Diamond Shamrock Corporation

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IN THE MATTER OF DIAMOND SHAMROCK CORPORATION CONSENT ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket C-2493. Complaint, Mar. 18, 1974—Decision, Mar. 18, 1974 Consent order requiring a Cleveland, Ohio, chemical manufacturer and explorer and producer of crude oil and natural gases, among other things to cease entering into reciprocal dealings or understandings which systematically use actual or potential purchases to obtain or increase sales to certain companies. Appearances For the Commission: Harold G. Munter and Louis Jordan. For the respondent: Richard W. Pogue of Jones, Day, Cockley & Reavis, Cleveland, Ohio.

Complaint 83 F.T.C.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act (15 U.S.C. Section 41, et seq.) and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Diamond Shamrock Corporation has violated and is now violating the provisions of Section 5 of the Federal Trade Commission Act, as amended, and it appearing to the Commission that a proceeding by it in respect thereof is in the public interest, hereby issues its complaint stating the following:

PARAGRAPH 1. Respondent Diamond Shamrock Corporation (hereinafter “Diamond”) is a corporation organized and existing under and by virtue of the laws of the State of Delaware with its principal place of business located at 1100 Superior Avenue, Cleveland, Ohio. PAR. 2. Diamond’s principal business is the manufacture and sale of chlorine and chlorine by-products, alkalis, silicates, chromates, organic chemicals, specialty chemical, fine chemicals, plastics, polyvinyl and coke and the exploration for and the production of crude oil and natural gases. Diamond’s total assets as of Dec. 31, 1971, were $702,924,000. Diamond’s total net sales for 1971 were $573,074,000 and it ranked 214th on Fortune Magazine’s 500 Largest Industrial Companies list for 1971. PAR. 3. In the course and conduct of its business as described above, Diamond has been and is now engaged in commerce as “commerce” is defined in the Federal Trade Commission Act, in that it has shipped and sold its products in the United States or caused them to be transported from its various places of manufacture and business for sale to other companies with places of business located in the several States of the United States.

PAR. 4. Except to the extent that competition has been frustrated, hindered, lessened and eliminated as hereinafter set forth, Diamond has been and is now engaged in competition with firms, partnerships and corporations engaged in the manufacture and marketing of the products described in Paragraph Two, above.

PAR. 5. In the course and conduct of its business as described above Diamond has been and is now engaged in unfair methods of competition and unfair acts and practices in commerce as described in Paragraph Three, above, in violation of Section 5 of the Federal Trade Commission Act in that Diamond has systematically utilized its actual or potential purchases to obtain or increase sales of its products, services or raw materials to certain companies.

In utilizing its purchases, as described above, to obtain or increase sales, Diamond has engaged in the following acts and practices but not limited thereto:

A. Compiled, coordinated or maintained sales and purchase informa- DIAMOND SHAMROCK ‘CORP. LODJL 1389 Decision and Order tion which related Diamond’s purchases from one or more companies to Diamond’s sales to one or more companies. B. Disclosed sales information to purchasing personnel or persons who by virtue of their responsibilities are able to influence purchases. C. Utilized or attempted to utilize sales information to decide who should be a supplier or the extent to which a company should be a supplier of Diamond.

D. Disclosed purchase information to sales personnel or persons who by virtue of their responsibilities are able to influence sales. E. Utilized or attempted to utilize purchases information to decide who should be a customer or to what extent a company should be a customer of Diamond.

F. Communicated with certain companies for the purpose of ascertaining, developing or furthering a relationship between Diamond’s purchases from and its sales to such companies. G. Purchased or agreed to purchase from certain companies on the understanding or condition that such companies would purchase from Diamond or its designees.

H. Purchased from certain companies in an attempt to induce such companies to purchase from Diamond.

I. Decreased or discontinued purchases from certain companies because such companies would not purchase or increase their purchases from Diamond.

