Legal Library: Cases and Proceedings

Entrepreneur Mitchell P. Rales agreed to pay $720,000 in civil penalties to resolve charges that he violated the Hart-Scott-Rodino Act by failing to report his purchases of shares in two industrial companies, Colfax Corporation and Danaher Corporation.  The FTC alleged that Rales violated the HSR Act by failing to file as required when his wife purchased shares in Colfax in 2011. The shares, which are attributed to Rales under the applicable HSR Rules, were above the filing threshold. According to the complaint, Rales was in violation of the HSR Act from 2011, when the shares were purchased, to 2016, when he made a corrective filing and observed the waiting period. The complaint also alleged that in 2008, Rales violated the HSR Act by buying shares of Danaher that exceeded the filing threshold and failing to file. Rales was in violation of the HSR Act between 2008, when he bought the shares, and 2016, when he made a corrective filing and observed the waiting period. Although Rales contended that the violations were inadvertent, the Commission determined to seek penalties because, as noted in the complaint, Rales had paid civil penalties to settle an earlier HSR enforcement action brought by the Department of Justice in 1991.

The FTC issued an administrative complaint alleging that the proposed merger of Advocate Health Care Network and NorthShore University HealthSystem will create the largest hospital system in the North Shore area of Chicago.  According to the complaint, the combined entity would operate a majority of the hospitals in the area and control more than 50 percent of the general acute care inpatient hospital services. The Commission also authorized staff to file for a preliminary injunction to maintain the status quo pending the administrative trial.

In the federal court proceeding, the district court denied the motion for a preliminary injunction on June 20, 2016, but granted plaintiffs' motion for a stay pending appeal.  On October 31, 2016, the Seventh Circuit reversed, and remanded the case back to the district court for further proceedings. On March 7, 2017, the district court granted an injunction, and the parties abandoned their merger plans.  On March 20, 2017, the Commission dismissed the administrative complaint.

Investment trust Caledonia Investments plc agreed to pay $480,000 in civil penalties to resolve charges that it violated federal premerger reporting laws by failing to report its purchase in 2014 of voting shares in the helicopter services company Bristow Group, Inc. According to the complaint, in June 2008, Caledonia first acquired voting shares in Bristow and reported its purchase to U.S. antitrust authorities, as required under the Hart-Scott-Rodino Act. Subsequently, Caledonia made additional purchases that were exempt from reporting under HSR rules. During that same timeframe, however, two Caledonia employees were designated to serve on Bristow’s board. Bristow awards restricted-stock voting securities to its board members, and by agreement, it set aside the securities for the two Caledonia board members for purchase by Caledonia. In February 2014, these voting shares vested, and Caledonia acquired them, according to the complaint. The Commission charged that Caledonia was required under the HSR Act to report this purchase but failed to do so. The HSR Act allows a company that has reported an initial purchase of voting shares to purchase additional voting shares from the same issuer – as long as those purchases do not cause the company’s total holdings to cross a higher reporting threshold over a five-year period following the initial purchase. The complaint charges that Caledonia’s 2014 purchase of voting shares in Bristow fell outside the five-year period following its initial purchase.

ON Semiconductor Corporation agreed to sell its Ignition IGBT business in order to settle charges that its proposed $2.4 billion acquisition of Fairchild Semiconductor International, Inc. would likely substantially lessen competition in the worldwide market for Ignition IGBTs, resulting in higher prices and reduced innovation. Ignition IGBTs are semiconductors that function as solid-state electronic switches in the ignition systems of automotive internal combustion engines.  The order preserves competition by requiring ON to divest its Ignition IGBT business to Chicago-based manufacturer Littelfuse, Inc. The divestiture includes design files and intellectual property that Littelfuse needs to manufacture ON’s Ignition IGBTs. ON must also facilitate the transfer of its customer relationships to Littelfuse, and supply Ignition IGBTs for Littlefuse to sell to customers while Littelfuse sets up its manufacturing operations.

Fortiline, LLC, a company that distributes ductile iron pipe, fittings and accessories throughout much of the United States, agreed to  settle charges that it violated federal antitrust law by inviting a competitor to raise and fix prices. This is the first case where the FTC has challenged an invitation to collude by a firm that is both a direct competitor with, and a distributor for, the invitee. According to an administrative complaint filed by the FTC, on two occasions in 2010, Fortiline invited a competing firm, which mainly manufactures ductile iron pipe but also engaged in direct sales to contractors, to collude on pricing in North Carolina and most of Virginia. In some areas, Fortiline competes with this firm – identified in the complaint as “Manufacturer A” – by distributing ductile iron pipe (“DIP”) products made by another DIP manufacturer, identified as “Manufacturer B.” In other areas, Fortiline distributes the product of Manufacturer A. The FTC’s complaint alleges that on two occasions when Fortiline was competing with Manufacturer A, Fortiline communicated an invitation to collude on DIP pricing.The proposed consent order prohibits Fortiline from entering into, attempting to enter into, or inviting any agreement with any competitor to raise or fix prices, divide markets, or allocate customers.

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.

Invibio agreed to settle charges that it used long-term supply contracts to exclude rivals and maintain its monopoly in implant-grade polyetheretherketone, known as PEEK, which is sold to medical device makers. The FTC’s complaint alleges that two other companies,Solvay Specialty Polymers LLC and Evonik Corporation, later entered the implant-grade PEEK market, but Invibio’s anticompetitive tactics impeded them from effectively competing for customers. Through these exclusive contracting practices, the complaint alleges that Invibio has been able to maintain high prices for PEEK, despite entry from Solvay and Evonik; to prevent its customers from using more than one source of supply, despite their business preference to do so; and to impede Solvay and Evonik from developing into fully effective competitors. Under the consent order, Invibio, Inc. and Invibio Limited, along with their corporate parent, Victrex plc, are generally prohibited from entering into exclusive supply contracts and from preventing current customers from using an alternate source of PEEK in new products. In addition, the companies must allow current customers meeting certain conditions to modify existing contracts to eliminate the requirement that the customer purchase PEEK for existing products exclusively from Invibio.

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.

Holding company Leucadia National Corporation has agreed to pay $240,000 in civil penalties to resolve FTC allegations that it violated federal premerger reporting laws by failing to report a conversion of its ownership interest in the financial services company Knight Capital
Group, Inc. In July 2013, Knight Capital consolidated with another financial services company, GETCO Holding Company, LLC to become KCG Holdings, Inc. That transaction converted Leucadia’s ownership interest in Knight Capital into nearly 16.5 million voting shares of the new entity, KCG Holdings, worth approximately $173 million. Leucadia did not report the transaction, according to the complaint, because it thought that it qualified for an exemption applicable to institutional investors. Although Leucadia consulted experienced HSR counsel in connection with the transaction, their counsel erroneously concluded that the exemption applied. Leucadia made a corrective filing in September 2014, acknowledging that the acquisition was reportable under the HSR Act. Even though Leucadia relied on the advice of counsel, the FTC determined to seek civil penalties because, as noted in the complaint, Leucadia had previously violated the HSR Act in 2007, which led to a corrective filing in 2008.