Simpson Timber Company

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r THE L-\TTEn O:F SIMPSON TIMBER COMPX,Y ET AL.

CONSENT ORDER: ETC. , IX REGARD 1'0 THE ALLEGED VIOLATlOX OF SEC. 7 OF THE CLAYTON ACT Docket "/13. Complaint, Jan. 4, 1960-Decision, Jan. 4, 1962 Consent order requiring a substantial producer of redwood lumber and its wholly-o\vned subsidiary, both of Seattle asb. which in 1955 occupied fourth position allollg major sellers of redwood and in 1856 acquired companies rating sixth and fifteenth, respectiyel:-, as well as another company extensive redwood timber and timberlands, combined 1955 sales for which merging companies exceeded sales of tbe industry leader-to divest themselves of ownership of 500 milion board feet of redwood lumber within a 13-year period, as in the order below in detail set out. CO:;IPL,UXT The Federal Trade Commission, having reason to believe tlmt the parties respondent named in the captjon he.reof and hereinafter more par6cularIy c1esjgnated and c1escrjbed, have violated and are now violating the provisions of Section 7 of the Clayton Act (U. C. Title , Sec. 18) as amended and approved December 29, 1950, hereby issues its complaint, pursuant to Section 11 of the aforesaid Act (U. Title 15, Sec. 21) clmrging as follows:

PARAGRAPH 1. Respondent Simpson Timber Company, herein referred to as Simpson, is a corporation organized and existing under FEDERAL TRADE COMMISSIOl\"' DECISIONS Complaint 60 F.

the Jaws of the State of "Washington since 189G , with its principal place of business located at 1010 "White Building, Seattle, "lVash. During the course of years the title of the corporation I1fls been Simpson Logging Company, but it has opcrateclllncler various trade names and has operated various divisions under' different trade names. On April 10, 1956, the official title of said eorporatc respondent was changed to Simpson Timber Company. Simpson Redwood Company is a \Tholly-m,ned subsidiary of Simpson Timber Company, with its principal place of business located at the same address. Simpson owns substantial tracts of redwood and other timberlands and is engaged in conducting logging operations and producing green lumber, finished lumber, green vencer, plywood, plywood products panel and flush doors, insulating board, book and fine paper, and COIlverted paper products out of Douglas fir, redwood and hemlock timber from plants and !acilities located in the States of "lVashington and California. As of December 31 , 1955, assets of this respondent corporation were listed at $50 678 000, of which $8 425 000 constituted standing timber, and income from products sold amounted to $52 968 000.

Simpson is engaged in the distribution and sale of its products including rcch\oocl, in c.omrnerce, as "commerce': is defined in the Cla.yton Act. It sells and distributes its products throughout the United States and for export through wholesalers and distributors. In HH:7 Simpson began limiteel logging operations on a redwood tract prey.lously ncql1ired in Xorthern California. In 1051, Simpson effected fl major acquisition, tlle cash purchase of aU assets of Everett Pulp and Papf'r Company, the operation of ",hieh company was continued as a division of Simpson. By this time Simpson T o1'thel'noperations in the California reel \\00(1 area had become \yell established: \yit.h logging operations: a. sfl\\mill at Klamath, Calif. and a Iinishing plant at ..'-\.reata" Calif. A wholly o\'nlcd subsidiary, Simpson Industries, Inc., \yas organized in 19;'54 for the purpose of acquiring the capital stock and assets of Shafer Bros. Logging Company near Shelton, \Vashington. The assets includccla, sawmill, timberlands, logging equipment, a railroad and a forest service contract adjacent to the Shelton \Vorking Circle. On November 11 , 19, , Simpson Logging Company, Ltd., was incorporated under the la.ws of Bl'itjsh ColUlnbia, Canada, as an operating subsidiary for the sale of insulating board products. ThcreaJter, on August 12, 1D5;j, Simpson Logging Company of :Michigan was ineorpolat;a under the la" s of the State of J\fic.higa.n as a wholly o",ned subsidiary for the purpose. of operating an acc.oustical tile plant snlPSO 'IT:\IBER CO. ET AL.

