[Federal Register Volume 72, Number 216 (Thursday, November 8, 2007)]
[Notices]
[Pages 63187-63197]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-5586]
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Abitibi-Consolidated, Inc. and Bowater
Incorporated; Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a Complaint, proposed Final
Judgment, Asset Preservation Stipulation and Order, and Competitive
Impact Statement have been filed with the United States District Court
for the District of Columbia in United States v. Abitibi-Consolidated,
Inc. and Bowater Incorporated, Civ. Action No. 1:07CV01912. On October
23, 2007, the United States filed a Complaint alleging that the
proposed merger between Abitibi-Consolidated Inc. (``Abitibi'') and
Bowater Incorporated would violate section 7 of the Clayton Act, 15
U.S.C. 18. The Complaint alleges that the acquisition would
substantially reduce competition for the production, distribution, and
sale of newsprint in the United States. Specifically, the Complaint
alleges that the merger would enhance the merged firm's ability and
incentive to reduce their combined newsprint output and
anticompetitively raise newsprint prices in the United States. The
proposed Final Judgment, also filed on October 23, 2007, requires the
parties to divest Abitibi's Snowflake, Arizona newsprint mill. A
Competitive Impact Statement filed by the United States describes the
Complaint, the proposed Final Judgment, and the remedies available to
private litigants who may have been injured by the alleged violation.
Copies of the Complaint, proposed Final Judgment, Asset
Preservation Stipulation and Order, and Competitive Impact Statement
are available for inspection at the Department of Justice, Antitrust
Division, 325 Seventh Street, NW., Suite 215, Washington, DC 20530
(202-514-2481), on the Internet at http://www.usdoj.gov/atr, and at the
Office of the Clerk of the United States District Court for the
District of Columbia. Copies of these materials may be obtained from
the Antitrust Division upon request and payment of the copying fee.
Public comment is invited within sixty (60) days of the date of
this notice. Such comments, and responses thereto, will be published in
the Federal Register and filed with the Court. Comments should be
directed to Joseph Miller, Assistant Chief, Litigation I Section,
Antitrust Division, Department of Justice, 1401 H Street, NW., Suite
4000, Washington, DC 20530 (202-307-0001).
J. Robert Kramer II,
Director of Operations, Antitrust Division.
The United States District Court for the District of Columbia
United States of America, Department of Justice, Antitrust
Division, 1401 H Street, NW., Suite 4000, Washington, DC 20530,
Plaintiff, v. Abitibi-Consolidated Inc., 1155 Metcalfe Street, Suite
800, Montr[eacute]al, QC H3B 5H2, Canada, and Bowater Incorporated, 55
E. Camperdown Way, Greenville, SC 29601, Defendants; Case No.:--------.
Case: 1:07-cv-01912, Assigned To: Collyer, Rosemary M., Assign.
Date: 10/23/2007, Description: Antitrust.
Complaint
The United States of America, acting under the direction of the
Acting Attorney General of the United States, brings this civil action
to enjoin the proposed merger of Defendants Abitibi-Consolidated Inc.
(``Abitibi'') and Bowater Incorporated (``Bowater''). The United States
alleges as follows:
I. Nature of the Action
1. On January 29, 2007, Abitibi and Bowater announced plans to
merge into a new company to be called AbitibiBowater Inc. in a
transaction valued at $1.6 billion.
2. Abitibi and Bowater are the two largest newsprint producers in
North America. The combination of these two firms will create a
newsprint producer three times larger than the next largest North
American newsprint producer. After the merger, the combined firm will
have the incentive and ability to withdraw capacity and raise newsprint
prices in the North American newsprint market.
3. Unless the proposed transaction is enjoined, Defendants' merger
will substantially lessen competition in the production and sale of
newsprint, in violation of section 7 of the Clayton Act, 15 U.S.C. 18.
II. Jurisdiction and Venue
4. The United States brings this action under section 15 of the
Clayton Act, as amended, 15 U.S.C. 25, to prevent and restrain
Defendants from violating section 7 of the Clayton Act, 15 U.S.C. 18.
5. Both Defendants produce and sell newsprint in the flow of
interstate commerce. Defendants' production and sale of newsprint
substantially affect interstate commerce. This Court has subject matter
jurisdiction over this action pursuant to section 15 of the Clayton
Act, 15 U.S.C. 25 and 28 U.S.C. 1331, 1337(a), and 1345.
6. Defendants have consented to venue and personal jurisdiction in
this judicial district.
III. Defendants to the Proposed Transaction
7. Abitibi, the largest newsprint supplier in North America, is a
Canadian corporation with its principal place of business in
Montr[eacute]al, Quebec, Canada. Abitibi produces and sells newsprint
to customers around the world. Abitibi owns and operates, either solely
or with other firms, eleven paper mills in the United States and Canada
that currently produce newsprint, as well as one mill in the United
Kingdom. In 2006, Abitibi's total sales were approximately $4.85
billion, including
[[Page 63188]]
approximately $1.7 billion in aggregate North American newsprint sales.
8. Bowater, the second-largest newsprint supplier in North America,
is incorporated in Delaware with its principal place of business in
Greenville, South Carolina. Bowater owns and operates, either solely or
with other firms, eight paper mills in the United States and Canada
that currently produce newsprint, as well as one mill in South Korea.
In 2006, Bowater's total sales were approximately $3.53 billion,
including approximately $1.1 billion in aggregate North American
newsprint sales.
IV. Trade and Commerce
A. The Relevant Market
1. Product Market: Newsprint
9. Newsprint is the lowest grade of uncoated groundwood paper
(i.e., paper manufactured from mechanically processed pulp). In 2006,
approximately 9.745 million metric tonnes of newsprint were sold in
North America. Newspaper publishers purchase more than 80 percent of
the available newsprint supply to print newspapers. Some newsprint also
is used in the production of direct mail and newspaper inserts.
10. Newspaper publishers have no close substitutes for newsprint to
use for printing newspapers. Newsprint is generally the least expensive
paper grade. In addition, publishers' newspaper presses are optimized
for newsprint and cannot be modified to use other paper grades without
incurring significant costs.
11. Newsprint used for other purposes constitutes only a small
share of total sales. While a small but significant increase in the
price of newsprint may cause some customers for these other uses to
switch to other grades of groundwood paper or otherwise reduce their
consumption of newsprint, those losses would not be sufficient to make
such a price increase unprofitable.
12. For these reasons, demand for newsprint is highly inelastic
with respect to changes in price. Accordingly, the production and sale
of newsprint is a distinct line of commerce and a relevant product
market within the meaning of the Clayton Act.
2. Geographic Market: North America
13. The relevant geographic market for the sale of newsprint is no
smaller than the United States and Canada (``North America'').
Newsprint can be transported within the United States and Canada at a
sufficiently low cost and in such a timely and reliable manner that an
attempt to increase price anticompetitively in any smaller region of
the United States or North America would prove unprofitable. In the
event of such an attempted price increase, customers could readily and
economically shift their purchases to newsprint producers throughout
North America.
