Consummated Mergers: It Ain't Over 'Til the Fat Lady Sings
Merging companies whose deals fall below the Hart-Scott-Rodino (HSR) merger filing threshold may think that once they have completed their merger and integration is finished, there is no longer any threat that the federal antitrust law enforcers, the FTC or DOJ, will challenge their deal. Consequently, these companies make substantial investments of time, money and other valuable resources in the merged entity that are at risk. Why? Because even consummated mergers can be challenged by the U.S. antitrust law enforcers. This risk was underscored by a recent decision from the Eleventh Circuit Court of Appeals. In July, the Eleventh Circuit affirmed the Federal Trade Commission's decision in Polypore, finding that the consummated merger of two battery separator manufacturers would substantially lessen competition in violation of Section 7 of the Clayton Act, and ordering extensive divestitures.1 In addition to demonstrating the risks that companies take when they consummate deals that have substantive antitrust problems, this decision illustrates the broad discretion the agencies enjoy in formulating remedies. In 2010, the Commission challenged Polypore's 2008 acquisition of Microporous. After a lengthy administrative trial, the ALJ determined that Polypore's acquisition of Microporous was anticompetitive in four North American battery separator markets. Battery separators are electronic insulators placed between the charged lead plates in batteries to prevent electrical short circuits while allowing current to flow between the plates. The FTC affirmed the ALJ's finding of liability in three of the four markets, and ordered Polypore to divest the acquired company to an FTC-approved buyer within six months. One notable aspect of the Commission's decision is that the ordered divestiture included a plant located outside of the relevant U.S. market: the Commission required Polypore to include the European plant it acquired from Microporous in the divestiture. That part of the divestiture was especially problematic for Polypore as it had closed one of its plants in Europe in anticipation of using the divested plant. The Commission's justification, which was accepted by the Eleventh Circuit, was that when Microporous produced separators for its European customers at its facilities in the United States, capacity constraints limited its ability to compete for additional business in the United States. However, if Microporous was able to use the plant...
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