Complaint )Iiehigan. On December 13 ID55 the Simpson Lumber Company was incorporated under the laws of the State of \Vashington; and on April 10, 1956, the name of this c0l1)oration "as changed to Simpson Hedwood Company, which company became the facility through which the acquisition involved herein was accomplished. On or about February 21 19i5G, Simpson, through its wholly owned subsidiary, respondent Simpson Redwood Company, acquired a controlling stock interest in Northern Red"ood Lumber Comprmy, and on iarch 2G, 195G, Simpson purchased all the assets of North.hern and assumed all its outstanding liabilities. This acquisition included Northern s subsidiary, The Arcnta and Iac1 R.iver Railrattd Company of l\:o1'bel, Calif., as well as substantial timber holdings of redIToml and Douglas fir in X orthcrn California, a remanufacturing plant, a. t\\mill, and a service railroad. The property Jms been estimated to contain -345 000 000 board feet net merchantnble recoverable recl"ood and 205 000 000 board feet net merchantable recoverable Douglas fir. The purchasing price \Vas approximately $11 000 000. These properties were integrated into the operations of Simpson. On or about lIiay 21 , 1956, Simpson Redwood acquired a controlling stock interest in Sage Land and l..number Company, Inc., a Xe\\ York corporation. This company, the propelties of ,which consist.ed entirely of timber and timberlands including redwood timber, has been liquidated into Simpson Redwood. Xo production facilities ,were involved in the acquisition, however the market value of the Sage timber was appraised at approximately 88 000 000. The lanel ,ras estiumted to contain 285 000 000 board feet net merchantable recoverable red\\ood and log OOO OOO board feet net merchantable rccoycrable Douglas fir. \IL 2. 1\1&.1\1: \Yoochyorking Company, hereinafter referred to as i&l\I was an Oregon corporation organized in .Tune 1018. It ,yas a fully integrated forest product company engaged in logging and production of lumber and forest products. ::U& 'I was engaged in the production for sale of fir, red\\ood, and hardwood plywood and veneers, flush doors, wood pipe and tanks; rough green and finished redwood and fir lumber and other related products. Plants and facilities of various types were located in the \Villamette Valley of Oregon from Portla.nd to Eugene, and in the Eureka, Calif., area. Timber holdings consisting primarily of Douglas fir ,were located in "\Vest Central Oregon; and holdings consisting primarily of redwood and Douglas fir were in the redwood belt of Del K ortc and Humboldt Counties in Northern California.. Total assets in 1955 were listed at S45 964 0()O, of which $18 160 000 constituted timber, timberlands a.nd relnJecl facilities. In lH5G net merchantable recoverable redwood ___ _ FE'DERAL TRADE COMMIS'SI01\ DECISIONS Complaint 60 F.

from timberlands of l\&l\ were estimated at 1 537 000 000 board feet. Tot.al sales for t.he fiscal year amounted to $42 708 000. Plants, locations, and commodities produced by M&:\l were as follows: Plant designation Location Products M&:\I Wood\vorking CO_---- Portland, Greg - - - Fir and hardwood ply- \vood.

Lyons PlanL - - -- -- -- - -- --- Lyons Oreg__ Fir plywood. Albany Plylock Albany, Oreg_ Fir plywood. Idanha Veneer___---------- K ear Salem, Oreg -- Fir veneer. National Pipe & Tank Portland, Greg - ---- Wood pipe and tanks. Eureka Plywood Plant - - - - - Eureka, Calif -- --- Fir and redwood plywood. Eureka R.edwood Lumber Co.

(wholly owned subsidiary of M&M).

Eureka Redwood Lumber - - - Eureka, Calif - - - - -- Rough green and finished redwood and fir lumber.

Eureka Redwood Lumber ---- Redwood Creek,un Rough green redwood and Company (No. Calif. fir lumber. Springfield Lumber Mils Inc.

(50 percent owned by :\1&1\) Springfield Mils HA" - - - ---- Springfield, Greg - - Finished green lumber. Springfield ::Iils " B" - - - - --- Springfield, Greg - - Finished green lumber. :\f&J\ was engaged in t.he production and sale of t.he above-named products, among others, and in pa.rticular redwood lumber and products manufactured therefrom, in commerce, as "commerce " is defined in the Chyton Act.. J\&1\ sold and distributed its products in commerce throughout the "C united States through ,,,wholesalers and distributors.

