytical focus for purposes of determining whether 

competition has been lost is to look at what sort of a competitor PDM EC would have been under 

prospective new ownership.

PDM EC benefited from being part of the larger PDM corporation, which had 

revenues in excess of $600 million, only a quarter of which came from revenue generated by the 

EC Division. (Byers, Tr. 6734) (FOF 8.7). PDM EC would have been sold, if at all, to a 

purchaser with a substantially smaller revenue base than PDM had as a corporation. Such a 

smaller company would have a harder time obtaining bonding for larger projects. In fact, as Mr. 
1167887 157 

Byers explained, the Bridge Division of PDM, the last division owned by PDM before the 

company was liquidated to its stockholders, had a harder time obtaining bonding because it was 

no longer associated with the larger revenue base of the four other PDM divisions which had 

already been sold. (Byers, Tr. 6738) (FOF 9.25).

The evidence is uncontradicted that the ability to obtain bonding is a function of 

the revenue base of the company. (Byers, Tr. 6738; Bryngelson, Tr. 6127-28; Izzo, Tr. 6511) 

(FOF 9.4, 9.22, 9.25, 9.26). A company such as Matrix would have a far more difficult time 

obtaining bonding or making parent company financial guarantees for larger projects as

compared to PDM prior to the Acquisition. In fact, prior to the Acquisition, PDM was the 

smallest of the LNG tank competitors, and at least one witness testified that PDM had had 

trouble making parent company financial guarantees prior to the Acquisition. (Izzo, Tr. 6488-

89). Given that the trend in the U.S. LNG projects is for larger and more expensive tanks and 

facilities, it is questionable whether PDM under the ownership of Matrix or an even smaller 

company would have been able to effectively participate in the LNG markets. (See Part III, 

supra). Had PDM EC been sold as a going concern, it is highly probable that it could not have 

bid for the majority of LNG and TVC projects. Accordingly, CB&I's acquisition of PDM EC 

can be adjudged to have had little competitive effect in those markets as compared to postAcquisition competition.

Nor is bonding and the ability to make financial guarantees the only consequence 

this Court must consider in evaluating what sort of a competitor PDM EC would have been in 

the unlikely event that it had been sold as a going concern. For example, the acquiring company 

could be so burdened by debt that it could not afford to make necessary investments or pay 

vendors. The purchasing entity could have managed the assets in a manner that is less effective 
1167887 158 

than PDM's management. In fact, Graver's performance began to degrade along with its

financial picture after it was purchased by ITEQ. (Kamrath, Tr. 1991, 2026-27) (FOF 8.128, 

8.129). Although many of the same people may have gone to work for the acquiring company, 

there is little evidence to suggest that PDM EC would have been able to exert the same 

competitive influence as it did pre-Acquisition. In short, there would be little (if any) difference 

in competition between the world of today, when PDM EC does not exist as a competitor, as 

compared to the world that would exist with a PDM EC operating under different ownership. 

IX. EVEN IF THE ACQUISITION HAS CREATED AN ISSUE REGARDING 

COMPETITION, A BREAKUP OF CB&I IS NOT AN APPROPRIATE

REMEDY.

During trial and throughout the course of this litigation, Complaint Counsel has 

continually sought the most draconian of remedies possible -- a breakup of CB&I. During 

opening statements, Complaint Counsel requested that "[r]elief in this matter must re-establish 

two independent viable and competitive entities." (Krulla, Tr. 101) (FOF 9.2). Such a remedy is 

unnecessary under the law and unsupported by record evidence. In its pursuit of a breakup 

remedy, Complaint Counsel ignores substantial evidence in the record showing that its proposed 

remedy would: 1) be potentially harmful to consumers; and 2) not be successful in enhancing 

competition in the relevant markets. 

A. COMPLAINT COUNSEL IS REQUIRED UNDER THE LAW TO 

SHOW THAT ITS PROPOSED RELIEF IS APPROPRIATE.

