Un-consummated merger

Today, five years post-consummation, the Commission approved Polypore International, Inc.’s application to sell Microporous, a competitor it purchased in 2008. Polypore was ordered to divest the entire business it had purchased after the Commission determined that the merger had substantially lessened competition in violation of the antitrust laws. Soon, customers in need of flooded lead-acid battery separators can buy these products from a newly independent company, restoring competition to its pre-merger state.

The backstory: In September 2008, the Commission filed an administrative complaint alleging that Polypore’s acquisition of rival battery separator manufacturer Microporous had substantially lessened competition in the sale in North America of battery separators for various types of batteries, such as those used in golf carts. (Battery separators are membranes placed between the positive- and negatively-charged plates to prevent electrical short circuits.) In March 2010, after a one-month trial, the administrative law judge found that Polypore’s acquisition was illegal and ordered Polypore to divest all Microporous assets—a plant in Piney Flats, Tennessee, as well as a plant in Feistritz, Austria. In November 2012, the Commission unanimously upheld the ALJ’s order, rejecting arguments that its divestiture order was overbroad because it included assets located outside North America, the geographic market alleged by the Commission for each of the products. The Eleventh Circuit upheld the Commission’s order, and in June 2013, the Supreme Court declined to review the matter. 

The takeways: First, the Commission can and will investigate consummated mergers, and when appropriate, will require divestitures to remedy the effects of a transaction that substantially lessens competition. Prior to the passage of the Hart-Scott-Rodino (“HSR”) Act and the implementation of the premerger notification program in 1978, all merger enforcement under Section 7 of the Clayton Act was after-the-fact. As a result, achieving a remedy in consummated mergers often involved a complicated “unscrambling of the eggs” to restore competition to pre-merger levels. Although premerger review has contributed to effective and efficient merger enforcement for more than thirty years, there will be times – typically for transactions that do not require premerger notice under the HSR Act -- when the Commission must act after-the-fact to restore competition and protect consumers in markets with proven anticompetitive effects from a consummated merger.  

Second, an effective remedy in any acquisition is one that most closely replicates the competition that was lost due to the merger. It may result in the sale of the entire business acquired. It may also involve the divestiture of assets outside the market of concern. In the Polypore matter, effective relief included the divestiture of assets located outside North America because such assets were necessary for the buyer to compete effectively in the North American markets for battery separators. The Bureau of Competition has developed a Statement on Negotiating Merger Remedies that provides guidance for how the Commission fashions effective relief for anticompetitive mergers, including those involving consummated deals.

Parties have the right to contest Commission’s charges, and the Commission will litigate when necessary to prevent or mitigate harm to consumers from anticompetitive mergers. Whether pre-merger or post-consummation, the Commission will take the steps necessary preserve or restore competition. For further discussion of how the Commission enforces the antitrust laws via consent orders as well as litigated orders, see my speech from earlier this year.