14. The relevant geographic market is no broader than North
America. Foreign imports account for approximately two percent of North
American newsprint consumption. Transportation costs of importing
newsprint are relatively high, and customers are concerned about the
reliability of foreign newsprint supply. Consequently, a small but
significant increase in the price of newsprint will not likely cause
customers to purchase sufficient volumes of additional newsprint from
outside of North America to make such a price increase unprofitable.
15. Accordingly, North America is a relevant geographic market
within the meaning of the Clayton Act.
B. Anticompetitive Effects
16. The proposed transaction likely will substantially reduce
competition in the North American newsprint market. Abitibi and Bowater
are the two largest producers of newsprint in North America and compete
directly against one another to produce and sell newsprint. Abitibi and
Bowater currently own approximately 25 percent and 16 percent of
capacity, respectively, which will result in a post-merger share of
over 40 percent.
17. Demand for newsprint in the North American market has declined
over the last several years at a rate of approximately 5 to 10 percent
per year because of a significant decline in demand for newspapers. As
a result, North American newsprint producers have closed, idled, or
converted some of their newsprint capacity. This decline in the demand
for newsprint is projected to continue, and the resulting excess
newsprint capacity will likely lead Defendants and their competitors to
close, idle, or convert more newsprint mills.
18. But for the merger, following the anticipated demand-based
reductions in capacity, neither Abitibi nor Bowater acting alone would
be of sufficient size to profitably increase the price of newsprint by
reducing its own output through strategically closing, idling, or
converting its capacity.
19. The proposed transaction would combine Defendants' large share
of newsprint capacity, thereby expanding the quantity of newsprint
sales over which the merged firm would benefit from a price increase.
This would provide the merged firm with an incentive to close capacity
sooner than it otherwise would to raise prices and profit from the
higher margins on its remaining capacity.
C. Neither Supply Responses Nor Entry Will Defeat an Exercise of Market
Power
20. Neither the combined firm's North American competitors, nor
producers from outside of the North American market, can, individually
or collectively, increase their newsprint sales to North American
customers to make a price increase by the merged firm unprofitable.
Additionally, entry by a new competitor would not be timely, likely, or
sufficient to defeat an exercise of market power by the merged firm.
The merged firm will therefore have both the incentive and the ability
to impose an anticompetitive price increase.
21. While some North American newsprint competitors currently have
some limited excess capacity, that capacity will be reduced by the
closure or conversion of unprofitable newsprint mills or machines in
response to falling demand for newsprint. Once this newsprint capacity
exits the market, the merged firm then will be able profitably to
exercise market power.
22. North American newsprint competitors would not defeat an
anticompetitive price increase by restarting their closed or idled
newsprint capacity in response to such a price increase. The increased
revenue from restarting a machine or mill would not outweigh the start-
up costs, particularly in a declining market.
23. Producers currently manufacturing other coated and uncoated
grades of paper are not likely to switch to producing newsprint in
response to a price increase. Declining demand for newsprint has caused
several producers to invest substantial capital to convert machines
that had previously been producing newsprint to machines that produce
grades of paper that return higher margins. These producers would not
find it profitable to switch back to newsprint to defeat an exercise of
market power by the merged firm.
24. North American newsprint producers currently export some of
their newsprint. Some of these newsprint exports likely would be
directed back to the North American market in response to a price
increase. However, this repatriation of newsprint will be insufficient,
even in combination with other competitive responses, to discipline an
exercise of market power by the combined firm. Abitibi and Bowater
collectively produce over 65
[[Page 63189]]
percent of the newsprint exported from North America and would have no
incentive to repatriate such exports. In addition, most of the
remaining exports by North American producers are sold pursuant to
long-term sales arrangements and relationships and therefore are
unlikely to be repatriated in response to a price increase in North
America.
25. Successful entry into the manufacturing and distribution of
newsprint is difficult, time consuming, and costly. New entry requires
investing hundreds of millions of dollars in equipment and facilities,
extensive environmental permitting, and the establishment of a reliable
distribution system and work force. Particularly given that demand for
newsprint is declining in North America, a new entrant would not find
it profitable to build a new newsprint mill in response to a price
increase, and could not do so within two years.
26. Accordingly, neither entry nor industry supply responses to a
price increase for newsprint in North America will deter the likely
exercise of market power by the combined firm.
V. Violation Alleged
27. The likely effect of the proposed merger of Abitibi and Bowater
may be substantially to lessen competition in interstate trade and
commerce in violation of section 7 of the Clayton Act, 15 U.S.C.
section 18.
28. Unless restrained, the proposed transaction likely will have
the following effects, among others:
(a) Competition likely will be lessened substantially in the
production and sale of newsprint in North America;
(b) actual and potential competition between Abitibi and Bowater in
the production and sale of newsprint in North America will be
eliminated; and
(c) prices charged for newsprint in North America likely will
increase.
VI. Requested Relief
31. The United States requests that:
(a) The proposed transaction be adjudged and decreed to be unlawful
and in violation of Section 7 of the Clayton Act, 15 U.S.C. 18;
(b) Defendants and all persons acting on their behalf be
permanently enjoined and restrained from consummating the proposed
transaction or from entering into or carrying out any contract,
agreement, understanding, or plan, the effect of which would be to
combine the businesses or assets of Defendants;
(c) Plaintiff be awarded its costs for this action; and
(d) Plaintiff receive such other and further relief as the Court
may deem just and proper.
Respectfully submitted.
Deborah A. Garza (DC Bar No. 395259),
Acting Assistant Attorney General, Antitrust Division.
James J. O'Connell (DC Bar No. 464109),
Acting Deputy Assistant Attorney General, Antitrust Division.
J. Robert Kramer II,
Director of Operations, Antitrust Division.
Joseph Miller (DC Bar No. 439965),
Assistant Chief, Litigation I Section, Antitrust Division.
Karl D. Knutsen, Ryan Danks, Mitchell Glende, Seth A. Grossman, N.
Christopher Hardee (DC Bar No. 458168), David Kelly, Ihan Kim,
Rebecca A. Perlmutter,
Attorneys, U.S Department of Justice, Antitrust Division, Litigation
I Section, 1401 H Street, NW., Suite 4000, Washington, DC 20530,
(202) 514-0976.
Dated: October 23, 2007.
The United States District Court for the District of Columbia
United States of America, Plaintiff, v. Abitibi-Consolidated Inc.
and Bowater Incorporated, Defendants; Case No.:--------, Judge:--------
, Deck Type: Antitrust, Date Stamp:--------.
