Lubrizol to Undo Lockhart Oxidate Deal


Lubrizol last week signed a consent order with the U.S. Federal Trade Commission, agreeing to void a 2007 noncompete agreement with Lockhart Chemical and transferring to Additives International the oxidate assets it had acquired from Lockhart two years ago.

According to the FTC, in February 2007 Lubrizol, based in Wickliffe, Ohio, acquired various assets, including oxidate formulas and trademarks, from Lockhart of Gibsonia, Pa., for $15.6 million. The purchase agreement included a noncompete agreement prohibiting Lockhart, for five years from the date of the purchase, from engaging in any business competitive with the assets it sold to Lubrizol. Lubrizol subsequently indicated that this provision barred Lockhart from leasing its plant in Flint, Mich., to another oxidate manufacturer, according to the FTC complaint.

Prior to the acquisition, the FTC believes Lubrizol and its then-competitor Lockhart together accounted for over 98 percent of sales in the U.S. oxidates market. Oxidates are used to make rust preventives. The acquisition created a monopoly in this market, the FTC concluded, contending that it violated antitrust laws and lessened competition in the U.S. market for these products.

In October 2008 Additives International, headquartered in Evanston, Ill., announced that it had secured a long-term lease with an option to purchase Lockharts 13-acre Flint, Mich., production facility, where it planned to begin making rust preventives based on oxidized waxes and petrolatums among other products.

Last weeks FTC consent order requires Lubrizol to transfer certain assets to Additives International, including a nonexclusive license to manufacture rust-preventive formulas acquired from Lockhart and the right to use Lockhart trademarks for two years. In addition, it requires Lockhart to lease a portion of its Flint plant to Additives International, and requires Lubrizol to waive its noncompete agreement with Lockhart in order to facilitate Additives Internationals use of the plant.

We knew this could be an issue, Gregory Jorjorian, president and chairman of Additives International told Lube Report this week. The investigation was going on when we leased the plant in October. Someone had brought the complaint before we were involved, not long after Lubrizol acquired the Lockhart line.

There will definitely be two viable suppliers in the [oxidate] market now, Jorjorian continued. Were ready to go. The FTC worked closely with us to assure well be a viable supplier.

Lubrizol cooperated fully with the FTCs investigation, according to a written statement from Lubrizol. Given the small size of the Lockhart transaction and the favorable terms that the FTC offered Lubrizol to settle the matter, Lubrizol made a business decision to enter into a consent agreement with the FTC. Lubrizol is satisfied with the terms of the agreement.

Lubrizol noted that its 2007 purchase included Lockharts entire metalworking product line, including sulfonates, emulsifier packages, corrosion inhibitors, lubricity agents, grease additives, esters and other products, as wells as oxidates.

The FTC emphasizes that a consent agreement is for settlement purposes only and does not constitute an admission of a law violation. The FTC voted four to zero to accept the proposed consent order, which is now subject to public comment through Mar. 27, when the Commission will decide whether to make it final.

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