[Federal Register Volume 81, Number 215 (Monday, November 7, 2016)]
[Notices]
[Pages 78187-78201]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26781]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Westinghouse Air Brake Technologies Corp.,
Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Hold Separate Stipulation and Order, and Competitive Impact Statement
have been filed with the United States District Court for the District
of Columbia in United States of America v. Westinghouse Air Brake
Technologies Corp. et al., Civil Action No. 1:16-cv-02147. On October
26, 2016, the United States filed a Complaint alleging that
Westinghouse Air Brake Technologies Corp.'s (``Wabtec'') proposed
acquisition of Faiveley Transport S.A. and Faiveley Transport North
America would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The
proposed Final Judgment, filed at the same time as the Complaint,
requires Wabtec to divest Faiveley's U.S. freight brakes business.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection on the Antitrust
Division's Web site at http://www.justice.gov/atr and at the Office of
the Clerk of the United States District Court for the District of
Columbia. Copies of these materials may be obtained from the Antitrust
Division upon request and payment of the copying fee set by Department
of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's Web site,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to Maribeth Petrizzi,
Chief, Litigation II Section, Antitrust Division, Department of
Justice, 450 Fifth Street NW., Suite 8700, Washington, DC 20530
(telephone: 202-307-0924).
Patricia A. Brink,
Director of Civil Enforcement.
United States District Court for the District of Columbia
United States of America, U.S. Department of Justice, Antitrust
Division, 450 Fifth Street NW., Suite 8700, Washington, DC 20530
Plaintiff, v. Westinghouse Air Brake Technologies Corp., 1001
Airbrake Avenue, Wilmerding, PA 15148, Faiveley Transport S.A., Le
Delage Building, Hall Parc--B[acirc]timent 6A, 6[egrave]me
[eacute]tage, 3, rue du 19 mars 1962, 92230 Gennevilliers, CEDEX--
France and Faiveley Transport North America, 50 Beachtree Boulevard,
Greenville, SC 29605, Defendants.
Case No.: 1:16-cv-02147
Judge: Tanya S. Chutkan
Filed: 10/26/2016
Complaint
The United States of America, acting under the direction of the
Attorney General of the United States, brings this civil antitrust
action to enjoin the proposed acquisition of Faiveley Transport S.A.
and Faiveley Transport North America (collectively, ``Faiveley'') by
Westinghouse Air Brake Technologies Corporation (``Wabtec'') and to
obtain other equitable relief. The United Sates alleges as follows:
I. Introduction
1. Wabtec proposes to acquire Faiveley, a global provider of
railway brake equipment components that make up a critical system
intimately linked to both the performance and safety of trains.
Faiveley produces its brake system components in the United States
through its subsidiary, Faiveley Transport North America. Wabtec is a
leading manufacturer of rail equipment used in the assembly of freight
cars built for use in the U.S. freight rail network. For purchasers of
components of freight car brake systems, Wabtec and Faiveley are two of
the top three suppliers approved by the Association of American
Railroads (``AAR''), with combined market shares ranging from
approximately 41 to 96 percent for many of the products in which they
compete. Where a product must be AAR approved, customers must source it
from an AAR-approved supplier of that product.
2. In 2010, Faiveley entered into a joint venture with Amsted Rail
Company, Inc. (``Amsted''), a rail equipment supplier based in Chicago,
Illinois, to form Amsted Rail Faiveley LLC (``ARF''). Faiveley owns
67.5 percent of ARF and Amsted owns the remaining 32.5 percent interest
in the joint venture. As part of the joint venture, all of the freight
car brake system components that are manufactured by Faiveley Transport
North America are marketed and sold to customers by Amsted. Amsted and
Faiveley do not compete for the sale of brake system components.
Critically, the joint venture allows Faiveley to bundle brake
components with Amsted's other products such as wheels and axles,
thereby increasing its ability to compete for the sale of freight car
brake system components.
3. Wabtec's proposed acquisition of Faiveley would eliminate head-
to-head competition in the development, manufacture, and sale of
several components of freight car brake systems in the United States.
The proposed acquisition likely would give Wabtec the incentive and
ability to raise prices or decrease the quality of service provided to
customers in the railroad freight industry. The proposed acquisition
also would eliminate future competition for control valves, the most
safety-critical component on a freight car. If approved, the proposed
acquisition would eliminate the entry of Faiveley into this market,
thus maintaining a century-old duopoly between Wabtec and its only
other control valve rival, and reducing the two incumbent control valve
suppliers' incentive to compete.
4. Accordingly, the proposed acquisition likely would substantially
lessen existing and future competition
[[Page 78188]]
in the development, manufacture, and sale of freight car brake system
components in the United States in violation of Section 7 of the
Clayton Act, 15 U.S.C. 18, and should be enjoined.
II. Jurisdiction and Venue
5. The United States brings this action pursuant to Section 15 of
the Clayton Act, as amended, 15 U.S.C. 25, to prevent and restrain the
defendants from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
6. Defendants manufacture and sell components of freight car brake
systems throughout the United States. They are engaged in a regular,
continuous, and substantial flow of interstate commerce, and their
activities in the development, manufacture, and sale of rail equipment
have had a substantial effect upon interstate commerce. The Court has
subject-matter jurisdiction over this action pursuant to Section 15 of
the Clayton Act, 15 U.S.C. 25, and 28 U.S.C. 1331, 1337(a), and 1345.
7. Venue is proper in this District under Section 12 of the Clayton
Act, 15 U.S.C. 22 and 28 U.S.C. 1391(c). Defendants have consented to
venue and personal jurisdiction in the District of Columbia.
III. Defendants and the Proposed Acquisition
8. Wabtec is a Delaware corporation headquartered in Wilmerding,
Pennsylvania. It is one of the world's largest providers of rail
equipment and services with global sales of $3.3 billion in 2015.
Wabtec makes and sells rail equipment, including braking equipment, for
a variety of different end uses, including the railroad freight
industry. In 2015, Wabtec's annual worldwide sales of freight rail
equipment were approximately $2 billion.
9. Faiveley Transport North America is a New York corporation
headquartered in Greenville, South Carolina. Faiveley makes and sells
rail equipment, including braking equipment, for a variety of end uses
to customers in 24 countries, including the United States. In
particular, it manufactures products used in freight rail applications.
During the fiscal year beginning April 1, 2015 and ending March 31,
2016, Faiveley had global sales of approximately [euro]1.1 billion,
with approximately $174 million of revenue in the United States.
Faiveley has manufacturing facilities in Europe, Asia, and North
America, including six U.S. locations. Faiveley Transport North America
is a wholly-owned subsidiary of defendant Faiveley Transport S.A., a
soci[eacute]t[eacute] anonyme based in Gennevilliers, France.
10. On July 27, 2015, Wabtec entered into an Exclusivity Agreement
with Faiveley whereby it made an irrevocable offer to acquire Faiveley,
for cash and stock totaling approximately $1.8 billion, including
assumed debt. The proposed acquisition would create the world's largest
rail equipment supplier with expected revenue of approximately $4.5
billion per year and a presence in every key rail market in the world.
IV. Trade and Commerce
A. Industry Overview
11. Rail freight transport is the use of railroads and freight
trains to transport cargo. A freight train is a group of freight cars
hauled by one or more locomotives on a railway. A typical freight
locomotive can haul as many as 25 to 100 freight cars.
12. The railroad freight industry plays a significant role in the
U.S. economy, hauling key commodities such as energy products,
automobiles, construction materials, chemicals, coal, petroleum,
equipment, food, metals, and minerals. The U.S. freight rail network
accounts for approximately 40 percent of the distance all freight
shipments of commodity goods travel in the United States. The U.S.
freight rail network is one of the most developed rail networks in the
world and it supports approximately $60 billion in railroad freight
shipments each year. This freight network consists of 140,000 miles of
trackage owned and operated by seven Class I Railroads (as identified
by the U.S. Department of Transportation), 21 regional railroads, and
510 local railroads.
13. Railroads and freight car leasing companies purchase new
freight cars from car builders. Car builders build the body of the
freight car and are responsible for sourcing and integrating all of the
components needed for the various sub-systems required to assemble a
functioning freight car. The most important sub-system is the safety
critical brake system. Manufacturers of brake systems and brake system
components sell their components and systems to car builders for new
freight cars and directly to railroads and leasing companies for
aftermarket maintenance of cars. Railroads and freight car leasing
companies collectively purchase and maintain approximately 1.5 million
freight cars utilized throughout the U.S. freight rail network. Freight
railroads in the United States spend over $20 billion annually to
acquire new freight cars and maintain existing freight car fleets.
Freight car maintenance is critical for the safety and performance of a
freight train.
B. Railroad Freight Industry Regulation
14. Freight cars often must travel over multiple railroads'
trackage in order to deliver commodities throughout the United States.
Traveling over multiple lines requires freight car equipment to be
mechanically interoperable and meet performance standards for certain
types of rail equipment. In order for the brake systems on individual
freight cars to work together properly, freight car brake systems must
be comprised of industry-approved components and meet critical
performance standards.
15. The Federal Railroad Administration of the U.S. Department of
Transportation establishes strict standards to ensure interoperability
of freight cars in use within the U.S. freight rail network. These
standards require that certain freight car components achieve common
performance and interoperability standards. For certain freight rail
equipment, including freight car brake systems, the AAR is responsible
for setting technical and performance standards. The AAR is a policy-
and standard-setting organization comprised of full, affiliate, and
associate members. Full members include the Class I railroads.
Affiliate and associate members include rail equipment suppliers and
freight car owners.
16. AAR's functions include technical and mechanical standard
setting for freight rail equipment. The AAR manages fifteen technical
committees comprised of select employees of full, affiliate, and
associate members. These committees write technical and performance
standards for components used on freight trains. They also approve
products for use within the U.S. freight rail network. Thus, a
component manufacturer like Wabtec or Faiveley must have AAR approval
for many significant components of a freight train before its products
can be used in the United States. The length and difficulty of the AAR-
approval process depends on the nature and function of the train
component. Brake components face some of the lengthiest and most
rigorous testing and approval processes because brakes are safety-
critical components that must be fail-safe. The Brake Systems Committee
of the AAR oversees the review and performance testing of brake
equipment and it awards incremental approvals over time before a
component can earn unconditional approval.