PAR. 6. The acts and practices of Diamond, as alleged above, have had and still have the capacity, tendency and effect of (a) foreclosing actual or potential suppliers of Diamond, (b) foreclosing competitors of Diamond from selling to actual or potential suppliers of Diamond, (c) giving Diamond an unfair competitive advantage over its competitors or (d) depriving its competitors or actual or potential suppliers of full and free competition in the market place.

PAR. 7. The aforesaid acts and practices of Diamond constitute a restraint of trade and an unfair method of competition in commerce in violation of Section 5 of the Federal Trade Commission Act. DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy of a draft of complaint which the Bureau of Competition proposed to present to the Commission for its consideration and which, if issued by the Commission would charge respondent with violation of the Federal Trade Commission Act; and The respondent and counsel for the Commission having thereafter Decision and Order 83 F.T.C.

executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, ‘and waivers and other provisions as requird by the Commission’s rules; and ' The Commission having thereafter considered the matter and having determined that it had reason to believe that the rspondent has violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of thirty (30) days, now in further conformity with the procedure prescribed in Section 2.34(b) of its rules, the Commission hereby issues its complaint, makes the following jurisdictional findings, and enters the following order:

1. Respondent Diamond Shamrock Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware with its principal place of business located at 1100 Superior Avenue, Cleveland, Ohio.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER For the purposes of this order, the definitions below shall apply, although words of inclusion used herein are not words of limitation: “Respondent Diamond” includes Diamond Shamrock Corporation, a corporation, its subsidiaries, successors, and assigns. “Respondent Diamond” shall not include Pickands, Mather & Co. (“PM”), Diamond Shamrock Oil & Gas Company (“Oil & Gas”), subsidiaries of PM or Oil & Gas, or successors and assigns of PM or Oil & Gas. “Company” includes any business entity and its subsidiaries. “Purchase” and “purchases” include any receipt of products, services, or raw materials from another company in exchange for money, products, services, or raw materials, other than any such receipt in connection with any transaction not prohibited by this order. “Sell” and “sales” include any conveyance of products or raw materials to, or any performance of services for another company in exchange for money, products, services, or raw materials, other than any such conveyance in connection with any transaction not prohibited by this order.

DIAMOND SHAMROCK CORP. 1393 1389 Decision and Order :

“Personnel” includes officers, directors, employees agents and representatives.

“Purchasing decision” includes any decision as to the selection of any supplier, the allocation of purchases among suppliers, the purchase of any products, services or raw materials, the failure or refusal to place any company on a bidders list, the failure or refusal to designate any company as a qualified bidder, the selection of a winning bidder, or the continuance, discontinuance, increase or decrease of purchases from any supplier.

I It is ordered, That respondent Diamond, its officers, directors, employees, agents, and representatives, directly or through any corporate or other device, shall forthwith cease and desist from: a. Purchasing or entering into or adhering to any agreement or understanding to purchase from an actual or potential supplier on the mutual understanding that any of such purchases are conditioned upon or related to any sales by respondent Diamond or any other company;

b. Selling or entering into or adhering to any agreement or understanding to sell to an actual or potential customer on the mutual understanding that any of such sales are conditioned upon or related to purchases by respondent Diamond or any other company;

ce. Communicating to another company that: 1. respondent Diamond’s purchasing decisions will or may be conditioned upon or related to sales by respondent Diamond or any other company;

2. sales by respondent Diamond will or may be conditioned upon or related to purchases by respondent Diamond or any other company.

Nothing contained in Subparagraphs a., b., or c. shall prevent respondent Diamond from entering inté; adhering to, or performing under any contractual term pursuant to which the volume of a product, service, or raw material purchased or sold depends upon amounts of said product, service, or raw material used or resold by the purchaser.

d. Discussing, comparing, exchanging, or utilizing data regarding actual or potential sales by respondent Diamond to any actual or potential supplier in making any purchasing decision; e. Discussing, comparing, or exchanging statistical data or other information with another company in order to ascertain, develop, facilitate, or further any relationship between purchases and sales of the nature prohibited by this order;

Decision and Order 83 F.T.C.

