83 FR 55533 - Linde AG and Praxair, Inc.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

Federal Register Volume 83, Issue 215 (November 6, 2018)

Page Range		55533-55540
FR Document		2018-24206

The consent agreement in this matter settles alleged violations of federal law prohibiting unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the complaint and the terms of the consent orders-- embodied in the consent agreement--that would settle these allegations.

Federal Register, Volume 83 Issue 215 (Tuesday, November 6, 2018)

[Federal Register Volume 83, Number 215 (Tuesday, November 6, 2018)]
[Notices]
[Pages 55533-55540]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2018-24206]

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FEDERAL TRADE COMMISSION

[File No. 171 0068]

Linde AG and Praxair, Inc.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis to Aid Public Comment describes both the
allegations in the complaint and the terms of the consent orders--
embodied in the consent agreement--that would settle these allegations.

DATES: Comments must be received on or before November 21, 2018.

ADDRESSES: Interested parties may file a comment online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write: ``Linde AG and Praxair,
Inc.; File No. 1710068'' on your comment, and file your comment online
at https://ftcpublic.commentworks.com/ftc/praxairlindedivest/ by
following the instructions on the web-based form. If you prefer to file
your comment on paper, write ``Linde AG and Praxair, Inc.; File No.
1710068'' on your comment and on the envelope, and mail your comment to
the following address: Federal Trade Commission, Office of the
Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D),
Washington, DC 20580, or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Constitution Center,
400 7th Street SW, 5th Floor, Suite 5610 (Annex D), Washington, DC
20024.

FOR FURTHER INFORMATION CONTACT: Jordan S. Andrew (202-326-3678),
Bureau of Competition, 600 Pennsylvania Avenue NW, Washington, DC
20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of thirty (30) days. The
following Analysis to Aid Public Comment describes the terms of the
consent agreement, and the allegations in the complaint. An electronic
copy of the full text of the consent agreement package can be obtained
from the FTC Home Page (for October 22, 2018), on

[[Page 55534]]

the World Wide Web, at https://www.ftc.gov/news-events/commission-actions.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before November 21,
2018. Write ``Linde AG and Praxair, Inc.; File No. 1710068'' on your
comment. Your comment--including your name and your state--will be
placed on the public record of this proceeding, including, to the
extent practicable, on the public Commission website, at https://www.ftc.gov/policy/public-comments.
Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/praxairlindedivest/ by following the instructions on the web-based
form. If this Notice appears at http://www.regulations.gov/#!home, you
also may file a comment through that website.
If you prefer to file your comment on paper, write ``Linde AG and
Praxair, Inc.; File No. 1710068'' on your comment and on the envelope,
and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite
CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024. If possible, submit your paper comment to the
Commission by courier or overnight service.
Because your comment will be placed on the publicly accessible FTC
website at https://www.ftc.gov, you are solely responsible for making
sure that your comment does not include any sensitive or confidential
information. In particular, your comment should not include any
sensitive personal information, such as your or anyone else's Social
Security number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. You are also
solely responsible for making sure that your comment does not include
any sensitive health information, such as medical records or other
individually identifiable health information. In addition, your comment
should not include any ``trade secret or any commercial or financial
information which . . . is privileged or confidential''--as provided by
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2),
16 CFR 4.10(a)(2)--including in particular competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular,
the written request for confidential treatment that accompanies the
comment must include the factual and legal basis for the request, and
must identify the specific portions of the comment to be withheld from
the public record. See FTC Rule 4.9(c). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted on the public FTC website--as legally required by FTC Rule
4.9(b)--we cannot redact or remove your comment from the FTC website,
unless you submit a confidentiality request that meets the requirements
for such treatment under FTC Rule 4.9(c), and the General Counsel
grants that request.
Visit the FTC website at http://www.ftc.gov to read this Notice and
the news release describing it. The FTC Act and other laws that the
Commission administers permit the collection of public comments to
consider and use in this proceeding, as appropriate. The Commission
will consider all timely and responsive public comments that it
receives on or before November 21, 2018. For information on the
Commission's privacy policy, including routine uses permitted by the
Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

Analysis of Proposed Consent Order To Aid Public Comment

I. Introduction

The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') designed to remedy the anticompetitive effects resulting
from the proposed merger of Praxair, Inc. (``Praxair'') and Linde AG
(``Linde'').
Pursuant to the Consent Agreement, Linde will divest the following
assets to Messer Group GmbH (``Messer''): Thirty-two air separation
units (``ASUs''); sixteen carbon dioxide facilities; source contracts
for nearly one billion cubic feet of helium, twelve helium transfill
stations, and a helium purification facility; one liquid hydrogen
production facility, as well as equipment, contracts, and related
assets. Linde also will divest assets related to its excimer laser gas
business to Messer.
Separately, Linde will divest five facilities that produce hydrogen
and carbon monoxide (``HyCO'') for on-site customers, along with
Linde's hydrogen pipeline in the Gulf Coast and related customer
contracts, to Matheson Tri-Gas, Inc. (``Matheson''). Lastly, Linde will
divest two additional HyCO plants to their respective owners. Linde
will divest its HyCO plant in Clear Lake, Texas to Celanese Corporation
(``Celanese'') and its HyCO plant in La Porte, Texas to LyondellBasell
Industries N.V. (``LyondellBasell'').
Praxair and Linde have agreed to divest the required facilities and
assets to the aforementioned buyers, or to alternative Commission-
approved buyers, within 120 days after signing the Consent Agreement.
Praxair and Linde will hold their businesses separate until they have
accomplished the divestitures to Messer and Matheson. The divestiture
of these facilities and related assets will preserve the competition
between Praxair and Linde that the proposed merger would otherwise
eliminate.
The proposed Consent Agreement will be on the public record for
thirty days, so that interested persons may submit comments. Comments
that the Commission receives during this period will become part of the
public record. After thirty days, the Commission will again review the
proposed Consent Agreement and the comments received, and will decide
whether it should withdraw from the proposed Consent Agreement, modify
it, or make final the accompanying Decision and Order.

II. The Transaction

On June 1, 2017, Linde and Praxair entered into an agreement and
plan of merger, in a transaction valued at approximately $80 billion.
Pursuant to the terms of their agreement, the parties will initiate a
stock-for-stock exchange to form a new company under the Linde name
with headquarters split between Danbury, Connecticut and Munich,
Germany. The Commission's Complaint alleges that the proposed merger,
if consummated, would violate Section 7 of the Clayton Act, as amended,
15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as
amended, 15 U.S.C. 45, by substantially lessening competition in the
United States in markets for bulk liquid oxygen; bulk liquid nitrogen;
bulk liquid argon; bulk liquid carbon dioxide; bulk liquid

[[Page 55535]]

hydrogen; bulk refined helium; on-site hydrogen; on-site carbon
monoxide; and excimer laser gases.

III. The Parties

Praxair is an international industrial gas and surface technology
company headquartered in Danbury, Connecticut. The company primarily
serves industrial and specialty gas customers in manufacturing, metals,
and chemicals industries. Praxair is the third-largest industrial gas
supplier globally by revenue. In the United States, Praxair owns forty-
one ASUs and twenty-eight carbon dioxide facilities. In 2017, Praxair's
revenue totaled approximately $11.4 billion, about $5 billion of which
derived from business in the United States.
Linde, headquartered in Munich, Germany, is a global supplier of
industrial gases, homecare respiratory services, and engineering
services to customers in the healthcare, chemicals, and energy
industries. Linde is the second-largest global industrial gas supplier
worldwide. In the United States, Linde owns thirty-two ASUs and thirty-
five carbon dioxide facilities. In 2017, Linde generated approximately
$20.2 billion in total revenue. Linde's 2017 U.S. revenue totaled
approximately $4.4 billion, of which about $2.5 billion derived from
its LinCare home healthcare business.