1. Complaint Counsel has a burden to present evidence regarding 

its proposed remedy.

Divestiture is effectively injunctive relief. In a Section 7 case, the plaintiff (in this 

case Complaint Counsel) bears the burden of proof regarding injunctive relief every bit as much 

as the plaintiff in a private damages proceeding bears the burden of proving the amount of 

damages. See Blue Cross & Blue Shield United v. Marshfield Clinic, 883 F. Supp. 1247, 1263 
1167887 159 

(W.D. Wis. 1995). In Marshfield Clinic, the district court found that, despite its findings that the 

acquisition at issue constituted an antitrust violation, the plaintiff had presented insufficient 

evidence to support its requested divestiture remedy. Id. at 1263-64. The court held that its 

liability finding, standing alone, did not meet the burden of proving a need for equitable relief. 

Id. at 1264. The district court did not order divestiture because it "would have a large impact on 

third parties such as patients, Marshfield doctors and others that have not been before this Court 

to protect their interests." Id. 

In order to win its proposed relief, Complaint Counsel must carry its burden by 

presenting evidence related to its effectiveness. The D.C. Circuit recently made this clear in 

United States v. Microsoft, 253 F.3d 34 (D.C. Cir. 2001). There, the Government sought to 

break up Microsoft into separate companies. Id. at 46. The Microsoft district court imposed the 

Government's proposed break-up remedy without taking any evidence concerning the feasibility, 

desirability or effectiveness of the remedy. United States v. Microsoft Corp., 97 F. Supp. 2d 59, 

64 (D.D.C. 2000). Although Microsoft is a Section 2 case, as opposed to a Section 7 case, it is 

instructive because it is the first case in many years to consider issues involved in breaking up a 

company, as compared to the more common remedy of requiring remedial, divestiture before a 

deal is given permission to close. The concerns expressed in Microsoft are the same concerns a 

finder of fact must evaluate in this case.

In Microsoft, the D.C. Circuit reversed, based in large part on the district court's 

failure to take evidence concerning remedy. 253 F.3d at 46. In so doing, the court recognized 

that "relief-specific" evidence was necessary if there were contested issues of fact regarding 

relief, and that a "full exploration of the facts" was necessary to drawing an appropriate decree in 

an antitrust case. Id. at 101. (citing United States v. Ward Banking Co., 376 U.S. 327, 330-31 
1167887 160 

(1964) (quoting Associated Press v. United States, 326 U.S. 1, 22 (1945)). In fact, the Court 

specifically noted that a "remedies decree must be vacated whenever there is "a bona fide 

disagreement concerning substantive items of relief which could be resolved only by trial." Id. at 

46. In Microsoft, those issues included "the feasibility of dividing Microsoft, the likely impact 

on consumers, and the effect of divestiture on shareholders." Id. at 101. An inquiry concerning 

these issues is squarely a factual issue which requires informed speculation of future events 

based on the evidence:

A prediction about future events is not, as a prediction, any less a 

factual issue. Indeed, the Supreme Court has acknowledged that 

drafting an antitrust decree by necessity "involves predictions and 

assumptions concerning future economic and business events." 

Ford Motor Co. v. United States, 405 U.S. 562, 578, 92 S. Ct. 

1142, 31 L.Ed. 2d 492 (1972). Trial courts are not excused from 

their obligation to resolve such matters through evidentiary

hearings. . . . 

Id.; see also Ford Motor Co., 405 U.S. at 571 (affirming antitrust merger injunctive relief after 

"nine days of hearing on remedy").30 The fact that a remedy must be supported by record

evidence is not disputed by Complaint Counsel. In its Complaint, Complaint Counsel

acknowledged that "the Commission may order such relief against respondents as is supported 

by the record and is necessary and appropriate . . . ." (See RX 79 at 8) (emphasis added). 