Final Judgment
Whereas, Plaintiff, United States of America, filed its Complaint
on October 23, 2007, and Plaintiff and Defendants, Abitibi-Consolidated
Inc. (``Abitibi'') and Bowater Incorporated (``Bowater''), by their
respective attorneys, have consented to the entry of this Final
Judgment without trial or adjudication of any issue of fact or law, and
without this Final Judgment constituting any evidence against or
admission by any party regarding any issue of fact or law;
And whereas, Defendants agree to be bound by the provisions of this
Final Judgment pending its approval by the court;
And whereas, the essence of this Final Judgment is the prompt and
certain divestiture of certain rights or assets by Defendants to assure
that competition is not substantially lessened;
And whereas, the United States requires Defendants to make certain
divestitures for the purpose of remedying the loss of competition
alleged in the Complaint;
And whereas, Defendants have represented to the United States that
the divestitures required below can and will be made and that
Defendants will later raise no claim of hardship or difficulty as
grounds for asking the Court to modify any of the divestiture
provisions contained below;
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is ordered, adjudged, and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against Defendants under section 7 of the Clayton
Act, 15 U.S.C. 18.
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' means the entity or entities to whom Defendants
divest some or all of the Divestiture Assets.
B. ``Abitibi'' means Defendant Abitibi-Consolidated Inc., a
Canadian corporation with its headquarters in Montr[eacute]al, Quebec,
Canada, its successors and assigns, and its subsidiaries, divisions,
groups, affiliates, partnerships and joint ventures, and their
directors, officers, managers, agents, and employees.
C. ``Bowater'' means Defendant Bowater Incorporated, a Delaware
corporation with its headquarters in Greenville, South Carolina, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships and joint ventures, and their directors,
officers, managers, agents, and employees.
D. ``Newsprint'' means the lowest grade of uncoated groundwood
paper (i.e., paper manufactured from mechanically processed pulp),
regardless of its basis weight. It is primarily used in the production
of newspaper, but also used in some advertising inserts, comic books,
trade publications, and direct mail, among other end-use products.
E. ``Divestiture Assets'' means:
(1) Abitibi's Snowflake, Arizona newsprint mill, located at Spur
277 North, Snowflake, Arizona 85937;
(2) All tangible assets used in the mill listed in section
II(E)(1), including all assets relating to research and development
activities, manufacturing equipment, tooling and fixed assets, real
property (leased or owned), personal property, inventory, newsprint
reserves, office furniture, materials, supplies, docking facilities,
on- or off-site warehouses or storage facilities relating to the mill,
Apache Railway Company assets; all licenses, permits and authorizations
issued by any governmental organization relating to the mill; all
contracts, agreements, leases (including renewal rights), commitments,
certifications, and understandings relating to the mill, including
supply agreements; all customer lists, contracts, accounts, and
[[Page 63190]]
credit records relating to the mill; all interests in, and contracts
relating to, power generation; all repair and performance records and
all other records relating to the mill; and
(3) all tangible assets used in the development, production,
servicing, distribution, and sales of products manufactured by the mill
listed in section II(E)(1), including but not limited to all
contractual rights, patents, licenses and sublicenses, intellectual
property, technical information, computer software and related
documentation, know-how, trade secrets, drawings, blueprints, designs,
design protocols, specifications for materials, specifications for
parts and devices, safety procedures for the handling of materials and
substances, quality assurance and control procedures, design tools and
simulation capability, all manuals and technical information provided
to the employees, customers, suppliers, agents or licensees, and all
research data concerning historic and current research and development
efforts relating to the mill, including, but not limited to designs of
experiments, and the results of successful and unsuccessful designs and
experiments.
III. Applicability
A. This Final Judgment applies to Defendants, as defined above, and
all other persons in active concert or participation with Defendants
who receive actual notice of this Final Judgment by personal service or
otherwise.
B. If, prior to complying with section IV and V of this Final
Judgment, Defendants sell or otherwise dispose of all or substantially
all of their assets that include the Divestiture Assets, they shall
require, as a condition of the sale or other disposition, that the
purchaser agrees to be bound by the provisions of this Final Judgment.
Defendants need not obtain such an agreement from the Acquirer of the
assets divested pursuant to this Final Judgment.
IV. Divestitures
A. Defendants are ordered and directed, within 120 calendar days
after the filing of the Complaint in this matter, or five (5) days
after notice of the entry of this Final Judgment by the Court,
whichever is later, to divest the Divestiture Assets in a manner
consistent with this Final Judgment to an Acquirer acceptable to the
United States in its sole discretion. The United States, in its sole
discretion, may agree to one or more extensions of this time period not
to exceed sixty (60) days in total, and shall notify the Court in such
circumstances. Defendants agree to use their best efforts to divest the
Divestiture Assets as expeditiously as possible.
B. In accomplishing the divestitures ordered by the Final Judgment,
Defendants promptly shall make known, by usual and customary means, the
availability of the Divestiture Assets. Defendants shall inform any
person making inquiry regarding a possible purchase of the Divestiture
Assets that they are being divested pursuant to this Final Judgment and
provide that person with a copy of this Final Judgment. Unless the
United States otherwise consents in writing, Defendants shall offer to
furnish to all prospective Acquirers, subject to customary
confidentiality assurances, all information and documents relating to
the Divestiture Assets that customarily are provided in a due diligence
process except such information or documents subject to the attorney-
client or work-product privilege. Defendants shall make available such
information to the United States at the same time that such information
is made available to any other person.
C. Unless the United States otherwise consents in writing,
Defendants shall provide the Acquirer and the United States information
relating to personnel involved in production, operations, and sales at
the Divestiture Assets to enable the Acquirer to make offers of
employment. Defendants will not interfere with any negotiations by the
Acquirer to employ any employee of the Divestiture Assets whose primary
responsibility is production, operations, or sales at the Divestiture.
D. Unless the United States otherwise consents in writing,
Defendants shall permit prospective Acquirers of the Divestiture Assets
to have reasonable access to personnel and to make inspections of the
physical facilities of the Divestiture Assets; access to any and all
environmental, zoning, and other permit documents and information; and
access to any and all financial, operational, and other documents and
information customarily provided as part of a due diligence process.
E. Defendants shall warrant to the Acquirer of the Divestiture
Assets that each asset will be operational on the date of sale.
F. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
G. At the option of the Acquirer, Defendants shall enter into a
fiber supply contract for old newsprint (ONP) sufficient to meet 25% of
the Acquirer's needs for a period of up to three (3) years from the
date of the divestiture. The terms and conditions of any such contract
must be reasonably related to market conditions for old newsprint and
the purchase price shall be set at the prevailing market price.
H. At the option of the purchaser and upon approval by the United
States, in its sole discretion, Defendants may enter into a transition
services agreement based upon commercial terms and conditions. Such an
agreement may not exceed twelve (12) months from the date of the
Divestiture. Transition services may include information technology
support, information technology licensing, computer operations and data
processing support, logistics support, and such other services as are
reasonably necessary to operate the Divestiture Assets.