IV. The Relevant Markets for Bulk Liquid Oxygen, Bulk Liquid Nitrogen,
and Bulk Liquid Argon

Oxygen, nitrogen, and argon are ``atmospheric gases,'' present in
the Earth's atmosphere in varying amounts. Industrial gas suppliers
like Linde and Praxair produce atmospheric gases for a range of
customer applications and industries, such as oil and gas, steelmaking,
health care, and food manufacturing. Oxygen, nitrogen, and argon are
three of the most widely used atmospheric industrial gases. Each
atmospheric gas has specific properties that make it uniquely suited
for its respective applications. For most of these applications, there
is no substitute for oxygen, nitrogen, or argon.
Suppliers distribute atmospheric gases to customers in different
forms and methods, depending on the volume of gas that the customer
requires. Customers that require extremely large volumes receive
atmospheric gases from on-site ASUs located at their facilities, or via
pipelines connecting ASUs to customer sites. Bulk customers require gas
volumes that are substantial, but not large enough to justify on-site
or pipeline gas delivery. For bulk customers, suppliers typically
transport bulk liquid oxygen, bulk liquid nitrogen, or bulk liquid
argon in cryogenic trailers that hold the gas in liquid form. The
liquid form is more condensed than the gaseous form, and therefore
easier to transport and store in large quantities. Bulk liquid gases
are then stored in tanks located at customer sites. From there,
customers can use the product in its liquid form, or convert it back to
its gaseous form before use. Small-volume customers purchase nitrogen,
oxygen, or argon in cylinders containing the product in gaseous form.
Typically, smaller customers receive gas cylinders from distributors
that purchase products from industrial gas suppliers in bulk liquid
form. It is impractical for bulk liquid oxygen, bulk liquid nitrogen,
or bulk liquid argon customers to switch distribution methods, as their
demand is too great to satisfy efficiently with cylinders, but too
small to justify the expense of on-site or pipeline delivery.
For atmospheric gases, the ratio of the product's value to its
transportation costs largely determines the relevant geographic market.
Due to the relatively low sales prices of bulk liquid oxygen and bulk
liquid nitrogen and the significant freight costs associated with
transporting them, these gases can ship, economically, a maximum
distance of approximately 100 to 250 miles from the ASU that produces
the gas. Therefore, it is appropriate to analyze the competitive
effects of the proposed merger in regional geographic markets for bulk
liquid oxygen and bulk liquid nitrogen. The relevant geographic markets
in which to analyze the effects of the proposed merger upon bulk liquid
oxygen and bulk liquid nitrogen are the following regions: (1) The
Northeast; (2) the Mid-Atlantic; (3) Upstate and Western New York; (4)
the Carolinas; (5) Northern Florida and Surrounding Areas; (6) Atlanta
and Surrounding Areas; (7) the Pacific Northwest; (8) Northern
California; (9) Southern California; (10) Arkansas and Surrounding
Areas; (11) Northern Texas and Surrounding Areas; (12) Southern Texas;
(13) the Central Gulf Coast; (14) the Eastern Midwest; (15) Greater
Chicago; (16) Missouri and Surrounding Areas; and (17) Puerto Rico.
Because bulk liquid argon is rarer and more expensive than bulk liquid
oxygen and bulk liquid nitrogen, suppliers can transport it
economically much greater distances. Therefore, the relevant geographic
area in which to analyze the effects of the proposed merger on the bulk
liquid argon market is the United States.
Each of the relevant markets for bulk liquid oxygen and bulk liquid
nitrogen would become significantly more concentrated following the
proposed merger. The proposed merger would consolidate two of the
leading suppliers of bulk liquid oxygen and bulk liquid nitrogen in
each of these areas. For bulk liquid argon, there are five significant
suppliers in the United States. Praxair is the second-largest domestic
producer of bulk liquid argon. The proposed merger would eliminate one
of the largest suppliers and substantially increase concentration in
the U.S. bulk liquid argon market, creating a highly concentrated
market.

V. The Relevant Markets for Bulk Liquid Carbon Dioxide

Carbon dioxide is a ``process gas,'' which means that it is
captured as a by-product of other manufacturing processes, such as
ethanol, ammonia, and hydrogen. Crude carbon dioxide also derives from
natural sources, such as natural gas wells. Suppliers convert and
distill crude carbon dioxide into final liquid form using a cryogenic
process at plants often located near carbon dioxide gas sources. The
most common applications for liquid carbon dioxide are in food and
beverage production. For example, customers commonly use carbon dioxide
in processes to carbonate beverages and chill or freeze food. For the
majority of its applications, liquid carbon dioxide has no viable
substitutes.
Suppliers deliver liquid carbon dioxide to customers in bulk
trailers or rail cars. Most customers store liquid carbon dioxide in
tanks located at their manufacturing facilities. Customers would not
switch to cylinder delivery because bulk delivery is far cheaper, and
they would have to manage significantly more deliveries to meet their
needs. In addition, customers would not consider self-sourcing liquid
carbon dioxide unless the cost increased significantly more than ten
percent, because of the costs to build necessary infrastructure and the
limited sources of carbon dioxide available.
Due to the significant freight costs associated with transporting
liquid carbon dioxide relative to its sales price, suppliers can only
ship liquid carbon dioxide economically up to 250 miles by truck. In
areas with few or no carbon dioxide sources, liquid carbon dioxide is
shipped as much as 750 miles by rail. Therefore, it is appropriate to
analyze the competitive effects of the proposed merger in regional
geographic markets for bulk liquid carbon dioxide. For bulk liquid
carbon dioxide, the relevant geographic markets in which to analyze the
effects of the proposed merger include the following regions: (1)

[[Page 55536]]

Northern California; (2) Southern California; (3) the Southeast; (4)
the Mid-Atlantic; (5) the Rocky Mountains; (6) the Plains; (7) Southern
Texas; (8) the Eastern Midwest; and (9) Greater Chicago.
The proposed merger would combine the largest and third-largest
suppliers of bulk liquid carbon dioxide in the United States. In each
relevant geographic market for bulk liquid carbon dioxide, the merged
firm would control a high share of capacity. Further, Linde and Praxair
are the two closest suppliers for numerous customers across multiple
relevant geographic markets, and the merger would eliminate a close
constraint on pricing of bulk liquid carbon dioxide.

