27954 Federal Register / Vol. 80, No. 94 / Friday, May 15, 2015 / Notices 

1 In particular, the written request for confidential 

treatment that accompanies the comment must 

include the factual and legal basis for the request, 

and must identify the specific portions of the 

comment to be withheld from the public record. See 

FTC Rule 4.9(c), 16 CFR 4.9(c). 

Bank and Trust, FSB, Decatur, Illinois, 

from a federal savings bank to a 

commercial bank. 

Board of Governors of the Federal Reserve 

System, May 12, 2015. 

Michael J. Lewandowski, 

Associate Secretary of the Board. 

[FR Doc. 2015–11757 Filed 5–14–15; 8:45 am] 

BILLING CODE 6210–01–P 

FEDERAL TRADE COMMISSION 

[File No. 141–0235] 

ZF Friedrichshafen AG and TRW 

Automotive Holdings Corp; Analysis of 

Proposed Consent Order To Aid Public 

Comment 

AGENCY: Federal Trade Commission. 

ACTION: Proposed consent agreement. 

SUMMARY: The consent agreement in this 

matter settles alleged violations of 

federal law prohibiting unfair methods 

of competition. The attached Analysis to 

Aid Public Comment describes both the 

allegations in the draft complaint and 

the terms of the consent order— 

embodied in the consent agreement— 

that would settle these allegations. 

DATES: Comments must be received on 

or before June 5, 2015. 

ADDRESSES: Interested parties may file a 

comment at https://

ftcpublic.commentworks.com/ftc/

zftrwautomativeconsent online or on 

paper, by following the instructions in 

the Request for Comment part of the 

SUPPLEMENTARY INFORMATION section 

below. Write ‘‘ZF Friedrichshafen AG’s 

and TRW Automotive Holdings Corp.— 

Consent Agreement; File No. 141–0235’’ 

on your comment and file your 

comment online at https://

ftcpublic.commentworks.com/ftc/

zftrwautomativeconsent by following 

the instructions on the web-based form. 

If you prefer to file your comment on 

paper, write ‘‘ZF Friedrichshafen AG’s 

and TRW Automotive Holdings Corp.— 

Consent Agreement; File No. 141–0235’’ 

on your comment and on the envelope, 

and mail your comment to the following 

address: Federal Trade Commission, 

Office of the Secretary, 600 

Pennsylvania Avenue NW., Suite CC– 

5610 (Annex D), Washington, DC 20580, 

or deliver your comment to the 

following address: Federal Trade 

Commission, Office of the Secretary, 

Constitution Center, 400 7th Street SW., 

5th Floor, Suite 5610 (Annex D), 

Washington, DC 20024. 

FOR FURTHER INFORMATION CONTACT: 

Stephen Antonio, Bureau of 

Competition, (202–326–2536), 600 

Pennsylvania Avenue NW., Washington, 

DC 20580. 

SUPPLEMENTARY INFORMATION: Pursuant 

to Section 6(f) of the Federal Trade 

Commission Act, 15 U.S.C. 46(f), and 

FTC Rule 2.34, 16 CFR 2.34, notice is 

hereby given that the above-captioned 

consent agreement containing consent 

orders to cease and desist, having been 

filed with and accepted, subject to final 

approval, by the Commission, has been 

placed on the public record for a period 

of thirty (30) days. The following 

Analysis to Aid Public Comment 

describes the terms of the consent 

agreement, and the allegations in the 

complaint. An electronic copy of the 

full text of the consent agreement 

package can be obtained from the FTC 

Home Page (for May 5, 2015), on the 

World Wide Web, at http://www.ftc.gov/ 

os/actions.shtm. 

You can file a comment online or on 

paper. For the Commission to consider 

your comment, we must receive it on or 

before June 5, 2015. Write ‘‘ZF 

Friedrichshafen AG’s and TRW 

Automotive Holdings Corp.—Consent 

Agreement; File No. 141–0235’’ on your 

comment. Your comment—including 

your name and your state—will be 

placed on the public record of this 

proceeding, including, to the extent 

practicable, on the public Commission 

Web site, at http://www.ftc.gov/os/

publiccomments.shtm. As a matter of 

discretion, the Commission tries to 

remove individuals’ home contact 

information from comments before 

placing them on the Commission Web 

site. 

Because your comment will be made 

public, you are solely responsible for 

making sure that your comment does 

not include any sensitive personal 

information, like anyone’s Social 

Security number, date of birth, driver’s 

license number or other state 

identification number or foreign country 

equivalent, passport number, financial 

account number, or credit or debit card 

number. You are also solely responsible 

for making sure that your comment does 

not include any sensitive health 

information, like medical records or 

other individually identifiable health 

information. In addition, do not include 

any ‘‘[t]rade secret or any commercial or 

financial information which . . . is 

privileged or confidential,’’ as discussed 

in Section 6(f) of the FTC Act, 15 U.S.C. 

46(f), and FTC Rule 4.10(a)(2), 16 CFR 

4.10(a)(2). In particular, do not include 

competitively sensitive information 

such as costs, sales statistics, 

inventories, formulas, patterns, devices, 

manufacturing processes, or customer 

names. 

If you want the Commission to give 

your comment confidential treatment, 

you must file it in paper form, with a 

request for confidential treatment, and 

you have to follow the procedure 

explained in FTC Rule 4.9(c), 16 CFR 

4.9(c).1 Your comment will be kept 

confidential only if the FTC General 

Counsel, in his or her sole discretion, 

grants your request in accordance with 

the law and the public interest. 

Postal mail addressed to the 

Commission is subject to delay due to 

heightened security screening. As a 

result, we encourage you to submit your 

comments online. To make sure that the 

Commission considers your online 

comment, you must file it at https://

ftcpublic.commentworks.com/ftc/

zftrwautomativeconsent by following 

the instructions on the web-based form. 

If this Notice appears at http://

www.regulations.gov/#!home, you also 

may file a comment through that Web 

site. 

If you file your comment on paper, 

write ‘‘ZF Friedrichshafen AG’s and 

TRW Automotive Holdings Corp.— 

Consent Agreement; File No. 141–0235’’ 

on your comment and on the envelope, 

and mail your comment to the following 

address: Federal Trade Commission, 

Office of the Secretary, 600 

Pennsylvania Avenue NW., Suite CC– 

5610 (Annex D), Washington, DC 20580, 

or deliver your comment to the 

following address: Federal Trade 

Commission, Office of the Secretary, 

Constitution Center, 400 7th Street SW., 

5th Floor, Suite 5610 (Annex D), 

Washington, DC 20024. If possible, 

submit your paper comment to the 

Commission by courier or overnight 

service. 

Visit the Commission Web site at 

http://www.ftc.gov to read this Notice 

and the news release describing it. The 

FTC Act and other laws that the 

Commission administers permit the 

collection of public comments to 

consider and use in this proceeding as 

appropriate. The Commission will 

consider all timely and responsive 

public comments that it receives on or 

before June 5, 2015. For information on 

the Commission’s privacy policy, 

including routine uses permitted by the 

Privacy Act, see http://www.ftc.gov/ftc/ 

privacy.htm. 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 94 / Friday, May 15, 2015 / Notices 27955 

Analysis of Agreement Containing 

Consent Order To Aid Public Comment 

Introduction 

The Federal Trade Commission 

(‘‘Commission’’) has accepted from ZF 

Friedrichshafen AG (‘‘ZF’’) and TRW 

Automotive Holdings Corp. (‘‘TRW’’), 

subject to final approval, an Agreement 

Containing Consent Order (‘‘Consent 

Agreement’’) designed to remedy the 

anticompetitive effects resulting from 

ZF’s proposed acquisition of TRW. 