1. For the period from the date of the filing of the Complaint in
this matter until one (1) year after the sale of the Divestiture
Assets, Defendants shall make available and deliver to the Divestiture
Assets within seven (7) business days the spare ceramic center roll
from Abitibi's Thorold, Ontario newsprint mill if: (a) the Acquirer or
the person identified in Section V(K), whomever is in control of the
Divestiture Assets at the time, determines that the Divestiture Assets'
PM 3 machine requires a new ceramic center roll and (b) the Divestiture
Assets' permanent spare ceramic center roll, which has already been
ordered, has not been delivered. If Defendants become obligated to
deliver the spare ceramic center roll, then they may identify a
suitable alternative ceramic center roll and request permission from
the United States, in its sole discretion, to deliver the alternative
center roll to the Divestiture Assets in place of the Thorold center
roll. Such permission must be in writing. In any event, Defendants must
deliver the Thorold center roll or an approved substitute to the
Divestiture Assets within seven (7) business days of being notified of
the need for the Thorold roll. Defendants will no longer be obligated
to provide a ceramic center roll to the Divestiture Assets if either of
the ceramic center rolls in Thorold's PM 6 or PM 7 machines break
before the Divestiture Assets require a new ceramic center roll.
J. Defendants shall warrant to the Acquirer that there are no
material defects in the environmental, zoning, or other permits
pertaining to the operation of the Divestiture Assets, and that
following the sale of the Divestiture Assets, Defendants will not
undertake, directly or indirectly, any challenges to the environmental,
zoning, or other
[[Page 63191]]
permits relating to the operation of the Divestiture Assets.
K. Unless the United States otherwise consents in writing, any
divestiture pursuant to section IV, or by trustee appointed pursuant to
section V, of this Final Judgment, shall include the entire Divestiture
Assets, and shall be accomplished in such a way as to satisfy the
United States, in its sole discretion, that the Divestiture Assets can
and will be used by the Acquirer as a viable, ongoing business engaged
in producing, distributing, and selling newsprint, that the Divestiture
Assets will remain viable, and that the divestiture of such asset will
remedy the competitive harm alleged in the Complaint. The divestitures,
whether pursuant to section IV or section V of this Final Judgment,
(1) Shall be made to an Acquirer that, in the United States' sole
judgment, has the intent and capability (including the necessary
managerial, operational, technical, and financial capability) to
compete effectively in the production, distribution, and sale of
newsprint; and
(2) Shall be accomplished so as to satisfy the United States, in
its sole discretion, that none of the terms of any agreement between
Acquirer and Defendants gives Defendants the ability to unreasonably
raise the Acquirer's costs, to lower the Acquirer's efficiency, or
otherwise to interfere in the ability of the Acquirer to compete
effectively in the production, distribution, and sale of newsprint.
V. Appointment of Trustee To Effect Divestitures
A. If Defendants have not divested the Divestiture Assets within
the time period specified in section IV(A), Defendants shall notify the
United States of that fact in writing. Upon application of the United
States, the Court shall appoint a trustee selected by the United States
and approved by the Court to effect the divestiture of the Divestiture
assets.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell the Divestiture Assets. The
trustee shall have the power and authority to accomplish the
divestiture to an Acquirer acceptable to the United States at such
price and on such terms as are then obtainable upon reasonable effort
by the trustee, subject to the provisions of section IV, V, and VI of
this Final Judgment, and shall have such other powers as this Court
deems appropriate. Subject to paragraph V(D) of this Final Judgment,
the trustee may hire at the cost and expense of Defendants any
investment bankers, attorneys, or other agents, who shall be solely
accountable to the trustee, reasonably necessary in the trustee's
judgment to assist in the divestiture.
C. Defendants shall not object to a sale by the trustee on any
ground other than the trustee's malfeasance. Any such objection by
Defendants must be conveyed in writing to the United States and the
trustee within ten (10) calendar days after the trustee has provided
the notice required under section VI.
D. The trustee shall serve at the cost and expense of Defendants,
on such terms and conditions as the United States approves, and shall
account for all monies derived from the sale of the Divestiture Assets
sold by the trustee and all costs and expenses so incurred. After
approval by the Court of the trustee's accounting, including fees for
its services and those of any professionals and agents retained by the
trustee, all remaining money shall be paid to Defendants and the trust
shall then be terminated. The compensation of the trustee and any
professionals and agents retained by the trustee shall be reasonable in
light of the value of the Divestiture Assets and based on a fee
arrangement providing the trustee with an incentive based on the price
and terms of the divestiture and the speed with which it is
accomplished, but timeliness is paramount.
E. Defendants shall use their best efforts to assist the trustee in
accomplishing the required divestiture. The trustee and any
consultants, accountants, attorneys, and other persons retained by the
trustee shall have full and complete access to the personnel, books,
records, and facilities of the business to be divested, and Defendants
shall develop financial and other information relevant to such business
as the trustee may reasonably request, subject to reasonable protection
for trade secrets or other confidential research, development, or
commercial information. Defendants shall take no action to interfere
with or to impede the trustee's accomplishment of the divestiture.
F. After its appointment, the trustee shall file monthly reports
with the United States and the Court setting forth the trustee's
efforts to accomplish the divestiture ordered under this Final
Judgment. To the extent such reports contain information that the
trustee deems confidential, such reports shall not be filed in the
public docket of the Court. Such reports shall include the name,
address, and telephone number of each person who, during the preceding
month, made an offer to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was contacted or made an
inquiry about acquiring the Divestiture Assets, and shall describe in
detail each contact with any such person. The trustee shall maintain
full records of all efforts made to divest the Divestiture Assets.
G. If the trustee has not accomplished such divestiture within six
(6) months after its appointment, the trustee shall promptly file with
the Court a report setting forth: (1) The trustee's efforts to
accomplish the required divestiture; (2) the reasons, in the trustee's
judgment, why the required divestiture has not been accomplished; and
(3) the trustee's recommendations. To the extent such report contains
information that the trustee deems confidential, such report shall not
be filed in the public docket of the Court. The trustee shall at the
same time furnish such report to the United States, who shall have the
right to make additional recommendations consistent with the purpose of
the trust. The Court thereafter shall enter such orders as it shall
deem appropriate to carry out the purpose of the Final Judgment, which
may, if necessary, include extending the trust and term of the
trustee's appointment by a period requested by the United States.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following execution of a definitive
divestiture agreement, Defendants or the trustee, whichever is then
responsible for effecting the divestiture required herein, shall notify
the United States of any proposed divestiture required by section IV or
V of this Final Judgment. If the trustee is responsible, it shall
similarly notify Defendants. The notice shall set forth the details of
the proposed divestiture and list the name, address, and telephone
number of each person not previously identified who offered or
expressed an interest in or desire to acquire any ownership interest in
the Divestiture Assets, together with full details of the same.