VI. The Relevant Market for Bulk Refined Helium

Both Linde and Praxair are suppliers of bulk refined helium. Bulk
refined helium has specific properties that make it uniquely suited for
its applications. For example, because helium has the lowest boiling
point of any element, liquid helium is valuable as a cooling agent in
superconductivity for medical applications, such as magnetic resonance
imaging (``MRI''), and certain manufacturing applications. For most
applications, there is no substitute for bulk refined helium, and
customers are unlikely to switch to another gas or product, even if the
price of bulk refined helium increased by five to ten percent.
Suppliers distribute refined helium to customers in cylinder form
or bulk form, depending on the customers' volume requirements.
Customers that require large volumes of refined helium generally
purchase the gas in bulk form. Suppliers often package bulk refined
helium in containers called ``dewars,'' and then distribute the product
in liquid form to customers. For customers that require helium in its
gaseous state, suppliers can convert bulk refined helium from liquid to
gaseous form. Suppliers distribute bulk quantities of gaseous helium in
high-pressure ``tube trailers.'' Customers obtain helium in bulk form
because it is the most cost-effective way to purchase the high volume
of refined helium that they require. Accordingly, customers would not
switch distribution methods for their purchases of refined helium, even
if the prices of bulk refined helium distributed by one method
increased by five to ten percent.
Helium is a rare and expensive gas that can be, and is, transported
economically on a worldwide basis. Capacity and demand for helium
produced abroad influences the capacity and demand for helium produced
domestically. Suppliers source helium primarily from a few large
sources, and ship helium from those sources to customers around the
world. Therefore, it is appropriate to analyze the competitive effects
of the proposed merger using a worldwide market for bulk refined
helium.
The market for bulk refined helium is highly concentrated. Linde
and Praxair are two of only five companies in the world with access to
significant quantities of bulk refined helium. The proposed transaction
combines the largest and third-largest bulk refined helium suppliers in
the world. Post-merger, the combined entity would control two-fifths of
the global helium supply.

VII. The Relevant Market for Bulk Liquid Hydrogen

Hydrogen is a non-atmospheric gas produced as a by-product of other
processes, including natural gas extraction and petrochemical
production. Most crude hydrogen comes from third-party feedstocks.
Industrial gas suppliers purify and liquefy crude hydrogen before
distributing it to customers. Customers use liquid hydrogen for a range
of applications across several industries. For example, liquid hydrogen
has applications in space programs as a primary rocket fuel and as a
propellant for nuclear powered rockets and space vehicles, in
hydrogenation and clean energy storage, and as an active ingredient in
chemical manufacturing processes.
Customers that require very large quantities of hydrogen on a
regular basis typically receive the gas via an on-site plant or
pipeline. For customers that require a small amount of hydrogen,
cylinders are most economical. Customers that require more hydrogen
than can be practicably supplied with cylinders, but not enough volume
to justify the costs of on-site or pipeline delivery, typically receive
bulk liquid delivery. For most applications, there are no viable
economic alternatives to bulk liquid hydrogen. Further, because
distribution methods depend on volume requirements, customers cannot
switch to cylinders or on-site distribution if bulk prices were to
increase.
The relevant geographic market for bulk liquid hydrogen is
national. The value of bulk liquid hydrogen relative to the cost of
transportation is the primary factor in defining the relevant
geographic market. Liquid hydrogen's high value and limited production
allows suppliers to transport it over long distances economically and
more efficiently than hydrogen in bulk gaseous form.
Linde and Praxair are two of just four main suppliers of bulk
liquid hydrogen in the United States. The U.S. bulk liquid hydrogen
market is highly concentrated, and Praxair is the largest producer of
bulk liquid hydrogen in the United States. The proposed merger would
remove one of the few bulk liquid hydrogen suppliers from the market.

VIII. The Relevant Market For HyCO

HyCO is the industry term for the on-site provision of hydrogen and
carbon monoxide gas. The same chemical process produces both gases, so
one gas is always the by-product of the other. Plants that produce
hydrogen and carbon monoxide create a mixture called synthesis gas (or
``syngas''), which producers separate into its constituent parts using
a cryogenic process.
HyCO includes separate product markets for on-site hydrogen and
carbon monoxide, because the two gases are not substitutes for each
other. For most applications, there are no viable substitutes for
hydrogen or carbon monoxide. Likewise, customers cannot substitute bulk
delivery for on-site supply of hydrogen or carbon monoxide, and so on-
site supply of these gases is a distinct product market, as well.
There are three main types of HyCO plants: (1) The steam methane
reformer (``SMR''); (2) the partial oxidation plant (``POX''); and (3)
the autothermal reformation plant (``ATR''). Each plant type produces
different proportions of hydrogen and carbon monoxide. SMRs produce the
highest proportion of hydrogen relative to carbon monoxide. POX and ATR
plants produce these gases in more equal proportions. For most on-site
hydrogen customers, suppliers build on-site SMRs; however, for
customers that need on-site carbon monoxide, suppliers will typically
construct POX or ATR plants. On-site HyCO customers usually conduct a
competitive bidding process several years in advance of a plant's
opening. This bidding process is the source of most competition in the
HyCO market. The customer and winning bidder typically enter into long-
term contracts that lock-in prices and other terms.
The majority of HyCO plants in the United States are SMRs built for
oil and petrochemical companies that only require hydrogen. Carbon
monoxide customers are few in number, but large in size and gas needs--
most are chemical companies that produce acetic acid, polyurethane, and
other compounds. HyCO plants are expensive, costing from $30 million to
over $400

[[Page 55537]]

million, depending on size and type. The industrial gas supplier
usually absorbs the cost of building the plant, and then yields the
return from a long-term (fifteen to twenty year) supply contract with
the customer. HyCO is a critical input for its customers' products, and
HyCO plants often integrate into customers' production sites.
Accordingly, HyCO customers require suppliers to have engineering and
operational expertise, as well as a demonstrated history and reputation
of successfully operating HyCO plants.
Relevant geographic markets for on-site hydrogen and carbon
monoxide are national. HyCO suppliers are generally able to serve
customers in all areas of the country. The Gulf Coast region is a
distinct submarket within the broader national markets for on-site
hydrogen and carbon monoxide, as it has the highest concentration of
HyCO customers anywhere in the United States. There, hydrogen pipelines
serve multiple customers from a single HyCO plant or serve as backup.
Hydrogen pipelines allow HyCO suppliers to offer customers lower prices
than they could with a dedicated on-site plant at the customer's
location. Consequently, HyCO suppliers are only competitive in areas of
the Gulf Coast where they have hydrogen pipeline networks.
U.S. markets for on-site hydrogen and carbon monoxide are highly
concentrated. Praxair is a market leader, and Linde represents one of a
limited number of viable alternative HyCO suppliers. The proposed
merger would remove one of the few HyCO suppliers from the market.

IX. The Relevant Market for Excimer Laser Gases

Excimer laser gases are a subset of specialty gases commonly used
to serve customers in the electronics industry, such as semiconductor
or liquid crystal display manufacturers. Excimer lasers use gas
mixtures, typically containing multiple noble gases (e.g., neon,
krypton, or xenon) and, occasionally, a halogen gas (e.g., fluorine or
chlorine). Suppliers of excimer laser gases produce or source noble and
halogen gases worldwide, then purify and blend these gases into
products that they distribute to customers in cylinders. Neon comprises
95 to 99 percent of most excimer laser gases, with other rare and
halogen gases making up the remainder. Neon, krypton, and xenon are
present in the air in extremely small amounts, and industrial gas
companies produce them only at very large ASUs with specialized
equipment to capture these trace gases.
The semiconductor industry is the main customer base for excimer
laser gases in the United States. Excimer laser gases generate
ultraviolet light in excimer lasers, a component of photolithography
machines. In addition, excimer laser gases have applications in
annealing processes to produce display screens and for medical
ablation, a minimally invasive process that cuts human tissue with
minimal scarring (e.g., LASIK vision surgery).
The relevant geographic market for excimer laser gases is at least
as broad as the United States. U.S. suppliers ship excimer laser gases
to customer sites around the country and the world. Suppliers source
excimer laser gas inputs, such as neon, domestically and
internationally. Although international customers may not distinguish
between excimer laser gases produced domestically or abroad, U.S.
excimer laser gas customers prefer suppliers that have domestic
production facilities and sources of neon.
Before supplying excimer laser gases to customers, suppliers must
complete qualification processes with both laser manufacturers and
individual customers to ensure that their excimer laser gases meet
purity, quality, and other specifications. Each qualification takes
three to eighteen months, and costs at least $125,000. Customers cannot
switch from excimer laser gases to another product because there is no
substitute that produces the same wavelength of light, and switching to
another supplier often requires additional qualifications, resources,
and time.
The market for excimer laser gases in the United States is highly
concentrated. Linde and Praxair have a combined share of approximately
70 percent in this market, and the proposed merger would reduce the
number of domestic suppliers from four to three.

