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Today, the Federal Trade Commission accepted for public comment a proposed consent order settling charges that Charlotte Pipe and Foundry Company’s 2010 purchase of Star Pipe Products, Inc.’s cast iron soil pipe (CISP) business was anticompetitive.  To help restore competition in CISP markets in the United States, the proposed order prohibits Charlotte Pipe from enforcing a confidentiality and non-compete agreement with Star Pipe, ensures that Charlotte Pipe will publicly disclose its prior acquisitions of other CISP importers, and requires Charlotte Pipe to notify the Commission before making future acquisitions in this industry.

CISP products are important components of pipeline systems used to transport wastewater from buildings to municipal sewage systems, to vent plumbing systems, and to transport rainwater to storm drains.  Construction firms, plumbers, and developers throughout the United States use them.

Charlotte Pipe is a privately held corporation with its headquarters in Charlotte, North Carolina.  It is one of the largest producers and sellers of CISP products in the United States.  The U.S. market for CISP is highly concentrated, with two firms, Charlotte Pipe and McWane, Inc., making up at least 90 percent of all domestic sales as of 2010.  In 2007, Star Pipe entered the U.S. CISP market and expanded its sales base throughout the country between 2007 and 2010.  The Commission alleges that in numerous areas of the country, Star Pipe competed aggressively on price and service, which benefitted American consumers.

Instead of continuing to compete with Star, in 2010, Charlotte Pipe purchased its CISP business for approximately $19 million.  At the same time, the FTC charges, the companies entered into an agreement under which Star Pipe and its employees kept the acquisition secret, and agreed not to compete with Charlotte Pipe in the CISP market for six years.  According to the Commission, after the acquisition, Charlotte Pipe destroyed Star Pipe’s CISP production equipment.

The FTC’s complaint alleges that Charlotte Pipe’s purchase of Star Pipe’s CISP business substantially lessened competition in U.S. markets for CISP products.  Specifically, the acquisition eliminated Star as “maverick firm” that could put pricing pressure on Charlotte Pipe, and gave the latter the opportunity to raise prices to consumers.  Furthermore, the acquisition eliminated the direct competition between Charlotte Pipe and Star Pipe.

The proposed order settling the FTC’s charges is designed to remedy Charlotte Pipe’s alleged anticompetitive conduct.  Because in the past Charlotte Pipe has acquired other firms in the CISP market through transactions that were not disclosed to the public and that were not reportable under the antitrust guidelines, the proposed order requires Charlotte Pipe to inform industry participants of its prior confidential acquisitions, as well as its role in Star Pipe’s exit from the CISP market. 

The proposed order also requires Charlotte Pipe to notify the FTC before making similar acquisitions in the United States. This will allow the FTC to review all future CISP-related deals that Charlotte Pipe proposes to enter into to ensure that they are not anticompetitive.  Finally, the proposed order prevents Charlotte Pipe from enforcing the confidentiality and non-compete agreement with Star Pipe.  This will allow Star Pipe and its employees to enter the CISP market and compete directly against Charlotte Pipe in the immediate future.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 4-0.  The FTC will publish a description of the consent agreement in the Federal Register shortly.  The agreement will be subject to public comment for 30 days, beginning today and continuing through May 2, 2013, after which the Commission will decide whether to make the proposed consent order final.        

Interested parties can submit comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. Comments in paper form should be mailed or delivered to:  Federal Trade Commission, Office of the Secretary, Room H-113, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.  The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.  Comments can also be submitted electronically.

NOTE:  The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.  The complaint is not a finding or ruling that the respondent has actually violated the law.  A consent order is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated.  When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions.  Each violation of such an order may result in a civil penalty of up to $16,000.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.