Legal Library: Cases and Proceedings

German cement producer HeidelbergCement AG and Italian producer Italcementi S.p.A. agreed to divest a cement plant in Martinsburg, WV and up to 11 cement distribution terminals in six other states to settle charges that their proposed $4.2 billion merger would likely harm competition in five regional markets for cement in the United States. Heidelberg and Italcementi are the second and fourth largest producers of cement in the world, and in the United States, the two companies compete through their respective U.S. subsidiaries, Lehigh Hanson and Essroc Cement Corp., to sell portland cement – an essential ingredient in making concrete. According to the FTC complaint, the merger as proposed would harm competition for portland cement in five metropolitan areas: Baltimore-Washington, DC; Richmond, Virginia; Virginia Beach-Norfolk-Newport News, Virginia; Syracuse, New York; and Indianapolis, Indiana. In each of these markets, the FTC alleges the merger as originally proposed would have reduced the number of competitively significant suppliers from three to two. The proposed consent agreement requires the merged company to divest to an FTC-approved buyer an Essroc cement plant and quarry in Martinsburg, West Virginia; seven Essroc terminals in Maryland, Virginia and Pennsylvania; and a Lehigh terminal in Solvay, New York. At the buyer’s option, the order also requires the merged company to divest two additional Essroc terminals in Ohio. Under the proposed order, these divestitures must occur within 120 days after the merger is complete. In addition, the merged company has ten days after the merger is complete to divest Essroc’s terminal in Indianapolis to Cemex, Inc.

Energy companies Energy Transfer Equity, L.P. (“ETE”), and The Williams Companies, Inc., agreed to divest Williams’ interest in an interstate natural gas pipeline to proceed with ETE’s proposed acquisition of Williams. According to the complaint, the proposed merger, if consummated, would have reduced competition in the market for “firm” – i.e., guaranteed – pipeline capacity to deliver natural gas to points within the Florida peninsula. In Florida, natural gas is extensively used for electric power generation, making competitive access to constant and reliable sources of supply critical. The complaint alleges that absent a remedy, the acquisition would eliminate the competition between FGT and Gulfstream, which historically has enabled Florida customers to obtain lower transportation rates and better terms of service. It also would have resulted in a pipeline monopoly at many natural gas delivery points within the peninsula.  The complaint also alleges that the proposed merger likely would harm future competition from a new interstate pipeline, Sabal Trail Transmission LLC, which is scheduled to start transporting natural gas to parts of the Florida peninsula in May 2017. According to the complaint, Sabal Trail and its future customers will rely on leased access to a segment of the Transco Pipeline, a Williams-owned, large interstate pipeline, for natural gas supply. The complaint alleges that the newly merged company would have an incentive to deny Sabal Trail additional capacity expansions on Transco because ETE’s FGT pipeline is a closer competitor to Sabal Trail than was Williams’ Gulfstream pipeline.

Ball Corporation has agreed to sell to Ardagh Group S.A. eight U.S. aluminum can plants and associated assets in order to settle charges that its proposed $8.4 billion acquisition of Rexam PLC is likely anticompetitive. According to the complaint, the acquisition would eliminate direct competition in the United States between Ball and Rexam, which are the first and second largest manufacturers of aluminum beverage cans in both the United States and the world. The complaint alleges without a divestiture, it is likely that the proposed merger would substantially lessen competition for standard 12-ounce aluminum cans in three regional U.S. markets – the South and Southeast, the Midwest, and the West. The complaint also alleges that the proposed merger would substantially lessen competition for specialty aluminum cans nationwide. Ball and Rexam produce specialty aluminum cans that range in size from 7.5 ounces to 24 ounces, come in different shapes, and are used to market a wide variety of different products such as portioncontrolled drinks and energy drinks. Under the terms of the consent agreement, Ball and Rexam are required to divest eight aluminum can plants and related assets in the United States to Ardagh, one of the world’s largest producers of glass bottles for the beverage industry and metal cans for the food industry. Ardagh will acquire aluminum can body plants in Fairfield, Calif., Chicago, Ill., Whitehouse, Ohio, Fremont, Ohio, Winston-Salem, N.C., Bishopville, S.C., and Olive Branch, Miss., and Rexam’s aluminum can end plant located in Valparaiso, Ind.. Ardagh also will acquire Rexam’s U.S. headquarters in Chicago, Ill., and Rexam’s U.S. Technical Center in Elk Grove, Ill.

