United States v. American Cyanamid Co.
| Decision Date | 09 November 1982 |
| Docket Number | No. 60 Civ. 3857-CLB.,60 Civ. 3857-CLB. |
| Citation | 556 F. Supp. 357 |
| Parties | UNITED STATES of America, Plaintiff, v. AMERICAN CYANAMID COMPANY, Defendant. |
| Court | U.S. District Court — Southern District of New York |
U.S. Dept. of Justice, Antitrust Div. for U.S. Government.
Donovan, Leisure, Newton & Irvine, New York City, for American Cyanamid.
Dewey, Ballantine, Bushby, Palmer & Wood, New York City, for intervenor Dart Industries, Inc.
Howrey & Simon, Washington, D.C., for intervenor Melamine Chemicals Inc. Thompson & Knight, Dallas, Tex., for amicus curiae Plastics Mfg. Co.
Before the Court at this time are two applications for intervention pursuant to Rule 24, F.R.Civ.P. in which Melamine Chemicals Inc. ("MCI"), a producer of melamine, and Dart Industries Inc. ("Dart"), a manufacturer of plastic laminates which consumes melamine, seek to intervene in a motion by defendant American Cyanamid Company ("Cyanamid") to terminate the 1964 Consent Decree in this antitrust action.
On October 27, 1982, during oral argument on the motions, the Court by oral order, granted the motion of Plastics Manufacturing Co., Inc. ("PMI") to appear as an amicus curiae in this action.
Although a full description of this litigation's extended history is inappropriate for purposes of this application, a brief discussion is necessary.
The Justice Department filed this civil action on October 5, 1960 alleging that Cyanamid violated provisions of both the Sherman and Clayton Acts by monopolizing the markets for melamine and melamine-containing products. In 1964, the parties entered into the Consent Decree settling the case, which was approved by the late Hon. Richard H. Levet, a Judge of this Court. United States v. American Cyanamid Co., 1964 Trade Cas. (CCH) ¶ 71,166 (S.D. N.Y.1964).
On August 9, 1982, after a fifteen month investigation, the Justice Department and Cyanamid filed a proposed stipulation with this Court, seeking an order terminating the 1964 Consent Decree.
Pursuant to the disclosure procedures of 15 U.S.C. § 16, Cyanamid duly published notice of the proposed termination in two consecutive editions of the Wall Street Journal, the Journal of Commerce and the Chemical Marketing Reporter. Interested parties were then given sixty days to respond to the Department of Justice concerning the proposed termination. As a result, MCI, Dart and PMI submitted objections to the proposed termination. Each now seeks to participate in the litigation on the district court level.
The Consent Decree has been amended on three occasions since 1964. Arguably, since it was issued, many of its provisions have become obsolete. Some have expired. However, Provision XI, the portion of the Consent Decree in which movants are interested, has remained in effect unchanged.
Provision XI requires Cyanamid:
"... to purchase annually from other producers of melamine (with preference to United States producers) an amount of melamine equivalent to ... Cyanamid's melamine requirements for the preceding year which it used in the production of laminates in the United States provided that at any time after ten (10) years from such date, Cyanamid may petition to this Court to be relieved from this provision, such relief to be granted upon a showing by Cyanamid to the satisfaction of this Court that the effect of such relief will not be substantially to lessen competition or tend to create a monopoly in any line of commerce in any section of the country."
We need not consider at this time the interesting history of this provision, nor its motivation when presented to and adopted by the Court. We note however that Cyanamid had acquired Formica, Inc. ("Formica"), then and perhaps now the world's leading melamine laminate manufacturer, and a substantial purchaser of melamine.
In reliance on the Consent Decree's terms, MCI along with other venture capitalists, entered the melamine crystal production industry. With time, only MCI proved able to survive in the industry. To date it is the only domestic producer of melamine crystals other than Cyanamid. As a result, the practical effect of Provision XI is to provide MCI with substantial forced annual sales of melamine crystals to Cyanamid at prices limited only by the availability of foreign product.