17. Freight car owners and operators view AAR approval as a
critical certification. Industry participants view
[[Page 78189]]
AAR approval as a high barrier to selling freight car brake systems and
components in the United States.
C. Freight Car Brake Equipment Purchases
18. On average, there are expected to be approximately 75,000 new
freight car builds per year in the United States. Demand for new cars
is tied to macroeconomic conditions, including demand for the
commodities that freight cars carry. In recent years demand for freight
cars has ranged from approximately 63,000 to 81,000 new car builds per
year. Railroads and freight car leasing companies typically issue
requests for proposals to freight car builders who compete to provide
complete freight cars built to specification. Freight car builders
source sub-systems and components from suppliers, like Wabtec and
Faiveley. Where a product must be AAR approved, car builders must
source it from an AAR-approved supplier of that product. For certain
components of a freight car brake system, Wabtec and Faiveley are two
of the only three AAR-approved suppliers.
19. New freight car procurements typically include performance
specifications identified by customers. Freight car builders use these
specifications to source and price particular components for the
procurement. Inclusion in new car procurements also becomes a source
for long-term revenues for component suppliers. Incumbent suppliers for
many freight car brake system components enjoy an advantage in the
aftermarket. Although components are technically interoperable,
changing suppliers often introduces at least some switching costs and
increased risk of failure for end-use customers. Thus, competitiveness
for original equipment sales is critical.
20. Customers can purchase freight car brake equipment on a
component-by-component basis. However, a large rail equipment supplier
will typically offer better pricing to customers who purchase multiple
freight car brake system components together as a bundle. For example,
rail equipment suppliers will offer more competitive pricing to
customers who purchase all the components for an entire freight car
brake system rather than piecemeal purchases of certain components.
Because product bundles may span multiple systems on a freight train,
suppliers with broad offerings often have a competitive advantage over
niche suppliers.
V. Relevant Markets
21. Defendants compete across a range of freight car brake system
components, many of which require AAR approval. Each product described
below constitutes a line of commerce under Section 7 of the Clayton
Act, 15 U.S.C. 18, and each is a relevant product market in which
competitive effects can be assessed. They are recognized in the
railroad freight industry as separate product lines, they have unique
characteristics and uses, they have customers that rely specifically on
these products, they are distinctly priced, and they have specialized
vendors.
22. Mergers and acquisitions that reduce the number of competitors
in already concentrated markets are more likely to substantially lessen
competition. Concentration can be measured in various ways, including
by market shares and by the widely-used Herfindahl-Hirschman Index
(``HHI''). See Appendix. Under the Horizontal Merger Guidelines, post-
acquisition HHIs above 2500 and changes in HHI above 200 trigger a
presumption that a proposed acquisition is likely to enhance market
power and substantially lessen competition in a defined market. Given
the high pre- and post-acquisition concentration levels in the relevant
markets described below, Wabtec's proposed acquisition of Faiveley
presumptively violates Section 7 of the Clayton Act. In almost all of
these markets, customers would face a duopoly after the acquisition.
A. Relevant Market 1: Hand Brakes
23. A hand brake is a manual wheel located at the end of a freight
car that, when turned, can engage a freight car's brake system without
using pneumatic or hydraulic pressure. It is a secondary means to
prevent a freight car from moving, for example, during maintenance or
when being connected to a new locomotive.
24. The market for the development, manufacture, and sale of
freight car hand brakes is already concentrated. Wabtec and Faiveley
together hold approximately 60 percent of this market based on the
quantity of hand brakes sold. Their only significant competitor holds
most of the remaining share of the hand brakes market. A fourth,
marginal competitor sells a negligible quantity of hand brakes each
year. Further, this competitor does not manufacture any other
significant components of a freight car brake system nor is it likely
to begin doing so in the foreseeable future. Thus, it is unlikely to
replace the competition that would be lost as a result of the proposed
acquisition.
25. In the U.S. market for the development, manufacture, and sale
of freight car hand brakes, the pre-acquisition HHI is 3,500. The post-
acquisition HHI would be in excess of 5,000, with an increase in HHI in
excess of 1,500. Thus, this market is highly concentrated and would
become significantly more concentrated as a result of the proposed
acquisition.
B. Relevant Market 2: Slack Adjusters
26. A slack adjuster is a pneumatically-driven ``arm'' that applies
pressure to the brake shoe (a friction material) in order to change the
brake shoe's position relative to the train's wheel. As the brake shoe
wears down, this adjustment in position maintains the brake systems'
ability to apply the correct amount of braking force by ensuring the
brake shoe is applied appropriately to the wheel to achieve optimal
braking capability.
27. Combined, Wabtec and Faiveley have approximately 76 percent of
this market based on quantity sold. Their only significant competitor
has a market share of approximately 24 percent, thereby making the
proposed acquisition a virtual merger-to-duopoly in the market for the
development, manufacture, and sale of slack adjusters. The proposed
acquisition threatens to further concentrate this market, as evidenced
by the pre- and post-merger HHIs. The post-acquisition HHI would be
approximately 6,300, reflecting an increase of approximately 2,800 as a
result of the acquisition.
C. Relevant Market 3: Truck-Mounted Brake Assemblies
28. Freight car braking equipment is often mounted under the bogie
(e.g., car), thereby serving as the foundation for the wheels. Truck-
mounted brake assemblies (``TMBs''), however, are an approach to
mounting the brakes on freight car designs for which body-mounted
brakes are not suitable. TMBs are free standing equipment that do not
require additional rigging and so are significantly lighter than their
bogie counterparts. They are commonly used for special lightweight or
low profile freight car designs.
29. Post-acquisition, the market for the development, manufacture,
and sale of TMBs would be highly concentrated. Combined, Wabtec and
Faiveley have approximately a 96 percent share of the market based on
quantity sold. The post-acquisition HHI of the merged firm would be
approximately 9,200, with an increase of approximately 3,600 resulting
from the acquisition.
[[Page 78190]]
D. Relevant Market 4: Empty Load Devices
30. Empty load devices are incorporated into every freight car and
detect when a freight car is empty. The empty load device relays this
information to the brake system control board, which is then able to
reduce the amount of braking force applied to the brakes on a freight
car that is empty so that it decelerates in concert with the remainder
of the freight cars in tow.
31. Post acquisition, the market for the development, manufacture,
and sale of empty load devices would be highly concentrated. Combined,
Wabtec and Faiveley have a 60 percent share of the market based on
quantity sold. The post-acquisition HHI of the merged firm would be
approximately 5,100, with an increase of approximately 1,700 resulting
from the acquisition.
E. Relevant Market 5: Brake Cylinders
32. A brake cylinder is a component of a freight car brake system
that converts compressed air into mechanical force to apply the brake
shoe to the wheel in order to decelerate or stop the train.
33. Post-acquisition, the market for the development, manufacture,
and sale of brake cylinders would be highly concentrated. Combined,
Wabtec and Faiveley have approximately a 41 percent share of the market
based on quantity sold. The post-acquisition HHI of the merged firm
would be approximately 5,100 with an increase of approximately 800
resulting from the acquisition.
F. Relevant Market 6: Control Valve and Co-Valves
34. Modern trains rely upon a fail-safe air (or pneumatic) brake
system that uses changes in air pressure to signal each freight car to
release its brakes. A reduction or loss of air pressure applies the
brakes using the compressed air in the air reservoir. An increase in
air pressure decreases the braking force applied until it is released.
The control valve, often described as the brain of a freight car's
brake system, regulates the flow of air to engage or disengage the
brakes.
35. A control valve is the most highly-engineered, technologically-
sophisticated component in a freight car brake system. Without it, a
supplier cannot offer a complete freight car brake system. The
development of a control valve also requires significant development
time and financial resources. In addition, it faces one of the railroad
freight industry's lengthiest and most rigorous testing and approval
processes.
36. The market for the development, manufacture, and sale of
control valves is characterized by a century-old duopoly between Wabtec
and another manufacturer. Over the past five years, Wabtec had
approximately 40 percent of the U.S. control valve market and its rival
had the other 60 percent of the market.
37. On June 29, 2016, Faiveley obtained conditional approval from
the AAR to sell a control valve. In doing so, it disrupted the duopoly
by becoming the first firm in over 25 years and only the second firm in
the last 50 years to develop a control valve and make substantial
progress through the industry's formidable testing and approval process
for freight car control valves. Thus, the proposed acquisition would
eliminate a third potential supplier of control valves, and continue a
longstanding duopoly for the foreseeable future.
38. Working closely with the control valve are its complementary
valves: The dirt collector, angle cock, and vent valve (collectively,
``co-valves''). A dirt collector is a ball style cut-out-cock with a
dirt chamber that is installed adjacent to the control valve. It allows
for impurities in the air compressor to be filtered out to keep the air
lines feeding the braking system clear of obstructions that would
reduce air pressure. An angle cock is placed at the end of the brake
pipe and provides a means for closing the brake pipe at the end of the
freight car. A vent valve is a device on a freight car that reacts to a
rapid drop in brake pipe pressure and is used to exhaust air from the
brake pipe during emergency brake applications. For new freight car
builds, sales of co-valves correlate with the sale of the control
valve. Customers have a preference for purchasing co-valves and control
valves from the same supplier, to which they return for replacement
parts in the aftermarket. While Faiveley currently has insignificant
sales of angle cocks, vent valves, and dirt collectors, it is an AAR-
approved supplier of these products.
G. Geographic Market
39. Based on customer location and the governing regulatory
framework, the United States is the relevant geographic market for the
development, manufacture, and sale of freight brake components. Wabtec
and Faiveley compete with each other for customers located throughout
the United States. When a geographic market is defined based on the
location of customers, competitors in the market are firms that sell to
customers in the specified region even though some suppliers that sell
into the relevant market may be located outside the geographic market.
