Merger - Product Market

Competition

Merger

Relevant Market

Product Market

Distinct Characteristics of Chloride TiO2 and Sulfate TiO2

Reasonable Interchangeability

Price Differential

SSNIP

(…) Customers are not willing to substitute sulfate TiO2 for chloride TiO2 in the vast majority of their products, notwithstanding the price differential.

Respondents argue that sulfate TiO2 and chloride TiO2 are substitutes, and therefore in the same product market, because it is possible for TiO2 customers to use either sulfate TiO2 or chloride TiO2 in approximately 80% of TiO2 end-use products, provided the quality is the same, and that only 10% of TiO2 end-use products must use chloride only. However, as shown above, customers do not find the quality to be the same. Even if it is possible, as a technical matter, for paint companies to make paint with either chloride TiO2 or sulfate TiO2, the fact is that they overwhelmingly choose not to do so. Furthermore, the proper antitrust inquiry, as set forth in the Merger Guidelines, is not whether it is theoretically possible for customers to substitute, but whether customers would reasonably substitute sulfate TiO2 for chloride TiO2 in sufficient volumes to render a small but significant non-transitory increase in price (“SSNIP”) (commonly 5%) unprofitable. Merger Guidelines §§ 4.1.1, 4.1.2. As addressed in more detail in section II.C.3. below, Dr. Hill conducted an empirical analysis and found that a hypothetical monopolist of all chloride TiO2 sales to customers in North America would find it profitable to impose a SSNIP.

(…) Respondents further argue that sulfate and chloride are in the same product market because, according to Respondents’ proffered economic expert witness, Dr. Ramsey Shehadeh, “there is a long-term relationship between sulfate and chloride titanium dioxide prices” characterized by “statistically and economically significant co-movement of prices.” RB at 53. This argument is unconvincing. Even if the prices are correlated, this does not show that the products are reasonably substitutable for each other, especially in light of the proof that TiO2 customers do not substitute. See also Preliminary Injunction Opinion, 2018 U.S. Dist. LEXIS 155127, at *21 (stating that “the mere fact that the prices of two goods move upward or downward together need not mean that they are substitutes”). As Dr. Hill explained, “the prices of two goods may be correlated, but they may not be in the same market. . . . One example of this would be, hamburger buns and hot dog buns are made from the same thing, and their demands highly correlated. Their prices will be correlated over time, but they are not close substitutes for one another.” Hill, Tr. 1707-08.

(…) The evidence proves that chloride TiO2 is a relevant product market.

(FTC, Office of Administrative Law Judges, In the Matter of Tronox/Cristal USA, Dec. 7, 2018, Docket No. 9377)

https://www.ftc.gov/enforcement/cases-proceedings/171-0085/tronoxcristal-usa