US Competition Law – Merger Enforcement2014 marked another year with a full docket for the DOJ and FTC. The agencies took formal action against 28 transactions in total, with a number

arnoldportercom

2014 Year in Review

Michael B Bernstein Kelly Schoolmeester

US Competition Law ndash Merger Enforcement

US Merger Enforcement - 2014 Year in Review | 2

2014 Statistical Overview 3

2014 Year in Review 4

Increasing Use of Court Challenges 4

The Threat of Litigation Is Enough For Some Parties to Abandon the Transaction 5

The Agencies Challenge Consummated Transactions 6

The Agencies Challenge Unlawful Pre-Merger Coordination and Gun-Jumping 6

The Agencies Scrutinize Transactions on Their Facts And Close Investigations Where the Transaction Does Not Raise Competitive Issues 7

Permitting Transactions With Conditions Is Still the Norm 7

The Agencies Not Only Look at Present Day Competition But Also Focus on Potential Competition Between the Merging Parties 8

Transactions With Only One or a Few Particular Localized Effects Do Not Escape Antitrust Scrutiny 9

The Agencies Are Concerned About Buyer Concentration Too 9

Grocery Store Consolidation Is Closely Scrutinized 10

Healthcare and Pharmaceutical Competition Is a Particular Concern for the Agencies 10

BroadcastandMediaTransactionsAlsoGarnerSignificantInterest 11

Other Industries Are Not Immune From Antitrust Scrutiny 12

The Agencies Continue to Seek Viable Divestiture Packages 12

Table of Contents


US Merger Enforcement - 2014 Year in ReviewAs expected merger enforcement continued to be a top priority for the Department of Justice and Federal Trade Commission (as well as State Attorneys General) in 2014 Brisk deal activity provided the authorities with no shortage of transactions to investigate and the agencies showcased their enforcement agendas by challenging numerous transactions resulting in conditioned approvals or abandoned transactions In doing so DOJandFTChavenotonlysentthemessagethattheyarewillingtolitigatemergerstheyfindproblematicbut have demonstrated their ability to win these cases And this vigorous enforcement is not just reserved to challenging the underlying transaction Rather DOJ and FTC also continue to scrutinize pre-merger conduct and take action against parties engaged in unlawful pre-merger coordination and ldquogun-jumpingrdquo

Despite the aggressive enforcement by DOJ and FTC most transactions however do not raise competitive issues And as discussed below even where antitrust issues are present those transactions are not necessarily destined to be blocked1 As has been typical in recent history most transactions raising antitrust issues are settled with the parties agreeing to divest assets or make commitments to remedy the perceived competitive harm

2014 - Statistical Overview

2014 marked another year with a full docket for the DOJ and FTC

Theagenciestookformalactionagainst28transactionsintotalwithanumberofsignificanttransactionsstill under review2

DOJ took action against 11 transactions (including one that was not reportable under the HSR Act) while the FTC challenged 17 transactions Another three transactions at DOJ were abandoned by the parties at the threat of the authority seeking to enjoin the transaction

The vast majority of these cases -- 25 of the 28 formal actions -- were resolved by consent decree

Structural remedies continue to be the preferred choice over behavioral remedies with divestitures required in 24 of the 25 consent decrees

The FTC continues to require an ldquoup-front buyerrdquo (ie identifying the buyer of the divested assets at the time of the consent) much more often than DOJ In 2014 DOJ required an up-front buyer in only two divestiture situations where the FTC required it in 12 transactions

The DOJ challenged one transaction in court and the FTC challenged two In both FTC cases the parties abandoned the transaction shortly after the actionwasfiledDOJrsquos case againstNationalCinemediaScreenvision is still ongoing 3

The agencies took formal action against 28 transactions in total with a number of significanttransactionsstillunderreview2

The DOJ took action against eleven transactions (including one that was not reportable under the HSR Act) while the FTC challenged 17 transactions Another three transactions at DOJ were abandoned by the parties at the threat of DOJ seeking to enjoin the transaction

The DOJ challenged one transaction in court and the FTC challenged two In both FTCcasesthepartiesabandonedthetransactionshortlyaftertheactionwasfiledDOJrsquoscaseagainstNationalCinemediaScreenvisionisstillongoing 3

The vast majority of these cases mdash 25 of the 28 formal actions mdash were resolved by consent decree



2014 Statistical Overview


Increasing Use of Court Challenges

While the DOJ and FTC have continued to show their willingness to litigate transactions the agencies appear to reserve litigation for those cases that they view as most problematic and where there is either no way to remedy the perceived anticompetitive harm or the parties are unwilling to restructure the transaction as required by the reviewing agency4

JostensAmerican Achievement Corp5 InApril2014shortlyaftertheCommissionvoted4-0tofilean administrative complaint alleging the merger between Jostens and American Achievement Corp (AAC) would violate the antitrust laws and a federal district complaint seeking a preliminary injunction the parties abandoned the transaction The FTC alleged that the merging parties were two of the three largest providers of high school and college class rings compete directly against each other to be selectedbytheschoolandthatthemergedentitywouldbeadominantfirminboththemarketforhigh school class rings and college class rings