Pursuant to an Agreement and Plan of 

Merger dated September 15, 2014, the 

parties agreed that ZF would acquire 

TRW for $105.60 per share in an allcash deal valued at approximately $12.4 

billion (‘‘the Acquisition’’). The 

proposed Acquisition would result in a 

duopoly in the heavy vehicle tie rod 

market. The Commission’s Complaint 

alleges that the proposed Acquisition, if 

consummated, would violate Section 7 

of the Clayton Act, as amended, 15 

U.S.C. 18, and Section 5 of the FTC Act, 

as amended, 15 U.S.C. 45, by 

substantially lessening competition in 

the market for heavy vehicle tie rods in 

North America. 

Under the terms of the proposed 

Decision and Order (‘‘Order’’) contained 

in the Consent Agreement, the parties 

are required to divest TRW’s Linkage 

and Suspension Business in a manner, 

and to an acquirer, that meets 

Commission approval. The divestiture 

package includes five manufacturing 

facilities in North America and Europe, 

along with related assets including 

intellectual property. The acquirer also 

has the option to enter into transitional 

services and supply agreements. The 

Consent Agreement provides an 

acquirer with everything needed to 

compete effectively in the North 

American heavy vehicle tie rod market. 

The parties must complete the 

divestiture within six months of 

executing the Consent Agreement. 

The Consent Agreement has been 

placed 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 Consent 

Agreement and the comments received, 

and decide whether it should withdraw 

from the Consent Agreement, modify it, 

or make it final. 

The Parties 

Headquartered in Friedrichshafen, 

Germany, ZF is a privately held global 

automotive and industrial products 

manufacturer. ZF makes light and heavy 

vehicle components for the powertrain, 

chassis, and driveline. ZF designs, 

manufacturers, and sells heavy vehicle 

tie rods, amongst several other products, 

in its chassis division. 

Headquartered in Livonia, Michigan, 

TRW sells chassis systems, electronic 

systems, passive occupant safety 

systems, and other automotive 

components. Like ZF, TRW designs, 

manufactures, and sells heavy vehicle 

tie rods. 

The Relevant Product and Market 

Structure 

The relevant line of commerce in 

which to analyze the effects of the 

Acquisition is heavy vehicle tie rods. A 

heavy vehicle is generally defined as 

one that weighs six tons or more, and a 

tie rod is a rigid connecter that links a 

vehicle’s individual wheels with the 

steering control mechanism. Customers 

and other market participants did not 

identify any substitutes for heavy 

vehicle tie rods. 

North America is the relevant 

geographic market in which to analyze 

the effects of the Acquisition on the 

heavy vehicle tie rod market. The size 

and weight of heavy vehicle tie rods 

generally make it uneconomical to ship 

them long distances. Customers 

interviewed primarily consider 

manufacturers in North America, and 

have found more distant firms 

uncompetitive for reasons including: (1) 

Price; (2) logistics; and (3) quality. 

Therefore, North America is the relevant 

geographic market. 

The market for heavy vehicle tie rods 

in North America is highly 

concentrated. It is served primarily by 

ZF, TRW, and USK Internacional S.A. 

DE C.V. (‘‘Urresko’’). These three firms 

have a share of nearly 99% of the 

market based on unit sales. The merger 

would reduce the number of 

competitors from three to two, and 

increase the Herfindahl-Hirschman 

Index from 4,218 to 5,046, an increase 

of 828. 

Entry 

Entry into the North American heavy 

vehicle tie rod market is not likely to 

deter or counteract any anticompetitive 

effects of the proposed Acquisition. 

Entry is unlikely in light of the 

relatively small market size, strong 

position of incumbents, high capital 

costs, switching costs, and knowledge 

barriers that exist. The parties did not 

identify any likely entrants, and those 

firms best situated for entry— 

manufacturers of related heavy vehicle 

components—expressed no interest in 

entering the North American heavy 

vehicle tie rod market. 

Effects of the Acquisition 

The proposed Acquisition would 

increase the likelihood of coordinated 

interaction among the remaining 

competitors in the North American 

heavy vehicle tie rod market. The 

combined company would have only 

one remaining significant competitor in 

North America, Urresko. Reducing the 

number of competitors from three to two 

would eliminate much uncertainty and 

make it easier for the remaining firms to 

reach agreement on terms of 

coordination, whether the coordination 

focuses on customer allocation, price, or 

some other aspect of competition. 

Additionally, the proposed 

Acquisition would eliminate direct 

competition between ZF and TRW, 

resulting in the increased probability 

that customers would pay higher prices 

for heavy vehicle tie rods. In the past, 

customers have been able to use 

competition between ZF and TRW to 

obtain better prices by obtaining 

competing bids. Customers have also 

switched between ZF and TRW. That 

competition would be lost absent the 

merger. 

The Consent Agreement 

The Consent Agreement eliminates 

the competitive concerns raised by ZF’s 

proposed acquisition of TRW by 

requiring the parties to divest TRW’s 

North American and European Linkage 

and Suspension Business (‘‘the L&S 

Business’’). The proposed divestiture 

includes everything needed for an 

acquirer to compete effectively in the 

North American market for heavy 

vehicle tie rods, and also includes 

additional products that ensure the 

business will be viable. Given the robust 

nature of the divested business, the 

Commission is confident that a postorder divestiture is sufficient to protect 

its interest in restoring competition. 

Pursuant to the Order, the parties are 

required, no later than six months from 

execution of the Consent Agreement, to 

divest the L&S Business to a 

Commission-approved acquirer. That 

business consists of both heavy and 

light vehicle components, and 

includes—in addition to tie rods— 

control arms, ball joints, stabilizer links, 

conventional steering linkages, drag 

links, V-links, radius rods, and I-shafts. 

The divestiture buyer will receive all 

rights and assets relating to the L&S 

Business, including five TRW 

manufacturing facilities, Portland (U.S.), 

Tillsonburg-Plant 2 (Canada), St. 

Catharines (Canada), Dacice (Czech 

Republic), and Krefeld-Gellep 

(Germany), as well as leased space 

previously occupied by L&S research 

mstockstill on DSK4VPTVN1PROD with NOTICES

27956 Federal Register / Vol. 80, No. 94 / Friday, May 15, 2015 / Notices 

1This statement reflects the views of Chairwoman 

Ramirez and Commissioners Brill, Ohlhausen, and 

McSweeny. 

2The proposed transaction would increase the 

Herfindahl-Hirschman Index (‘‘HHI’’) in the 

relevant market from 4,218 to 5,046. The threshold 

at which a market is considered ‘‘highly 

concentrated’’ under the Merger Guidelines is 

2,500. See U.S. Dep’t of Justice & Fed. Trade 

Comm’n, Horizontal Merger Guidelines § 5.3 (2010). 

and development at TRW’s Dusseldorf 

Tech Center. The divested assets also 

include intellectual property rights as 

well as all books, records, and 

confidential business information 

related to the L&S Business. 

To ensure that the divestiture is 

successful, the Order requires the 

parties to provide transition services 

such as logistical and administrative 

support at the option of the acquirer. 

Moreover, the acquirer will have the 

option to enter into a transition supply 

agreement with the parties for key 

manufacturing inputs necessary to 

perform existing customer contracts. 

The Consent Agreement also includes 

other standard terms designed to ensure 

the viability of the divestiture, including 

requirements that the parties assist the 

acquirer in hiring the existing work 

force of the business, and refrain from 

soliciting those employees for up to two 

years. 