2. Section 7 does not require Complaint Counsel's proposed

remedy when other, more suitable remedies are available.

In examining the issue of remedy, this Court has significant discretion in

fashioning appropriate relief when other options are available. Indeed, the Commission itself has 

acknowledged this fact:

 

30 In fact, CB&I proposed to Complaint Counsel this spring to bifurcate these proceedings into a liability and 

remedy phase. That proposal was rejected by Complaint Counsel as unworkable and inconsistent with the

Commission's de novo review. Respondents' Counsel have separately been told that the purpose of the proceedings 

before this Court is to make a complete evidentiary record for further review. Complaint Counsel knows that this 

trial is its one and only chance to present remedy evidence. It has not done so. 
1167887 161 

It is. . . well settled that the normal remedy in cases where Section 

7 violation is found is the divestiture of what was unlawfully 

acquired. . . . This is not to say that divestiture is an automatic 

sanction, mechanically invoked in merger cases. In cases where 

several equally effective remedies are available short of a

complete divestiture, a due regard should be given to the

preservation of substantial efficiencies or important benefits to the 

consumer in the choice of an appropriate remedy.

In the Matter of Retail Credit Company, 92 F.T.C. 258-59 (1978) (emphasis added). 

The United States Supreme Court in United States v. E.I. DuPont de Nemours, 

366 U.S. 316 (1961) has held that divestiture is not a required remedy under Section 7 of the 

Clayton Act. In DuPont, the Supreme Court reversed the lower court ruling that there had been 

no violation of the Clayton Act, and remanded with the observation that "the District Courts, in 

the framing of equitable decrees, are clothed with 'large discretion to model their judgments to fit 

the exigencies of the particular case.'" United States v. E.I. DuPont de Nemours, 353 U.S. 586, 

607-08 (1961) (quoting International Salt Co. v. United States, 332 U.S. 392, 400-01). The 

district court fashioned a remedy after several weeks of hearings that required partial divestiture. 

See United States v. E.I. DuPont de Nemours, 177 F. Supp. 1 (D.C. N.D. Ill. 1959). The 

Government appealed based on its contention that anything less than full divestiture was

inadequate to redress the violation and the Supreme Court again granted certiorari to "review. . . 

the District Court's discharge of the duty delegated by [the Court's] judgment to formulate a 

decree." United States v. E. I. DuPont de Nemours, 366 U.S. 316, 321-22 (1961). The Court 

specifically noted that it had previously "alluded to the 'large discretion' of the District Courts in 

manners of remedy in antitrust cases." Id. The Court noted that "[t]hese expressions are not,

however, to be understood to imply a narrow review here of the remedies fashioned by the 

District Courts in antitrust cases." Id. at 323. The Court noted its previously announced criteria 

for fashioning remedy in antitrust cases: 
1167887 162 

In considering the subject ... three dominant influences must guide 

our action: 1. The duty of giving complete and efficacious effect 

to the prohibitions of the statute; 2, the accomplishing of this result 

with as little injury as possible to the interest of the general public; 

and, 3, a proper regard for the vast interests of private property 

which may have become vested in many persons as a result of the 

acquisition either by way of stock ownership or otherwise of

interests in the stock or securities of the combination without any 

guilty knowledge or intent in any way to become actors or

participants in the wrongs which we find to have inspired and 

dominated the combination from the beginning.

Id. at 327-28 (quoting United States v. American Tobacco Co., 221 U.S. 106, 185 (1911)). 

Notably, the Court did not hold that divestiture is the only available remedy. In fact, it 

specifically rejected the Government's assertion to the contrary, reasoning that "Congress would 

not be deemed to have restricted the broad remedial powers of courts of equity without explicit 

language doing so in terms, or some other strong indication of intent." Id. at 331 n.9. 

