Agency Says Companies Closed Deal Without Antitrust Clearance
The Federal Trade Commission has negotiated an agreement with the German firm, Mahle GmbH, to prevent the firm from exercising any control over its competitor, Metal Leve S.A., of Brazil, in which Mahle acquired a controlling interest in June without first filing for U.S. antitrust review. Both firms manufacture diesel engine parts, including pistons, through U.S. subsidiaries -- Mahle, Inc., located in Morristown, Tennessee; and Metal Leve, Inc., based in Ann Arbor, Michigan, respectively. The “hold separate” agreement negotiated by the FTC prevents immediate anticompetitive effects and preserves the agency’s ability to prevent higher prices or other anticompetitive effects and to maintain competition should its investigation of the acquisition determine that it violates U.S. antitrust laws. Federal law also provides for the possibility of civil penalties against firms that fail to file for antitrust review before going ahead with deals that meet certain thresholds.
According to the hold separate agreement, Mahle entered into a purchase agreement to acquire 50.1 percent of Metal Leve S.A. on June 11, and consummated the deal on or before June 26 without first filing notification with the FTC and the Department of Justice. The Hart-Scott-Rodino Act (HSR Act) requires companies under certain conditions to file such a notification and then to wait a specified time while one of the two agencies reviews the transaction. If it believes the action would substantially reduce competition in any market in violation of antitrust laws, the reviewing agency can attempt to block or modify the deal before the companies mingle assets and injure competition. Companies in violation of the HSR Act can be subject to civil penalties of up to $10,000 per day. The FTC said Mahle did not file its HSR notification until July 22.
At that time, the Commission opened an investigation of the transaction to determine whether it violates the Clayton Act or the FTC Act. That investigation is ongoing and the hold separate agreement negotiated by the FTC prevents any anticompetitive effects from the acquisition and preserves the agency’s ability to restore Metal Leve as a viable competitor should the agency determine the transaction is illegal. The hold separate agreement:
- prohibits Mahle and Metal Leve from exchanging confidential information;
- requires Mahle to place its shares of Metal Leve in trust and prohibits it from directing the voting of those shares;
- prohibits Metal Leve from paying dividends to Mahle;
- prohibits Mahle employees or agents from participating in any manner in the conduct of Metal Leve’s business or attempting to influence Metal Leve; and
- prohibits Mahle and Metal Leve from running down Metal Leve or its U.S. subsidiary as a competitor.
This is the first time the FTC has announced a hold separate agreement on a pending HSR Act filing after an acquisition was consummated in violation of the Act. The hold separate agreement is effective until the expiration of the HSR waiting period (after Mahle and Metal Leve supply information requested by the agency) or until it is overtaken by an FTC law enforcement action to remedy any anticompetitive effects of the acquisition. The agreement also contains provisions to ensure that employees and agents of both firms are aware of its requirements and prohibitions, and to assist the FTC in monitoring the firms’ compliance.
The Commission vote to approve the hold separate agreement was 5-0.
Copies of the agreement are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov
Bureau of Competition
George S. Cary,
M. Howard Morse,
Daniel P. Ducore,
(FTC File No. 961 0085)
Office of Public Affairs
202-326-2161 or 202-326-2180