In addition, before suppliers can sell components of freight car brake
systems in the United States, they must first get AAR approval. The
AAR's regulatory authority requires products be certified for
interoperability within the U.S. freight rail network. Because these
products are certified for use and sale anywhere in the United States,
the regulatory framework determines which firms can supply the U.S.
customer base, which supports a United States geographic market.
Furthermore, suppliers of freight car brake systems and components
typically deliver their products and services to customers' locations
and are able to price discriminate based on those locations.
40. In addition, a small but significant increase in price of each
of the foregoing components of a freight car brake system sold into the
United States would not cause a sufficient number of U.S. customers to
turn to providers of freight brake components sold into other countries
because those products lack AAR approval and interoperability with U.S.
freight rail networks. Accordingly, the United States is a relevant
geographic market within the meaning of Section 7 of the Clayton Act.
VI. Anticompetitive Effects
41. Wabtec and Faiveley presently compete in the development,
manufacture, and sale of many components of a freight car brake system,
including hand brakes, slack adjusters, empty load devices, TMBs and
brake cylinders. The defendants' combined shares in each of these
markets range from approximately 41 to 96 percent. Therefore, the
unilateral competitive effects of the proposed acquisition are
presumptively harmful in these product markets under the Horizontal
Merger Guidelines. The proposed acquisition likely will result in
unilateral effects that substantially lessen competition in the markets
for hand brakes, load detection devices, slack adjusters, TMBs, and
brake cylinders, respectively.
42. In each of the foregoing relevant markets, Wabtec and Faiveley
presently compete against each other and only one other large
competitor. Prices and other terms of trade are usually determined by
negotiations between suppliers and customers. Products are not highly
differentiated by function or performance, and price is the primary
customer consideration given that performance is presumed after
approval by the industry's standard-setting body, the AAR.
[[Page 78191]]
43. A merger between two competing sellers reduces the ability of
buyers to negotiate better contract terms, including price, by
leveraging competing offers. The loss of customer negotiating power can
significantly enhance the ability and incentive of the merged entity to
offer less competitive terms. Customers likely derive significant
benefits from having Faiveley in the market today, as reflected by its
substantial market shares in the relevant freight brake components
identified above. The resulting loss of a competitor and increased
concentration of market share indicate that the acquisition likely will
result in significant harm from expected price increases and decreases
in quality of service.
44. When the proposed acquisition was announced, Wabtec and a
second manufacturer were the only AAR-approved suppliers of control
valves, a duopolistic market they had shared for over a century.
45. As the second-largest railway brake manufacturer in the world,
Faiveley was uniquely positioned to enter the control valve market.
Faiveley had developed a control valve prototype that it intended to
shepherd through the AAR's control valve testing and approval process.
If successful, it would have become a third control valve supplier. But
for the merger, Faiveley likely would have entered the control valve
market, thereby invigorating competition between Wabtec and its only
competitor in the control valve market. The entry of a third supplier
of control valves likely would increase competition and allow customers
to negotiate better prices and terms.
46. Faiveley's entry into the control valve market would pose an
immediate threat to the incumbent suppliers, forcing them to compete
aggressively or risk losing a sale to Faiveley. Faiveley's customers
anticipate it would offer price competition in order to gain quick
acceptance of its control valve. As a result, Faiveley likely would
have had a substantial impact on pricing, service and other commercial
terms offered by the incumbent suppliers, even with a small initial
share of actual sales. Therefore, the proposed acquisition is likely to
result in anticompetitive unilateral effects in the market for control
valves.
VII. Entry
47. Given the substantial time required to develop and qualify a
component of a freight car brake system, timely and sufficient entry by
other competitors into any of the relevant markets is unlikely to
mitigate the harmful effects of the proposed acquisition.
48. The likelihood of another potential entrant in the control
valve market is even more remote given the historical dearth of
meaningful attempts to enter this market, as well as the substantial
time and cost associated with entry into the control valve market.
VIII. Violation Alleged
49. The acquisition of Faiveley by Wabtec likely would
substantially lessen competition in each of the relevant markets in
violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
50. Unless enjoined, the acquisition likely would have the
following anticompetitive effects, among others:
(a) Actual and potential competition between Wabtec and Faiveley in
the relevant markets would be eliminated;
(b) competition generally in the relevant markets would be
eliminated; and
(c) prices and commercial terms for the relevant products would be
less favorable, and quality and service relating to these products
likely would decline.
IX. Request for Relief
51. The United States requests that this Court:
(a) Adjudge and decree Wabtec's proposed acquisition of Faiveley to
be unlawful and in violation of Section 7 of the Clayton Act, 15 U.S.C.
18;
(b) preliminarily and permanently enjoin and restrain defendants
and all persons acting on their behalf from consummating Wabtec's
proposed acquisition or from entering into or carrying out any
contract, agreement, plan, or understanding, the effect of which would
be to combine Faiveley with the operations of Wabtec;
(c) award the United States its costs of this action; and
(d) award the United States such other relief as the Court deems
just and proper.
Dated: October 26, 2016
Respectfully submitted,
FOR PLAINTIFF UNITED STATES:
Renata B. Hesse (DC Bar #466107)
Acting Assistant Attorney General
Antitrust Division
Sonia K. Pfaffenroth
Deputy Assistant Attorney General
Antitrust Division
Patricia A. Brink
Director of Civil Enforcement
Antitrust Division
Maribeth Petrizzi (DC Bar #435204)
Chief, Litigation II Section
Antitrust Division
Stephanie A. Fleming
Assistant Chief, Litigation II Section
Antitrust Division
Doha Mekki*
James K. Foster, Jr.
Erin C. Grace
Daniel J. Monahan
Suzanne Morris
Trial Attorneys
United States Department of Justice
Antitrust Division, Litigation II Section
450 Fifth Street NW., Suite 8700
Washington, DC 20530
Telephone: (202) 598-8023
Facsimile: (202) 514-9033
[email protected]
*LEAD ATTORNEY TO BE NOTICED
Appendix
Herfindahl-Hirschman Index
The Herfindahl-Hirschman Index (``HHI'') is a commonly accepted
measure of market concentration. The HHI is calculated by squaring
the market share of each firm competing in the relevant market and
then summing the resulting numbers. For example, for a market
consisting of four firms with shares of 30, 30, 20, and 20 percent,
the HHI is 2,600 (30\2\ + 30\2\ + 20\2\ + 20\2\ = 2,600). The HHI
takes into account the relative size distribution of the firms in a
market. It approaches zero when a market is occupied by a large
number of firms of relatively equal size, and reaches its maximum of
10,000 points when a market is controlled by a single firm. The HHI
increases both as the number of firms in the market decreases and as
the disparity in size between those firms increases.
United States District Court for the District of Columbia
United States Of America, Plaintiff, v. Westinghouse Air Brake
Technologies Corp., Faiveley Transport S.A., and Faiveley Transport
North America, Defendants.
Case No.: 1:16-cv-02147
Judge: Tanya S. Chutkan
Filed: 10/26/2016
Competitive Impact Statement
Plaintiff United States of America (``United States''), pursuant to
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact
Statement relating to the proposed Final Judgment submitted for entry
in this civil antitrust proceeding.
I. Nature and Purpose of the Proceeding
On July 27, 2015, Defendant Westinghouse Air Brake Technologies
Corp. (``Wabtec'') and Defendants Faiveley Transport S.A. and Faiveley
Transport North America (``Faiveley'') entered into an Exclusivity
Agreement pursuant to which Wabtec made an irrevocable offer to acquire
Faiveley for cash and stock totaling approximately $1.8 billion,
including assumed debt. The United States filed a civil antitrust
[[Page 78192]]
Complaint on October 26, 2016, seeking to enjoin the proposed
acquisition. The Complaint alleges that the acquisition likely would
lessen competition substantially for the development, manufacture, and
sale of various railroad freight car brake components including hand
brakes, slack adjusters, truck-mounted brake assemblies, empty load
devices, brake cylinders, and brake control valves in the United States
in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. This loss
of competition likely would result in significant harm from expected
price increases and decreases in quality of service by the incumbent
suppliers in the markets for those products.
At the same time the Complaint was filed, the United States filed a
Hold Separate Stipulation and Order and a proposed Final Judgment,
which are designed to eliminate the anticompetitive effects of the
acquisition. Under the proposed Final Judgment, which is explained more
fully below, Defendants are required to divest Faiveley's entire U.S.
freight car brakes business, including all assets relating to
Faiveley's freight car brake control valve development project (known
as the FTEN) to a named buyer, Amsted Rail Company, Inc. (``Amsted'').
These assets collectively are referred to as the ``Divestiture
Assets.'' Under the terms of the Hold Separate Stipulation and Order,
Defendants will take certain steps to ensure that the Divesture Assets
are operated as a competitively independent, economically viable and
ongoing business concern, that the Divestiture Assets will remain
independent and uninfluenced by the consummation of the acquisition;
and that competition is maintained during the pendency of the ordered
divestiture.
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment would terminate this action, except that
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. Description of the Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
Wabtec is a Delaware corporation headquartered in Wilmerding,
Pennsylvania. It is one of the world's largest providers of rail
equipment and services with global sales of $3.3 billion in 2015. In
the United States, Wabtec makes and sells rail equipment, including
braking equipment, for a variety of different end-uses, including the
railroad freight industry. Wabtec's annual global sales of freight rail
equipment totaled approximately $2 billion in 2015.
Faiveley Transport S.A. is a soci[eacute]t[eacute] anonyme based in
Gennevilliers, France. Faiveley makes and sells rail equipment,
including braking equipment, for a variety of end uses to customers in
24 countries, including the United States. In particular, it
manufactures products used in freight rail applications. During the
fiscal year beginning April 1, 2015 and ending March 31, 2016, Faiveley
had global sales of approximately [euro]1.1 billion, with approximately
$174 million of revenue in the United States. Faiveley has
manufacturing facilities in Europe, Asia, and North America, including
six U.S. locations.
