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ORIGINAL 

DEC- . Z 2009 )

UNITED STATES OF AMERICA 515l3Bi.~/ 

SECRÇTAR'( ~.?
 BEFORE THE FEDERAL TRADE COMMISSION --~. 

In the Matter of ) 

) Docket No. 9327 

) Polypore International, Inc. )
 PUBLIC

a corporation
 ) 

) 

RESPONDENT'S POST-TRIAL BRIEF FOR REOPENED HEARING 

Counsel for Respondent: 

Wiliam L. Rikard, Jr. 

Eric D. Welsh 

Deborah L. Edney 

Adam C. Shearer 

Brian R. Weyhrich 

PARKR POE ADAMS & BERNSTEIN LLP 

401 South Tryon Street, Suite 3000 

Charlotte, NC 28202 

Telephone: (704) 372-9000 

Facsimile: (704) 335-9689 

wiliamrikard~parkerpoe.com 

ericwelsh~parkerpoe.com 

John F. Graybeal 

PARKR POE ADAMS & BERNSTEIN LLP 

150 Fayettevile Street
 

Raleigh, NC 27602 

Telephone: (919) 835-4599 

Facsimile: (919) 828-0564 

ioOOgraybeal~parkerpoe.com 

PPAB 1631442vl 
Table of Contents 

I. INTRODUCTION............................................................................................................. 1
 

II. PROCEDURAL BACKGROUND.................................................................................. 3
 

III. FACTS AND BACKGROUND.............................................. .......................... ............... 4
 

A. The 1999 Contract and Negotiations for New Contract ..........................................4
 

B. ~
 l...........................................11
 

C. ~ l......13
 

D. ~
 

l..................................................................................................................... .15
 

IV. LEGAL ARGUMENT.................................................................................................... 18
 

A. The acquisition of Microporous by Polypore had no effect on competition in
 

the FTC's alleged SLI market segment because Microporous was neither an
 

actual paricipant in the market nor an uncommitted entrant ................................18
 

B. Almost Two Years After The Acquisition, Competition in the SLI Market 

Segment Is Intense................................................................................................ .19
 

C. The Evidence Presented at the November Hearing Shows that the Necessar
 

Conditions for Coordinated Interaction do not Exist in the Alleged SLI
 

Market Segment. ................................................................................................... .21
 

D. Large Buyers with Substantial Market Power Wil Prevent Coordinated
 

Interaction in the alleged SLI Market Segment. ....................................................24
 

V. CONCLUSION ............................................................................................................... 29
 

PPAB 1631442vl 
TABLE OF AUTHORITIES
 

Case Law
 

Chicago Bridl;e & Iron Co. N.V. v. FTC, 534 F.3d 410 (5th Cir. 2008) .......................................21
 

FTC v. Elders Grain, 868 F.2d 901 (ih Cir. 1989)........................................................................29
 

FTC v. CCC Holdings Inc. 605 F. Supp.2d 26 (D.D.C. 2009).....................................................21
 

FTC v. H.J. Heinz Co., 246 F.3d 708 (D.C. Cir. 2001).................................................................21
 

FTC v. Occidental Petroleum Corp., 1986 U.S. Dist. LEXIS 26138 (D.D.C. 1986) ....................25
 

FTC v. RR Donnelley & Sons Co., 1990 U.S. Dist. LEXIS 11361 (D.D.C. 1990) ........26,28,30
 

In re B.A. T. Industries, 104 F. T. C. 852 (1984) .................. ...................... ................................... ..19
 

In the Matter of 
 Owens-Ilinois. Inc., 115 F.T.C. 170 (1992) .......................................................29
 

Lektro-Vend. Corp. v. Vendo Co., 660 F.2d 255 (7th Cir. 1981) ..................................................21
 

United States v. Archer-Daniels-Midland C0781 F. Supp. 1400 (S.D. Iowa 1991)................29,30
 

United States v. Baker Hughes. Inc., 908 F.2d 981 (D.C. Cir. 1990)..........................20,25,28,29
 

United States v. Country Lake Foods754 F. Supp. 669 (D. Minn. 1990) .....................................29
 

United States v. Falstaff Brewing Corp., 383 F.Supp. 1020 (D.RI. 1974) ...................................22
 

United States v. General Dynamics Corp., 415 U.S. 486 (1974) ..................................................20
 

United States v. Int'l Harvester Co., 564 F.2d 769 (7th Cir. 1977)................................................21
 

United States v. Marine Bancorp., 418 U.S. 602 (1974) ...............................................................19
 

United States v. Syufy Enterprises, 903 F.2d 659 (9th Cir. 1990) .................................................20
 

United States v. Waste Management. Inc., 743 F.2d 976 (2d Cir. 1984) ......................................20
 

Varney v. Coleman Co., 385 F. Supp. 1337 (D.N.H. 1974)..........................................................22
 

Other Authorities 

Commentar on the Horizontal Merger Guidelines .................................................................... ..23
 

Horizontal Merger Guidelines, 57 Fed.Reg. 41552, 41560, §2.1 (1992) ......................................23
 

ABA Section of Antitrust Law, Mergers and Acquisitions at 159-60 (3d ed. 2008) ....................26
 

PPAB 1631442vl 11
 

.. 
Areeda, Solow and Hovenkamp, Antitrust Law (2d ed. 2006)......................................................26
 

Horizontal Merger Guidelines, 57 Fed.Reg. 41552,41560, S 2.12 (1992) ...................................27
 

PPAB 1631442vl iIi 

~ ., 
I. INTRODUCTION
 

The hearng on November 12, 2009 showed that competition in the production and sale of 

battery separators in North America is healthy and vigorous. Although there are disputes between 

Complait Counel and Respondent about many things, there can be no basis for disagreement on that 

fudamental point. The point is a crucial one, of course, because the ultimate issue pending before ths 

Cour is whether Polypore's acquisition of Microporous Products L.P. ("Microporous") is likely "to 

substantially lessen competition." With the acquisition having occured almost two years ago, the lack 

of adverse effects was clear and visible in the testimony and documents presented on November 12. 