PAR. 3. On August 17, 1956, respondent Simpson Timber Company, through its wholly-owned subsidiary, Simpson Hedwood Company, acquired the 11&"f common stock a,nd asset.s. The purc11ase price was in excess of S50 OOO 000.

PAIL 4. (a) 1With the exception of a small quantity.y of redwood in the State of Oregon, Northern California contains the entire world' supply of redwood timber. Katural phenomena, such as the long grm,t.h period, limit the supply of mechantable redwood timber. Red- ,voOll timber is being logged at a rate considerably greater than the growth rate. The number of producers has declined substantially since 1947 and some of the principal producers have increased th,c;ir red' wood t.imber holdings. Both Simpson and f&1\ were and are substantial "producers" of redwood lumber operators of sawmills which saw redwood logs into rough green timber and board from timberland owned or upon which they have cutt.ing rights. (b) For the year 1955, prior to the merger of Simpson Timber Co, (including Sage), ::&:\1 and North.hern Redwood, sales of redwood SIMPSON TIMBER CO. ET AL.

Complaint lumber by these companies, respectively, totaled approximately 45. 11M bd. feet, 44.3 MM bd. feet and 21.0 MM bd. feet. Said sales established each of the herein-named companies in fourth, sixth and fifteenth position, respectively, among the major sellers of redwood lumber and products for the year 1955. Combined sales of the merged companies for the year 1955 exceeded that of the industry sales leader Iammond Lumber Co., which had sales of 91.2 MM bd. feet. (c) Approximately 50 percent of redwood sales are made outside the State of California to various designated regions throughout the United States. During 1955, the combined sales of the merged companies represented approximately 18.3 percent of that market. Hammond Lumber Co., the merged companies' principal competitor and a leading producer in the redwood industry, held a market share in 1955 of approximately 18. 1 percent. In addition, combined market shares of the merged companies within the State of California were substantial (d) For the year 1955, the respective production shares of the merged companies were: Simpson (including Sage) approximately 3 percent; Northern Redwood approximately 2.1 percent; and M&M approximately 4.6 percent. This combined total of 11 percent of redwood production placed respondent in a Jeadership position with the then principal producer, Hammond Lumber Co. PAR. 5. The effect of the aforesaid acquisition of J\&M 'Woodworking Company by Simpson, through its subsidiary Simpson Redwood Company, may be substantially to lessen competition or tend toward a monopoly in the redwood lumber industry within the United States. Iore specifically, the aforesaid effects include the actual or potential lessening of competition or a tendency to create a monopoly in violation of Section 7 of the Clayton Act, as amended, in the following ways, among others:

1. Respondents' competitivo position in the production and sale of redwood lumber and its by-products has been enhanced to the detriment of actual and potential competition in the industry. 2. Actual and potential competition between respondents and M&M 'Voodworking Company has been and will be eliminated in the production and sale of redwood lumber and its by-products. 3. Industry-wide concentration of the production and sale of redwood lumber has been and may be increa.sed. 4. Respondents' competitive position in the sale of redwood hunber and its by-products in the continental United States outside the State of California, such as in the Eastern States, ha.s been enhanced to the detriment of actual and potential competition, and I&:YI , , j FEDERAL TRADE cO:\i:nSSIOK DEGISIOKS Initial Decision 60 F.

W oodworking Company has been eliminated as a substltntial independent competitor.

5. This acquisition has "nd may have the effect of substantially increasing the concentration of 01\1101'ship and control of the limited supply of standing redwood timber in the -enited States. P.,\R. 6. The foregoing acquisition, acts and practices of respondent as hereinbefore alleged and set forth constitute fl violation Section 7 of the Clayton Act (TJ. c. Title 15, Sec. 18) as amended andappl'oved December 29 , 19:30.