Faiveley Transport North America is a wholly-owned subsidiary of
Faiveley Transport S.A. It is a New York Corporation headquartered in
Greenville, South Carolina. It is the sole business unit of Faiveley
that is responsible for the development, manufacture, and sale of
freight car brake components in the United States.
In 2010, Faiveley entered into a joint venture with Amsted, a rail
equipment supplier based in Chicago, Illinois, to form Amsted Rail
Faiveley, LLC (``ARF''). Faiveley owns 67.5 percent of ARF and Amsted
owns the remaining 32.5 percent. As part of the joint venture, all of
the freight car brake components that are manufactured by Faiveley
currently are marketed and sold to customers by Amsted. Critically, the
joint venture allows Faiveley to bundle brake components with Amsted's
other products such as wheels and axles, thereby increasing its ability
to compete for the sale of freight car brake components against Wabtec.
On July 27, 2015, Wabtec and Faiveley entered into an Exclusivity
Agreement whereby Wabtec would acquire Faiveley for cash and stock
totaling approximately $1.8 billion, including assumed debt. The
proposed acquisition would create the world's largest rail equipment
supplier with expected revenue of approximately $4.5 billion per year
and a presence in every key rail market in the world. As part of that
acquisition, Wabtec proposed to acquire all of Faiveley's freight car
brakes business in the United States, including its interest in the ARF
joint venture and Faiveley's FTEN freight car brake control valve now
being developed. This acquisition is the subject of the Complaint and
proposed Final Judgment filed by the United States on October 26, 2016.
B. Background on Freight Car Brake Equipment Purchases
Rail freight transport is the use of railroads and freight trains
to transport cargo. The railroad freight industry plays a significant
role in the U.S. economy, hauling key commodities such as energy
products, automobiles, construction materials, chemicals, coal,
petroleum, equipment, food, metals, and minerals. The U.S. freight rail
network accounts for approximately 40 percent of the distance all
freight shipments of commodity goods travel in the United States. The
U.S. freight rail network is one of the most developed rail networks in
the world and it supports approximately $60 billion in railroad freight
shipments each year. This freight network consists of 140,000 miles of
trackage owned and operated by seven Class I Railroads, 21 regional
railroads, and 510 local railroads.
In order to deliver commodities throughout the United States,
freight cars often must travel over multiple railroads' trackage.
Traveling over multiple lines requires freight car equipment to be
mechanically interoperable and meet common performance standards for
certain types of rail equipment. In order for the brake systems on
individual freight cars to work together properly, freight car brake
systems must be comprised of industry-approved components and meet
critical performance standards. For certain freight rail equipment,
including freight car brake systems, the Association of American
Railroads (``AAR'') is responsible for setting technical and
performance standards. The AAR is a policy- and standard-setting
organization comprised of full, affiliate, and associate members. Full
members include the Class I railroads. Affiliate and associate members
include rail equipment suppliers and freight car owners.
AAR's functions include technical and mechanical standard setting
for freight rail equipment. The AAR manages fifteen technical
committees that write technical and performance standards for all
components used on freight trains and approve products for use. Thus, a
component manufacturer must have AAR approval for brake components
before they can be used. Brake components face some of the lengthiest
and most rigorous testing and approval processes because brakes are
safety-critical components that must be fail-safe. The Brake Systems
Committee of the AAR oversees the review and performance tests of
braking equipment
[[Page 78193]]
and it awards incremental approvals over time before a component can
earn unconditional approval. Freight car owners and operators view AAR
approval as a critical certification. Industry participants view AAR
approval as a high barrier to selling freight car brake systems and
components in the United States.
Railroads and freight car leasing companies collectively spend over
$20 billion annually to obtain new freight cars and to maintain
approximately 1.5 million freight cars utilized throughout the United
States. On average, there are expected to be approximately 75,000 new
freight car builds per year in the United States, and demand for new
cars is tied to macroeconomic conditions, including demand for the
commodities these freight cars carry. In recent years, demand for
freight cars has ranged from approximately 63,000 to 81,000 new car
builds. Railroads and freight car leasing companies typically issue
requests for proposals to freight car builders who compete to provide
complete freight cars built to specification. Freight car builders
source sub-systems and components from suppliers like, Wabtec and
Faiveley. Where a product must be AAR approved, car builders must
source it from an AAR-approved supplier of that product. For certain
components of a freight car brake system, Wabtec and Faiveley are two
of the only three AAR-approved suppliers of the product.
New freight car procurements typically include performance
specifications identified by customers. Freight car builders use these
specifications to source and price particular components for the
procurement. Inclusion in new car procurements also becomes a source
for long-term revenues for component suppliers. Incumbent suppliers for
many freight car brake system components enjoy an advantage in the
aftermarket. Although components are technically interoperable,
changing suppliers often introduces switching costs and increased risk
of failure for end-use customers. Thus, competitiveness for original
equipment sales is critical.
C. Relevant Markets Affected by the Proposed Acquisition
Defendants compete across a range of freight car brake system
components that require AAR approval. The Complaint alleges that each
of these brake system components is a relevant product market in which
competitive effects can be assessed. The different components are
recognized in the railroad freight industry as separate product lines,
they have unique characteristics and uses, they have customers that
rely specifically on these products, they are distinctly priced, and
they have specialized vendors. Competition would likely be lessened
with respect to those components as a result of the proposed
acquisition because there would be one fewer substantial equipment
manufacturer in each of these highly concentrated markets. For
purchasers of components of freight car brake components, Wabtec and
Faiveley are two of the top three suppliers, with combined market
shares of approximately 41 to 96 percent for the products in which they
compete. Faiveley is expected to be an even stronger competitor after
full commercialization of the FTEN.
1. U.S. Markets for Hand Brakes, Slack Adjusters, Truck-Mounted Brake
Assemblies, Empty Load Devices, and Brake Cylinders
The Complaint alleges likely harm in five distinct product markets
for freight car brake components that Faiveley currently sells under
and through the ARF joint venture: Hand brakes, slack adjusters, truck-
mounted brake assemblies (``TMBs''), empty load devices, and brake
cylinders. A hand brake is a manual wheel located at the end of a
freight car that, when turned, can engage a freight car's brakes system
without using pneumatic or hydraulic pressure. It is a secondary means
to prevent a freight car from moving, for example, during maintenance
or when being connected to a new locomotive. A slack adjuster is a
pneumatically-driven ``arm'' that applies pressure to the brake shoe (a
friction material) in order to change the brake shoe's position
relative to the train's wheel. As the brake shoe wears down, this
adjustment in position maintains the brake systems' ability to apply
the correct amount of braking force by ensuring the brake shoe is
applied appropriately to the wheel to achieve optimal braking
capability. TMBs are an approach to mounting brakes on freight car
designs for which body-mounted brakes are not suitable. TMBs are free-
standing equipment that do not require additional rigging and so are
significantly lighter than body-mounted brakes. They are commonly used
for special lightweight or low profile freight car designs. Empty load
devices are incorporated into every freight car and detect when a
freight car is empty. The empty load device relays this information to
the brake system control board, which is then able to reduce the amount
of braking force applied to the brakes on a freight car that is empty
so that it decelerates in concert with the remainder of the freight
cars in tow. A brake cylinder is a component of a freight car brake
system that converts compressed air into mechanical force to apply the
brake shoe to the wheel in order to stop or slow the train.
2. U.S. Market for Freight Brake Control Valves and Co-Valves
The Complaint also alleges likely harm in a distinct product market
for freight car brake control valves and the associated co-valves that
are typically sold with them. The control valve, often described as the
brain of a freight car's brake system, regulates the flow of air to
engage or disengage the brakes. A control valve is the most highly-
engineered, technologically-sophisticated component in a freight car
brake system. Without it, a supplier cannot offer a complete freight
car brake system. The development of a control valve also requires
significant development time and financial resources. In addition, it
faces one of the railroad freight industry's lengthiest and most
rigorous testing and approval processes. This results in extremely high
entry barriers for this market.
Working closely with the control valve are its complementary
valves: The dirt collector, angle cock, and vent valve (collectively,
``co-valves''). A dirt collector is a ball style cut-out-cock with a
dirt chamber that is installed adjacent to the control valve. It allows
for impurities in the air compressor to be filtered out to keep the air
lines feeding the braking system clear of obstructions that would
reduce air pressure. An angle cock is placed at the end of the brake
pipe and provides a means for closing the brake pipe at the end of the
freight car. A vent valve is a device on a freight car that reacts to a
rapid drop in brake pipe pressure and is used to exhaust air from the
brake pipe during emergency brake applications. These co-valves are an
essential part of the development, manufacture, and sale of control
valves, and for new freight car builds, sales of co-valves correlate
with the sale of the control valve.
The market for the development, manufacture, and sale of control
valves is characterized by a century-old duopoly between Wabtec and
another manufacturer. Over the past five years, Wabtec had
approximately 40 percent of the U.S. control valve market and its rival
had the other 60 percent of the market.
On June 29, 2016, after a lengthy and expensive development
process, Faiveley obtained conditional approval from the AAR to sell
its control valve. In doing so, it become the first firm in over 25
years and only the second in the
[[Page 78194]]
last 50 years to develop a control valve and make substantial progress
through the industry's formidable testing and approval process.
Faiveley has built the first 200 units and satisfactorily completed all
AAR laboratory tests. It projects sales of a few thousand units over
the next few years as it works with railroads to continue to test and
demonstrate the FTEN in various functional environments. Full
commercialization and unconditional AAR approval is expected within
seven years.
D. Geographic Market
As alleged in the Complaint, the United States is the relevant
geographic market for the development, manufacture, and sale of freight
brake components. Wabtec and Faiveley compete with each other for
customers located throughout the United States.
When a geographic market is defined based on the location of
customers, competitors in the market are firms that sell to customers
in the specified region, even though some suppliers that sell into the
relevant market may be located outside the geographic market. Before
suppliers can sell components of freight car brake systems in the
United States, they must receive AAR approval. The AAR's regulatory
authority requires products be certified for interoperability within
the U.S. freight rail network. Because these products are certified for
use and sale anywhere in the United States, the regulatory framework
determines which firms can supply the U.S. customer base, which
supports a United States geographic market. Furthermore, suppliers of
freight car brake systems and components typically deliver their
products and services to customers' locations and are able to price
discriminate based on customers' locations.