Before considerig the November 12 evidence, however, it is importt to note that, regardless 

of that evidence, the acquisition had utterly no effect in the SLI market segment alleged by Complait 

Counsel. As was established by the evidence presented at the initial hearg, Microporous was neither 

an actual competitor nor an uncommtted entrant in that segment. ~ 

l. As a result, the FTC's Section 7 

case as regards this segment is an empty shelL. What the November 12 evidence ilumates is the 

intense competition in ths market segment drven by powerf buyers that ~ 

l.
 

The evidence also served to remind the Cour that f
 

PPAB 1631442vl 
l. 

f 

l. 

The overreachig by the FTC in ths matter is pervasive, but was nowhere more evident than in 

Complait Counsel's openig statement when he, without any basis and contrar to all available law on 

the subject, told the Cour that a buyer would have to have f 

L to be considered a power buyer. (Robertson, Tr. 5627). As set out below, there is simply no 

PPAB 1631442vl 2 
support for such an incorrect and outrageous statement, and it is a continuation of the overzealous 

conduct of 
 Complait Counel in ths matter. i 

In fact, it would be hard to imagine a story of more vigorous competition. It remains to be seen 

whether the result of ths competition will be good for consumers, f 

l. 

Ths memorandum will recap the evidence recently presented and will then show that: (1) the 

acquisition of Microporous by Polypore had no effect on competition in the FTC's alleged auto (SLI) 

market segment because Microporous was neither an actu paricipant in the market nor an
 

uncommtted entrant; (2) the evidence adduced at the mai hearg and supplemented on November 

12 shows indisputably that competition in ths segment is intense and shows no signs of abating; (3) 

all the evidence also shows that the conditions for coordinated interaction do not exist in this alleged 

segment; and (4) the presence of 
 powerf buyers like f L and others - indeed, a highy 

concentrated industr on the buyer side - assures that coordinated interaction canot occur. 

II. PROCEDURA BACKGROUN
 

By Order dated October 15,2009, ths Cour reopened the hearng record in ths proceedig to
 

allow the acceptance of new and additional evidence related to the followig four proffers: 

1. Afterthe close of the record, Exide decided to move flits PE
 

separator purchases for ~ L to another supplier, and in the span 

of less than thee months, Exide has placed orders from Daramc in excess of 

f L ofPE separators, all requested to be delivered by year end.
 

Ths amount exceeds any reasonable forecast provided by Exide, is inconsistent 

with past order pattern and, based on Exide's f h amounts 

to approxiately f L worth ofPE separator(sJ. Douglas Gilespie of
 

i Although Complaint Counsel is incorrect in his assertion, if he were correct and taking the reverse of his point, 

then his statement thoroughly defeats the FTC's claim that Daramic is a monopolist either in the alternative PE 

Market or SLI market that the governent has alleges 
 as Daramic does not now, even remotely, f 

J - either in North America or Worldwide. 

PPAB 1631442vl 3 
Exide has admtted to Respondent that Exide's recent purchase orders equate to 

f L worth ofPE separator purchases from Daramc.
 

2. With Exide's purchase orders for more than f lofPE 

separators from Daramc, Exide does not intend to and will not purchase any 

additional PE separators from Daramc in either f l.
 

3. In light of Exide's apparent decision not to purchase PE separators from
 

Daramc in f l, Daramc will likely have to f 

l. 

4. IfDaramc is able to retain any small amount of 
 business from Exide in f l,
 

or thereafer, which appears unikely, Daramc will only be able to obta such 

sales though a f l.
 

On November 12, 2009, the pares appeared before ths Cour and presented new evidence 

related to the above proffers. 

m. FACTS AND BACKGROUN
 

A. The 1999 Contract and Negotiations for New Contract
 

f 

l. (pX0728, in camera). f
 

l. (R01675, in camera). At ths time f 

l.
 

f
 

l. (R01721, in camera; Seibert, Tr.
 

5646-48, in camera). f 

l. (Toth, Tr. 5751, in
 

PPAB 1631442vl 4 
camera).~ 

l. (R 1721-002, in camera; Seibert, Tr. 5648, in camera).
 

From Daramc's perspective, f 

l. (Toth, Tr. 5749-50, in camera).
 

f 

l. (FOF
 

14; Seibert, Tr. 5648-49, in camera; Toth, Tr. 5749-50, in camera). f 

l. (Seibert, Tr. 5682-83, in camera; RX 

1724, in camera). 

Importtly, ~
 

l. (Seibert,
 

Tr. 5649, in camera, 5658, in camera; RX 1667-002, in camera; RX 1668-002, in camera; RX 1669­

002, in camera; RX 1713, in camera; RX 1718, in camera; RX 1714, in camera). f 

l. (Seibert, Tr. 5668, in camera). f 

l. 