B. Within fifteen (15) calendar days of receipt by the United
States of such notice, the United States may request from Defendants,
the proposed Acquirer, any other third party, or the trustee, if
applicable, additional information concerning the proposed divestiture,
the proposed Acquirer, and any other potential Acquirer. Defendants and
the trustee shall furnish any additional information requested within
fifteen (15) calendar days of the receipt of the request, unless the
parties shall otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice, or
within
[[Page 63192]]
twenty (20) calendar days after the United States has been provided the
additional information requested from Defendants, the proposed
Acquirer, any third party, or the trustee, whichever is later, the
United States shall provide written notice to Defendants and the
trustee, if there is one, stating whether or not it objects to the
proposed divestiture. If the United States provides written notice that
it does not object, the divestiture may be consummated, subject only to
Defendant's limited right to object to the sale under section V(C) of
this Final Judgment. Absent written notice that the United States does
not object to the proposed Acquirer or upon objection by the United
States, a divestiture proposed under section IV or section V shall not
be consummated. Upon objection by Defendants under paragraph V(C), a
divestiture proposed under section V shall not be consummated unless
approved by the Court.
VII. Asset Preservation
Until the divestiture required by this Final Judgment has been
accomplished, Defendants shall take all steps necessary to comply with
the Asset Preservation Stipulation and Order entered by this Court.
Defendants shall take not action that would jeopardize the divestiture
ordered by this Court.
VIII Affidavits
A. Within twenty (20) calendar days of filing of the Complaint in
this matter, and every thirty (30) calendar days thereafter until
divestitures have been completed under section VI or V, Defendants
shall deliver to the United States an affidavit as to the fact and
manner of its compliance with section VI or V of this Final Judgment.
Each such affidavit shall include the name, address, and telephone
number of each person who, during the preceding thirty days, made an
offer to acquire, expressed an interest in acquiring, entered into
negotiations to acquire, or was contacted or made an inquiry about
acquiring, any interest in the Divestiture Assets, and shall describe
in detail each contact with any such person during the period. Each
such affidavit shall also include a description to the efforts
Defendants have take to solicit buyers for the Divestiture Assets, and
to provide required information to any prospective Acquirer, including
the limitations, if any, on such information. Assuming the information
set forth in the affidavit is true and complete, any objection by the
United States to information provided by Defendants, including
limitations on the information, shall be made within fourteen (14)
calendar days of receipt of such affidavit.
B.. Within twenty (20) calendar days of the filing of the Complaint
in this matter, Defendants shall deliver to the United States an
affidavit that describes in reasonable detail all actions Defendants
have taken and all steps they have implemented on an ongoing basis to
comply with section VII of this Final Judgment. Defendants shall
deliver to the United States an affidavit describing any changes to the
efforts and actions outlined in Defendants' earlier affidavits filed
pursuant to this section within fifteen (15) calendar days after the
change is implemented.
C. Defendants shall keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after such
divestiture has been completed.
IX. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of determining whether the Final Judgment should be
modified or vacated, and subject to any legally recognized privilege,
from time to time duly authorized representatives of the United States
Department of Justice, including consultants and other persons retained
by the United States, shall upon written request of a duly authorized
representative of the Assistant Attorney General in charge of the
Antitrust Division, and on reasonable notice to Defendants, be
permitted:
(1) Access during Defendants' office hours to inspect and copy,
or at the United States's option, to require Defendants to provide
electronic or hard copies of, all books, ledgers, accounts, records,
data, and documents in the possession, custody, or control of
Defendants, relating to any matters contained in this Final
Judgment; and
(2) To interview, either informally or on the record,
Defendants' officers, employees, or agents, who may have their
individual counsel present, regarding such matters. The interviews
shall be subject to the reasonable convenience of the interviewee
and without restraint or interference by Defendants.
B. Upon the written request of a duly authorized representative of
the Assistant Attorney General in charge of the Antitrust Division,
Defendants shall submit written reports or responses to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. If, at the time information or documents are furnished by
Defendants to the United States, Defendants represent and identify in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(7) of the Federal
Rules of Civil Procedure, and Defendants mark each pertinent page of
such material, ``Subject to claim of protection under Rule 26(c)(7) of
the Federal Rules of Civil Procedure,'' then the United States shall
give Defendants ten (10) calendar days notice prior to divulging such
material in any legal proceeding (other than a grand jury proceeding).
X. Notification of Future Transactions
A. Unless such transaction is otherwise subject to the reporting
and waiting period requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''),
Defendants shall not, without notifying the United States, directly or
indirectly acquire any assets or any interest, including any financial,
security, loan, equity, or management interest, in any of Defendants'
jointly-owned newsprint mills or machines if the value of such
acquisition exceeds $2,000,000. Defendants are exempted from this
notice provision if either (1) from the date of the filing of the
Complaint in this matter, the acquisition accounts for less than a 5%
change in any interest and does not change control in any of
Defendants' jointly-owned mills or machines, or (2) the acquisition is
the direct result of an asset swap between one of Defendants' jointly-
owned mills or machines to another of Defendants' mills or machines of
the same character, and (3) such transaction is not otherwise subject
to the requirements of the HSR Act. This notification requirement shall
run for a period of ten (10) years from the entry of this Final
Judgment.
Provided, however, that the following transactions shall be exempt
from the notice requirement: (1) Defendants further investing in a pre-
existing jointly-owned mill or machine on a pro-rata basis with
Defendants' partner(s); and (2) loans (including guarantees and
security interests on loans) for the following purposes, provided that
they do not enable any distribution from the joint venture to
Defendants or Defendants' joint venture partner(s) that
[[Page 63193]]
would not have otherwise occurred: (i) Capital expenditures relating to
pre-existing jointly-owned mills or machines, (ii) working capital
transactions of the same character that Defendants have engaged in over
the past ten (10) years; (iii) debt repayment or refinancing which does
not impact equity share or the relative effective return between
Defendants and their partner(s); and (iv) mergers or acquisitions other
than those relating to newsprint mills or machines.
B. Such notification shall be provided to the United States in the
same format as, and per the instructions relating to, the Notification
and Report Form set forth in the Appendix to Part 803 of Title 16 of
the Code of Federal Regulations as amended, except that the information
requested in Items 5 through 9 of the instructions must be provided
only about newsprint, and the required filing fee under the HSR Act
shall be waived. Notification shall be provided at least thirty (30)
days prior to acquiring any such assets or interest, and shall include,
beyond what may be required by the applicable instructions, the names
of the principal representatives of the parties to the agreement who
negotiated the agreement, and any management or strategic plans
discussing the proposed transaction. This section shall be broadly
construed and any ambiguity or uncertainty regarding the filing of
notice under this section shall be resolved in favor of filing notice.
XI. No Reacquisition
Defendants may not reacquire any part of the Divestiture Assets
during the term of this Final Judgment.
XII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XIII. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten (10) years from the date of its entry.
XIV. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, and
any comments thereon and the United States's responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the court, entry of this Final Judgment is in the public interest.
Date:----------------
Court approval subject to procedures of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16.
-----------------------------------------------------------------------
United States District Judge.
The United States District Court for the District of Columbia
United States of America, Plaintiff, v. Abitibi-Consolidated Inc.
and Bowater Incorporated, Defendants; Case No.:--------.
Case: 1:07-cv-01912, Assigned To: Collyer, Rosemary M., Assign
Date: 10/23/2007, Description: Antitrust.
