The opinion of the court was delivered by: BRIEANT
Memorandum Decision (Termination of Consent Decree)
Pursuant to Rule 60(b)(5) and (6) of the F.R. Civ. P. and Provision XV of the Consent Decree in this civil antitrust action made August 4, 1964 by the late Hon. Richard H. Levet of this Court, defendant American Cyanamid Company ("Cyanamid"), with the consent of plaintiff United States Government ("Government"), moves to terminate all provisions of the aforesaid decree or judgment which now remain in effect.
Intervenors Melamine Chemicals Inc. ("MCI"), a producer of melamine, and Dart Industries ("Dart"), a plastic laminate producer which consumes melamine, along with amicus curiae Plastics Manufacturing Company, a producer of plastic laminates and melamine resins, oppose such termination, contending that an anticompetitive impact on the melamine and melamine related industries will result.
Melamine is a fine white crystalline powder which is used in the manufacture of resins which in turn are used for high-pressure laminates, such as "Formica" a well-known trade-marked product manufactured by a division of Cyanamid, as well as artificial chinaware, plastic parts for the automobile industry and coatings for textile and paper products. A study in 1982 by the United States International Trade Commission (Inv. No. 731-TA-107-Prelim. "Melamine From Brazil") reports that United States consumption of melamine resins in 1981 by end uses is estimated as follows: high-pressure laminates, such as "Formica", 29% of the total; surface coatings, 23%; molding compounds, 16%; paper treating and paper coating, 15%; textile treating and textile coating, 5%; and other (including adhesives), 12%. Typical of the uses of high-pressure laminates are decorative countertops, furniture and cabinet panels, tabletops, and partitions in commercial buildings. More than 80% of all melamine molding compounds are consumed in the manufacture of dinnerware which varies in quality from picnic disposables to advanced products which compete with fine chinaware.
Shortly following the entry of the Consent Decree there were four domestic producers of melamine, including Cyanamid and Fisher Chemical Co., the predecessor of MCI. Now, and since 1979, there are only two domestic producers, MCI and Cyanamid. There are now 17 melamine producers outside the United States, six in Western Europe, three in Eastern Europe and the U.S.S.R., three in Japan, and one each in Brazil, India, Kuwait, Taiwan and the Republic of Korea. World production capacity in 1982, by regions, is estimated by the United States Department of Commerce as follows:
Western Europe 40%
United States 15%
Eastern Europe and the
Other countries 8%
Total world capacity to produce melamine increased from 886 million pounds in 1979 to 981 million pounds in 1982, or by 11%. The People's Republic of China is expected to open a melamine plant with annual capacity of 26 million pounds by the end of 1983.
Melamine is essentially a fungible intermediate chemical. There is no distinctive difference in quality or chemical content according to plant or country of origin. Its production is capital intensive; increased put-through in an operating plant does not increase the labor costs and the chemical reaction proceeds on a continuous flow process much the same as that of an oil refinery. Such a product should be expected to sell at a competitive price having a long term relation to the marginal costs of the least efficient producer.
The complaint in this civil antitrust action was filed October 5, 1960 against Cyanamid and alleged violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, and Section 7 of the Clayton Act, 15 U.S.C. § 18. The complaint charged that Cyanamid unlawfully allocated and monopolized the foreign and domestic melamine and melamine-contained markets through its leadership of an international cartel of melamine producers, its exclusive control and manipulation of melamine technology and "Dicy," (described infra), and by its acquisition in 1956 of Formica, Inc., then and now the principal domestic user of Melamine crystals for the production of high pressure laminates.
As a result of these alleged violations, the Government alleged that the price of melamine and melamine-contained products was unreasonably high, the available supply of melamine unreasonably low, actual competition in the melamine and melamine related industries lessened, and the potential emergence of new competitors in those industries effectively foreclosed.