VeriskEagleView6 The FTC issued an administrative complaint in December 2014 alleging the acquisition of Verisk by EagleView would violate the antitrust laws The Commission also authorized seeking a temporary restraining order and preliminary injunction in federal district court Verisk and EagleView are providers of rooftop aerial measurement services relied on by insurance providers to calculate the costs of repairing or replacing rooftops The FTC alleged that EagleView already controlled 90oftherelevantmarketandVeriskrsquossubsidiariesprovideditsonlymeaningfulcompetitionasEagleView had successfully forced all other entrants from the market through extensive patent litigation Thepartiesabandonedthetransactionsoonaftertheadministrativecomplaintwasfiled

National CineMediaScreenvision7InNovember2014DOJfiledsuitintheSouthernDistrictofNewYorktoenjoinNationalCineMediarsquosproposedacquisitionofScreenvisionDOJallegedthatthemergerwouldcombinetheonlytwosignificantprovidersofpre-showcinemaadvertisingtomovietheatersand would result in the merged entity serving 88 of all movie theater screens in the US The case is still pending

2014 Year in Review


The Threat of Litigation Is Enough For Some Parties to Abandon the Transaction

A number of recent cases demonstrate that once the DOJ or FTC decides that it is willing to go to court toenjoinatransactionholdingadealtogetherisquitedifficultandthepartiesmaychoosetoabandonthetransactionLitigationaddssignificanttimetothetransactiontimelinemdash time that the parties may not have underthemergeragreementorotherwiseItalsoaddssignificantburdenandfurtherdistractsthebusinessesMoreoverwiththeagenciesrsquorecentsuccessinblockingtransactionsthespecteroflitigationaddsfurtheruncertainty for the merging parties

Louisiana-PacificAinsworth8 In May 2014 after DOJ expressed concerns that the transaction substantiallylessenedcompetitioninthemarketfororientedstrandboard(OSB)inthePacificNorthwestandUpperMidwestLouisiana-Pacific(LP)abandoneditsproposedacquisitionofAinsworthLumberDOJfoundthatLPandAinsworthweretwoofonlyfourprincipalproducersofOSBinthePacificNorthwest and two of only three principal producers of OSB in the Upper Midwest DOJ found that thetransactionwouldnotonlyeliminatehead-to-headcompetitionbutwouldgivethecombinedfirmsignificantmarketsharemdash over 50 in both regions mdash that would better position it to restrict OSB supply as well as coordinate output and pricing decisions with the few other competitors to drive prices above competitive levels

FlakeboardSierraPine9 In October 2014 after DOJ expressed continuing concerns about the anticompetitiveeffectsof the transactiononmediumdensityfiberboard(MDF)customerson theWest Coast Flakeboard abandoned its proposed acquisition of three mills from SierraPine DOJ stated thattheacquisitionwouldcombinetwoofthefoursignificantsuppliersofMDFontheWestCoastresulting in a market share of 58 for thicker and denser grades of MDF sold on the West Coast Moreover DOJ found that Flakeboard and SierraPine were the two closest sellers geographically with the nearest competing mill several hundred miles away

EmbarcaderoCA10 In November 2014 after DOJ expressed concerns about the potential for anticompetitive effects arising from the transaction for users of data modeling software Embarcadero terminateditsproposedacquisitionofCArsquosErwindatamodelerDOJfoundthatEmbarcaderorsquosERStudioproductsandCArsquosErwinproductwereparticularlyclosecompetitorsandthepurchaseoftheseassets would reduce competition on price and functionality


The Agencies Challenge Consummated Transactions

While most transactions are challenged prior to consummation the authorities are not bound to review only mergersthatrequirepre-notificationRatherDOJandFTCbothhavejurisdictiontoreviewconsummatedtransactions and indeed from time to time mdashastheDOJdidin2013withtheBazaarvoicePowerReviewstransaction mdash do investigate and challenge such transactions DOJ challenged one consummated transaction in 2014

Heraeus Electro-NiteMidwest Instrument Company11 Heraeus Electro-Nite closed on its acquisition of certain assets from Midwest Instruments in 2012 The transaction was not reportable under the HSR Act but DOJ subsequently learned of the transaction and opened its investigation DOJ found that prior to the acquisition the parties competed directly on price service and innovation in supplying sensors and instruments to steel manufacturers and that the transaction lessened competition in the market for development production sale and service of single-use sensors used to monitor molten steel in the manufacturing process Together the parties controlled 95 of the market As such almost two years after consummation DOJ required that all of the assets in the US and Mexico acquired by Heraeus from Midwest be divested to Keystone a recent market entrant

The Agencies Challenge Unlawful Pre-Merger Coordination amp Gun-Jumping

In addition to reviewing the merits of proposed transactions DOJ and FTC continue to closely scrutinize pre-merger conduct to ensure there is no unlawful pre-merger coordination between the parties Merging parties therefore should continue to be vigilant to ensure there is no improper pre-merger coordination as such conduct not only subjects the parties to potential legal action but typically can delay approval of the transactionbyshiftingthefocusoftheagencyrsquosinquiryfromanalyzingthetransactiontodeterminingifinformationwassharedinappropriatelyorifatransferofbeneficialcontroloccurred

