Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Steris, Synergy Health merger would reduce competition in sterilization service market, FTC argues, (Aug 18, 2015)

By Linda O’Brien, J.D., LL.M.

The proposed $1.9 billion merger of Steris Corporation and United Kingdom-based Synergy Health plc would violate antitrust laws by significantly reducing future competition for contract radiation sterilization services, according to the FTC’s reply memorandum in support of its motion for preliminary injunction filed in the federal district court in Cleveland. The trial on the agency’s administrative complaint is set for October (FTC v. Steris Corporation, August 18, 2015).

In May 2015, the FTC issued an administrative complaint, charging that Steris’ proposed $1.9 billion acquisition of Synergy Health would violate the antitrust laws by significantly reducing future competition in regional markets for sterilization of products using radiation, particularly gamma or x-ray radiation. A trial before an administrative law judge on the merits is scheduled to begin on October 28. The agency also sought a temporary restraining order and preliminary injunction in federal court to maintain the status quo pending the administrative trial.

Steris and Synergy Health both provide contract sterilization services for companies that need to ensure their products are free of unwanted microorganisms before they reach customers. Currently, gamma radiation is considered the only feasible method of sterilizing large volumes of dense and heterogeneously packaged products. Only Steris and one other company provide contract gamma sterilization services in the United States. However, at the time the proposed merger was announced, Synergy was implementing a strategy to open contract x-ray sterilization services in the U.S.

According to the FTC’ complaint, the proposed transaction would eliminate likely future competition between Steris’ gamma sterilization facilities and Synergy’s planned x-ray sterilization facilities in the United States, depriving consumers of alternative sterilization services and additional competition.

Likelihood of success. According to the reply memorandum, the Commission demonstrated that Synergy probably would have entered and competed in the U.S. sterilization services market with x-ray technology and its entry would have resulted in substantial deconcentration and lower prices. Steris’ proposed acquisition of Synergy meets all of the elements of a merger whose effect may be substantially to lessen competition, since Synergy had “available feasible means” for entering the market and those means offered a substantial likelihood of significant procompetitive effects.

Moreover, the proposed acquisition eliminates the only well-positioned alternative to contract gamma sterilization from entering the U.S. market, which would have prevented Steris from exercising market power. Synergy was well financed and had taken affirmative steps to enter the market until the proposed transaction was announced.

Balance of the equities. Furthermore, the equities weigh in favor of preliminary injunctive relief. Allowing the merger to close before the completion of the administrative proceeding would cause irreparable harm by allowing the combined firm to begin altering Synergy’s operations and business plans, accessing Synergy’s confidential information, and eliminating key Synergy personnel. Any risk of potential competitive harm should outweigh the anticipated benefits of the merger as the companies have failed to assert any meaningful competition-enhancing savings in the deal. A preliminary injunction would allow the court to preserve the x-ray assets Synergy might have left, the reply memorandum states.

The case is No. 1:15-cv-01080-DAP.

Attorneys: Tara Reinhart for the Federal Trade Commission. John Majoras (Jones Day) for Steris Corporation. Paolo Morante (DLA Piper) for Synergy Health plc.

Companies: Steris Corporation; Synergy Health plc

News: Antitrust OhioNews