ANALYSIS OF AGREEMENT CONTAINING

CONSENT ORDERS TO AID PUBLIC COMMENT

In the Matter of Quaker Chemical Corporation, Global Houghton LTD., Gulf Houghton 

Lubricants LTD., and AMAS Holding SPF

File No. 171-0125, Docket No. C-4681

I. Introduction

The Federal Trade Commission (“Commission”) has accepted for public comment, 

subject to final approval, an Agreement Containing Consent Orders (“Consent Agreement”) from 

Quaker Chemical Corporation (“Quaker”), Global Houghton LTD. (“Houghton”), Gulf 

Houghton Lubricants LTD., and AMAS Holding SPF (collectively, the “Respondents”). The 

Consent Agreement would remedy the anticompetitive effects that likely would result from 

Quaker’s proposed acquisition of Houghton (“Transaction”).

Absent a remedy, the Transaction would threaten to harm competition in the manufacture 

and sale of: (1) aluminum hot rolling oils (“AHRO”) and associated technical support in North 

America; and (2) steel cold rolling oils (“SCRO”) and associated technical support in North 

America. In particular, the Commission’s Complaint alleges that the Transaction, if 

consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and that 

the asset purchase agreement constitutes a violation of Section 5 of the Federal Trade 

Commission Act, as amended, 15 U.S.C. § 45, by substantially lessening competition in the 

manufacture and sale of AHRO and SCRO in an area no greater than North America.

The Consent Agreement addresses the Commission’s concerns by, among other things, 

requiring Quaker to divest Houghton’s North American AHRO and SCRO product lines to Total

S.A. (“Total”), a multination oil and gas company headquartered in France. Quaker must also 

divest the intellectual property associated with Houghton’s AHRO and SCRO, and adjacent 

products including steel cleaners and AHRO compatible hydraulic fluids. 

The Commission has placed the proposed Consent Agreement on the public record for 30 

days to solicit comments from interested persons. Comments received during this period will 

become part of the public record. After 30 days, the Commission will again review the proposed 

Consent Agreement and any comments received, and will decide whether it should withdraw 

from the Consent Agreement, modify it, or make it final.

II. The Respondents

Respondent Quaker, a publicly traded company, is a global supplier of specialty process 

chemicals, lubricants, greases, and other metal processing products. Headquartered in 

Conshohocken, Pennsylvania, Quaker’s 2018 revenues were $868 million. 

Respondent Houghton is a global supplier of advanced metalworking fluids and services. 

It serves the automotive, aerospace, metals, mining, machinery, and beverage industries. 

Houghton is headquartered in Valley Forge, Pennsylvania. 
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III. The Proposed Acquisition

The Commission’s Complaint alleges that a relevant product market in which to analyze 

the Transaction is the manufacture and sale of AHRO and associated technical support services. 

AHRO is a mixture of water, oil, and additives, custom-formulated to lubricate each individual 

rolling mill. AHRO is necessary to allow manufacturers to operate hot rolling mills for 

aluminum sheet production. There is no substitute product for AHRO; lubricants for rolling 

other metals or for other rolling processes will not work for aluminum hot rolling.

The associated technical support services are appropriately included in this product 

market, as AHRO suppliers provide these services as an integral component of the physical 

product. There is no separate charge for these services. Technical support services begin with 

the formulation of the oil and continue throughout the life of the supply relationship, including 

necessary modifications to the formulation and contamination monitoring in both the trial phase 

and during active production. Technical support services from the AHRO supplier are essential 

to the ongoing performance of the mill, and there is no substitute for these services as provided 

in conjunction with AHRO.

The Commission’s Complaint also alleges that an area no greater than North America is a

relevant geographic market in which to analyze the effects of the Transaction. U.S. AHRO 

customers do not obtain supply from outside North America. Rolling oil suppliers typically 

supply their customers by truck and station technical support personnel at or near their 

customers’ mills to ensure timely supply and rapid service. At the mill, customers blend the oil 

with the mill’s own water supply to create the final emulsion. Given the large volumes of rolling 

oil required to run a mill, and the need for timely re-supply, shipping AHRO from outside North 

America would be cost- and supply-prohibitive.