FlakeboardSierraPine12 In addition to threatening to enjoin the merger between Flakeboard and SierraPine DOJ announced a settlement where the parties agreed to pay $5 million institute an antitrustcomplianceprogramtocomplywiththeFinalOrderfileyearlycompliancereportsfortenyears and provide DOJ with inspection rights in order to resolve a ldquogun-jumpingrdquo violation The DOJ alleged that the parties agreed to close a SierraPine mill and direct former customers to Flakeboard before the merger closed


The Agencies Scrutinize Transactions on Their Facts And Close Investigations Where the Transaction Does Not Raise Competitive Issues

While much has been made of an aggressive antitrust agenda by the US authorities the agencies continue to rigorously analyze each transaction based on its own facts and without preconceived notions Similar to theFTCrsquos clearance of theOfficeDepotOfficeMaxmerger in 201313 the agencies have permitted transactions to proceed without conditions where the parties are able to demonstrate there is unlikely to be an anticompetitive effect

Menrsquos WearhouseJos A Bank14OnlyafewmonthsaftertheFTCclearedtheOfficeDepotOfficeMaxtransactiontheFTCcloseditsinvestigationoftheacquisitionofJosABankbyMenrsquosWearhouseTheFTCscrutinizedthetransactionbetweentheretailersformenrsquostailoredclothingandtuxedorentalsandsomespeculatedthattheFTCrsquosdecisioncouldrestoncompetitionfromonlinesaleswhichwasanimportantargumentinOfficeDepotOfficeMaxRathertheFTCstatedthatldquothedecisionrestedprimarily on the competitive environment among brick-and-mortar stores not competition from online salesrdquo and largely discounted the online market for suits given that most consumers strongly prefer to purchase at a brick-and-mortar store 15 The FTC found that there were many other brick-and-mortar retailersthatsellmenrsquossuitsofsimilarqualityandthatthepartieshaddifferentproductassortmentsthatreflecttheirdifferentcustomerpreferencesWithregardtotuxedorentalstheFTCfoundthatJosABankwasarelativelysmallplayertherewereasignificantnumberoflocalandregionalcompetitorsand national presence was not an important factor for consumers

Permitting Transactions With Conditions Is Still the Norm

The vast majority of transactions are settled by consent decree where the authorities permit the transaction to proceed with conditions typically a structural remedy that requires divestiture of certain assets The agencies not only want to ensure the right set of assets is divested but they want to ensure that the buyer of the divested assets is a viable competitor Thus in some cases mdash more common for the FTC than DOJ mdash an ldquoup-front buyerrdquo (ie identifying the buyers of the divested assets at the time of the consent) is required


The Agencies Not Only Look at Present Day Competition But Also Focus on Potential Competition Between the Merging Parties

Even where the merging parties do not currently compete the agencies may takeactionwheretheybelievethepartieslikelywillcompetesignificantlyin the near future The FTC brought a number of cases with ldquopotential competitionrdquo concerns this past year requiring divestiture of products still in development Although all of these potential competition cases in 2014 werefiledbytheFTCandallrelatedtotransactionsinthepharmaceuticalmedical device space this theory of harm is also considered by DOJ and often applicable in other contexts mdash especially in transactions relating to high-tech products and services

ActavisForest Labs16 Actavis a manufacturer of generic pharmaceuticals agreed to acquire Forest Labs in February 2014 The FTC reviewed the transaction and found that competition for three genericpharmaceuticalswouldbereducedfromthreefirmstotwoforoneproduct(genericdiltiazemhydrochloride)andfromfourfirmstothreefortheothertwoproducts(genericursodioltabletsandgeneric propranolol hydrochloride) In addition the FTC concluded that the transaction would delay the imminent entry of an Actavis product which was the only approved generic of a branded product manufactured by Forest and marketed by GlaxoSmithKline (Lamictal ODT) The FTC required divestiture of the four pharmaceutical products to three up-front buyers

EndoBoca Life17 Nearly seven months after the parties announced the transaction in March 2014 thepartiesagreedtodivesttheirrightstomarketanddistributefourgenericmultivitaminfluoridedrops for children to Sonar Products and sell three other generic drugs in development to Rhodes Pharmaceuticals The FTC found that Endo competed with Boca for four prescription multivitamin dropproductswhereBocawastheexclusivemarketeranddistributorInadditiontheFTCrsquoscomplaintalleged that the proposed acquisition would eliminate future competition in three other generic drug markets where Boca was one of only a small handful of potential future entrants

Akorn EnterprisesHi-Tech Pharmacal18 InApril2014 theFTCapprovedAkornrsquos acquisitionof Hi-Tech Pharmacal on the condition that the parties divest three prescription eye products and two topical anesthetics to Watson Laboratories The FTC alleged that combining the two pharmaceutical companies would result in a reduction from four to three competitors for two generic products (Ciloxan drops and EMLA cream) and three to two for two other generic products (Quixin drops and Xylocaine jelly) In addition the FTC found that future competition would be reduced for generic ilotycin ointment (for bacterial eye infections) as Hi-Tech was poised to enter

