US Merger Enforcement - 2014 Year in Review As expected, merger enforcement continued to be a top priority for the Department of Justice and Federal Trade Commission (as well as State Attorneys General) in 2014. Brisk deal activity provided the authorities with no shortage of transactions to investigate, and the agencies showcased their enforcement agendas by challenging numerous transactions resulting in conditioned approvals or abandoned transactions. In doing so, DOJ and FTC have not only sent the message that they are willing to litigate mergers they find problematic but have demonstrated their ability to win these cases. And, this vigorous enforcement is not just reserved to challenging the underlying transaction. Rather, DOJ and FTC also continue to scrutinize pre-merger conduct and take action against parties engaged in unlawful pre-merger coordination and “gun-jumping”. Despite the aggressive enforcement by DOJ and FTC, most transactions, however, do not raise competitive issues. And, as discussed below, even where antitrust issues are present, those transactions are not necessarily destined to be blocked.1 As has been typical in recent history, most transactions raising antitrust issues are settled with the parties agreeing to divest assets or make commitments to remedy the perceived competitive harm. 2014 - Statistical Overview 2014 marked another year with a full docket for the DOJ and FTC. The agencies took formal action against 28 transactions in total, with a number of significant transactions still under review.2 DOJ took action against 11 transactions (including one that was not reportable under the HSR Act), while the FTC challenged 17 transactions. Another three transactions at DOJ were abandoned by the parties at the threat of the authority seeking to enjoin the transaction. The vast majority of these cases -- 25 of the 28 formal actions -- were resolved by consent decree. Structural remedies continue to be the preferred choice over behavioral remedies with divestitures required in 24 of the 25 consent decrees. The FTC continues to require an “up-front buyer” (i.e., identifying the buyer of the divested assets at the time of the consent) much more often than DOJ. In 2014, DOJ required an up-front buyer in only two divestiture situations, where the FTC required it in 12 transactions. The DOJ challenged one transaction in court and the FTC challenged two. In both FTC cases, the parties abandoned the transaction shortly after the action was filed. DOJ’s case against National Cinemedia/ Screenvision is still ongoing. 3 The agencies took formal action against 28 transactions in total, with a number of significant transactions still under review.2 The DOJ took action against eleven transactions (including one that was not reportable under the HSR Act), while the FTC challenged 17 transactions. Another three transactions at DOJ were abandoned by the parties at the threat of DOJ seeking to enjoin the transaction. The DOJ challenged one transaction in court and the FTC challenged two. In both FTC cases, the parties abandoned the transaction shortly after the action was filed. DOJ’s case against National Cinemedia/Screenvision is still ongoing. 3 The vast majority of these cases — 25 of the 28 formal actions — were resolved by consent decree. Structural remedies continue to be the preferred choice over behavioral remedies with divestitures required in 24 of the 25 consent decrees. The FTC continues to require an “up-front buyer” (i.e., identifying the buyer of the divested assets at the time of the consent) much more often than DOJ. In 2014, DOJ required an up-front buyer in only two divestiture situations, where the FTC required it in 12 transactions.
Increasing Use of Court Challenges While the DOJ and FTC have continued to show their willingness to litigate transactions, the agencies appear to reserve litigation for those cases that they view as most problematic and where there is either no way to remedy the perceived anticompetitive harm or the parties are unwilling to restructure the transaction as required by the reviewing agency.4 Jostens/American Achievement Corp. 5 In April 2014, shortly after the Commission voted 4-0 to file an administrative complaint alleging the merger between Jostens and American Achievement Corp. (AAC) would violate the antitrust laws and a federal district complaint seeking a preliminary injunction, the parties abandoned the transaction. The FTC alleged that the merging parties were two of the three largest providers of high school and college class rings, compete directly against each other to be selected by the school, and that the merged entity would be a dominant firm in both the market for high school class rings and college class rings. Verisk/EagleView. 6 The FTC issued an administrative complaint in December 2014 alleging the acquisition of Verisk by EagleView would violate the antitrust laws. The Commission also authorized seeking a temporary restraining order and preliminary injunction in federal district court. Verisk and EagleView are providers of rooftop aerial measurement services relied on by insurance providers to calculate the costs of repairing or replacing rooftops. The FTC alleged that EagleView already controlled 90% of the relevant market, and Verisk’s subsidiaries provided its only meaningful competition, as EagleView had successfully forced all other entrants from the market through extensive patent litigation. The parties abandoned the transaction soon after the administrative complaint was filed. National CineMedia/Screenvision. 7 In November 2014, DOJ filed suit in the Southern District of New York to enjoin NationalCineMedia’s proposed acquisition of Screenvision. DOJ alleged that the merger would combine the only two significant providers of pre-show cinema advertising to movie theaters and would result in the merged entity serving 88% of all movie theater screens in the US. The case is still pending.