(Seibert, Tr. 5650, in camera; RX 1665, in camera). 

f 

PPAB 1631442vl 5 
l (R 1665-001, in camera). f
 

l. (Seibert, Tr. 5650-51, in camera, 5697, in camera, 5669-70, in camera; 

RX1665-002-1665-003, in camera.). Furer, f
 

l. (Seibert, Tr. 5650-51, in camera, 5697, in camera, 5669-70, in camera; RXI665-002­

1665-003, in camera).2 f 

l. 

Notwthstanding f 

l. (R 1713, in camera; RX 1667, in camera;
 

Seibert, Tr. 5665, in camera). ~ 

l. (R 1713-003; Seibert, Tr. 5657, in camera). f
 

l. 

It was tranparent though f 

2 f 

l. (RX01665 at 003, in camera). 

f
 

f l. (Gilespie, Tr. 2934, in camera; FOF 15t4).
 

PPAB 1631442vl 6 
l. (Toth, Tr. 5737-39, 5741 in camera; Seibert, Tr.
 

5645, in camera). ~ 

l. (Toth, Tr. 5739-40, in
 

camera). 

f 

l. (Seibert, Tr. 5651-53, in camera, 5655, in camera; RX 1617, in camera). f 

l. (Seibert, Tr. 5652, in camera). 

f l. (Seibert, Tr. 5652,
 

in camera). ~ 

l. (R 1667-002, in
 

camera; Seibert, Tr. 5658, in camera). f 

l. 

(Gilespie, Tr. 5858, in camera.). f 

l. (R 1667-002; Seibert, Tr. 5670, in camera). f
 

PPAB 1631442vl 7 
l. (Toth, Tr. 5740-41, in camera).
 

f
 

l. (R1668, in camera; RX1669, in camera; Seibert, Tr. 5660, in camera, Seibert, 

Tr. 5734, in camera). ~ 

l.
 

f
 

l. (Toth, Tr.
 

5741-42, in camera). ~
 l. 

(Toth, Tr. 5742, 5744 in camera). f 

L (Toth, Tr. 5742-43, in camera). f 

l. (Toth, Tr. 5742-43, in
 

camera)(R01712 at 001, in camera). f 

l. (Toth, Tr. 5743-44, in camera). f 

l. (Toth, Tr. 5743-44, in camera). Ultimately, f 

l. (RXOI704, in camera). f
 

PPAB 1631442vl 8 
l. (Toth, Tr. 5745, in
 

camera).
 

f
 

l. (Toth, Tr. 5746, in camera). f 

l. (Toth, Tr. 5746-50, in camera). f 

l 

(Toth, Tr. 5747-48, in camera). f 

l. (Toth, Tr. 5749-50, in
 

camera). f 

l. Toth Tr., 5749-50, in camera).
 

~ 

l. 

(Seibert, Tr. 5662-63, in camera, 5666, in camera; RX 1714-002, in camera; RX 1718-002, in 

camera.) f 

l. (Toth, Tr. 5751-52, 5755 in camera). f 

l. (Toth, Tr. 5756, 5758 in camera). ~ 

PPAB 1631442vl 9 
l. (Toth, Tr. 5756-59 in
 

camera). f 

l. (Toth, Tr. 5760-61 in camera). 

f l. (R01714, in 

camera; Toth, Tr. 5761-62 in camera). f 

l. (R01714, in camera; Toth, Tr. 5761-62 in camera).
 

However, f 

l. (RO 1687 at 002, in
 

camera)(Toth, Tr. 5761-62 in camera). f
 

l. (Toth, Tr.
 

5761-62 in camera). f 

L (Toth, Tr. 5762-63 in camera; RX01693, in 

camera). f l. (Toth, Tr. 5762-63 in camera; RX01693, in 

camera; RX01712, in camera). 

f 

l. 

(R01712, in camera; Toth, Tr. 5762-63 in camera). f 

l. (R01681, in camera; Toth, Tr.
 

5763-64, in camera). f 

PPAB 1631442vl 10 
l. 

B. f l 

f 

l. 

f 

)l. (FOF 1529). f 

l. (FOF 1529).
 

f 

l. (FOF 1541). f
 

l. (FOF 1541, 1547).
 

f
 

l. (FOF 1531, 1532). Tellngly, f
 

PPAB 1631442vl 11 
l. (FOF 1532). f
 

l. (FOF 1532). f
 

l. 

(FOF 1531).
 

f
 

l. f
 

l. (FOF
 

1533). f 

l. (FOF 1535). Comparatively, f
 

l. (FOF 1534). Thus, f
 

l. (FOF 1533).
 

f 

l. (FOF 1540). f
 

l. Gilespie's explanations, however,
 

as offered to ths Cour, are not even remotely plausible. Gillespie is simply not a credible witness. 

(FOF 1540). For example, f 

PPAB 1631442vl 12 
l. (FOF 1548). However, accordig to Exide's second quarer results, Exide's free cash has 

declined 129% from last year, which Gilespie does not dispute, and its sales of tranporttion and 

industral batteries is down 29% and 26%, respectively. (FOF 1548). Far from being flush with cash 

or in a perfect financial position f 

l, Exide's latest fiancial statements show a business
 

strggling in a recession. (FOF 1548). 