Competitive Impact Statement
Plaintiff United States of America (``United States''), pursuant to
section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
Defendants Abitibi-Consolidated Inc. (``Abitibi'') and Bowater
Incorporated (``Bowater'') entered into a merger agreement, dated
January 29, 2007, pursuant to which Defendants would merge to create a
new company, AbitibiBowater Inc. The United States filed a civil
antitrust complaint on October 23, 2007, seeking to enjoin the proposed
merger. The Complaint alleges that the likely effect of the merger
would be to lessen competition substantially in the production and
distribution of newsprint in North America in violation of section 7 of
the Clayton Act, 15 U.S.C. 18. This loss of competition likely would
result in higher newsprint prices in the United States. At the same
time the Complaint was filed, the United States also filed an Asset
Preservation Stipulation and Order (``Stipulation'') and a proposed
Final Judgment, which are designed to eliminate the anticompetitive
effects of the merger.
Under the proposed Final Judgment, which is explained more fully in
section III, Defendants are required to divest Abitibi's Snowflake,
Arizona, newsprint mill, which has approximately 375,000 metric tonnes
of newsprint manufacturing capacity. Until the mill is sold and
operated under the new ownership, Defendants must take certain steps to
ensure that the mill and its accompanying assets, as defined in the
proposed Final Judgment (hereafter, the ``Divestiture Assets''), are
operated as ongoing, economically viable, and competitive assets.
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. Description of the Events Giving Rise to the Alleged Violation
A. Defendants and the Proposed Transaction
Abitibi and Bowater both produce, distribute, and sell newsprint
and other groundwood paper throughout the world. Defendants also
produce other pulp and wood-related products, operate sawmills, and own
or lease timberlands throughout the United States and Canada.
Abitibi is a Canadian company with its headquarters in
Montr[eacute]al, Quebec, Canada. In 2006, Abitibi reported total sales
of approximately $4.85 billion. Its North American newsprint sales were
approximately $1.7 billion. Abitibi is the largest newsprint producer
in North America. It owns approximately 25 percent of North American
capacity.
Bowater is incorporated in Delaware, and has its headquarters in
Greenville, South Carolina. In 2006, Bowater reported total sales of
approximately $3.53 billion. Its North American newsprint sales were
approximately $1.1 billion. Bowater is the second largest newsprint
producer in North America. It owns approximately 16 percent of North
American capacity.
Defendants publicly announced their proposed transaction on January
29, 2007. The new company, AbitibiBowater Inc., will be headquartered
in Montr[eacute]al, Quebec, Canada, but it will be incorporated in
Delaware and listed on both NYSE and Toronto stock exchanges.
B. The Competitive Effects of the Transaction on the Newsprint Market
1. Newsprint is the Relevant Product Market
The Complaint alleges that the production, distribution, and sale
of newsprint is a relevant product market within the meaning of section
7 of the
[[Page 63194]]
Clayton Act. Newspapers are printed on newsprint. Newsprint is an
uncoated groundwood paper made by a mechanical pulping process without
the use of chemical additives, such as bleach. Newsprint can also be
made, partly or entirely, from recovered fiber, such as old newsprint
and old magazines. Because of the production process and lack of
additives, newsprint is the lowest quality and generally least
expensive grade of groundwood paper.\2\
---------------------------------------------------------------------------
\2\ There are two primary newsprint basis weights, 30 pound
(48.8 gsm) and 27.7 pound (45 gsm), the lighter of which has a
higher yield. The differences between the two weights are not
material to product market definition because prices for each basis
weight track each other, newspaper publishers can use either weight
in their presses, and newsprint manufacturers can produce either
weight on the same newsprint machines without incurring switching
costs.
---------------------------------------------------------------------------
Newspaper publishers, who buy more than 80 percent of all newsprint
sold in the United States, have no close substitutes to use for
printing newspapers because of newsprint's price and physical
characteristics, such as its strength and opacity. In addition, because
publishers' newsprint presses are optimized to use newsprint, switching
to another grade of paper would be costly.
Newsprint used for other purposes, primarily the production of
direct mail and newspaper inserts, constitutes only a small share of
total newsprint sales. If newsprint prices were to increase by a small
but significant amount, some customers for these other uses might
switch to other grades of groundwood paper or otherwise reduce their
consumption of newsprint. Those losses, however, would not be
sufficient to make such a price increase unprofitable.\3\ For these
reasons, demand for newsprint is highly inelastic to changes in price.
Accordingly, the production, distribution, and sale of newsprint is a
line of commerce and a relevant product market.
---------------------------------------------------------------------------
\3\ Defendants also produce higher-grade groundwood paper and
would be able to recapture some of the revenue lost from newsprint
in these other groundwood grades.
---------------------------------------------------------------------------
2. Relevant Geographic Market: North America
The Complaint alleges that the relevant geographic market is no
smaller than the United States and Canada (``North America'').\4\
Newsprint can be transported within the United States and Canada at a
sufficiently low cost and in such a timely and reliable manner that an
attempt to increase price in any smaller region of the United States or
North America would prove unprofitable. In the event of such an
attempted price increase, customers could readily and economically
shift their purchases to newsprint producers throughout North America.
In addition, national newspaper buying groups, which account for over
70 percent of all newsprint purchases throughout the United States,
create a North American pricing structure. Price differences across
regions within the United States have been small and short-lived, as
supply has shifted rapidly to restore parity marketwide.
---------------------------------------------------------------------------
\4\ The United States did not fully investigate whether Mexico
should be included in the North American market because the
inclusion or exclusion of Mexico does not change the analysis.
Mexico is not a significant producer of newsprint, it does not
export significant amounts of newsprint to the United States, and
the industry does not consider Mexico to be part of the North
American market.
---------------------------------------------------------------------------
The Complaint also alleges that the relevant geographic market is
no broader than North America. Newsprint mills located in Canada and
the United States account for approximately 98 percent of North
American newsprint consumption. Transportation costs of importing
newsprint are high, and customers are concerned about the reliability
of foreign newsprint supply. Consequently, a small but significant
increase in the price of newsprint will not likely cause customers to
purchase sufficient volumes of additional newsprint from outside North
America to make such a price increase unprofitable. Accordingly, North
America is a relevant geographic market.
3. Anticompetitive Effects of the Merger
The Complaint alleges that the proposed merger likely will
substantially reduce competition to supply newsprint in the United
States. Abitibi and Bowater are the two largest North American
newsprint producers, and they directly compete against one another to
produce and sell newsprint. Abitibi and Bowater currently own
approximately 25 percent and 16 percent of North American newsprint
capacity, respectively, which will result in a post-merger share of
over 40 percent.\5\
---------------------------------------------------------------------------
\5\ The 40 percent market share represents the merged firm's
newsprint capacity over which it would be able to profit from an
anticompetitive price increase. This share does not include
approximately nine percent of North American newsprint capacity
attributable to Abitibi and Bowater through joint-venture
relationships and a sales management contract. This volume is not
relevant to the competitive effects analysis because, under the
structure of these arrangements, Defendants would not be able to
benefit from a price increase on this capacity.