The Commission has also recognized that Section 7 does not require divestiture as 

the only available remedy. It has observed that divestiture can be so drastic in some cases that 

"the cure would be worse than the disease," and that in such cases, it would not be an appropriate 

remedy. See In the Matter of Ekco Prods. Co., 65 F.T.C. 1163, 126 (1964). This is especially 

true in a case involving multiple product markets. The Commission has noted that, "[i]n multiple 

market cases, this may result in all elements being proven as to all alleged markets, as to some 

markets but not to others, or as to none of the alleged markets. A case falling into the second 

category may entail more narrow relief (e.g., partial rather than complete divestiture). . . ." In the 

Matter of The Grand Union Company, 102 F.T.C. 812, 503 (1983). 

B. COMPLAINT COUNSEL HAS NOT MET ITS BURDEN OF

PROOF WITH RESPECT TO REMEDY.

During its case-in-chief, which lasted 18 trial days, Complaint Counsel presented 

testimony of 24 witnesses (live and by deposition) who are customers or competitors of CB&I. 
1167887 163 

Remarkably, Complaint Counsel failed to ask any of these witnesses questions regarding the 

feasibility, desirability or effectiveness of its proposed remedy, nor did any of these witnesses 

volunteer a shred of evidence regarding this issue. The only "testimony" presented by Complaint 

Counsel in support of its remedy was provided by their expert economist -- Dr. Simpson. 

Despite the fact that Dr. Simpson gave over 600 pages of testimony, he testified regarding the 

issue of remedy for only eight pages. This paucity of testimony is not surprising. None of the 24 

witnesses on which Dr. Simpson relied for his opinions discussed this issue. Further, Dr. 

Simpson is not a fact witness, he has no background in breaking up companies, and did not have 

any fact evidence available to him to offer any opinions regarding remedy. (Simpson, Tr. 5715) 

(FOF 9.3). 

These eight pages do not carry Complaint Counsel's burden. When asked the 

question "Do you believe that customers would benefit by reconstituting a competitive

company," Dr. Simpson simply answered, "Yes, I do," without any further elaboration. 

(Simpson, Tr. 3611) (FOF 9.4). He offered no evidence showing that creating an independent 

company from the ribs of CB&I would be practical, desirable or effective, nor could he cite any 

evidence showing that customers for whose benefit remedy would be imposed would favor 

disassembly of CB&I into two separate companies. He also failed to cite any testimony from 

any customer to support his "opinion," and he presented no evidence that a breakup would 

actually establish a viable second company, would not hurt CB&I's ability to service industry 

customers, would result in lower pricing or better quality, or would in any way accomplish the 

objectives of Complaint Counsel's proposed remedy. In fact, when asked to "name one customer 

that's testified in this proceeding that they think that CB&I should be broken up into two 

companies," Dr. Simpson stated "None come to mind." (Simpson, Tr. 5718) (FOF 9.4). 
1167887 164 

In addition to failing to provide any evidence regarding the appropriateness of 

Complaint Counsel's contemplated remedy, Dr. Simpson has also admitted that he does not even 

know how the remedy would be implemented and that he is not qualified to oversee such a 

breakup: 

Q. Sir, are you qualified -- and I should back up. You know that if a 

remedy, the remedy you propose, is implemented, there will have to be 

some sort of a trustee appointed to implement it; correct? 

A. I don't know exactly how it would be implemented.

Q. You don't even know how the remedies are implemented, sir?

A. No, I do not.

Q. Sir, are you qualified to act as a trustee to oversee splitting up CB&I into 

two companies?

A. I don't believe I am. 

Q. Yet, sir, you've testified that it's feasible to do that, split CBI into two 

companies, you've testified to that? 