3h. J. 1V allace Adai" and 3h. Eu,gene Kaplan for the Commission. BaJ,:ci' c0 JII!'ih;8on oy JIi'. Eel'ward F. I-Jou)(J' II00oei' Y, Slm.on. and i1/?'. Ela1'olcl F. Bake)' of '\Vashington, D. Evans lcLaren Lane, P01cell Beeks by 3h. Geo1'ge V. Powell of Seattle Wash. ; and PiUsbnTY, il adlson SutTO by 3h. Francis R. Ki7'kham and ilr. George A. Seats of San Francisco, Calif., for respondents. I:\ ITIAL DECISION" BY ,y ALTER R.. J OHNSOX, I-IEARIKG EX.\:II:'EH The complaint issued by the Commission on January 4, 1960, charges the respondents with violation of Section 7 of the Clayton Act, as amended, in connection with the acquisition of the M&M 'Woodworking Company.

Follmving a pre-hearing conference, hearings were held at Eureka California, San Francisco, California, New York, N. , and \Vashington, D. , after which counsel in support of t.he complaint rested their case in chief.

Thereafter, on September 19 la61 there was submitted to the hearing examiner an agreement by and behyeen respondents, by their duly authorized offcers and their attorneys, and by counsel supporting the complaint providing for entry or a consent order to cease and desist and to diyest. In accorda.nce therewith, t.he parties agree that: Respondents admit all the jurisdictional facts alleged in the complaint and agree that the record lllay be taken as if findings of jurisdictional facts had been duly made in accordance with such allegations. The agreement disposes of an of this proceeding as to all parties. The parties agree that the order contained therein is in the public interest for the reasons set forth in Appendix A which is attached to and made a part of the. agreement.

Respondents waive;

(a) Any further procedural steps before the hearing examine.r and the Commission;

SIMPSOX TIMBER CO. ET AL.

Inital Decisioll (b) The making of findings of fact 'Or conclusions of law; and (c) AJJ of the rights they may have to challenge or contest the validity of the order entered in accordance with this agreement. The record on which the ini ti.1 decision and the decision of the Commission shan be based shah consist solely of the complaint a.nd this agreement.

The agremnent shall not become a part of the offcial record unless and untH it becomes a pa.rt of the decision of the Commission. The agreement is for settlement purposes only and does not constitute an admission by respondents that they ha,ve violated the law as alleged in the complaint.

The order agreed upon may be entered in this proceeding by the Comnlission without further notice to respondents. 1Vhen so entered it shall have the same force and effect as if entered after a fun hearing. It ma.y be altered, modified 'Or set aside in the manner provided for other orders. The complaint may be used in construing the terms of the order.

The hearing examiner finds that the content of the agreement meets a1l of the requirements of Section 3.25 (b) of the Rules of the Commission.

The hearing examiner having considered the agreement and pro posed order, and being of the opinion that they provide an appropriate basis for settlement and disposition of this proceeding, the agreement is hereby accept.ed, the following jurisdictional findings made, and the follmying order issued.

1. R.respondent Simpson Timber Company is a corporation existing and doing business under and by virtue of the laws of the State of 1Vashington, with its offce and principal phee of business located at 2000 1Vashington Building, Seattle, 1Vash. (its former address was 1010 1'1,it8 Building, Seattle, 1Vash., a8 designated in the complaint). Respondent Simpson Redwood Company is a wholly owned subsidiary of Simpson Timber Company, and is a corporation existing and doing buisJ1rss under and by virtue of the laws of the State of 'Vashington, with its offce and principal place of business located at 2000 1Vashington Building, Seattle, 1Vash. (its former address was 1010 'Vhits Building, Seattle, 1Vash., as designated in the complaint). 2. The Federal Trade Commission has jurisdiction of the subject matt.er of this proeeecling and of t.he respondents. Initial Decisioll 60 F.

ORDER 1. It is ordered That respondents, Simpson Timber Company and Simpson Redwood Company, corporations, their subsidinries, offcers directors, agents, representatives, and employees shall seJJ and divest themselves absolutely and in good faith within 13 years from January , 1961, of ownership of an amount of redwood timher and/or redwood logs equal to 500 000 000 board feet, not less than 90% of which in ac-shall be old growth and 10% of which may be second growth cordance with the following provisions of this order. 2. In disposing of the total amount required to he divested hy this order, respondents, during each twelve-month period beginning January 1 , 1961, shall sell and divest to purchasers, as purchasers are hereinafter defined, not Jess than 35 000 000 board feet of redwood timber and/or redwood logs. In the event respondents slml! seJJ more than 55 000 000 board feet of redwood cutting rights and/or redwood logs in anyone year, the amount by which such sales exceed 55 000 000 board feet shall not be credited against the total amount to be divested pursuant to this order. R,respondents ma.y fLverage sales of redwood timber and/or logs over any three consecutive calendar years in complying with t.his order; provided hmvever, that any three consecutive years may exclude any year or years in which respondents are unable to seJJ 35 000 000 board feet at prices equal to or above the minimum prices specified in paragraph 5 of this section of this order. Sales to others than purchasers shall not be credited against the total amount to be divested.

