Will the FTC Take an Enforcement Action Against a Small Transaction Consummated Years Ago?
On October 12, 2012, the FTC voted 5-0 to approve a consent order resolving competitive concerns related to Magnesium Elektron’s acquisition of Revere Graphics.
In September 2007, Magnesium Elektron acquired the assets of Revere Graphics for $15 million. Magnesium Elektron and Revere Graphics produce magnesium plates for photoengraving.
The FTC was concerned the proposed merger would substantially lessen competition and create a monopoly in the market for magnesium plate production.
To resolve the FTC’s concerns, Magnesium agreed to sell intellectual property and technical know-how used to manufacture the magnesium plates to Universal Engraving Inc.
The challenge is noteworthy for several reasons. First, the challenge reiterates that the FTC is serious about enforcing the antitrust laws against small mergers that do not meet the HSR thresholds. Second, it demonstrates that completed deals that slip beneath the FTC’s radar screen initially are fair game even if the FTC learns about them several years later. Third, the fact that a deal is not HSR reportable does not mean that no antitrust issues exist with the combination. Here, the acquisition was for only $15 million. Fourth, the FTC can and will challenge consummated deals if it determines that the deals are anticompetitive. Fifth, the FTC has a particular interest in post-acquisition competitive effects of consummated mergers.
Therefore, parties to a consummated transactions that raise significant competition issues and avoided HSR scrutiny, for whatever reason, should proceed with reasonable caution and closely monitor post-acquisition conduct. Moreover, corporate and private counsel should be aware of the likely consequences and the risks of consummating transactions that raise significant competitive issues. The risks may include: defending against costly and lengthy government investigations; reorganizing because of the FTC’s demands to divest even after integration has taken place; disgorging profits gained form the alleged anticompetitive merger; and reorganizing because of the FTC’s demands to suspend non-compete agreements that would allow important employees of the business to obtain other employment.