Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Heraeus required to divest assets to gain Justice Department approval of Minco acquisition, (Jan 3, 2014)

To resolve Department of Justice competitive concerns regarding Heraeus Electro-Nite LLC’s acquisition of Midwest Instrument Company Inc. (Minco), Heraeus will be required to divest certain assets acquired from Minco to Keystone Sensors LLC. Without the divestiture, Heraeus’ acquisition of Minco 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.

The DOJ’s Antitrust Division announced yesterday that it filed a civil antitrust suit (U.S. v. Heraeus Electro-Nite LLC, Case 1:14-cv-0005) in the U.S. district court for the District of Columbia, challenging the completed acquisition. The department also filed a proposed settlement that, if approved by the court, would resolve the competitive concerns raised in the complaint.

Heraeus Electro-Nite LLC is a developer of precious metal technology for the measurement, monitoring, and control of molten metal processes. In September 2012, Heraeus acquired Minco, a designer and manufacturer of differential pressure gauges and switches. The acquisition was not required to be reported under the premerger notification statute, and the DOJ learned of the transaction 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 DOJ charges 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.

The required divestiture of certain assets to an identified purchaser, Keystone, has been evaluated and approved by the department. The proposed settlement will ensure that the assets Keystone requires in order to enter the U.S. market and compete more effectively with Heraeus would be readily available. The divestiture to Keystone will promote competition in the sensors and instruments market, which was reduced when Heraeus acquired Minco. Keystone, a provider of commercial sensors for data collection, was formed in May 2013 for the purpose of entering the U.S. market for sensors and instruments and to offer customers an alternative to purchasing from Heraeus.

The proposed settlement requires Heraeus to waive noncompete provisions it had imposed on some former employees. The waiver of these provisions will enable Keystone 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. Heraeus also is required to provide the DOJ with 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 of the premerger notification law.

“The proposed settlement will benefit consumers in the single-use sensors and instruments market by facilitating the entry of a new competitor into this market,” said Renata B. Hesse, Deputy Assistant Attorney General of the Department of Justice’s Antitrust Division. “Today’s enforcement action shows that the department is committed to redressing anticompetitive mergers, including consummated mergers for which reporting is not required under the premerger notification law.”

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