Hercules Incorporated

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In THE Marrer oF HERCULES INCORPORATED, ET AL.

CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF SEC. 7 OF THE CLAYTON ACT Docket. C-1794. Complaint, Sept. 23, 1970—Decision, Sept. 23, 1970 Consent order requiring a major producer of rope synthetic fiber, located in Wilmington, Del. (Hercules), to divest. all stock and share capital it acquired from a major distributor of hard and synthetic fiber rope, located in Auburn, N.Y. (Columbian), by selling such shares within 90 days to Columbian; that Hercules refrain for 10 years from acquiring any stock of any domestic concern: which in the prior year had over $500,000 worth of purchases of polypropylene resin without: 45 days notice to the Federal Trade Commission; and that Columbian refrain from acquiring any stock of any domestic rope producer without prior approval of the Federal Trade Commission.

HERCULES INC., ET AL. 1243.

1242 Complaint Complaint:

The Federal Trade. Commission, having reason to believe that Hercules Incorporated and Columbian Rope Company, corporations and respondents herein, have violated the provisions of Section 7 of the Clayton Act, as amended (15 U.S.C. §18); therefore pursuant to Section 11 of the Clayton Act, as amended (15 U.S.C. § 21) it issues this Complaint, stating its charges in that respect as follows: I. Definitions 1. For the purposes of this complaint, the following definitions are applicable: .

(a) “Fiber”—any tough substance composed of thread-like material whether of animal, vegetable, mineral or man-made origin, especially substances: capable of being spun or woven. (b) “Yarn”—a number of fibers twisted together. (c) “Strand” (sometimes called “thread”)—two or more yarns twisted together in the opposite direction to that of the yarn itself. (ad) “Rope”—a longitudinally extended element composed of three or more strands, each strand composed of two or more yarns. (e) “Wire rope”—a type of rope consisting of a center, which acts as a base on cushion, atound which wire strands are twisted. (f) “Centers” (sometimes called ‘“cores”)—very high quality nonmetallic fiber rope produced to exacting specifications, used in the manufacture of wire rope.

(g) “Polypropylene resin”—a synthetic product formed by the polymerization of purified propylene.

(h) “Fiber grade” (sometimes called “filament grade”) polypropylene resin—that grade of polypropylene resin suitable for commercial use in the production of filaments and fibers. (i) “Synthetic fiber”—fibers of man-made origin, such as polypropylene, nylon and polyester (Dacron). “Synthetic rope” rope made from synthetic fibers.

(j) “Hard fiber”—vegetable fibers made from Abaca (“Manila”) or Agave (“sisal”). “Hard fiber rope”—rope made from hard fibers. II. The Respondents A. Hercules I ncorporated 2. Respondent Hercules Incorporated (“Hercules”), is a corporation.organized and existing under the.laws of the State of Delaware, Complaint TT E.T.C.

with its principal office and principal place of business located at 910 Market Street, Wilmington, Delaware.

3. Hercules is a diversified firm which includes nine operating departments and a central research organization. Through its polymer department, it has become one of the nation’s leading producers of ‘plastics resins. Total revenue from all of Hercules’ operations was ‘$532 million during 1965, of which plastics sales accounted for ap- ‘proximately $48 million of this revenue. 4. Hercules was the first company in the United States to enter into the commercial production of polypropylene. Since its entry into the production of that resin in 1958, two years ahead of any other corporation, it has maintained a substantial share of the polypropylene market. Hercules’ total shipments of polypropylene resin and polypropylene yarn and fiber each represent approximately 44 percent of total United States shipments of these products in 1963. In 19638, Hercules’ total shipments of polypropylene resin amounted to 58 million pounds valued at $16 million. Hercules’ total production of polypropylene yarn and fiber amounted to 8 million pounds valued at $6.5 million during 1963.

5. Hercules is and for many years has been extensively engaged in the sale and shipment across state lines of many chemical and other products, including polypropylene. Hercules is and was at the time of the acquisitions challenged herein, engaged in “commerce” within the meaning of the Clayton Act.

B. Columbian Rope Company 6. Respondent Columbian Rope Company (“Columbian”) is a corporation organized and existing under the laws of the State of New York, with its principal office and principal place of business located at 309 Genesee Street, Auburn, New York. 7. Columbian produces and sells rope and related products made of natural and synthetic fibers. Columbian’s consolidated net sales in the United States in 1964 were over $11 million and, as of December 31, 1964, its total domestic assets were $10 million and its domestic net worth was $9 million. Columbian owns or leases factories in Auburn and Maspeth, New York; Plymouth, Massachusetts; New Orleans, Louisiana; and Newport News, Virginia. 8. Columbian ranked second in 1963 among producers of hard and synthetic fiber rope, accounting for 19 percent of all domestic shipments. Columbian’s total shipments of hard and synthetic fiber rope during 1963 amounted to 15 million pounds valued at $8.5 million. "1242 Complaint 9. Columbian is one of the largest domestic producers of rope manufactured from polypropylene and other synthetic fibers. It maintains its own facilities for the extrusion of polypropylene resin into fibers. In 1963, it accounted for approximately 14 percent of all domestic shipments of synthetic rope.

