Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS—D.D.C.: Consent decree allowing paper company combination approved, (Dec 14, 2015)

By Jeffrey May, J.D.

The federal district court in Washington, D.C. has approved a proposed final judgment resolving Department of Justice Antitrust Division concerns over the combination of paper companies Verso Paper Corp. and NewPage Holdings Inc. The court found the settlement, which required the divestiture of two NewPage mills, to be in the public interest, despite objections raised by former employees of a Bucksport, Maine, paper mill that Verso sold around the time of the acquisition (U.S. v. Verso Paper Corp., December 11, 2015, Chutkan, T.).

Approval of the consent decree comes nearly a year after the Antitrust Division filed its complaint. Both Verso and NewPage produced two types of coated publication paper: coated freesheet web paper (used in web printing applications) and coated groundwood paper (used primarily for the interior pages of magazines and catalogues and other medium-quality printing applications). The government alleged that the proposed acquisition would likely substantially lessen competition in the manufacture and sale of coated freesheet web paper, coated groundwood paper, and label paper to customers in North America. At the same time the government filed its complaint, it announced a proposed consent decree that would settle these concerns.

Under the terms of the proposed consent decree, Verso was required to divest NewPage’s Rumford, Maine, and Biron, Wisconsin, paper mills to Canadian forest-products company Catalyst Paper Corporation. According to the government, the divestiture of the mills to Catalyst created an effective competitor. These divestitures have been completed.

During Tunney Act proceedings, the Justice Department received comments from a labor union representing former employees of the closed Bucksport mill as well as from a former non-union employee of that mill. The commentors called into question the adequacy of the government’s investigation and the divestiture relief. Among other things, they argued that the government should have required the divestiture of the Bucksport facility or prevented its sale to a company that planned to “scrap the mill.”

Public interest standard. The court explained that whether the proposed consent decree was in the public interest depended upon the adequacy of the mandated divestitures. Because the government's factual basis for concluding that the divestitures were a reasonably adequate remedy for the anticompetitive harms alleged in the complaint, the settlement was approved. The court noted that the remedies were not “so inconsistent with the allegations charged as to fall outside of the ‘reaches of the public interest.’”

With respect to the government’s decision not to include the Bucksport mill in the remedy, the court said that Justice Department provided a sufficient factual basis for its decision to exclude that facility. Arguments against approval—that Catalyst was not an appropriate purchaser for the divested assets and that prices increased following the merger—also were rejected. The court noted that the government supported its choice of purchaser of the divested assets and that, despite price fluctuations, the divestitures adequately remedied the alleged harm.

This is Case No. 1:14-cv-02216.

Attorneys: Karl Dodd Knutsen for U.S. Department of Justice. Scott Alan Stempel (Morgan, Lewis & Bockius, LLP) for Verso Corp. Daryl A. Libow (Sullivan & Cromwell LLP) for NewPage Holdings Inc.

Companies: Newpage Holdings Inc.; Verso Corp.; Catalyst Paper Corp.

Cases: AcquisitionsMergers Antitrust AntitrustDivisionNews DistrictofColumbiaNews