The relevant market for AHRO and associated technical support services in North 

America is highly concentrated. Quaker and Houghton are the only two companies that 

commercially supply AHRO in North America. Thus, post-transaction, Quaker will be the 

monopoly AHRO supply option for third parties in North America.

Timely, sufficient entry is unlikely to alleviate any potential competitive harm in the 

market for AHRO and associated technical support services. Consistent with the Commission’s 

allegations in the 2010 AEA Investors/ Houghton (“Houghton/D.A. Stuart”) complaint (Docket 

No. C-4297), entry is difficult in this market. Formulating AHRO and providing technical 

support services require specialized knowledge that is not widely available. Even the few 

AHRO customers with in-house supply capabilities are unable to supply fully their own mills

given the shortage of qualified scientists to develop and real-time modify rolling oil formulations 

and support their use in mill operations. Large, well-established customers of AHRO are 

unaware of potential entrants that could enter the market and supply AHRO.

Customer acceptance is also a significant entry barrier. Customers are reluctant to switch 

AHRO suppliers because AHRO is so critical to aluminum sheet rolling. Aluminum 

manufacturers place great weight on the AHRO suppliers’ experience and reputation. They 

likely would be unwilling to chance a supplier that lacks the parties’ established reputations and 
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decades of experience given the risk of catastrophic effects should the supplier’s product or 

support capabilities fall short. There are significant time commitments and costs associated with 

switching to a new AHRO supplier. Given that AHRO is a relatively small cost component in 

the production of aluminum coil, it is unlikely that a small significant sustained price increase

would justify a lengthy trial process for a new entrant without a proven track record.

The Commission’s Complaint also alleges that a relevant product market in which to 

analyze the Transaction is the manufacture and sale of SCRO and associated technical support. 

SCRO includes sheet cold rolling oils, pickle oils, and tin plate rolling oils (“TPRO”). Steel 

manufacturers use SCRO to reduce friction and prevent metal-to-metal contact between surfaces 

of the mill’s rollers and the steel during the cold rolling process for steel sheet of any width or 

gauge, for any further processing (e.g., tinplating or coating with another substance, e.g., zinc, 

aluminum, or paint), and for any end-use (e.g., can bodies, can ends, and other closures for food 

and beverages, household appliances, such as washers and dryers, automobile or truck parts, or 

building and construction products). Like other rolling oils, SCRO is a mixture of water, oil, and 

additives for lubrication and corrosion protection. SCRO producers customize the product for 

each individual rolling mill, and there are no substitutes for SCRO. Lubricants designed for 

other mills, metals, or rolling processes could damage mill equipment and render the processed 

steel unusable.

As with AHRO, SCRO suppliers provide essential technical support services as part of 

the supply of the lubricant (i.e., without a separate charge). The provision of these technical 

services is an essential component of the SCRO supply relationship. 

As with AHRO, North America is the relevant geographic market for SCRO. Staff’s 

investigation did not reveal evidence that any mill in the United States received SCRO products 

and services from suppliers outside North America.

Steel manufacturers in the United States primarily use SCRO made with animal fat in 

their mills. Because animal fat will congeal under typical tanker truck conditions, SCRO

suppliers must deliver it via heated tanker trucks. This heating requirement adds to 

transportation costs, making imports of animal fat-based SCRO cost-prohibitive.

The animal fat-based composition of SCRO used in the United States also limits 

customers’ choices for supply. Steel mills in the United States typically are older and have 

relatively smaller tanks that require frequent drainage. As a result, it is not economical for U.S. 

steel mills to use vegetable oil based (commonly referred to as synthetic oil) that is more 

advanced but higher cost. European steel mills, which are generally newer and have larger tanks, 

use this synthetic SCRO. Given the greater cost of synthetic SCRO and the costs of shipping, 

U.S. steel manufacturers are unlikely to turn to overseas SCRO suppliers in response to a small 

significant sustained price increase.

