Office of the Director March 23, 2001 Tom D. Smith, Esq. Re: RHI/Global Industrial Technologies, Inc. File No. 991-0281 Dear Mr. Smith: The staff of the Â鶹´«Ã½ Trade Commission ("Commission") has investigated whether an acquisition of Global Industrial Technologies, Inc. ("Global") by RHI AG ("RHI") would violate Section 5 of the Â鶹´«Ã½ Trade Commission Act, as amended, 15 U.S.C. § 45, or Section 7 of the Clayton Act, 15 U.S.C. § 18. RHI and Commission staff executed an Agreement Containing Consent Order on December 16, 1999 ("Consent Agreement"), in which RHI consented to the issuance of a Decision and Order that requires a divestiture of assets and other relief to restore competition in markets affected by RHI's acquisition of Global. The Commission accepted the Consent Agreement and proposed Decision and Order for public comment on December 30, 1999. The Commission recently has issued a Decision and Order that includes modifications agreed to by RHI. The Decision and Order will become final upon service on RHI. During the period after the proposed Decision and Order was accepted for public comment, the Commission's staff has monitored closely RHI's compliance with the proposed Decision and Order and with the agreements pursuant to which it was to divest assets to Resco Products, Inc. ("Resco"). On the basis of the investigation and the Commission's determination to issue a final Decision and Order, and pursuant to authority delegated to the Bureau Director by the Commission, 49 Fed. Reg. 6171 (1984), the investigation has been closed. The proposed Decision and Order, as it was accepted for public comment, provided that RHI would divest certain assets to Resco pursuant to divestiture contracts between them that were incorporated into the proposed Decision and Order. RHI agreed in the Consent Agreement to comply with the terms of the proposed Decision and Order from the date it executed the agreement. As provided by the proposed Decision and Order, the Commission also appointed an Interim Trustee to monitor RHI's compliance with the proposed Decision and Order and the divestiture contracts. RHI divested assets to Resco on March 3, 2000. Soon after, however, disputes arose between RHI, Resco, and the Commission's staff about RHI's compliance with the terms of the proposed Decision and Order and the divestiture contracts. Information received from the Interim Trustee and other sources indicated that RHI had failed to comply completely with some of its divestiture obligations under the proposed Decision and Order and the included contracts. RHI and Resco were encouraged to settle their disputes. Following several months of negotiations, and with the extensive participation of the Interim Trustee in settlement discussions, RHI and Resco reached a settlement of their disputes and executed a settlement agreement on October 27, 2000 ("Settlement Agreement"). Under the Settlement Agreement, RHI will perform certain additional obligations to Resco, and will pay $5 million to Resco. This relief should restore Resco's competitive position to what it would have been if RHI had fully performed its obligations under the proposed Decision and Order and the divestiture contracts as initially entered.(1) RHI has also consented to modify the proposed Decision and Order, among other things to incorporate the Settlement Agreement into the final order. The Commission issued the final Decision and Order on March 21, 2001. Any violation of the Settlement Agreement, or the other parts of the Divestiture Agreement as defined, will thus constitute a failure to comply with the order. On the assumption that the information received by Commission staff is accurate and complete, the investigation has been closed. Several factors were important to this determination. Notwithstanding the adverse impact of RHI's conduct, Resco has been able to use the divested assets to compete successfully in the relevant markets. RHI has cooperated fully with the Interim Trustee and the Commission's staff, and appears to have negotiated in good faith with Resco to resolve the outstanding disputes. Although the Bureau is concerned about the time required to resolve this matter, RHI has settled Resco's claims without litigation and has re-negotiated the terms of the Commission's order as needed to resolve the Bureau's concerns. The determination to close this investigation is not to be construed as a determination that a violation may not have occurred, just as the pendency of an investigation should not be construed as a determination that a violation has occurred. The Commission reserves the right to take such further action as the public interest may require. Sincerely, Molly S. Boast 1. The Bureau notes that neither the Bureau nor the Commission has determined whether RHI in fact failed to comply with all its obligations under the proposed Decision and Order and the divestiture contracts. The Bureau has, however, assumed the accuracy of Resco's allegations of breach by RHI in evaluating the sufficiency of the Settlement Agreement to address any harm from RHI's alleged failures. |