A. I don't recall exactly what I said on that point.

Q. Sir, do you think it's feasible to split CBI into two companies or not? 

A. I believe it is.

(Simpson, Tr. 5715) (FOF 9.5). To make matters worse, Dr. Simpson never considered the 

possibility that Respondents might win a liability trial in only one or two of the four markets at 

issue in this litigation. (Simpson, Tr. 5586) (FOF 9.32). In fact, Dr. Simpson expressly admitted 

that, if Complaint Counsel won less than its entire case, the question of whether a breakup would 

be an appropriate remedy "would actually require quite a bit of thought." (Simpson, Tr. 5586) 

(FOF 9.32).
1167887 165 

In short, Dr. Simpson's testimony regarding remedy is conclusory and wholly 

unsupported by record evidence. It cannot carry Complaint Counsel's burden of proof as a 

matter of law. This case, should it ever get to the Court of Appeals, would surely be reversed if 

any remedy were to be imposed based upon the case put on by Complaint Counsel, which is as 

bereft of remedy evidence as was the initial decision in Microsoft. It is noteworthy that after 

remand from the D.C. Circuit, Judge Kollar-Kotelly held a hearing solely on the issue of remedy 

that lasted longer than this entire proceeding. See New York v. Microsoft Corp., 224 F. Supp. 2d 

76, 87 (D.D.C. 2002). 

C. EVIDENCE SUGGESTS THAT COMPLAINT COUNSEL'S

PROPOSED REMEDY WILL NOT CREATE COMPETITION,

AND THAT IT WILL HARM CONSUMERS.

The purpose of an antitrust remedy is not a punitive one. See Brunswick Corp. v.

Pueblo Bowl-o-Mat, Inc., 429 U.S. 477, 485-86 (1977) (finding that the primary purpose of 

antitrust damage remedies is remedial, not punitive). Any remedy in this case should be 

fashioned to encourage competition and improve customers' ability to receive quality goods or 

services at a competitive price. The evidence presented in this trial suggests that a break-up of 

CB&I will not improve the state of competition in the relevant markets, and that such a remedy 

could actually harm CB&I's customers. For example, Joseph Hilgar of Air Products noted that 

the Acquisition has created some benefits for Air Products, and that a divestiture would "be bad 

for Air Products and the industrial gas business in general." (Hilgar, Tr. 1540) (FOF 9.10). 

Further, the evidence shows that it would be difficult to implement Complaint Counsel's

proposed remedy. As one of Complaint Counsel's own witnesses observed, breaking up CB&I 

"would be pretty difficult." (Outtrim, Tr. 808-09) (FOF 9.11).
1167887 166 

1. Evidence shows that provisions in CB&I's contracts would

make Complaint Counsel's proposed breakup unworkable.

Complaint Counsel asks this Court to order a breakup without considering the 

effects of such a remedy on contractual relationships between CB&I and its customers in the 

relevant product areas and customers unrelated to this litigation. Many such contracts have 

"non-assignability" clauses. (Glenn, Tr. 4168-69) (FOF 9.16). Such a clause is common in the 

construction industry. Gerald Glenn explained their meaning:

If you qualify for a project, and CB&I's experience and

qualifications are the basis for that award, the customer expects 

CB&I to execute that project the way that they have promised to 

do that and the basis for their selection. So they have a clause 

there that you are not able to assign any or all of the requirements 

under that contract to a third-party without their permission.

(Glenn, Tr. 4168-69) (FOF 9.16). Similarly, many contracts also contain a "key employee"

provision, which protects the customer against a "bait and switch" by CB&I. (Glenn, Tr. 4168-

69) (FOF 9.17). If a customer awards CB&I a contract with the expectation that a certain group 

of people will work on the job, such a clause prevents CB&I from removing those personnel 

from the job. (Glenn, Tr. 4169) (FOF 9.17). Some customers have indicated that they would be 

reluctant to agree to assignment clauses allowing a new company to assume control of its job. 

(See Izzo, Tr. 6508) (FOF 9.16). 

2. Evidence shows that Complaint Counsel's proposed breakup 

remedy would create two companies incapable of competing 

for jobs in the relevant product areas.

Evidence demonstrates that a breakup of CB&I would not enhance competition. 