X. Effects of the Acquisition

The proposed merger would eliminate direct and substantial
competition between Praxair and Linde in each of the relevant markets,
provide the merged firm with an enhanced ability to increase prices
unilaterally, and eliminate a competitor for gas customers in markets
where alternative sources of supply are limited. The proposed merger,
therefore, likely would allow the merged firm to exercise market power
unilaterally, increasing the likelihood that purchasers of bulk liquid
oxygen, bulk liquid nitrogen, bulk liquid argon, bulk liquid carbon
dioxide, bulk liquid hydrogen, bulk refined helium, on-site hydrogen,
on-site carbon monoxide, and excimer laser gases would pay higher
prices in the relevant areas.
The proposed merger would also enhance the likelihood of collusion
or coordinated action among remaining firms in these relevant markets,
because the merger would eliminate a significant competitor from each
market, leaving a small number of viable competitors. In addition,
certain market conditions, such as the relative homogeneity of
suppliers and products, and the transparency of detailed market
information, are conducive to coordination among competing suppliers.
These conditions also enhance the ability of competitors engaged in a
coordinated scheme to detect and punish deviations from the scheme.

XI. Entry

New entry into the relevant markets would not occur in a timely
manner sufficient to deter or counteract the likely adverse competitive
effects of the proposed merger. Entry into the bulk liquid oxygen,
nitrogen, and argon markets is costly, difficult, and unlikely because
of, among other things, the time and cost required to construct the
ASUs that produce these products. Constructing an ASU at a scale
sufficient to be viable in the market would cost at least $30 to $100
million, most of which are sunk costs. Moreover, it is not economically
justifiable to build an ASU unless a significant amount of the plant's
capacity has been pre-sold prior to construction, either to an on-site
customer or to customers with commitments under contract. Such pre-sale
opportunities occur infrequently and unpredictably and can take several
years to secure.
Entry into the bulk liquid carbon dioxide market would also not be
timely, likely, or sufficient to deter or counteract the adverse
competitive effects of the proposed merger. Constructing a plant
capable of producing bulk liquid carbon dioxide would cost at least $5
to $30 million. In addition, successful entry into the bulk liquid
carbon dioxide market requires access to raw carbon dioxide supply
sources, which are typically unavailable due to long-term contracts
with incumbent liquid carbon dioxide suppliers.
New entry into the bulk liquid hydrogen market is unlikely to be
timely or sufficient to counteract the proposed transaction's likely
anticompetitive effects. Liquid hydrogen production facilities require
years to construct and considerable capital to finance. Further,
customers require liquid hydrogen suppliers to have backup supply and
be

[[Page 55538]]

able to deliver product to their sites. A firm is more likely to
succeed if it has a portfolio of diversified liquid hydrogen sources,
as well as a reliable distribution network, which would require
substantial time, resources, and investments to obtain.
Timely, sufficient entry into the bulk refined helium market is
extremely unlikely, if not impossible. The most significant impediment
to entry is securing a source of refined helium. A new entrant would
need to secure multiple sources of refined helium, acquire necessary
transportation and storage equipment, and establish a distribution
infrastructure. Market incumbents secure all available sources of
refined helium in long-term contracts. A new entrant would need to
locate a new source of crude helium and build a refinery. In addition,
an entrant would need to invest tens of millions of dollars to acquire
necessary infrastructure and distribution assets, including transfills,
cryogenic storage trailers, high-pressure tube trailers, and liquid
dewars capable of transporting helium from the refinery to customers.
Given the substantial costs and challenges of entering the bulk refined
helium market, new entry sufficient to counteract the competitive
effects of the proposed merger would not occur in a timely manner.
Entry into the HyCO market requires engineering expertise,
experience in designing and operating the various types of HyCO plants,
significant capital resources, and a proven record of success with HyCO
customers. It would take several years and substantial investments for
a new entrant to develop the expertise, experience, reputation, and
credibility necessary to compete in the HyCO market. A new HyCO
facility costs $30 to $300 million, depending on the plant size and
product mix. Further, in the Gulf Coast, a hydrogen pipeline is an
added barrier to enter the HyCO market. Existing pipelines are scarce
in this region, and building a new pipeline requires substantial time
and resources that few firms have. Finally, opportunities to compete
for new or existing HyCO customers are limited, as HyCO supply
contracts are long-term, and customers invariably award contracts to
proven suppliers.
New entry sufficient to deter or avert the proposed merger's
anticompetitive effects in the market for excimer laser gases is
unlikely to occur. The principal barrier to new entry is sourcing neon,
which accounts for just 0.0018 percent of the Earth's atmosphere.
Suppliers can produce neon efficiently only at the largest ASUs, which
must have a neon gas column. Such an ASU would take several years and
cost hundreds of million dollars to construct. In addition, an entrant
would have to produce or otherwise secure other input gases, as well as
supply, logistics, and distribution infrastructure and employees. An
entrant would also have to construct a facility to blend excimer laser
gases. Finally, an entrant would have to qualify its products with
laser manufacturers and customers, which involves testing gas blends at
a customer plants. The costs of entry would be difficult to justify, as
the total U.S. excimer laser gas market is only around $40 million.

