A federal appeals court has upheld the FTC’s 2005 decision that condemned construction firm Chicago Bridge & Iron Co.’s (CB&I) acquisition of certain assets of rival Pitt-Des Moines, Inc. (PDM). The FTC found that the acquisition eliminated competition in the market for field-erected industrial and water storage tanks and other specialized steel-plate structures, in violation of Section 7 of the Clayton Act and Section Five of the Federal Trade Commission Act. On January 25, 2008 the US Court of Appeals for the Fifth Circuit denied CB&I’s petition to review the FTC’s decision.
The FTC filed an administrative complaint against CB&I immediately following the company’s 2001 acquisition of assets from PDM. According to the complaint, CB&I and PDM competed as the two leading producers of various types of field-erected industrial storage tanks including (i) liquefied natural gas storage tanks; (ii) liquefied petroleum gas storage tanks; (iii) liquid atmospheric gas storage tanks; and (iv) thermal vacuum chambers. In 2003, an FTC administrative law judge found that CB&I’s acquisitions were unlawful and ordered that PDM’s assets be divested. Reviewing the administrative law judge’s decision, the full Commission affirmed, except with respect to the relief prescribed. To restore lost competition the FTC ordered CB&I to create two self-sufficient divisions capable of competing in each of the affected markets, and to divest one.
On appeal, the Fifth Circuit affirmed the FTC’s decision. It determined that the agency correctly applied the legal standards of burdens of proof and persuasion, and properly analyzed evidence of “potential entry” in declining CB&I’s assertion that entry would be sufficient to counteract any anticompetitive effects of the acquisitions. Finally, the court upheld the FTC’s remedy as neither overbroad nor punitive, and denied CB&I’s claim that the agency should have conducted a separate evidentiary hearing before deciding on the remedy imposed.