In addition, a small but significant increase in price of each of
the foregoing components of a freight car brake system sold into the
United States would not cause a sufficient number of U.S. customers to
turn to providers of freight brake components sold into other countries
because those products lack AAR approval and interoperability with U.S.
freight rail networks.
E. Anticompetitive Effects
1. Freight Car Hand Brakes, Slack Adjusters, Truck-Mounted Brake
Assemblies, Empty Load Devices, and Brake Cylinders
Wabtec and Faiveley presently compete vigorously in the
development, manufacture, and sale of hand brakes, slack adjusters,
TMBs, empty load devices, and brake cylinders, and because these
markets are highly concentrated and subject to high entry barriers,
unilateral anticompetitive effects would be likely to result from the
acquisition. In each of the foregoing relevant markets, Wabtec and
Faiveley presently compete against each other and another large
competitor in a bargaining format where products are not highly
differentiated by function or performance and price is the primary
customer consideration, given that performance is presumed after
approval by the industry's standard-setting body, the AAR. Given the
nature and the extent of this competition, a merger between two
competing sellers would remove a buyer's ability to negotiate these
sellers against each other. The loss of this bargaining competition can
significantly enhance the ability and incentive of the merged entity to
obtain a result more favorable to it and less favorable to the buyer
than the merging firms would have obtained separately, absent the
merger. As its substantial market shares attest, customers derive
significant benefits from having Faiveley in the market today. The
resulting loss of a competitor and increased concentration of market
share indicate that the acquisition likely will result in significant
harm from expected price increases and decreases in quality of service
if the proposed acquisition is consummated.
2. Freight Car Control Valves and Co-Valves
Wabtec and a second manufacturer are now the only unconditionally
approved suppliers of freight car brake control valves. As the second-
largest railway brake manufacturer in the world, Faiveley was uniquely
positioned to enter this market because of both its general competency
and the substantial progress it has already made in developing the
product. Absent the merger it would have become the only other freight
car brake control valve supplier.
The proposed acquisition would eliminate future competition for the
development, manufacture, and sale of control valves by eliminating
Faiveley's entry into this market. Faiveley's entry into the control
valve market would have posed an immediate threat to the incumbent
suppliers' by forcing them to compete aggressively or risk losing a
sale to Faiveley. This market is also characterized by bargaining and
price competition and involves the same competitive dynamics described
above. Faiveley's customers would have enjoyed enhanced price
competition immediately as Faiveley strove to gain quick acceptance of
its control valve. Over the long term, the existence of Faiveley as a
third supplier would have continued to enhance competition.
Without the required divestiture of assets, Wabtec's acquisition of
Faiveley would have eliminated important head-to-head competition in
the development, manufacture, and sale of freight car brake components
and likely would have given Wabtec the incentive and ability to raise
prices and decrease the quality of service provided to the railroad
freight car industry. Absent the required divestiture of assets, the
acquisition also would have eliminated a third potential supplier of
control valves, thereby freezing in place a longstanding duopoly in
that market.
F. Barriers to Entry
Given the substantial time required to develop and qualify a
component of a freight car brake system, timely and sufficient entry by
other competitors into any of the relevant markets, is unlikely to
mitigate the harmful effects of the proposed acquisition. The
likelihood of another potential entrant in the control valve market is
particularly remote given the historical dearth of meaningful attempts
to enter this market, as well as the substantial time and cost
associated with entry into the control valve market.
III. Explanation of the Proposed Final Judgment
The divestitures required by the proposed Final Judgment will
eliminate the anticompetitive effects of the acquisition in the
relevant markets by establishing a new, independent, and economically
viable competitor in the development, manufacture, and sale of freight
car brake components by quickly transferring full ownership of the ARF
joint venture to Amsted. It is also expected to eliminate the
anticompetitive effects of the acquisition from the loss of competition
in the development, manufacture, and sale of brake control valves by
transferring to Amsted all assets relating to the FTEN control valve
project, including the FTEN valve itself, as well as dirt collectors,
angle cocks, and vent valves.
Paragraph II(G) of the proposed Final Judgment defines the
Divestiture Assets to include all assets owned or under the control of
Faiveley at the current ARF facility in Greenville, South Carolina, and
include Faiveley's full and complete interest, rights, and property in
ARF and the FTEN control valve. The Divestiture Assets include all
tangible assets relating to ARF and the FTEN control valve, including,
but not limited
[[Page 78195]]
to, research and development activities; all manufacturing equipment,
tooling and fixed assets, including, at the option of the Acquirer, the
braking simulation testing equipment known as the ``whale'' located at
Greenville, South Carolina, personal property, inventory, office
furniture, materials, supplies, and other tangible property; all
licenses, permits and authorizations issued by any governmental
organization; all contracts, teaming arrangements, agreements, leases,
commitments, certifications, and understandings, including supply
agreements; all customer lists, contracts, accounts, and credit
records; all repair and performance records, and all other records.
The Divestiture Assets also include all intangible assets relating
to ARF and the FTEN control valve, including, but not limited to, all
patents, licenses and sublicenses, intellectual property, copyrights,
trademarks, trade names, service marks, service names, technical
information, computer software and related documentation, know-how,
trade secrets, drawings, blueprints, designs, design protocols,
specifications for materials, specifications for parts and devices,
safety procedures for the handling of materials and substances, quality
assurance and control procedures, design tools and simulation
capability, all manuals and technical information Faiveley provides to
its own employees, customers, suppliers, agents or licensees, and all
research data, including, but not limited to, designs of experiments,
and the results of successful and unsuccessful designs and experiments.
Paragraph IV(A) of the proposed Final Judgment requires Defendants,
within twenty (20) calendar days after the signing of the Hold Separate
Stipulation and Order in this matter to divest the Divestiture Assets
in a manner consistent with the Final Judgment to Amsted or an Acquirer
acceptable to the United States, in its sole discretion. The
Divestiture Assets must be divested in such a way as to satisfy the
United States in its sole discretion that they assets can and will be
operated by the purchaser as a viable, ongoing business that can
compete effectively in the relevant market. Defendants must take all
reasonable steps necessary to accomplish the divestiture quickly and
shall cooperate with the named acquirer (Amsted) or any other
prospective purchaser. The United States, in its sole discretion, may
agree to one or more extensions of this time period not to exceed sixty
(60) calendar days in total, and shall notify the Court in such
circumstances.
In the event that Defendants do not accomplish the divestiture
within the period prescribed in the proposed Final Judgment, Paragraph
V(A) of the proposed Final Judgment provides that the Court will
appoint a trustee selected by the United States to effect the
divestiture. If a trustee is appointed, the proposed Final Judgment
provides that Wabtec will pay all costs and expenses of the trustee.
The trustee's commission will be structured so as to provide an
incentive for the trustee based on the price obtained and the speed
with which the divestiture is accomplished. After his or her
appointment becomes effective, the trustee will file monthly reports
with the Court and the United States setting forth his or her efforts
to accomplish the divestiture. At the end of six months, if the
divestiture has not been accomplished, the trustee and the United
States will make recommendations to the Court, which shall enter such
orders as appropriate, in order to carry out the purpose of the trust,
including extending the trust or the term of the trustee's appointment.
Paragraph IV(I) of the proposed Final Judgment provides that final
approval of the divestiture, including the identity of the Acquirer, is
left to the sole discretion of the United States to ensure the
continued independence and viability of the Divestiture Assets in the
relevant markets. In this matter, Amsted has been identified as the
expected purchaser of the Divestiture Assets and is currently in final
negotiations with Defendants for a purchase agreement. After a thorough
examination of Amsted, its plans for the Divestiture Assets and the
proposed sale agreements, as well as consideration of feedback from
customers, the United States approved Amsted as the buyer. Amsted is a
strong competitor in other freight car equipment such as bogies,
wheels, and axles. It is uniquely positioned as the current face of
Faiveley brake components to the marketplace (through ARF) and has been
the expected conduit through which FTEN was to be marketed by Faiveley
absent the merger. Amsted's intimate familiarity with the products, the
personnel, the AAR approval process, and the relevant customers should
ensure that in its hands the Divestiture Assets will provide meaningful
competition.
Under Paragraph IV(I) of the proposed Final Judgment, in the event
Amsted is unable to acquire the Divestiture Assets, another Acquirer
may purchase the Divestiture Assets, subject to approval by the
Department in its sole discretion. The divestiture of assets must be
accomplished as a single divestiture of all the Divestiture Assets to a
single Acquirer. The Divestiture Assets may not be sold piecemeal. This
is to protect the integrity of the Divestiture Assets as an ongoing,
viable business and to enable the existing business to continue as a
vigorous competitor in the future.
Section XI of the proposed Final Judgment requires Wabtec to
provide notification to the Antitrust Division of certain proposed
acquisitions not otherwise subject to filing under the Hart-Scott
Rodino Act, 15 U.S.C. 18a (the ``HSR Act''), and in the same format as,
and per the instructions relating to the notification required under
that statute. The notification requirement applies in the case of any
direct or indirect acquisitions of any assets of or interest in any
entity engaged in certain activities relating to freight car brake
systems or components in the United States. Section XI further provides
for waiting periods and opportunities for the United States to obtain
additional information similar to the provisions of the HSR Act before
such acquisitions can be consummated.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment will neither
impair nor assist the bringing of any private antitrust damage action.
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C.