The Threat of Litigation Is Enough For Some Parties to Abandon the Transaction A number of recent cases demonstrate that once the DOJ or FTC decides that it is willing to go to court to enjoin a transaction, holding a deal together is quite difficult and the parties may choose to abandon the transaction. Litigation adds significant time to the transaction timeline — time that the parties may not have under the merger agreement or otherwise. It also adds significant burden and further distracts the businesses. Moreover, with the agencies’ recent success in blocking transactions, the specter of litigation adds further uncertainty for the merging parties. Louisiana-Pacific/Ainsworth. 8 In May 2014, after DOJ expressed concerns that the transaction substantially lessened competition in themarketfor oriented strand board (OSB)in the Pacific Northwest and Upper Midwest, Louisiana-Pacific (LP) abandoned its proposed acquisition of Ainsworth Lumber. DOJ found that LP and Ainsworth were two of only four principal producers of OSB in the Pacific Northwest and two of only three principal producers of OSB in the Upper Midwest. DOJ found that the transaction would not only eliminate head-to-head competition but would give the combined firm significant market share — over 50% in both regions — that would better position it to restrict OSB supply, as well as coordinate output and pricing decisions with the few other competitors to drive prices above competitive levels. Flakeboard/SierraPine. 9 In October 2014, after DOJ expressed continuing concerns about the anticompetitive effects of the transaction on medium density fiberboard (MDF) customers on the West Coast, Flakeboard abandoned its proposed acquisition of three mills from SierraPine. DOJ stated that the acquisition would combine two of the four significant suppliers of MDF on the West Coast, resulting in a market share of 58% for thicker and denser grades of MDF sold on the West Coast. Moreover, DOJ found that Flakeboard and SierraPine were the two closest sellers geographically, with the nearest competing mill several hundred miles away. Embarcadero/CA. 10 In November 2014, after DOJ expressed concerns about the potential for anticompetitive effects arising from the transaction for users of data modeling software, Embarcadero terminated its proposed acquisition of CA’s Erwin data modeler. DOJ found that Embarcadero’s ER Studio products and CA’s Erwin product were particularly close competitors and the purchase of these assets would reduce competition on price and functionality.
The Agencies Challenge Consummated Transactions While most transactions are challenged prior to consummation, the authorities are not bound to review only mergers that require pre-notification. Rather, DOJ and FTC both have jurisdiction to review consummated transactions, and indeed, from time to time — as the DOJ did in 2013 with the Bazaarvoice/PowerReviews transaction — do investigate and challenge such transactions. DOJ challenged one consummated transaction in 2014. Heraeus Electro-Nite/Midwest Instrument Company. 11 Heraeus Electro-Nite closed on its acquisition of certain assets from Midwest Instruments in 2012. The transaction was not reportable under the HSR Act, but DOJ subsequently learned of the transaction and opened its investigation. DOJ found that prior to the acquisition, the parties competed directly on price, service and innovation in supplying sensors and instruments to steel manufacturers, and that the transaction lessened competition in the market for development, production, sale and service of single-use sensors used to monitor molten steel in the manufacturing process. Together, the parties controlled 95% of the market. As such, almost two years after consummation, DOJ required that all of the assets in the US and Mexico acquired by Heraeus from Midwest be divested to Keystone, a recent market entrant. The Agencies Challenge Unlawful Pre-Merger Coordination & Gun-Jumping In addition to reviewing the merits of proposed transactions, DOJ and FTC continue to closely scrutinize pre-merger conduct to ensure there is no unlawful pre-merger coordination between the parties. Merging parties, therefore, should continue to be vigilant to ensure there is no improper pre-merger coordination, as such conduct not only subjects the parties to potential legal action, but typically can delay approval of the transaction by shifting the focus of the agency’s inquiry from analyzing the transaction to determining if information was shared inappropriately or if a transfer of beneficial control occurred. Flakeboard/SierraPine.12 In addition to threatening to enjoin the merger between Flakeboard and SierraPine, DOJ announced a settlement where the parties agreed to pay $5 million, institute an antitrust compliance program to comply with the Final Order, file yearly compliance reports for ten years, and provide DOJ with inspection rights in order to resolve a “gun-jumping” violation. The DOJ alleged that the parties agreed to close a SierraPine mill and direct former customers to Flakeboard before the merger closed.