In fact, such a remedy is likely to reduce competition because it will reduce the number of 

competitors with sufficient financial might to compete for large LNG import terminals. 

Financial size of a competitor can affect its ability to meet customers' bonding requirements. 
1167887 167 

(E.g., Izzo. Tr. 6511-12) (FOF 9.22). For many customers, financial viability of a prospective 

bidder is important to a pre-qualification process. (Rapp, Tr. 1313) (FOF 9.24).

Several customers have expressed concern that a divestiture could result in fewer 

qualified bidders for LNG projects. For example, Larry Izzo of Calpine noted that breaking up 

CB&I could result in two companies lacking the "bonding or guarantee ability to make our bid 

list." (Izzo, Tr. 6511-12) (FOF 9.24). Izzo explained that foreign companies, such as Skanska, 

Technigaz, and TKK had the financial strength to guarantee a large LNG project. (Izzo, Tr. 

6511-12) (FOF 9.22). By contrast, the two "residual" companies left by a divestiture could have 

difficulty in this area:

I'd be concerned about whether either of the two residual

companies would have the bonding or guarantee ability to make 

our bid list, and unless a company could guarantee what we were 

asking them to do, which I feel comfortable with with the Skanskas 

and Technigazes and TKKs, I don't know -- I seriously doubt 

PDM's ability being able to backstop a large enough project as 

we're talking about. I don't even think PDM would make my bid 

list, and whether a split company -- whether CBI would make it 

would depend on what was left of the company. I think they

would be disadvantaged compared to the other companies I'm

talking about from an ability to guarantee the work to the owner. 

(Izzo, Tr. 6511-12) (FOF 9.24). Similarly, Rob Bryngelson explained that El Paso considers a 

company's ability to post performance bonds and provide necessary liquidated damages

coverages in order to determine if "they're a strong enough company, [so that] we can go and get 

some money to cover our damages." (Bryngelson, Tr. 6127-28) (FOF 9.9, 9.26). Mr.

Bryngelson added that the Acquisition has given "some comfort in the bid process" because 

CB&I is a "larger company now, with more assets to go after if they do fail in the process of 

constructing a tank." (Bryngelson, Tr. 6154) (FOF 9.9). Mr. Bryngelson noted that a breakup 

would rob El Paso of this comfort:
1167887 168 

Q. Okay. If the FTC is successful in breaking up CB&I into two separate 

companies, would that concern El Paso? 

A. It would concern me, yes.

Q. Why would it concern you? 

A. It would be, as I mentioned before, a smaller company, and in that

situation, I would be less inclined to do any more than maybe one or two 

jobs with them total. 

* * * 

Q. If CBI were split in two, would you be concerned that both of the newly 

created companies as a result of the breakup might not have a sufficient 

size to satisfy El Paso that they could back up, you know, the necessary 

work to be done?

A. Yes. That would concern me.

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The sale of PDM's assets provides an instructive example of how financial size 

can affect a company's ability to compete. During 2001 and 2002, various divisions of PDM 

were sold off (CB&I acquired the Water and EC Divisions.) The last division sold by PDM was 

PDM Bridge, which sometimes required bonding to perform its projects. PDM Bridge's ability 

to obtain necessary bonding was recently reduced because it was no longer associated with the 

four other divisions of PDM that had already been sold. (Byers, Tr. 6738) (FOF 8.25). 
1167887 169 

3. Evidence shows that Complaint Counsel's proposed breakup 

remedy would disrupt projects already in progress.

A breakup could result in disruption of projects already in progress. Some 

customers have expressed this concern. For example, [xxxxxxxxxxxxxxxxxxxxxxxxxx 

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xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx] Such a concern is well founded, as PDM, 

EC and Water were integrated divisions with shares resources prior to the acquisition. Richard 

Byers, formerly of PDM, explained that the PDM Water and EC divisions were sold together 

because "they shared many services. They shared human resources, they shared physical plant. 