Given the robustness of the divested 

business and the protections contained 

in the Order, the Commission is 

confident that a post-order divestiture 

will be sufficient to preserve 

competition. The L&S Business has been 

run largely as a standalone business 

within TRW, and potential buyers have 

confirmed that the divested assets 

include everything necessary to 

compete effectively as a viable business. 

Similarly, potential customers have 

confirmed that an acquirer of the L&S 

Business would be a workable option as 

a supplier. 

To ensure compliance with the Order, 

the Commission will appoint an Interim 

Monitor to oversee ZF’s and TRW’s 

performance of their obligations 

pursuant to the Consent Agreement, and 

to keep the Commission informed about 

the status of the divestiture. The Order 

also allows the Commission to appoint 

a Divestiture Trustee to accomplish the 

divestiture if the parties fail to divest 

within the required timeframe. Lastly, 

the Consent Agreement contains 

standard reporting requirements and 

terminates in ten years. 

The Commission has also issued an 

Order to Hold Separate and Maintain 

Assets to protect the assets until they 

are divested. During the hold separate 

period, the parties must fund the 

business’ operations, including capital 

projects, according to existing plans. To 

ensure compliance with the Hold 

Separate Order, a Commission-approved 

Hold Separate Monitor will oversee the 

L&S Business during the interim period. 

Opportunity for Public Comment 

The purpose of this analysis is to 

facilitate public comment on the 

Consent Agreement to aid the 

Commission in determining whether it 

should make the Consent Agreement 

final. This analysis is not an official 

interpretation of the proposed Consent 

Agreement and does not modify its 

terms in any way. 

By direction of the Commission, 

Commissioner Wright dissenting. 

Donald S. Clark, 

Secretary. 

Statement of the Federal Trade 

Commission 

In the Matter of ZF Friedrichshafen AG 

and TRW Automotive Holdings Corp. 

The Commission has issued a 

proposed complaint and consent order 

to address narrow competitive concerns 

associated with ZF Friedrichshafen 

AG’s proposed $12.4 billion acquisition 

of TRW Automotive Holdings Corp.1

Specifically, we have reason to believe 

that this proposed acquisition is likely 

to substantially reduce competition in 

the manufacture and sale of heavy 

vehicle tie rods in North America. The 

proposed remedy, which involves a 

divestiture of TRW’s linkage and 

suspension business in North America 

and Europe, addresses our competitive 

concerns and will bolster the viability of 

the divested business in the hands of a 

buyer, without eliminating efficiencies 

that otherwise might arise from the 

combination of the two companies. 

ZF and TRW are global automotive 

parts manufacturers. Both companies 

manufacture and sell a wide variety of 

components for discrete systems within 

a motor vehicle such as the chassis, 

powertrain, and suspension systems. 

They each have production facilities 

located throughout the United States, 

Canada, and Mexico. 

The proposed transaction will create 

the second-largest global auto parts 

supplier. Our competitive concerns 

arise from a limited aspect of the 

proposed combination, namely, its 

likely effect in the market for the 

manufacture and sale of heavy vehicle 

tie rods for customers in North America. 

Tie rods are part of a motor vehicle’s 

steering and linkage system; they are 

rigid connectors that link the wheels to 

the vehicle’s steering control 

mechanism. To perform their intended 

function within the linkage systems of 

vehicles weighing six tons or more, 

these tie rods have to be large 

(approximately three to six feet long) 

and heavy (weighing approximately 50 

pounds). This means that tie rods 

designed for light vehicles are not 

practical substitutes since they would 

be too small and light and therefore not 

as strong structurally. At the same time, 

tie rods designed for much heavier, 

industrial vehicles (like mining vehicles 

weighing hundreds of tons) would not 

be substitutes either. 

Because of their weight, it is not 

economical to ship heavy vehicle tie 

rods over long distances. For this 

reason, North American customers 

primarily consider manufacturers with 

production facilities in the United 

States, Canada, and Mexico and 

generally do not regard suppliers 

outside of North America as viable 

options for reasons of price, logistics, 

and quality. As a result, ZF and TRW, 

together with a Mexican firm, USK 

Internacional, S.A. de C.V. (‘‘Urresko’’), 

account for virtually all (99%) of the 

sales of heavy vehicle tie rods in North 

America. We estimate the market shares 

of ZF, TRW, and Urresko to be 23%, 

18%, and 58%, respectively. Fringe 

competitors hold the remaining 1% 

market share. 

The parties’ proposed combination 

will therefore reduce the number of 

significant competitors in the relevant 

market from three to two and 

substantially increase concentration in 

an already highly concentrated market.2

Based on this increase in concentration 

and current market conditions, we 

believe the transaction is likely to 

produce substantial anticompetitive 

effects in the relevant market, in 

particular, by increasing the potential 

for coordination. Furthermore, there is 

unlikely to be any entry that would 

alleviate our competitive concerns. The 

small market size, the strong position of 

the incumbents, switching costs, and 

capital and knowledge barriers, among 

other factors, would more than likely 

deter North American manufacturers of 

related automotive parts—the most 

logical candidates for entry—from 

expanding their product offerings to 

include heavy vehicle tie rods. 

Consequently, we have reason to believe 

that the proposed combination would 

substantially lessen competition in the 

relevant market and harm customers 

and consumers, thereby violating 

Section 7 of the Clayton Act. 

In light of the foregoing, we 

respectfully disagree with 

Commissioner Wright’s assertions that 

we lack a ‘‘credible basis’’ on which to 

conclude that the merger may enhance 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 80, No. 94 / Friday, May 15, 2015 / Notices 27957 

3 Dissenting Statement of Commissioner Joshua D. 

Wright at 3–4. 

4See Carl Shapiro, The 2010 Horizontal Merger 

Guidelines: From Hedgehog to Fox in Forty Years, 

77 Antitrust L.J. 701 (2010) (‘‘Thus, like the fox, the 

2010 Guidelines embrace multiple methods. But 

this certainly does not mean they reject the use of 

market concentration to predict competitive effects, 

as can be seen in Sections 2.1.3 and 5.’’). As 

Commissioner Wright acknowledges, ‘‘The 

predictive power of market share and market 

concentration data is informed by economic theory 

and available empirical evidence.’’ Wright Dissent 

at 7. 

5See, e.g., Steven C. Salop, The Evolution and 

Vitality of Merger Presumptions: A DecisionTheoretic Approach 11 (Georgetown Law Faculty 

Publications and Other Works, Working Paper No. 

1304, 2014), available at http://

scholarship.law.georgetown.edu/facpub/1304 

(‘‘[V]arious theories of oligopoly conduct—both 

static and dynamic models of firm interaction—are 

consistent with the view that competition with 

fewer significant firms on average is associated with 

higher prices. . . . Accordingly, a horizontal merger 

reducing the number of rivals from four to three, 

or three to two, would be more likely to raise 

competitive concerns than one reducing the number 

from ten to nine, ceteris paribus.’’); Steffen Huck, 

et al., Two Are Few and Four Are Many: Number 

Effects from Experimental Oligopolies, 53 J. Econ. 

Behavior & Org. 435, 443 (2004) (testing the 

frequency of collusive outcomes in Cournot 

oligopolies and finding ‘‘clear evidence that there 

is a qualitative difference between two and four or 

more firms’’); Timothy F. Bresnahan & Peter C. 

Reiss, Entry and Competition in Concentrated 

Markets, 99 J. Pol. Econ. 977, 1006 (1991) (finding, 

in a study of tire prices, that ‘‘[m]arkets with three 

or more dealers have lower prices than monopolists 

or duopolists,’’ and noting that, ‘‘while prices level 

off between three and five dealers, they are higher 

than unconcentrated market prices’’). 

