FOR THE DISTRICT OF COLUMBIA
PROPOSED FINAL JUDGMENT
Pursuant to the requirements of the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16(b)-(h) ("APPA" or "Tunney Act"), the United States hereby responds to the public comments received regarding the proposed Final Judgment in this case. After careful consideration of the comments, the United States continues to believe that the proposed Final Judgment will provide an effective and appropriate remedy for the antitrust violations alleged in the Complaint. The United States will move the Court for entry of the proposed Final Judgment after the public comments and this response have been published in the Federal Register, pursuant to 15 U.S.C. § 16(d).
On February 24, 2010, the United States filed the Complaint in this matter alleging that the proposed acquisition of the Alcan Packaging Food Americas business of Rio Tinto plc ("Rio Tinto") by Bemis Company, Inc. ("Bemis") would violate Section 7 of the Clayton Act, 15 U.S.C. § 18. Simultaneously with the filing of the Complaint, the United States filed a proposed Final Judgment and a Hold Separate Stipulation and Order ("HSSO") signed by plaintiff and the defendants, consenting to the entry of the proposed Final Judgment after compliance with the requirements of the Tunney Act, 15 U.S.C. § 16. Pursuant to those requirements, the United States filed its Competitive Impact Statement ("CIS") in this Court, also on February 24, 2010; published the proposed Final Judgment and CIS in the Federal Register on March 4, 2010, see United States v. Bemis Company, Inc. et al., 75 Fed. Reg. 9929; and published summaries of the terms of the proposed Final Judgment and CIS, together with directions for the submission of written comments relating to the proposed Final Judgment, in The Washington Post for seven days beginning on March 10, 2010 and ending on March 16, 2010. The 60-day period for public comments ended on May 15, 2010; three comments were received as described below and attached hereto.
I. THE INVESTIGATION AND PROPOSED RESOLUTION
On July 5, 2009, Bemis and Rio Tinto entered into an agreement for Bemis to acquire the Alcan Packaging Food Americas business ("Alcan") from Rio Tinto. For the next seven months, the United States Department of Justice ("Department") conducted an extensive, detailed investigation into the likely competitive effects of the Bemis/Rio Tinto transaction. As part of this investigation, the Department obtained substantial documents and information from the merging parties and issued 21 Civil Investigative Demands to third parties. In all, the Department received and considered more than 35 boxes of hard copy material and over 682,000 electronic documents. The Department also conducted over 44 primary interviews and multiple follow-up interviews with customers, competitors, and other individuals with knowledge of the flexible-packaging industry. The investigative staff carefully analyzed the information provided and thoroughly considered all of the issues presented. The Department considered the potential competitive effects of the transaction on the development, production, and sale of flexible packaging sold in North America, and concluded that Bemis's acquisition of Alcan likely would substantially lessen competition in the development, production, and sale of flexible-packaging rollstock for chunk, sliced, and shredded natural cheese packaged for retail sale and flexible-packaging shrink bags for fresh meat in the United States and Canada.
As explained more fully in the Complaint and CIS, the acquisition of Alcan by Bemis would have substantially increased concentration and lessened competition in the development, production, and sale of flexible-packaging rollstock for chunk, sliced, and shredded natural cheese packaged for retail sale and flexible-packaging shrink bags for fresh meat in the United States and Canada. The acquisition effectively would have reduced the number of suppliers of flexible-packaging rollstock for chunk, sliced, and shredded natural cheese packaged for retail sale from two to one, would have eliminated competition between Bemis and Alcan with respect to those products, and would have increased the likelihood that Bemis would unilaterally increase prices to a significant number of customers. The acquisition also would have reduced the number of suppliers of flexible-packaging shrink bags for fresh meat from three to two, would have eliminated the competition between Bemis and Alcan with respect to that product, and would have facilitated coordination between Bemis and the remaining supplier of shrink bags for fresh meat. The Department therefore filed its Complaint alleging competitive harm in the development, production, and sale of the aforementioned product markets in the United States and Canada, and sought a remedy that would ensure that such harm is prevented. The proposed Final Judgment requires the divestiture of sufficient assets to prevent the increase in concentration that likely would have resulted from the acquisition of Alcan by Bemis.
