merger

March 2, 2018

Close Coordination Between FTC and EC on Essilor and Luxottica Antitrust Reviews

On March 1, 2018, Essilor International S.A. (“Essilor”) and Luxottica Group S.p.A. (“Luxottica”) announced that the proposed combination between the two companies has been cleared by both the FTC and the EC without conditions.

Critics raised concerns about the merged company’s shutting out competitors, which would leave consumers with fewer options and less freedom of choice. For example, if the merged firm bundles together frames and lenses for sale in its Lenscrafters stores, other lens manufacturers will lose sales. Independent stores might also be left out or excluded from the markets. The concern was not just in these critics’ imagination as Luxottica has a history of shutting out its rivals. Year ago, Luxottica and Oakley had a disagreement about pricing, and Luxottica stopped Oakley’s products in their stores. Oakley’s stock price collapsed, and it was later bought by Luxottica. Critics also claimed the merger eliminated competition between the two companies and ends the possibility of future competition. Essilor had started promoting its own sunglasses and online sales, and Luxottica was beginning its own lens manufacturing. The two firms were expanding into each other’s markets and competing against each others, which would have driven down prices, improved quality, and helped consumers. Given the decisions by the FTC and EC, that competition will never occur.

According to the FTC in its statement to close its investigation of the merger, the evidence did not support a conclusion that Essilor’s proposed acquisition of Luxottica violates federal antitrust laws: “FTC staff extensively investigated every plausible theory and used aggressive assumptions to assess the likelihood of competitive harm. The investigation exhaustively examined information provided by a wide and deep swath of market participants, as well as the parties’ own documents and data. Assessing the likely competitive effects of a proposed transaction is a fact-specific exercise that takes into account the current market dynamics, which may be different in the future. Here, however, the evidence did not support a conclusion that Essilor’s proposed acquisition of Luxottica may be substantially to lessen competition in violation of Section 7 of the Clayton Act.” The FTC vote to close the investigation and issue the closing statement was 2-0.

February 22, 2018

Is the Selective Enforcement Defense Applicable To Antitrust Cases?

by Doyle, Barlow & Mazard PLLC

On February 21, 2018, Judge Leon ruled against AT&T Inc.’s (“AT&T”) ability to discover evidence that would support its selective enforcement defense.

Background

On November 21, 2017, the U.S. Department of Justice’s (“DOJ”) Antitrust Division filed a complaint in federal court block AT&T’s acquisition of Time Warner Inc. (“Time Warner”).

January 28, 2018

DOJ Antitrust Division Improves the Enforceability of its Consent Decrees

by Doyle, Barlow & Mazard PLLC

On January 26, 2018, the head of the Antitrust Division, Makan Delrahim delivered remarks to the NY State Bar where he discussed his views on behavioral remedies and consent decrees.

He noted that the Division’s recent consent decrees reflect several provisions designed to ensure the Division can meaningfully enforce them. Delrahim stated that the DOJ’s approach will be to enter into consent decrees only when the DOJ can effectively enforce them, and when the DOJ enters into consent decrees, to enforce them effectively.

Consent decrees should be used consistent with a view of the Antitrust Division as a law enforcement agency, not a regulatory one. Faced with a violation, the Antitrust Division has an obligation to the public to ensure any settlement contains meaningful relief and that the settling parties obey its terms. He said that “filing a consent decree that would be difficult to enforce certainly minimizes litigation risk and provides for a quick win in the press, but it goes without saying that the unenforceable decree provisions would not vindicate the Division’s duty to protect competition.”

December 20, 2017

Power Buyer Defense Not Enough: FTC Wins PI Hearing Against Sanford Health

by Doyle, Barlow & Mazard PLLC

On December 15, 2017, a federal district court granted the Federal Trade Commission’s (“FTC”) and North Dakota Attorney General’s request for a preliminary injunction against Sanford Health’s proposed acquisition of Mid Dakota Clinic, a large multispecialty group, pending the FTC’s administrative trial on the merits scheduled for January of 2018. FTC v. Sanford Health, et al., Case. No. 1:17-cv-00133 (D. N.D. Dec. 15, 2017).

