[Federal Register: February 12, 1999 (Volume 64, Number 29)]
[Notices]
[Page 7208-7210]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12fe99-103]
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DEPARTMENT OF JUSTICE
Antitrust Division
[Civil No. 98-CV-2340 (TPJ)]
United States v. Halliburton Company; Public Comment and
Plaintiff's Response
Pursuant to the Antitrust Procedures and Penalities Act, 15 U.S.C.
16(b)-(h), the United States of America hereby publishes below the
comment received on the proposed Final Judgment in United States v.
Halliburton Company, et al., Civil No. 98-CV-2340 (TPJ), filed in the
United States District Court for the District of Columbia, together
with the United States' response to the comment.
Copies of the comment and response are available for inspection in
Room 215 of the U.S. Department of Justice, Antitrust Division, 325
Seventeh Street, N.W., Washington, DC 20530 (telephone: 202/514-2481)
and at the office of the Clerk of the United States District Court for
the District of Columbia, 333 Constitution Avenue, N.W., Washington, DC
20001. Copies of these materials may be obtained upon request and
payment of a copying fee.
Constance K. Robinson,
Director of Operations, Antitrust Division.
Plaintiff's Response to Public Comment
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C.A. 16(b)-(h) (1997) (``Tunney Act''), the
United States hereby responds to the single public comment received
regarding the proposed Final Judgment in this case.
I. Background
On September 29, 1998, the United States Department of Justice
(``the Department'') filed the Complaint in this matter. The Complaint
alleges that the proposed merger of Halliburton Company
(``Halliburton'') and Dresser Industries, Inc. (``Dresser'') would
combine two of only four companies that provide logging-while-drilling
(``LWD'') tools and services for oil and natural gas drilling and are
the only sources of current and likely future innovations in new or
improved LWD tools. LWD tools provide data during drilling for oil on
the type of formation being drilled, whether there is oil in the
formation, and the ease with which the oil can be extracted from the
formation. LWD tools are mounted on the drill string and measure and
transmit data while the drilling is ongoing that allow the drillers to
determine if changes should be made in the drilling. Also mounted on
the drill string with LWD tools are measurement-while-drilling
(``MWD'') tools. MWD tools measure and transmit data while the drilling
is ongoing about the direction and angle of the drill bit. Because it
is necessary that LWD tools and MWD tools be compatible, customers who
want to use both types of tools on a particular drilling project
usually obtain them from the same company. The proposed merger would
reduce competition and likely lead to higher prices for LWD services,
reduce LWD service quality, and slow the pace of LWD-related
innovation, in violation of Section 7 of the Clayton Act, 15 U.S.C.A.
18 (1997).
Simultaneously with the filing of the Complaint, the Plaintiff
filed the
[[Page 7209]]
proposed Final Judgment and a Stipulation and Order signed by all the
parties that allows for entry of the Final Judgment following
compliance with the Tunney Act. A Competitive Impact Statement
(``CIS'') was also filed, and subsequently published in the Federal
Register on November 2, 1998. The CIS explains in detail the provisions
of the proposed Final Judgment, the nature and purposes of these
proceeding, and the transaction giving rise to the alleged violation.
To prevent the competitive harm, the proposed Final Judgment
requires the defendants to divest Halliburton's worldwide LWD business,
including virtually all of Halliburton's LWD tools, enough of its MWD
tools for use with the LWD tools, manufacturing, workshop, and testing
and repair equipment, a U.S. facility, the right to hire employees of
the LWD business, and worldwide, royalty-free, irrevocable licenses to
the intellectual property used in connection with the use, manufacture
or sale of the transferred tools.
The sixty-day comment period for public comments expired on January
1, 1999. The Department received only one comment.\1\ The comment was
prepared by Mr. Geoffrey A. Mantooth, an attorney, on behalf of his
client, Mr. Serge A. Scherbatskoy.
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\1\ The comment is attached. The Department plans to publish
promptly the comment and this response in the Federal Register. The
Department will provide the Court with a certificate of compliance
with the requirements of the Tunney Act and file a motion for entry
of the Final Judgment once publication takes place.
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II. Response to the Public Comment
Mr. Mantooth observes that the proposed Final Judgment ``attempts
to distinguish between `LWD Service' and `MWD Services,' and allows
Halliburton to keep some of its MWD Services.'' Mr. Mantooth then
states that the proposed Final Judgment ``does not give any basis or
reason for the definitions of LWD and MWD. The distinction between LWD
and MWD appears to arbitrary and without merit.'' Mr. Mantooth
continues by citing classifications of LWD and MWD tools that appear in
Schedule A of the proposed Final Judgment, contrasting these
classifications with descriptions appearing in an industry trade
journal (copy attached to his comment), and concluding that in that
particular journal ``the distinction between LWD and MWD is clearly
blurred.'' Mr. Mantooth ends his letter with a request for ``a more
realistic definition'' of LWD Services. He provides no suggestions for
doing so.
Mr. Mantooth's comment appears to be arguing either that the
Department should have alleged a broader market and required
divestiture of more MWD assets, or that the proposed Final Judgment's
description of the divestiture assets is not sufficiently specific or
clear. Neither argument is adequate to support a conclusion that the
public interest would not be served by entry of the proposed Final
Judgment.
