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UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA



UNITED STATES OF AMERICA    

                  Plaintiff,

                  v.

CAMERON INTERNATIONAL
CORPORATION

and

NATCO GROUP INC.

                  Defendants.

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CASE NO.: 09-cv-2165

Judge Rosemary M. Collyer

Date: April 30, 2010




MOTION AND MEMORANDUM OF
HE UNITED STATES IN SUPPORT OF ENTRY OF FINAL JUDGMENT

Pursuant to Section 2(b) of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16(b)-(h) ("APPA"), plaintiff, the United States of America ("United States") moves for entry of the proposed Final Judgment filed in this civil antitrust proceeding. The proposed Final Judgment may be entered at this time without further hearing if the Court determines that entry is in the public interest. The Competitive Impact Statement ("CIS"), filed in this matter on January 20, 2010, explains why entry of the proposed Final Judgment would be in the public interest. The United States is also filing a Certificate of Compliance, attached hereto as Exhibit A, which sets forth the steps taken by the parties to comply with all applicable provisions of the APPA and certifying that the statutory waiting period has expired.

I. Background

On November 17, 2009, the United States filed a civil antitrust Complaint alleging that the proposed acquisition of NATCO Group Inc. ("NATCO") by Cameron International Corporation ("Cameron") likely would substantially lessen competition for customized electrostatic desalters used in the oil refining industry (hereinafter, "refinery desalters") in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. That loss of competition likely would result in higher prices, less favorable terms of sale, and less innovation in the U.S. refinery desalter market. The United States's Complaint also alleged that Cameron's acquisition in 2005 of certain refinery desalter assets from Chicago Bridge & Iron N.V. ("CB&I") substantially lessened competition for refinery desalters in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. In that acquisition, Cameron acquired the desalting, dehydration, distallate treating, and gas oil separation equipment business of Howe Baker Engineers Ltd., which was a wholly owned subsidiary of CB&I (hereinafter, the "Howe Baker assets"). Cameron's acquisition of the Howe Baker assets reduced from two to one the number of sellers of refinery desalters in the U.S. market at that time. That loss of competition gave Cameron the power to raise prices, offer less favorable terms of sale, and invest less in technology in the U.S. refinery desalter market. Accordingly, the Complaint requested a judgment that Cameron's acquisition of NATCO would violate Section 7 of the Clayton Act and that Cameron's acquisition of the Howe Baker assets violated Section 7 of the Clayton Act. The United States, therefore, sought to permanently enjoin Cameron's acquisition of NATCO and to require Cameron to divest the Howe Baker assets.

At the same time the Complaint was filed, the United States filed a Hold Separate Stipulation and Order ("Hold Separate Order") and a proposed Final Judgment, which are designed to eliminate the anticompetitive effects of the acquisition, and a CIS. The Court signed and entered the Hold Separate Order on November 17, 2009. Under the terms of the proposed Final Judgment, Cameron is required to divest the Howe Baker desalter and dehydrator assets that it purchased from CB&I, as well as any additions to or improvements of those assets. In addition, Cameron is required to divest a fully paid-up, non-exclusive, worldwide, irrevocable license to NATCO's refinery desalter technology that utilizes dual frequency transformers and AC/DC power supplies (hereinafter, "dual frequency technology"). Finally, Cameron is required to divest an option to purchase either Cameron's or NATCO's pilot plant, which is equipment used to evaluate and simulate performance of desalter technologies on oil samples. The CIS explains the basis for the Complaint and the reasons why entry of the proposed Final Judgment would be in the public interest.

The Hold Separate Order provides that the proposed Final Judgment may be entered by the Court after the completion of the procedures required by 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 Final Judgment and to punish violations thereof.

II. Compliance with the APPA

The APPA requires a sixty-day period for the submission of public comments on a proposed Final Judgment. See 15 U.S.C. § 16(b). In compliance with the APPA, the United States filed the CIS on January 20, 2010; published the proposed Final Judgment and CIS in the Federal Register on February 1, 2010 (see United States v. Cameron International Corporation, et al., 75 Fed. Reg. 5132); and published summaries of the terms of the proposed Final Judgment and CIS, together with directions for the submission of written comments relating to the proposed Final Judgment, in The Washington Post for seven days beginning on February 21, 2010 and ending on February 27, 2010. The sixty-day public comment period terminated on April 28, 2010, and the United States received no public comments. Simultaneously with this Motion and Memorandum, the United States is filing a Certificate of Compliance that states all the requirements of the APPA have been satisfied. It is now appropriate for the Court to make the public interest determination required by 15 U.S.C. § 16(e) and to enter the proposed Final Judgment.