The Agencies Scrutinize Transactions on Their Facts And Close Investigations Where the Transaction Does Not Raise Competitive Issues While much has been made of an aggressive antitrust agenda by the US authorities, the agencies continue to rigorously analyze each transaction based on its own facts and without preconceived notions. Similar to the FTC’s clearance of the Office Depot/OfficeMax merger in 2013,13 the agencies have permitted transactions to proceed without conditions where the parties are able to demonstrate there is unlikely to be an anticompetitive effect. Men’s Wearhouse/Jos. A. Bank. 14 Only a few months afterthe FTCcleared the Office Depot/OfficeMax transaction, the FTCclosed itsinvestigation ofthe acquisition ofJos. A.Bank by Men’sWearhouse. The FTC scrutinized the transaction between the retailers for men’s tailored clothing and tuxedo rentals, and some speculated that the FTC’s decision could rest on competition from online sales which was an important argument in Office Depot/OfficeMax. Rather, the FTC stated that “the decision rested primarily on the competitive environment among brick-and-mortar stores, not competition from online sales” and largely discounted the online market for suits given that most consumers strongly prefer to purchase at a brick-and-mortar store. 15 The FTC found that there were many other brick-and-mortar retailers that sell men’s suits of similar quality and that the parties had different product assortments that reflect their different customer preferences. With regard to tuxedo rentals, the FTC found thatJos. A.Bank was a relatively small player, there were a significant number oflocal and regional competitors, and national presence was not an important factor for consumers. Permitting Transactions With Conditions Is Still the Norm The vast majority of transactions are settled by consent decree, where the authorities permit the transaction to proceed with conditions, typically a structural remedy that requires divestiture of certain assets. The agencies not only want to ensure the right set of assets is divested, but they want to ensure that the buyer of the divested assets is a viable competitor. Thus, in some cases — more common for the FTC than DOJ — an “up-front buyer” (i.e., identifying the buyers of the divested assets at the time of the consent) is required.
The Agencies Not Only Look at Present Day Competition, But Also Focus on Potential Competition Between the Merging Parties Even where the merging parties do not currently compete, the agencies may take action where they believe the parties likely will compete significantly in the near future. The FTC brought a number of cases with “potential competition” concerns this past year requiring divestiture of products still in development. Although all of these potential competition cases in 2014 were filed by the FTC and all related to transactions in the pharmaceutical/ medical device space, this theory of harm is also considered by DOJ and often applicable in other contexts — especially in transactions relating to high-tech products and services. Actavis/Forest Labs. 16 Actavis, a manufacturer of generic pharmaceuticals, agreed to acquire Forest Labs in February 2014. The FTC reviewed the transaction and found that competition for three generic pharmaceuticals would be reduced from three firmsto two for one product (generic diltiazem hydrochloride) and from four firms to three for the other two products (generic ursodiol tablets and generic propranolol hydrochloride). In addition, the FTC concluded that the transaction would delay the imminent entry of an Actavis product, which was the only approved generic of a branded product manufactured by Forest and marketed by GlaxoSmithKline (Lamictal ODT). The FTC required divestiture of the four pharmaceutical products to three up-front buyers. Endo/Boca Life. 17 Nearly seven months after the parties announced the transaction, in March 2014, the parties agreed to divest their rights to market and distribute four generic multivitamin fluoride drops for children to Sonar Products, and sell three other generic drugs in development to Rhodes Pharmaceuticals. The FTC found that Endo competed with Boca for four prescription multivitamin drop products whereBoca wasthe exclusive marketer and distributor. In addition, the FTC’s complaint alleged that the proposed acquisition would eliminate future competition in three other generic drug markets where Boca was one of only a small handful of potential future entrants. Akorn Enterprises/Hi-Tech Pharmacal. 18 In April 2014, the FTC approved Akorn’s acquisition of Hi-Tech Pharmacal on the condition that the parties divest three prescription eye products and two topical anesthetics to Watson Laboratories. The FTC alleged that combining the two pharmaceutical companies would result in a reduction from four to three competitors for two generic products (Ciloxan drops and EMLA cream), and three to two for two other generic products (Quixin drops and Xylocaine jelly). In addition, the FTC found that future competition would be reduced for generic ilotycin ointment (for bacterial eye infections), as Hi-Tech was poised to enter. Akorn/VersaPharm. 