Jim Walter Corporation

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IN THE MATIER OF JIM WALTER CORPORATION Docket 8986. Interlocutory Order, March, 1982 ORDER DEFINING THE SCOPE OF THE PROCEEDINGS ON REMAND AND DIRECTING COMPLAINT COUNSEL TO SUBMIT A PROPOSED AMENDED COMPLAINT On March 13, 1981, the Commission directed complaint counsel and respondent to fie briefs presenting their views as to further disposition of this matter.

Complaint counsel argue that under the standards enunciated by the reviewing court Jim Walter Corp. v. 625 F.2d 679 (5th Cir. FT 1980), staff could prove in further hearings the existence of two relevant geographic markets: (a) the 26-state area extending from Texas to and including New York and Massachusetts; and (b) the 41 states east of the Rocky Mountains. Complaint counsel also argue that the Commission s prior product market determinations were correct and continue to be correct in both of the proposed geographic markets and that the acquisition violates Section 7 of the Clayton Act, 15 U. C. 18, in either or both geographic markets. Complaint counsel also assert that their case would not be affected even if elastomeric roofing materials were included in the product market,t and conclude by asserting that a new hearing would be in the public interest both because the acquisition assertedly violates Section 7 and because complaint counsel think there is a strong likelihood of effective relief.

Respondent, Jim Walter Corporation ("JWC"), on the other hand argues that principles of fairness and finality, as well as the Commission s rules. require a dismissal of the complaint. Even if a dismissal is not required, JWC argues that new evidentiary hearings are not appropriate inasmuch as they would necessarily entail extended discovery and the consideration of current evidence relating to market definition (product and geographic), market share data and the structure of the market, thereby, in JWC's view causing considerable waste of resources. JWC further argues that the 26-state area and 41-state area asserted by complaint counsel are not relevant markets within which to assess the effects of the acquisition and that, in any event, complaint counsel have shown neither an abilty to prove either actual or potential anticompetitive effects nor the appropriateness of divestiture as a remedy. Elaatomeric roofmg materi81 " consist of solid-preformed sheets and liquids. The term include! the synthetic rubbers neoprene and Hypalon 9. well as acrylic, butyl, rubberiz asphalt, urethane Bnd silicone 400 Interlocutory Order The Commission rejects JWC's assertion that dismissal of the complaint is required. The court of appeals "vacate( d) the FTC decision and remand(edJ the case for reconsideration in light of (the court' s) opinion" and "for such proceedings as may be appropriate. " 625 F.2d at 684, 678. In so doing, the court suggested several areas of further inquiry. Indeed, any fair reading of the court' s opinion shows that the court fully expected that the remand might involve a new trial of some, or several, issues. 625 F.2d at 681 683-84. Settled principles of administrative law establish that this disposition of the case was well within the court' s discretion. Ford Motor Co. v. NLRB, 305 U.S. 364, 372-375 (1939).' While JWC' argument for dismissal is not a frivolous one, the decision whether to dismiss or proceed must, given the court's mandate allowing the Commission to proceed, depend upon whether the Commission has reason to believe both that the challenged conduct violates the law and that further proceedings are in the public interest. In the present case, the Commission has considered the court' decision, as well as the arguments and factual statements set out in the briefs of the parties submitted in response to the Commission Order of March 13, 1981. We have determined that the present record, and the factual assertions made in the parties' briefs, give the Commission reason to believe that both (1) asphalt and tar roofing products and (2) asphalt and tar proof products as well as elastomeric roofing materials are appropriate markets within which to assess the effects of the acquisition in both (1) the 26-state area and (2) the 41state area advanced by complaint counsel. The Commission also has reason to believe that the acquisition may have had, or may cause anticompetitive effects in all of these markets. The Commission also believes that the public interest would be best served by holding further hearings to determine both the legality of the acquisition and, should the transaction be found ilegal, the appropriate remedy. Given the time elapsed since the acquisition was consummated, the Commission has determined that it is appropriate on remand for the Administrative Law Judge to focus upon the industry as it has developed in the intervening years and, should the acquisition be found unlawful, to consider what, if any, remedy is most appropriate, given the present structure of the market(s). 3 See e.g., United States v. E. L du Pont de Nemours & Co. 353 U.S. 586, 597-598 (1957).

