UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Department of Justice
Antitrust Division
1401 H Street, NW
Suite 3000
Washington, D.C. 20530,
Plaintiff,
v.
VULCAN MATERIALS COMPANY
1200 Urban Center Drive
Birmingham, AL 35242,
and
FLORIDA ROCK INDUSTRIES, INC.
155 East 21st Street
Jacksonville, FL 32206,
Defendants.
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Case: 1:07-cv-02044
Assigned To : Sullivan, Emmet G.
Assign. Date : 11/13/2007
DECK TYPE: Antitrust
DATE STAMP:
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COMPLAINT
Plaintiff United States of America ("United States"), acting under
the direction of the Attorney General of the United States, brings this
civil antitrust action to obtain equitable and other relief against
defendants Vulcan Materials Company ("Vulcan") and Florida Rock Industries,
Inc. ("Florida Rock") to prevent Vulcan's proposed acquisition of Florida
Rock. Plaintiff complains and alleges as follows:
I. NATURE OF THE ACTION
- On February 19, 2007, Vulcan and Florida Rock signed a definitive
agreement for Vulcan to acquire Florida Rock in a cash-and-stock transaction
valued at approximately $4.6 billion. The total blended cash-and-stock
consideration for this transaction is approximately $68 per share.
- Vulcan and Florida Rock both produce and distribute in the United
States building materials, including, among other things, construction
aggregates (which includes coarse aggregate) and ready mix concrete.
Vulcan is the largest supplier of construction aggregates in the United
States. Florida Rock is also a leading supplier of construction aggregates
in the United States. Combined, Vulcan and Florida Rock will have
construction aggregates reserves totaling approximately 13.9 billion
tons.
- The United States brings this action to prevent the proposed acquisition
of Florida Rock by Vulcan because it would substantially lessen competition
in the production, distribution, and sale of coarse aggregate in and
around Atlanta, Georgia; Columbus, Georgia; Chattanooga, Tennessee;
and South Hampton Roads, Virginia, in violation of Section 7 of the
Clayton Act, 15 U.S.C. § 18.
II. PARTIES TO THE PROPOSED TRANSACTION
- Defendant Vulcan is a New Jersey corporation with its principal
place of business in Birmingham, Alabama. Vulcan produces, distributes,
and sells, among other products, construction aggregates, ready mix
concrete, hot mix asphalt, and asphalt coating to customers in 21
states, the District of Columbia, and Mexico.
- Vulcan is the largest producer of construction aggregates in the
United States. It has over 300 facilities for the production and distribution
of construction aggregates and other products. In 2006, Vulcan shipped
approximately 255 million tons of construction aggregates, the majority
of which were coarse aggregate. In 2006, Vulcan reported total sales
of approximately $3 billion.
- Defendant Florida Rock is a Florida corporation with its principal
place of business in Jacksonville, Florida. Florida Rock produces,
distributes, and sells in the Southeastern and mid-Atlantic states,
among other products, construction aggregates, ready mix concrete,
prestressed concrete, and cement.
- Florida Rock is one of the largest United States suppliers of construction
aggregates. In 2006, Florida Rock shipped approximately 45 million
tons of construction aggregates, the majority of which was coarse
aggregate. In 2006, Florida Rock reported total sales of approximately
$1.4 billion.
III. JURISDICTION AND VENUE
- Plaintiff United States brings this action under Section 15 of
the Clayton Act, as amended, 15 U.S.C. § 25, to prevent and restrain
defendants from violating Section 7 of the Clayton Act, 15 U.S.C.
§ 18.
- Defendants produce, distribute, and sell coarse aggregate and other
products in the flow of interstate commerce. Defendants' activities
in producing, distributing, and selling these products substantially
affect interstate commerce. This Court has subject matter jurisdiction
over this action pursuant to Section 12 of the Clayton Act, 15 U.S.C.
§ 22, and 28 U.S.C. §§ 1331, 1337(a), and 1345.
- Defendants have consented to venue and personal jurisdiction in
this judicial district.
IV. TRADE AND COMMERCE
- The Relevant Product Market
- Construction aggregates consist primarily of crushed stone, gravel,
and sand produced from natural deposits of various materials and removed
from quarries, mines, or pits.
- Coarse aggregate is a type of construction aggregates.Coarse aggregate
is crushed stone produced at quarries or mines and used for, among
other things, road base and the production of ready mix concrete and
asphalt. Coarse aggregate typically is mixed with other materials
to produce ready mix concrete and asphalt. Different sizes of coarse
aggregate are needed to meet different project specifications.