10. Columbian is and for many years has been extensively engaged in the sale and shipment across State lines of rope and other products and has been extensively engaged in the purchase across State lines of fibers, polypropylene resin and other materials used in the production of rope. Columbian is and was at the time of the acquisitions challenged herein, engaged in “commerce” within the meaning of the Clayton Act.

IIT. The Acquisitions A. Assets Acquired by Columbian Rope Company from Plymouth Cordage Company 11. On October 1, 1965, Columbian purchased for approximately $6 million, all the assets of the domestic rope and Plymkraft divisions of Plymouth Cordage Company (“Plymouth”). The assets acquired included the land, plants, machinery, and inventory at Plymouth, Massachusetts; Plymouth trademarks and patents; and the right to use the name “Plymouth.” The assets acquired represented substantially all of Plymouth’s domestic rope operations, but did not include any part of Plymouth’s Canadian rope-making subsidiary. 12. In 1963, Plymouth ranked first among domestic producers of hard and synthetic fiber rope, accounting for 20 percent of all domestiz shipments. Plymouth’s total shipments of hard and synthetic fiber rope during 1963 amounted to 16 million pounds valued at over $8 million.

18. Plymouth also was one of the nation’s largest producers of synthetic rope.: During 1963, it accounted for 17 percent of this market, with shipments of synthetic rope totaling 2.6 million pounds valued at $3 million. Plymouth also operated facilities for extrusion of polypropylene resin into filaments for use in the production of rope.

14. Prior to October 1, 1965, when it sold the assets described in Paragraph 11, above, Plymouth had been extensively engaged in the sale and shipment across State lines of rope and other products and had been extensively engaged in the purchase across State lines of fibers, polypropylene resin and other materials used in the production of rope. Plymouth was engaged in “commerce” within the 467-207-7380

Complaint 77 ETC.

sition and characteristics from polypropylene resin produced for other uses. Specialized and costly additives must be blended into the resin to produce the necessary stability, color and other unique characteristics necessary for the manufacture of fibers. Polypropylene resin for fiber usage sells at higher price than polypropylene resin for other uses.

26. In 1964 there were nine companies engaged in production of polypropylene resin in the United States. In 1964, the four largest producers accounted for 74 percent of total U.S. production of polypropylene resin. Barriers to entry into the production of polypropylene resin are high; substantial polyolefin sales and technological know-how are required in addition to substantial amounts of capital. 27. Further barriers to entry into the production of polypropylene resin arise from the significant degree of vertical integration already present in the processing and fabrication of this resin. One of the principal uses for polypropylene resin is the manufacture of filament and fiber. Between 1962 and 1965 polypropylene producers made six partial or complete acquisitions of companies in the fiber field. V. Violations Charged 28. The effect of the acquisition by Columbian of certain assets of Plymouth Cordage Company, as set forth in Paragraph 11, above, may be substantially to Jessen competition or to tend to create a monopoly in the United States in the production and sale of rope, synthetic rope, polypropylene rope, and hard fiber rope, in violation of Section 7 of the Clayton Act, in that actual and potential competition between Columbian and Plymouth has been eliminated and already high levels of concentration may be substantially increased and the possibility of deconcentration lessened. 99. The effect of the acquisition by Hercules of part of the capital stock of Columbian, as described in Paragraphs 15 and 16, above, may be substantially to lessen competition or to tend to create a monopoly in the United States in the production and sale of polypropylene resin and fiber grade polypropylene resin and in the production and sale of rope, synthetic rope, polypropylene rope and hard fiber rope in violation of Section 7 of the Clayton Act, in the following ways, among others:

(a) Actual and potential competition in the production and sale of polypropylene resin and fiber grade polypropylene resin has been and may be foreclosed ;

(b) The trend toward vertical integration between polypropylene HERCULES INC., ET AL. 124Y 1242 Decision and Order resin producers and users of polypropylene resin may be accelerated, thus further foreclosing actual competition in the sale of polypropylene resin, increasing the barriers to entry for potential polypropylene producers and inducing further mergers and consolidations; and (c) But for the agreement by which Hercules acquired 34 percent of the voting stock of Columbian, Columbian probably would not have acquired the Plymouth assets described in Paragraph 11, above. Decision AND ORDER The Commission having heretofore determined to issue its complaint charging the respondents named in the caption hereof with violation of Section 7 of the Clayton Act, as amended, and the respondents having each been served with notice of said determination and with a copy of the complaint the Commission intended to issue, together with a proposed form of complaint; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the complaint to issue herein, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission’s Rules; and The Commission having considered the agreement and having accepted same, and the agreement containing consent order having thereupon been placed on the public record for a period of thirty (80) days, now in further conformity with the procedure prescribed in § 2.84(b) of its Rules, the Commission hereby issues its complaint in the form contemplated by said agreement, makes the following jurisdictional findings, and enters the following order: 1. Respondent Hercules Incorporated is a corporation organized and existing under the laws of the State of Delaware, with its principal office and principal place of business located at 910 Market Street, Wilmington, Delaware.

2. Respondent Columbian Rope Company is a corporation organized and existing under the laws of the State of New York, with its principal office and principal place of business located at 309 Genesee Street, Auburn, New York.

8. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents.

1252 FEDERAL TRADE COMMISSION. DECISIONS Complaint TT B.T.C.