16(a), the proposed Final Judgment has no prima facie effect in any
subsequent private lawsuit that may be brought against Defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least sixty (60) days preceding
the effective date of the proposed Final Judgment within which any
person may submit to the United States written comments regarding the
proposed Final Judgment. Any person who wishes to comment should do so
within sixty (60) days of the date of publication of this
[[Page 78196]]
Competitive Impact Statement in the Federal Register, or the last date
of publication in a newspaper of the summary of this Competitive Impact
Statement, whichever is later. All comments received during this period
will be considered by the United States Department of Justice, which
remains free to withdraw its consent to the proposed Final Judgment at
any time prior to the Court's entry of judgment. The comments and the
response of the United States will be filed with the Court. In
addition, comments will be posted on the U.S. Department of Justice,
Antitrust Division's Internet Web site and, under certain
circumstances, published in the Federal Register.
Written comments should be submitted to: Maribeth Petrizzi, Chief,
Litigation II Section, 450 Fifth Street NW., Suite 8700, Antitrust
Division, United States Department of Justice, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
The United States considered, as an alternative to the proposed
Final Judgment, a full trial on the merits against Defendants. The
United States could have continued the litigation and sought
preliminary and permanent injunctions against Wabtec's acquisition of
Faiveley. The United States is satisfied, however, that the divestiture
of assets described in the proposed Final Judgment will preserve
competition for the development, manufacture, and sale of certain
components of a freight car brake system, including hand brakes, slack
adjusters, truck-mounted brake assemblies, empty load devices, brake
cylinders, and control valves, in the relevant markets identified by
the United States. Thus, the proposed Final Judgment would achieve all
or substantially all of the relief the United States would have
obtained through litigation, but avoids the time, expense, and
uncertainty of a full trial on the merits.
VII. Standard of Review Under the APPA for the Proposed Final Judgment
The APPA requires that proposed consent judgments in antitrust
cases brought by the United States be subject to a sixty-day comment
period, after which the court shall determine whether entry of the
proposed Final Judgment is ``in the public interest.'' 15 U.S.C.
16(e)(1). In making that determination, the court, in accordance with
the statute as amended in 2004, is required to consider:
(A) the competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
Id. at Sec. 16(e)(1)(A) & (B). In considering these statutory factors,
the court's inquiry is necessarily a limited one as the government is
entitled to ``broad discretion to settle with the defendant within the
reaches of the public interest.'' United States v. Microsoft Corp., 56
F.3d 1448, 1461 (D.C. Cir. 1995); see generally United States v. SBC
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public
interest standard under the Tunney Act); United States v. U.S. Airways
Group, Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (noting that the
court's ``inquiry is limited'' because the government has ``broad
discretion'' to determine the adequacy of the relief secured through a
settlement); United States v. InBev N.V./S.A., No. 08-1965 (JR), 2009-2
Trade Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, at *3 (D.D.C.
Aug. 11, 2009) (noting that the court's review of a consent judgment is
limited and only inquires ``into whether the government's determination
that the proposed remedies will cure the antitrust violations alleged
in the complaint was reasonable, and whether the mechanism to enforce
the final judgment are clear and manageable.'').\1\
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\1\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for court to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns,
489 F. Supp. 2d at 11 (concluding that the 2004 amendments
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------
As the United States Court of Appeals for the District of Columbia
Circuit has held, a court conducting inquiry under the APPA may
consider, among other things, the relationship between the remedy
secured and the specific allegations set forth in the government's
complaint, whether the decree is sufficiently clear, whether
enforcement mechanisms are sufficient, and whether the decree may
positively harm third parties. See Microsoft, 56 F.3d at 1458-62. With
respect to the adequacy of the relief secured by the decree, a court
may not ``engage in an unrestricted evaluation of what relief would
best serve the public.'' United States v. BNS, Inc., 858 F.2d 456, 462
(9th Cir. 1988) (quoting United States v. Bechtel Corp., 648 F.2d 660,
666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62; United
States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); InBev,
2009 U.S. Dist. LEXIS 84787, at *3. Courts have held that:
[t]he balancing of competing social and political interests affected
by a proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree. The court is required to determine not whether a
particular decree is the one that will best serve society, but
whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\2\ In
determining whether a proposed settlement is in the public interest, a
district court ``must accord deference to the government's predictions
about the efficacy of its remedies, and may not require that the
remedies perfectly match the alleged violations.'' SBC Commc'ns, 489 F.
Supp. 2d at 17; see also U.S. Airways, 8 F. Supp. 3d at 75 (noting that
a court should not reject the proposed remedies because it believes
others are preferable); Microsoft, 56 F.3d at 1461 (noting the need for
courts to be ``deferential to the government's predictions as to the
effect of the proposed remedies''); United States v. Archer-Daniels-
Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court
should grant due respect to the government's prediction as to the
effect of proposed remedies, its perception of
[[Page 78197]]
the market structure, and its views of the nature of the case).
---------------------------------------------------------------------------
\2\ Cf. BNS, 858 F.2d at 464 (holding that the court's
``ultimate authority under the [APPA] is limited to approving or
disapproving the consent decree''); United States v. Gillette Co.,
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the
court is constrained to ``look at the overall picture not
hypercritically, nor with a microscope, but with an artist's
reducing glass''). See generally Microsoft, 56 F.3d at 1461
(discussing whether ``the remedies [obtained in the decree are] so
inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest' '').
---------------------------------------------------------------------------
Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be approved
even if it falls short of the remedy the court would impose on its own,
as long as it falls within the range of acceptability or is `within the
reaches of public interest.' '' United States v. Am. Tel. & Tel. Co.,
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also U.S.
Airways, 38 F. Supp. 3d at 76 (noting that room must be made for the
government to grant concessions in the negotiation process for
settlements (citing Microsoft, 56 F.3d at 1461); United States v. Alcan
Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) (approving the
consent decree even though the court would have imposed a greater
remedy). To meet this standard, the United States ``need only provide a
factual basis for concluding that the settlements are reasonably
adequate remedies for the alleged harms.'' SBC Commc'ns, 489 F. Supp.
2d at 17.
Moreover, the court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its Complaint, and does not authorize the court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways,
38 F. Supp 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable; InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (concluding that
``the `public interest' is not to be measured by comparing the
violations alleged in the complaint against those the court believes
could have, or even should have, been alleged''). Because the ``court's
authority to review the decree depends entirely on the government's
exercising its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review the
decree itself,'' and not to ``effectively redraft the complaint'' to
inquire into other matters that the United States did not pursue.
Microsoft, 56 F.3d at 1459-60. As this Court confirmed in SBC
Communications, courts ``cannot look beyond the complaint in making the
public interest determination unless the complaint is drafted so
narrowly as to make a mockery of judicial power.'' 489 F. Supp. 2d at
15.
In its 2004 amendments, Congress made clear its intent to preserve
the practical benefits of utilizing consent decrees in antitrust
enforcement, adding the unambiguous instruction that ``[n]othing in
this section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2); see also U.S. Airways, 38 F. Supp. 3d
at 76 (indicating that a court is not required to hold an evidentiary
hearing or to permit intervenors as part of its review under the Tunney
Act). This language codified what Congress intended when it enacted the
Tunney Act in 1974, as the author of this legislation, Senator Tunney
explained: ``The court is nowhere compelled to go to trial or to engage
in extended proceedings which might have the effect of vitiating the
benefits of prompt and less costly settlement through the consent
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Sen.
Tunney). Rather, the procedure for the public interest determination is
left to the discretion of the court, with the recognition that the
court's ``scope of review remains sharply proscribed by precedent and
the nature of Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d
at 11.\3\ A court can make its public interest determination based on
the competitive impact statement and response to public comments alone.
U.S. Airways, 38 F. Supp. 3d at 76.
---------------------------------------------------------------------------
\3\ See also United States v. Enova Corp., 107 F. Supp. 2d 10,
17 (D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., No. 73-CV-681-W-1, 1977-1
Trade Cas. (CCH) ] 61,508, at 71,980, *22 (W.D. Mo. 1977) (``Absent
a showing of corrupt failure of the government to discharge its
duty, the Court, in making its public interest finding, should . . .
carefully consider the explanations of the government in the
competitive impact statement and its responses to comments in order
to determine whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298, at 6 (1973) (``Where the
public interest can be meaningfully evaluated simply on the basis of
briefs and oral arguments, that is the approach that should be
utilized.'').
---------------------------------------------------------------------------
VIII. Determinative Documents
There are no determinative materials or documents within the
meaning of the APPA that were considered by the United States in
formulating the proposed Final Judgment.
Dated: October 26, 2016.
Respectfully submitted,
/s/--------------------------------------------------------------------
DOHA MEKKI
United States Department of Justice
Antitrust Division, Litigation II Section
450 Fifth Street NW., Suite 8700
Washington, DC 20530
Telephone: (202) 598-8023
Facsimile: (202) 514-9033
[email protected]
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Westinghouse Air Brake
Technologies Corp., Faiveley Transport S.A., and Faiveley Transport
North America, Defendants.
Case No.: 1:16-cv-02147
Judge: Tanya S. Chutkan
Filed: 10/26/2016
Proposed Final Judgment
Whereas, Plaintiff, United States of America, filed its Complaint
on October 26, 2016, the United States and defendants, Westinghouse Air
Brake Technologies Corp., Faiveley Transport S.A., and Faiveley
Transport North America, by their respective attorneys, have consented
to the entry of this Final Judgment without trial or adjudication of
any issue of fact or law, and without this Final Judgment constituting
any evidence against or admission by any party regarding any issue of
fact or law;
And whereas, defendants agree to be bound by the provisions of this
Final Judgment pending its approval by the Court;
And whereas, the essence of this Final Judgment is the prompt and
certain divestiture of certain rights and assets by the defendants to
assure that competition is not substantially lessened;
And whereas, the United States requires defendants to make a
certain divestiture for the purpose of remedying the loss of
competition alleged in the Complaint;
And whereas, defendants have represented to the United States that
the divestiture required below can and will be made and that defendants
will later raise no claim of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
below;
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is ordered, adjudged and decreed:
I. Jurisdiction
This Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against defendants under Section 7 of the Clayton
Act, as amended (15 U.S.C. 18).
[[Page 78198]]
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' means Amsted Rail Company, Inc., or another entity
to which defendants divest the Divestiture Assets.
