Antitrust Law Daily Wrap Up, TOP STORY: Combination of lumber companies dropped in light of U.S., Canada competition concerns, (May 15, 2014)

By Jeffrey May, J.D.

Louisiana-Pacific Corporation (LP) and Ainsworth Lumber Co. Ltd. have agreed to terminate a September 2013 acquisition agreement in light of difficulties in obtaining approval from U.S. and Canadian antitrust agencies, the companies announced yesterday.

According to the companies, clearance from the U.S. Department of Justice Antitrust Division and the Canadian Competition Bureau “could not be obtained without divestitures significantly beyond those contemplated in the Arrangement Agreement without engaging in lengthy and expensive litigation.”

LP CEO Curt Stevens said that, while his company fundamentally disagrees with the analysis by antitrust agencies of the competitive dynamics of the industry, the company had “no choice but to terminate the agreement rather than accept the distraction, disruption, costs and risk of litigating this matter in both the U.S. and Canada, where the process could take upwards of a year.”

Department of Justice statement. Following the decision of the building material makers to abandon the transaction, the Department of Justice issued a statement, saying that the proposed deal “likely would have substantially lessened competition in the market for the production of oriented strand board (OSB) sold to customers in the Pacific Northwest and Upper Midwest regions of the United States.” OSB is a type of manufactured wood-based panel used in the construction and remodeling of homes and other buildings.

U.S.-based LP and Ainsworth of Canada are two of only four principal producers selling OSB into the Pacific Northwest, and two of only three principal producers selling OSB into the Upper Midwest, according to the Justice Department. The proposed merger would have given the combined firm a 63 percent market share in the Pacific Northwest region of the United States and a 55 percent market share in the Upper Midwest, the statement noted.

“The companies’ decision to abandon the transaction, which would likely have resulted in less competition and higher OSB prices, is a win for customers in the Pacific Northwest and the Upper Midwest,” said Renata B. Hesse, Deputy Assistant Attorney General of the Department of Justice Antitrust Division. “As a result of the abandonment of this transaction, consumers will continue to benefit from Ainsworth’s presence as an independent competitive force in the OSB industry.”

Canada Competition Bureau release. The Canada Competition Bureau also concluded that had LP’s acquisition of Ainsworth proceeded as proposed, it would likely have resulted in a substantial lessening of competition for the supply of OSB, according to an agency announcement.

Both the Justice Department and the Competition Bureau noted their close cooperation during the review of the proposed transaction.

“This review is an excellent example of the strength of the Canada-U.S. partnership in competition law enforcement that is based on decades working together to promote competition,” said Canada Commissioner of Competition John Pecman.

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