The Federal Trade Commission (“FTC”) recently put an end to a non-compete agreement between two bleach companies that allegedly drastically reduced competition in the American South. Oltrin Solutions, LLC and JCI Jones Chemicals Inc., were competitors in the market for bulk bleach, which is used primarily as a disinfectant in municipal water treatment. Oltrin is a joint venture between Trinity Manufacturing and Olin Corporation, the largest bleach producer in North America. JCI is one of the world’s leading producers and distributors of various water treatment chemicals, including bleach.
According to the original complaint, in March 2010, Oltrin agreed to pay JCI a sum of $5.5 million over the course of four years. In exchange, JCI agreed to provide Oltrin with a list of their bulk bleach customers, and agreed not to sell bulk bleach in either North or South Carolina for a period of six years.
Bulk bleach is typically sold in quantities of 4500-4800 gallons, an amount large enough that it limits the ease of transport. Because of these transportation difficulties, the FTC defined the relevant geographic markets as the area within 300 miles of JCI’s former bleach production plant. Essentially, this area includes North and South Carolina and southern Virginia. According to the FTC, the agreement between Oltrin and JCI eliminated competition between the two companies “in the relevant geographic market; substantially increased the market concentration for bulk bleach sales in the relevant geographic market; and increased Oltrin’s ability to raise bulk bleach prices.”
Based on the terms of a proposed consent order, which was unanimously approved by the FTC, Oltrin will be required to release JCI from the non-compete agreement, and to transfer some of its bulk bleach contracts back to JCI. Additionally, Oltrin must provide JCI with a short-term backup supply agreement in order to assist JCI with its reentry back into the market. Additionally, Oltrin and JCI are both required to notify the FTC prior to entering into any agreements in the bulk bleach market. Oltrin is also required to notify any customer who has placed a bid after 2010 that JCI is in the bulk bleach business in this market again. The consent order is subject to public comment until February 21, 2013, at which point the FTC will choose whether the order becomes final.
In light of the Department of Justice’s recent activity in the high-tech sector concerning no-hire agreements and the FTC’s activities from In the Matter of Renown Health, which we previously blogged about, companies should be cognizant of the effect of their market share/the use of non-compete agreements in particular markets and the possibility of government regulatory activity regardless of whether the jurisdiction permits non-compete agreements.