The U.S. Federal Trade Commission has approved a settlement that resolves objections to formation of Montell Polyolefins, a $6 billion joint venture between Montedison SpA and Royal Dutch/Shell.
FTC had alleged the joint venture between the world's largest polypropylene producers could have reduced competition in several polypropylene and related polypropylene production and licensing markets and reduce U.S. export sales.
Royal Dutch said FTC's agreement will enable the companies to start the countdown to have Montell Polyolefins up and running as close as possible to the Mar. 1 start-up permitted by FTC. Montell will have its headquarters in Hoofddorp, near Amsterdam's Schipol airport. Production capacity of the new company will be 3.3 million metric tons/year of polypropylene and 700,000 metric tons/year of polyethylene (OGJ, Jan. 10, 1994, p. 34).
THE SETTLEMENT
Under the settlement, the Royal Dutch/Shell group will sell all of Shell Oil Co.'s polypropylene assets to Union Carbide Corp. or another FTC approved buyer. That firm would compete with Montell, Shell, and Montedison.
FTC also challenged the royalty and profit sharing agreement between Montedison and Mitsui Petrochemical Industries Ltd., Montedison's partner for the licensing of polypropylene technology and polypropylene catalyst. The agency said the pact would have restricted price competition and constitute an illegal agreement to allocate markets.
The settlement will require Montedison to forsake revenues under the agreement from future U.S. licenses by Mitsui and ban Montedison from signing similar agreements.
FTC's complaint said Shell cooperates with Union Carbide on research, development, and licensing of polypropylene technology worldwide by combining Shell's SHAC polypropylene catalyst with Union Carbide's Unipol process technology. It noted that Unipol/SHAC is Montedison's main competitor in these markets.
Under the proposed joint venture, Shell is to retain its polypropylene business and a partnership with Union Carbide, Seadrift Polypropylene Co. FTC's complaint alleged the polypropylene production and licensing markets are moderately to highly concentrated and have high barriers to entry.
Also, the complaint alleges, industry practices make collusion among current polypropylene resin competitors easier, including technology licensing and supply arrangements that enable sales monitoring, signaling of price increases, and long term customer-supplier relationships that facilitate customer allocation.
CARBIDE'S CONCERN
Union Carbide, which had opposed Montell, agreed with FTC that Shell should sell its polypropylene assets to Union Carbide or another acquirer, but "we're very concerned that many months will pass before the assets are divested. This delay will lead to significant harm to competition."
Union Carbide has asked a federal judge in New York to issue a preliminary injunction blocking Montell's formation until Shell has divested the assets that FTC requires to be sold. The court is expected to hear the issue late next month.
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