UNITED STATES DISTRICT COURT|
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
U.S. Department of Justice
325 7th Street, NW, Suite 500
Washington, D.C. 20530
CAL DIVE INTERNATIONAL, INC.
400 N. Sam Houston Parkway E, Suite 400
Houston, Texas 77060,
STOLT OFFSHORE S.A.
Dolphin House, Windmill Road
Middlesex, TW 16 THT, England,
STOLT OFFSHORE, INC.
10787 Clay Road
Houston, Texas 77041,
S&H DIVING, LLC
10787 Clay Road
Houston, Texas 77041
CIVIL CASE NO.: 1:05CV02041
JUDGE: Emmet G. Sullivan
DECK TYPE: Antitrust
DATE STAMP: October 18, 2005
The United States of America, acting under the direction of the Attorney
General of the United States, brings this civil action to enjoin permanently
the proposed acquisition by Cal Dive International, Inc. ("Cal Dive")
of certain assets of Stolt Offshore, Inc. and S&H Diving, LLC (hereinafter
collectively "Stolt"), and complains and alleges as follows:
- On or about April 11, 2005, Cal Dive entered into an agreement to
purchase certain assets from Stolt, including a number of diving support
vessels, saturation diving systems, and other assets used by Stolt
to compete in the provision of saturation diving services in the United
States Gulf of Mexico.
- Cal Dive and Stolt are two of only three major providers of saturation
diving services to offshore pipeline construction companies and to
owners and operators of pipelines, platforms and other offshore structures
located in the United States Gulf of Mexico. As two of the largest
providers of these services, Cal Dive and Stolt regularly compete
directly for saturation diving projects.
- Cal Dive's acquisition of Stolt's saturation diving assets would
eliminate Stolt as a competitor for the provision of saturation diving
services in the United States Gulf of Mexico. As a result, purchasers
of these services likely will face higher prices and reduced service.
The proposed transaction would substantially reduce competition among
providers of saturation diving services in the United States Gulf
of Mexico, in violation of Section 7 of the Clayton Act, 15 U.S.C.
JURISDICTION AND VENUE
- This complaint is filed by the United States under 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, as amended,
15 U.S.C. § 18.
- The defendants are engaged in interstate commerce and in activities
substantially affecting interstate commerce. Cal Dive and Stolt provide
saturation diving services, pipelay services, and other support services
to customers located in multiple states in and around the United States
Gulf of Mexico. The defendants' sales of saturation diving services
in the United States represent a regular, continuous and substantial
flow of interstate commerce, and have had a substantial effect upon
- This Court has subject matter jurisdiction over this action pursuant
to 28 U.S.C. §§ 1331, 1337 and Sections 15 of the Clayton
Act, 15 U.S.C. § 25.
- The defendants have consented to personal jurisdiction and venue
in this judicial district.
THE DEFENDANTS AND THE TRANSACTION
- Cal Dive International, Inc. is a corporation organized and existing
under the laws of the state of Minnesota. Its corporate headquarters
are located in Houston, Texas, and its primary subsea and marine services
operations are located in Morgan City, Louisiana. Cal Dive provides
a full range of marine contracting services in both shallow and deep
water. Cal Dive employs more than 300 full-time supervisors, divers,
tenders and support staff, making it the largest provider of diving
services in the United States Gulf of Mexico. Cal Dive's total revenues
in 2004 exceeded $540 million, including more than $45 million for
saturation diving services in the United States Gulf of Mexico.
- Stolt Offshore, Inc., with headquarters in Houston, Texas, is a
corporation organized and existing under the laws of the state of
Louisiana. S&H Diving, LLC, is a Louisiana limited liability company,
with offices in Houston, Texas. Stolt Offshore S.A., the ultimate
parent of both Stolt Offshore, Inc. and S&H Diving, LLC, is a
major international marine contractor registered in Luxembourg, with
2004 revenues in excess of $1.2 billion worldwide. In the United States
Gulf of Mexico, Stolt offers construction and installation engineering
services for conventional pipelines, subsea tiebacks, heavy lift salvage,
and subsea inspection, maintenance and repair services. Stolt is one
of the largest providers of saturation diving services in the United
States Gulf of Mexico. In 2004, Stolt had revenues in excess of $30
million from saturation diving services in the United States Gulf
- On or about April 11, 2005, Cal Dive and Stolt entered into an Asset
Purchase Agreement, pursuant to which Cal Dive agreed to purchase,
and Stolt agreed to sell, certain assets for a purchase price of $125
million dollars. Pursuant to the Asset Purchase Agreement, Cal Dive
would acquire, among other assets, all of the saturation diving systems,
vessels and related equipment currently used by Stolt to provide saturation
diving services in the United States Gulf of Mexico.
TRADE AND COMMERCE
- Much of the world's oil and gas reserves are located in offshore
areas, including in the United States Gulf of Mexico. Marine contractors
design, engineer, fabricate, and install offshore drilling and production
rigs, platforms and other structures, which are used to extract crude
oil and natural gas from commercially significant subsea reservoirs.