It was -- at that time it was considered impossible to split the two." (Byers, Tr. 6780-81) (FOF 

9.30).

4. Evidence shows that Complaint Counsel's proposed breakup 

remedy would leave two companies without sufficient

resources or personnel to service their customers.

The evidence in this case demonstrates that a breakup could create two 

companies without sufficient personnel to compete in some or all of the relevant markets. 

For example, Jeffrey Sawchuck of BP expressed concern regarding the effect of a 

breakup on CB&I's engineering capabilities: 

Q. And if that engineering design department were instantly cut in half, 

would they have enough people in your judgment to service customer 

needs?

A. We would have some real concerns about that actually. If the design 

department was split in half, because they are a small group of people, and 

they have -- they are a fairly expert group, it's real difficult to split one 
1167887 170 

person in half when they may have one or two -- only have one or two 

people in certain disciplines.

Q. And I take it the same would be true for the other company that received 

the other half of the CBI design and engineering group, that the half that 

remained with CBI would give up PDM and that the half that would go 

would not be big enough to meet all of BP's needs either on its own?

A. Yeah, I would have to say we would have some concerns about that.

(Sawchuck, Tr. 6077-78) (FOF 9.9). 

The same concern exists in the TVC market. Ron Scully of XL noted that the 

market for TVCs is not large enough to support the existence of two suppliers, and that a 

divestiture would only reduce the amount of competition available for these jobs. (Scully, Tr. 

1226-27, 1236-39) (FOF 6.97). A breakup would result in two smaller companies that would 

each be substantially weaker than the current CB&I. (Scully, Tr. 1239-40) (FOF 6.96). 

Customers benefit from having a merged CB&I and PDM with the combined wisdom of CB&I 

and PDM employees working together. (Scully, Tr. 1240) (FOF 6.98). 

5. Evidence shows that Complaint Counsel's proposed breakup 

remedy would affect several hundred pending projects.

A breakup would affect jobs in the relevant product areas, as well as hundreds, 

perhaps thousands, of other contracts between CB&I and its customers. During 2001, CB&I 

completed 700 contracts. Currently, CB&I has over 2,000 contracts. (Glenn, Tr. 4170) (FOF 

9.27).

6. Expert economic testimony supports the conclusion that

divestiture is not necessary and is ill-advised because it will not 

result in two lowest companies.

 Unlike Dr. Simpson, Dr. Harris -- Respondents' expert-considered the testimony 

of customers regarding the potential effects of a divestiture on their businesses. Based on his 

review of the entire record, Dr. Harris concluded that divestiture is "unsupported in the record." 
1167887 171 

(Harris, Tr. 7375-76) (FOF 7.141, 7.143). Dr. Harris explained that the goal of any divestiture 

should be to create "two low-cost companies," and observed that a divestiture may well create 

higher-cost companies, which would "hurt competition in all four markets." (Harris, Tr. 7375-

76) (FOF 7.143). Dr. Harris correctly observed that there is no evidence in the record to suggest 

that a divestiture could create two low-cost companies: 

It does no good to create two new competitors with both of them 

having higher costs and it also does no good for one low cost and 

one higher cost. That's, according to the FTC, that's what we have 

now, we have a low-cost CB&I and a bunch of new competitors 

that are high cost. So for this relief to have any impact you must 

have confidence that the two firms that will be the result will both, 

not one but both, be low-cost producers in the markets. And you 

know, there's no evidence in the record that I've seen to suggest 

that's true. 

(Harris, Tr. 7367-68).

D. SHOULD THE COURT FIND LIABILITY, OTHER REMEDIES 

SUPPORTED BY THE EVIDENCE ARE STILL AVAILABLE.

Should the Court find liability in one or more of the markets at issue in this case, 

it is not powerless to solve competitive problems. The record contains ample evidence that any 

competitive problems in the markets at issue can be solved through remedies short of divestiture. 