B. ``Wabtec'' means defendant Westinghouse Air Brake Technologies
Corp., a Delaware corporation with its headquarters in Wilmerding,
Pennsylvania, its successors and assigns, and its subsidiaries,
divisions, groups, affiliates, partnerships and joint ventures, and
their directors, officers, managers, agents, and employees.
C. ``Faiveley'' means defendant Faiveley Transport S.A., a French
corporation with its headquarters in Gennevilliers, France, its
successors and assigns, and its subsidiaries, divisions, groups,
affiliates, partnerships and joint ventures, and their directors,
officers, managers, agents, and employees. ``Faiveley'' includes
defendant Faiveley Transport North America, a New York corporation
headquartered in Greenville, South Carolina, a wholly-owned subsidiary
of Faiveley Transport S.A.
D. ``Amsted'' means Amsted Rail Company, Inc., an Illinois
corporation with its headquarters in Chicago, Illinois, its successors
and assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships and joint ventures, and their directors, officers,
managers, agents, and employees. Amsted is a wholly-owned subsidiary of
Amsted Industries Incorporated of Chicago, Illinois.
E. ``Amsted Rail Faiveley LLC'' means the ongoing business and all
associated assets of a joint venture that currently exists between
Faiveley and Amsted, was established in 2010 for the purpose of
manufacturing and selling freight car brake components, and has
headquarters located in Greenville, South Carolina.
F. ``FTEN control valve'' means the ongoing project and all
associated assets of the freight car brake control valve for freight
car brake systems developed or under development by Faiveley.
G. ``Divestiture Assets'' means:
1. Faiveley's full and complete interest, rights, and property in
Amsted Rail Faiveley LLC and the FTEN control valve;
2. All tangible assets relating to Amsted Rail Faiveley LLC and the
FTEN control valve, including, but not limited to, research and
development activities; all manufacturing equipment, tooling and fixed
assets, including, at the option of the Acquirer, the braking
simulation testing equipment known as the ``whale'' located at the
Greenville, South Carolina, personal property, inventory, office
furniture, materials, supplies, and other tangible property; all
licenses, permits and authorizations issued by any governmental
organization; all contracts, teaming arrangements, agreements, leases,
commitments, certifications, and understandings, including supply
agreements; all customer lists, contracts, accounts, and credit
records; all repair and performance records and all other records; and
3. All intangible assets relating to Amsted Rail Faiveley LLC and
the FTEN control valve, including, but not limited to, all patents,
licenses and sublicenses, intellectual property, copyrights,
trademarks, trade names, service marks, and service names; technical
information, computer software and related documentation, know-how,
trade secrets, drawings, blueprints, designs, design protocols, and
design tools and simulation capability; specifications for materials;
specifications for parts and devices; safety procedures for the
handling of materials and substances; quality assurance and control
procedures; all manuals and technical information Faiveley provides to
its own employees, customers, suppliers, agents or licensees; and all
research data, including, but not limited to, designs of experiments,
and the results of successful and unsuccessful designs and experiments.
III. Applicability
A. This Final Judgment applies to Wabtec and Faiveley, as defined
above, and all other persons in active concert or participation with
any of them who receive actual notice of this Final Judgment by
personal service or otherwise.
B. If, prior to complying with Section IV and V of this Final
Judgment, defendants sell or otherwise dispose of all or substantially
all of their assets or of lesser business units that include the
Divestiture Assets, they shall require the purchaser to be bound by the
provisions of this Final Judgment. Defendants need not obtain such an
agreement from the Acquirer of the assets divested pursuant to this
Final Judgment.
IV. Divestiture
A. Defendants are ordered and directed, within twenty (20) calendar
days after the signing of the Hold Separate Stipulation and Order in
this matter to divest the Divestiture Assets in a manner consistent
with this Final Judgment to Amsted or an Acquirer acceptable to the
United States, in its sole discretion. The United States, in its sole
discretion, may agree to one or more extensions of this time period not
to exceed sixty (60) calendar days in total, and shall notify the Court
in such circumstances. Defendants agree to use their best efforts to
divest the Divestiture Assets as expeditiously as possible.
B. In the event defendants are attempting to divest the Divestiture
Assets to an Acquirer other than Amsted, defendants promptly shall make
known, by usual and customary means, the availability of the
Divestiture Assets. Defendants shall inform any person making an
inquiry regarding a possible purchase of the Divestiture Assets that
they are being divested pursuant to this Final Judgment and provide
that person with a copy of this Final Judgment.
C. In accomplishing the divestiture ordered by this Final Judgment,
defendants shall offer to furnish to all prospective Acquirers, subject
to customary confidentiality assurances, all information and documents
relating to the Divestiture Assets customarily provided in a due
diligence process except such information or documents subject to the
attorney-client privileges or work-product doctrine. Defendants shall
make available such information to the United States at the same time
that such information is made available to any other person.
D. Defendants shall provide the Acquirer and the United States
information relating to Faiveley personnel with responsibilities for
Amsted Rail Faiveley LLC or the FTEN control valve to enable the
Acquirer to make offers of employment. Defendants will not interfere
with any negotiations by the Acquirer to employ any Faiveley employee
whose primary responsibility is the production, development, and sale
of products relating to Amsted Rail Faiveley LLC and the FTEN control
valve.
E. Defendants shall permit the Acquirer of the Divestiture Assets
to have reasonable access to personnel and to make inspections of the
physical facilities relating to the Divestiture Assets; access to any
and all environmental, zoning, and other permit documents and
information; and access to any and all financial, operational, or other
documents and information customarily provided as part of a due
diligence process.
F. Defendants shall warrant to the Acquirer(s) that each asset will
be operational on the date of sale.
G. Defendants shall not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
[[Page 78199]]
H. Defendants shall warrant to the Acquirer that there are no
material defects in the environmental, zoning or other permits
pertaining to the operation of each asset, and that following the sale
of the Divestiture Assets, defendants will not undertake, directly or
indirectly, any challenges to the environmental, zoning, or other
permits relating to the operation of the Divestiture Assets.
I. Unless the United States otherwise consents in writing, the
divestiture pursuant to Section IV, or by Divestiture Trustee appointed
pursuant to Section V, of this Final Judgment, shall include the entire
Divestiture Assets, and shall be accomplished in such a way as to
satisfy the United States, in its sole discretion, that the Divestiture
Assets can and will be used by the Acquirer as part of a viable,
ongoing business in the design, development, manufacture, marketing,
servicing, distribution, and sale of products relating to Amsted Rail
Faiveley LLC and the FTEN control valve. The divestiture, whether
pursuant to Section IV or V of this Final Judgment, shall be made to an
Acquirer that, in the United States's sole judgment, has the intent and
capability (including the necessary managerial, operational, technical
and financial capability) of competing effectively in the design,
development, manufacture, marketing, servicing, distribution, and sale
of products relating to Amsted Rail Faiveley LLC and the FTEN control
valve; and that none of the terms of any agreement between the Acquirer
and defendants give defendants the ability unreasonably to raise the
Acquirer's costs, to lower the Acquirer's efficiency, or otherwise to
interfere in the ability of the Acquirer to compete effectively.
V. Appointment of Divestiture Trustee
A. If defendants have not divested the Divestiture Assets within
the time period specified in Paragraph IV(A), defendants shall notify
the United States of that fact in writing. Upon application of the
United States, the Court shall appoint a Divestiture Trustee selected
by the United States and approved by the Court to effect the
divestiture of the Divestiture Assets.
B. After the appointment of a Divestiture Trustee becomes
effective, only the Divestiture Trustee shall have the right to sell
the Divestiture Assets. The Divestiture Trustee shall have the power
and authority to accomplish the divestiture to an Acquirer acceptable
to the United States at such price and on such terms as are then
obtainable upon reasonable effort by the Divestiture Trustee, subject
to the provisions of Sections IV, V, and VI of this Final Judgment, and
shall have such other powers as this Court deems appropriate. Subject
to Paragraph V(D) of this Final Judgment, the Divestiture Trustee may
hire at the cost and expense of defendants any investment bankers,
attorneys, or other agents, who shall be solely accountable to the
Divestiture Trustee, reasonably necessary in the Divestiture Trustee's
judgment to assist in the divestiture. Any such investment bankers,
attorneys, or other agents shall serve on such terms and conditions as
the United States approves including confidentiality requirements and
conflict of interest certifications.
C. Defendants shall not object to a sale by the Divestiture Trustee
on any ground other than the Divestiture Trustee's malfeasance. Any
such objections by defendants must be conveyed in writing to the United
States and the Divestiture Trustee within ten (10) calendar days after
the Divestiture Trustee has provided the notice required under Section
VI.
D. The Divestiture Trustee shall serve at the cost and expense of
Wabtec pursuant to a written agreement, on such terms and conditions as
the United States approves, including confidentiality requirements and
conflict of interest certifications. The Divestiture Trustee shall
account for all monies derived from the sale of the assets sold by the
Divestiture Trustee and all costs and expenses so incurred. After
approval by the Court of the Divestiture Trustee's accounting,
including fees for its services yet unpaid and those of any
professionals and agents retained by the Divestiture Trustee, all
remaining money shall be paid to Wabtec and the trust shall then be
terminated. The compensation of the Divestiture Trustee and any
professionals and agents retained by the Divestiture Trustee shall be
reasonable in light of the value of the Divestiture Assets and based on
a fee arrangement providing the Divestiture Trustee with an incentive
based on the price and terms of the divestiture and the speed with
which it is accomplished, but timeliness is paramount. If the
Divestiture Trustee and Wabtec are unable to reach agreement on the
Divestiture Trustee's or any agent's or consultant's compensation or
other terms and conditions of engagement within fourteen (14) calendar
days of appointment of the Divestiture Trustee, the United States may,
in its sole discretion, take appropriate action, including making a
recommendation to the Court. The Divestiture Trustee shall, within
three (3) business days of hiring any other professionals or agents,
provide written notice of such hiring and the rate of compensation to
defendants and the United States.
