Recent Merger and Acquisition Activity at DOJ and FTC
In the past month, the Federal Trade Commission (FTC) and Department of Justice (DOJ) have blocked or required substantial divestitures in a number of noteworthy transactions, perhaps reflecting the stepped-up merger enforcement both agencies have identified as a priority.
- Bemis/Alcan – On Feb. 25, 2010, the DOJ approved Bemis Co. Inc.’s $1.2 billion acquisition of Alcan Packaging Food Americas, but required Alcan to divest certain assets, including its flexible packaging business, which generates approximately $100 million in annual sales. Without the divestiture, the DOJ claimed the acquisition would “have lessened the vigorous competition that currently exists among suppliers of flexible packaging for natural cheese and fresh meat.”
- Election Systems & Software Inc. – On March 8, 2010, the DOJ and nine state attorneys general announced they had settled a lawsuit challenging the acquisition of Premier Election Solutions, Inc., requiring substantial divestitures of virtually all of Premier’s assets and intellectual property. This settlement is particularly noteworthy because the DOJ did not begin its investigation of this transaction until after the companies had combined assets and dismantled many of Premiere’s divisions, because the size of the transaction fell well below the Hart-Scott-Rodino reporting threshold.
- Blue Cross Blue Shield of Michigan – Also on March 8, 2010, the DOJ announced that Blue Cross Blue Shield of Michigan had abandoned its plans to purchase Physicians Health Plan of Mid-Michigan, after the DOJ informed the parties it would file an antitrust suit to block the acquisition. According to the DOJ, the acquisition would have given Blue Cross Blue Shield of Michigan a 90 percent market share in the Lansing, Mich., area. The companies stated they initially believed the deal would go through without incident.
- Polypore International Inc. – Again on March 8, 2010, an FTC administrative law judge found that Polypore International Inc.’s consummated acquisition of a rival battery separator manufacturer, Microporous L.P., was anticompetitive, and violated federal law. In his decision, the administrative law judge ordered Polypore to divest Microporous to an FTC-approved buyer. The FTC had filed an administrative complaint challenging the deal in September 2008, and a one-month trial was held in May 2009. Polypore has announced it intends to appeal the administrative law judge’s decision.
Criminal Fines Issued in Packaged-Ice Price-Fixing Conspiracy
In February and March 2010, two more companies were sentenced in connection with their participation in a conspiracy to suppress and eliminate competition by allocating packaged-ice customers and territories in the Detroit metropolitan area and southeastern Michigan. Arctic Glacier International Inc. and Home City Ice Company each pleaded guilty to one count of criminal conspiracy to restrain trade, and each was fined $9 million.
Each company is still facing putative class actions by direct and indirect purchasers, as well as actions by several states’ attorneys general.
EU Developments
The European Commission makes regular use of its “commitments” procedure under Article 9 of EC Regulation 1/2003 in order to settle competition law investigations. When adopted, the procedure was not expected to be used regularly. However, its flexibility, relative speed, and the fact that no infringement decision is made (upon which third-party actions can be based) or fine imposed has resulted in it becoming a key tool for the Commission outside the cartel sphere. The most recent case involving Microsoft (concerning alleged tying of Internet Explorer to Windows) was settled using commitments.
The Commission is currently market testing proposed commitments received from Italian natural gas supplier ENI and members of the Oneworld airline alliance. The ENI case was launched in the wake of the Commission’s energy sector inquiry, following concerns that ENI’s behavior was blocking competitors’ access to the transport infrastructure needed to import gas into Italy to the detriment of consumers.
The Commission was concerned that, in doing so, ENI could be in breach of EU rules regarding abuse of a dominant market position. ENI has proposed structural remedies that effectively mean the full divestiture of all of ENI’s shares in all gas transport pipelines in relation to which the Commission has competition concerns.
In April 2009, the Commission opened proceedings in relation to its concerns under Article 101 TFEU (the EU prohibition on anti-competitive agreements) about agreements between British Airways, American Airlines, and Iberia. Pursuant to these agreements, the parties intend to jointly manage schedules, capacity, and pricing, as well as share revenues on transatlantic routes between North America and Europe. They have now offered commitments in order to alleviate the Commission’s concerns.
In particular, they have offered to make available landing and take-off slots at London Heathrow or London Gatwick airports on routes to Boston, New York, Dallas and Miami. There are also related proposals concerning operating authorizations at New York’s JFK airport, access to the frequent flyer programs on the relevant routes, and arrangements enabling competitors to offer tickets on the parties’ flights and facilitate access to connecting traffic.