The Tronox matter was a Horizontal Merger challenge brought by the Federal Trade Commission (“FTC”) as an Administrative (Part 3) Adjudication under Section 7 of the Clayton Act and Section 5 of the FTC Act. The Commission challenged Tronox’s proposed acquisition of Cristal’s titanium dioxide (“TiO2”) business for approximately $1.67 billion plus a minority equity stake, alleging that the transaction would substantially lessen competition in the North American market for chloride-process TiO2, a white pigment used in paints, coatings, plastics, and paper. The administrative proceeding ran in parallel with the FTC’s federal district court action, which separately enjoined the transaction pending completion of the administrative litigation.
The FTC alleged that combining two leading producers of chloride-process TiO2 would create a highly concentrated North American market and increase the likelihood of coordinated conduct among the remaining suppliers, thereby establishing a prima facie case that the acquisition would substantially lessen competition.
The respondents asserted that the transaction would generate more than $100 million in synergies, derived largely from operating Cristal’s plants in conjunction with Tronox’s feedstock integration, including improvements at Cristal’s pigment plant in Yanbu and the activation of the Jazan slagger, both in Saudi Arabia. On behalf of the FTC, Professor Zmijewski, supported by Erik Himan, evaluated the claimed efficiencies under the Horizontal Merger Guidelines framework. Professor Zmijewski examined whether the asserted efficiencies were cognizable: whether the efficiencies were adequately verifiable, merger-specific, and, benefitted customers in the relevant geographic market.
Following a multi-week administrative trial, Chief Administrative Law Judge D. Michael Chappell issued an Initial Decision upholding the complaint. He found a strong prima facie case that the acquisition would substantially lessen competition in the North American chloride-process TiO2 market through increased concentration and the likelihood of coordinated effects. The Court further held that the respondents had failed “to demonstrate cognizable synergies or efficiencies” that might justify the likely anticompetitive effects.
A Commission consent order ultimately resolved the matter, requiring divestiture of Cristal’s North American TiO2 assets, including the Ashtabula complex, to an independent buyer and preserving competition in the North American chloride-process TiO2 market.