The litigation was settled by entry of the Consent Decree referred to above. Since that time, the Consent Decree has been the subject of various proceedings before this Court, familiarity with which is assumed. In 1969, 1973 and 1974, the Court modified various provisions of the Consent Decree at the request of Cyanamid and with the consent of the Government. In 1975, the Government initiated criminal contempt proceedings against Cyanamid alleging that Cyanamid in 1972 had wilfully violated the Consent Decree's maximum melamine production level. This Court, after a trial found Cyanamid not guilty of a criminal contempt. United States v. American Cyanamid Co., 1978-1 Trade Cas. P61,843 (S.D.N.Y. 1977). See also, Stamicarbon, N.V. v. American Cyanamid Co., 506 F.2d 532 (2d Cir. 1974).
The Consent Decree itself was formulated so as to dissolve Cyanamid's monopoly of the United States melamine industry and encourage the entrance of new producers into the domestic melamine market. A brief review of its provisions may be of assistance to the reader.
The first two provisions of the Consent Decree established the Court's jurisdiction over this controversy and defined the terminology employed in the Decree. Provision III identified the parties and entities bound by the Consent Decree.
Provision IV directed Cyanamid to divest itself of its melamine plant in Willow Island, West Virginia, within two years of the entry date of the Decree. This was done, by sale to MCI's predecessor. Cyanamid was also directed to guarantee Willow Island's purchaser access to its employees, customer lists and technology for one year following the purchase of the plant. Finally, if requested by the purchaser of Willow Island, Cyanamid was required to purchase 50% of its melamine requirements in excess of its own melamine production at the prevailing market price for melamine produced in the United States for a maximum term of ten years.
Provision V of the Decree, now expired, in effect prohibited Cyanamid for a ten year period, from producing more than 30 million pounds of melamine per year in the United States or to expand its domestic production capacity beyond that amount until other domestic melamine producers increased their production capacity by 25 million pounds.
Provision VI enjoins Cyanamid from: (1) entering into or maintaining an agreement to allocate or divide customers, territories or markets for the sale, manufacture or distribution of melamine or melamine-contained products; (2) eliminating, limiting or restraining competition in these products; (3) limiting or restraining the importation or exportation of these products; and (4) refusing to do business with any person engaged in the sale, use or manufacture of melamine or melamine-contained products. This provision is still in effect.
Provision VII prohibits Cyanamid from: (1) referring melamine business to any company identified as a co-conspirator in the original complaint, or to any other company in the melamine business; (2) from entering into an agency or distributorship relationship with any such company; or (3) from attempting to prevent or restrict any company from entering or participating in the melamine business. At present, this provision is arguably obsolete, at least as to domestic producers, since the named co-conspirators and the then existing melamine producing companies are no longer involved in melamine production.
Provision VIII currently prohibits Cyanamid from refusing to sell melamine to any individual willing and financially able to pay the going market price and forbids Cyanamid from establishing price differentials between Dicy and Melamine for the purpose of, or which would result in, restraining trade in melamine or melamine resins in the United States. This latter provision is now technologically obsolete. See infra, slip op. p. 8.
Provision IX is still operative and orders Cyanamid to grant to any party so requesting, a nonexclusive, unrestricted license under all its existing urea, Dicy and melamine patents and to all future patents concerning the production, use and sale of melamine resin. This provision also regulated Cyanamid's acquisition of any new patents for a five year period which expired in August of 1969.
Provision X directed Cyanamid for a ten year period to furnish, upon request, all its technical information relating to the commercial manufacture of Dicy, melamine and melamine resins. This provision has been fully complied with and expired in 1974.
Provision XI, the sole present source of discord in this litigation, appears by its terms to operate in perpetuity, subject only to defeasance after ten years upon application to the Court as therein contemplated. It reads in relevant part as follows:
"(A) . . . Cyanamid is ordered and directed to purchase annually from other producers of melamine (with the preference to United States producers) an amount of melamine equivalent to the requirements of Cyanamid for melamine for use by Cyanamid 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. Cyanamid's requirements for the purposes of this Section XI shall be deemed to be an amount of melamine of all grades, but not superior to that customarily used by Cyanamid in the manufacture of laminates, at least equivalent to the amount of such melamine used by Cyanamid in its production of laminates during the preceding calendar year.
(C) In the event Cyanamid considers that the melamine price offered for its purchase pursuant to subsection (A) hereof is oppressively high, Cyanamid may apply to the Court, and upon a showing by Cyanamid to the satisfaction of this Court that the price is noncompetitive, the ...