Antitrust Alert: First Successful Private Antitrust Merger Challenge Leads to Divestiture Order
A federal district court has ordered a defendant in private antitrust litigation to divest a manufacturing plant following a competitor's merger challenge. Although the decision is certain to be appealed, it may embolden customers or competitors wishing to challenge a transaction and create new risks for merging parties.
In 2012, Jeld-Wen acquired Craftmaster International, a competing manufacturer of household door components. In 2016, just before the four-year statute of limitations had run, Steves & Sons ("S&S") sued Jeld-Wen, its competitor and supplier, and alleged that the Craftmaster acquisition violated the Clayton Act. S&S sought treble damages and equitable relief.
Although the Justice Department had twice investigated and twice declined to challenge the acquisition, the court permitted S&S to proceed to trial and prohibited both parties from telling the jury about DOJ's investigations.
Following a verdict in its favor, S&S asked the court to require Jeld-Wen to divest one of its factories. Though DOJ filed a statement of interest expressing reservations about the divestiture process, the court ordered Jeld-Wen to sell the plant under a special master's supervision and pay $185 million in antitrust and contract damages.
It is not uncommon for customers and shareholders to challenge transactions as a means to extract settlements. But S&S marks the first time a private plaintiff has successfully tried a merger challenge after the government has conducted a Hart-Scott-Rodino Act investigation and declined to challenge a transaction.
While the government's decision not to contest a merger does not foreclose subsequent investigations or litigation, the court's decision in S&S to exclude evidence of DOJ's investigations and order a divestiture notwithstanding the agency's concerns may undermine any comfort that premerger clearance provides to merging parties.
The October 5, 2018 decision can be found here.
For more information, please contact your principal Jones Day representative or any of the lawyers below.
J. Bruce McDonald
+1.832.239.3822 / +1.202.879.5570
Julia E. McEvoy
Joseph D. Antel, an associate in the Washington Office, assisted in the preparation of this Alert.
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