II. SUMMARY OF PUBLIC COMMENTS AND THE UNITED STATES'S RESPONSE
During the 60-day comment period, the United States received comments from three individuals: (1) A Concerned Menasha Citizen (unsigned); (2) Ms. Sheri Lemmers; and (3) Mr. Stuart Springstube. The comments, which are attached to this response, raise a single, overarching concern: that the former Alcan plant in Menasha, Wisconsin (the "Menasha facility") should not be "split" between Bemis and the acquirer of the divested business, as required by the proposed Final Judgment.
The proposed Final Judgment requires the divestiture of the Menasha facility in order to preserve competition in the markets for flexible-packaging rollstock for chunk, sliced, and shredded natural cheese packaged for retail sale. However, the Menasha facility contains a stand-alone wax-coating operation in addition to its production facilities for flexible-packaging for natural cheese. The terms of the proposed Final Judgment allow Bemis to move the wax-coating operation from Menasha to another of Bemis's plants and allow Bemis access to the Menasha facility for a limited period of time post-divestiture in order to effectuate that transfer.
The United States has reviewed the comments submitted and has determined that the proposed Final Judgment remains in the public interest.
The commenters argue that the wax-coating operations should not be removed from the Menasha facility because it will be detrimental both to that operation and to the operations that remain in the plant. See Concerned Comment at 2; Lemmers Comment at 1; Springstube Comment. In addition, the commenters claim that the presence of competing companies in the plant has, and will continue to cause, the following problems: (1) former co-workers are now competitors and cannot communicate freely with each other, see Lemmers Comment at 1; Concerned Comment at 1; Springstube Comment; and (2) managers for the competing entities are fighting over supplies and tools needed by each company to do its work.(1) Concerned Comment at 1; Lemmers Comment at 1.
The concerns expressed in the comments do not provide a basis to alter the proposed Final Judgment. The Menasha plant is a key component of the proposed divestiture package. It represents a critical base of knowledge and expertise that is necessary for the acquirer of the divested business to compete successfully with Bemis in the markets for flexible-packaging rollstock for chunk, sliced, and shredded natural cheese packaged for retail sale. However, the wax-coating operation at the Menasha facility is unrelated to the production of flexible packaging for natural cheese.
The Department investigated whether removing the wax-coating operation from Menasha would adversely affect the viability of the plant. The Department reviewed blueprints of the Menasha facility, visited and toured the plant, interviewed plant management, reviewed Bemis's plans for phased removal of the wax-coating operation from Menasha, and reviewed the plant's operational and financial documents. After careful consideration of this information, the Department determined that, because the wax-coating operation is largely confined to a discrete area of the plant, it could be moved by Bemis to another facility with minimal disturbance to the overall operation of the plant. The Department also determined that the plant would remain a competitive and profitable business entity without the wax-coating operation. Finally, the Department determined that the acquirer of the divested business, as the sole owner of the Menasha facility and Bemis's landlord, would be well-positioned to manage Bemis's exit from the plant.(2)
This is not to imply, however, that Bemis will be able to remove the wax-coating operation from the Menasha facility without making any changes to the plant or its operations. Certain accommodations, as reflected in the language of the proposed Final Judgment, must be made in order to preserve future competition between Bemis and the acquirer of the divested business and limit the interaction of the two businesses while the wax-coating operation is being removed. For example, while the proposed Final Judgment allows Bemis to occupy the portions of the facility utilized for the wax-coating operation, it also requires that removal of that operation be completed within three years of the closing of the transaction.(3) The proposed Final Judgment also requires that, within three months of the closing of the transaction, Bemis create physical barriers in the Menasha facility to separate its business activities from those of the acquirer of the divested business while removal of the wax-coating operation is occurring.
It appears that Bemis's very compliance with the requirements of the proposed Final Judgment have given rise to the commenters' concerns about diminished working relationships within the Menasha plant. However, the Department continues to believe that compliance with those requirements is necessary to preserve current and future competition between Bemis and the acquirer of the divested business.