XII. The Consent Agreement

The proposed Consent Agreement aims to eliminate the competitive
concerns that the proposed merger raises in each relevant market. It
requires Linde to divest to Messer all thirty-two of its U.S. ASUs,
along with related equipment, supply contracts, technology, and
goodwill, in the seventeen bulk liquid oxygen and nitrogen markets at
issue in this matter. With the divestitures, the merger will not
increase concentration in any market for bulk liquid nitrogen, oxygen,
or argon. As part of the divestiture, Messer will acquire all of
Linde's customer contracts and bulk tanks located at the customer
locations.
The proposed Consent Agreement also requires Linde to divest to
Messer sixteen carbon dioxide facilities, including production plants
and all associated rail depots. Linde will divest all existing
contracts with customers supplied by the respective carbon dioxide
facilities. Additionally, all assets used to support the distribution
of bulk liquid carbon dioxide will be part of the divestiture,
including trailers, tractors, and rail cars.
Linde must also divest to Messer its entire bulk liquid hydrogen
business, which includes Linde's liquid hydrogen production facility in
Magog, Quebec, source agreements, and four hydrogen transfills. Linde
will divest all assets related to the bulk liquid hydrogen business
including, among other things, employee contracts and information,
customer and supply contracts, leases, distribution trailers, and
equipment necessary to distribute bulk liquid hydrogen.
The proposed Consent Agreement requires Linde to divest to Messer
all of Linde's U.S. bulk refined helium business, as well as global
helium sourcing contracts, which, when combined with divestitures in
other jurisdictions, are equal to Praxair's current worldwide helium
capacity. In addition, Linde will divest its entire network of helium
transfills across the United States. All of Linde's helium customer
contracts in the United States, Canada, Brazil, Colombia, and Chile are
included in the divestiture. The proposed Consent Agreement also
provides Messer with the requisite number of dewars, tube trailers, and
helium ISO containers to serve its helium customers worldwide.
The proposed Consent Agreement also requires Linde to divest to
Matheson five on-site hydrogen SMRs to Matheson, along with Linde's
hydrogen pipeline in the Gulf Coast and all relevant customer
contracts. The proposed divestiture includes Linde's SMR facilities in
Anacortes, Washington; Lemont, Illinois; Lima, Ohio; McIntosh, Alabama;
and Saraland, Alabama. The SMR assets also include Linde's Remote
Operating Center in La Porte, Texas, the ``control center'' for Linde's
on-site hydrogen business. In addition, Linde will divest its POX
plants in Clear Lake, Texas, and La Porte, Texas, back to their
customers, Celanese and LyondellBasell, respectively. This divestiture
will resolve the competitive issues that these customers would
otherwise face post-merger, as they will be able operate the facilities
themselves or contract with one of the firms with a nearby hydrogen
pipeline.
To address competitive concerns in the market for excimer laser
gases, the proposed Consent Agreement also requires Linde to divest to
Messer all of Linde's customer contracts, intellectual property, and
key Linde staff to sustain business operations and customer
relationships. Neon-producing ASUs will also be included in the asset
package. To ensure a seamless transfer, Linde has agreed to supply its
finished excimer laser gas products to Messer for a period of three
years (with possible extensions of time). This supply agreement will
give Messer sufficient time to construct or renovate a facility and
obtain OEM and customer certification. The proposed Decision and Order
also requires Linde to underwrite the cost of building Messer's new
facility. If Messer does not commence construction of the plant within
one year, then Linde must rescind its sale of the excimer laser gas
business to Messer and divest it to a Commission-approved acquirer.
Linde and Praxair have agreed to divest the required facilities,
together with all related equipment, customer and supply contracts,
technology, and goodwill, to one or more Commission-approved buyers
within four months of consummating the proposed merger. All acquirers
of divested assets must receive

[[Page 55539]]

the prior approval of the Commission. The Commission's goal in
evaluating possible purchasers of divested assets is to maintain the
competitive environment that existed prior to the acquisition.
The proposed Consent Agreement incorporates an Order to Hold
Separate and Maintain Assets (``Order to Hold Separate'') to ensure
that Linde and Praxair (1) continue to operate separately until the
divestitures to Messer and Matheson have been completed and (2)
continue to maintain all assets until the required divestitures have
been completed. The Order to Hold Separate appoints Grant Thornton LLP
as monitor to oversee compliance with all the obligations and
responsibilities under the proposed Decision and Order and requires
Linde to execute an agreement conferring upon the monitor all of the
rights, powers, and authorities necessary to permit the monitor to
ensure the continued health and competitiveness of the divested
businesses. Further, if the parties fail to divest the assets as
required within the time specified, the Commission may appoint a
divestiture trustee to divest the assets in a manner consistent with
the proposed Decision and Order and subject to Commission approval.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official interpretation of the proposed Consent Agreement or to modify
its terms in any way.

By direction of the Commission, Commissioner Chopra dissenting.
Donald S. Clark,
Secretary.

Statement of Commissioner Rohit Chopra

Today, the FTC is proposing to impose conditions on a merger
between Praxair, Inc. (NYSE: PX) and Linde AG (FWB: LIN), the world's
second- and third-largest industrial gas suppliers. While these firms
may not be household names, they provide inputs to an enormous number
of industrial and consumer products throughout our economy. The merger
would be clearly anticompetitive in violation of the Clayton Act, with
a high likelihood of harming manufacturers of a wide range of
industrial and consumer products.
The Commission is proposing to order substantial divestitures
across multiple lines of businesses. Notably, Linde is divesting the
vast majority of its U.S. industrial gas business to a joint venture
between Messer Group GmbH and CVC Capital Partners, a private equity
firm. Separately, Linde will also divest other assets to Matheson Tri-
Gas, Inc. While the divestitures go a long way to address the
anticompetitive concerns, the decision to approve this remedy was still
a close call.
The transaction, as originally structured, does not appear to have
any significant merger-specific efficiencies that would guarantee
benefits to customers. However, the proposed order requires substantial
divestitures that might preserve or even increase competition in some
product markets. But even with the proposed remedies, this transaction
is not without risks to competition. In particular, I would have
preferred to include additional protections for the public to safeguard
against risks often posed by the private equity buyer interest in the
divested assets, as well as the level of debt financing and investment
horizons involved.

Divestiture Buyer Financing

Competition enforcers, including the FTC, should always examine
whether its merger remedies have been successful over the long term.
The FTC's 2017 Merger Remedies study highlighted some of the lessons
learned from past merger remedies.\1\
---------------------------------------------------------------------------

\1\ See The FTC's Merger Remedies 2006-2012, A Report of the
Bureaus of Competition and Economics, Federal Trade Commission,
January 2017, available at: https://www.ftc.gov/reports/ftcs-merger-remedies-2006-2012-report-bureaus-competition-economics.
---------------------------------------------------------------------------

When evaluating the suitability of a divestiture buyer, agencies
must determine whether the buyer can meaningfully replace competitive
market forces eliminated by a merger. For example, agencies need to be
confident that the buyer possesses the know-how and technical
capabilities to successfully operate the divested businesses. Among
other things, the 2017 study found that the success of a divestiture
over time depends, in part, on whether the buyer has adequate financing
to ensure success. Given recent trends in our capital markets, we need
to carefully scrutinize buyer financing.
In situations like the matter before us, I approached this line of
inquiry with several questions in mind:
(1) Does the deal's financing structure allow the buyer to make
significant investments to maintain and grow their business in order to
vigorously compete? Does the buyer have adequate liquidity to be a
nimble and opportunistic competitor?
(2) What is the buyer's level of debt financing, compared to others
in the industry? Have creditors protected themselves in ways that are
aligned--or misaligned--with the goal of preserving competition?
(3) Does the buyer's financing and governance structure create
temptations to make asset sales that would reduce competition?
As noted above, in this matter one of the divestiture buyers, MG
Industries, is a new joint venture between Messer Group GmbH, a major
industrial gas company, and CVC Capital Partners, a private equity
firm.
In this situation, I would have preferred terms in the proposed
order that would have required prior notice to or approval by the
Commission of any asset sales by MG Industries. There is past
Commission precedent for doing so. In situations where there was a risk
that the divestiture buyer may subsequently sell assets it acquired
pursuant to a divestiture order, the Commission has sometimes ordered
the divestiture buyer to agree to a prior approval provision covering
any sale of the assets acquired for a defined period of time.
For example, in the Koninklijke Ahold and Delhaize Group matter,
due to concern that one of the divestiture buyers (Supervalu) might
later transact acquired stores, the Commission required Supervalu to
seek prior approval for any such transfer of the divested stores for a
period of three years.\2\
---------------------------------------------------------------------------

