Antitrust Lawyer Blog Commentary on Current Developments

DOJ Requires Divestitures Allowing International Paper to Acquire Temple-Inland

On February 10, 2012, the Department of Justice (“Department”) entered into a settlement that allows International Paper to acquire Temple-Inland. The settlement agreement requires International Paper and Temple-Inland Inc. to divest three containerboard mills in order to proceed with their $4.3 billion merger. The Department said that the merger, as originally proposed, would have substantially lessened competition in the production and sale of containerboard, the type of paper used to make corrugated boxes, in the United States. The following mills are to be sold: (1) both the New Johnsonville Mill and the Ontario Mill, AND (2) either the Port Hueneme Mill or the Henderson Mill, but not both mills.
According to the Department's complaint and competitive impact statement, International Paper and Temple-Inland are, respectively, the largest and third-largest producers of containerboard in North America, the designated relevant geographic market. The merger, as originally proposed, would have produced a single firm in control of approximately 37 percent of North American containerboard capacity. That level of market share combined with the Department's showing a Herfindahl-Herschman Index (“HHI”) increase of approximately 605 (demonstrating an increased market concentration) exceed the levels that courts have found to create a presumption that the proposed merger would likely substantially lessen competition. The Department also argued that because of the close relationship between market price and industry output in the containerboard industry, the merger if allowed without conditions was likely to cause International Paper to unilaterally decrease output in order to raise the market price of containerboard.

Melody Cheung
(202) 589-1834
mcheung@dbmlawgroup.com