Marine contractors, using pipelay vessels, also install undersea pipelines
that transport crude oil, natural gas, and other natural resources
from production sites to other sites offshore and onshore.
- Human divers perform a wide variety of services for marine contractors
as well as the owners and operators of offshore pipelines, platforms
and other structures. Divers are used in subsea construction projects,
for inspection, maintenance and repair services, and for recovery
and salvage after structures are damaged by weather or accident. Divers
can perform these services either by surface diving or saturation
- Surface divers can perform diving services only in relatively shallow
depths. Following each dive, surface divers must undertake time-consuming
decompression procedures to allow their bodies to adjust to the lower
pressure that exists at the surface.
- Saturation diving systems permit divers to work for prolonged periods
and at much greater depths, without undergoing decompression after
each dive. During saturation diving operations, divers live for as
long as several weeks in airtight chambers aboard diving vessels.
The pressure in those chambers is maintained at a level that is equivalent
to the pressure at the subsea work site. Saturation diving systems
are typically rated to depths of between 600 and 1,000 feet of sea
water. A saturation diving system typically consists of one or more
saturation chambers, one or more diving bells, and related safety,
monitoring and life support systems and equipment. Saturation diving
systems can be permanently installed on a vessel, or they can be portable,
which allows them to be transported from one vessel to another.
- A vessel must maintain a fixed position while a saturation dive
is in progress. This can be accomplished either by anchor-and-chain
mooring systems or through dynamic positioning. Some saturation diving
projects require dynamically-positioned vessels because of harsh weather,
environmental concerns, water depth, or pipeline congestion on the
B. Relevant Product Market
- The relevant product market affected by this transaction is "saturation
diving services," the provision of human diving services utilizing
saturation diving systems, diving support vessels and other assets.
Providers and customers of saturation diving services analyze the
specific characteristics of a saturation diving project to determine
which resources, such as dynamically positioned vessels or saturation
chambers of a particular size, are required or are most economical
for completing the project. Saturation diving service providers often
bid against one another for projects, and are relatively more constrained
in the prices they can charge for a particular project by competitors
who have comparably more suitable resources available for completing
- For projects that utilize divers at substantial depths or for extended
periods, surface diving is not a safe or cost-effective substitute
for saturation diving services. Other underwater technologies, such
as remotely operated vehicles or atmospheric diving suits, have significant
practical, technical and cost limitations. It is thus unlikely that
a sufficient number of customers would switch away from saturation
diving services to make a small but significant nontransitory increase
in the price of those services unprofitable.
- Saturation diving services is a relevant antitrust product market
and a line of commerce within the meaning of Section 7 of the Clayton
C. Relevant Geographic Market
- Cal Dive and Stolt compete with each other for the provision of
saturation diving services in the United States Gulf of Mexico. In
the event of an increase in the price of saturation diving services
in the United States Gulf of Mexico, it is unlikely that a sufficient
number of other providers of saturation diving services operating
outside of the United States Gulf of Mexico would bid their services
in this market such that a price increase would be unprofitable.
- The United States Gulf of Mexico is a relevant geographic antitrust
market and a section of the country within the meaning of Section
7 of the Clayton Act.
A. Market Concentration
- The relevant market is highly concentrated and would become significantly
more concentrated as a result of the proposed transaction. An appropriate
measure of concentration in the market for saturation diving services
is capacity, calculated on the basis of the number of saturation diving
systems used by each competitor in the relevant geographic market.
Prior to the transaction, Cal Dive accounts for more than 30%, and
Stolt for approximately 20%, of all saturation diving systems competing
in the United States Gulf of Mexico.
- The transaction would increase substantially the concentration in
the market for saturation diving services in the United States Gulf
of Mexico. The number of significant competitors in that market would
be reduced from three to two. As measured by the Herfindahl-Hirschman
Index ("HHI"), which is commonly employed in merger analysis and is
defined and explained in Appendix A to this Complaint, the proposed
transaction would increase the HHI by more than 1100, resulting in
a post-merger HHI of approximately 3000.
B. Loss of Competition
- The proposed transaction is likely to substantially reduce competition
in the market for saturation diving services in the United States
Gulf of Mexico. The transaction would combine the saturation diving
assets of two of the largest providers of saturation diving services
in the United States Gulf of Mexico, giving Cal Dive more than half
of the capacity in the market.
- Customers for saturation diving services in the United States Gulf
of Mexico have benefitted from competition between Cal Dive and Stolt.
Cal Dive and Stolt each possess similar types of saturation diving
systems and vessels that provide the two companies the ability to
effectively bid against each other for a wide variety of saturation
diving jobs, including those that call for either dynamically positioned
vessels or vessels with anchor-and-chain mooring systems. Many customers
consider Cal Dive and Stolt to be the most attractive competitors
in the market for saturation diving services in the United States
Gulf of Mexico because of their size, vessels, experience, and reputation
for safety. The two companies often directly compete against one another
for particular projects, bidding similar combinations of resources.