AkornVersaPharm19 In August 2014 the FTC announced it was requiring Akorn to divest its Abbreviated New Drug Application for generic injectable rifampin (a tuberculosis drug) that was pending before the Food amp Drug Administration (FDA) to Watson Labs in order to complete its acquisition of VersaPharm VersaPharm was one of three companies that then had approval to sell generic rifampin Akorn was likely to enter the market in the near future The FTC concluded that the acquisition likely would have resulted in Akorn either delaying or foregoing the introduction of its product leading to reduced competition

MedtronicCovidien20 Medical device manufacturers Medtronic and Covidien announced a transaction in June 2014 Except for Bard which already had a product approved and on the market Medtronic and


Covidien were the only companies with a drug-coated balloon catheter for the femoropopliteal artery in developmentthathadreachedtheclinicaltrialstageoftheFDArsquosapprovalprocessTheFTCfoundthatMedtronicrsquosacquisitionofCovidienlikelywouldreducecompetitionfordrug-coatedballooncathetersforfemoral artery disease by combining the two suppliers most likely to enter the market in the next couple of years and compete with Bard Thus in November 2014 the FTC required Medtronic to divest its drug coated balloon catheter in development to another medical device manufacturer Spectranetics Corporation The divestiture was also a condition for clearance in the European Union and Canada

Transactions With Only One or a Few Particular Localized Effects Do Not Escape Antitrust Scrutiny

While much attention is given to larger transactions and those with the potential for widespread competitive effects transactions that have anticompetitive effects even if limited to one very localized geographic market do not slip by the agencies

LandmarkRoss21 In order to complete its acquisition of Ross Aviation in July 2014 DOJ required LandmarkAviationtodivestcertainfixedbaseoperator(FBO)assetsusedtoprovideflightsupportservices to general aviation customers at Scottsdale Municipal Airport in Arizona While Landmark operated 40 FBO facilities in the US and Ross operated 19 FBO facilities DOJ found that the transaction would have combined the only two FBOs serving general aviation customers at Scottsdale Municipal Airport which likely would have resulted in higher prices and lower quality of services there

Martin MariettaTexas Industries22 Martin Marietta and Texas Industries manufacturers of aggregate (crushed stone produced in quarries and mines) announced plans to combine in January 2014 DOJ and the Texas State Attorney General found that in parts of Texas the parties are two of only three suppliers approved by the Texas Department of Transportation and thus the proposed merger likely would have resulted in higher prices for customers in these geographic areas As a result in June 2014 DOJ and the Texas State Attorney General required divestiture of one Oklahoma quarry and two Texas rail yards that predominately served the Dallas metropolitan area

Surgery Center HoldingsSymbion23InOctober2014theFTCfoundthatSurgeryCenterrsquosacquisitionofSymbionwouldresultinalossofcompetitionintheOrangeCityDeltonaareaofFloridaWhileforthemostpartthepartiesrsquooperationsdidnotoverlapthetransactionwouldcombinetheonlytwomulti-specialtyambulatorysurgicalcenters intheOrangeCityDeltonaareasofFloridaleavingonlyonemeaningfulalternativetoSurgeryPartnersrsquooutpatientsurgicalservicesTheFTCrequiredthepartiestodivestSymbionrsquosBlue Springs Surgery Center in Orange City Florida to a Commission-approved buyer

The Agencies Are Concerned About Buyer Concentration Too

The antitrust agencies also are concerned about competition between buyers of products In other words sellers are entitled to a competitive price for their products Thus when a merger reduces the number of buyers to a few or only one enforcement action may result

Tyson FoodsHillshire24 In August 2014 DOJ (and the State Attorneys General for Illinois Iowa and Missouri) permitted Tyson to acquire Hillshire Brands subject to Tyson divesting its sow purchasing


businessDOJfoundthatTysonandHillshirearebothsignificantpurchasersofsowsusedformakingsausage Without the divestiture the combined entity would have accounted for more than one-third of sow purchases from US farmers resulting in diminished competition for the purchase of sows

Grocery Store Consolidation Is Closely Scrutinized

The agencies have particular concern with transactions that can lead to higher prices for consumers and thus transactions in the grocery store industry are always scrutinized closely Given the nature of customer shopping patterns in examining supermarket transactions theFTChas continued todefinethe relevant geographic market using fairly local geographies mdash within approximatelyathree-to-tenmileradiusfromthepartiesrsquostoresItalsohasreaffirmeditslong-standingviewthatsupermarketsareadistinctantitrustproduct market excluding club convenience and other specialty food stores from the relevant product market

Bi-LoDelhaize25 As a condition of acquiring 154 stores from Delhaize Bi-Lo agreed to divest 12 supermarkets in Florida Georgia and South Carolina to Rowes IGA Supermarkets HAC Inc W Lee Flowers amp Co Inc and Food Giant26 The FTC claimed that the transaction would result in harm to consumers through higher prices diminished quality and reduced service levels in 11 localized areas in the three states

Healthcare and Pharmaceutical Competition Is a Particular Concern for the Agencies

The agencies have long been concerned about healthcare costs for consumers and as such pharmaceutical and other healthcare transactions continue to be scrutinized closely27