The facts, however, speak much louder and more trthfly than Mr. Gilespie's words: f
 

l. (FOF 1538). f 

l. (FOF 1539). f
 

l. (FOF 1549, 1552). f
 

l. 

c. f l 

PPAB 1631442vl 13 
Exide's recent actions make clear that it is using its leverage and power to f 

l. The evidence
 

shows that ~ 

l. (Gilespie, TrJ022, in camera; 5830-31, in camera). f
 

l. (Gilespie, Tr. 5826, in camera).3
 

Although Mr. Gilespie denied at the November 12,2009 hearg that f 

l, his words are flatly contradicted by his testiony in the 

May heargs. (Gilespie, Tr. 5825-26, in camera; Gilespie, Tr. 3022-24, 3041, in camera). In May, 

f 

l. (Gilespie, Tr. 3022-24, 3041, in camera). He fuer testified in May that f 

L (Gilespie, Tr. 3034), f
 

L (Gilespie, Tr. 3024, in camera (emphasis supplied)). Accordigly, f 

i.4 Mr. Gilespie is not 

3 As noted above, f 

l. (FOF 1552). Contrary to Gilespie's testimony, f 

l. 4 Mr. Gilespie's total 
 lack of candor is plain when this prior testimony is compared to his testimony on November 

12,2009. There, his testimony was that f 

l. (Gilespie, Tr. 5823,
 

in camera). His prior testimony is clear - f 

PPAB 1631442vl 14 
a credible witness and ths Cour should give no weight to his statements that f 

l - not only because of his diectly contradictory statements in the two heargs -­

but also in light of the overwhelmg evidence that f 

l. 

Mr. Gilespie's testimony that f 

D. 

f 

l. (FOF 1512). 

f l 

l. (Toth, Tr. 5766, in camera). f 

5766-67, in camera). f 

1610). f 

market power and pricing power as alleged by Complaint Counsel. 

f 

l. (Toth, Tr. 

l. (FOF 1606, 

L that Daramc lacks 

l. (FOF 1613). f 

l. (Gilespie, Tr. 3022-24, 3034, in camera; 5823, in camera). 

PPAB 1631442vl 15 
l. (Toth, Tr. 5747-49, in camera). ~ 

l. (FOF 1614; Toth, Tr. 5749-51, in camera). f
 

l. (FOF 1616, 1618, 1620). Despite ths, ~ 

l. (FOF 1602, 1623). f 

l 

l. (FOF 1604). 

l. (FOF 1610). f 

f 

(Toth, Tr. 5765-66, in camera). In tota, f 

l. (Toth, Tr. 5748, 5765-67, in camera). f 

l. (FOF 1616). 

l. 

PPAB 1631442vl 16 
f 

l. (FOF 234, 1097). 

l. (Seibert, Tr. 5964). f 

5766, in camera). 

f 

l. (Toth, Tr. 

l. (Toth, Tr. 5748-49, 5778, in camera). f 

(Toth, Tr. 5748-49). f 

l. 

f 

l. 

PPAB 1631442vl 17 
L show that Daramc does not have the market power, much less the monopoly 

position alleged by Complaint Counsel. 

IV. LEGAL ARGUMNT
 

A. The acquisition of 
 Microporous by Polypore had no effect on competition in the FTC's 

alleged SLI market segment because Microporous was neither an actu parcipant in
 

the market nor an uncommtted entrant 

As set fort fuly in Respondent's Intial Post-Trial briefing, Complait Counel's case has 

been, and continues to be followig the November 12,2009 hearng, devoid of evidence showig that 

the acquisition of Microporous had any effect in their alleged SLI market. Microporous had never had 

a "commercial" sale of SLI material prior to the acquisition and there is no support for any clai that it 

would have begu selling SLI separators in North America "but for" the acquisition. (FOF 318, 336, 

576-582, 1336; PX77). Microporous had no contracts for the sale of SLI products at the time of the 

acquisition. In fact, it had never had a contract for the sale of any SLI product in its entire history. Id. 

Far from showig that Microporous was "very close" to selling SLI separators in Nort America in 

Februar 2008, the evidence adduced at tral shows that Microporous was neither an actual paricipant, 

nor an uncommitted entrant and that Microporous had little hope of securg SLI sales in Nort
 

America. (FOF 382,576-82,383,414-419). 

The fact that f L, as admtted by 

Mr. Gilespie on November 12, 2009, fuer shows the irelevance of Microporous' "intended" new 

production line - a line for which no instalation steps had been taen with a tota additional capacity of 

only f l. (Gilespie, Tr. 5838-39, in camera; FOF 306-309, 385, 374-376, 

927, 946-957, 1147). In ths tye of case, the law requires "clear proof' of entr and looks for 

"subjective evidence" that entr is likely, e.g., management studies and capital expenditue plan. In re 

RA.T. Industres, 104 F.T.C. 852, 926-28 (1984). Complait Counel canot show such evidence 

here. In addition, Marne Bancorp established the requiement that the would-be entrant "offer a 

PPAB 1631442vl 18 
substatial likelihood of ultimately producing deconcentration of that market or other signficant pro-


competitive effects." United States v. Mare Bancorp., 418 U.S. 602,633 (1974). In light of 
 the size
 

of both Daramic f L in the SLI segments, Microporous' alleged entr at the small scale 

available and at the high costs it faced could not have provided sufcient competitive impact to satisfY 

ths standard.
 