6See Merger Guidelines § 2.1.3 (‘‘Mergers that 

cause a significant increase in concentration and 

result in highly concentrated markets are presumed 

to be likely to enhance market power, but this 

presumption can be rebutted by persuasive 

evidence showing that the merger is unlikely to 

enhance market power.’’); Chicago Bridge & Iron 

Co., N.V. v. FTC, 534 F.3d 410, 423 (5th Cir. 2008) 

(‘‘Typically, the Government establishes a prima 

facie case by showing that the transaction in 

question will significantly increase market 

concentration, thereby creating a presumption that 

the transaction is likely to substantially lessen 

competition.’’); FTC v. H.J. Heinz Co., 246 F.3d 708, 

716 (D.C. Cir. 2001) (merger to duopoly creates a 

rebuttable presumption of anticompetitive harm 

through direct or tacit coordination). 

7The investigation in this matter did not proceed 

to a full phase because the parties proposed a 

remedy soon after second requests had been issued. 

Consequently, the quantum of evidence is not the 

same as if the agency had completed a full-phase 

investigation. But that does not mean, as 

Commissioner Wright suggests, that we are 

lowering our reason-to-believe standard when a 

remedy is proposed during the course of an 

investigation. Wright Dissent at 9. We believe our 

complaint is well supported and meets the same 

reason-to-believe standard we always apply. We 

simply do not think it would have been appropriate 

to subject the parties to the added expense and 

delay of a full-phase investigation. It would not 

have been a good use of Commission resources 

either. 

8Although coordinated effects is the primary 

basis upon which we found reason to believe that 

the proposed transaction violates Section 7 of the 

Clayton Act, we also found evidence of unilateral 

effects, namely, that in the past, customers have 

solicited competing bids from ZF and TRW to 

obtain better prices, and have switched between ZF 

and TRW as their preferred supplier. 

9Merger Guidelines § 7.1. 

10 15 U.S.C. 45(b) (2013). 

11See Shapiro, supra note 4, at 708 (‘‘In 

particular, as the revised Guidelines explain, the 

Agencies place considerable weight on HHI 

measures in cases involving coordinated effects.’’). 

12Among the Antitrust Division’s recent 

prosecutions of companies and individuals in the 

automotive parts industry for price-fixing and bidrigging is an indictment involving TRW in an 

alleged conspiracy for seat belts, air bags, and 

steering wheels. See Plea Agmt., United States v. 

TRW Deutschland Holding GMBH, Crim. No. 12– 

20491 (E.D. Mich. Sept. 25, 2012), available at 

http://www.justice.gov/atr/cases/f287600/

287657.pdf. See generally Merger Guidelines § 7.2 

(‘‘Previous collusion or attempted collusion in 

another product market may also be given 

substantial weight if the salient characteristics of 

that other market at the time of the collusion are 

closely comparable to those in the relevant 

market.’’). 

13See Salop; Huck et al.; Bresnahan & Reiss, 

supra note 5. 

14See Merger Guidelines § 7.1 (recognizing that 

‘‘the risk that a merger will induce adverse 

coordinated effects may not be susceptible to 

quantification or detailed proof’’). The Guidelines 

contemplate that the third factor can be satisfied in 

several ways; as Commissioner Wright himself 

notes, an acquisition of a maverick firm is but ‘‘one 

illustrative example of the type of evidence that 

would satisfy this third condition.’’ Wright Dissent 

at 3. 

the risk of coordination and that our 

action is otherwise inconsistent with the 

2010 Horizontal Merger Guidelines.3

Under the 2010 Guidelines, substantial 

increases in concentration caused by a 

merger rightly continue to play an 

important role in our merger analysis.4

They do so for the simple reason that 

highly concentrated markets are more 

conducive to anticompetitive outcomes 

than less concentrated markets.5

Accordingly, the lens we apply to the 

evidence in a merger that reduces the 

number of firms in a market to three or 

two is, and should be, different than the 

lens we apply to a merger that reduces 

the number of firms to seven or six. 

Where, as here, a proposed merger 

significantly increases concentration in 

an already highly concentrated market, 

a presumption of competitive harm is 

justified under both the Guidelines and 

well-established case law.6

Despite Commissioner Wright’s 

insistence to the contrary, our inquiry 

extended beyond consideration of 

market concentration and application of 

the Guidelines presumption of 

competitive harm. We also examined 

the transaction’s likely anticompetitive 

effects, and are satisfied that there is 

sufficient evidence to support the 

issuance of our complaint and proposed 

consent order.7 As noted above, we are 

particularly concerned that the 

transaction is likely to enhance the 

potential for coordination.8 As set forth 

in the Guidelines, the Commission is 

likely to challenge a merger under a 

coordinated effects theory if: ‘‘(1) The 

merger would significantly increase 

concentration and lead to a moderately 

or highly concentrated market; (2) that 

market shows signs of vulnerability to 

coordinated conduct [ ]; and (3) the 

[Commission has] a credible basis on 

which to conclude that the merger may 

enhance that vulnerability.’’ 9 We have 

reason to believe that all three factors 

are satisfied here.10

First, as noted above, the proposed 

transaction results in a highly 

concentrated relevant market.11 Second, 

the market is susceptible to coordinated 

conduct, as evidenced by several recent 

cases of collusion in the auto parts 

industry.12 Third, by reducing the 

number of significant competitors to 

only two, the merger would decrease the 

impediments to reaching common terms 

of coordination and make it easier to 

monitor compliance with, and retaliate 

against potential deviation from, a 

coordinated scheme. Specifically, as 

remaining duopolists with nearly equal 

shares (41% and 58%, respectively), the 

combined firm and Urresko would have 

greater incentives to take advantage of a 

market with relatively few customers 

that purchase homogeneous products 

through individual purchase orders 

rather than long-term supply contracts. 

They would also find it easier to divide 

customers and monitor their allocations. 

Our concern that the merger may 

enhance the relevant market’s 

vulnerability to coordination is backed 

by the well-accepted view that markets 

with only two or three firms are more 

conducive to anticompetitive outcomes 

than markets with four or more firms.13

The proposed merger would eliminate a 

third competitor and create greater 

symmetry between the two remaining 

firms. 

Additionally, there is no evidence 

that fringe competitors, which have 

higher prices, or new entrants, which 

are unlikely to materialize, could 

disrupt any coordination between the 

combined firm and Urresko. For these 

reasons, we have ample basis to 

conclude that the merger may enhance 

the vulnerability to coordinated effects 

that already exists in the relevant 

market.14

As we noted above, the parties have 

chosen to address our limited 

competitive concerns in the heavy 

vehicle tie rods market through a 

proposal to divest TRW’s linkage and 

suspension business in North America 

and Europe. This allows the parties to 

address our competition concerns, as 

well as those of the European 

Commission. The EC has already 

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15See Press Release, European Commission, 

Mergers: Commission Clears Acquisition of 

Automotive Components Manufacturer TRW by 

Rival ZF, Subject to Conditions (Mar. 12, 2015), 

available at http://europa.eu/rapid/press-release_

IP-15-4600_en.htm. 

1See 2010 Horizontal Merger Guidelines § 7.1. 