E. Defendants shall use their best efforts to assist the
Divestiture Trustee in accomplishing the required divestiture. The
Divestiture Trustee and any consultants, accountants, attorneys, and
other agents retained by the Divestiture Trustee shall have full and
complete access to the personnel, books, records, and facilities of the
business to be divested, and defendants shall develop financial and
other information relevant to such business as the Divestiture Trustee
may reasonably request, subject to reasonable protection for trade
secret or other confidential research, development, or commercial
information or any applicable privileges. Defendants shall take no
action to interfere with or to impede the Divestiture Trustee's
accomplishment of the divestiture.
F. After its appointment, the Divestiture Trustee shall file
monthly reports with the United States and, as appropriate, the Court
setting forth the Divestiture Trustee's efforts to accomplish the
divestiture ordered under this Final Judgment. To the extent such
reports contain information that the Divestiture Trustee deems
confidential, such reports shall not be filed in the public docket of
the Court. Such reports shall include the name, address, and telephone
number of each person who, during the preceding month, made an offer to
acquire, expressed an interest in acquiring, entered into negotiations
to acquire, or was contacted or made an inquiry about acquiring, any
interest in the Divestiture Assets, and shall describe in detail each
contact with any such person. The Divestiture Trustee shall maintain
full records of all efforts made to divest the Divestiture Assets.
G. If the Divestiture Trustee has not accomplished the divestiture
ordered under this Final Judgment within six months after its
appointment, the Divestiture Trustee shall promptly file with the Court
a report setting forth (1) the Divestiture Trustee's efforts to
accomplish the required divestiture, (2) the reasons, in the
Divestiture Trustee's judgment, why the required divestiture has not
been accomplished, and (3) the Divestiture Trustee's recommendations.
To the extent such report contains information that the Divestiture
Trustee deems confidential, such report shall not be filed in the
public docket of the Court. The Divestiture Trustee shall at the same
time furnish such report to the United States which shall have the
right to make additional recommendations consistent with the purpose of
the trust. The Court thereafter shall enter such
[[Page 78200]]
orders as it shall deem appropriate to carry out the purpose of the
Final Judgment, which may, if necessary, include extending the trust
and the term of the Divestiture Trustee's appointment by a period
requested by the United States.
H. If the United States determines that the Divestiture Trustee has
ceased to act or failed to act diligently or in a reasonably cost-
effective manner, it may recommend the Court appoint a substitute
Divestiture Trustee.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following execution of a definitive
divestiture agreement, defendants or the Divestiture Trustee, whichever
is then responsible for effecting the divestiture required herein,
shall notify the United States of any proposed divestiture required by
Section IV or V of this Final Judgment. If the Divestiture Trustee is
responsible, it shall similarly notify defendants. The notice shall set
forth the details of the proposed divestiture and list the name,
address, and telephone number of each person not previously identified
who offered or expressed an interest in or desire to acquire any
ownership interest in the Divestiture Assets, together with full
details of the same.
B. Within fifteen (15) calendar days of receipt by the United
States of such notice, the United States may request from defendants,
the proposed Acquirer, any other third party, or the Divestiture
Trustee, if applicable, additional information concerning the proposed
divestiture, the proposed Acquirer, and any other potential Acquirer.
Defendants and the Divestiture Trustee shall furnish any additional
information requested within fifteen (15) calendar days of the receipt
of the request, unless the parties shall otherwise agree.
C. Within thirty (30) calendar days after receipt of the notice or
within twenty (20) calendar days after the United States has been
provided the additional information requested from defendants, the
proposed Acquirer, any third party, and the Divestiture Trustee,
whichever is later, the United States shall provide written notice to
defendants and the Divestiture Trustee, if there is one, stating
whether or not it objects to the proposed divestiture. If the United
States provides written notice that it does not object, the divestiture
may be consummated, subject only to defendants' limited right to object
to the sale under Paragraph V(C) of this Final Judgment. Absent written
notice that the United States does not object to the proposed Acquirer
or upon objection by the United States, a divestiture proposed under
Section IV or V shall not be consummated. Upon objection by defendants
under Paragraph V(C), a divestiture proposed under Section V shall not
be consummated unless approved by the Court.
VII. Financing
Defendants shall not finance all or any part of any purchase made
pursuant to Section IV or V of this Final Judgment.
VIII. Hold Separate
Until the divestiture required by this Final Judgment has been
accomplished, defendants shall take all steps necessary to comply with
the Hold Separate Stipulation and Order entered by this Court.
Defendants shall take no action that would jeopardize the divestiture
ordered by this Court.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter, and every thirty (30) calendar days thereafter until
the divestiture has been completed under Section IV or V, defendants
shall deliver to the United States an affidavit as to the fact and
manner of its compliance with Section IV or V of this Final Judgment.
Each such affidavit shall include the name, address, and telephone
number of each person who, during the preceding thirty (30) calendar
days, made an offer to acquire, expressed an interest in acquiring,
entered into negotiations to acquire, or was contacted or made an
inquiry about acquiring, any interest in the Divestiture Assets, and
shall describe in detail each contact with any such person during that
period. Each such affidavit shall also include a description of the
efforts defendants have taken to solicit buyers for the Divestiture
Assets, and to provide required information to prospective Acquirers,
including the limitations, if any, on such information. Assuming the
information set forth in the affidavit is true and complete, any
objection by the United States to information provided by defendants,
including limitation on information, shall be made within fourteen (14)
calendar days of receipt of such affidavit.
B. Within twenty (20) calendar days of the filing of the Complaint
in this matter, defendants shall deliver to the United States an
affidavit that describes in reasonable detail all actions defendants
have taken and all steps defendants have implemented on an ongoing
basis to comply with Section VIII of this Final Judgment. Defendants
shall deliver to the United States an affidavit describing any changes
to the efforts and actions outlined in defendants' earlier affidavits
filed pursuant to this section within fifteen (15) calendar days after
the change is implemented.
C. Defendants shall keep all records of all efforts made to
preserve and divest the Divestiture Assets until one year after such
divestiture has been completed.
X. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of any related orders such as any Hold Separate
Stipulation and Order, or of determining whether the Final Judgment
should be modified or vacated, and subject to any legally recognized
privilege, from time to time authorized representatives of the United
States Department of Justice, including consultants and other persons
retained by the United States, shall, upon written request of an
authorized representative of the Assistant Attorney General in charge
of the Antitrust Division, and on reasonable notice to defendants, be
permitted:
1. Access during defendants' office hours to inspect and copy, or
at the option of the United States, to require defendants to provide
hard copy or electronic copies of, all books, ledgers, accounts,
records, data, and documents in the possession, custody, or control of
defendants, relating to any matters contained in this Final Judgment;
and
2. to interview, either informally or on the record, defendants'
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews shall be subject to the
reasonable convenience of the interviewee and without restraint or
interference by defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
defendants shall submit written reports or response to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment as may be requested.
C. No information or documents obtained by the means provided in
this section shall be divulged by the United States to any person other
than an authorized representative of the executive branch of the United
States, except in the course of legal proceedings to which the United
States is a party (including grand jury proceedings), or for the
purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
[[Page 78201]]
D. If at the time information or documents are furnished by
defendants to the United States, defendants represent and identify in
writing the material in any such information or documents to which a
claim of protection may be asserted under Rule 26(c)(1)(g) of the
Federal Rules of Civil Procedure, and defendants mark each pertinent
page of such material, ``Subject to claim of protection under Rule
26(c)(1)(g) of the Federal Rules of Civil Procedure,'' then the United
States shall give defendants ten (10) calendar days notice prior to
divulging such material in any legal proceeding (other than a grand
jury proceeding).
XI. Notification
A. Unless such transaction is otherwise subject to the reporting
and waiting period requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''),
during the term of this Final Judgment, Wabtec, without providing
advance notification to the Antitrust Division, shall not directly or
indirectly acquire any assets of or any interest, including, but not
limited to, any financial, security, loan, equity, or management
interest, in any entity engaged in the design, development, production
(including the provision of any input product comprising five percent
or more of the value of any final product), marketing, servicing,
distribution, or sale of freight car brake systems or components
thereof in the United States.
B. Such notification shall be provided to the Antitrust Division in
the same format as, and per the instructions relating to the
Notification and Report Form set forth in the Appendix to Part 803 of
Title 16 of the Code of Federal Regulations as amended, except that the
information requested in Items 5 through 9 of the instructions must be
provided only about freight car brake systems or components thereof
described in Section V of the Complaint filed in this matter (including
any input product comprising five percent or more of the value of any
final product). Notification shall be provided at least thirty (30)
calendar days prior to acquiring any such interest, and shall include,
beyond what may be required by the applicable instructions, the names
of the principal representatives of the parties to the agreement who
negotiated the agreement, and any management or strategic plans
discussing the proposed transaction. If within the thirty-day period
after notification, representatives of the Antitrust Division make a
written request for additional information, Wabtec shall not consummate
the proposed transaction or agreement until thirty (30) calendar days
after submitting all such additional information. Early termination of
the waiting periods in this paragraph may be requested and, where
appropriate, granted in the same manner as is applicable under the
requirements and provisions of the HSR Act and rules promulgated
thereunder. This Section shall be broadly construed and any ambiguity
or uncertainty regarding the filing of notice under this Section shall
be resolved in favor of filing notice.
XII. No Reacquisition
Wabtec may not reacquire any part of the Divestiture Assets during
the term of this Final Judgment.
XIII. Retention of Jurisdiction
This Court retains jurisdiction to enable any party to this Final
Judgment to apply to this Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XIV. Expiration of Final Judgment
Unless this Court grants an extension, this Final Judgment shall
expire ten years from the date of its entry.
XV. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including making copies available to the
public of this Final Judgment, the Competitive Impact Statement, and
any comments thereon and the United States' responses to comments.
Based upon the record before the Court, which includes the Competitive
Impact Statement and any comments and response to comments filed with
the Court, entry of this Final Judgment is in the public interest.
Date:------------------------------------------------------------------
Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16.
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United States District Judge
[FR Doc. 2016-26781 Filed 11-4-16; 8:45 am]
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