- There are no reliable substitutes for coarse aggregate because it
differs from other products in its physical composition, functional
characteristics, customary uses, consistent availability, and pricing.
To the extent that any substitutes exist, customers already use these
to the full extent possible in light of the limits on their availability
and the amounts that can be used in a given product, and could not
use more of them in place of coarse aggregate in response to an increase
in the price of coarse aggregate.
- A small but significant post-acquisition increase in the price of
coarse aggregate would not cause the purchasers of coarse aggregate
to substitute another product or otherwise reduce their usage of coarse
aggregate in sufficient quantities so as to make such a price increase
unprofitable.
- Accordingly, the production, distribution, and sale of coarse aggregate
is a line of commerce and a relevant product market within the meaning
of Section 7 of the Clayton Act.
- The Relevant Geographic Markets
- Coarse aggregate is a bulky, heavy, and relatively low-value product.
The cost of transporting coarse aggregate is high compared to the
value of the product.
- Transportation costs limit the distance coarse aggregate can be
economically transported from a quarry or mine to a job site or a
ready mix concrete or asphalt plant. The geographic area within which
a coarse aggregate supplier can compete most vigorously thus is limited
by the cost of hauling the coarse aggregate. As a result, the competitiveness
of a coarse aggregate supplier in a given area is limited by its distance
from customer plants or project sites relative to other suppliers.
- Florida Rock owns and operates a coarse aggregate quarry located
in Cedarton, Georgia, known as the Six Mile quarry. This quarry serves
a geographic area that includes, among other areas, all or part of
Floyd, Polk, Haralson, and Bartow Counties in Georgia (hereafter referred
to as "Northwest Atlanta"). Customers with plants or jobs within Northwest
Atlanta may, depending on the location of their plant or job sites,
also economically procure coarse aggregate from Vulcan's Adairsville,
Bartow, and Rockmart quarries and from another competitor's quarry
located in Cartersville, Georgia. Other quarries cannot on a regular
basis compete successfully for customers with plants or jobs in Northwest
Atlanta because they are too far away and the hauling costs are too
great.
- A small but significant post-acquisition increase in the price of
coarse aggregate to customers with plants or jobs in Northwest Atlanta
would not cause those customers to procure coarse aggregate from quarries
farther away than those identified in paragraph 18 in sufficient quantities
so as to make such a price increase unprofitable.
- Florida Rock owns and operates a coarse aggregate quarry located
in Yorkville, Georgia, known as the Paulding quarry. This quarry serves
a geographic area that includes, among other areas, all or part of
Paulding, Douglas, Carroll, Haralson, Polk, and Cobb Counties in Georgia
(hereafter referred to as "West Atlanta"). Customers with plants or
jobs within West Atlanta may, depending on the location of their plant
or job sites, also economically procure coarse aggregate from Vulcan's
Villa Rica, Kennesaw, and Lithia Springs quarries and from the quarries
of other competitors located in Dallas, Georgia, and Douglasville,
Georgia. Other quarries cannot on a regular basis compete successfully
for customers with plants or jobs in West Atlanta because they are
too far away and the hauling costs are too great.
- A small but significant post-acquisition increase in the price of
coarse aggregate to customers with plants or jobs in West Atlanta
would not cause those customers to procure coarse aggregate from quarries
farther away than those identified in paragraph 20 in sufficient quantities
so as to make such a price increase unprofitable.
- Florida Rock owns and operates a coarse aggregate quarry located
in Tyrone, Georgia, known as the Tyrone quarry. This quarry serves
a geographic area that includes, among other areas, all or part of
Fulton, Coweta, Fayette, and Clayton Counties in Georgia (hereafter
referred to as "Southwest Atlanta"). Customers with plants or jobs
within Southwest Atlanta may, depending on the location of their plant
or job sites, also economically procure coarse aggregate from Vulcan's
Madras quarry and from another competitor's quarry located in Tyrone,
Georgia. Other quarries cannot on a regular basis compete successfully
for customers with plants or jobs in Southwest Atlanta because they
are too far away and the hauling costs are too great.
- A small but significant post-acquisition increase in the price of
coarse aggregate to customers with plants or jobs in Southwest Atlanta
would not cause those customers to procure coarse aggregate from quarries
farther away than those identified in paragraph 22 in sufficient quantities
so as to make such a price increase unprofitable.