2Those settings have included the use of 

disgorgement in competition cases, the proper 

scope of our standalone Section 5 authority, the 

intersection of intellectual property and antitrust, 

and the treatment of U.S. businesses by foreign 

antitrust jurisdictions. See, e.g., Dissenting 

Statement of Commissioner Maureen K. Ohlhausen, 

In re Cardinal Health, Inc., FTC File No. 101–0006 

(Apr. 17, 2015), available at https://www.ftc.gov/

public-statements/2015/04/dissenting-statementcommissioner-maureen-k-ohlhausen-cardinalhealth-inc (dissenting from consent involving 

disgorgement of profits for alleged Section 2 

violation); Maureen K. Ohlhausen, Section 5 of the 

FTC Act: Principles of Navigation, 2 J. Antitrust 

Enforcement 1 (2014), available at http://

www.ftc.gov/public-statements/2013/10/section-5- 

ftc-act-principles-navigation-0 (advocating for 

additional guidance on the FTC’s use of its 

standalone Section 5 authority); Dissenting 

Statement of Commissioner Maureen K. Ohlhausen, 

In re Motorola Mobility LLC & Google, Inc., FTC 

File No. 121–0120 (Jan. 3, 2013), available at 

https://www.ftc.gov/public-statements/2013/01/

statement-commissioner-maureen-ohlhausen-0 

(dissenting from consent involving standalone 

Section 5 claim against holder of standard-essential 

patents); Testimony of Commissioner Maureen K. 

Ohlhausen, ‘‘The Foreign Investment Climate in 

China: U.S. Administration Perspectives on the 

Foreign Investment Climate in China,’’ before the 

U.S.-China Economic and Security Review 

Commission (Jan. 28, 2015), available at https://

www.ftc.gov/public-statements/2015/01/testimonycommissioner-maureen-k-ohlhausen-hearingforeign-investment (discussing importance of 

foreign antitrust jurisdictions pursuing the goals of 

predictability, transparency, and fairness). 

1Compl. ¶ 12, ZF Friedrichshafen AG, FTC File 

No. 141–0235 (May 5, 2015). 

2U.S. Dep’t of Justice & Fed. Trade Comm’n, 

Horizontal Merger Guidelines § 7 (2010) [hereinafter 

Merger Guidelines]. 

accepted the proposed settlement and 

ordered the divestiture of the European 

assets.15 Furthermore, there is no 

evidence that the divestiture of TRW’s 

linkage and suspension business would 

eliminate any efficiencies that otherwise 

might result from the parties’ proposed 

combination. 

In sum, because we have reason to 

believe that customers and consumers 

are likely to suffer a substantial loss of 

competition as a result of the proposed 

transaction, and there are no 

demonstrated countervailing 

efficiencies, we believe the public 

interest is best served by accepting the 

proposed consent order to remedy our 

competitive concerns. 

Separate Statement of Commissioner 

Maureen K. Ohlhausen 

ZF Friedrichshafen AG/TRW 

Automotive Holdings Corp. 

I voted in favor of issuing for public 

comment the proposed consent 

agreement in this matter. As discussed 

below, there is sufficient evidence to 

provide me with a reason to believe 

that, absent a remedy, the transaction is 

likely to violate Section 7 of the Clayton 

Act. I also find that the proposed 

consent, which is intended to remedy 

any such violation, is in the public 

interest. 

Based on the evidence presented to 

me—including the evidence discussed 

in the Analysis to Aid Public Comment 

and the majority statement in this 

matter—I am satisfied that the ‘‘reason 

to believe’’ prong that the Commission 

must assess in issuing a complaint, 

including in the consent context, is met 

here. It is important to note that the 

Commission makes the reason to believe 

determination before a full evidentiary 

and legal record is developed during a 

trial on the merits, which suggests that 

the standard must necessarily be lower 

than what the Commission or a court 

should apply for finding ultimate 

liability. Individual Commissioners, of 

course, have different views on how 

much evidence is necessary to satisfy 

the reason to believe standard. 

Unfortunately, there does not appear to 

be a consensus view on what the 

standard requires. I respect 

Commissioner Wright’s view that the 

standard was not met for him in this 

case. For the reasons identified in the 

majority statement in this matter, I 

determined that there is a credible basis 

on which to conclude that this merger 

may enhance the vulnerability to 

coordinated effects that already exists in 

the relevant market at issue.1

I further view this consent to be in the 

public interest. In my time as a 

Commissioner, I have advocated for 

transparency, predictability, and 

fairness across a variety of settings.2

Those three critical goals apply equally 

to the merger context. A practical 

problem in our merger review process 

arises, however, where investigations 

are cut short by the merging parties, 

which, for business, strategic, or other 

reasons, offer staff and then ultimately 

the Commission a proposed remedy in 

lieu of responding to a Second Request 

or other compulsory process. In such 

cases, the available evidence may be 

sufficient to provide reason to believe 

the proposed transaction would violate 

Section 7, but a full investigation might 

(or might not) reveal additional 

evidence sufficient to counterbalance 

the available evidence and support 

closing the investigation altogether. In 

that situation, the goals of predictability 

and fairness counsel against forcing 

merging parties (and Commission staff) 

to incur the significant costs associated 

with a full-phase investigation. Merging 

parties also expend non-trivial amounts 

of time and money in developing and 

then proposing remedies to FTC staff; 

those good-faith efforts—particularly 

ones that involve coordination of 

remedies across antitrust jurisdictions— 

should not be discounted. The public 

interest analysis thus should take into 

account the need for predictability and 

fairness for merging parties in these 

circumstances. 

Dissenting Statement of Commissioner 

Joshua D. Wright 

In the Matter of ZF Friedrichshafen AG 

and TRW Automotive Holdings Corp. 

The Commission has voted to issue a 

Complaint and Decision & Order against 

ZF Friedrichshafen AG (‘‘ZF’’) to 

remedy the allegedly anticompetitive 

effects of ZF’s proposed acquisition of 

TRW Automotive Holdings Corp. 

(‘‘TRW’’). I respectfully dissent because 

the evidence is insufficient to provide 

reason to believe ZF’s acquisition will 

substantially lessen competition for 

heavy vehicle tie rods sold in North 

America. In particular, I believe the 

Commission has not met its burden to 

show that the acquisition will result in 

an increased likelihood of harm from 

coordinated effects or from unilateral 

effects. As a consequence, the 

Commission should close the 

investigation and allow the parties to 

complete the proposed transaction 

without imposing a remedy. 

I write separately today to explain my 

vote and to discuss the quality and 

quantity of evidence necessary to 

support a coordinated and unilateral 

effects challenge under the 2010 

Horizontal Merger Guidelines (‘‘Merger 

Guidelines’’). 

The Complaint alleges the proposed 

transaction increases the likelihood of 

coordinated effects and unilateral effects 

in the market for heavy vehicle tie rods 

sold in North America.1 After the 

proposed transaction, ZF and TRW 

would have a combined 41% share. The 

remaining competitor, Urresko, has a 

58% share. Fringe suppliers have a 1% 

share. 

I. Coordinated Effects Are Unlikely in 

the Relevant Market 

The Complaint implicates an 

important question with regard to 

coordinated effects: What evidence is 

necessary to establish reason to believe 

a proposed transaction may 

substantially lessen competition by 

‘‘enabling or encouraging post-merger 

coordinated interaction among firms in 

the relevant market that harms 

customers.’’ 2

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3 Id. § 7.1. 

4 Id. 

5 Id. 

6Plea Agreement ¶ 4(e)–(f), United States v. TRW 

Deutschland Holding GmbH, No. 2:12–cr–20491– 

GCS–PJK (E.D. Mich. Sept. 25, 2012). 

7The Merger Guidelines state that ‘‘The Agencies 

presume that market conditions are conducive to 

coordinated interaction if firms representing a 

substantial share in the relevant market appear to 

have previously engaged in express collusion 

affecting the relevant market,’’ but that prior 

‘‘express collusion in another geographic market 

will have the same weight if the salient 

characteristics of that other market at the time of the 

collusion are comparable to those in the relevant 

market,’’ and that prior collusion ‘‘in another 

product market may also be given substantial 

weight if the salient characteristics of that other 

market at the time of the collusion are closely 

comparable to those in the relevant market.’’ Merger 

Guidelines, supra note 2, § 7.2. Thus, I am 

comfortable with concluding the prior TRW 

Deutschland price-fixing case is material to our 

investigation, and that this evidence increases the 

likelihood of coordination, all things equal. 

