The Department of Justice (DOJ) recently sued to dissolve a closed merger that did not require a filing under the Hart-Scott-Rodino (HSR) Act. In the suit, the DOJ seeks to undo Dean Food Company’s April 2009 acquisition of Foremost Farms USA’s Consumer Products Division. The transaction did not have to be cleared with federal antitrust agencies in advance because the purchase price was below the minimum reporting threshold set by the HSR Act. The case involves the acquisition by one milk processor of the plants of a competitor.

The complaint made extensive use of ill-considered internal documents and emails of the parties in which they explicitly discussed the acquired company’s price competition using inflammatory language such as “irrational pricing.” The DOJ seized on this language in alleging that the acquisition reduced competition in the sale of milk to school districts in Wisconsin and the Upper Peninsula of Michigan and reduced competition in the sale of milk to supermarkets, grocery stores and other commercial consumers in those areas as well as in northeastern Illinois. The DOJ is requesting that the court order Dean to divest the assets acquired in the deal, permanently enjoin Dean from reacquiring those assets and require Dean to notify the antitrust authorities prior to any future acquisition of any school milk or fluid milk processing system.

As this case demonstrates, the fact that the HSR Act does not require a transaction to be reported does not immunize it from subsequent scrutiny. The DOJ has the power to challenge deals even after they are consummated (nine months later, in this case) if there is evidence of anticompetitive effects. Therefore, acquirers need to be careful and judicious about the documents they create concerning competitors and potential acquisition targets, even when they do not have HSR reporting obligations. (United States of America, et al. v. Dean Foods Company, Case No. 10-C-0059 (E.D. Wis. filed Jan. 22, 2010))