- Florida Rock owns and operates a coarse aggregate quarry located
in Riverdale, Georgia, known as the Forest Park quarry. This quarry
serves a geographic area that includes, among other areas, all or
part of Fulton, Clayton, Henry, DeKalb, and Fayette Counties in Georgia
(hereafter referred to as "South Atlanta"). Customers with plants
or jobs within South Atlanta may, depending on the location of their
plant or job sites, also economically procure coarse aggregate from
Vulcan's Red Oak quarry and from another competitor's quarry located
in College Park, Georgia. Other quarries cannot on a regular basis
compete successfully for customers with plants or jobs in South Atlanta
because they are too far away and the hauling costs are too great.
- A small but significant post-acquisition increase in the price of
coarse aggregate to customers with plants or jobs in South Atlanta
would not cause those customers to procure coarse aggregate from quarries
farther away than those identified in paragraph 24 in sufficient quantities
so as to make such a price increase unprofitable.
- Florida Rock owns and operates a coarse aggregate quarry located
in Zotella, Georgia, known as the Griffin quarry. This quarry serves
a geographic area that includes, among other areas, all or part of
Spalding and Henry Counties in Georgia (hereafter referred to as "Southeast
Atlanta"). Customers with plants or jobs within Southeast Atlanta
may, depending on the location of their plant or job sites, also economically
procure coarse aggregate from Vulcan's Stockbridge quarry. In addition,
Vulcan is in the process of opening a new quarry in Butts County,
Georgia, expected to be operational in 2008, from which it plans to
serve, among other areas, customers in all or part of Southeast Atlanta.
Other quarries cannot on a regular basis compete successfully for
customers with plants or jobs in Southeast Atlanta because they are
too far away and the hauling costs are too great.
- A small but significant post-acquisition increase in the price of
coarse aggregate to customers with plants or jobs in Southeast Atlanta
would not cause those customers to procure coarse aggregate from quarries
farther away than those identified in paragraph 26 in sufficient quantities
so as to make such a price increase unprofitable.
- Florida Rock owns a majority interest in a company that owns and
operates a coarse aggregate quarry located in Columbus, Georgia, known
as the Columbus quarry. This quarry serves a geographic area that
includes, among other areas, all or part of Muscogee and Harris Counties
in Georgia (hereafter referred to as "Columbus"). Customers with plants
or jobs within Columbus may, depending on the location of their plant
or job sites, also economically procure coarse aggregate from Vulcan's
Barin quarry and from another competitor's quarry located in Midland,
Georgia. Other quarries cannot on a regular basis compete successfully
for customers with plants or jobs in Columbus because they are too
far away and the hauling costs are too great.
- A small but significant post-acquisition increase in the price of
coarse aggregate to customers with plants or jobs in Columbus would
not cause those customers to procure coarse aggregate from quarries
farther away than those identified in paragraph 28 in sufficient quantities
so as to make such a price increase unprofitable.
- Florida Rock owns and operates a coarse aggregate quarry located
in Chattanooga, Tennessee, known as the Jersey Pike quarry. This quarry
serves a geographic area that includes, among other areas, all or
part of Hamilton County in Tennessee (hereafter referred to as "Chattanooga").
Customers with plants or jobs within Chattanooga may, depending on
the location of their plant or job sites, also economically procure
coarse aggregate from Vulcan's Chattanooga quarry and from another
competitor's quarries located in Chattanooga and Ringgold, Georgia.
Other quarries cannot on a regular basis compete successfully for
customers with plants or jobs in Chattanooga because they are too
far away and the hauling costs are too great.
- A small but significant post-acquisition increase in the price of
coarse aggregate to customers with plants or jobs in Chattanooga would
not cause those customers to procure coarse aggregate from quarries
farther away than those identified in paragraph 30 in sufficient quantities
so as to make such a price increase unprofitable.
- Florida Rock owns and operates a coarse aggregate quarry located
in Richmond, Virginia, known as the Richmond quarry, a coarse aggregate
quarry located in Havre de Grave, Maryland, known as the Havre de
Grace quarry, and a barge-served distribution yard located in Chesapeake,
Virginia, known as the Gilmerton yard. Florida Rock also operates
a distribution yard owned by a third party located in Chesapeake,
Virginia. Via these distribution yards, Florida Rock serves a geographic
area that includes, among other areas, all or part of the cities of
Norfolk, Suffolk, Portsmouth, Chesapeake, and Virginia Beach in Virginia
(hereafter referred to as "South Hampton Roads"). Customers with plants
or jobs within South Hampton Roads may, depending on the location
of their plant or job sites, also economically procure coarse aggregate
from Vulcan rail and barge terminals supplied by Vulcan's Richmond,
Lawrenceville, and Skippers quarries. Other quarries cannot on a regular
basis compete successfully for customers with plants or jobs in South
Hampton Roads because they do not have appropriate distribution facilities
in the area and/or quarries similarly proximate to rail lines or navigable
water sources.