19 In August 2014, the FTC announced it was requiring Akorn to divest its Abbreviated New Drug Application for generic injectable rifampin (a tuberculosis drug) that was pending before the Food & Drug Administration (FDA) to Watson Labs in order to complete its acquisition of VersaPharm. VersaPharm was one of three companies that then had approval to sell generic rifampin. Akorn was likely to enter the market in the near future. The FTC concluded that the acquisition likely would have resulted in Akorn either delaying or foregoing the introduction of its product, leading to reduced competition. Medtronic/Covidien.20 Medical device manufacturers Medtronic and Covidien announced a transaction in June 2014. Except for Bard, which already had a product approved and on the market, Medtronic and Covidien were the only companies with a drug-coated balloon catheter for the femoropopliteal artery in development that had reached the clinical trial stage of the FDA’s approval process. The FTC found that Medtronic’s acquisition ofCovidien likely would reduce competition for drug-coated balloon cathetersfor femoral artery disease by combining the two suppliers most likely to enter the market in the next couple of years and compete with Bard. Thus, in November 2014, the FTC required Medtronic to divest its drug coated balloon catheter in development to another medical device manufacturer, Spectranetics Corporation. The divestiture was also a condition for clearance in the European Union and Canada. Transactions With Only One or a Few Particular Localized Effects Do Not Escape Antitrust Scrutiny While much attention is given to larger transactions and those with the potential for widespread competitive effects, transactions that have anticompetitive effects, even if limited to one very localized geographic market, do not slip by the agencies. Landmark/Ross. 21 In order to complete its acquisition of Ross Aviation, in July 2014, DOJ required Landmark Aviation to divest certain fixed base operator (FBO) assets used to provide flight support services to general aviation customers at Scottsdale Municipal Airport in Arizona. While Landmark operated 40 FBO facilities in the US and Ross operated 19 FBO facilities, DOJ found that the transaction would have combined the only two FBOs serving general aviation customers at Scottsdale Municipal Airport, which likely would have resulted in higher prices and lower quality of services there. Martin Marietta/Texas Industries. 22 Martin Marietta and Texas Industries, manufacturers of aggregate (crushed stone produced in quarries and mines), announced plans to combine in January 2014. DOJ and the Texas State Attorney General found that in parts of Texas, the parties are two of only three suppliers approved by the Texas Department of Transportation and, thus, the proposed merger likely would have resulted in higher prices for customers in these geographic areas. As a result, in June 2014, DOJ and the Texas State Attorney General required divestiture of one Oklahoma quarry and two Texas rail yards that predominately served the Dallas metropolitan area. Surgery Center Holdings/Symbion. 23 In October 2014, the FTC found that Surgery Center’s acquisition of Symbion would result in a loss of competition in the Orange City/Deltona area of Florida. While, for the mostpart,theparties’operationsdidnotoverlap,the transactionwouldcombine theonlytwomulti-specialty ambulatory surgical centers in the Orange City/Deltona areas of Florida leaving only one meaningful alternative toSurgeryPartners’outpatientsurgicalservices.TheFTCrequiredthepartiestodivestSymbion’s Blue Springs Surgery Center in Orange City, Florida, to a Commission-approved buyer. The Agencies Are Concerned About Buyer Concentration Too The antitrust agencies also are concerned about competition between buyers of products. In other words, sellers are entitled to a competitive price for their products. Thus when a merger reduces the number of buyers to a few or only one, enforcement action may result. Tyson Foods/Hillshire. 24 In August 2014, DOJ (and the State Attorneys General for Illinois, Iowa, and Missouri) permitted Tyson to acquire Hillshire Brands subject to Tyson divesting its sow purchasing business. DOJfound that Tyson and Hillshire are both significant purchasers ofsows used for making sausage. Without the divestiture, the combined entity would have accounted for more than one-third of sow purchases from US farmers resulting in diminished competition for the purchase of sows. Grocery Store Consolidation Is Closely Scrutinized The agencies have particular concern with transactions that can lead to higher prices for consumers and, thus, transactions in the grocery store industry are always scrutinized closely. Given the nature of customer shopping patterns, in examining supermarket transactions, the FTC has continued to define the relevant geographic market using fairly local geographies — within approximately a three-to-ten mile radius from the parties’ stores. It also has reaffirmed its long-standing view that supermarkets are a distinct antitrust product market, excluding club, convenience, and other specialty food stores from the relevant product market. Bi-Lo/Delhaize. 