The Department defined the product market as LWD services for
offshore drilling projects. This definition, which excluded MWD
services, was based on investigation and analysis, using judicial
precedent and the Horizontal Merger Guidelines issued jointly by the
Department and the Federal Trade Commission. As is set forth in
paragraphs 10 and 11 of the Complaint, MWD tools and LWD tools provide
different measurements--the former measure the direction and angle of
the drill bit, while the latter evaluate the formation through which
the drill bit is cutting. Many drillers purchase only MWD services, and
there are a number of firms that provide MWD services that do not
supply LWD services. While the component used to transmit data from MWD
tools does share characteristics with the component used to transmit
data from LWD tools, the tools themselves are distinct. Mr. Mantooth's
attachment to his letter focuses on the data transmission components,
not on the tools.\2\
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\2\ While Mr. Mantooth may believe the Department should have
alleged a broader product market, the public interest standard set
forth in the Tunney Act does not extend ``to evaluate claims that
the government did not make and to inquire as to why they were not
made.'' United States v Microsoft Corp., 56 F.3d 1448, 1459 (D.C.
Cir. 1995); see also United States v Associated Milk Producers,
Inc., 534 F.2d 113, 117-18 (8th Cir. 1976). Mr. Mantooth's comment,
to the extend it challenges the Department's product market, does
not therefore provide a reason to find that the proposed Final
Judgement fails to satisfy the public interest.
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Mr. Mantooth may not intend to disagree with the Department's
product market, but simply expressing a concern that there is
insufficient specificity in the description of the divestiture assets.
The Department believes that such a concern is unwarranted. Although
there are similarities in the two pieces of equipment cited in the
attachment to Mr. Mantooth's comment, the Department believes the list
of tools in Schedule A to the proposed Final Judgment is sufficiently
specific. HDS1, which is used to transmit data from MWD tools, and
HDSM, which is used to transmit data from LWD tools, are distinct
products. The Department is confident that prospective purchasers will
be able to get the equipment contemplated by the proposed Final
Judgment, and that the Department will be able to ensure that its
contemplated remedy is effected.
III. Conclusion
After careful consideration of the comment, the Plaintiff concludes
that Mr. Mantooth's comment does not change its determination that
entry of the proposed Final Judgment will provide an effective and
appropriate remedy for the antitrust violation alleged in the Complaint
and is in the public interest. The Plaintiff will move the Court to
enter the proposed Final Judgment after the public comment and this
Response has been published in the Federal Register, as 15 U.S.C. 16(d)
requires.
Dated this 27th day of January, 1999.
Respectively submitted,
Angela L. Hughes,
Member of The Florida Bar, #211052.
Robert L. McGeorge,
Joan H. Hogan,
Andrew K. Rosa,
Salvatore Massa,
U.S. Department of Justice, Antitrust Division, 325 7ty Street, NW,
Suite 500, Washington, D.C. 20530, (202) 307-6351.
Wofford, Zobal & Mantooth
Patent Attorneys
110 West Seventh, Suite 500, Fort Worth, Texas 76102
December 29, 1998.
Via Federal Express
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agricultural Section, Antitrust
Division, 325 Seventh Street, N.W., Suite 500, Washington, D.C.
20530
Re: United States v. Halliburton Company, Case No. 98-CV-2340
Dear Mr. Fones: Pursuant to the invitation in the Federal
Register of November 2, 1998, (Volume 63, Number 211), the following
is a comment on the subject case:
The proposed final judgment attempts to distinguish between
``LWD Services'' and ``MWD Services'', and allows Halliburton to
keep some of its MWD Services.
Yet, the proposed final judgment does not give any basis or
reason for the definitions of LWD and MWD. The distinction between
LWD and MWD appears to be arbitrary and without merit. For example,
in Schedule A of the proposed final judgment, LWD includes CWRGM
Resistivity, DNSC Density, and SCWR Slim Resistivity Tool, while MWD
includes HDSM Directional Tool, HDS1 MWD Kits, and RX4 MLWD Surface
System. In the May 1998 issue of Hart's Petroleum Engineer
International, page 17 (copy enclosed), the distinction between LWD
and MWD is clearly blurred.
The undersigned would appreciate a more realistic definition of
LWD services. If there
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are any questions, please do not hesitate to call.
Very Truly Yours,
Geoffrey A. Mantooth,
Attorney for Serge A. Scherbatskoy.
cc: United States District of Columbia (w/enclose)
The MWD Comparison Tables which is the enclosure to the letter sent
by Geoffrey A. Mantooth of Wofford, Zobal & Mantooth can be obtained
from the U.S. Department of Justice, Antitrust Division, 325 7th
Street, Room 215, Washington, D.C. 20530 (202/514-2481) or the United
States District Court, District of Columbia.
Certificate of Service
I hereby certify that I have caused a copy of the foregoing
Plaintiff's Response to Public Comments, as well as the attached copy
of the public comment received from Geoffrey A. Mantooth on behalf of
Serge A. Scherbatskoy, to be served on counsel for Defendants in this
matter by facsimile and first class mail, postage prepaid, at the
addresses set forth below.
Counsel for Defendant Halliburton Company:
Ky P. Ewing, Jr., Esquire,
Vinson & Elkins, 1455 Pennsylvania Avenue, N.W., Washington, D.C.
20004-1008, Telephone: (202) 639-6580, Facsimile: (202) 639-6604.
Counsel for Defendant Dresser Industries, Inc.:
Helen D. Jaffe, Esquire,
Weil, Gotshal & Manges, 767 Fifth Avenue, New York, NY 10153,
Telephone: (212) 310-8572, Facsimile: (212) 310-8007.
Dated: January 27, 1999.
Angela L. Hughes,
[FR Doc. 99-2715 Filed 2-10-99; 8:45 am]
BILLING CODE 4410-11-M