III. STANDARD OF JUDICIAL REVIEW
The APPA requires that proposed consent judgments in antitrust cases brought by the United States be subject to a sixty-day comment period, after which the court shall determine whether entry of the proposed Final Judgment "is in the public interest." 15 U.S.C. § 16(e)(1). In making that determination in accordance with the statute, the court is required to consider:
15 U.S.C. § 16(e)(1)(A)-(B). In considering these statutory factors, the court's inquiry is necessarily a limited one as the government is entitled to "broad discretion to settle with the defendant within the reaches of the public interest." United States v. Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see generally United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public interest standard under the Tunney Act); United States v. InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ¶76,736, No. 08-1965 (JR), 2009 U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that the court's review of a consent judgment is limited and only inquires "into whether the government's determination that the proposed remedies will cure the antitrust violations alleged in the complaint was reasonable, and whether the mechanisms to enforce the Final Judgment are clear and manageable").
As the United States Court of Appeals for the District of Columbia Circuit has held, under the APPA, a court considers, among other things, the relationship between the remedy secured and the specific allegations set forth in the government's complaint, whether the decree is sufficiently clear, whether enforcement mechanisms are sufficient, and whether the decree may positively harm third parties. See Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the relief secured by the decree, a court may not "engage in an unrestricted evaluation of what relief would best serve the public." United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have held that:
Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).(4) In determining whether a proposed settlement is in the public interest, the court "must accord deference to the government's predictions about the efficacy of its remedies, and may not require that the remedies perfectly match the alleged violations." SBC Commc'ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 (noting the need for courts to be "deferential to the government's predictions as to the effect of the proposed remedies"); United States v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court should grant due respect to the United States' prediction as to the effect of proposed remedies, its perception of the market structure, and its views of the nature of the case).
Courts have greater flexibility in approving proposed consent decrees than in crafting their own decrees following a finding of liability in a litigated matter. "[A] proposed decree must be approved even if it falls short of the remedy the court would impose on its own, as long as it falls within the range of acceptability or is 'within the reaches of public interest.'" United States v. Am. Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) (approving the consent decree even though the court would have imposed a greater remedy). Therefore, the United States "need only provide a factual basis for concluding that the settlements are reasonably adequate remedies for the alleged harms." SBC Commc'ns, 489 F. Supp. 2d at 17.
Moreover, in its 2004 amendments to the Tunney Act,(5) Congress made clear its intent to preserve the practical benefits of utilizing consent decrees in antitrust enforcement, stating "[n]othing in this section shall be construed to require the court to conduct an evidentiary hearing or to require the court to permit anyone to intervene." 15 U.S.C. § 16(e)(2). The language wrote into the statute what Congress intended when it enacted the Tunney Act in 1974, as Senator Tunney explained: "[t]he court is nowhere compelled to go to trial or to engage in extended proceedings which might have the effect of vitiating the benefits of prompt and less costly settlement through the consent decree process." 119 Cong. Rec. 24,598 (1973) (statement of Senator Tunney). Rather, the procedure for the public-interest determination is left to the discretion of the court, with the recognition that the court's "scope of review remains sharply proscribed by precedent and the nature of Tunney Act proceedings." SBC Commc'ns, 489 F. Supp. 2d at 11.(6)
The issues raised in the public comments were among the many considered during the United States's extensive and thorough investigation. Pursuant to this investigation, the United States has determined that the Menasha facility will remain a competitive and profitable business entity competing in the development, production, and sale of flexible-packaging rollstock for chunk, sliced, and shredded natural cheese packaged for retail sale The United States also has determined that the proposed Final Judgment as drafted provides an effective and appropriate remedy for the antitrust violations alleged in the Complaint, and is therefore in the public interest. The United States will move this Court to enter the proposed Final Judgment after the comments and this response are published in the Federal Register.
Dated: June 7, 2010
CERTIFICATE OF SERVICE
I, Rachel J. Adcox, hereby certify that on June 7, 2010, I caused a copy of the foregoing Response of Plaintiff United States to Public Comments on the Proposed Final Judgment to be served upon defendants Bemis Company, Inc., Rio Tinto plc, and Alcan Corporation by mailing the documents electronically to the duly authorized legal representatives of defendants as follows:
Counsel for Defendant Bemis Company, Inc.:
Stephen M. Axinn, Esq.
Counsel for Defendants Rio Tinto plc and Alcan Corporation:
Steven L. Holley, Esq.