---------------------------------------------------------------------------
North American newsprint demand has declined over the last several
years at a rate of approximately 5 to 10 percent per year because of a
significant decline in demand for newspapers. As a result, North
American newsprint producers have closed or idled capacity and
converted some of their newsprint machines to produce other grades of
paper. This decline in demand for newsprint is projected to continue,
and the resulting excess newsprint capacity likely will lead Defendants
and their competitors to close, idle, or convert more newsprint mills.
But for the merger, neither Defendant acting alone would be of
sufficient size to profitably increase the price of newsprint by
reducing its own output through strategically closing, idling, or
converting its capacity.
The combination enhances Defendants' incentives to exercise market
power because the merged firm will control a greater base of capacity
over which the merged firm would benefit from an increase in newsprint
prices after strategically closing, idling, or converting some of its
capacity. Without Snowflake's capacity, the merged firm would not be of
sufficient size to be able to recoup the losses from such strategic
closures through increases in prices on its remaining newsprint
production. The divestiture of Snowflake would adequately address the
likelihood that the proposed merger substantially would reduce
competition for newsprint in the United States.
4. Neither Supply Responses Nor Entry Will Defeat the Exercise of
Market Power
Neither the combined firm's North American producers, nor
competitors from outside of the North American market, can,
individually or collectively, increase their newsprint sales to North
American customers to make a price increase by the merged firm
unprofitable. Entry by a new competitor would not be timely, likely, or
sufficient to defeat an exercise of market power by the merged firm.
The merged firm will therefore have both the incentive and the ability
to impose an anticompetitive price increase.
While North American newsprint competitors currently have some
limited excess capacity, that capacity will be reduced by the closure
or conversion of unprofitable newsprint mills or machines in response
to falling demand for newsprint. Once this capacity exits the market,
the merged firm then will be able profitably to exercise market power.
North American newsprint competitors would not defeat an
anticompetitive price increase by restarting their closed or idled
capacity. The increased revenue from restarting a closed mill or
machine would not
[[Page 63195]]
outweigh the start-up costs, particularly in a declining market.
North American producers with the capacity to make higher-grade
groundwood paper are not likely to switch production from those grades
into newsprint production in response to a price increase. Declining
demand for newsprint has caused several producers to invest substantial
capital to convert newsprint machines to produce more profitable value-
added grades of paper. These producers would not find it profitable to
switch from producing higher grades back to newsprint to defeat an
exercise of market power by the merged firm.
Some North American producers export a portion of their newsprint
capacity. Some of these newsprint exports likely would be directed back
to the North American market in response to a price increase. However,
this repatriation of newsprint will be insufficient, even in
combination with other competitive responses, to discipline an exercise
of market power by the combined firm. Abitibi and Bowater collectively
produce 65 percent of North American newsprint exports, and would have
no incentive to repatriate their exports to defeat a price increase. In
addition, most of the remaining exports by North American producers are
sold pursuant to long-term sales arrangements and relationships and,
therefore, are unlikely to be repatriated in response to a price
increase.
Greenfield entry is highly unlikely. A new North American newsprint
mill or machine would cost in excess of a hundred million dollars.
Particularly given that demand for newsprint is declining in North
America, a new entrant would not find it profitable to build a new
newsprint mill in response to a price increase, and could not do so
within two years.
Accordingly, expansion, repatriation, and entry would not be
timely, likely, or sufficient to deter an anticompetitive price
increase by the merged firm.
III. Explanation of the Proposed Final Judgment
The proposed Final Judgment provides for the divestiture of
Abitibi's Snowflake, Arizona, newsprint mill to a buyer acceptable to
the United States, in its sole discretion, to preserve competition for
newsprint in the United States. Snowflake is located in northeastern
Arizona. In 2006, Snowflake produced over 330,000 metric tonnes of
newsprint on two machines. Snowflake is one of the most efficient and
profitable newsprint mills in North America. Plans to improve the
Snowflake mill's efficiency in coming years with investments in energy
and machinery are already underway. Snowflake's size and cost position
ensure that its divestiture to a competitor of the merged firm will
preserve competition in the North American newsprint market.
As part of its investigation, the United States considered market
shares, costs of production, the extent of industry excess capacity,
and future reductions in newsprint demand in analyzing whether the
merger would cause an anticompetitive increase in newsprint prices. As
discussed in Section II.B.3, if Defendants were allowed to merge
without a divestiture, the merged firm would be able to close its
capacity strategically, allowing the merged firm to raise newsprint
prices and recoup its lost profits on its combined output. Divesting
Snowflake, however, will reduce the capacity over which the merged firm
could profit to a level at which it would not have the ability to close
capacity strategically.
Snowflake uses 100 percent recycled fiber and Abitibi currently
supplies the snowflake mill with approximately 25 to 30 percent of its
fiber requirements. At the option of the Acquirer, the proposed Final
Judgment requires Defendants to enter into a supply contract for up to
25 percent of Snowflake's old newsprint requirements at the prevailing
market price for up to three years from the date of the divestiture.
Similarly, at the option of the Acquirer, and upon the approval of the
United States, the proposed Final Judgment also requires Defendants to
provide certain transition services for up to twelve (12) months as
part of the divestiture.
In merger cases where the United States seeks a divestiture remedy,
it requires completion of the divestiture within the shortest time
period reasonable under the circumstances. Section IV of the proposed
Final Judgment requires Defendants to complete the divestiture within
120 days after the filing of the Complaint in this matter. The assets
must be divested in such a way as to satisfy the United States in its
sole discretion that the operations can and will be operated by the
purchaser as a viable, ongoing business than can compete effectively in
the relevant market. The United States, in its sole discretion, may
grant one or more extensions of time, not to exceed sixty (60) calendar
days in total. Defendants must use their best efforts to accomplish the
divestiture as expeditiously as possible.
If Defendants do not accomplish the divestiture within the period
prescribed in the proposed Final Judgment, a trustee shall be appointed
by the Court upon the application of the United States. If a trustee is
appointed, the proposed Final Judgment provides that Defendants will
pay all costs and expenses of the trustee. The trustee's commission
will be structured so as to provide an incentive for the trustee based
on the price obtained and the speed with which the divestiture is
accomplished. After his or her appointment becomes effective, the
trustee will file monthly reports with the Court and the United States
setting forth his or her efforts to accomplish the divestiture. If the
divestiture has not been accomplished at the end of the six months, the
trustee and the United States will make recommendations to the Court,
which shall enter such orders as appropriate in order to carry out the
purpose of the trust, including extending the trust or the term of the
trustee's appointment.
Finally, the proposed Final Judgment sets forth the process for and
the circumstances when Defendants must notify the United States of the
acquisition of any mill or machine or any interest in a mill or
machine, if the value of such exceeds $2,000,000, that is currently
jointly-owned by either Abitibi or Bowater with any third party. This
notification requirement applies to certain transactions not otherwise
subject to the reporting and waiting period requirements under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and runs for ten
years from entry of the Final Judgment. The provision is intended to
ensure that any such acquisition does not undermine the benefits that
the divestiture of the Snowflake mill will bring to the market.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against the defendants.