B. Alost Two Years Afer The Acquisition. Competition in the SLI Market Segment Is 

Intense 

Alost two years after the acquisition occured in Febru 2008, the facts noted above and put
 

into evidence on November 12 show that the SLI market segment is intense. f 

l, outcomes predicted by an intensely competitive process. 

The enforcement agencies and, more importantly, the cours have made it clear that 

concentration and market share data must yield to market facts about the actu state of competition. 

The Merger Guidelines state that "market share and concentration data provide only the staring point 

for analyzing the competitive impact of a merger." Sec. 2.0. The Guidelines fuer provide that 

"market share and market concentration data may either understate or overstate the likely futue 

competitive signficance of a fi or fis in the market or the impact of a merger." Sec. 1.52. The
 

cours have agreed that concentration data "(are) not conclusive indicators of anticompetitive effect." 

United States v. General Dynamcs Corp., 415 U.S. 486, 498 (1974). "(E)vidence of a high market 

share does not requie a distrct cour to conclude that there is an antitrt violation" (United States v. 

Svu Enterprises, 903 F.2d 659, 665 n.6 (9th Cir. 1990)), because market share statistics can be 

"misleading as to actual futue competitive effect." United States v. Waste Management. Inc., 743 F.2d 

976,982 (2d Cir. 1984). As the D.C. Circuit said, "(e)vidence of market concentration simply provides 

PPAB 1631442vl 19 
a convenient staring point for a broader inqui into futue competitiveness." United States v. Baker 

Hughes. Inc., 908 F.2d 981, 984 (D.C. Cir. 1990). 

Complait Counsel have made the same inappropriate arguent here that the FTC made in 

FTC v. CCC Holdings Inc. 605 F. Supp.2d 26 (D.D.C. 2009). In CCC, the FTC pointed to FTC v. 

H.J. Hein Co., and claied that no cour had ever approved a "merger to duopoly" - just as Complait 

Counel here does with respect to the merger in the alleged North American SLI segment. 246 FJd 

708, 716 (D.c. Cir. 2001); Complaint Counel's Post-Trial Brief at 1. In CCC, Judge Collyer rebuked 

the FTC for their arguent, notig that just because the FTC makes the arguent, that alone doesn't
 

"settle(J the question." 605 F. Supp.2d at 21. Like in CCC, the FTC's arguent canot "settle the 

question," or prove the FTC's case. 

Importtly, as noted above and in Respondent's intial filings, the acquisition in ths case had 

no effect on market strctue in the Nort American SLI segment. Respondent's Post Trial Br. at pp. 

18-19. If that strctue was a duopoly afer the merger, it was a duopoly before the merger as well. As
 

a result, Complaint Counel's "merger to duopoly" arguent here is in error both legally and factuly. 

As the authorities above show, empircal evidence of the actu state of competition overcomes 

presumptions that might otherwse be made about competition based on market share and 

concentration data. Such empircal evidence may be unavailable in a pre-consumation merger case. 

But it has frequently been available in post-consumation cases and, where the evidence is not subject 

to manpulation,5 it has been relied upon as being paricularly inormative as regards the state of market 

competition. Indeed, several decisions have relied on post-acquisition evidence to determe that the 

acquisition had no anticompetitive effect. See e.g., United States v. Int'l Harester Co., 564 F.2d 769, 

778 (7th Cir. 1977)(the evidence showed "intensification in competition since (the acquisition)"); 

Lektro-Vend. Corp. v. Vendo Co., 660 F.2d 255,276 (7th Cir. 1981)(post acquisition evidence showed 

5 Such evidence was rejected in Chicag:o Bridge & Iron Co. N.V. v. FTC, 534 F.3d 410, 434-35 (5th Cir. 2008) 

because the cour believed it was subject to manipulation. 

PPAB 1631442vl 20 
that "Vendo's (the acquig company) post-acquisition shares and profits dramatically declined"); 

Varey v. Coleman Co., 385 F. Supp. 1337 (D.N.H. 1974)(post-acquisition evidence showed that 

defendant lost money and market share); United States v. Falsta Brewing Corp., 383 F.Supp. 1020 

(D.RI. 1974)("post-acquisition evidence showed that competition remaied intense and that the 

acquired company's profits and market share declined after the geographic extension merger." 660 

F.2d at 276). 

The post-acquisition impacts on competition in these cases are very simlar to the ones in the 

pending case since, here also, competition has remaied intense, or even intensified, and f 

l. Moreover, there can be no serious clai that the competition story
 

told by the evidence produced for the cour on November 12 was manpulated by Daramc. Quite to 

the contrar, the competitive strggle of 2009 shows that Daramc was the victim of these 

developments, not their master. 

In this highy competitive climate, coordinated interaction will not occur. Since the evidence 

presented both at tral and at the November 12 hearg show that competition is intense in the North 

American SLI segment, the Cour should conclude that the acquisition did not violate Section 7 of the 

Clayton Act and dismiss the Complait. 

C. The Evidence Presented at the November Hearg Shows that the Necessar
 

Conditions for Coordinated Interaction do not Exist in the Alleged SLI Market 

Segment. 

The same evidence referenced above that shows competition in the SLI segment is intense also 

shows that so-called coordinated interaction will not occur in that segment. Much evidence in support 

of ths proposition was presented at the initial hearg, including evidence that f 

l. The evidence presented on November 12, however,
 

shows even more dramatically f 

PPAB 1631442vl 21 
l. If the Cour had any doubt about this matter at the end of
 

the initial hearg, surely it was in no doubt at the close of the hearg on November 12.
 

