Davis Polk


Government Merger Challenges

September 25, 2013

While we are all undoubtedly aware of the Department of Justice’s (“DOJ”) pending lawsuit seeking to enjoin the merger of AMR and U.S. Airways, you may be less focused on the fact that the federal antitrust agencies are currently engaged in three other merger challenges in court. While these cases have not generated as much popular attention as the AMR matter, they nonetheless illustrate the vigor of this administration’s antitrust enforcement and, in particular, the agencies’ willingness to take a matter to trial.

The three ongoing litigations are:


In this matter, the DOJ is challenging the combination of Bazaarvoice and PowerReviews, two providers of online ratings. The merger, which was not subject to HSR notification, was consummated 15 months ago. The trial began in federal district court in San Francisco on Monday. As in the AMR case, the DOJ’s complaint quotes from a host of documents obtained from the parties (primarily Bazaarvoice) to support the government’s allegation that the purpose of the acquisition was to eliminate Bazaarvoice’s only competitor. The defendants’ principal response is that these documents are irrelevant because, they argue, the actual extent of competition in the market has not diminished in the 15 months since the deal closed. (Interestingly, the precedent on which the defendants’ place most reliance was authored 22 years ago by the father of the judge who is trying the current litigation.)

Ardagh Group/Saint-Gobain Containers

Slated to be heard in federal district court in DC on October 17, this matter involves the FTC’s challenge to the proposed merger of glass bottle makers Ardagh and Saint-Gobain. The FTC alleges that the deal will result in only two firms (the merged firm and Owens-Illinois) controlling more than 75% of the U.S. market for “glass containers for beer and spirits.” The parties contest this definition of the market, arguing that glass containers compete with cans and plastic containers. In a press release issued on September 20, Ardagh announced that it was proposing to “fix” the FTC’s concerns by divesting itself of four of its U.S. glass manufacturing plants. The FTC, however, had not agreed to this proposed remedy. In a significant victory for the government, the judge in the matter ruled yesterday that Ardagh cannot introduce at trial any evidence relating to its proposed “fix.” The judge indicated that she is not prepared to “litigate the fix” and that the proposed remedy had been introduced at too late a date. She urged the parties to discuss the possible remedy before the trial is scheduled to commence.

St. Luke’s Health System/Saltzer Medical Group

The third merger case currently before a court is the FTC’s challenge to the proposed merger of St. Luke’s Health System and Saltzer Medical Group. Opening arguments were heard on Monday by Chief Judge B. Lynn Winmill of the federal district court in Idaho. The FTC alleges that the merger will give St. Luke’s an 80% share of primary care physicians in Nampa, ID. The defendants argue that the relevant geographic market is larger than Nampa and that the merged firm intends to invest $200 million in a new electronic medical records system. The FTC’s record in challenging hospital mergers has been decidedly mixed over the past decade or so, although it has prevailed in its two most recent challenges.

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While AMR/U.S. Airways is clearly an attention grabber, the government has not been reluctant to go to court to challenge less prominent deals. Of course, in all of these cases, it remains to be seen which party will prevail. Victories for the government will likely embolden the agencies further. Losses may represent significant setbacks that will make the likelihood of additional court cases more uncertain.

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Arthur J. Burke 212 450 4352
650 752 2005
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