Velsicol, and ACI. In addition to these domestic suppliers,
the Dead Sea Bromine Works, an Israeli company and the largest
foreign producer (Smith Tr. 169), is an aggressive company
which markets bromine and a variety of brominated flame
There are no high barriers to entry in the bromine
production business. The reason new companies have not come
into the bromine production business since the entry of ACI
and Ethyl is that the return on investment is low. For
example, White Chemicals considered entering into bromine
production in 1974-1975 but ultimately concluded it was
uneconomical to produce bromine. (DX 19 (White Aff. ¶ 8-10)).
Morton-Norwich, one of the FTC's affiants, is clearly a
potential entrant. It has access to brine fields and bromine
technology and could enter the market if the price of bromine
made production economical. (FTC Ex. 76 (Rowlett Aff. ¶ 10)).
Mr. Wikman, one of Ethyl's employees, testified at his
deposition that, if the price of bromine increased
significantly, entry by new companies would be likely. (DX 70
(Wikman Dep. 13)).
These circumstances demonstrate that, if prices increased,
collusively or otherwise, companies now poised to enter the
market would do so; those already in the market, and operating
substantially below capacity, would increase output and
importers such as the Dead Sea Works would increase their
These factors alone suggest that bromine prices will not
increase. Mr. Doelling testified that the cost of bromine, as
well as other chemicals used to flame retard plastics, such as
chlorine, phosphorus, boron and antimony, "will remain the
same relative to current costs, adjusting for inflation." (DX
70 (Doelling Dep. 74)).
In addition to overcapacity and its attendant procompetitive
effects on supply and price, there is a second critical factor
that demonstrates the absence of any lessening of competition
in a bromine area. Bromine is an intermediate product. Bromine
is of commercial significance only when mixed with other
chemicals to make new compounds. As Mr. Anderson stated,
"Bromine does not reach the consumer as bromine." (DX 70
(Anderson Dep. 28); see Smith Tr. 166)). In fact, over 90% of
all bromine produced is used by the producers themselves to
make various bromine derivatives. Only 10% or so is sold either
to producers or companies not basic in bromine. (Smith Tr.
Bromine production, standing alone, is not a viable
business. Thus, each producer also manufactures bromine
derivatives. (Smith Tr. 170). Given this vertical integration,
any increase in the price of bromine would be borne largely by
the producers themselves. In fact, an increase in the price of
bromine would hurt producers because it would make brominated
products, such as flame retardants, less competitive with
other, similar products, such as chlorinated flame retardants.
It also would make the end products into which their
brominated compounds are mixed, less competitive with
competing, non-brominated end products, thus further reducing
Producers of brominated derivatives, such as brominated
flame retardants, prosper only to the extent they can develop
more cost-effective products that will be chosen over
competing products and consumed in large quantities. In turn,
by making the end products such as plastics more price
competitive, bromine product makers can expand their sales. In
short, the structure of the industry is such that bromine
producers have strong incentives to keep the price of bromine
A key factor to consider in analyzing whether the proposed
acquisition will violate Section 7 is the impact of the
transaction on bromine customers. As the court stated in
United States v. Tidewater Marine Service, Inc., 284 F. Supp. 324,
338 (E.D.La. 1968), "(i)n measuring the anticompetitive
effect of a merger, we must examine its effect on . . . the
customers of the merged companies." See also Brunswick Corp. v.
Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 486 n. 10, 97 S.Ct. 690,
696, 50 L.Ed.2d 701
(1976) (antitrust laws are for the protection of the "people
of the United States as individuals, especially consumers");
and Apex Hosiery v. Leader, 310 U.S. 469, 493, 60 S.Ct. 982,
992, 84 L.Ed. 1311 (1940) (antitrust laws designed to prevent
lessening of competition "to the detriment of purchasers or
consumers of goods and services").
Only a relatively small amount of bromine is sold
commercially. Thus, only about 10% of overall bromine
production is sold by producers to third parties. The bromine
customers were unanimous in testifying in favor of this
transaction. Mrs. Malmberg of duPont, a large bromine
purchaser, testified that she favored the acquisition and
believes it will be procompetitive. In her commercial
judgment, it will leave three strong, aggressive competitors
in the market — Dow, Ethyl and Great Lakes — and believes there
will be no adverse impact on her ability to obtain adequate
supplies at negotiated, rock-bottom prices. Indeed, from her
viewpoint, putting Velsicol's capacity under Great Lakes'
management will result in increased supply and further downward
pressure on prices. (Malmberg Tr. 161).
Mrs. Malmberg testified that she preferred aggressive,
reliable suppliers with overcapacity. (Malmberg Tr. 149).
Presently, there are two such suppliers — Dow and Ethyl. Great
Lakes, although aggressive and reliable, is operating at
capacity. Velsicol, although saddled with tremendous
overcapacity, is unreliable and not price competitive. The
acquisition will increase the number of ideal suppliers from
two to three. Having acquired Velsicol's brine fields, Great
Lakes will be catapulted from a position of net buyer to one of
overcapacity. (Malmberg Tr. 159-60). Thus, from the customer
perspective, the acquisition is entirely procompetitive with
respect to price and supply.
Other purchasers share Mrs. Malmberg's unqualified approval
of the deal. (DX 5 (Heldt Aff. ¶¶ 6, 10); DX 6 (Green Aff. ¶
10); DX 9 (Spottl Aff. ¶ 3); DX 19 (White Aff. ¶ 12)). They
believe, to quote Dr. Heldt, President of Helix Associates,
Inc., that the transaction "is in the best interest of Helix
and other purchasers of elemental bromine." (DX 5 (Heldt Aff. ¶
6)). In sum, bromine buyers see "only procompetitive benefits
from the proposed acquisition," and "urge that it be
permitted." (Id. at ¶ 10).
Substantial evidence has been introduced concerning
Ethyl/Saytech's competitive relationship with Great Lakes and
Velsicol. This evidence suggests that Ethyl/Saytech opposes
the acquisition because it will enhance, not lessen,
competition and will make it more difficult for Ethyl/Saytech
to sell its brominated flame retardants. In this regard, the
court takes note of Brown Shoe's admonition that the antitrust
laws are to protect competition, not competitors. Brown Shoe v.
United States, 370 U.S. 294, 320, 82 S.Ct. 1502, 1521, 8
L.Ed.2d 510 (1962).
(a) In 1980, Saytech competed head to head with
Great Lakes with respect to at least 84% of
Saytech's sales volume — Say-tech 102 (52%), BN-451
(12%) and BLC 462 (20%). (DX 70 (Doelling Dep.
(b) Doelling testified that Great Lakes' purchase
of Velsicol's flame retardant business will make
Great Lakes a stronger competitor, and that it
will be more difficult for Saytech to get sales
in the marketplace. (DX 70 (Doelling Dep. 50)).
(c) Doelling testified that if Velsicol went out
of business, Saytech would lose a competitor with
respect to 30% of its 1980 sales. (DX 70
(Doelling Dep. 38)).
(d) Doelling testified that, in his commercial
judgment and based on his experience in the
industry, Great Lakes is an aggressive marketer
of flame retardants in both the domestic and
international markets (DX 70 (Doelling Dep.
Velsicol's bromine and fire retardant businesses are no
longer competitive and have no prospect of again becoming
competitive unless Great Lakes is allowed to acquire the
facilities. Velsicol's bromine business is a failing company.
The evidence establishes that Velsicol's bromine business has
been hit hard by toxicological