\2\ In the Matter of Koninklijke Ahold and Delhaize Group, C-
4588 (Consent) (July 22, 2016), available at: https://www.ftc.gov/enforcement/cases-proceedings/151-0175/koninklijke-ahold-delhaize-group.
---------------------------------------------------------------------------

In the Nestle Holdings, Inc. and Ralston Purina Co. matter, the
Commission required the divestiture buyer (a private equity fund) to
seek approval by the Commission prior to the sale of certain assets
held less than five years.\3\ The buyer would later seek permission
from the Commission to sell assets, reducing the likelihood of needing
to litigate an anticompetitive transaction.
---------------------------------------------------------------------------

\3\ In the Matter of Nestle Holdings, Inc., and Ralston Purina
Company, C-4028 (Consent) (December 11, 2001), available at: https://www.ftc.gov/enforcement/cases-proceedings/0110083/nestle-holdings-inc-ralston-purina-company.
---------------------------------------------------------------------------

Special Considerations With Financial Buyers

Private equity funds continue to play a greater role in deal
activity across the globe. Notably, private equity participation is
associated with higher levels of debt financing, which can amplify both
risk and returns on equity. At the most basic level, heavy debt

[[Page 55540]]

burdens can increase the likelihood of insolvency. Private equity
participation is also associated with other firm behavior that can
reduce long-term competition, including opportunistic asset sales. This
risk may be more acute when funds purchase assets in unusual and
distressed situations.
Enforcers must carefully examine investors' unique incentives that
can drive firm behavior in ways that affect competition. To assess
these incentives, we must always actively probe the entire
circumstances of investor involvement in a merger transaction under
review. For example, what is the buyer's investment thesis and
strategy? How has the investor typically realized gains out of past
investments? Does the buyer plan to invest more of its own equity
capital into the business or simply further rely on debt financing?
When and how does the investor intend to exit its investment? Given all
of this, what really is the long-term impact on competition?
While Commission staff certainly ask many of these questions in
their review of divestiture buyers, it will be important to ensure that
we are conducting careful and adequate due diligence with respect to
buyers that are heavily reliant on debt financing and where investment
firms exert significant control.
[FR Doc. 2018-24206 Filed 11-5-18; 8:45 am]
BILLING CODE 6750-01-P

Federal Register / Vol. 83, No. 215 / Tuesday, November 6, 2018 / Notices 55533

component of the FDIC’s efforts to not make greater use of mainstream FEDERAL TRADE COMMISSION
comply with a Congressional mandate banking services.
[File No. 171 0068]
contained in section 7 of the Federal To obtain this information, the FDIC
Deposit Insurance Reform Conforming partners with the U.S. Census Bureau, Linde AG and Praxair, Inc.; Analysis To
Amendments Act of 2005 (‘‘Reform which administers the Household Aid Public Comment
Act’’) (Pub. L. 109–173), which calls for
Survey supplement (‘‘FDIC AGENCY: Federal Trade Commission.
the FDIC to conduct ongoing surveys
Supplement’) to households that
‘‘on efforts by insured depository ACTION: Proposed Consent Agreement.
institutions to bring those individuals participate in the CPS. The supplement
and families who have rarely, if ever, has been administered every other year SUMMARY: The consent agreement in this
held a checking account, a savings since January 2009. The previous survey matter settles alleged violations of
account or other type of transaction or questionnaires and survey results can be federal law prohibiting unfair methods
check cashing account at an insured accessed through the following link: of competition. The attached Analysis to
depository institution (hereafter in this http://www.economicinclusion.gov/ Aid Public Comment describes both the
section referred to as the ‘unbanked’) surveys/. allegations in the complaint and the
into the conventional finance system.’’ Consistent with the statutory mandate terms of the consent orders—embodied
Section 7 further instructs the FDIC to in the consent agreement—that would
to conduct the surveys on an ongoing
consider several factors in its conduct of settle these allegations.
basis, the FDIC already has in place
the surveys, including: (1) ‘‘What DATES: Comments must be received on
arrangements for conducting the sixth
cultural, language and identification or before November 21, 2018.
Household Survey as a supplement to
issues as well as transaction costs ADDRESSES: Interested parties may file a
the June 2019 CPS.
appear to most prevent ‘unbanked’ comment online or on paper, by
individuals from establishing However, prior to finalizing the next following the instructions in the
conventional accounts’’; and (2) ‘‘what survey questionnaire, the FDIC seeks to Request for Comment part of the
is a fair estimate of the size and worth solicit public comment on whether SUPPLEMENTARY INFORMATION section
of the ‘‘unbanked’’ market in the United changes to the existing instrument are below. Write: ‘‘Linde AG and Praxair,
States.’’ The National Survey of desirable and, if so, to what extent. It Inc.; File No. 1710068’’ on your
Unbanked and Underbanked should be noted that, as a supplement comment, and file your comment online
Households is designed to address these of the CPS survey, the Household at https://ftcpublic.commentworks.com/
factors and provide a factual basis on Survey needs to adhere to specific ftc/praxairlindedivest/ by following the
the proportions of unbanked parameters that include limits in the instructions on the web-based form. If
households. Such a factual basis is length and sensitivity of the questions you prefer to file your comment on
necessary to adequately assess banks’ that can be asked of CPS respondents. paper, write ‘‘Linde AG and Praxair,
efforts to serve these households as Interested members of the public may Inc.; File No. 1710068’’ on your
required by the statutory mandate. The obtain a copy of the proposed survey comment and on the envelope, and mail
National Survey of Unbanked and questionnaire on the following web your comment to the following address:
Underbanked Households is the only page: https://www.fdic.gov/regulations/ Federal Trade Commission, Office of the
population-representative survey laws/federal/2018/2019-draft- Secretary, 600 Pennsylvania Avenue
conducted at the national level that household-survey-questionnaire.pdf NW, Suite CC–5610 (Annex D),
provides state-level estimates of the size Washington, DC 20580, or deliver your
and characteristics of unbanked and Request for Comment comment to the following address:
underbanked households for all 50 Federal Trade Commission, Office of the
Comments are invited on: (a) Whether Secretary, Constitution Center, 400 7th
states and the District of Columbia.
the collection of information is Street SW, 5th Floor, Suite 5610 (Annex
The FDIC supplement collects necessary for the proper performance of
nationally-representative data, not D), Washington, DC 20024.
the FDIC’s functions, including whether
otherwise available, to measure and FOR FURTHER INFORMATION CONTACT:
the information has practical utility; (b) Jordan S. Andrew (202–326–3678),
track economic inclusion, and assess the
the accuracy of the estimates of the Bureau of Competition, 600
accessibility and sustainability of
burden of the information collections, Pennsylvania Avenue NW, Washington,
banking relationships. The survey
including the validity of the DC 20580.
identifies different banking status
methodology and assumptions used; (c)
groups, including unbanked and SUPPLEMENTARY INFORMATION: Pursuant
underbanked consumers. In identifying ways to enhance the quality, utility, and to Section 6(f) of the Federal Trade
underbanked consumers, the FDIC clarity of the information to be Commission Act, 15 U.S.C. 46(f), and
considers households that have bank collected; and (d) ways to minimize the FTC Rule 2.34, 16 CFR 2.34, notice is
accounts but also substantially rely on burden of the collection of information hereby given that the above-captioned
nonbank financial services to meet basic on respondents, including through the consent agreement containing a consent
financial needs such as receiving use of automated collection techniques order to cease and desist, having been
income, paying bills, saving and storing or other forms of information filed with and accepted, subject to final
money, and accessing basic consumer technology. All comments will become approval, by the Commission, has been
credit. There is an emphasis on services a matter of public record. placed on the public record for a period
that are disproportionately relied on by of thirty (30) days. The following
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Dated at Washington, DC, on November 1,
the unbanked, and are provided by a 2018. Analysis to Aid Public Comment
company or firm, as opposed to those Federal Deposit Insurance Corporation. describes the terms of the consent
accessed informally through agreement, and the allegations in the
Robert E. Feldman,
individuals. The survey captures the use complaint. An electronic copy of the
of a range of bank and nonbank Executive Secretary. full text of the consent agreement
products, and other data to help assess [FR Doc. 2018–24228 Filed 11–5–18; 8:45 am] package can be obtained from the FTC
the reasons why some households do BILLING CODE 6714–01–P Home Page (for October 22, 2018), on

