FTC: Yes, We Actually Do Know Best
In March I reported on Dow Chemical Company’s request to the Federal Trade Commission to modify the terms of an order forcing the company to sell one of its manufacturing plants to a Commission-selected buyer:
Last year the FTC forced Dow to sell an acrylic latex plant in Torrance, California. The FTC staff determined there was insufficient competition in this particular market. Hilarity ensued.
The FTC staff decided Dow should sell the plant to a company called Arkema. The FTC order required “divestiture” of the entire California plant and the surrounding land. The only problem was Arkema didn’t want the entire plot of land, which included “several industrial sites leased to and occupied by third parties,” according to Dow. And Dow cannot just sell Arkema that part of the land where the plant is located, because, Dow says, “Under the California Subdivision Map Act, it is illegal to sell (or transfer fee title to) the portion of the overall site that houses the Torrance latex plant without first creating as a separate legal parcel the real estate underlying the Torrance latex plant.”
So Dow is now trying to serve two masters — the FTC and California — with conflicting demands. The FTC wants the land sold to Arkema. California won’t allow a subdivision of the land without a lengthy regulatory process. In the interim, Dow is leasing the land to Arkema, which is technically in violation of the FTC order, while trying to create the necessary subdivision to eventually allow Arkema to acquire just the plant itself. And Dow has also petitioned the FTC to modify its earlier order to make this “legal.”
Yesterday the FTC denied all of Dow’s requests for relief:
After reviewing the application, the FTC found that Dow failed to make the required showing that the final order should be reopened, that modifying the order would be in the public interest, or that the FTC should grant the time extension. Further, competitive risks remain if Dow retains control of the Torrance Facility, the FTC found, and there is a strong public interest in Dow’s full compliance with the terms of the final order.
Dow reportedly will attempt to auction off the land next month. If that doesn’t happen, an FTC trustee will simply seize the land and sell it on the Commission’s behalf. (Yes, this is basically eminent domain, but nobody in the antitrust business dares call it that.)