ValeantPrecision28InJuly2014theFTCfoundthatValeantrsquosacquisitionofrivalpharmaceuticalmanufacturer Precision could only proceed if the parties agreed to divest or relinquish the rights to Precisionrsquosbrandedsingle-agenttopicaltretinoinstoActavisandgenericRetin-A(acnetreatmentdrugs) to Matawan Pharmaceuticals The FTC alleged that the two companies were the only providers ofbrandedandgenericsingle-agenttopicaltretinoinsaswellastheonlytwosignificantsuppliersofgeneric Retin-A such that the transaction would eliminate the competition between the parties and givethemergedentityamonopolyinfourofthefivegenericversionsoftheacnemedication

Prestige BrandsInsight Pharmaceuticals29 In October 2014 the FTC required Prestige to divest the assetsandmarketingrightsforInsightrsquosover-the-countermotionsicknessdrugBoninetoWellspringPharmaceuticals in order to proceed with its acquisition of Insight Prestige the maker of Dramamine andInsightthemakerofBonineweretheonlytwobrandedmotionsicknessproductswithsignificantsales in the US The FTC found that the combination as originally proposed would reduce competition and risked higher prices for over the counter motion sickness medication

Thermo FisherLife Technologies30 Nearly a year after Thermo Fisher agreed to acquire a competing manufacturerofscientificresearchproductsLifeTechnologiestheFTCapprovedthetransactionsubject to Thermo Fisher divesting its siRNA reagents cell culture media and sera businesses to GE Healthcare The FTC found that as proposed the combined entity would have more than 50 of the


worldwide market for individual siRNA reagents greater than 90 of the market for siRNA reagent libraries at least a 50 share of the worldwide market for cell culture media and a 60 share for cell culture sera

Community Health SystemsHealth Management Associates31 Community Health and Health Management two of the largest hospital operators in the US agreed to divest two hospitals (one in Alabama and one in South Carolina) and related assets (including outpatient facilities) to gain FTC approval of the transaction The FTC alleged that as proposed the transaction would result in a reduction of competition for general acute care inpatient services sold to commercial health plans and provided to commercially insured patients in two local markets that likely would lead to higher prices

GlaxoSmithKlineNovartis32 InNovember2014 theFTCconditionedGlaxoSmithKlinersquos (GSK)joint venture with Novartis to sell consumer health care products on Novartis divesting its nicotine cessationproductHabitrolanditsprivatelabelpatchtoDrReddyrsquosThepartieseachmanufactureand market a range of consumer health care products in the US including smoking cessation products mdashGSKrsquosnicotinecessationpatchNicodermandNovartisrsquoscompetingproductHabitrolTheFTCfoundthatthetwocompaniesweretheonlysignificantprovidersofnicotinepatchesintheUSandajointventurewouldhavecreatedaconflictofinterestincreasedthelikelihoodofcoordinationandreduced competition

Eli LillyNovartis Animal Health33 In December 2014 the FTC permitted subject to conditions EliLillyrsquosacquisitionofNovartisAnimalHealthAfteraneight-monthreviewtheFTCrequiredEli Lilly to divest its Sentinel product line and associated assets to French pharmaceutical company Virbac SA The FTC alleged that the combination as proposed would reduce competition for canine heartworm medication It found entry was not likely given the high costs of development for veterinary pharmaceuticals and the products were close substitutes mdash they are the only two products given orally containthesameactiveingredientandalsotreatfleasandotherparasites

Broadcast and Media Transactions Also Garner Significant Interest

Broadcast andmedia transactions also receive significant scrutinygiventhe potential for direct consumer impact DOJ took action in three such transactions in 2014

Media GeneralLIN Media34 In March 2014 Media General a broadcast television operator announced its proposed acquisition of LIN Media DOJ found that Media General and LIN had competing operationsinanumberofgeographicareasandrequireddivestitureofsevenstationsinfivegeographicmarkets DOJ alleged that without the required divestitures the combined company would control at least a 34 share (and in one case an 83 share) in the affected geographic areas likely increasing prices to advertisers for spot broadcast television advertisements in each of these areas

SinclairPerpetual35 DOJ (and the Pennsylvania AG) required Sinclair and Perpetual to divest their interests inanABCaffiliate inHarrisburgPA inorder toproceedwithSinclairrsquos acquisitionofPerpetual DOJ and the Pennsylvania AG alleged that advertisers viewed the merging stations as relatively close substitutes and that without divestiture the combined entity would own three of six broadcasttelevisionstationsinthearealikelyleadingtosignificantlyincreasedcostsforadvertisingin the Harrisburg-Lancaster-Lebanon-York Pennsylvania Designated Marketing Area (DMA)


NexstarCCA36AsintheSinclairtransactionDOJrequiredadivestitureofaCBSandFOXaffiliateinEvansville Indiana in order for Nexstar to proceed with its acquisition of Communications Corporation of America (CCA) DOJ alleged that as proposed the transaction would allow Nexstar to control three of the four major broadcast networks in Evansville Indiana giving it a ldquodominantrdquo position that likely wouldallowthecombinedfirmtoincreasetelevisionadvertisingpricesintheEvansvilleIndianaDMA

Other Industries Are Not Immune From Antitrust Scrutiny

The agencies review transactions in all sectors of the economy and where the agencies perceive the markets are concentrated or the transaction otherwise is likely to lead to anticompetitive effects the agencies will take action

