On July 28, 2010, the FTC entered into a settlement agreement with Australian based Nufarm Limited (“Nufarm”) regarding its March 5, 2008 acquisition of all of the shares of United Kingdom-based A.H. Marks Holding Limited (“A.H. Marks”).
Both companies held or had access to regulatory approvals from the United States Environmental Protection Agency (“EPA”) to sell certain herbicides in the United States: MCPA, MCPP-p, and 2,4DB. These herbicides are relied upon by farmers, landscapers, and consumers. Before the transaction, both Nufarm and A.H. Marks sold the raw herbicides to agricultural formulators who used them to make formulated herbicides.
The FTC alleged that the acquisition resulted in Nufarm obtaining monopoly of two phenoxy herbicide markets (MCPA and MCPP-p) and reduced a third market (2,4DB) to a duopoly. Furthermore, FTC alleged that the merger would result in higher prices and other anticompetitive effects, because there are no comparable substitutes on the market for these three herbicides.
To resolve the anticompetitive concerns, the FTC entered into a consent order with Nufarm, in which Nufarm agreed to sell certain rights and assets associated with two of the herbicides to competitors and modify some of its business agreements with two other companies to allow them to fully compete in the market. The FTC vote approving the complaint and proposed settlement order was 4-0, with Commissioner Edith Ramirez recused.
The challenge is noteworthy for several reasons. First, the challenge reiterates that the FTC is serious about enforcing the antitrust laws against consummated mergers. 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 later. Third, the FTC has a particular interest in post-acquisition competitive effects of consummated mergers.
Therefore, parties to a consummated deal that raise significant antitrust 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.