[Federal Register: February 12, 1999 (Volume 64, Number 29)]
[Page 7208-7210]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



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.

    \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.

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 
    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\

    \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.

    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) 

    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. 

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

[[Page 7210]]

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]