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Federal Register / Vol. 83, No. 215 / Tuesday, November 6, 2018 / Notices 55535

hydrogen; bulk refined helium; on-site bulk liquid oxygen, bulk liquid would become significantly more
hydrogen; on-site carbon monoxide; and nitrogen, or bulk liquid argon in concentrated following the proposed
excimer laser gases. cryogenic trailers that hold the gas in merger. The proposed merger would
liquid form. The liquid form is more consolidate two of the leading suppliers
III. The Parties
condensed than the gaseous form, and of bulk liquid oxygen and bulk liquid
Praxair is an international industrial therefore easier to transport and store in nitrogen in each of these areas. For bulk
gas and surface technology company large quantities. Bulk liquid gases are liquid argon, there are five significant
headquartered in Danbury, Connecticut. then stored in tanks located at customer suppliers in the United States. Praxair is
The company primarily serves sites. From there, customers can use the the second-largest domestic producer of
industrial and specialty gas customers product in its liquid form, or convert it bulk liquid argon. The proposed merger
in manufacturing, metals, and chemicals back to its gaseous form before use. would eliminate one of the largest
industries. Praxair is the third-largest Small-volume customers purchase suppliers and substantially increase
industrial gas supplier globally by nitrogen, oxygen, or argon in cylinders concentration in the U.S. bulk liquid
revenue. In the United States, Praxair containing the product in gaseous form. argon market, creating a highly
owns forty-one ASUs and twenty-eight Typically, smaller customers receive gas concentrated market.
carbon dioxide facilities. In 2017, cylinders from distributors that
Praxair’s revenue totaled approximately V. The Relevant Markets for Bulk
purchase products from industrial gas
$11.4 billion, about $5 billion of which Liquid Carbon Dioxide
suppliers in bulk liquid form. It is
derived from business in the United impractical for bulk liquid oxygen, bulk Carbon dioxide is a ‘‘process gas,’’
States. liquid nitrogen, or bulk liquid argon which means that it is captured as a by-
Linde, headquartered in Munich, customers to switch distribution product of other manufacturing
Germany, is a global supplier of methods, as their demand is too great to processes, such as ethanol, ammonia,
industrial gases, homecare respiratory satisfy efficiently with cylinders, but too and hydrogen. Crude carbon dioxide
services, and engineering services to small to justify the expense of on-site or also derives from natural sources, such
customers in the healthcare, chemicals, pipeline delivery. as natural gas wells. Suppliers convert
and energy industries. Linde is the For atmospheric gases, the ratio of the and distill crude carbon dioxide into
second-largest global industrial gas product’s value to its transportation final liquid form using a cryogenic
supplier worldwide. In the United costs largely determines the relevant process at plants often located near
States, Linde owns thirty-two ASUs and geographic market. Due to the relatively carbon dioxide gas sources. The most
thirty-five carbon dioxide facilities. In low sales prices of bulk liquid oxygen common applications for liquid carbon
2017, Linde generated approximately and bulk liquid nitrogen and the dioxide are in food and beverage
$20.2 billion in total revenue. Linde’s significant freight costs associated with production. For example, customers
2017 U.S. revenue totaled transporting them, these gases can ship, commonly use carbon dioxide in
approximately $4.4 billion, of which economically, a maximum distance of processes to carbonate beverages and
about $2.5 billion derived from its approximately 100 to 250 miles from the chill or freeze food. For the majority of
LinCare home healthcare business. ASU that produces the gas. Therefore, it its applications, liquid carbon dioxide
is appropriate to analyze the has no viable substitutes.
IV. The Relevant Markets for Bulk Suppliers deliver liquid carbon
Liquid Oxygen, Bulk Liquid Nitrogen, competitive effects of the proposed
merger in regional geographic markets dioxide to customers in bulk trailers or
and Bulk Liquid Argon rail cars. Most customers store liquid
for bulk liquid oxygen and bulk liquid
Oxygen, nitrogen, and argon are nitrogen. The relevant geographic carbon dioxide in tanks located at their
‘‘atmospheric gases,’’ present in the markets in which to analyze the effects manufacturing facilities. Customers
Earth’s atmosphere in varying amounts. of the proposed merger upon bulk liquid would not switch to cylinder delivery
Industrial gas suppliers like Linde and oxygen and bulk liquid nitrogen are the because bulk delivery is far cheaper,
Praxair produce atmospheric gases for a following regions: (1) The Northeast; (2) and they would have to manage
range of customer applications and the Mid-Atlantic; (3) Upstate and significantly more deliveries to meet
industries, such as oil and gas, Western New York; (4) the Carolinas; (5) their needs. In addition, customers
steelmaking, health care, and food Northern Florida and Surrounding would not consider self-sourcing liquid
manufacturing. Oxygen, nitrogen, and Areas; (6) Atlanta and Surrounding carbon dioxide unless the cost increased
argon are three of the most widely used Areas; (7) the Pacific Northwest; (8) significantly more than ten percent,
atmospheric industrial gases. Each Northern California; (9) Southern because of the costs to build necessary
atmospheric gas has specific properties California; (10) Arkansas and infrastructure and the limited sources of
that make it uniquely suited for its Surrounding Areas; (11) Northern Texas carbon dioxide available.
respective applications. For most of and Surrounding Areas; (12) Southern Due to the significant freight costs
these applications, there is no substitute Texas; (13) the Central Gulf Coast; (14) associated with transporting liquid
for oxygen, nitrogen, or argon. the Eastern Midwest; (15) Greater carbon dioxide relative to its sales price,
Suppliers distribute atmospheric Chicago; (16) Missouri and Surrounding suppliers can only ship liquid carbon
gases to customers in different forms Areas; and (17) Puerto Rico. Because dioxide economically up to 250 miles
and methods, depending on the volume bulk liquid argon is rarer and more by truck. In areas with few or no carbon
of gas that the customer requires. expensive than bulk liquid oxygen and dioxide sources, liquid carbon dioxide
Customers that require extremely large bulk liquid nitrogen, suppliers can is shipped as much as 750 miles by rail.
volumes receive atmospheric gases from Therefore, it is appropriate to analyze
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transport it economically much greater
on-site ASUs located at their facilities, distances. Therefore, the relevant the competitive effects of the proposed
or via pipelines connecting ASUs to geographic area in which to analyze the merger in regional geographic markets
customer sites. Bulk customers require effects of the proposed merger on the for bulk liquid carbon dioxide. For bulk
gas volumes that are substantial, but not bulk liquid argon market is the United liquid carbon dioxide, the relevant
large enough to justify on-site or States. geographic markets in which to analyze
pipeline gas delivery. For bulk Each of the relevant markets for bulk the effects of the proposed merger
customers, suppliers typically transport liquid oxygen and bulk liquid nitrogen include the following regions: (1)