f. Preparing or maintaining statistical data which compares or otherwise relates respondent Diamond’s actual or potential purchases from a company to its actual or potential sales to such company;

g. Causing or permitting any of respondent Diamond’s personnel whose primary duties are to directly obtain sales on behalf of respondent Diamond, including, but not limited to, respondent Diamond’s personnel holding any of the positions listed in Appendix 2, hereof, to:

1. engage in purchasing;

2. obtain statistical data or other information which shows actual or potential purchases from any company;. 8. specify or recommend to any other of respondent Diamond’s personnel that any purchasing decision should be made because of the status of any company as an actual or potential customer;

h. Causing or permitting any of respondent Diamond’s personnel whose primary duties are to directly purchase on behalf of respondent Diamond, including, but not limited to, respondent Diamond’s personnel holding any of the positions listed in Appendix 8, hereof, to:

1. engage in obtaining or attempting to obtain sales; 2. obtain statistical data or other information which shows actual or potential sales to any company; 8. specify or recommend to any other of respondent Diamond’s personnel that sales could or should be made to any company because of the status of such company as an actual or potential supplier.

The obligations imposed under Paragraphs d., f., g., and h. shall terminate and cease to be effective on and after the tenth (10th) anniversary of the date of this order.

I It is further ordered, That respondent Diamond shall, within thirty (30) days subsequent to the date of this order, withdraw (and provide for continued isolation of):

a. From the possession, custody, and control of all of its personnel holding any of the positions listed in Appendix 2, hereof, all statistical data and other information which shows actual or potential purchases from another company;

b. From the possession, custody, and control of all of its personnel holding any of the positions listed in Appendix 3, hereof, all statistical data and other information which shows actual or potential sales to another company.

DIAMOND SHAMROCK CORP. wee.

1389 Decision and Order 3. specify or recommend to any of our non-purchasing personnel that sales could or should be made to any company.

Selling No personnel of the Company promoting or obtaining sales to any actual or potential customer shall suggest or imply that such sales are conditioned upon or related to our purchases or purchases by any other company. No sales personne! shall:

1. engage in purchasing;

2. in any manner obtain statistical data or other information which shows actual or potential purchases from any company;

3. specify or recommend to any of our non-sales personnel that purchases could or should be made from any company.

The provisions of the Order contain various conditions, and in the case of any conflict between the above statement of policies and guidelines and the terms of the Order, the latter shall prevail.

ATTACHMENT B To Our Customers and. Suppliers:

Pursuant to the attached Order of the Federal Trade Commission, we herewith advise you that it is the policy of Diamond Shamrock Corporation and its subsidiaries to purchase solely on the basis of price, quality, and service. We wish to assure you that our purchases will in no way be conditioned upon or related to our sales to you or any other company. Chief Executive Officer ATTACHMENT C Name and address Position IT have been supplied with a copy of the Order of the Federal Trade Commission against Diamond Shamrock Corporation dated, and a copy of Attachment A thereto. I have read those documents and have received an explanation of the Order from counsel for the Company and counsel has answered my questions concerning it. I understand that the Order may affect the manner in which my duties may be conducted on behalf of the Company and that violation of its provisions may subject me to disciplinary proceedings which may include dismissal from my employment. I further understand that I may in the future be required to respond to inquiries by authorized representatives of the Federal Trade Commission regarding the manner in which I have conducted such duties. Accordingly, I am filing for my reference a copy of the Order and Attachment A thereto.

; Signature APPENDIX 1 EXECUTIVE PERSONNEL—DIAMOND SHAMROCK CORPORATION Chairman of the Board and Chief Executive Officer President and Chief Operating Officer Executive Vice President, Corporate Development oe:

~ Vice President, Finance. oes “Mice President, Research '&: Corporate Development - Vice President, Administration - “e Vice President and Secretary ! Treasurer” nS So Controller :

“ EXECUTIVE PERSONNEL—DIAMOND SHAMROCK : CHEMICAL COMPANY President ceEDERAL ‘TRADE ‘COMMISSION DECISIONS | | Order S oe ~ Vice President, Diamond Shamrock Corporation Executive: ‘Vice President Group Vice President Senior Vice President - -- Vice President APPE NDIX 2 Personnel ‘whose p primary duties are directly ‘to obtain sales on behalf of Respondent S a Diamond: »:::

AG CHEM SALES SPECIALIST - “Ag Chem Division = ASSISTANT DISTRICT SALES ’ MANAGER...