Background

In June of 2017, the FTC and the North Dakota Attorney General sued to block the merger of the two largest physician groups in Bismarck and Mandan, North Dakota. The FTC alleged that the two groups had based on physician headcount at 75 percent of the physicians for adult primary care physician services, pediatric services, and obstetrics and gynecology services, and 100 percent of the general surgery physician services in the Bismarck-Mandan area. The merger would eliminate competition between them and substantially lessen competition in the four markets.

December 8, 2017

Senator Warren Criticizes Current State of Antitrust Enforcement

by Doyle, Barlow & Mazard PLLC

On December 6, 2017, Senator Elizabeth Warren sharply criticized the state of antitrust enforcement in a speech at the Open Markets Institute.

She said that antitrust enforcers adopted the Chicago School principles, which narrowed the scope of the antitrust laws and allowed mega-mergers to proceed resulting in many concentrated industries. She believes that antitrust enforcers already have the tools to reduce concentrated markets and that they simply must start enforcing the law again.

Senator Warren’s recommendations included stronger merger enforcement, cracking down on anticompetitive conduct and increasing agency involvement in defending competition.

December 7, 2017

Trump’s FTC Challenges Tronox’s Acquisition of Cristal

by Doyle, Barlow & Mazard PLLC

On December 5, 2017, the Federal Trade Commission (“FTC”) issued an administrative complaint challenging Tronox Limited’s proposed acquisition of Cristal, a merger of two of the top three suppliers of chloride process titanium dioxide (“TiO2”) in the North American market.

Background

On February 21, 2017, Tronox inked a deal to buy Cristal for $1.67 billion and a 24% stake in the new entity. The transaction would have created the largest TiO2 company in the world, based on titanium chemical sales and nameplate capacity.

November 30, 2017

Cutting Out the Regulatory Middle-Man: AT&T Responds to DOJ’s Complaint

by Doyle, Barlow & Mazard PLLC

On November 21, 2017, the U.S. Department of Justice (“DOJ”) filed a lawsuit to block AT&T Inc.’s acquisition of Time Warner Inc. The vertical merger, which combines AT&T’s video distribution platform with Time Warner’s programming, could be the first such deal litigated in almost 40 years.

According to the DOJ, the proposed acquisition will result in higher prices for programming, thus harming consumers. The DOJ’s complaint alleges that the merged firm will have the increased ability and incentive to credibly threaten to withhold or raise the price of crucial programming content – such as Time Warner’s HBO, TNT, TBS, and CNN – from AT&T’s multi-channel video programmer distributor (“MVPD”) rivals. At present, Time Warner negotiates with an MVPD to reach a price that depends on each party’s willingness to walk away. But the transaction would change the bargaining leverage such that AT&T/Time Warner would have less to lose from walking away. Or so the DOJ alleges. According to this reasoning, post-merger, if the merged firm and an MVPD are unable to reach an agreement, some customers would switch from their current MVPD to AT&T/DirecTV in order to obtain the sought-after Time Warner content. In addition, the DOJ alleges that AT&T/DirecTV has approximately 25 million subscribers and that there are 18 Designated Marketing Areas (“DMAs”) – out of 210, nationwide – where AT&T/DirecTV has approximately 40% share of the local MVPD market.

However, AT&T’s response indicates that the DOJ’s complaint is a misguided effort to block a pro-competitive deal that poses no real threat to consumers. The DOJ’s theory betrays a lack of understanding of the current and rapidly evolving market for content and distribution. The merged firm will still have a strong financial incentive to license Time Warner’s programming to as many outlets as possible. Because local cable monopolies dominate local markets through the bundling of broadband and MVPD services, AT&T does not have a clear economic incentive to cut off rival video distributors. After all, such a strategy is risky because AT&T might lose more than it gains with only the possibility that a small number of subscribers would switch to AT&T/DirecTV. In fact, consumers are increasingly willing to cut the cord entirely as they look to virtual MVPDs like Sling TV as well as subscription video on demand services (“SVODs”) such as Amazon Prime (80 million U.S. subscribers) and Netflix (109 million subscribers worldwide), demonstrating that the video distribution and content markets have become ever more dynamic – and competitive. And the lines between MVPDs, virtual MVPDs and SVODs are blurring as Amazon Prime recently carried the Titans/Steelers game live. AT&T called out the DOJ for not providing any market analysis or empirical evidence to support its theory that consumers would be harmed.