Daramc has presented much legal and factul inormation regarding the coordinated 

interaction issue in its Post-Trial Brief (pp. 21-22), its Post-Trial Rely Brief (pp. 30-32) and in its 

proposed fmdigs of 
 fact and conclusions oflaw (FOF numbers 1313, COLs 1440-45). Accordingly, 

ths material can be sumarzed here. 

The Commenta on the Horizontal Merger Guidelines sets out the stadards that have 

frequently been ,applied: "Successfu coordiation tyically requies rivals (1) to reach terms of 

coordination that are profitable to each of the paricipants in the coordinating group, (2) to have a 

mean to detect deviations that would underme the coordinated interaction, and (3) to have the ability 

to punsh deviating fis, so as to restore the coordinated statu quo and dimsh the risk of deviations. 

. . . It may be relatively more diffcult for fis to coordinate on multiple dimensions of competition in 

markets with complex product characteristics or terms of trade." Commenta on the Horiontal 

Merger Guidelines at 18-19. 

In evaluating the likelihood of coordinated interaction, cour also examne factors such as ''te 

availability of key inormation concerng market conditions, transactions and individual competitors; 

the extent of firm and product heterogeneity; pricing or marketing practices tyically employed by 

fis in the market; the characteristics of buyers and sellers; and the characteristics of tyical
 

transactions." Merger Guidelines § 2.1. Coordinated interaction is less likely in industres, such as the 

alleged SLI market, which involve differentiated as opposed to homogenous products with complex 

pricing and other marketing issues that are negotiated with customers on a one-on-one basis.
 

(Respondent's Responses to CCFOF 147,530-531,549; RFOF 34; Kahwaty, Tr. 5181-84, in camera). 

PPAB 1631442vl 22 
The aggressive competition in the alleged SLI market is entirely inconsistent with a suggestion 

of coordinated interaction between separator producers. f 

l. 

All of these obstacles to coordinated interaction apply to the FTC's alleged SLI market. 

Although supply side substitution among battery separators is easy (FOF 1330), they are highly 

differentiated products (FOF 1342), which mean that it is more diffcult for competitors to reach terms 

of coordination that are profitable for each. The large number of price and price-related terms adds to 

the diffculty of arving at terms of coordination. (FOF 1444). Negotiations between battery
 

separators and customers are conducted in confdence in a one-on-one setting and they are directed at 

the formulation of large contracts that cover several years in duration. 

The November 12 hearg included evidence of f 

l, 

and showed that these negotiations are conducted privately. (FOF 1505-1528). Consequently it is 

apparent that competing producers have no way of knowig whether Daramc is deviating from any 

"terms of coordination" that might have been established. It is impossible to develop viable ''terms of 

coordination" uness the paricipants can monitor compliance, detect cheating and impose some kid of 

punshient for any cheating that occurs. Even in ths proceedig, Exide has been very guded about 

the inormation that Respondent can hear with regard to its f 

l. (Russell, Tr. 5783-5788, 5824-25). And it was brought out at the intial hearg that
 

f 

PPAB 1631442vl 23 
l. (FOF 1444). Ths state of affairs has obviously not changed and Complaint 

Counsel can show f 

l. 

There are other signficant barers to coordinated interaction in ths alleged market segment;
 

including the substantial levels of excess capacity, which mitigate strongly agaist any fuer 

reductions in output (FOF 1444) and the ease of entr into ths industr. (FOFs 1378 - 83). FTC v.
 

Occidental Petroleum Corp., 1986 U.S. Dist. LEXIS 26138 (D.D.C. 1986)("(CJollusive behavior will 

not be possible" where entr is easy). Finally, as the next section of ths brief will point out, the 

presence of powerf customers provides a strong deterrent to coordinated interaction. 

D. Large Buyers with Substatial Market Power Wil Prevent Coordinated Interaction in
 

the alleged SLI Market Segment6. 

The presence of buyer power in markets involving inequent purchases, long-term contracts 

and bidding can be a substantial factor in promoting a competitive market. Such buyer power has been 

pronounced "likely to promote competition even in a highy concentrated market." Baker Hughes Inc., 

908 F.2d at 986; See also ABA Section of Antitrst Law, Mergers and Acquisitions at 159-60 (3d ed. 

2008)("Cours have recognied that evidence that a small number of buyers purchase most of the 

product in the market indicates that sellers may not have a great deal of freedom in establishig prices 

and thus may be less likely to adhere to a collusive agreement. Sophisticated buyers are more likely to 

detect collusion and offer sellers large orders to induce defections from the agreement or to vertically 

6 Complaint Counsel have not, and cannot, show any evidence of Daramic has unilateral market power subsequent 

to the acquisition (or before). The evidence is replete that f 

This is strong evidence that Daramic does not have unilateral market power. Additionally, f 

l. Contrary to Complaint Counsel's
 assertion, Daramic has not been able to unilaterally raise the price of any product since the merger. (FOF 306-309, 

339,239,314,442,569,734,946-951,1200, 1236, 1298; 1308, 1313, 1384, 1339, 1366-72; PX0489; Respondent's 

Response to CCFOF 324). 