In support of its application to intervene, MCI contends that the annual sales it receives pursuant to Provision XI are vital to its continued existence, and that termination of the Decree will end these sales and effectively force it out of business. This "will substantially lessen competition and ... tend to create a monopoly in Cyanamid." (MCI's Memorandum in Opposition to Cyanamid's Motion to Terminate, p. 3).
MCI alleges that the Government has either "misconceived or ignored the true issues" in evaluating the propriety of the proposed termination of the Decree. (MCI's Memo in Opp., p. 14). Specifically, MCI contends that the Government has failed or refused to consider three relevant facts: (1) Cyanamid's ownership of Formica; (2) the effect of the proposed termination on the other customers and markets for melamine resins, laminates and other products that use melamine; and (3) Cyanamid's status as both a producer and consumer of melamine. (MCI's Memo in Opp., p. 15).
Proposed intervenor Dart, through its Ralph Wilson Plastics Division, produces plastic laminates in principal competition with Cyanamid's Formica division. Melamine resin, a basic raw material used in the production of plastic laminates, is produced from melamine crystals. As a result, producers of plastic laminates, such as Dart and PMI, are ultimately affected by any supply or demand change in the melamine crystal market.
Since Cyanamid and MCI are now the only domestic suppliers of melamine crystals, Dart contends that termination of the Consent Decree will have an anticompetitive impact on the plastic laminate industry because it will enable or encourage Cyanamid to withdraw completely from the melamine crystal market, in order to use its melamine production capacity internally to meet the production demands of Formica. Whether or not this is a valid contention does not resolve the issue of intervention.
Dart and PMI assert that foreign melamine producers are not reliable sources for melamine crystals and have little competitive influence on the melamine or melamine related markets. They allege that as a result of MCI's vigorous anti-dumping campaign against foreign melamine producers, foreign suppliers are unwilling to risk the expense and exposure of anti-dumping proceedings in order to offer melamine crystals at competitive prices to domestic purchasers. (PMI's Memo in Opp., p. 7). Here again whether or not this is a valid contention does not resolve the issue of intervention.
As a result of Cyanamid's supposed intention to withdraw from the melamine crystal market and the absence of reliable and adequate foreign suppliers, Dart alleges that MCI will inherit a monopolistic position in the melamine crystal market. Melamine resin producers, on whom Dart and PMI rely, will be forced, it is said, "to pay monopolistic, anti-competitive prices for raw and intermediate materials." (Affidavit of Ralph Wilson, sworn to October 20, 1982). When this cost increase is passed on to plastic laminate producers, they will "be unable to compete in the manufacture and marketing of plastic laminates and related materials with Cyanamid, which by virtue of ... its ownership of Formica will be able to price squeeze competitors out of that line of commerce." (Affidavit of Ralph Wilson, sworn to Oct. 20, 1982, p. 3). Here again whether or not this is a valid contention does not resolve the issue of intervention.
In opposition to applicants' motions to intervene, the Justice Department asserts that it has fully examined and evaluated the applicants' contentions and has nonetheless concluded that termination of the Consent Decree is appropriate because it is no longer necessary to insure a competitive melamine market.
In support of this conclusion, Justice Department cites the fundamental changes in the melamine industry and the emergence of foreign producers as realistic, competitive sources of melamine crystals.
The immediate question presented here is solely whether MCI and Dart should be permitted to intervene in this action pursuant to Rule 24, F.R.Civ.P. as of right, as they assert, or permissively, in the Court's discretion.
The Court notes at the outset that counsel for the parties have conceded on the record that Cyanamid's motion to terminate may be resolved by the Court essentially on the present record before it, without...
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U.S. v. American Cyanamid Co.
...1 Cyanamid cross-appeals from an order entered November 11, 1982, granting MCI and Dart Chemicals, Inc. leave to intervene permissively, 556 F.Supp. 357. At issue herein is the termination of Part XI of the decree, which compelled Cyanamid to purchase a portion of its requirements for melam......