This direct and close competition has resulted in lower prices and
higher quality in saturation diving services than would otherwise
- If Cal Dive's proposed acquisition of Stolt's saturation diving
assets is consummated, the competition between Cal Dive and Stolt
will be eliminated, and the market for saturation diving services
in the United States Gulf of Mexico will become substantially more
concentrated. This loss of competition increases the likelihood of
unilateral action by Cal Dive to increase prices and diminish the
quality or quantity of services, or of coordinated action by the remaining
players in the market to achieve the same ends.
C. Entry and Expansion
- Entry by a new saturation diving services provider or expansion
by an existing fringe competitor would be difficult, time consuming
and expensive. It would require obtaining saturation diving systems,
suitable vessels and related equipment and the divers and other personnel
necessary to provide saturation diving services. It also would require
establishing the operational experience and reputation for safety
demanded by customers in the market. Redeployment of saturation diving
assets from outside the United States Gulf of Mexico is unlikely to
constrain a price increase in the relevant market. Therefore, new
entry or expansion would not be timely, likely, or sufficient to thwart
the competitive harm of the acquisition.
- The effect of Cal Dive's proposed acquisition of the saturation
diving support assets of Stolt, if it were consummated, may be substantially
to lessen competition in the provision of saturation diving services
in interstate trade and commerce in the United States Gulf of Mexico,
in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.
Unless restrained, the transaction will likely have the following
effects, among others:
- actual and potential competition between Cal Dive and Stolt in
the provision of saturation diving services would be eliminated;
- competition generally in the provision of saturation diving services
would be eliminated or substantially lessened;
- prices of saturation diving services would increase; and
- quality and service levels in the provision of saturation diving
services would decrease.
REQUEST FOR RELIEF
The United States requests that:
- the proposed transaction be adjudged to violate Section 7 of the
- the defendants be permanently enjoined from carrying out the Asset
Purchase Agreement dated April 11, 2005, or from entering into or carrying
out any agreement, understanding, or plan, the effect of which would
be to allow Cal Dive to merge with or acquire any of the saturation
diving equipment, saturation diving vessels, or other saturation diving
assets of Stolt;
- the United States be awarded costs of this action;
- the United States have such other relief as the Court may deem
just and proper.
Dated: October 18, 2005.
FOR PLAINTIFF UNITED STATES
Thomas O. Barnett
Acting Assistant Attorney General
J. Bruce McDonald
Deputy Assistant Attorney General
Dorothy B. Fountain
Deputy Director of Operations
Donna N. Kooperstein
Chief, Transportation, Energy, and
William H. Stallings
Assistant Chief, Transportation, Energy, and
Jennifer L. Cihon (OH Bar #0068404)
Angela L. Hughes (DC Bar #303420)
John M. Snyder (DC Bar #456921)
Bethany K. Hipp (GA Bar #141678)
U.S Department of Justice
325 7th St., N.W., Suite 500
Washington, D.C. 20530
DEFINITION OF "HHI"
The term "HHI" means the Herfindahl-Hirschman Index, a commonly accepted
measure of market concentration. The HHI is calculated by squaring the
market share of each firm competing in the 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 (302
+ 302 + 202 + 202 = 2,600). The HHI
takes into account the relative size and 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
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.
Markets in which the HHI is between 1000 and 1800 are considered to
be moderately concentrated, and markets in which the HHI is in excess
of 1800 points are considered to be highly concentrated. Transactions
that increase the HHI by more than 100 points in highly concentrated
markets presumptively raise significant antitrust concerns under the
Department of Justice and Federal Trade Commission 1992 Horizontal Merger
CERTIFICATE OF SERVICE
I hereby certify that on October 18, 2005, I caused a copy of the
foregoing Complaint, proposed Final Judgment, Hold Separate Stipulation
and Order and Plaintiff United States' Explanation of Consent Decree
Procedures to be served on counsel for defendants in this matter in
the manner set forth below:
By electronic mail and hand delivery:
Counsel for Defendant Cal Dive International, Inc.
Daniel L. Wellington (D.C. Bar #273839)
Neely B. Agin (D.C. Bar #456005)
Fulbright & Jaworski LLP
801 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2623
Tel: (202) 662-4574
Fax: (202) 662-4643
Counsel for Defendants Stolt Offshore S.A., Stolt Offshore, Inc.
and S&H Diving LLC
Paul C. Cuomo (D.C. Bar #457793)
Sean F. Boland (D.C. Bar #249318)
1299 Pennsylvania Avenue, NW
Washington, D.C. 20004-2402
Tel: (202) 783-0800
Fax: (202) 383-6610
Jennifer L. Cihon (OH Bar #0068404)
Department of Justice
325 Seventh Street, N.W.
Washington, DC 20530
(202) 616-2441 (Fax)