PPAB 1631442vl 24 

l 
integrate"); FTC v. RR Donnelley & Sons Co., Civ. No. 90-1619 SSH, 1990 U.S. Dist. LEXIS 11361, 

at 10 (D.D.C. 1990)("(T)he sophistication and bargaig power of buyers playa signficant role in
 

assessing the effects of a proposed transaction"). Indeed, the existence of powerf buyers and a highly 

concentrated buying side of the market is an important "strctual barer to coordiation" - somethg
 

that Complaint Counsel incorrectly claied respondent has failed to show. See IV Phillip A. Areeda, 

John L. Solow 
 and Herbert Hovenkamp, Antitrt Law at xv, 95 (2d ed. 2006); Complaint Counsel's 

Post-Trial Reply Brief at 22-23. 

The evidence presented at the November 12 hearg was a vivid demonstration of a "power 

buyer," (i.e., Exide) at work. The evidence concerng f 

l. Remarkably, ~
 

L The evidence regarding f 

l. (FOF 1575, 1582-83). Ths
 

pictue shows a company - Daramc - f
 

l.
 

The buying side of the SLI battery separator segment is highly concentrated. f
 

PPAB 1631442vl 25 
l. (FOF 240). The evidence in ths case has featued the 

two largest purchasers, f 

l, includig that Daramc is a monopolist in other market segments and a viable
 

paricipant in alleged anticompetitive agreements. 

Both the enforcement agencies and the cour have recognzed the signficant inuence that
 

buyers with market power can have. The Merger Guidelines note that "buyer characteristics and the 

natue of the procurement process may afect the incentives to deviate from terms of coordiation." 

Sec. 2.12. The Guidelines also state that "(b)uyer size alone is not the determg characteristic." 

Rather, they specify that incentives to deviate from coordiation may be enhanced "(w)here large 

buyers likely would engage in long-term contracting, so that the sales covered by such contracts can be 

large relative to the total output of a fi in the market." Id. 

As the November 12 evidence shows, the Guidelines' references to long-term contracting and 

to sales as a substantial percentage of output apply directly to the circumstaces of this case. f 

l. (R01119, in
 

camera; RXOl120, in camera; Hauswald, Tr. 1118; Gilespie, Tr. 3126, in camera). f 

l. (R01119, in camera; RX01120,
 

PPAB 1631442vl 26 
in camera; Hauswald, Tr. 1118; Gilespie, Tr. 3126, in camera). Plaiy, the purchasers in ths segment
 

had - and continue to have - substatial power over Daramc.7 

The federal cours have applied these and related concepts in several cases where the role of 

powerf buyers has been recognzed. The factors that have been considered importt by the cour
 

are all present here: large, powerfl buyers; high levels of concentration on the buying side; the use of 

long-term contracts; and the abilty of 
 buyers to shift purchasers easily from one supplier to another. In 

Baker Hughes, the cour held that a small number of large, powerfl buyers meant that the merging 

suppliers could not exercise market power. 908 F.2d 981, 983 (D.C. Cir. 1990). The cour cited the 

customers' ability to "closely examne the available options and tyically insist on receiving multiple, 

confdential bids for each order" as evidence that buyer leverage could be used to combat price 

increases. Id. Simlarly, the cour refused to grant the FTC a prelimar injunction in Donnelley & 

Sons, fiding that the customers of the merging firms had substatial bargaing power. 1990-2 Trade 

Cas. (CCH) ~ 69,239 at 64,852 (D.D.C. 1990). 

High levels of concentration on the buying side were also importt factors in United States v. 

Countr Lake Foods, and United States v. Archer-Danels-Midland Co. 754 F. Supp. 669, 679 (D. 

Min. 1990); 781 F. Supp. 1400, 1416-18 (S.D. Iowa 1991). There, governent action challenging 

mergers in both cases was rebufed, with the cours fiding high concentration on the buyer side. 

Countr Lake Foods, 754 F.Supp. at 679; Archer-Daniels-Midland, 781 F.Supp. at 1416-18, 1424. In 

Countr Lake Foods thee distrbutors accounted for more than 90% of the purchases and in Archer7 Interestingly, f
 

l. RXOl687 at 002, in camera). Further, f 

l. (FOF 1552).
 

PPAB 1631442vl 27 
Danels-Midland 20 large buyers accounted for more than 60% of total purchases. Countr Lake 

Foods, 754 F.Supp. at 679; Archer-Danels-Midland, 781 F.Supp. at 1416. 

These cases, among others, also show that Complaint Counel's clai that a customer must
 

enjoyf L in order to be considered to have buyer 

power is patently false. (Robertson, Tr. 5627, in camera). The cours have not requied a specific 

mium market share percentage when makg a determation that a customer has buying power. 

See. e.g., Federal Trade Commssion v. Elders Grai, 868 F.2d 901 (7th Cir. 1989); Baker Hughes. Inc., 

908 F.2d 918 (D.C. Cir. 1990); In the Matter of Owens-Ilinois. Inc., 115 F.T.C. 170 (1992); ArcherDanels-Midland Co., 781 F.Supp. at 1406. In fact, if 
 Complait Counel's statement were tre, then 

there could be only one power buyer in each market - a suggestion contrar to all prior case law. 

