Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Cal.: Consent decree resolving U.S. premerger coordination allegations approved, (Feb 3, 2015)

By Jeffrey May, J.D.

The federal district court in San Francisco yesterday approved a U.S. consent decree, resolving Department of Justice Antitrust Division allegations that particleboard suppliers Flakeboard America Ltd. and SierraPine engaged in premerger coordination, also known as “gun jumping,” in violation of both Sec. 7A of the Clayton Act and Sec. 1 of the Sherman Act. Approval came just one week after the 60-day public comment period on the settlement ended. The Antitrust Division did not receive any public comments on the proposed final judgment (U.S. v. Flakeboard America Ltd., February 2, 2015, Chhabria, V.).

The government's action followed Flakeboard's abandoned attempt to acquire the western U.S. operations of rival SierraPine last year. Flakeboard’s parent company, Arauco, announced that Arauco and SierraPine jointly and voluntarily agreed to terminate the proposed transaction in light of Justice Department objections to the transaction.

A little over a month after the deal fell through, the Justice Department, in November 2014, filed a complaint alleging that Flakeboard and its parent companies during the premerger waiting period coordinated with SierraPine with respect to closing a particleboard mill and moving the mill’s customers to Flakeboard. According to the government, the challenged conduct amounted to a per se unlawful agreement between competitors to reduce output and allocate customers in violation of Sec. 1 of the Sherman Act and premature transfer of operational control of SierraPine’s business to Flakeboard during the Hart–Scott–Rodino (HSR) Antitrust Improvements Act waiting period in violation of Sec. 7A of the Clayton Act.

At the same time the complaint was filed, the Justice Department announced a proposed consent decree intended to resolve the government's concerns. Under the terms of the consent decree, which has now been approved by the court, the defendants must pay a combined $3.8 million in civil penalties ($1.9 million each) to settle allegations that they violated the HSR Act. In addition, to resolve allegations that it violated Sec. 1 of the Sherman Act, Flakeboard must disgorge $1.15 million in illegally obtained profits. The government estimates that Flakeboard earned approximately $1.15 million in illegally obtained profits during the six-month period leading up to the settlement.

The proposed consent decree also requires both Flakeboard and SierraPine to establish antitrust compliance programs, name an antitrust compliance officer, and agree to certain restrictions. Injunctive relief prohibits premerger coordination in the future by either defendant.

As noted, the Justice Department did not receive any comments on the settlement during the 60-day comment period. The Justice Department was seeking comment solely on the remedies for the alleged Sherman Act violation. As is past cases involving alleged HSR violations, the government took the position that the civil-penalty component of the proposed final judgment was not open to public comment.

This is Case3:14-cv-04949-VC.

Attorneys: Amy R. Fitzpatrick for U.S. Department of Justice Antitrust Division. Andrew M. Lacy (Simpson, Thacher & Bartlett LLP) for Flakeboard America Ltd. Amanda P. Reeves (Latham & Watkins LLP) for SierraPine.

Companies: Flakeboard America Ltd.; SierraPine

Cases: AcquisitionsMergers Antitrust AntitrustDivisionNews CaliforniaNews