For example, if the Court were to find that the LIN/LOX market has been affected by the 

Acquisition, there are many ways to encourage competition. For example, a current or potential 

competition could receive assistance from CB&I in entering the LIN/LOX market.

W.T. Cutts of AT&V, indicated that he could fully compete against CB&I on all 

fronts and, if he were able to obtain the following: CB&I's customer lists, technical

specifications of LNG applications, cryogenic welding systems, CB&I's name and reputation, 

and a few of CB&I's cryogenic marketing employees, employees and equipment for four
1167887 172 

additional field crews, more financial strength and bonding capacity, and CB&I's standard 

operating procedures. (Cutts, Tr. 2371-74, 2391) (FOF 9.36). 

E. CB&I HAS OFFERED A SOLUTION TO ANY COMPETITIVE

ISSUE ASSOCIATED WITH THE TVC MARKET.

Even if this Court finds that the Acquisition has substantially lessened

competition in the TVC market, Respondents have proposed a remedy that would resolve any 

concerns associated with this reduction. The Court has the power to impose remedies such as 

this proposed remedy, as opposed to ordering a divestiture. See In the Matter of Retail Credit 

Company, 92 FTC 1, 258-59 (1978). This remedy, and the ramifications of divestiture in this 

market, are discussed more fully in Part VI, supra.

F. SUMMARY: A BREAKUP OF CB&I IS NOT APPROPRIATE IN 

THIS CASE.

Because Section 7 has not been violated, this Court need not impose any remedy. 

Should the Court find that a violation has occurred, it should not order a breakup of CB&I as 

Complaint Counsel has requested. Complaint Counsel bears the burden of proving that its 

proposed remedy is appropriate. It has not done so; in fact, Complaint Counsel has made no 

significant effort to address the issue of remedy in its case-in-chief. The evidence in this case 

demonstrates that a breakup of CB&I would not assist competition in any of the relevant 

markets, and would in all probability harm competition in some or all of those markets. In the 

face of this possibility, it would be irresponsible to order a breakup of CB&I, especially when 

other, less drastic means of encouraging competition in the relevant markets are available. 
1167887 173 

CONCLUSION

For all of the reasons fully set forth above, the Complaint as to all product 

markets should be dismissed with prejudice.

Dated: March 19, 2003 Respectfully submitted,

 

______________________________

Duane M. Kelley

Jeffrey A. Leon

Greg J. Miarecki

Christopher B. Essig

Michael P. Mayer

Andrew D. Shapiro

Danielle A. R. Coffman

David E. Dahlquist

James F. Herbison

Lance W. Lange

Winston & Strawn

35 West Wacker Drive

Chicago, IL 60601-9703

(312) 558-5600 (voice)

(312) 558-5700 (fax)

dkelley@winston.com

jleon@winston.com

gmiareck@winston.com

cessig@winston.com

mmayer@winston.com

ashapiro@winston.com

dcoffman@winston.com

ddahlqui@winston.com

jherbiso@winston.com

llange@winston.com

Counsel for Respondents

Chicago Bridge & Iron Company N.V.

 and Pitt Des-Moines, Inc.
1167887 174 

CERTIFICATE OF SERVICE

I, Greg J. Miarecki, hereby certify that on this 19th day of March, 2003, I served a 

true and correct copy of Respondents' Correct Post-Trial Brief -- Public Version, by hand 

delivery upon:

The Honorable D. Michael Chappell

Administrative Law Judge

Federal Trade Commission

600 Pennsylvania Avenue, N.W.

Washington, D.C. 20580

(two copies)

Rhett R. Krulla

Assistant Director

Bureau of Competition

Federal Trade Commission

600 Pennsylvania Avenue, N.W.

Room S-3602

Washington, D.C. 20580

Steven L. Wilensky

Federal Trade Commission

601 Pennsylvania Avenue, N.W.

Room S-3618

Washington, D.C. 20580