Justice Department Wins Historic Arbitration of a Merger Dispute
Novelis Inc. Must Divest Assets to Consummate Transaction with Aleris Corporation
The Department of Justice prevailed in a first-of-a-kind arbitration, which will resolve a civil antitrust lawsuit challenging Novelis’s proposed merger with Aleris Corporation. As a result, Novelis must divest Aleris’s entire aluminum auto body sheet operations in North America, which will fully preserve competition in this important industry. In addition, under the terms of the arbitration agreement between defendants and the Department, Novelis must reimburse the Department for its fees and costs incurred in connection with the arbitration.
“Today’s decision is a victory for automakers and American consumers and taxpayers and will preserve competition in the market for aluminum auto body sheet,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “This first-of-its-kind arbitration proved to be an effective procedure for the streamlined adjudication of a dispositive issue in a merger challenge. As demonstrated in this case, arbitration has the potential to be a powerful dispute resolution tool in the right circumstances and I look forward to applying the learning from this case to future matters. I am very proud of the Division’s talented and dedicated team of lawyers, paralegals, and economists who pioneered this ground-breaking arbitration, representing the Division exceedingly well throughout these proceedings.”
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 Justice Department’s 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. Fact discovery proceeded under the supervision of the district court. Pursuant to the arbitration agreement, following the close of fact discovery, the matter was referred to binding arbitration to resolve the issue of product market definition. A ten-day arbitration hearing concluded last week, marking 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.
Today, the arbitrator ruled for the United States, holding that aluminum auto body sheet constitutes a relevant product market, as the United States had alleged. Because the Department prevailed, the United States will file a proposed final judgment with the U.S. District Court for the Northern District of Ohio that requires Novelis to divest Aleris’s entire aluminum ABS operations in North America to preserve competition in the relevant market. This arbitration procedure provided certainty and allowed the defendants to close their transaction subject to foreign regulatory review.
The Department thanks Kevin Arquit, a highly-respected and experienced antitrust lawyer and former Director of the Federal Trade Commission’s Bureau of Competition, for serving as the arbitrator in this matter. The Department also thanks defendants’ legal team from Latham & Watkins, LLP and Fried Frank, and in particular, Dan Wall and the litigating team from Latham & Watkins, for their highly-skilled advocacy and professionalism.
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.