Antitrust Law Daily Wrap Up, ANTITRUST—D.D.C.: U.S. consent decree preserving competition for sensors and instruments used in steel industry approved, (Apr 8, 2014)

By Jeffrey May, J.D.

A U.S. consent decree, resolving a Department of Justice Antitrust Division challenge to Heraeus Electro-Nite LLC’s 2012 acquisition of Midwest Instrument Company Inc. (Minco), is in the public interest, the federal district court in Washington, D.C. has decided. Thus, the court granted its approval to the settlement, which requires Heraeus to divest to an upfront buyer, Keystone Sensors, LLC, the assets acquired from Minco that are located in the United States and Mexico (U.S. v. Heraeus Electro-Nite LLC, April 7, 2014, Boasberg, J.).

In January, the Justice Department filed a civil antitrust suit, challenging the consummated acquisition on the ground that it substantially lessens competition in the market for the development, production, sale, and service of single-use sensors and instruments (S&Is) used to measure and monitor the temperature and chemical composition of molten steel in the steel manufacturing process. At the same time, the government filed for court approval the proposed consent decree resolving the claims.

Heraeus is a developer of precious metal technology for the measurement, monitoring, and control of molten metal processes. Minco was a designer and manufacturer of differential pressure gauges and switches.

Heraeus’ September 2012 acquisition of Minco was not required to be reported under the Hart-Scott-Rodino Act, and the Justice Department learned of the transaction shortly after it was completed. Prior to the acquisition, Heraeus and Minco competed head-to-head on price, service, and innovation in supplying sensors and instruments to steel manufacturers for whom the reliability and precise performance of the sensors is of critical importance, according to the complaint.

The consent decree resolves the government’s allegations that the transaction: (1) eliminated the competition between Heraeus and Minco in the development, production, sale, and service of S&Is in the United States; (2) significantly reduced incentives to discount prices, increase quality services, or invest in innovation; (3) increased price levels for S&Is; and (4) decreased innovation, lengthened delivery times, and reduced the quality and terms of service.

In addition to the divestiture obligations, the consent decree contains a requirement that Heraeus provide Keystone information relating to all Heraeus personnel in the United States who were formerly employed by Minco to enable Keystone to make offers of employment. Heraeus also must waive noncompete provisions it had imposed on some former employees.

According to the government, the waiver of these provisions will enable Keystone, a provider of commercial sensors for data collection, to hire experienced individuals with expertise in this specialized business. By making experienced individuals available to be hired immediately, Heraeus’ agreement to waive these noncompete provisions will also enhance competition in the single-use sensors and instruments market by facilitating the entry or expansion of other new competitors into the market, in the government’s view.

The consent decree also requires Heraeus to provide advance notice of any future acquisition in the market for sensors and instruments in the United States that is not subject to the reporting requirements.

The government on April 7 moved for entry of the proposed final judgment following a sixty-day public comment period mandated by the Antitrust Procedures and Penalties Act or Tunney Act. The government received no public comments during that period.

Heraeus is a Delaware corporation, headquartered in Langhorne, Pennsylvania. Keystone is a Delaware corporation, headquartered in Cranberry Township, Pennsylvania. Its principal place of business will be located in Johnson City, Tennessee.

This is Case 1:14-cv-0005.

Attorneys: Lowell R. Stern for Department of Justice Antitrust Division. Paul M. Honigberg and Jeremy A. Rist (Blank Rome LLP) for Heraeus Electro-Nite LLC.

Companies: Heraeus Electro-Nite LLC; Midwest Instrument Company Inc.; Keystone Sensors, LLC

Cases: Antitrust DistrictofColumbiaNews AntitrustDivisionNews