. The Commision lIimiiarly rejects JWC' s argument that Commisgion Rule 3. , 16 C. R. 3. , requires dismis. AB JWC points out, Rule 3.55 govern petitions for reconsideration of Commision decisions. The Rule has nothing to do with the dispoitionof this matter on remand. 3 Post-acquisition evidence is solicite on remand herebeUB of OUT decisioo that evidence of 11 new product line-IMtomeric roflng mo.teria1in addition to the tar and asphalt roofing materi81slIhouid be included in the (Continued) Interlocutory Order 99 F. In view of the comments by the court of appeals regarding the possible interest of Celotex Corporation 625 F.2d at 681, the Commission believes Celotex should be joined as a respondent on remand. Also, while the original complaint in this matter alleged only a violation of Section 7 of the Clayton Act, 15 U . C. 18, the Commission believes that on remand the Administrative Law Judge should consider the legality of the acquisition under Section 5 of the FTC Act, 15 U. C. 45, as well as under Section 7. In light of the Commission s determination to (1) order retrial of the case; (2) join Celotex Corporation as a party; (3) allege a possible violation of Section 5 of the FTC Act; (4) allege two relevant product markets and adverse competitive effects in two geographic markets; and (5) evaluate the post-acquisition effects of the acquisition, the administrative complaint must be amended. However, Commission Rule 3. 15(a), 16 C. R. 3.15(a), plainly provides that the scope of the required amendments is beyond the authority of an Administrative Law Judge to order and amendments such as those required by this Order may be issued only by order of the Commission, upon certification by an Administrative Law Judge. In the present case the matter is pending before the Commission on remand from the court of appeals and the parties have already submitted briefs discussing the disposition of the case on remand. Although the present posture of the case would thus allow the Commission to prepare and direct the issuance of an amended administrative complaint, nonetheless the Commission believes it would be better practice for complaint counsel to prepare a proposed amended complaint that is consistent with the terms of this Order. Because this matter is already before the Commission, it makes no sense for the amended complaint to be certified to the Commission by an Administrative Law Judge. Accordingly, to avoid unnecessary duplication, this Order instructs complaint counsel to submit, within 14 days, directly to the Commission, a proposed amended complaint which the Commission might then direct the Secretary to issue and serve. It also provides respondent an opportunity to address the proposed amendments in writing. Accordingly, It is hereby ordered That within 14 days after the issuance of the Order complaint counsel submit to the Commission, and serve upon asmeot of the anticompetitive effec of this acquisition.Although pot-acquisition evidence should not be given "to much weight," Fedral Tr Cummieivn v. CoTUwlid/ed FDO Corp. 38 U.S. 592, 598 (196), principaly beus it il within the power of the acuiring company to manipulate the acquire IltB in II manner favorable to its ca,Unite Sw.te v. Continental Can Co. 378 U.S. 441, 46 (196), it is nevertheles appropriate to consider pot-acquisition evidence in particular Section 7 C8. There is authority for relyig on "the bet 60infonna.tion(Steart,available"J. concurrngin asingin thea judgent).merger as old as this one (ten years).Coruolidted Foo Corp. 38 U.S. at 400 Interlocutory Order counsel for Jim Walter Corporation, a proposed amended complaint that is consistent lIith this order;

It is further ordered That if Jim Walter Corporation wishes to address the proposed amended complaint, it shall fie its comments within 14 days of service upon it of the proposed amended complaint; and It is further ordered That upon issuance of the amended complaint this matter is remanded to the Administrative Law Judge to conduct further proceedings consistent with the opinion of the court of appeals and this Order.

Commissioner Pertchuk did not participate. Modifying Order 99 F.