3. The redwood timber and/or logs to be divested by respondents pursuant to this order may be any redwood timber and/or logs owned by respondents, whether or not acquired as a, result of respondents acquisition of M&;Vr VV oodworking Company. 4. In the event respondents shall sell redwood-type timberlands to purchasers during the period of this order, the board feet of redwood timber so soJel may be credited against the total boarel feet required to be divested by this order or may be apportioned egually over the period ending December 31, 1973, in determining the minimum a,rnount which respondents are required to sell and the maximum amount permitted to be credited in each calenelar year. In the event respondents shall enter into cutting contracts for the sale of timber or into long term contracts for the sale of logs with purchasers during the period of this order, the boarel feet of redwood timber anel/or logs so sold or contracted to be solel may be "pportioneel egually over the term of SI11SON TIMBER CO. ET AL.

Initial Decision such contracts or over the period ending December 31, 1973 in determining the minimum amount which respondents are required to sell and the maximum amount permitted to be credited in each calendar year. In the event respondents elect to apportion sales of redwood timber and/or logs under this paragraph 4 of this section of this order, all such amounts apportioned shall be credited against the total amount to be divested pursuant to this order, except to the extent that such apportionment results in a total amount for any calendar year which is greater than 55 000 000 board feet. 5. Respondents shall not be required during the 13-year period beginning January 1 , 1961, to sell and divest redwood timber and/or logs at prices which are less than $20.00 per thousand board feet for stumpage, plus 8% per annum compounded from .January 1 1961, to cover actual carrying costs. In the event respondents perform the logging function of such redwood logs, the east of logging shall be added to said price. Such costs of logging to be applied in determining said minimum price shall be the actual logging costs of respondent Simpson Redwood Company for the preceding calendar year, and shall be verified by reports of independent certified public accountants of recognized standing from the books and records of respondent Simpson Redwood Company.

6. In the event respondents have not divested the total amount of 500 million board fect during the 13-year period .January 1, 1961, to December 31 , 1973, this order shall remain in full force and effect until such date as total divestiture is completed or until December 31 1980, whichever date is earlier, whereupon this order shall tenninate; provided however that for any amount in excess of 100 million board feet which has not been sold and divested by December 31, 1973, the minimum prices shall bc reduced to an iUnolmt equal to 80% of the minimum prices provided for in paragraph 5 of this section of this order.

7. In the event respondents, acting in accordance with the provisions of tills order, have divested the total of 500 million board feet required to be divested prior to the expiration of 13 years from January 1, 1961, then, and in that event, this order shall tenninate. I t is further o1'dered:

1. For the duration of this order respondents shall not acquire any interest whatsoever in rechvood-type tilnberlands old gro\vth redwood cutting rights or old growth redwood logs containing a combined total of more than 100 million board feet of old growth redwood during the FEDERAL TRADE CO vIISSIO DECISIONS Initial Decision GO F.'I.

period of t.his order, and in the event respondents purchase re.dwoodtype timberlands, old grmvth redwood cutting right or old growth redwood logs containing in excess of 50 million hoard feet of old growth redwood during the period of this order, respondents shall divest themsehres of an alllOunt of olel growth redwood timber -a,nel/or logs equal to the amount by which such purchases e.xceeel 50 million board feet in accordance with the terms of this order. In determining whether tjmbe.rlancls are reel-woad-type, such determination shall be made on the basis of forty(40) acre parcels. 2. For a period of J 0 years from ,TallHlry J, 1961, respondents shall not acquire any interest whatsoever in 'any old growth redwood sawmill; nor in any plant or company producing more than 100/0 old growth redwood plywood; nor in any plant or company producing lnore than 10% redwood pipes and tanks.