The FTC filed an administrative complaint charging that the proposed $982 million merger of Canadian chemical suppliers Superior Plus Corp. and Canexus Corp. would violate the antitrust laws by significantly reducing competition in the North American market for sodium chlorate – a commodity chemical used to bleach wood pulp that is then processed into paper, tissue, diaper liners, and other products. Superior and Canexus are two of the three major producers of sodium chlorate in North America. If the merger takes place, the new company and rival AkzoNobel will control approximately 80 percent of the total sodium chlorate production capacity in North America.  By combining more than half of all North American sodium chlorate production capacity in the merged Superior and Canexus, the acquisition is likely to lead to anticompetitive reductions in output and higher prices, the complaint alleges. Additionally, by removing Canexus as an independent sodium chlorate producer, with its large scale and low-costs, the acquisition will also increase the likelihood of coordination in an already vulnerable market, according to the complaint.  The FTC also authorized staff to seek a temporary restraining order and a preliminary injunction in federal court to prevent the parties from consummating the merger and to maintain the status quo pending the administrative proceeding. The FTC and the Canadian Competition Bureau collaborated in this investigation.  On June 30, the parties abandoned their plans.

Keystone Orthopaedic Specialists, LLC, an orthopedic practice formed through a combination of six independent orthopedic practices, agreed to settle charges that the merger substantially reduced competition for orthopedic services in Berks County, Pennsylvania. The complaint also names Orthopaedic Associates, one of the six practices that merged into Keystone in 2011, which was split off from Keystone in 2014. Under the terms of the settlement, Keystone and Orthopaedic Associates are required to obtain prior approval from the Commission before acquiring any interests in each other, before acquiring another orthopedic practice in Berks County, and before hiring or offering membership to an orthopedist who has provided services in Berks County in the past year. The settlement is designed to maintain competition in the relevant market by preserving Orthopaedic Associates’ separation, and allowing health plans to avail themselves of current market conditions by renegotiating existing Keystone contracts.

On 4/20/2011, the FTC challenged Phoebe Putney Health System, Inc.’s (Phoebe’s) proposed acquisition of rival Palmyra Park Hospital, Inc. (Palmyra) from HCA, in Albany, Georgia. The FTC’s administrative complaint alleges that the deal will reduce competition significantly and allow the combined Phoebe/Palmyra to raise prices for general acute-care hospital services charged to commercial health plans, substantially harming patients and local employers and employees. The FTC also alleges that Phoebe has structured the deal in a way that uses the Hospital Authority of Albany-Dougherty County (the Authority) in an attempt to shield the anticompetitive acquisition from federal antitrust scrutiny under the “state action” doctrine. The FTC’s staff, together with the Attorney General of the State of Georgia, filed a separate complaint in federal district court in Albany, Georgia, seeking an order to halt any transaction involving Phoebe, the Authority, or Palmyra, under which Phoebe would acquire control of Palmyra’s operations, until the conclusion of the FTC’s administrative proceeding and any subsequent appeals. On 2/19/2013, the Supreme Court reversed the judgment of the Court of Appeals and remanded further proceedings.  On June 27, 2011, the district court denied the motion for a preliminary injunction on the grounds that the transaction was protected by the state action doctrine.  On December 14, the Eleventh Circuit affirmed.  In February 2013, the Supreme Court reversed, finding that the state of Georgia had not clearly articulated a policy that would permit the Hospital Authority to approve anticompetitive mergers.

On 3/14/2013, the Commission issued an order granting complaint counsels motion to lift the stay on administrative proceedings. On 4/9/2013, an amended complaint and renewed motions for a PI and TRO were filed in federal district court in Georgia, pending an 8/5/2013 administrative trial. On 5/15/2013, the U.S. District Court for the Middle District of Georgia granted the FTC’s motion for a temporary restraining order. On 6/25/2013, the Commission granted the motion to withdraw the matter from Part III, and accepted for public comment a proposed settlement of its charges. Due to the unique circumstances of the Certificate of Need (CON) laws in Georgia, the Commission originally believed it was unable to require that the hospitals become independent competitors. On 9/5/2014, based on public comments received, as well as other information, the Commission determined that Georgia’s CON laws may not preclude structural relief, and voted to withdraw its acceptance of the proposed consent agreement and return the matter to administrative litigation. On 3/31/15, the FTC entered into a settlement agreement requiring Phoebe Putney and the Hospital Authority must notify the FTC in advance of acquiring any part of a hospital or a controlling interest in other healthcare providers in the Albany, Georgia area for the next 10 years, and prohibiting them from objecting to regulatory applications made by potential new hospital providers in the same area for up to five years. The settlement is similar to the one proposed in 2013 and does not require structural relief.