However, without a more detailed assessment of 

any logical connection between the markets where 

collusion actually took place and the relevant 

market here, I am hesitant to give this factor alone 

substantial weight given observable differences 

between the markets. For instance, in the markets 

at issue in that case, the bidding process appeared 

to be more formal with longer commitments. See 

Information ¶ 8, United States v. TRW Deutschland 

Holding GmbH, No. 2:12–cr–20491–GCS–PJK (E.D. 

Mich. July 30, 2012). 

8For instance, the primary input to produce 

heavy vehicle tie rods is steel. Looking at the 

producer price index for steel mill products, the 

average annual price change over the past ten years 

is 1.6% with a standard deviation of 6.6%. Some 

of the specific yearly changes are substantial, e.g., 

¥8.6%, 7.5%, 9.1%, 12.8%. Producer Price Index— 

Metals and Metal Products, U.S. Bureau of Labor 

Statistics, http://www.bls.gov/regions/mid-atlantic/

data/ProducerPriceIndexMetals_US_Table.htm (last 

visited May 8, 2015). 

9The Commission cites Carl Shapiro to support 

the proposition that market concentration is 

relevant to coordinated effects analysis. See 

Statement of the Federal Trade Commission 2 n.4, 

ZF Friedrichshafen AG, FTC File No. 141–0235 

(May 8, 2015) (quoting Carl Shapiro, The 2010 

Horizontal Merger Guidelines: From Hedgehog to 

Fox in Forty Years, 77 Antitrust L.J. 701, 708 (2010) 

(‘‘In particular, as the revised Guidelines explain, 

the Agencies place considerable weight on HHI 

measures in cases involving coordinated effects.’’)). 

I agree. The 2010 Merger Guidelines establish 

market concentration as one of three conditions that 

must be satisfied to find coordinated effects. What 

Shapiro does not state, and the proposition the 

Commission does not otherwise substantiate, is that 

evidence of changes in market concentration is 

sufficient to satisfy the third condition along with 

the first. 

10 Dissenting Statement of Commissioner Joshua 

D. Wright 3, Fidelity National Financial, Inc., FTC 

File No. 131–0159 (Dec. 23, 2013). 

The Merger Guidelines offer three 

conditions that, if satisfied, suggest the 

agency is likely to challenge a merger 

upon the basis that it will result in an 

increased likelihood of competitive 

harm from coordination. The Merger 

Guidelines specify that the agencies are 

likely to challenge a merger if: (1) ‘‘the 

merger would significantly increase 

concentration and lead to a moderately 

or highly concentrated market;’’ 3 (2) the 

‘‘market shows signs of vulnerability to 

coordinated conduct;’’ 4 and (3) ‘‘the 

Agencies have a credible basis on which 

to conclude that the merger may 

enhance that vulnerability.’’ 5

The second and third conditions are 

at issue here and worthy of further 

discussion. 

The record evidence is mixed with 

respect to the second condition, 

whether the market shows signs of 

vulnerability to coordinated conduct. 

Evidence that the market is generally 

conducive to coordinated interaction 

includes the fact that heavy vehicle tie 

rods are fairly homogeneous goods and 

are purchased using relatively shortterm contracts. 

Also potentially germane to assessing 

the vulnerability of the relevant market 

to coordinated conduct are previous 

episodes of coordination by the same 

players in different markets. In 2012, a 

German subsidiary of TRW Automotive, 

TRW Deutschland Holding GmbH, pled 

guilty to a conspiracy to fix prices of 

seatbelts, airbags, and steering wheels 

sold to two German automobile 

customers for vehicles manufactured or 

sold in the United States.6 While this 

prior episode does not involve the same 

relevant product or geographic markets 

as the current matter, it might suggest 

some vulnerability to coordination.7

There are other considerations, 

however, that indicate the market for 

heavy vehicle tie rods is not particularly 

vulnerable to coordination. First, while 

the product might be fairly 

homogeneous, there are significant 

switching costs including the time and 

cost involved with validation testing of 

the new supplier’s tie rods. All else 

equal, significant switching costs make 

markets less vulnerable to coordination 

because they diminish firms’ ability to 

punish effectively deviations from the 

coordinated price. Second, cost and 

demand fluctuations appear to be 

relatively frequent and large, which 

increase the information costs needed to 

detect accurately deviations.8 Third, 

Urresko is a relatively recent entrant 

and has become the largest supplier in 

the market. These types of disruptive 

market events are generally not 

conducive to successful coordinated 

interactions. Finally, there are a number 

of large buyers, which can result in 

dramatic market share swings if a 

supplier loses the majority of a buyer’s 

business. While the record evidence 

with respect to vulnerability of the 

relevant market is certainly mixed at 

best, it would not be unreasonable to 

find the second prong in the Merger 

Guidelines satisfied. 

Ultimately, however, I do not have 

reason to believe the proposed 

transaction is likely to result in 

coordinated effects because the record 

evidence does not satisfy the third 

condition—that is, there is no ‘‘credible 

basis on which to conclude that the 

merger may enhance’’ any pre-merger 

vulnerability to coordination. 

The Merger Guidelines provide the 

acquisition of a maverick firm as one 

illustrative example of the type of 

evidence that would satisfy this third 

condition. There is no evidence that 

either ZF or TRW is a maverick firm as 

contemplated by the Merger Guidelines. 

The sole evidence offered in favor of 

the proposition that the proposed 

transaction will enhance the market’s 

vulnerability to coordination is that the 

merger will reduce the number of firms 

in the relevant market from three to two. 

I do not agree that a reduction of firms 

from three to two, without more, is 

enough to provide ‘‘a credible basis to 

conclude that the merger may enhance 

that vulnerability.’’ The observation that 

a market with N firms will, after the 

merger, have N–1 firms, is simply 

insufficient without more to establish 

the required credible basis under the 

Merger Guidelines. This is true even 

when a merger reduces the number of 

firms from three to two. The 

Commission offers no explanation as to 

why the Merger Guidelines would go 

through the trouble of requiring a 

credible basis to believe a merger will 

change the market’s competitive 

dynamics that enhances the market’s 

vulnerability to coordinated conduct, in 

addition to an increase in market 

concentration, in order to substantiate a 

coordinated effects merger challenge if 

the latter were considered sufficient to 

satisfy both elements.9

As I have stated previously, ‘‘there is 

no basis in modern economics to 

conclude with any modicum of 

reliability that increased 

concentration—without more—will 

increase post-merger incentives to 

coordinate. Thus, the Merger Guidelines 

require the federal antitrust agencies to 

develop additional evidence that 

supports the theory of coordination and, 

in particular, an inference that the 

merger increases incentives to 

coordinate.’’ 10 Janusz Ordover, in a 

leading treatment of the economics of 

coordinated effects, similarly explains 

that ‘‘It is now well understood that it 

is not sufficient when gauging the 

likelihood of coordinated effects from a 

merger to simply observe that because 

the merger reduces the number of firms, 

it automatically lessens the coordination 

problem facing the firms and enhances 

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11 Janusz A. Ordover, Coordinated Effects, in 2 

Issues in Competition Law and Policy 1359, 1367 

(ABA Section of Antitrust Law 2008) (‘‘It is quite 

clear . . . that a reduction in the number of firms 

and concomitant increases in concentration do not 

necessarily make collusion inevitable or even more 

likely, stable, or complete.’’). 

