[Federal Register Volume 74, Number 67 (Thursday, April 9, 2009)]
[Notices]
[Pages 16208-16210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-8203]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 081 0265]


BASF SE; Analysis of Agreement Containing 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 or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the 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 May 1, 2009.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to``BASF SE, 
File No. 081 0265'' to facilitate the organization of comments. Please 
note that your comment--including your name and your state--will be 
placed on the public record of this proceeding, including on the 
publicly accessible FTC website, at (http://www.ftc.gov/os/publiccomments.shtm).
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual'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. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential. . . .,'' as provided in 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which 
confidential treatment is requested must be filed in paper form, must 
be clearly labeled ``Confidential,'' and must comply with FTC Rule 
4.9(c).\1\
---------------------------------------------------------------------------

    \1\ FTC Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See FTC Rule 4.9(c), 16 CFR 4.9(c).
---------------------------------------------------------------------------

    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: (https://

[[Page 16209]]

secure.commentworks.com/ftc-BASF) (and following the instructions on 
the web-based form). To ensure that the Commission considers an 
electronic comment, you must file it on the web-based form at the 
weblink: (https://secure.commentworks.com/ftc-BASF). If this Notice 
appears at (http://www.regulations.gov/search/index.jsp), you may also 
file an electronic comment through that website. The Commission will 
consider all comments that regulations.gov forwards to it. You may also 
visit the FTC website at http://www.ftc.gov to read the Notice and the 
news release describing it.
    A comment filed in paper form should include the ``BASF, File No. 
081 0265`` reference both in the text and on the envelope, and should 
be mailed or delivered to the following address: Federal Trade 
Commission, Office of the Secretary, Room H-135, 600 Pennsylvania 
Avenue, NW, Washington, DC 20580. The FTC is requesting that any 
comment filed in paper form be sent by courier or overnight service, if 
possible, because U.S. postal mail in the Washington area and at the 
Commission is subject to delay due to heightened security precautions.
    The Federal Trade Commission Act (``FTC Act'') and other laws 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, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC website, to the extent practicable, 
at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of 
discretion, the Commission makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC website. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at (http://www.ftc.gov/ftc/privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Wallace W. Easterling, Bureau of 
Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202) 
326-2936.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 the 
Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that 
the above-captioned consent agreement containing a consent order 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 February 18, 2009), on the World Wide Web, at (http://www.ftc.gov/os/2009/04/index.htm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from BASF SE (``BASF'' or ``Respondent'') to remedy the 
anticompetitive effects stemming from BASF's proposed acquisition of 
Ciba Holding Inc. (``Ciba''). Under the terms of the Consent Agreement, 
BASF is required to divest to a Commission-approved buyer certain Ciba 
assets and intellectual property relating to two of its high 
performance pigment businesses.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days to receive comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will review the Consent 
Agreement and comments received and decide whether to withdraw from the 
proposed Consent Agreement, modify it, or make final the Consent 
Agreement's proposed Decision and Order.
    Pursuant to an Agreement and Plan of Merger dated September 15, 
2008, BASF proposes to purchase all of Ciba's outstanding stock in a 
transaction valued at approximately $5.1 billion. 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. Sec.  18, 
and Section 5 of the Federal Trade Commission Act (``FTC Act''), as 
amended, 15 U.S.C. Sec.  45, by lessening competition in the world 
markets for the research, development, manufacture and sale of bismuth 
vanadate and indanthrone blue pigments. The Consent Agreement will 
remedy the alleged violation by divesting certain Ciba assets and 
intellectual property to a third party thereby replacing the lost 
competition that would result from the acquisition in these markets.

II. The Parties

    BASF, headquartered in Ludwigshafen, Germany, is the world's 
leading chemical company. It manufactures, among other things, 
chemicals, plastics, agricultural products, fine chemicals and high 
performance pigments. BASF is a leading supplier of several high 
performance pigments including bismuth vanadate and indanthrone blue. 
In 2008, BASF's worldwide sales were approximately $79.5 billion.
    Ciba, headquartered in Basel, Switzerland, is a leading supplier of 
chemicals used to, among other things, provide color performance and 
care for plastics, coatings, textile, paper, home and personal care 
products. Ciba is a leading supplier of high performance pigments 
including bismuth vanadate and indanthrone blue. In 2008, Ciba's 
worldwide sales were approximately $5.4 billion.

III. The Complaint

    According to the Commission's Complaint, the relevant lines of 
commerce in which to analyze the effects of the proposed acquisition 
are the markets for the research, development, manufacture, and sale of 
bismuth vanadate and indanthrone blue pigments. Pigments are small 
particles that are used to impart color to a wide variety of products 
including inks, coatings, plastics and fibers. Bismuth vanadate and 
indanthrone blue are high performance pigments. High performance 
pigments are pigments that offer superior durability and light fastness 
compared to other pigments such as commodity pigments. As a result, 
high performance pigments are particularly suited for use in products 
that are exposed to sunlight and weather, such as automotive coatings.
    Bismuth vanadate is a high performance pigment that imparts a 
brilliant yellow coloration with a green tint. Bismuth vanadate is 
primarily used in applications requiring exposure to high temperatures 
because of its durability under such conditions. Because no other 
pigment offers the same combination of unique color and high 
performance characteristics that bismuth vanadate provides, customers