Eli Lilly and Company agreed to divest its Sentinel product line of medications for treating heartworm disease in dogs in order to settle FTC charges that its proposed $5.4 billion acquisition of Novartis Animal Health would likely be anticompetitive. Under the settlement, Eli Lilly will divest its Sentinel product line and associated assets to the French pharmaceutical company, Virbac S.A. The FTC’s complaint challenging the transaction alleges that the proposed acquisition would be anticompetitive and lead to higher prices. According to the complaint, Eli Lilly’s Trifexis and Novartis Animal Health’s Sentinel products are particularly close substitutes because they are the only two products that are given orally once a month, contain the same active ingredient, and also treat fleas and other internal parasites in dogs.

The Commission challenged Schering-Plough’s proposed $41.4 billion acquisition of Merck & Co., and required divestitures to preserve competition in markets for human and animal pharmaceuticals. The proposed consent order requires that Merck sell its interest in Merial Limited, an animal health joint venture with Sanofi-Aventis S.A., and that Schering-Plough sell its assets related to significant drugs for nausea and vomiting in humans.

Valeant Pharmaceuticals International, Inc. and Precision Dermatology, Inc. agreed to sell or relinquish rights to Precision’s branded single-agent topical tretinoins and generic Retin-A, common acne treatments, to settle FTC charges that Valeant’s proposed $475 million acquisition of Precision would likely be anticompetitive. According to the FTC complaint, Valeant’s proposed acquisition of Precision would likely reduce competition in the market for branded and generic single-agent topical tretinoins, and in a separate market for generic Retin-A. The proposed consent order requires Valeant to sell Precision’s assets related to Tretin-X, its branded single-agent topical tretinoin, to Actavis, Inc., and Precision’s assets related to generic Retin-A to Matawan Pharmaceuticals LLC, a subsidiary of Rouses Point Pharmaceuticals.

Fidelity National Financial, Inc. agreed to settle charges that its proposed $2.9 billion acquisition of Lender Processing Services, Inc. (LPS) would likely substantially lessen competition by combining the firms’ title plant assets in several local markets in Oregon. To preserve competition, the proposed settlement requires Fidelity to sell a copy of LPS’s title plants in six Oregon counties and an ownership interest equivalent to LPS’s share of a jointly owned title plant in the Portland, Oregon, metropolitan area.

The FTC challenged Ardagh Group, S.A.’s proposed $1.7 billion acquisition of Saint-Gobain Containers, Inc., alleging that it will reduce competition and result in the two firms – the merged firm and its only remaining significant competitor, Owens-Illinois – controlling in excess of 75 percent of the U.S. markets for glass containers for beer and spirits customers, resulting in higher prices for those customers. The FTC issued an administrative complaint against the two companies, alleging that the acquisition would violate U.S. antitrust law. The proposed acquisition would combine the second-largest manufacturer of glass containers (Saint-Gobain) and the third-largest (Ardagh).The complaint alleges that glass container competitors possess a wealth of information about each other and the glass container industry, and that reducing the number of major competitors from three to two will make it substantially easier for the remaining two competitors to coordinate with one another to achieve supracompetitive prices or other anticompetitive outcomes. The Commission also filed a motion for a preliminary injunction in federal court to preserve the status quo pending the outcome of the administrative trial on the merits.  On 11/3/13, the parties stipulated to a hold separate order in the federal court proceeding.   On 11/8/13 the Commission stayed the part 3 litigation pending settlement discussions. On 4/10/14, Ardagh Group SA agreed to sell six of its nine glass container manufacturing plants in the United States to settle the FTC's charges. The FTC’s settlement order requires Ardagh to sell six of the manufacturing plants and related assets it acquired through its 2012 acquisition of Anchor Glass Container Corporation, along with Anchor’s former corporate headquarters in Tampa, Fla.