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55538 Federal Register / Vol. 83, No. 215 / Tuesday, November 6, 2018 / Notices

able to deliver product to their sites. A several years and cost hundreds of network of helium transfills across the
firm is more likely to succeed if it has million dollars to construct. In addition, United States. All of Linde’s helium
a portfolio of diversified liquid an entrant would have to produce or customer contracts in the United States,
hydrogen sources, as well as a reliable otherwise secure other input gases, as Canada, Brazil, Colombia, and Chile are
distribution network, which would well as supply, logistics, and included in the divestiture. The
require substantial time, resources, and distribution infrastructure and proposed Consent Agreement also
investments to obtain. employees. An entrant would also have provides Messer with the requisite
Timely, sufficient entry into the bulk to construct a facility to blend excimer number of dewars, tube trailers, and
refined helium market is extremely laser gases. Finally, an entrant would helium ISO containers to serve its
unlikely, if not impossible. The most have to qualify its products with laser helium customers worldwide.
significant impediment to entry is manufacturers and customers, which The proposed Consent Agreement
securing a source of refined helium. A involves testing gas blends at a customer also requires Linde to divest to
new entrant would need to secure plants. The costs of entry would be Matheson five on-site hydrogen SMRs to
multiple sources of refined helium, difficult to justify, as the total U.S. Matheson, along with Linde’s hydrogen
acquire necessary transportation and excimer laser gas market is only around pipeline in the Gulf Coast and all
storage equipment, and establish a $40 million. relevant customer contracts. The
distribution infrastructure. Market proposed divestiture includes Linde’s
incumbents secure all available sources XII. The Consent Agreement SMR facilities in Anacortes,
of refined helium in long-term contracts. The proposed Consent Agreement Washington; Lemont, Illinois; Lima,
A new entrant would need to locate a aims to eliminate the competitive Ohio; McIntosh, Alabama; and Saraland,
new source of crude helium and build concerns that the proposed merger Alabama. The SMR assets also include
a refinery. In addition, an entrant would raises in each relevant market. It Linde’s Remote Operating Center in La
need to invest tens of millions of dollars requires Linde to divest to Messer all Porte, Texas, the ‘‘control center’’ for
to acquire necessary infrastructure and thirty-two of its U.S. ASUs, along with Linde’s on-site hydrogen business. In
distribution assets, including transfills, related equipment, supply contracts, addition, Linde will divest its POX
cryogenic storage trailers, high-pressure technology, and goodwill, in the plants in Clear Lake, Texas, and La
tube trailers, and liquid dewars capable seventeen bulk liquid oxygen and Porte, Texas, back to their customers,
of transporting helium from the refinery nitrogen markets at issue in this matter. Celanese and LyondellBasell,
to customers. Given the substantial costs With the divestitures, the merger will respectively. This divestiture will
and challenges of entering the bulk not increase concentration in any resolve the competitive issues that these
refined helium market, new entry market for bulk liquid nitrogen, oxygen, customers would otherwise face post-
sufficient to counteract the competitive or argon. As part of the divestiture, merger, as they will be able operate the
effects of the proposed merger would Messer will acquire all of Linde’s facilities themselves or contract with
not occur in a timely manner. customer contracts and bulk tanks one of the firms with a nearby hydrogen
Entry into the HyCO market requires located at the customer locations. pipeline.
engineering expertise, experience in The proposed Consent Agreement To address competitive concerns in
designing and operating the various also requires Linde to divest to Messer the market for excimer laser gases, the
types of HyCO plants, significant capital sixteen carbon dioxide facilities, proposed Consent Agreement also
resources, and a proven record of including production plants and all requires Linde to divest to Messer all of
success with HyCO customers. It would associated rail depots. Linde will divest Linde’s customer contracts, intellectual
take several years and substantial all existing contracts with customers property, and key Linde staff to sustain
investments for a new entrant to supplied by the respective carbon business operations and customer
develop the expertise, experience, dioxide facilities. Additionally, all relationships. Neon-producing ASUs
reputation, and credibility necessary to assets used to support the distribution will also be included in the asset
compete in the HyCO market. A new of bulk liquid carbon dioxide will be package. To ensure a seamless transfer,
HyCO facility costs $30 to $300 million, part of the divestiture, including Linde has agreed to supply its finished
depending on the plant size and product trailers, tractors, and rail cars. excimer laser gas products to Messer for
mix. Further, in the Gulf Coast, a Linde must also divest to Messer its a period of three years (with possible
hydrogen pipeline is an added barrier to entire bulk liquid hydrogen business, extensions of time). This supply
enter the HyCO market. Existing which includes Linde’s liquid hydrogen agreement will give Messer sufficient
pipelines are scarce in this region, and production facility in Magog, Quebec, time to construct or renovate a facility
building a new pipeline requires source agreements, and four hydrogen and obtain OEM and customer
substantial time and resources that few transfills. Linde will divest all assets certification. The proposed Decision
firms have. Finally, opportunities to related to the bulk liquid hydrogen and Order also requires Linde to
compete for new or existing HyCO business including, among other things, underwrite the cost of building Messer’s
customers are limited, as HyCO supply employee contracts and information, new facility. If Messer does not
contracts are long-term, and customers customer and supply contracts, leases, commence construction of the plant
invariably award contracts to proven distribution trailers, and equipment within one year, then Linde must
suppliers. necessary to distribute bulk liquid rescind its sale of the excimer laser gas
New entry sufficient to deter or avert hydrogen. business to Messer and divest it to a
the proposed merger’s anticompetitive The proposed Consent Agreement Commission-approved acquirer.
effects in the market for excimer laser requires Linde to divest to Messer all of Linde and Praxair have agreed to
khammond on DSK30JT082PROD with NOTICES

gases is unlikely to occur. The principal Linde’s U.S. bulk refined helium divest the required facilities, together
barrier to new entry is sourcing neon, business, as well as global helium with all related equipment, customer
which accounts for just 0.0018 percent sourcing contracts, which, when and supply contracts, technology, and
of the Earth’s atmosphere. Suppliers can combined with divestitures in other goodwill, to one or more Commission-
produce neon efficiently only at the jurisdictions, are equal to Praxair’s approved buyers within four months of
largest ASUs, which must have a neon current worldwide helium capacity. In consummating the proposed merger. All
gas column. Such an ASU would take addition, Linde will divest its entire acquirers of divested assets must receive

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Document Created: 2018-11-06 00:18:17
Document Modified: 2018-11-06 00:18:17

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
Action		Proposed Consent Agreement.
Dates		Comments must be received on or before November 21, 2018.
Contact		Jordan S. Andrew (202-326-3678), Bureau of Competition, 600 Pennsylvania Avenue NW, Washington, DC 20580.
FR Citation		83 FR 55533