September 28, 2017

DOJ Protects U.S. Electric Arc Furnace Mill Operators

by Doyle, Barlow & Mazard PLLC

On September 27, 2017, the DOJ announced Showa Denko K.K. (“SDK”) will be required to divest SGL Carbon SE’s (“SGL”) entire U.S. graphite electrodes business in order for SDK to proceed with its proposed $264.5 million acquisition of SGL’s global graphite electrodes business.

According to the DOJ’s complaint, SDK and SGL manufacture and sell large ultra-high power (UHP) graphite electrodes that are used to generate sufficient heat to melt scrap metal in electric arc furnaces. The complaint alleges that SDK and SGL are two of the three leading suppliers of large UHP graphite electrodes to U.S. electric arc furnace steel mills, and that the two firms together have a combined market share of about 56%. The third domestic player has a 22% market share. While the rest of the market share (22%) is held by a number of importers, the DOJ alleged that none of the importers could individually or collectively are in a position to constrain a unilateral exercise of market power.

In the United States, individual EAF customers solicit bids from three domestic producers of large UHP graphite electrodes, and these producers develop individualized bids based on each customer’s Request

September 27, 2017

Does Avoiding a Second Request Mean that Your Deal Is Approved?

by Doyle, Barlow & Mazard PLLC

The answer is No. The fact that your deal avoided a second request investigation does not mean that you are in the clear if your deal substantially lessens competition in a relevant antitrust market.

The Department of Justice’s Antitrust Division (“DOJ”) and Federal Trade Commission (“FTC”) have for years emphasized that they will investigate and challenge consummated transactions that were not initially reviewed or slipped through the cracks if those transactions substantially lessen competition. It does not matter that for one reason or another that merging parties were able to successfully avoid a long drawn out investigation. The DOJ’s lawsuit to block Parker’Hannifin’s acquisition of CLARCOR, Inc. illustrates that the DOJ may open an investigation and challenge a transaction even after it allowed the Hart-Scott Rodino (“HSR”) waiting period to expire. The enforcement action also serves as a reminder that if merging parties do not cooperate with a merger investigation, they risk being sued.

DOJ Sues Parker-Hannifin Seven Months After Allowing it to Close its Acquisition of CLARCOR

September 20, 2017

FTC Cleared Valero Deal But California State AG Successfully Challenged It

by Doyle, Barlow & Mazard PLLC

On September 19, 2017, Valero Corporation (“Valero”) abandoned its acquisition of two northern California bulk petroleum terminals from Plains All American Pipeline (“Plains”) after the California state attorney general filed a lawsuit in the Northern District of California against Valero’s proposed acquisition. The lawsuit was filed on July 8, 2017, a day after the FTC decided not to take any action against the transaction.

Background of Case

Valero is a refiner and retailer of gas in California and through the acquisition, it was seeking to add Plain’s storage and distribution terminals in Richmond and Martinez, California. California alleged that the transaction would allow Valero to control the last independently operated gathering line in the state with available capacity. Part of the state’s argument was that the acquisition would eliminate Plains as a maverick competitor. California alleged that Valero’s acquisition would permit the vertically integrated refiner to reduce competitor access to the distribution terminals, which would result in increased fuel prices at retail gas stations. California alleged that Valero would be able to recoup lost terminal profits (after withholding access from competitors) through a downstream increase in gas prices. California also alleged that once all the fuel terminals were vertically integrated, there would be a higher risk of coordination among Valero and other vertically integrated providers to similarly reduce supply into the terminal and increase prices at gas stations.