Ardent Mills Joint Venture37 In February 2014 ConAgra Cargill and CHS announced the proposed formationoftheArdentMillsjointventurewhichwouldcombinetheflourmillingassetsofConAgraMills and Horizon Milling (a joint venture between Cargill and CHS) DOJ alleged that ConAgra and HorizonaretwoofthethreelargestflourmillersintheUSandthatthetransactionwouldeliminatehead-to-head competition between the parties leading to an increased likelihood of anticompetitive coordinationbetweenflourmillersDOJalsoallegedthatflourmillingcapacitywouldbereducedwhich would result in higher prices for hard wheat in Northern Texas Northern and Southern California and the Upper Midwest as well as higher prices for soft wheat in Southern California and Northern TexasAsaresultDOJrequiredthepartiestodivestfourflourmills

CoreLogicDataQuick38 CoreLogic and DataQuick provide national assessor and recorder bulk data used byrealpropertyanalystsandstatisticiansTheFTCallegedthatCoreLogicrsquosacquisitionofDataQuickwould leave only two providers of this information such that it would increase the risk of anticompetitive coordination between the remaining providers and risk the exercise of market power likely leading to higher prices As such the FTC required CoreLogic to license its proprietary data sets to RealtyTrac

Continental AGVeyance39 Continental a leading automotive parts manufacturer agreed to acquire Veyance a manufacturer of engineered rubber parts for use in industrial automotive and military applications Both companies provide commercial vehicle air springs that provide stability to the suspensions of large trucks and trailers DOJ found that as originally proposed the transaction would result in only two major providers of new springs in North America and a limited number of suppliers for replacement air springs which likely would have facilitated anticompetitive coordination between the remaining suppliers and risked price increases and quality reductions In addition Continental had anexclusivesupplyagreementwithVeyancersquosonlysignificantcompetitorforbarrierhosesinNorthAmerica ConsequentlyDOJrequireddivestitureofVeyancersquosairspringbusinessandContinentalagreed to waive the exclusivity provision with its barrier hose supplier

The Agencies Continue to Seek Viable Divestiture Packages

In formulating divestiture packages the agencies seek to ensure the buyer of the divestedassetswillbeviableandbesufficienttoreplacethecompetitionthatislostduetothetransactionInsometransactionstherefore theagenciesfinditpreferable for a stand-alone business to be divested because such assets have already demonstrated an ability to compete mdash even if it means requiring the divestiture of an entire business that was recently acquired In others the agencies attempt to structure the divestiture in a manner that replicates the lost amount of competition


ArdaghSaint-Gobain40Overayearsincethetransactionwasfirstannouncedandnearlyninemonthsafter the FTC challenged the transaction in court in April 2014 the FTC and Ardagh agreed to a settlement that allowed Ardagh to proceed with its acquisition of rival container manufacturer Saint-Gobain Containers The parties both manufactured glass containers and the FTC alleged that the combination would have resulted in the combined entity having 85 of the glass container market for brewers and 77 of the market for distillers which likely would lead to higher prices for customers of glass containers for beer and spirits Under the settlement Ardagh agreed to divest all six glass container manufacturing plants among other assets it acquired in 2012 through its acquisition of Anchor Glass Container Corporation

VersoNewpage41 Almost a year after the two paper manufacturers announced the transaction the parties settled with DOJ by agreeing to divest two paper mills mdash one in Rumsford Maine and another in Biron Wisconsin DOJ alleged the transaction would threaten competition for the manufacture and sale of certain coated paper as the combined share without the divestiture would be 50 for coated freesheet web paper 40 for coated groundwood paper and 70 for label paper The two mills being divested represent approximately the same amount of production that Verso operated at the time of the transaction

Endnotes1 DavidGelfandDeputyAssistantAttorneyGeneralforLitigationAntitrustDivisionUSDepartmentofJusticeldquoReflectionsonthePastYearAtthe

Antitrust Divisionrdquo Remarks as Prepared for the Global Competition Review Live Conference 10 (September 16 2014) (ldquoWhile we are always prepared to go to court to challenge an anticompetitive merger success for consumers is not necessarily a blocked transaction In many instances the division can achieve success without expending the time and resources involved in protracted litigation through meaningful consent decrees that target only the anticompetitive portions of a dealrdquo) available at httpwwwjusticegovatrpublicspeeches308619pdf

2 ForexampleComcastTimeWarnerATampTDIRECTVFamilyDollarDollarTreeReynoldsLorillardTruliaZillowHolcimLafargeandSyscoUSFoods are still under review

3 Complaint United States v National CineMedia Inc No 14-CV-8732 (SDNY Nov 3 2014) available at httpwwwjusticegovatrcasesf309600309659pdf4 Bill Baer Assistant Attorney General Antitrust Division US Department of Justice ldquoRemedies Matter The Importance of Achieving Effective Antitrust

Outcomesrdquo Remarks as Prepared for the Georgetown 7th Annual Global Antitrust Enforcement Symposium (Sept 25 2013) (ldquoLitigation is not our preferred optionrdquo) available at httpwwwjusticegovatrpublicspeeches300930pdf