25 As a condition of acquiring 154 stores from Delhaize, Bi-Lo agreed to divest 12 supermarkets in Florida, Georgia, and South Carolina to Rowes IGA Supermarkets, HAC, Inc., W. Lee Flowers & Co., Inc. and Food Giant.26 The FTC claimed that the transaction would result in harm to consumers through higher prices, diminished quality and reduced service levels in 11 localized areas in the three states. Healthcare and Pharmaceutical Competition Is a Particular Concern for the Agencies The agencies have long been concerned about healthcare costs for consumers and, as such, pharmaceutical and other healthcare transactions continue to be scrutinized closely.27 Valeant/Precision. 28 In July 2014, the FTC found that Valeant’s acquisition of rival pharmaceutical manufacturer Precision could only proceed if the parties agreed to divest or relinquish the rights to Precision’s branded single-agent topical tretinoins to Actavis, and generic Retin-A (acne treatment drugs) to Matawan Pharmaceuticals. The FTC alleged that the two companies were the only providers of branded and generic single-agent topical tretinoins as well as the only two significant suppliers of generic Retin-A, such that the transaction would eliminate the competition between the parties and give the merged entity a monopoly in four of the five generic versions of the acne medication. Prestige Brands/Insight Pharmaceuticals. 29 In October 2014 the FTC required Prestige to divest the assets and marketing rights for Insight’s over-the-counter motion sickness drug Bonine to Wellspring Pharmaceuticals in order to proceed with its acquisition of Insight. Prestige, the maker of Dramamine, and Insight, the maker ofBonine, were the only two branded motion sickness products with significant sales in the US. The FTC found that the combination as originally proposed would reduce competition and risked higher prices for over the counter motion sickness medication. Thermo Fisher/Life Technologies. 30 Nearly a year after Thermo Fisher agreed to acquire a competing manufacturer of scientific research products, Life Technologies, the FTC approved the transaction subject to Thermo Fisher divesting its siRNA reagents, cell culture media, and sera businesses to GE Healthcare. The FTC found that, as proposed, the combined entity would have more than 50% of the worldwide market for individual siRNA reagents, greater than 90% of the market for siRNA reagent libraries, at least a 50% share of the worldwide market for cell culture media, and a 60% share for cell culture sera. Community Health Systems/Health Management Associates. 31 Community Health and Health Management, two of the largest hospital operators in the US, agreed to divest two hospitals (one in Alabama and one in South Carolina) and related assets (including outpatient facilities) to gain FTC approval of the transaction. The FTC alleged that, as proposed, the transaction would result in a reduction of competition for general acute care inpatient services sold to commercial health plans and provided to commercially insured patients in two local markets that likely would lead to higher prices. GlaxoSmithKline/Novartis. 32 In November 2014, the FTC conditioned GlaxoSmithKline’s (GSK) joint venture with Novartis to sell consumer health care products on Novartis divesting its nicotine cessation product, Habitrol, and its private label patch to Dr. Reddy’s. The parties each manufacture and market a range of consumer health care products in the US, including smoking cessation products — GSK’s nicotine cessation patch, Nicoderm, and Novartis’s competing product, Habitrol. The FTC found that the two companies were the only significant providers of nicotine patches in the US, and a joint venture would have created a conflict of interest, increased the likelihood of coordination, and reduced competition. Eli Lilly/Novartis Animal Health. 33 In December 2014, the FTC permitted, subject to conditions, Eli Lilly’s acquisition of Novartis Animal Health. After an eight-month review, the FTC required Eli Lilly to divest its Sentinel product line and associated assets to French pharmaceutical company Virbac S.A. The FTC alleged that the combination as proposed would reduce competition for canine heartworm medication. It found entry was not likely given the high costs of development for veterinary pharmaceuticals and the products were close substitutes — they are the only two products given orally, contain the same active ingredient, and also treat fleas and other parasites. Broadcast and Media Transactions Also Garner Significant Interest Broadcast and media transactions also receive significant scrutiny given the potential for direct consumer impact. DOJ took action in three such transactions in 2014. Media General/LIN Media. 