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United States: Antitrust Division agrees to mid-trial settlement to resolve merger challenge

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In brief

The Antitrust Division of the Department of Justice (DOJ) announced that it reached a settlement in its litigation challenge against ASSA ABLOY AB’s (“Assa Abloy”) proposed USD 4.3 billion acquisition of Spectrum Brand Holding Inc.’s Hardware and Home Improvement division (“Spectrum”). [1] The settlement, which came in the middle of trial and is now subject to court approval, is the first negotiated settlement under DOJ Assistant Attorney General Jonathan Kanter.  

Notably, comments from the judge during the trial suggested skepticism towards the DOJ’s position and potential difficulties for the DOJ in winning its case.[2] Without the settlement, this case may have been next in a recent number of DOJ litigation losses.

Key takeaways

  • In its complaint, the DOJ said the initial divestiture package was “insufficient” and that only a block of the transaction would preserve competition.[3] It echoed this point in its Competitive Impact Statement, stating that the relief offered by the Proposed Final Judgement would not “fully eliminate the risks to competition alleged in [its] [c]omplaint,” and that “only a complete injunction preventing the original proposed merger would have eliminated those risks.”[4] However, the DOJ accepted that “the [P]roposed Final Judgement, which includes additional provisions and protections, [would] address some of the concerns.”[5]
  • The divestiture package set forth in the Proposed Final Judgment includes certain additional assets not included in the defendants’ initial agreement with the proposed divestiture purchaser, Fortune Brands Home & Security, Inc. (“Fortune”), requires a shorter transition-services period to eliminate lingering entanglements between Assa Abloy and Fortune, and involves a monitoring trustee to ensure compliance with the Final Judgment for a five-year period.
  • This resolution may signal that the DOJ now is more willing to entertain and agree to merger settlements. Previously, AAG Kanter had consistently maintained a strong preference for blocking problematic transactions rather than agreeing to settlements. Whether this matter marks a material shift in agency policy, however, remains to be seen.
  • Baker McKenzie’s global antitrust practice continues to monitor developments and trends and engage with regulators worldwide on behalf of our clients. In fact, in an unrelated matter, Baker McKenzie recently secured clearance for a complex global merger, which included a remedy that covered the US and Canada.

Case Details On September 15, 2022, the DOJ sued to block the proposed transaction between door hardware manufacturer Assa Abloy and Spectrum’s hardware division, claiming that the combination would eliminate direct competition in the markets for premium residential door hardware and smart locks.[6] The DOJ argued that the proposed merger would grant the parties, post-transaction, a “near-monopoly” in the relevant markets, and would result in higher prices, lower quality and reduced innovation.[7] To address concerns, the companies announced that they would sell certain assets to Fortune.[8] The DOJ sought to block the merger, arguing that the proposed divestiture was insufficient to restore the competitive intensity that existed prior to the combination.[9] Trial began on April 24, 2023, and the DOJ and the defendants submitted the proposed settlement to the judge for approval on May 5, 2023.[10]

[1] Justice Department Reaches Settlement in Suit to Block ASSA ABLOY’s Proposed Acquisition of Spectrum Brands’ Hardware and Home Improvement Division

[2] See e.g., Viability of divestiture buyer key in Assa Abloy challenge, judge says; also see e.g., Judge: Assa Abloy incentivised to find strong buyer

[3] Download document here.

[4] Download document here.

[5] Download document here.

[6] Justice Department Sues to Block ASSA ABLOY’s Proposed Acquisition of Spectrum Brands’ Hardware and Home Improvement Division

[7] Download document here.

[8] ASSA ABLOY sells Emtek and the Smart Residential business in the U.S. and Canada in furtherance of the proposed acquisition of the Hardware and Home Improvement division

[9] Download document here.

[10] Download document here.

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Author

Mark H. Hamer is Global Chair of the Firm's Antitrust & Competition Practice Group, comprised of over 300 competition lawyers in over 60 offices across 43 countries. Mark has over 25 years of wide-ranging litigation experience, including first-chair roles in jury trials, bench trials and arbitrations. His primary focus is antitrust litigation. Before joining Baker McKenzie, Mark was a successful trial attorney in the Antitrust Division of the US Department of Justice. He was involved in some of the DOJ's highest-profile antitrust trials. Before joining the DOJ, Mark was a partner at another global law firm where he handled complex multidistrict antitrust class actions in courts across the nation. Mark's practice focuses on antitrust litigation, both private and public. He assists clients in the defense of merger challenges, class actions, and civil and criminal investigations. He helps clients navigate federal and state regulatory inquiries, enforcement actions, complex merger clearance matters and multidistrict antitrust class actions. As an experienced antitrust counsel, Mark also regularly provides antitrust advice on a broad range of non-litigation matters, including antitrust deal support, merger clearance strategy, sales and distribution advice, and antitrust compliance.

Author

Creighton Macy is the Chair of Baker McKenzie's North America Antitrust & Competition Practice Group. Creighton is recognized as a leading global antitrust practitioner. Creighton has extensive experience representing clients in a wide variety of antitrust matters, including mergers and acquisitions, investigations by the United States Department of Justice and the Federal Trade Commission, private litigation, and counselling on issues such as antitrust compliance. Before joining the Firm, Creighton served as Chief of Staff and Senior Counsel in the DOJ Antitrust Division, working as a senior advisor to the Assistant Attorney General on civil and criminal antitrust enforcement and policy matters, as well as budget and personnel issues. During Creighton's time at the DOJ, the Antitrust Division undertook an unprecedented volume of high-profile civil and criminal matters. Creighton advises clients on all aspects of the antitrust regulatory and litigation process. He has experience in a diverse range of sectors such as software, media, semiconductor, financial services, agriculture, pharmaceutical, sports, consumer goods, aviation, music, and motion pictures.

Author

John Fedele is a member of Baker McKenzie's antitrust practice and is located in its Washington, DC office. While he has a broad range of antitrust experience, he most frequently represents clients before the Antitrust Division of the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) in investigations of proposed mergers and acquisitions, and routinely analyzes and manages filing obligations under the Hart-Scott-Rodino (HSR) Act and foreign competition regimes. John is a member of the Washington D.C. office’s Diversity Advisory Committee, serves as a contact in the firm’s PointONE program designed to allow employees to raise workplace concerns in a safe space, and maintains an active pro bono practice. He also is a member of Baker McKenzie’s Global Merger Control Task Force. Mr. Fedele focuses his practice on a wide range of antitrust matters. In addition to representing clients in investigations of mergers and acquisitions before the FTC and DOJ, Mr. Fedele provides antitrust counsel to companies on a variety of commercial activity including distribution agreements, joint venture arrangements, and supply agreements, as well as works with companies to evaluate their antitrust compliance programs

Author

Teisha Johnson is a member of Baker McKenzie's antitrust practice in Washington, DC. She advises clients on a wide range of antitrust and e-discovery matters, and has considerable experience counseling clients in government investigations, proposed mergers and acquisitions, compliance, and litigation matters. Teisha focuses her practice on antitrust investigations and e-discovery matters. She routinely leads cross-border teams in investigations of proposed mergers, and responding to international investigations and discovery requests. She also advises clients on all aspects of the antitrust regulatory process, including representing clients in matters before the Federal Trade Commission and the Antitrust Division of the US Department of Justice, as well as in civil and criminal investigations before federal and state authorities. In addition, she regularly counsels clients in consumer protection matters, including allegations of unfair and deceptive practices brought under Section 5 of the FTC Act.

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