On August 20, 2009, the DOJ announced that it reached a proposed settlement with Microsemi Corporation requiring the company to divest all of the assets that it acquired from Semicoa Inc. on July 14, 2008. The DOJ investigated the consummated acquisition and filed a civil antitrust suit to force Microsemi to divest the Semicoa assets to restore competition on December 18, 2008. Without this settlement agreement to divest, there would be little or no competition in the development, manufacture and sale of certain semiconductor devices used in military and space programs essential to the security of the United States.
The Antitrust Division filed a proposed settlement in U.S. District Court for the Eastern District of California. The settlement resolves the lawsuit and addresses the DOJ’s competitive concerns with the transaction. The DOJ investigated the transaction even though the transaction was not subject to the Hart-Scott-Rodino Antitrust Improvements Act. As a result, the DOJ did not learn about the transaction until it was already consummated.
These semiconductor devices that were the subject of the investigation are small signal transistors and ultrafast recovery rectifier diodes. They are used to control the flow of electric current. Both small signal transistors and ultrafast recovery rectifier diodes are used in critical military and civil applications ranging from satellites to nuclear missile systems. Highly reliable performance under demanding conditions is essential in these military and space systems, where component failure could result in failure of the mission.
Prior to the acquisition, Microsemi and Semicoa were the only manufacturers of small signal transistors qualified for these applications. In addition, Semicoa and Microsemi were each poised to become qualified for their ultrafast recovery rectifier diodes, which are in critically short supply. The complaint alleged that customers benefitted from robust competition between the two firms, however, that Microsemi’s acquisition of Semicoa’s assets would result in increased prices and slower delivery of critical military components.
The announcment of the settlement and the fact that the DOJ investigated this consummated acquisition is noteworthy for several reasons. First, it demonstrates that the DOJ will investigate a consummated transaction even if it was not HSR reportable. Second, the DOJ can and will challenge a consummated deal if it determines that the deal is anticompetitive. Third, the DOJ has a particular interest in post-acquisition competitive effects of consummated mergers. Fourth, the DOJ will seek a divestiture to remedy an anticompetitive merger. Therefore, parties to a consummated deal, particularly transactions that avoided HSR scrutiny, for whatever reason, should proceed with reasonable caution and monitor closely post-acquisition conduct.