.. District Sales Offices ASSI STANT PRODUCT’ MANAGER [ ] Electro Products Division AUTOMOTIVE ACCOUNT REPRESENTATIVE Dacromet::..

DIRECTOR OF: SALES Industrial Chemicals Sales Office DISTRICT PRODUCT: MANAGERS District Sales Offices DISTRICT SALES MANAGERS District Sales Offices DIVISION SALES MANAGER [.] Electro Chemicals. Division ~ FIELD SALES MANAGER. - Nopco Division FIELD SALES SUPERVISOR Nopco Division GROUP MARKET MANAGER {] Nopco Division MANAGE R-MARKETING AN D SALES [ ] ;

Soda Products Division ° TANAGER SANURIL SYSTEMS Concord ‘MANAGER SANILEC SYSTEMS Chemicals Division-Soda.

- Concord :

MARKET. DEVELOPMENT SPECIALIST...

~ Coneord’ :

MARKET MANAGER tJ Nopco Division — MARKETING SPECIALIST ..> Nopeo Division NATIONAL: ACCOUNTS MANAGER Agricultural Chemicals Division - NATIONAL ACCOUNTS SALES .

REPRESENTATIVE.

...Fine Chemicals: Division NATIONAL ACCOUNTS SUPERVISOR '. Nopco Division PRODUCT MANAGER [ J Ag Chem. Division-Soda: Products Division-Electro Chemicals Division :

REGIONAL MANAGER Plastics Division - REGIONAL SALES MANAGER Ag Chem Division-Fine Chemicals Division “SALESMAN Chemetals Division-Nopco Division-Fine Chemicals.

Division-District Sales Offices SALES COORDINATOR Chemietals Division-Nopco FOOD FAIR STORES, INC., eran «1401.

1401. : Decision and Order:

Division |.

SALES MANAGER Chemetals Division-Dacromet- Nopco Division-Harte & Co.

~ SALES REPRESENTATIVE « Harte & Co. 9.

- SALES TECHNICAL SERVICE MAN Plastics Division SENIOR TECHNICAL SALES “TECHNICAL SALES | REPRESENTATIVE “Plastics Division REPRESENTATIVE © -. Nopeo ‘Division-Plasties Division ONS TECHNICAL SPECIALIST - Concord VICE PRESIDENT, MARKETING a Harte & Co.

APPENDIX 3.

-* “Personnel whose primary « duties are: directly to purchase “on “behalf of Respondent Diamond:

ASSISTANT" PURCHASING AGENT:

i Nopco Division — - BUYER: ~ Park Works ...

JUNIOR BUYER Purchasing Department - MANAGER ADMINISTRATION. | ~ :Chemetals Division MANAGER PRODUCT DEVELOPMENT AND COORDINATION Fine Chemicals Division MANAGER/PURCHASING AND STORES | . Purchasing Department MATERIALS MANAGER ‘Purchasing Department NATIONAL ACCOUNTS/FLEET ADMINISTRATION Purchasing Department-Deer a PLANT PURCHASING AGENT : Purchasing Department:

PROJECT COORDINATOR Purchasing Department .- ~ PURCHASING AGENT Purchasing Department - :

~ PURCHASING FIELD -. ADMINISTRATOR. :

Purchasing Department...

. PURCHASING MANAGER .

Purchasing Department PURCHASING STORE MANAGER - Deer Park Works :

SENIOR BUYER Purchasing Department-Deer Park Works SUPERVISOR OF CONSTRUCTION Purchasing Department:

WORKS PURCHASING AGENT Deer Park Works - Purchasing Department