I further certify that on June 7, 2010, I caused a copy of the foregoing to be delivered electronically and via U.S. mail, postage prepaid, to the following person:
Mr. Stuart Springstube
RE: Bemis/Alcan Acquisition
The proposal that the DOJ has allowed with the Bemis/Alcan acquisition is and will continue to be detrimental to the community of Menasha. It will also have an impact on the cheese industry. The turmoil that is running through the Menasha Plant is devastating the business. Bemis has walked in the doors and caused great chaos in the plant. The people chosen to go with Bemis are all unsure of their future and worry about what plans are for the future of the wax business. At the present time those employees feel that Bemis will destroy the business in due time. Remedy Company is also unsure of their future Bemis is doing everything in their power to take business that does not involve the cheese business and they are out to destroy what is left of Remedy Company. Remedy Company is taking a stance that everything in the mill is theirs and that they will need it to continue business. On the other hand Bemis is being left with nothing. Simply trying to start up offices has become mission impossible. They will not provide essential items such as office furniture and computers. The hourly machine workers in this plant have created relationships over long periods of time in this facility and they are being asked not to talk to an old friend. Living in America gives us the right to freedom of speech, but Bemis and the DOJ is trying to take that away. Give the people of the plant some dignity and sympathy, you are destroying a successful plant that through the years has brought business into the community of Menasha, and to the local cheese manufactures of the surrounding area.
The City of Menasha spent millions of dollars five years ago to bring more and new equipment into the Menasha facility. The city funded part of the expense to reroute the city street to make Menasha Plant a growth of opportunity. The community of Menasha found this to be a great addition to their city. It brought jobs to the area, revenue to local businesses, and a sense of pride back to their community. Bemis and the DOJ has taken all of that away. It was not only in the best interest of the employees at Alcan but it was in the best interest of Menasha to keep this plant going.
I hope that the DOJ takes a closer look at the destruction that Bemis has caused. Look at what this will do to the surrounding area and how it will affect the City of Menasha. This acquisition did not have to take place as it did. Bemis could have chosen to leave Menasha Plant alone and let them strive to be a small but competitive business. Leave the employees in tack and let the business make or break on its own. Bemis has toured the plant and taken everything they desired from it, they have taken knowledgeable people and trades and will survive. Now it seems as though their final goal is too bury Remedy Company and soon after the wax business will come to an end.
In am writing in concern of the Bemis/Alcan acquisition, and currently work within the Menasha Plant where complete chaos takes place on a daily basis. It was the employees understanding that this transition is not to interrupt the work on either side of the sale. Unfortunately everyday is a battle zone, management is very cut throat on daily work supplies and tools that are needed by each side to conduct business as usual. There are supervisors and managers hoarding things just so others can not use them. There is bitterness throughout the plant and unrespectable and unprofessional talk among everyone. This plant has been very successful over the years and that is due to the loyalty and companionship that coworkers have with each other. Since Bemis has taken over this building it has ruined long time friendships and reputations of managers and supervisors that were once respected. We have a Plant Manager and an Operations Manager on opposite sides of the fence now and it leads to battles on a daily basis.
Employees have lost a lot since this purchase was allowed, customers are disappointed that Bemis has the advantage, and the community of Menasha, Wisconsin is losing a great plant that brings money into their community.
I am disappointed in the decision that the Department of Justice came to. This plant should not be divided and can only survive as one. Relocating departments from this mill is detrimental to the success of the remaining Menasha Plant. Bemis seems to be doing everything in their power to make sure that Menasha no longer will exist. Back in November of 2009 Bemis came in and meet with potential employees and said that we were very valuable employees to them, that they cared about us. I would like to know when the caring comes into play. They are currently forcing some of the people that they have chosen to stay with them to work 12 hours a day seven days a week. They also do not allow for personal days during this time nor will they excuse any doctor's appointments that you may have scheduled. Many of these employees do not have regular scheduled shifts and it is very difficult to schedule appointments, as you well know some doctors require you to schedule appointment anywhere from three to six months in advance. Bemis claims they care about your health and want you to be healthy but yet I can not be a half hour late for work or I will disciplined with an occasion. Five occasions are allowed within a year's timeframe and it takes you a year from the date of a call in to get that occasion back. Life today is busy and fast paced, people need to live life and enjoy it. Yet I can not understand how I am to enjoy my life working seven days a week twelve hours a day and expect to function normally. Granted this system is not suppose to remain for long, but who has given them a timeline for how long they can abuse employees. We are humans, not animals! It is offensive to work for such an employer that cares nothing about life and family.