Archer-Danels-Midland Co., which considered a challenge to the acquisition of 
 two com wet 

milling plants by a producer of high frctose com syrp (HFCS), found that the acquisition did not 

violate either the Sherman or Clayton Acts and was therefore lawf. In finding no antitrst violation,
 

the Cour weighed the relatively stagnant HHI numbers and lack of any evidence of coordiated pricing 

with the signficant presence of large sophisticated consumers. The Cour explaied: 

The evidence in this case shows that the buyig side of the HFCS 

industr is populated by very large and sophisticated purchasers and
 

there is a contiuig trend toward increasing concentration on the
 

buyig side, as large bottlers purchase formerly independent bottling 

franchises or brig them under their sweetener purchasing wigs, and 

as smaller concern band together in buying cooperatives to increase 

their purchasing leverage. 

Archer-Danels-Midland, 781 F.Supp. at 1422. The Cour described the power buyers as 

''tough, experienced, sophisticated negotiators" who "consistently negotiate a price below the price 

anounced or listed by the HFCS producer from whom they ultimately purchase." Id. at 1418. The 

Cour specifically named Coca-Cola as an example of a power buyer despite the fact that it controlled 

only 40% of the market. Id. at 1416. 

PPAB 1631442vl 28 
The use of long-term contracts and the ability of buyers to shift purchases from one supplier to 

another were also cited by the cours in Donnelley and Archer-Danels-Midland. 120 F.T.C. 36, *190­

92 (1995); 781 F.Supp. at 1418. The cours there referred to buyer use of long-term contracts as a 

mean of controllng prices and reducing the number of transactions thereby increasing their relative 

importance. Donnelley, 120 F.T.C. at *191; Archer-Danels-Midland, 781 F.Supp. at 1422. 

When fiding buyer power in Archer-Danels-Midland, the cour cited the buyers' abilty to 

frequently shift their purchases among suppliers, delay reachig agreement, inist upon and maitain 

secrecy in transaction prices and act aggressively to cut off suppliers. Ths recitation of factors is an 

amazgly simlar and complete account of f l, as 

shown by the November 12 evidence. 781 F.Supp. 1417-18. 

Assessing the new evidence in light of the cases involving substantial market power on the 

buying side is instrctive and helpfu. But it only shows the competitiveness of the SLI market
 

segment from that perspective. The broader pictue, as shown by the new evidence, is that the SLI
 

segment is intensely competitive. That undermes and defeats the Section 7 clais that have been 

made in ths case. 

V. CONCLUSION
 

As set fort above, the recent actions of Exide since the close of the hearg record have 

provided fuer proof that the acquisition of Micro porous has not substantially lessened competition. 

f 

l. 

The remedy suggested by Complait Counsel, which would require divestue of the Piney Flats 

and Feistrtz plants, is unecessar as the facts above prove that competition in the battery separator
 

PPAB 1631442vl 29 
market continues to thve. Accordingly, Respondent respectfly requests that Complaint Counel's 

clais be dismissed with prejudice and that a judgment be rendered in Respondent's favor.
 

PPAB 1631442vl 30
 
Dated: December "2 2009 Respectfully Submitted,
 

Wili . Rikard, Jr.
 

Eric D. Welsh
 

c: i) '. (;,,


PARKR POE ADAMS & BERNSTEIN LLP 

401 South Tryon Street, Suite 3000 

Charlotte, NC 28202 

Telephone: (704) 372-9000 

Facsimile: (704) 335-9689 

wiliamikard~parkerpoe.com 

ericwelsh~parkerpoe.com 

John F. Graybeal 

PARKR POE ADAMS & BERNSTEIN LLP 

150 Fayettevile Street 

Raleigh, NC 27602 

Telephone: (919) 835-4599
 

Facsimile: (919) 828-0564 

johngraybeal~parkerpoe.com 

Attorneys for Respondent 

PPAB 1631442vl 31 
CERTIFICATE OF SERVICE 

I hereby certify that on December do , 2009, I caused to be fied via hand delivery and 

electronic mail delivery an original and two copies of the foregoing Respondent's Re-Opened 

Hearing Post-Trial Brief ¡PUBLICi, and that the electronic copy is a true and correct copy of 

the paper original and that a paper copy with an original signature is being fied with: 

Donald S. Clark, Secretary 

Office of the Secretary 

Federal Trade Commission 

600 Pennsylvania Avenue, NW, Rm. H-135 

Washington, DC 20580 

secretary~ftc. gov 

I hereby certify that on December do, 2009, I caused to be served one copy via 

electronic mail delivery and four copies via hand delivery of the foregoing Respondent's PostTrial Brief for Re-Opened Hearing ¡PUBLICi upon: 

The Honorable D. Michael Chappell 

Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Avenue, NW 

Washington, DC 20580 

oali~ftc.gov 

I hereby certify that on December Q , 2009, I caused to be served via first-class mail 

delivery and electronic mail delivery a copy of the foregoing Respondent's Post-Trial Brief for 

Re-Opened Hearing ¡PUBLICi upon: 

J. Robert Robertson, Esq. Steven Dah, Esq. 

Federal Trade Commission Federal Trade Commission 

600 Pennsylvania Avenue, NW 600 Pennsylvania Avenue, NW 

Washington, DC 20580 Washington, DC 20580 

rro bertson~ftc. gov sdahm~ftc.gov 2,.: i.#­

Brian R. We ich 

Parker Poe Adams & Bernstein LLP 

Three Wachovia Center 

401 South Tryon Street, Suite 3000 

Charlotte, NC 28202 

Telephone: (704) 335-9050 

Facsimile: (704) 334-4706 

PPAB 1631442vl 32