- A small but significant post-acquisition increase in the price of
coarse aggregate to customers with plants or jobs in South Hampton
Roads would not cause those customers to procure coarse aggregate
from quarries farther away than those identified in paragraph 32 in
sufficient quantities so as to make such a price increase unprofitable.
- Accordingly, the relevant geographic markets, within the meaning
of Section 7 of the Clayton Act, are locations of coarse aggregate
customers in: Northwest Atlanta, West Atlanta, Southwest Atlanta,
South Atlanta, Southeast Atlanta, Columbus, Chattanooga, and South
Hampton Roads.
- Anticompetitive Effects
- The Proposed Transaction Will Harm Competition in the Markets
for Coarse Aggregate in the Relevant Geographic Markets.
- Price competition between Vulcan and Florida Rock in the production,
distribution, and sale of coarse aggregate has benefited customers.
- In Southeast Atlanta and South Hampton Roads, the proposed acquisition
will eliminate the competition between Vulcan and Florida Rock and
reduce the number of suppliers of many specifications of coarse aggregate
from two to one.In Southeast Atlanta, the acquisition will also eliminate
the competition between Florida Rock and Vulcan that would result
from the opening of Vulcan's new quarry in Butts County.
- In Northwest Atlanta, Southwest Atlanta, South Atlanta, Columbus,
and Chattanooga, the proposed acquisition will eliminate the competition
between Vulcan and Florida Rock and reduce the number of coarse aggregate
suppliers from three to two generally, and for some customers and
projects from two to one.
- In West Atlanta, the proposed acquisition will eliminate the competition
between Vulcan and Florida Rock and reduce the number of coarse aggregate
suppliers from four to three generally, and for some customers and
projects from three to two.
- The proposed acquisition will substantially increase the likelihood
that Vulcan will unilaterally increase the price of coarse aggregate
to a significant number of customers in Northwest Atlanta, West Atlanta,
Southwest Atlanta, South Atlanta, Southeast Atlanta, Columbus, Chattanooga,
and South Hampton Roads.
- The response of other coarse aggregate suppliers in the relevant
geographic markets would not be sufficient to constrain a unilateral
exercise of market power by Vulcan after the acquisition because those
suppliers likely would not have sufficient capacity and/or incentives
to increase production and sales enough to defeat an anticompetitive
price increase by Vulcan. State permits and county zoning restrictions
in many cases limit quarries' hours of operation and/or production
levels, and many coarse aggregate suppliers face practical limitations
on the amount of truck traffic their facilities can handle. Moreover,
because coarse aggregate mined from quarries is a depletable natural
resource and every quarry has finite reserves, every sale by a supplier
today represents a tradeoff against future sales.
- In addition, and notwithstanding competitor responses, post-merger
Vulcan will be able to increase prices to those customers that have
plants or job sites for which both a Vulcan quarry and a Florida Rock
quarry are closer than any other quarries producing coarse aggregate
meeting their specifications. Coarse aggregate suppliers know the
locations of their competitors' quarries and the distance from their
own quarries and their competitors' quarries to a customer's plant
or job site. Generally, because of transportation costs, the farther
a supplier's closest competitor is from a job site, the less price
competition that supplier faces for that project. Post-acquisition,
in instances where Vulcan and Florida Rock quarries would be the closest
quarries to a customer's plant or project and the next closest coarse
aggregate supplier's plant is farther from the customer's plant or
project, the combined firm, using the knowledge of its competitors'
quarry locations, would be able to charge such customers higher prices.
- Without the constraint of competition between Vulcan and Florida
Rock, the combined firm will have a greater ability to exercise market
power by raising prices to customers for whom Vulcan or Florida Rock
were sources of coarse aggregate.
- In addition, Vulcan's elimination of Florida Rock as an independent
competitor in the production, distribution, and sale of coarse aggregate
is likely to facilitate anticompetitive coordination among the remaining
coarse aggregate suppliers in Northwest Atlanta, West Atlanta, Southwest
Atlanta, South Atlanta, Columbus, and Chattanooga. Coarse aggregate
is homogeneous and suppliers have access to information about competitors'
output, capacity, and costs. Given these market conditions, eliminating
one of the few coarse aggregate competitors is likely to further increase
the ability of the remaining competitors to coordinate successfully.
- The transaction therefore will substantially lessen competition
in the production, distribution, and sale of coarse aggregate in the
relevant geographic markets. This is likely to lead to higher prices
for the ultimate consumers of coarse aggregate, in violation of Section
7 of the Clayton Act.