12See Analysis of Agreement Containing Consent 

Order to Aid Public Comment 2, ZF Friedrichshafen 

AG, FTC File No. 141–0235 (May 5, 2015). 

13Merger Guidelines § 5.3, supra note 2. 

14See id. § 6.3. 

15See Statement of the Federal Trade 

Commission, supra note 9, at 2. 

16 Id. at 2 n.5. 

17Timothy F. Bresnahan & Peter C. Reiss, Entry 

and Competition in Concentrated Markets, 99 J. Pol. 

Econ. 977 (1991). While Bresnahan and Reiss is an 

important early contribution to the static entry 

literature, it cannot possibly bear the burden the 

Commission wishes to place upon it. Abstracting 

from the complexities of market definition was 

necessary for the researchers to isolate entry 

decisions. This is possible when studying the 

effects of entry by a second dentist in a town with 

a population of less than 1,000, but not in most realworld antitrust applications. The authors of the 

study make this point themselves, noting that 

‘‘whether this pattern appears in other industries 

remains an open question.’’ Id. at 1007. 

18 In earlier research using similar empirical 

techniques and data—namely, small rural 

markets—Bresnahan and Reiss plainly reject the 

notion that the findings should inform views of 

market structure and competition generally: ‘‘We do 

not believe that these markets ‘stand in’ for highly 

concentrated industries in the sectors of the 

economy where competition is national or global.’’ 

Timothy F. Bresnahan & Peter C. Reiss, Do Entry 

Conditions Vary Across Markets, 3 Brookings 

Papers Econ. Activity 833, 868 (1987). 

19Steffen Huck et al., Two Are Few and Four Are 

Many: Number Effects from Experimental 

Oligopolies, 53 J. Econ. Behavior & Org. 435 (2004). 

20 Id. at 436 (‘‘The number of firms is not the only 

factor affecting competition in experimental 

markets. This implies that there exists no unique 

number of firms that determines a definite 

borderline between non-cooperative and collusive 

markets irrespective of all institutional and 

structural details of the experimental markets.’’). 

21Steven C. Salop, The Evolution and Vitality of 

Merger Presumptions: A Decision-Theoretic 

Approach (Georgetown Law Faculty Publications 

and Other Works, Working Paper No. 1304, 2014), 

available at http://scholarship.law.georgetown.edu/ 

facpub/1304/. 

22Nevertheless, to the extent Salop argues in 

favor of legal presumptions in merger analysis, he 

clarifies that they ‘‘obviously should be based on 

valid economic analysis, that is, proper economic 

presumptions,’’ which should be updated ‘‘based 

on new or additional economic factors besides 

market shares and concentration.’’ Id. at 37, 48. I 

agree. Additionally, Salop explains that 

‘‘[c]ontemporary economic learning suggests that 

concentration be considered when undertaking 

competitive effects analysis—in conjunction with 

other factors suggested by the competitive effects 

theory—but not treated as the sole determinant of 

post-merger pricing.’’ Id. at 13–14. Notably, Salop 

does not endorse a distinction between four-to-three 

mergers or three-to-two mergers and mergers in less 

concentrated markets that justifies a presumption 

that the former are anticompetitive; rather, he 

merely observes that empirical evidence and 

economic theory do not warrant ‘‘ignoring market 

shares and concentration in merger analysis.’’ Id. at 

12 (emphasis in original). 

23Merger Guidelines, supra note 2, § 5.3. 

their incentives to engage in tacit 

collusion; far from it.’’ 11 The required 

additional evidence needed to satisfy 

the third condition is absent in this 

case. 

II. Unilateral Effects Are Unlikely in 

the Relevant Market 

The sole evidence offered in favor of 

the Commission’s allegation that the 

merger will render unilateral price 

effects likely is that some customers 

have used the competition between ZF 

and TRW to obtain better pricing and 

some customers have switched between 

the two suppliers.12 While this is 

certainly material to our inquiry, this is 

a thin reed, without more, upon which 

to base a unilateral price effects case. 

There is no information on price effects. 

Moreover, there is no substantial 

evidence on the record with respect to 

the role the market leader, Urresko, 

plays in disciplining prices. The fact 

that Urresko is a recent entrant and has 

become the market leader in a relatively 

short period of time also renders 

dubious the proposition that barriers to 

entry in the relevant market are 

adequate to sustain a post-merger price 

increase. Additionally, even with 

sufficient barriers, Urresko’s rapid 

growth undermines significantly any 

unilateral effects argument and suggests 

a post-merger price increase from a 

merged ZF–TRW would be fragile and 

potentially unsuccessful. The Merger 

Guidelines contemplate the possibility 

of intense competition in markets with 

small numbers of firms, observing that 

‘‘Even a highly concentrated market can 

be very competitive if market shares 

fluctuate substantially over short 

periods of time in response to changes 

in competitive offerings.’’ 13

Moreover, unilateral effects in a 

homogeneous goods market principally 

involve reductions in output.14 In order 

to be profitable, the reduction in output 

must not be met by a sufficient supply 

response by rivals. Thus, absent 

meaningful capacity constraints, 

unilateral effects are less likely in 

homogeneous goods markets. I have 

seen no evidence that Urresko is 

capacity constrained. 

III. Conclusion 

The Commission insists that a 

different ‘‘lens’’ should be used to 

evaluate evidence in markets where the 

number of firms is reduced by merger to 

three or two.15 The Commission cites in 

support of its structural theory and 

presumption three academic articles 

written by economists.16 Only two offer 

economic evidence and the proffered 

substantiation fails to support the claim. 

The first is an important early entrant 

into the static entry literature examining 

the relationship between market size 

and the number of entrants in a market, 

focusing upon isolated rural markets.17

It strains credulity to argue that 

Bresnahan and Reiss’s important 

analysis of the impact of entry in 

markets involving doctors, dentists, 

druggists, plumbers, and tire dealers in 

local and isolated areas, where they find 

the competitive benefits of a second 

competitor are especially important, 

apply with generality sufficient to 

support a widely applicable 

presumption of harm based upon the 

number of firms. Indeed, the authors 

warn against precisely this 

interpretation of their work.18

The second is a laboratory experiment 

and does not involve the behavior of 

actual firms and certainly cannot 

provide sufficient economic evidence to 

support a presumption that four-to-three 

and three-to-two mergers in real-world 

markets will result in anticompetitive 

coordination.19 Once again, the authors 

warn against such an interpretation.20

Finally, the Commission cites a draft 

article, authored by Steve Salop, in 

support of its view that economic 

evidence supports a presumption that 

four-to-three and three-to-two mergers 

are competitively suspect.21 The article 

does not purport to study or provide 

new economic evidence on the 

relationship between market structure 

and competition. Thus, it cannot 

support the Commission’s 

proposition.22 In sum, there is simply 

no empirical economic evidence 

sufficient to warrant a presumption that 

anticompetitive coordination is likely to 

result from four-to-three or three-to-two 

mergers. 

It is important to note that the 

Commission and I have no disagreement 

over the proposition that the number of 

competitors within a market is a 

relevant fact to assess the likely 

competitive effects of a transaction. The 

relevant question is not whether the 

number of firms matters but how much 

it matters—and in particular, whether a 

movement to three or two firms 

warrants a generally applicable 

presumption that a transaction is more 

likely than not to harm competition. I 

do not believe it does. The Commission 

disagrees. 

The Merger Guidelines make clear 

that the purpose of market 

concentration and market shares 

associated thresholds ‘‘is not to provide 

a rigid screen to separate competitive 

benign mergers from anticompetitive 

ones, although high levels of 

concentration do raise concerns.’’ 23

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24See Statement of Commissioner Joshua D. 