34 In March 2014, Media General, a broadcast television operator, announced its proposed acquisition of LIN Media. DOJ found that Media General and LIN had competing operationsin a number of geographic areas and required divestiture ofseven stationsin five geographic markets. DOJ alleged that, without the required divestitures, the combined company would control at least a 34% share (and in one case an 83% share) in the affected geographic areas, likely increasing prices to advertisers for spot broadcast television advertisements in each of these areas. Sinclair/Perpetual. 35 DOJ (and the Pennsylvania AG) required Sinclair and Perpetual to divest their interests in an ABC affiliate in Harrisburg, PA in order to proceed with Sinclair’s acquisition of Perpetual. DOJ and the Pennsylvania AG alleged that advertisers viewed the merging stations as relatively close substitutes and that without divestiture, the combined entity would own three of six broadcast television stations in the area, likely leading to significantly increased costs for advertising in the Harrisburg-Lancaster-Lebanon-York, Pennsylvania Designated Marketing Area (DMA) Nexstar/CCA. 36 As in the Sinclair transaction, DOJ required a divestiture of a CBS and FOX affiliate in Evansville, Indiana in order for Nexstar to proceed with its acquisition of Communications Corporation of America (CCA). DOJ alleged that, as proposed, the transaction would allow Nexstar to control three of the four major broadcast networks in Evansville, Indiana, giving it a “dominant” position that likely would allow the combined firm to increase television advertising pricesin the Evansville,Indiana DMA. Other Industries Are Not Immune From Antitrust Scrutiny The agencies review transactions in all sectors of the economy and where the agencies perceive the markets are concentrated or the transaction otherwise is likely to lead to anticompetitive effects, the agencies will take action. �� Ardent Mills Joint Venture. 37 In February 2014, ConAgra, Cargill, and CHS announced the proposed formation of the Ardent Millsjoint venture, which would combine the flour milling assets of ConAgra Mills and Horizon Milling (a joint venture between Cargill and CHS). DOJ alleged that ConAgra and Horizon are two of the three largest flour millers in the US and that the transaction would eliminate head-to-head competition between the parties, leading to an increased likelihood of anticompetitive coordination between flour millers. DOJ also alleged that flour milling capacity would be reduced, which would result in higher prices for hard wheat in Northern Texas, Northern and Southern California, and the Upper Midwest, as well as higher prices for soft wheat in Southern California and Northern Texas. As a result, DOJ required the parties to divest four flour mills. CoreLogic/DataQuick. 38 CoreLogic and DataQuick provide national assessor and recorder bulk data used by real property analysts and statisticians. The FTC alleged that CoreLogic’s acquisition of DataQuick would leave only two providers of this information such that it would increase the risk of anticompetitive coordination between the remaining providers and risk the exercise of market power, likely leading to higher prices. As such, the FTC required CoreLogic to license its proprietary data sets to RealtyTrac. Continental AG/Veyance. 39 Continental, a leading automotive parts manufacturer, agreed to acquire Veyance, a manufacturer of engineered rubber parts for use in industrial, automotive, and military applications. Both companies provide commercial vehicle air springs that provide stability to the suspensions of large trucks and trailers. DOJ found that, as originally proposed, the transaction would result in only two major providers of new springs in North America and a limited number of suppliers for replacement air springs, which likely would have facilitated anticompetitive coordination between the remaining suppliers and risked price increases and quality reductions. In addition, Continental had an exclusive supply agreement with Veyance’s only significant competitor for barrier hoses in North America. Consequently, DOJ required divestiture of Veyance’s air spring business and Continental agreed to waive the exclusivity provision with its barrier hose supplier. The Agencies Continue to Seek Viable Divestiture Packages In formulating divestiture packages, the agencies seek to ensure the buyer of the divested assets will be viable and be sufficient to replace the competition that is lost due to the transaction. In some transactions, therefore, the agencies find it preferable for a stand-alone business to be divested because such assets have already demonstrated an ability to compete — even if it means requiring the divestiture of an entire business that was recently acquired. In others, the agencies attempt to structure the divestiture in a manner that replicates the lost amount of competition.