[[Page 16210]]

of bismuth vanadate could not achieve the same colors and performance 
levels in their products without it. Thus, there are no substitute 
products that customers of bismuth vanadate could turn to even in the 
face of a significant price increase.
    Indanthrone blue is a high performance pigment that imparts a blue 
coloration with a tinge of red. Because of its durability and light 
fastness, indanthrone blue is used primarily in automotive coatings. 
Similar to bismuth vanadate, no other pigment offers the same 
combination of unique color and high performance characteristics that 
indanthrone blue provides and customers of indanthrone blue could not 
achieve the same colors and performance levels in their products 
without it. Thus, there are no substitute products that customers of 
indanthrone blue could turn to even if faced with a significant price 
increase.
    The Complaint alleges that the relevant geographic market in which 
to analyze the anticompetitive effects of the proposed acquisition is 
the world. Transportation costs and technical barriers to worldwide 
shipment of the relevant products are insignificant. As a result, 
several pigment suppliers manufacture these products in a single 
location and ship them worldwide. For example, BASF and Ciba supply the 
relevant products for their customers worldwide from their production 
facilities in Europe.
    The Complaint further alleges that the relevant markets are highly 
concentrated. In the bismuth vanadate market, the proposed transaction 
would reduce the number of significant players in that market from four 
to three and the combined entity would have a market share of 
approximately 60 percent based on sales. The market for indanthrone 
blue is also highly concentrated with BASF and Ciba constituting two of 
only three significant suppliers. In that market, the combined entity's 
market share would be approximately 56 percent based on sales. By 
eliminating competition between BASF and Ciba in the relevant markets, 
the proposed transaction would allow the combined firm to unilaterally 
exercise market power, as well as increase the likelihood of 
coordinated interaction among the remaining suppliers. As a result, the 
proposed transaction would increase the likelihood that purchasers of 
bismuth vanadate and indanthrone blue would be forced to pay higher 
prices for these products and that innovation and service in these 
markets would decline.
    Entry into either relevant market is not likely and would not be 
timely or sufficient to deter or counteract the anticompetitive effects 
that would result from the proposed merger. It would take a new entrant 
well over two years to complete all of the requisite steps for entry, 
including: researching and developing the pigment technology; building 
a manufacturing facility; and passing the rigorous qualification 
testing required to get customer approval. Additionally, new entry into 
either the bismuth vanadate or indanthrone blue markets is unlikely to 
occur because the capital investment to become a viable supplier is 
high relative to the limited sales opportunities available to new 
entrants.

IV. Terms of the Proposed Order

    The proposed Consent Agreement effectively remedies the proposed 
merger's anticompetitive effects in the markets for bismuth vanadate 
and indanthrone blue pigments. BASF is required to divest assets used 
to research, develop, manufacture, and sell those products. The 
divested assets will permit the acquirer to become a viable competitor 
in the relevant markets.
    The assets to be divested include Ciba's bismuth vanadate 
production assets which are located in Europe, or provides a mechanism 
for, at the acquirer's option, production to be relocated to the 
acquirer's production facilities. More specifically, BASF can either: 
(1) divest the Ciba bismuth vanadate production facility, (2) lease the 
production facility to the acquirer, or (3) enter into a tolling 
agreement that provides sufficient time for the acquirer to begin 
production at its own facilities and to qualify that production with 
customers. The indanthrone blue production assets will be used to 
produce that product pursuant to a tolling arrangement at the Ciba 
facilities until the acquirer of those assets is prepared to shift 
production to its own facilities. All tangible assets and intellectual 
property used to produce the relevant products will also be divested. 
Several credible acquirers have expressed interest in purchasing the 
assets to be divested.
    The provisions ordering the two divestitures further include 
ancillary relief such as supply agreements, protections for 
confidential information, assistance in hiring of key employees, and 
the appointment of a monitor to oversee the divestiture process to 
ensure that the acquirer, or acquirers, of the relevant assets will be 
able to effectively compete in the research, development, manufacture, 
and sale of bismuth vanadate and indanthrone blue pigments. A final 
Order to Maintain Assets has also been issued.
    The proposed Consent Agreement includes a provision that allows the 
Commission to appoint an interim monitor to ensure that BASF 
expeditiously complies with all of its obligations and performs all of 
its responsibilities as required by the Commission's Decision and 
Order. If appointed, the interim monitor would be required to file 
periodic reports with the Commission to ensure that the Commission 
remains informed about the status of the divestitures and the efforts 
being made to accomplish the divestitures.
    Finally, the Consent Agreement contains provisions that allow the 
Commission to appoint a divestiture trustee to divest the assets that 
are the subject of the Commission's Decision and Order if BASF fails to 
divest the designated assets within six (6) months after the Consent 
Agreement is accepted by the Commission for Public Comment. To ensure 
that the Commission remains informed about the status of the proposed 
divestitures and the transfer of the assets, the proposed Consent 
Agreement requires BASF to file reports with the Commission 
periodically until the divestitures and transfers are accomplished.
    The purpose of this analysis is to facilitate public comment on the 
proposed Decision and Order. This analysis is not intended to 
constitute an official interpretation of the Consent Agreement and the 
proposed Decision and Order.
    By direction of the Commission.

Richard C. Donohue,
Acting Secretary.
[FR Doc. E9-8203 Filed 4-8-09: 8:45 am]
BILLING CODE 6750-01-S