5 Complaint Visant Corp No 141 0133 (FTC Apr 17 2014) available at httpwwwftcgovsystemfilesdocumentscases140417visantcmpltpdf6 Complaint Verisk Analytics Inc No 141 0085 (FTC Dec 16 2014) available at httpwwwftcgovsystemfilesdocumentscases141216veriskcmptpdf7 Complaint United States v National CineMedia Inc No 14-CV-8732 (SDNY Nov 3 2014) available at httpwwwjusticegovatrcasesf309600309659pdf8 PressReleaseDepartmentofJusticeLouisiana-PacificCorpAbandonsItsProposedAcquisitionofAinsworthLumberCoLtd(May142014)available

at httpwwwjusticegovatrpublicpress_releases2014305936htm9 Press Release Department of Justice Flakeboard Abandons Its Proposed Acquisition of SierraPine (October 1 2014) available at httpwwwjusticegov

atrpublicpress_releases2014309005htm10 PressReleaseDepartmentofJusticeEmbarcaderoTechnologiesAndCAIncTerminateProposedTransferofCAIncrsquosErwinDataModeler(November

5 2014) available at httpwwwjusticegovatrpublicpress_releases2014309752htm

11 United States v Heraeus Electro-Nite Co LLC No 14-CV-00005 (DDC Jan 2 2014) available at httpwwwjusticegovatrcasesheraeushtml12 United States v Flakeboard Am Ltd Case No 314-cv-4949 (ND Ca Nov 11 2014) available at httpwwwjusticegovatrcasesflakeboardhtml13 Office Depot Inc No 131 0104 (FTC Nov 1 2013) available at httpwwwftcgovenforcementcases-proceedingsclosing-lettersoffice-depot-

incofficemax-inc 14 LetterfromAprilTaborActingSecretaryoftheFTCtoJeffreyKornCounselforTheMenrsquosWearhouseInc(May302014)available at httpwww

ftcgovsystemfilesdocumentsclosing_lettersmens-wearhousejosbank-clothiers140530menswearhousecltrpdf15 FTC ldquoSometimes Brick amp Mortar Competition is Enoughrdquo (May 30 2014) available at httpwwwftcgovnews-eventsblogscompetition-matters201405

sometimes-brick-mortar-competition-enough16 Actavis PLC No 141 0098 (FTC Sept 5 2014) available at httpwwwftcgovenforcementcases-proceedings141-0098actavis-plc-forest-laboratories-

matter17 Endo Health Solutions Inc No 131 0225 (FTC Mar 19 2014) available at httpwwwftcgovenforcementcases-proceedings131-0225endo-health-

solutions-inc-boca-life-science-holdings-llc-boca18 Akorn Inc No 131 0221 (FTC June 20 2014) available at httpwwwftcgovenforcementcases-proceedings131-0221akorn-hi-tech-pharmacal-matter19 Akorn Inc No 141 0162 (FTC Sept 19 2014) available at httpwwwftcgovenforcementcases-proceedings141-0162akorn-inc-matter 20 Medtronic Inc No 141 1807 (FTC Nov 26 2014) available at httpwwwftcgovenforcementcases-proceedings141-0187medtronic-inc-covidien-

plc-matter21 United States v LM US Corp Acquisition Inc No 14-CV-01291 (DDC Oct 30 2014) available at httpwwwjusticegovatrcaseslmushtml22 United States v Martin Marietta Materials Inc No 14-CV-01079 (DDC Sept 30 2014) available at httpwwwjusticegovatrcasesmartinhtml


23 HIG Bayside Debt amp LBO Fund II LP No 141 0183 (FTC Dec 24 2014) available at httpwwwftcgovenforcementcases-proceedings141-0183hig-bayside-debt-et-al

24 United States v Tyson Foods Inc No 14-CV-01474 (DDC Nov 20 2014) available at httpwwwjusticegovatrcasestysonhtml25 Lone Star Fund V (US) LP No 131 0161 (FTC Feb 25 2014) available at httpwwwftcgovenforcementcases-proceedings131-0162bi-lo-holdings-llc26 OnJanuary152015theFTCapprovedamodifiedconsentdecreeRowersquosIGAsubsequentlywithdrewitscommitmenttopurchasefourstoresanddespite

effortsbyBi-LotomarketandsellthesefourstoresitcouldonlyfindabuyerforonestoreAsaresulttheFTCnolongerrequiredthedivestitureofthefourstorestoRowersquosIGAandrequiredBi-LotosellonestoretoSunripeMarketPressReleaseFTCFTCApprovesModifiedFinalOrderforBi-Lo(Jan 15 2015) available at httpwwwftcgovnews-eventspress-releases201501ftc-approves-modified-final-order-bi-lo

