[Federal Register Volume 65, Number 250 (Thursday, December 28, 2000)]
[Notices]
[Pages 82380-82381]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-33028]
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FEDERAL TRADE COMMISSION
[File No. 001-0197]
The Valspar Corporation; Analysis to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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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 draft
complaint that accompanies the consent agreement 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 January 18, 2001.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room H-159, 600 Pennsylvania Avenue, NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Christina R. Perez, FTC/H-374, 600
Pennsylvania Avenue, NW., Washington, DC 20580. (202) 326-2048.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and section 2.34 of
the Commission's 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 December 19, 2000), on the World Wide Web, at ``http://
www.ftc.gov/os/2000/12/index.htm.'' A paper copy can be obtained from
the FTC Public Reference Room, Room H-130, 600 Pennsylvania Avenue,
NW., Washington, DC 20580, either in person or by calling (202) 326-
3627.
Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, NW.,
Washington, DC 20580. Two paper copies of each comment should be filed,
and should be accompanied, if possible, by a 3\1/2\ inch diskette
containing an electronic copy of the comment. Such comments or views
will be considered by the Commission and will be available for
inspection and copying at its principal office in accordance with
section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR
4.9(b)(6)(ii)).
Analysis of Agreement Containing Consent Order To Aid Public
Comment
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Order (``Consent
Agreement'') from Valspar Corporation (``Valspar''), which is designed
to remedy the anticompetitive effects resulting from Valspar's
acquisition of Lilly Industries, Inc. (``Lilly''). Under the terms of
the agreement, within ten days of the date the Consent Agreement is
placed on the public record, Valspar will be required to divest its
mirror coatings business, which is comprised of silver, tin and copper
solutions, mirror backing paint, and any other coating researched,
developed, manufactured or sold by Valspar that is used in the
production of a mirror, to Spraylat Corporation. Should Valspar fail to
do so, the Commission may appoint a trustee to divest the mirror
coatings business.
The proposed Consent Agreement has been placed on the public record
for thirty (30) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After thirty (30) days, the Commission will again review the
proposed Consent Agreement and the comments received, and will decide
whether it should withdraw from the proposed Consent Agreement or make
final the Decision & Order.
Pursuant to an Asset Purchase Agreement dated June 23, 2000,
Valspar has agreed to acquire Lilly for approximately $762 million. The
Commission's Complaint alleges that the acquisition, if consummated,
would violate section 7 of the Clayton Act, as amended, 15 U.S.C. 18,
and section 5 of the Federal Trade Commission Act, as amended, 15
U.S.C. 45, in the markets for silver solutions, tin solutions, copper
solutions and mirror backing paint.
Valspar and Lilly are the two leading suppliers of silver, tin and
copper solutions (``mirror solutions'') in the United States and two of
three suppliers of mirror backing paint in the United States. Five
basic inputs are needed to make a mirror: glass, a tin solution, a
silver solution, a copper solution, and mirror backing paint. Most
mirrors are made by placing clean pieces of glass flat on a conveyor
belt, which moves the glass through the various stations where the
solutions and paint are applied to
[[Page 82381]]
the back of each piece of glass. The first layer applied to the glass
is a tin solution, which is an adhesion promoter so that the silver
will bond to the glass. After the tin solution, a silver solution is
applied, which creates a metal film on the glass surface, giving the
mirror its reflective surface. The third step is to apply a copper
solution, which helps keep the silver from oxidizing and creates a
surface to which the mirror backing paint will adhere. Finally, the
mirror backing paint is applied. This adds a hard coating that protects
the solutions from becoming scratched or damaged and further protects
the silver solution from corrosion.
Both Lilly and Valspar produce all of the components, other than
glass, necessary to make a mirror. The United States mirror solutions
and mirror backing paint markets are highly concentrated, and the
proposed acquisition would produce a firm controlling over 90% of the
mirror solutions markets and over 60% of the mirror backing paint
market. Both companies have frequently competed against each other for
customers. By eliminating competition between the two most significant
competitors in these highly concentrated markets, the proposed
acquisition would allow the combined firm to exercise market power
unilaterally, thereby increasing the likelihood that purchasers of
mirror solutions as well as mirror backing paint would be forced to pay
higher prices and that innovation and service levels in these markets
would decrease.
Significant impediments to new entry exist in the mirror solutions
and mirror backing paint markets. A new entrant into any of these
markets would need to undertake the difficult, expensive and time-
consuming process of developing a competitive product, establishing
reliable U.S. distribution and technical support, and developing a
reputation among mirror manufacturers for consistently producing a
high-quality product. Because of the difficulty of accomplishing these
tasks, new entry into either the mirror solutions markets or the mirror
backing paint market could not be accomplished in a timely manner.
Additionally, new entry into any one of these markets is made more
unlikely because of the limited sales opportunities available to new
entrants.
The Consent Agreement effectively remedies the acquisition's
anticompetitive effects in the United States mirror solutions and
mirror backing paint markets by requiring Valspar to divest its mirror
coatings business. Pursuant to the Consent Agreement, Valspar is
required to divest its mirror coatings business to Spraylat Corporation
within ten days of the date the Commission places the Order on the
public record. Should Valspar fail to do so, the Commission may appoint
a trustee to divest the business.
The Commission's goal in evaluating possible purchasers of divested
assets is to maintain the competitive environment that existed prior to
the acquisition. A proposed buyer of divested assets must not itself
present competitive problems. The Commission is satisfied that Spraylat
is a well-qualified acquirer of the divested assets. Based in Mount
Vernon, New York, Spraylat is a family owned company that manufactures
and sells specialty paints and coatings for industrial uses. Spraylat
possesses the necessary industry expertise to replace the competition
that existed prior to the proposed acquisition. Furthermore, Spraylat
poses no separate competitive issues as the acquirer of the divested
assets.
The Consent Agreement includes a number of provisions that are
designed to ensure that the transfer of Valspar's mirror coatings
business to the acquirer is successful. The Consent Agreement requires
Valspar to provide incentives to certain key employees to accept
employment, and remain employed, by the acquirer. Valspar is also
prohibited from inducing key customers from terminating their contracts
with the acquirer for a period of one year. Finally, Valspar employees
involved with its mirror coating business are prohibited from
disclosing any confidential information to employees involved with the
Lilly business.
In order to ensure that the Commission remains informed about the
status of the Valspar mirror coatings business pending divestiture, and
about efforts being made to accomplish the divestiture, the Consent
Agreement requires Valspar to report to the Commission within 30 days,
and every thirty days thereafter until the divestiture is accomplished.
In addition, Valspar is required to report to the Commission every 60
days regarding its obligations to provide transitional services and
facilities management.
The purpose of this analysis is to facilitate public comment on the
Consent Agreement, and it is not intended to constitute an official
interpretation of the Consent Agreement or to modify in any way its
terms.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 00-33028 Filed 12-27-00; 8:45 am]
BILLING CODE 6750-01-M