[[Page 63196]]
V. Procedures Available For Modification of the Proposed Final Judgment
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty days of the date of publication of this Competitive Impact
Statement in the Federal Register. All comments received during this
period will be considered by the Department of Justice, which remains
free to withdraw its consent to the proposed Final Judgment at any time
prior to the Court's entry of judgment. The comments and the response
of the United States will be filed with the Court and published in the
Federal Register.
Written comments should be submitted to: Joseph Miller, Assistant
Chief, Litigation I Section, 1401 H St. NW., Suite 4000, Antitrust
Division, United States Department of Justice, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
final Judgment, a full trial on the merits against Defendants. The
United States could have continued the investigation and sought
preliminary and permanent injunctions against Abitibi and Bowater's
proposed merger. the United States is satisfied, however, that the
divestiture of assets described in the proposed Final Judgment will
preserve competition in the market identified by the United States and
that such a remedy would achieve all or substantially all of the relief
the United States would have obtained through litigation, but avoids
the time, uncertainty, and expense of a trial.
In developing this relief, the United States considered a number of
divestiture alternatives and determined that the divestiture of the
Snowflake mill, under the circumstances, was the best solution given
the size and efficiency of the Snowflake mill. The analysis conducted
by the United States indicates that the Snowflake mill is among the
largest and most profitable mills in the United States. The location of
the mill to be divested is not competitively significant because the
evidence does not support the conclusion that the relevant geographic
market is narrower than North America.
VII. Standard of Review Under the APPA for the Proposed Final Judgment
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a sixty-day comment period, after which the Court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the court, in accordance with the statute as amended in 2004, is
required to consider:
(A) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) The impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A)-(B); see generally United States v. SBC Commc'ns,
Inc., 489 F. Supp. 2d 1, 11 (D.D.C. 2007)(concluding that the 2004
amendments ``effected minimal changes'' to scope of review under Tunney
Act, leaving review ``sharply proscribed by precedent and the nature of
Tunney Act proceedings'').\6\
---------------------------------------------------------------------------
\6\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
16(e)(2004), with 15 U.S.C. 16(e)(1)(2006).
---------------------------------------------------------------------------
As the United States Court of Appeals for the District of Columbia
Circuit has held, under the APPA a court considers, among other things,
the relationship between the remedy secured and the specific
allegations set forth in the government's complaint, whether the decree
is sufficiently clear, whether enforcement mechanisms are sufficient,
and whether the decree may positively harm third parties. See United
States v. Microsoft Corp., 56 F.3d 1448, 1458-62 (D.C. Cir. 1995). With
respect to the adequacy of the relief secured by the decree, a court
may not ``engage in an unrestricted evaluation of what relief would
best serve the public.'' United States v. BNS, Inc., 858 F.2d 456, 462
(9th Cir. 1988) (citing United States v. Bechtel Corp., 648 F.2d 660
(9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62. Courts have
held that:
[t]he balancing of competing social and political interest affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\7\ In
making its public interest determination, a district court ``must
accord deference to the government's predictions about the efficacy of
its remedies, and may not require that the remedies perfectly match the
alleged violations because this may only reflect underlying weakness in
the government's case or concessions made during negotiation.'' SBC
Commc'ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461
(``noting the need for courts to be deferential to the government's
predictions as to the effect of the proposed remedies''); United States
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003)
(noting that the court should grant due respect to the United States'
prediction as to the effort of proposed remedies, its perception of the
market structure, and its views of the nature of the case).
---------------------------------------------------------------------------
\7\Cf. BNS, 858 F.2d at 464 (holding that the court's ``ultimate
authority under the [APPA] is limited to approving or disapproving
the consent decree''); United States v. Gillette Co., 406 F. Supp.
713, 716 (D. Mass. 1975) (noting that, in this way, the court is
constrained to ``look at the overall picture not hypercritically,
nor with a microscope, but with an artist's reducing glass''). See
generally Microsoft, 56 F.3d at 1461 (discussing whether ``the
remedies [obtained in the decree are] so inconsonant with the
allegations charged as to fall outside of the `reaches of the public
interest' '').
---------------------------------------------------------------------------
Court approval of a consent decree requires a standard more
flexible and less strict than that appropriate to court adoption of a
litigated decree following
[[Page 63197]]
a finding of liability. ``[A] proposed decree must be approved even if
it falls short of the remedy the court would impose on its own, as long
as it falls within the range of acceptability or is ``within the
reaches of public interest.'' United States v. Am. Tel. & Tel. Co., 552
F. Supp. 131, 151 (D.D.C. 1982)(citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky.
1985) (approving the consent decree even though the court would have
imposed a greater remedy). To meet this standard, the United States
``need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns,
489 F. Supp. 2d at 17.
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459. Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States did not pursue. Id.
at 1459-60. As this Court recently confirmed in SBC Commc'ns, courts
``cannot look beyond the complaint in making the public interest
determination unless the complaint is drafted so narrowly as to make a
mockery of judicial power.'' SBC Commc'ns, 489 F. Supp. 2d at 15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction ``[n]othing in this
section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2). The language wrote into the statute
what the Congress that enacted the Tunney Act in 1974 intended, as
Senator Tunney then explained: ``[t]he court is nowhere compelled to go
to trial or to engage in extended proceedings which might have the
effect of vitiating the benefits of prompt and less costly settlement
through the consent decree process.'' 119 Cong. Rec. 24,598 (1973)
(statement of Senator Tunney). Rather, the procedure for the public
interest determination is left to the discretion of the court, with the
recognition that the court's ``scope of review remains sharply
proscribed by precedent and the nature of Tunney Act proceedings.'' SBC
Commc'ns, 489 F. Supp. 2d at 11.\8\
---------------------------------------------------------------------------
\8\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone''); S.
Rep. No. 93-298, 93d Cong., 1st Sess., at 6 (1973) (``Where the
public interest can be meaningfully evaluated simply on the basis of
briefs and oral arguments, that is the approach that should be
utilized.''); United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade
Cas. (CCH) ] 61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing
of corrupt failure of the government to discharge its duty, the
Court, in making its public interest finding, should . . carefully
consider the explanations of the government in the competitive
impact statement and its responses to comments in order to determine
whether those explanations are reasonable under the
circumstances.'').
---------------------------------------------------------------------------
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: October 23, 2007.
Respectfully submitted,
Karl D. Knutsen, Ryan Danks, Mitchell Glende, Seth A. Grossman, N.
Christopher Hardee (DC Bar No. 458168), David Kelly, Ihan Kim,
Rebecca A. Perlmutter,
Attorneys, U.S. Department of Justice, Antitrust Division,
Litigation I Section, 1401 H Street, NW., Suite 4000, Washington, DC
20530, (202) 514-0976.
[FR Doc. 07-5586 Filed 11-07-07; 8:45 am]
BILLING CODE 4410-11-M