Wright 3–5, Holcim Ltd., FTC File No. 141–0129 

(May 8, 2015). 

25Analysis of Agreement Containing Consent 

Orders to Aid Public Comment 2, Actavis plc, FTC 

File No. 141–0098 (June 30, 2014) (‘‘In generic 

pharmaceutical product markets, price generally 

decreases as the number of generic competitors 

increases. Accordingly, the reduction in the number 

of suppliers within each relevant market would 

likely have a direct and substantial anticompetitive 

effect on pricing.’’). 

26Analysis of Agreement Containing Consent 

Orders to Aid Public Comment 3, Akorn 

Enterprises, Inc., FTC File No. 131–0221 (Apr. 14, 

2014) (‘‘In generic pharmaceuticals markets, price is 

heavily influenced by the number of participants 

with sufficient supply.’’). 

27See David Reiffen & Michael R. Ward, Generic 

Drug Industry Dynamics, 87 Rev. Econ. & Stat. 37 

(2005). As an aside, given that we are now ten years 

removed from the publication of this important 

study and over twenty years removed from the 

sample period, it might be worth revisiting this 

question with fresher data if the Commission 

intends to continue relying upon inferences of 

competitive harm from market structure in the 

generic pharmaceutical market. 

28See Statement of the Federal Trade 

Commission, supra note 9, at 3 n.7; see also 

Separate Statement of Commissioner Maureen K. 

Ohlhausen 1, ZF Friedrichshafen AG, FTC File No. 

141–0235 (May 8, 2015). 

29Separate Statement of Commissioner Maureen 

K. Ohlhausen, supra note 28, at 2. 

30Statement of the Federal Trade Commission, 

supra note 9, at 3 n.7. 

31That said, as I stated in Holcim Ltd., I am not 

suggesting the ‘‘reason to believe’’ standard 

‘‘requires access to every piece of relevant 

information and a full and complete economic 

analysis of a proposed transaction, regardless of 

whether the parties wish to propose divestitures 

before complying with a Second Request.’’ See 

Statement of Commissioner Joshua D. Wright, supra 

note 24, at 11. 

Rather concentration is but one aspect 

of the inquiry aimed at better 

understanding post-merger incentives to 

compete. The predictive power of 

market share and market concentration 

data is informed by economic theory 

and available empirical evidence. There 

is no empirical evidence sufficient to 

establish a generally applicable 

presumption that mergers that reduce 

the number of firms to three or two are 

likely to harm competition.24 Further, 

the Commission’s reliance upon such 

shorthand structural presumptions 

untethered from empirical evidence 

subsidize a shift away from the more 

rigorous and reliable economic tools 

embraced by the Merger Guidelines in 

favor of convenient but obsolete and 

less reliable economic analysis. 

This is not to say that evidence of 

changes in market structure cannot ever 

warrant such a presumption. It does 

when the evidence warrants as much. 

The Commission has in certain contexts 

found reason to believe competition 

would be substantially lessened based 

simply upon a reduction of firms in the 

relevant market. See Actavis plc-Forest 

Laboratories 25 and also Akorn-Hi-Tech 

Pharmacal,26 which both involve 

generic pharmaceutical markets. The 

Commission was able to draw 

conclusions about the relationship 

between price and the number of firms 

in generic pharmaceutical markets 

because substantial research has been 

done to establish that such a 

relationship exists.27 Indeed, the cases 

in the pharmaceutical industry are the 

exceptions that prove the rule that the 

Commission needs to do more than 

count the number of firms in a market 

to have reason to believe a substantial 

lessening of competition is likely. No 

such research has been done in this 

market. Accordingly, unlike in generic 

pharmaceutical markets, we have no 

evidence to conclude that a simple 

reduction in the number of firms in this 

market is likely to lead to higher prices 

and lower output. Simply assuming 

such a relationship exists in this market 

without any evidence to suggest that it 

does harkens back to the bad old days 

of the first half of the 20th century, 

when the structure-conductperformance paradigm was in vogue. 

To summarize, there are three-to-two 

mergers that give rise to unilateral 

effects, and three-to-two mergers that 

give rise to coordinated effects. It is our 

burden to show that this three-to-two 

merger is likely anticompetitive. The 

Commission must find sufficient 

evidence to support an inference of 

likely economic harm to consumers. 

The heavy degree of reliance upon a 

structural presumption in this case is 

not sufficient to do so. 

Finally, the Commission and 

Commissioner Ohlhausen each claim 

that the quantity, and presumably the 

quality, of the evidence is not the same 

for investigations truncated by remedy 

proposals compared to cases where a 

full phase investigation is completed or 

compared to a completed trial, 

respectively.28 While this observation is 

an accurate description of the pragmatic 

reality of conducting law enforcement 

investigations, I do not agree with the 

implication that the quantum and 

quality of evidence needed to satisfy the 

‘‘reason to believe’’ standard should 

turn on whether and when a remedy 

proposal is offered during an 

investigation. The idea is that we should 

‘‘take into account the need for 

predictability and fairness for merging 

parties in these circumstances’’ 29 and 

considerations whether it is 

‘‘appropriate to subject the parties to the 

added expense and delay of a full phase 

investigation.’’ 30 I fully support the 

agency identifying opportunities to 

lower the administrative costs of 

antitrust investigations and believe 

there to be ample opportunity to do so. 

But attempts to operate a more efficient 

law enforcement system must satisfy the 

constraint, required by law, that there is 

reason to believe a transaction violates 

Section 7 of the Clayton Act. That 

standard sets a relatively low bar for the 

minimum level of evidence required to 

substantiate a merger challenge. I reject 

the view that it should be a standard 

that should be relaxed because the 

merging parties offer a remedy.31 The 

Commission is primarily a law 

enforcement agency, albeit one that 

largely conducts it business by entering 

into consents with merging parties. 

Making the consent process more 

efficient and predictable is a laudable 

goal; but we must not allow pursuit of 

a more efficient consent process to 

distort our evaluation of the substantive 

merits. To do so, as in my view we have 

here, risks in the long run reducing the 

institutional capital of the agency in 

magnitudes far greater than any 

potential cost savings from truncating 

an investigation. 

For these reasons, I cannot join my 

colleagues in supporting the consent 

order because I do not have reason to 

believe the transaction violates Section 

7 of the Clayton Act nor that a consent 

ordering divestiture is in the public 

interest. 

[FR Doc. 2015–11721 Filed 5–14–15; 8:45 am] 

BILLING CODE 6750–01–P 

FEDERAL TRADE COMMISSION 

[File No. 141 0129 ] 

Holcim Ltd. and Lafarge S.A.; Analysis 

of Proposed Consent Orders To Aid 

Public Comment 

AGENCY: Federal Trade Commission. 

ACTION: Proposed consent agreement. 

SUMMARY: The consent agreement in this 

matter settles alleged violations of 

federal law prohibiting unfair methods 

of competition. The attached Analysis to 

Aid Public Comment describes both the 

allegations in the draft complaint and 

the terms of the consent orders— 

embodied in the consent agreement— 

that would settle these allegations. 

DATES: Comments must be received on 

or before June 4, 2015. 

ADDRESSES: Interested parties may file a 

comment at https://

ftcpublic.commentworks.com/ftc/

holcimlafargeconsent online or on 

paper, by following the instructions in 

the Request for Comment part of the 

SUPPLEMENTARY INFORMATION section 

below. Write ‘‘Holcim Ltd. and Lafarge 

mstockstill on DSK4VPTVN1PROD with NOTICES