27 Four of the transactions are discussed above mdashActavisForestLabsAkornVersaPharmAkornHi-TechPharmacalandEndoBocaLife28 Valeant Pharmaceuticals International Inc No 141 0101 (FTC Aug 21 2014) available at httpwwwftcgovenforcementcases-proceedings141-0101

valeant-pharmaceuticals-international-precision-dermatology29 Prestige Brands Holdings Inc No 141 0159 (FTC Oct 15 2014) available at httpwwwftcgovenforcementcases-proceedings141-0159prestige-

brands-holdings-inc-insight-pharmaceuticals30 Thermo Fisher Scientific Inc No 131 0134 (FTC Apr 2 2014) available at httpwwwftcgovenforcementcases-proceedings131-0134thermo-fisher-

scientific-inc-matter31 Community Health Systems Inc No 131 0202 (FTC Apr 11 2014) available at httpwwwftcgovenforcementcases-proceedings131-0202community-

health-systems-health-management-associates-matter32 Novartis AG No 141 0141 (FTC Nov 26 2014) available at httpwwwftcgovenforcementcases-proceedings141-0141novartis-ag-matter-

glaxosmithkline33 Eli Lilly and Co No 141 0142 (FTC Dec 22 2014) available at httpwwwftcgovenforcementcases-proceedings141-0142eli-lilly-company-novartis-

ag-matter34 United States v Media General Inc No 14-CV-01823 (DDC Oct 30 2014) available at httpwwwjusticegovatrcasesmediageneralhtml35 United States v Sinclair Broadcasting Group Inc No 14-CV-01186 (DDC Nov 25 2014) available at httpwwwjusticegovatrcasessinclairhtml36 United States v Nexstar Broadcasting Group Inc No 14-CV-02007 (DDC Nov 26 2014) available at httpwwwjusticegovatrcasesnexstarhtml37 United States v ConAgra Foods Inc No 14-CV-00823 (DDC Oct 02 2014) available at httpwwwjusticegovatrcasesconagrahtml38 CoreLogic Inc No 131 0199 (FTC May 21 2014) available at httpwwwftcgovenforcementcases-proceedings131-0199corelogic-inc-matter39 United States v Continental AG No 14-CV-02087 (DDC Dec 11 2014) available at httpwwwjusticegovatrcasescontinentalaghtml40 Ardagh Group SA No 131 0087 (FTC June 18 2014) available at httpwwwftcgovenforcementcases-proceedings131-0087ardagh-group-sa-

saint-gobain-containers-inc-compagnie-de41 United States v Verso Paper Corp No 14-CV-02216 (DDC Dec 31 2014) available at httpwwwjusticegovatrcasesversohtml


Charlotte SimphalAssociate Brussels+32 (0)2 290 7841charlottesimphalaportercom

Michael B BernsteinPartner Washington DC+1 2029425227michaelbbernsteinaportercom

Jonathan GleklenPartner US Practice Chair Washington DC+1 2029425454jonathangleklenaportercom

Marleen Van KerckhovePartner EU Practice Chair Brussels+32 (0)2 290 7817marleenvankerckhoveaportercom

US Contacts EU Contacts

Kelly SchoolmeesterAssociate Washington DC+1 2029425716 kellyschoolmeesteraportercom

Tiiu IversonAssociate Brussels+32 (0)2 290 7860 tiiuiversonaportercom

Arnold amp Porter Contacts

Brussels1 Rue du Marquis ndashMarkiesstraat 1B-1000 BrusselsBELGIUM

+32 (0)2 290 7800

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+1 3038631000

HoustonSuite 1600700 Louisiana StreetHouston Texas 77002-2755

+1 7135762400

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+44 (0)20 7786 6100

Los Angeles44th Floor777 South Figueroa StreetLos Angeles CA 90017-5844

+1 2132434000

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+1 2127151000

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Washington DC555 Twelfth Street NWWashington DC 20004-1206

+1 2029425000

Copyright 2015copy Arnold amp Porter LLP all rights reserved arnoldportercom


2014 Statistical Overview 3

2014 Year in Review 4

Increasing Use of Court Challenges 4

The Threat of Litigation Is Enough For Some Parties to Abandon the Transaction 5

The Agencies Challenge Consummated Transactions 6

The Agencies Challenge Unlawful Pre-Merger Coordination and Gun-Jumping 6

The Agencies Scrutinize Transactions on Their Facts And Close Investigations Where the Transaction Does Not Raise Competitive Issues 7

Permitting Transactions With Conditions Is Still the Norm 7

The Agencies Not Only Look at Present Day Competition But Also Focus on Potential Competition Between the Merging Parties 8

Transactions With Only One or a Few Particular Localized Effects Do Not Escape Antitrust Scrutiny 9

The Agencies Are Concerned About Buyer Concentration Too 9

Grocery Store Consolidation Is Closely Scrutinized 10

Healthcare and Pharmaceutical Competition Is a Particular Concern for the Agencies 10

BroadcastandMediaTransactionsAlsoGarnerSignificantInterest 11

Other Industries Are Not Immune From Antitrust Scrutiny 12

The Agencies Continue to Seek Viable Divestiture Packages 12

Table of Contents

























2014 Year in Review











































































































+32 (0)2 290 7800


+1 3038631000


+1 7135762400


+44 (0)20 7786 6100


+1 2132434000


+1 2127151000


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+1 2029425000


























2014 Year in Review











































































































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+1 7135762400


+44 (0)20 7786 6100


+1 2132434000


+1 2127151000


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+1 6507982920


+1 2029425000








2014 Year in Review











































































































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+44 (0)20 7786 6100


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+1 2029425000



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Documents

US Competition Law – Merger Enforcement2014 marked another year with a full docket for the DOJ and FTC. The agencies took formal action against 28 transactions in total, with a number