Ardagh/Saint-Gobain. 40 Over a yearsince the transaction was first announced and nearly nine months after the FTC challenged the transaction in court, in April 2014, the FTC and Ardagh agreed to a settlement that allowed Ardagh to proceed with its acquisition of rival container manufacturer SaintGobain Containers. The parties both manufactured glass containers and the FTC alleged that the combination would have resulted in the combined entity having 85% of the glass container market for brewers and 77% of the market for distillers, which likely would lead to higher prices for customers of glass containers for beer and spirits. Under the settlement, Ardagh agreed to divest all six glass container manufacturing plants, among other assets, it acquired in 2012 through its acquisition of Anchor Glass Container Corporation. Verso/Newpage. 41 Almost a year after the two paper manufacturers announced the transaction, the parties settled with DOJ by agreeing to divest two paper mills — one in Rumsford, Maine and another in Biron, Wisconsin. DOJ alleged the transaction would threaten competition for the manufacture and sale of certain coated paper as the combined share without the divestiture would be 50% for coated freesheet web paper, 40% for coated groundwood paper, and 70% for label paper. The two mills being divested represent approximately the same amount of production that Verso operated at the time of the transaction. Endnotes 1 David Gelfand, Deputy Assistant Attorney General for Litigation, Antitrust Division, U.S. Department of Justice, “Reflections on the Past Year At the Antitrust Division,” Remarks as Prepared for the Global Competition Review Live Conference, 10 (September 16, 2014) (“While we are always prepared to go to court to challenge an anticompetitive merger, success for consumers is not necessarily a blocked transaction. In many instances, the division can achieve success without expending the time and resources involved in protracted litigation through meaningful consent decrees that target only the anticompetitive portions of a deal.”), available at http://www.justice.gov/atr/public/speeches/308619.pdf. 2 For example, Comcast/Time Warner, AT&T/DIRECTV, Family Dollar/Dollar Tree, Reynolds/Lorillard, Trulia/Zillow, Holcim/Lafarge, and Sysco/US Foods are still under review. 3 Complaint, United States v. National CineMedia, Inc., No. 14-CV-8732 (S.D.N.Y. Nov. 3, 2014), available at http://www.justice.gov/atr/cases/f309600/309659.pdf. 4 Bill Baer, Assistant Attorney General Antitrust Division, U.S. Department of Justice, “Remedies Matter: The Importance of Achieving Effective Antitrust Outcomes,” Remarks as Prepared for the Georgetown 7th Annual Global Antitrust Enforcement Symposium (Sept. 25, 2013) (“Litigation is not our preferred option”), available at http://www.justice.gov/atr/public/speeches/300930.pdf. 5 Complaint, Visant Corp., No. 141 0133, (F.T.C. Apr. 17, 2014), available at http://www.ftc.gov/system/files/documents/cases/140417visantcmplt.pdf. 6 Complaint, Verisk Analytics, Inc., No. 141 0085, (F.T.C. Dec. 16, 2014), available at http://www.ftc.gov/system/files/documents/cases/141216veriskcmpt.pdf. 7 Complaint, United States v. National CineMedia, Inc., No. 14-CV-8732 (S.D.N.Y. Nov. 3, 2014), available at http://www.justice.gov/atr/cases/f309600/309659.pdf. 8 Press Release, Department ofJustice, Louisiana-Pacific Corp. AbandonsIts Proposed Acquisition of Ainsworth LumberCo. Ltd. (May 14, 2014), available at http://www.justice.gov/atr/public/press_releases/2014/305936.htm. 9 Press Release, Department of Justice, Flakeboard Abandons Its Proposed Acquisition of SierraPine (October 1, 2014), available at http://www.justice.gov/ atr/public/press_releases/2014/309005.htm. 10 Press Release, Department ofJustice, Embarcadero Technologies And CA Inc. Terminate Proposed Transfer of CA Inc.’s Erwin Data Modeler (November 5, 2014), available at http://www.justice.gov/atr/public/press_releases/2014/309752.htm. 11 United States v. Heraeus Electro-Nite Co., LLC, No. 14-CV-00005 (D.D.C. Jan. 2, 2014), available at http://www.justice.gov/atr/cases/heraeus.html. 12 United States v. Flakeboard Am. Ltd., Case No. 3:14-cv-4949 (N.D. Ca. Nov. 11, 2014), available at http://www.justice.gov/atr/cases/flakeboard.html. 13 Office Depot, Inc., No. 131 0104 (F.T.C. Nov. 1, 2013), available at http://www.ftc.gov/enforcement/cases-proceedings/closing-letters/office-depotincofficemax-inc. 14 Letter from April Tabor, Acting Secretary of the FTC, to Jeffrey Korn, Counsel for The Men’s Wearhouse, Inc. (May 30, 2014), available at http://www. ftc.gov/system/files/documents/closing_letters/mens-wearhouse/jos.bank-clothiers/140530menswearhousecltr.pdf. 15 FTC, “Sometimes Brick & Mortar Competition is Enough,” (May 30, 2014), available at http://www.ftc.gov/news-events/blogs/competition-matters/2014/05/ sometimes-brick-mortar-competition-enough. 16 Actavis, PLC, No. 141 0098 (F.T.C. Sept. 5, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/141-0098/actavis-plc-forest-laboratoriesmatter. 17 Endo Health Solutions, Inc., No. 131 0225 (F.T.C. Mar. 19, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/131-0225/endo-healthsolutions-inc-boca-life-science-holdings-llc-boca. 18 Akorn, Inc., No. 131 0221 (F.T.C. June 20, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/131-0221/akorn-hi-tech-pharmacal-matter. 19 Akorn Inc., No. 141 0162 (F.T.C. Sept. 19, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/141-0162/akorn-inc-matter. 20 Medtronic Inc., No. 141 1807 (F.T.C. Nov. 26, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/141-0187/medtronic-inc-covidienplc-matter. 21 United States v. LM US Corp Acquisition, Inc., No. 14-CV-01291 (D.D.C. Oct. 30, 2014), available at http://www.justice.gov/atr/cases/lmus.html. 22 United States v. Martin Marietta Materials, Inc., No. 14-CV-01079 (D.D.C. Sept. 30, 2014), available at http://www.justice.gov/atr/cases/martin.html.