- Entry is Not Likely to Deter the Exercise of Market Power.
- Timely and successful entry into the production, distribution, and
sale of coarse aggregate is unlikely in the relevant geographic areas.
- Securing the proper site for a coarse aggregate quarry or mine is
difficult, time-consuming, and costly. It requires the investigation
and extensive testing of candidate sites, as well as negotiating necessary
land transfers, leases, and/or easements. The location of a quarry,
mine, or yard is important due to the high cost of transporting coarse
aggregate, but there are few sites, especially in metropolitan areas,
on which to locate coarse aggregate operations.
- Due to the geology in South Hampton Roads, coarse aggregate for
most applications in South Hampton Roads is produced outside the area.
For an entrant to compete effectively in South Hampton Roads with
a combined Vulcan and Florida Rock, that entrant must pair a new or
existing rail- or water-served quarry with a distribution yard in
the South Hampton Roads area that is capable of receiving coarse aggregate
from such a quarry. Rail- or water-served quarries situated to compete
effectively in South Hampton Roads, and the proper sites for distribution
yards to serve those quarries, are scarce.
- Obtaining necessary zoning variances and governmental permits for
a coarse aggregate quarry or mine also can be difficult, time-consuming,
and costly. In metropolitan areas, land of the necessary size and
geology often is already utilized or does not have the appropriate
zoning, and obtaining zoning variances can be extremely difficult.
Attempts to open a new coarse aggregate quarry or mine, especially
in metropolitan areas (such as West Atlanta, Southwest Atlanta, South
Atlanta, Columbus, Chattanooga, and South Hampton Roads) but also
frequently in rural areas, often face fierce public opposition. This
public opposition can prevent a coarse aggregate quarry or mine from
opening or make opening it much more time-consuming and costly. In
addition, state and federal water, air quality, and other permitting
process requirements must be met.
- Even after a quarry or mine site is acquired and properly zoned
and permitted, the owner must spend significant time and resources
to prepare the land and install the equipment necessary to run the
operation.
- Therefore, entry by any other firm into the coarse aggregate market
in the relevant geographic areas will not be timely, likely, or sufficient
to defeat an anticompetitive price increase.
V. VIOLATIONS ALLEGED
- The proposed acquisition of Florida Rock by Vulcan would substantially
lessen competition and tend to create a monopoly in interstate trade
and commerce in violation of Section 7 of the Clayton Act, 15 U.S.C.
§ 18.
- Unless restrained, the transaction will have the following anticompetitive
effects, among others:
- actual and potential competition between Vulcan and Florida
Rock in the production, distribution, and sale of coarse aggregate
in the relevant geographic markets will be eliminated;
- competition generally in the production, distribution, and sale
of coarse aggregate in the relevant geographic markets will be
substantially lessened; and
- prices for coarse aggregate in the relevant geographic markets
likely will increase.
VI. REQUEST FOR RELIEF
- Plaintiff requests that:
- Vulcan's proposed acquisition of Florida Rock be adjudged and
decreed to be unlawful and in violation of Section 7 of the Clayton
Act, 15 U.S.C. § 18;
- defendants and all persons acting on their behalf be permanently
enjoined and restrained from consummating the proposed acquisition
or from entering into or carrying out any contract, agreement,
plan, or understanding, the effect of which would be to combine
Vulcan with the operations of Florida Rock;
- plaintiff be awarded its costs for this action; and
- plaintiff receive such other and further relief as the Court
deems just and proper.
FOR PLAINTIFF UNITED STATES OF AMERICA:
_______________/s/________________
Thomas O. Barnett
Assistant Attorney General
D.C. Bar #426840
_______________/s/________________
David L. Meyer
Deputy Assistant Attorney General
D.C. Bar #414420
_______________/s/________________
Patricia A. Brink
Deputy Director of Operations
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_______________/s/________________
Maribeth Petrizzi
Chief, Litigation II Section
D.C. Bar #435204
_______________/s/________________
Dorothy B. Fountain
Assistant Chief, Litigation II Section
D.C. Bar #439469
_______________/s/________________
Robert W. Wilder
Helena Gardner
Christine A. Hill (D.C. Bar #461048)
Leslie Peritz
Lowell Stern (D.C. Bar #440487)
James S. Yoon (D.C. Bar #491309)
Attorneys
United States Department of Justice
Antitrust Division, Litigation II Section
1401 H Street, NW, Suite 3000
Washington, D.C. 20530
(202) 307-6336
Dated: November 13, 2007
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