III. Standard of Judicial Review

The Clayton Act, as amended by 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 in accordance with the statute, the court is required to consider:

  1. 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
  2. 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.

15 U.S.C. § 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. InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ¶76,736, No. 08-1965 (JR), 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.").

As the United States Court of Appeals for the District of Columbia has held, under the APPA a court considers, 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) (citing 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). (1) In determining whether a proposed settlement is in the public interest, the 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 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 United States's prediction as to the effect of proposed remedies, its perception of the market structure, and its views of the nature of the case).

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 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). Therefore, 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 InBev, 2009 U.S. Dist. LEXIS 84787, at *20 ("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 to the Tunney Act, (2) Congress made clear its intent to preserve the practical benefits of utilizing consent decrees in antitrust enforcement, stating: "[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). The language wrote into the statute what Congress intended when it enacted the Tunney Act in 1974, as Senator Tunney explained: "[t]he 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 Senator 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)

The United States alleged in its Complaint that the acquisition of NATCO by Cameron would substantially lessen competition in the development, production, and sale of refinery desalters in the United States. In addition, the United States alleged that Cameron's acquisition of the Howe Baker assets substantially lessened competition in the development, production, and sale of refinery desalters in the United States. The remedy in the proposed Final Judgment resolves the alleged competitive effects by requiring Cameron to divest the Howe Baker desalter and dehydrator assets that it purchased from CB&I, as well as any additions to or improvements of those assets; a fully paid-up, non-exclusive, worldwide, irrevocable license to NATCO's refinery desalter technology that utilizes dual frequency technology; and an option to purchase either Cameron's or NATCO's pilot plant. Cameron has divested these assets to a viable purchaser approved by the United States. Moreover, the public, including affected competitors and customers, has had the opportunity to comment on the proposed Final Judgment as required by law, and no comments have been submitted. There has been no showing that the proposed settlement constitutes an abuse of the United States's discretion or that it is not within the zone of settlements consistent with the public interest.

IV. Conclusion

For the reasons set forth in this Motion and Memorandum and in the CIS, the Court should find that the proposed Final Judgment is in the public interest and should enter the Final Judgment without further hearings. The United States respectfully requests that the Final Judgment, attached hereto as Exhibit B, be entered as soon as possible.



Dated: April 30, 2010 Respectfully submitted,


    UNITED STATES OF AMERICA:


_______________/s/________________
Christine A. Hill
D.C. Bar #461048
United States Department of Justice
Antitrust Division, Litigation II Section
450 5th Street, N.W., Suite 8700
Washington, D.C. 20530
(202) 305-2738


CERTIFICATE OF SERVICE

I, Christine A. Hill, hereby certify that on April 30, 2010, I caused a copy of the foregoing Motion and Memorandum of the United States in Support of Entry of Final Judgment to be served upon defendants Cameron International Corporation and NATCO Group Inc. by mailing the documents electronically to the duly authorized legal representatives of defendants as follows:

Counsel for Defendant Cameron International Corporation:


Sean F.X. Boland, Esquire
Paul Cuomo, Esquire
Howrey LLP
1299 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
bolands@howrey.com
cuomop@howrey.com

Counsel for Defendant NATCO Group Inc.:


Bradley C. Weber, Esquire
Locke Lord Bissell & Liddell LLP
2200 Ross Avenue
Suite 2200
Dallas, Texas 75201
bweber@lockelord.com

    _______________/s/________________
Christine A. Hill, Esquire
D.C. Bar #461048
United States Department of Justice
Antitrust Division, Litigation II Section
450 Fifth Street, N.W., Suite 8700
Washington, D.C. 20530
(202) 305-2738


FOOTNOTES

1. 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'").

2. The 2004 amendments substituted the word "shall" for "may" when directing the courts to consider the enumerated factors and amended the list of factors to focus on competitive considerations and 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).

3. See 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., 1977-1 Trade Cas. (CCH) ¶ 61,508, at 71,980 (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, 93d Cong., 1st Sess., 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.").