Justice Department Concludes Historic Arbitration of a Merger Dispute
Arbitration Will Resolve the Issue of Product Market Definition in the Novelis-Aleris Merger
The Department of Justice this week concluded an arbitration that will resolve a civil antitrust lawsuit challenging Novelis Inc.’s proposed acquisition of Aleris Corporation.
The lawsuit seeks to preserve competition in the North American market for rolled aluminum sheet for automotive applications, commonly referred to as aluminum auto body sheet. This marks the first time the Antitrust Division has used its authority under the Administrative Dispute Resolution Act of 1996 (5 U.S.C. § 571 et seq.) to resolve a matter.
“This first-of-its-kind arbitration has allowed us to resolve the dispositive issue in this case efficiently, saving taxpayer and private resources, while providing critical time-certainty,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “The Antitrust Division looks forward to the arbitrator’s opinion, and will study this matter both to assess the circumstances in which arbitration may be appropriate and to identify possibilities for further streamlining the process. We will continue to examine ways to enforce our competition laws in a manner that maximizes the Division’s scarce enforcement resources to protect American consumers.”
On Sept. 4, 2019, the Justice Department’s Antitrust Division filed a civil antitrust lawsuit in the U.S. District Court for the Northern District of Ohio seeking to block Novelis Inc.’s proposed acquisition of Aleris Corporation. Prior to filing the complaint, the Antitrust Division reached an agreement with defendants to refer the matter to binding arbitration if the parties were unable to resolve the United States’ competitive concerns with the defendants’ transaction within a certain period of time.
As described in Plaintiff United States’ Explanation of Plan to Refer this Matter to Arbitration, filed on the district court’s docket, fact discovery proceeded under the supervision of the district court. Following the close of fact discovery, the matter was referred to binding arbitration to resolve a single issue: whether aluminum auto body sheet constitutes a relevant product market under the antitrust laws.
The arbitration procedure allowed for a flexible and efficient proceeding presided over by an arbitrator with extensive expertise in antitrust law and economics. Former Federal Trade Commission Director of the Bureau of Competition and experienced antitrust lawyer, Kevin Arquit, was selected as the arbitrator. The hearing was held over ten days (including some partial days) in the Antitrust Division’s Anne K. Bingaman Auditorium and Lecture Hall in the Liberty Square Building in Washington, D.C. Eleven fact witnesses and three expert witnesses testified in the proceedings. The parties agreed to dispense with certain evidentiary requirements to allow for a more flexible and efficient hearing. The parties also dispensed with the need for post-trial briefing and agreed that the arbitrator will render a short decision of no more than five pages by March 13.
If the United States prevails, the United States will then file a proposed final judgment that requires Novelis to divest certain agreed-upon assets to preserve competition in the relevant market. If the defendants prevail, the United States will seek to voluntarily dismiss the complaint. Novelis has held separate the agreed-upon divestiture assets pursuant to a hold separate stipulation and order entered by the district court, and defendants are permitted to close the transaction pursuant to this order.
Novelis is a Canadian corporation headquartered in Atlanta, Georgia. It offers flat-rolled aluminum products in three segments: automotive, beverage can, and specialty products. In the fiscal year ending March 31, 2019, Novelis’s revenues were approximately $12.3 billion. Novelis is a wholly-owned subsidiary of Hindalco Industries Ltd., an Indian company headquartered in Mumbai, India.
Aleris is a Delaware corporation headquartered in Cleveland, Ohio. It offers flat-rolled aluminum products to the automotive, aerospace, and building and construction industries, among others. In 2018, Aleris’s revenues were approximately $3.4 billion.