3. During the effective period of this order respondents' ownership of redwood-type timberlands slmllnot exceed 202 000 acres. 4. Nothing contained in this order shall apply to purchases by respondents 'Of redwood timber or logs from lands owned or controlled by the United States Forest Service, Bureau of Indian Affairs Bureau of Land :\lanagement, or the State of California. 5. In the event respondents make trades with purchasers, as purchasers are defined herein, of any of their old growth redwood timber or re.dwood-type timberlands for other timbe.r or timberlands, including old growth rech-vooel timbe.r and redwood-type timberlands, the net balance of old growth redwood and/or redwood-type timberlands disposed of or obtained shall be subject to all of the terms and conditions of this order with such net balance being credited as either a. divestiture or acquisition.

6. In the event of an act of God or major catastrophe, including but not limited to, Lire, insect infestation or disease, which the rcspondents allege results in a substantial change of conditions in reference to their redwood timber holdings, the Commission shall, upon respondents' petition and affdavit, reopen the proceeding for reception of evidence as to whether the changed conditions require an alteratjon or modification of this order.

III It is 11frther ordered That by such divestitures none of the redwood timber and/or logs required to be divested by this order shall be sold or transferred, directly or indirectly! to anyone who at the time of the divestiture is a stockholder, offcer, director, employee, or agent , or othenvise directly or indirectly connected with 'Or under the SBIPSON TB1BER co. ET AL.

Final Order control of, respondents or any of their subsidiaries or affliated campa,nies.

DEFIXITIOXS 1. "Purchasers:' as referred to herein, shall include any person partnership or firm engaging in the ownership or cutting of 'Old grolvth recl'\Yooc11ogs or timbcr or the production of lec1wood lumber therefrom, and shall exclude the following-named companies and their subsidiaries, affliates, agents or representatives: The Pacific Lumber Company The Georgia Pacific Corporation Union Lumber Company Arcata H.ecl\\ood Company Willits Red,mod Products Company.

2. "Old grmyth" redlYOoc1 timber means timber which is described interchangeably as "old grmvth'J or " virgin ' timber, as distinguished from ,,,hat is cornmonly referred to as ('young growth" or "second gro\yth:' timber. This includes rec1,yood logs produced from felle.c redwood trees a.nd timber cutting contracts as well as uncut rechvood trees on Hie stump. "Old growth:' redwood excludes " second gro\"th" or "young growth" redwood timber which has grown on fully or partially Cllt- Oyer lands subsequent to the logging of such lands and which is less than one hundred years of age. 3. "Cutting rights': or " cutting contracts" mean contracts for the purchase and snle of uncut redwood trees. Such contracts mayor may not specify a third pa.rty, individual or firm who shall perform the logging, that is, the cutting and removal of the trees. They mny or may not specif:.y that the logging shall be done by the seller' or P111' chasel'.

4. "Rech\"ood-type': timberlands means redwood timberlands, as defined bv the 'C. S. Forest Service in Forest Survey Helease o. 2. page ;"6 , that is, forests in which 20% or more of t11e original stand is or was rechyood.

5. "Board feet" lneans the unit of measure of volume of redwood tirnber and/or logs based on tire Humboldt sele. FI); At. ORDER By its order of October 31 , 1961, the Commission extended until furtllCr order tlle date on which.h the initial decision of the hearing examiner herein would become the decision of the Commission; and The Commission nmy having concluded that said initial decision is appropriate in an respects to dispose of this proceeding: 710-GOS-- u4- FEDERAL TRADE COMMISSIO"- DECISIONS Complaint 60 F.

It is ordered That the initial decision of the hearing examiner filed September 22, 1961, be, and it hereby is, adopted as the decision of the Commission.

It is further O1'dered That respondents Simpson Timber Company\ a corporation, and Simpson Redwood Company, a corporation, shall on :.Jarch 1 , 1962, and at the expiration of each calendar year until termination or the order contained in the initial decision fls provided by the terms thereof, file with the Commission a report, in writing, setting forth in detail the ma.nJler and form in ,,,which they have