23 H.I.G. Bayside Debt & LBO Fund II, L.P., No. 141 0183 (F.T.C. Dec. 24, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/141-0183/ hig-bayside-debt-et-al. 24 United States v. Tyson Foods, Inc., No. 14-CV-01474 (D.D.C. Nov. 20, 2014), available at http://www.justice.gov/atr/cases/tyson.html. 25 Lone Star Fund V (U.S.) L.P., No. 131 0161 (F.T.C. Feb. 25, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/131-0162/bi-lo-holdings-llc. 26 On January 15, 2015, the FTCapproved a modified consent decree.Rowe’sIGA subsequently withdrew its commitment to purchase fourstores, and despite efforts by Bi-Lo to market and sell these four stores, it could only find a buyer for one store. As a result, the FTC no longer required the divestiture of the four stores to Rowe’s IGA and required Bi-Lo to sell one store to Sunripe Market. Press Release, FTC, FTC Approves Modified Final Order for Bi-Lo (Jan. 15, 2015), available at http://www.ftc.gov/news-events/press-releases/2015/01/ftc-approves-modified-final-order-bi-lo. 27 Four of the transactions are discussed above — Actavis/Forest Labs, Akorn/VersaPharm, Akorn/Hi-Tech Pharmacal and Endo/Boca Life. 28 Valeant Pharmaceuticals International, Inc., No. 141 0101 (F.T.C. Aug. 21, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/141-0101/ valeant-pharmaceuticals-international-precision-dermatology. 29 Prestige Brands Holdings, Inc., No. 141 0159 (F.T.C. Oct. 15, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/141-0159/prestigebrands-holdings-inc-insight-pharmaceuticals. 30 Thermo Fisher Scientific, Inc., No. 131 0134 (F.T.C. Apr. 2, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/131-0134/thermo-fisherscientific-inc-matter. 31 Community Health Systems, Inc., No. 131 0202 (F.T.C. Apr. 11, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/131-0202/communityhealth-systems-health-management-associates-matter. 32 Novartis AG, No. 141 0141 (F.T.C. Nov. 26, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/141-0141/novartis-ag-matterglaxosmithkline. 33 Eli Lilly and Co., No. 141 0142 (F.T.C. Dec. 22, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/141-0142/eli-lilly-company-novartisag-matter. 34 United States v. Media General, Inc., No. 14-CV-01823 (D.D.C. Oct. 30, 2014), available at http://www.justice.gov/atr/cases/mediageneral.html. 35 United States v. Sinclair Broadcasting Group, Inc., No. 14-CV-01186 (D.D.C. Nov. 25, 2014), available at http://www.justice.gov/atr/cases/sinclair.html. 36 United States v. Nexstar Broadcasting Group, Inc., No. 14-CV-02007 (D.D.C. Nov. 26, 2014), available at http://www.justice.gov/atr/cases/nexstar.html. 37 United States v. ConAgra Foods, Inc., No. 14-CV-00823 (D.D.C. Oct. 02, 2014), available at http://www.justice.gov/atr/cases/conagra.html. 38 CoreLogic, Inc., No. 131 0199 (F.T.C. May 21, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/131-0199/corelogic-inc-matter. 39 United States v. Continental AG, No. 14-CV-02087 (D.D.C. Dec. 11, 2014), available at http://www.justice.gov/atr/cases/continentalag.html. 40 Ardagh Group, S.A., No. 131 0087 (F.T.C. June 18, 2014), available at http://www.ftc.gov/enforcement/cases-proceedings/131-0087/ardagh-group-sasaint-gobain-containers-inc-compagnie-de. 41 United States v. Verso Paper Corp., No. 14-CV-02216 (D.D.C. Dec. 31, 2014), available at http://www.justice.gov/atr/cases/verso.html.