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FTC v. Rag-Stiftung

United States District Court for the District of Columbia

January 24, 2020, Decided; February 3, 2020, Filed

Civil Action No. 19-2337 (TJK)

Opinion

MEMORANDUM OPINION

Hydrogen peroxide (H2O2) is a veritable swiss army knife of chemicals. Often an environmentally friendly alternative to other substances, it bleaches paper, treats wastewater, disinfects knee scrapes, fuels rockets, and plays [*5]  a role in manufacturing semiconductors, to name a few of its myriad applications. In November 2018, two of the five North American suppliers of hydrogen peroxide, Evonik and PeroxyChem, announced a proposed $625 million merger, and not long after, the Federal Trade Commission (FTC) launched an investigation into the potential anticompetitive effect of the merger. After a nine-month investigation, the FTC filed both an administrative complaint and this preliminary injunction action under Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b), and Section 7 of the Clayton Act, 15 U.S.C. § 18. The Court held a two-week evidentiary hearing in November 2019, during which it heard from twenty fact witnesses and two experts and received hundreds of exhibits.

The FTC seeks a preliminary injunction barring Evonik's acquisition of PeroxyChem, and it has the burden of showing that it is likely the proposed merger will substantially lessen competition in a relevant market. But the FTC made an important misstep. Rather than recognizing how hydrogen peroxide suppliers compete for customers served by its countless end uses—accounting for products' variations in purity, concentration, stabilizer chemicals, profitability, and even regulatory [*6]  approval—the FTC pleaded and argued for a single market for all "non-electronics" hydrogen peroxide. And because evaluating a merger's competitive effects on a market requires the FTC to properly define a market in terms of both product and geography, that oversimplification all but precludes the Court from siding with it. For the reasons explained below, the Court concludes that the FTC has not made out its prima facie case, which requires it to show undue concentration for a particular product in a particular geographic area, and it has not otherwise shown a likelihood that the proposed Evonik-PeroxyChem merger will substantially harm competition. The Court must therefore deny the FTC's motion for a preliminary injunction, ECF No. 3.1

I. Background

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2020 U.S. Dist. LEXIS 18346 *; 2020-1 Trade Cas. (CCH) P81,075; 2020 WL 532980

FEDERAL TRADE COMMISSION, Plaintiff, v. RAG-STIFTUNG et al., Defendants.

CORE TERMS

hydrogen peroxide, grade, suppliers, merger, customers, plant, swinging, geographic, pre-electronics, specialty, products, prices, coordination, bidding, markets, effects, relevant market, divestiture, substitution, concentration, competitors, preliminary injunction, anticompetitive, prima facie case, proposed merger, formulations, constrain, compete, vulnerability, chemical