I am in hopes that this hostile takeover ends in peace and that the DOJ reconsiders their proposal. This plant has always been a success story for the company and community and now it has turned into a bloody battle field. I believe that it is in the best interest of everyone including the DOJ to reconsider the ruling that was made. How would you like to walk into a war zone everyday wondering who is going to belittle you and who was going to be respectable to you? It's a question that employees should not even have to think about.
U.S. Department of Justice,
This letter is in regards' to your decision in the Bemis acquisition of Alcan. I am a employee of the Alcan plant in Menasha and the decision to split our plant into two separate plants is a death sentence for many of us maybe all of us. Our plant was an example of how an America plant can be successful. Put now we are being forced to be split the plant and compete against our self. Bemis should have been allowed to have the whole plant or non of it. I am not great at writing letters if you would give me ten minutes of your time I could explain this better. PLEASE call me. I strongly encourage you to change your decision, I need this job not an unemployment check. Let Bemis have the Menasha plant.
Sincerely, Stuart S. Springstube
1. One commenter is also concerned about the scheduling and leave policies that Bemis has instituted since taking over the Menasha plant. See Lemmers Comment at 1-2. These concerns are beyond the scope of the Department's investigation into the potential competitive harms associated with Bemis's purchase of Alcan.
2. One of the commenters also expressed a concern that Bemis would take over the wax-coating operation only to destroy it. See Concerned Comment at 1. This concern is not well founded. Bemis specifically asked to retain the wax-coating operation and is moving it at great expense. Thus, while the wax-coating operation no longer will exist at the Menasha plant, the Department has no reason to believe that Bemis will not continue to produce and sell wax-coated products at its own facilities. 3. The three-year time frame was determined to be necessary in order to allow Bemis to continue to supply wax-coated products to customers during the transition. 4. Cf. BNS, 858 F.2d at 464 (holding that the court's "ultimate authority under the [APPA] is limited to approving or disapproving the consent decree"); United States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the court is constrained to "look at the overall picture not hypercritically, nor with a microscope, but with an artist's reducing glass"). See generally Microsoft, 56 F.3d at 1461 (discussing whether "the remedies [obtained in the decree are] so inconsonant with the allegations charged as to fall outside of the 'reaches of the public interest'").
3. The three-year time frame was determined to be necessary in order to allow Bemis to continue to supply wax-coated products to customers during the transition.
4. Cf. BNS, 858 F.2d at 464 (holding that the court's "ultimate authority under the [APPA] is limited to approving or disapproving the consent decree"); United States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the court is constrained to "look at the overall picture not hypercritically, nor with a microscope, but with an artist's reducing glass"). See generally Microsoft, 56 F.3d at 1461 (discussing whether "the remedies [obtained in the decree are] so inconsonant with the allegations charged as to fall outside of the 'reaches of the public interest'").
5. The 2004 amendments substituted the word "shall" for "may" when directing the courts to consider the enumerated factors and amended the list of factors to focus on competitive considerations and address potentially ambiguous judgment terms. Compare 15 U.S.C. § 16(e) (2004), with 15 U.S.C. § 16(e)(1) (2006); see also SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004 amendments "effected minimal changes" to Tunney Act review). 6. See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000) (noting that the "Tunney Act expressly allows the court to make its public interest determination on the basis of the competitive impact statement and response to comments alone"); United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ¶ 61,508, at 71,980 (W.D. Mo. 1977) ("Absent a showing of corrupt failure of the government to discharge its duty, the Court, in making its public interest finding, should . . . carefully consider the explanations of the government in the competitive impact statement and its responses to comments in order to determine whether those explanations are reasonable under the circumstances."); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 (1973) ("Where the public interest can be meaningfully evaluated simply on the basis of briefs and oral arguments, that is the approach that should be utilized.").
6. See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000) (noting that the "Tunney Act expressly allows the court to make its public interest determination on the basis of the competitive impact statement and response to comments alone"); United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ¶ 61,508, at 71,980 (W.D. Mo. 1977) ("Absent a showing of corrupt failure of the government to discharge its duty, the Court, in making its public interest finding, should . . . carefully consider the explanations of the government in the competitive impact statement and its responses to comments in order to determine whether those explanations are reasonable under the circumstances."); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 (1973) ("Where the public interest can be meaningfully evaluated simply on the basis of briefs and oral arguments, that is the approach that should be utilized.").