As in the market for AHRO, Quaker and Houghton are the two dominant suppliers of 

SCRO and associated technical support services in North America. Although fringe competitors 

participate in this market, to the extent that customers need both SCRO and related support and 

technical services combined, the merger may present as an effective merger-to-monopoly. 
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IV. Effects of the Transaction

The proposed transaction would be a merger to monopoly in the market for AHRO and 

associated technical support services. Staff’s investigation has revealed no evidence to suggest 

that the likely competitive effects of this combination are meaningfully different from those of 

the Houghton/D.A. Stuart transaction remedied by the Commission in 2010. In addition, 

customers worry that the proposed transaction would consolidate all AHRO technical expertise 

within one company. Today, Quaker and Houghton compete on their technical support service 

capabilities, including their availability, responsiveness, and expertise in anticipating, preventing, 

diagnosing, and addressing problems related to their lubricants in order to ensure smooth 

operations and high quality aluminum sheet. The parties’ support service technicians must 

thoroughly understand the design of each mill, the products made there, and the interaction 

between the rolling oil, substrate, and rollers. When problems arise today, they create an 

opportunity for a competitor to challenge the incumbent supplier as the customer seeks a solution 

and/or a superior product as quickly as possible to get operations back on track. Post-merger, 

customers will have only one support team – Quaker’s – to turn to in the event of operational 

issues, and will lose the advantage of a possible switch to encourage investment in 

troubleshooting.

The Transaction presents similar concerns for customers of SCRO and associated 

technical support services. Notwithstanding the presence of a few fringe suppliers, SCRO 

customers fear that the deal may result in higher prices, lower service levels, reduced innovation, 

and supply availability challenges. Like AHRO customers, SCRO customers face meaningful 

barriers to switching suppliers, including lengthy trial periods, downtime, and long waits for 

customer approval. 

Quaker and Houghton also compete on the quality of their technical support services and 

expertise. Customers rely on their SCRO suppliers to troubleshoot and address operational 

issues as they arise. When the incumbent supplier cannot resolve problems to the customer’s 

satisfaction, the customer may turn to a competing supplier to propose an alternative solution. 

Post-merger, Quaker will no longer face Houghton as a competitive threat to keep its service 

levels sharp; competition from fringe SCRO suppliers may not be sufficient to protect customers.

Customers have also raised concerns that the proposed merger would eliminate their only

SCRO alternative in the event of supply challenges or emergencies. If a supply disruption 

occurs, SCRO customers must either turn to an alternative supplier or idle their mills at great 

expense. Steel manufacturers take comfort in the availability of multiple potential SCRO 

suppliers to ensure that they can access this essential input in times of shortages. The proposed 

transaction would eliminate the most promising alternative supply option for SCRO customers, 

and may deprive them of any viable alternative at all.

A prospective entrant into the SCRO market faces similar barriers to those that render 

entry unlikely for AHRO, including technical expertise and reputational hurdles. Entry is 

difficult even for a supplier that operates in other fluid-based markets.
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V. The Proposed Consent Agreement

The proposed order requires a divestiture to Total. Total’s business includes oil and gas 

exploration, refining, and marketing as well as chemical manufacturing. Total had annual 

revenues in 2018 of approximately $210 billion. The divestiture to Total would replicate 

Houghton’s competitive presence in the AHRO and SCRO markets in North America by 

creating a viable, effective, and independent competitor. The order requires Quaker to divest 

certain products, transfer key employees, and provide transition services and toll manufacturing. 

The term of the proposed order is ten years. The order also requires Quaker to supply the 

divested products to Total for a transitional period while transferring the manufacturing 

technology to Total.

To remedy harm in the market for AHRO, Quaker will divest to Total: (1) Houghton’s 

formulations, intellectual property, including patent for non-oleic acid formula, trade secrets, 

including know-how for its AHRO; (2) customer contracts for North America; (3) key Houghton 

employees that are responsible for the commercial and technical aspects of the AHRO business; 

and (4) adjacent products including fire resistant hydraulic fluids.

To remedy harm in the market for SCRO, which includes sheet cold rolling oil, TPRO, 

and pickle oil, Quaker will divest to Total: (1) Houghton’s formulations, trade secrets and 

intellectual property, including know-how for sheet cold rolling oils, TPRO, and pickle oil;

(2) customer contracts for North America; (3) key Houghton employees that are responsible for 

the commercial and technical aspects of the SCRO business; and (4) SCRO and TPRO cleaners.