Protecting Consumer Welfare: The Antitrust Division’s Civil Program Protects and Restores Competition in a Number of Industries Impacting American Consumers

Division Update Spring 2018

The past year has witnessed a series of important wins for the Antitrust Division’s civil program, preserving competition in consumer product, industrial, agricultural, and defense industries. A few of the markets impacted by the Division’s efforts include organic milk, refinery process chemicals used in the oil and natural gas industries, crop protection chemicals and seed treatments, and sonobuoys used by the Department of Defense.

U.S. v. Danone S.A. and The WhiteWave Foods Co.

Milk

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The Division preserved competition in the U.S. market for organic milk through its challenge of Danone S.A.’s proposed acquisition of The WhiteWave Foods Company, Inc. Danone, a leading U.S. manufacturer of organic yogurt, had for 20 years participated in the raw organic milk and fluid organic milk markets through a strategic partnership and supply and licensing agreements with WhiteWave’s closest competitor, CROPP Cooperative. As a result, Danone’s acquisition of WhiteWave would have effectively combined WhiteWave and CROPP, the top purchasers of raw organic milk in the Northeastern United States and the producers of the three leading brands of fluid organic milk in the United States.

As originally structured, the transaction likely would have resulted in less favorable contract terms for farmers in the northeastern United States for the purchase of their raw organic milk. It would have also aligned the interests of the producers of the only three national fluid organic milk brands—Stonyfield, Horizon, and Organic Valley—risking higher prices and fewer choices for U.S. customers. On April 3, 2017, the Division filed its complaint challenging the transaction, as well as a settlement that required Danone to divest Stonyfield Farm, Inc., including the supply and licensing agreements with CROPP.

U.S. v. General Electric Co. and Baker Hughes Inc.

Oil refinery

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The Division preserved competition in the market for refinery process chemicals used in the U.S. crude oil and natural gas extraction market, and also incentivized efficient and effective remedies in its challenge to General Electric’s proposed acquisition of Baker Hughes. Baker Hughes and GE were two of the leading providers of refinery process chemicals in the United States, covering over 50 percent of the market.

Refineries process hydrocarbons like crude oil and natural gas extracted from wells into finished products like gasoline. GE and Baker Hughes were two of a few firms with the technical capabilities and expertise to provide refinery process chemicals and services in the United States and competed vigorously in price, service quality, and product development.

On June 12, 2017, the Division filed its complaint, along with a proposed final judgment that required GE to divest its Water & Process Technologies business unit, which included its refinery process chemicals and services unit, to a named buyer, SUEZ, S.A.

Under the terms of the decree, GE was to complete its divestitures to Suez by approximately the end of September 2017, or, if the United States exercised its discretion to grant an extension, by approximately the end of 2017. After consummating the GE/Baker Hughes merger, GE informed the United States that it would be unable to complete the divestiture until 2018, outside of the agreed-upon timeframe, because in 19 foreign jurisdictions there were legal and other barriers to Suez operating the assets.

On October 16, 2017, the court entered a modified final judgment that added two provisions to the final judgment designed to encourage GE to complete the divestiture promptly. The modified final judgment encouraged prompt divestiture in two ways: (1) it required GE to begin making daily incentive payments as of January 1, 2018, until the divestiture is completed and (2) it required GE to reimburse the United States for attorney’s fees and costs incurred in addressing the delay.

U.S. and Plaintiff States v. The Dow Chemical Co. and E.I. Du Pont de Nemours & Co.

Wheat

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The Division’s challenge to the proposed merger of The Dow Chemical Company and E.I. DuPont de Nemours and Company, and the resulting settlement, preserved competition in two important markets in the United States: crop protection chemicals and treated seeds. Dow and DuPont were two of the leading companies in both crop protection chemicals and treated seeds in the United States. Each company also manufactured a number of petrochemicals, including high-pressure ethylene derivatives that are crucial inputs to a number of important products and industries.

The proposed merger would likely have reduced or eliminated competition in the markets for broadleaf herbicides for winter wheat and chewing pest insecticides, and would have tended to create a monopoly in the markets for acid copolymers and ionomers in the United States, resulting in higher prices and reduced services and innovation in these markets.

The Division, along with attorneys general from several states, filed a complaint and proposed final judgment on June 15, 2017. The settlement required DuPont to divest its Finesse-formulated herbicide products and its Rynaxypyr-formulated insecticide products, along with the assets used to develop, manufacture, and sell those products. Dow Chemical also was required to divest its Freeport, Texas acid copolymers and ionomers manufacturing unit and associated assets.

U.S. v. Ultra Electronics Holdings plc

Ocean

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Finally, the Division helped to preserve competition in the market for sonobuoys, which are used by the U.S. Navy in support of underwater missions for detection, classification, and localization of adversary submarines during peacetime and combat operations. Ultra Electronics Holdings plc and Sparton Corporation, the only two companies qualified to supply sonobuoys to the U.S. Navy, abandoned their merger after the Division expressed concerns about the loss of competition that would have resulted from this merger.

Updated April 10, 2018

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