Daily Dicta: Stuck in the Litigation Slow Lane
The unusual merger case highlights a longstanding disparity between review by the Justice Department and the Federal Trade Commission.
September 06, 2018 at 01:41 PM
8 minute read
When Tom Petty sang that the waiting is the hardest part, it's a safe bet he wasn't talking about the Federal Trade Commission.
But the sentiment is still on point. Because for 18 months, two companies that make an industrial chemical that provides bright white pigment for paints and plastics have been trying to win antitrust approval for their $2.4 billion merger.
They and their lawyers from Kirkland & Ellis and Arnold & Porter aren't much closer to an answer. On Tuesday, a federal judge issued a preliminary injunction enjoining the merger. While that might normally be the death knell, in this instance it hardly moves the needle.
It's a bizarre and in some ways unprecedented case that highlights a longstanding disparity: Some industries get their deals reviewed by the Justice Department's Antitrust Division, where you get fast-track litigation in federal court. But other industries, for no real reason other than institutional tradition, get their deals reviewed by the FTC, where you can be trapped in administrative purgatory until your merger shrivels up and dies on the vine.
Consider this study in contrasts. In November of 2017, the Justice Department sued to block the merger of AT&T and Time Warner, a complex, $85 billion combination by two companies that touch just about every person in the United States. The case went to trial in March, U.S. District Judge Richard Leon issued a decision in June, and AT&T completed the acquisition on June 14 (though the government is pursuing an appeal).
And then there's deal between Stamford, Connecticut-based titanium dioxide maker Tronox, which wants to buy Cristal—a Saudi Arabia-based titanium dioxide maker with sales of about $300 million in North America in 2016. It's a union that's of interest to the paint industry and other titanium dioxide makers, but not many people beyond that.
They got the FTC.
The agency challenged the merger, filing an administrative complaint on Dec. 5, 2017—just two weeks after DOJ went after AT&T. But Tronox and Cristal are still months away from resolution even as the clock ticks down on their transaction.
The legal questions presented are straightforward. Is the relevant geographic market for titanium dioxide global or just North America? Could you substitute sulfate titanium dioxide for chloride titanium dioxide? Will the merger result in output-enhancing synergies that will benefit consumers? Will these benefits outweigh any alleged anti-competitive effects?
All legitimate questions, but not exactly new ground for an antitrust inquiry.
In what seems to be a first, the FTC opted not to seek a preliminary injunction in district court right off the bat. The agency didn't explain why, but perhaps they figured they didn't need to bother. Antitrust regulators in Europe were also reviewing the transaction, so Tronox and Cristal couldn't close anyway.
Instead, there was an administrative trial—a five week proceeding before FTC Administrative Law Judge D. Michael Chappell that ended on June 22.
Tronox is represented by a Kirkland team that includes Michael Williams, Aaron L. Nielson and Karen McCartan DeSantis, while Cristal is represented by Arnold & Porter's James Cooper and Peter Levitas.
They'll be back before Chappell for closing arguments on Sept. 14. And then he'll issue a decision … well, it's hard to say exactly when.
The judge himself made no bones about the efficiency of the FTC process. “All right. Let me just talk about some timing,” he said on June 22, according to court papers. “In the event anyone here would suffer from the delusion that this process would finish up much quicker than a preliminary injunction proceeding in federal court, let me disabuse you of that fantasy.”
He continued, “The last two cases here, between the end of trial and my decision, about six months. In 1-800 Contacts, that decision was issued in May 2018. They haven't even had closing arguments yet on the appeal to the commission. And there's the pretty much automatic appeal of my decision to the commission. Once the commission gets a case, it's anybody's guess when you'll get a decision.”
In what looked like a desperate attempt to try to force quicker resolution, Tronox in January sued the FTC in the Northern District of Mississippi (Tronox has a plant there) seeking a declaratory judgment and injunctive relief.
“This is a case about basic fairness in antitrust regulation,” Paul Cassisa Jr. of Butler Snow wrote. “The FTC is trying to block the transaction, not through ordinary litigation processes in the federal courts but instead by challenging the transaction only using its time-consuming administrative process, thus running out the clock until the purchase agreement expires, so the parties never have a meaningful opportunity to defend the legality of Tronox's proposed acquisition.”
Tronox withdrew the complaint in March.
In early July, the European Commission approved the Tronox/ Cristal merger with a minor condition. And suddenly, the FTC decided it needed a preliminary injunction after all.
On Tuesday, U.S District Judge Trevor McFadden of the District of Columbia sided with the FTC and granted the injunction, ruling that the agency was likely to prevail on the merits. His opinion remains sealed.
Appointed by President Donald Trump, McFadden, 40, became a judge less than a year ago. Before that, he was a white-collar partner at Baker McKenzie and a top official in DOJ's criminal division.
If McFadden had first crack at reviewing the merger, perhaps the parties might have abandoned the deal when he gave it a thumbs-down. But at this point, they've already tried the case before Chappell.
What will be more telling is how Chappell, an longtime ALJ with deep subject matter experience, will evaluate the same evidence.
When he does issue his opinion, it will be reviewed by an all-new bench of FTC commissioners. The last one who voted to bring the case, Maureen Ohlhausen, will leave in September when her term expires.
As for Tronox, all it can do now is hope it gets an answer by December 31, after which it'll face a $60 million breakup fee if the deal doesn't go through.
Which means the waiting isn't just hard—it's also expensive.
The sea of familiar faces—some vehemently opposing his nomination and others publicly backing him—underscored the high stakes and partisanship that's come with Kavanaugh's nomination.
CVR Energy is now alleging the elite law firm engaged in unethical billing practices by basing its legal fees on the amount charged by investment banks.
Plaintiffs submitted photos showing mice lounging around—and even on top of—a plug-in repellent that claims to deter rodents.
Ted Frank, the director of litigation at the Center for Class Action Fairness at the Competitive Enterprise Institute, is asking the Supreme Court to overturn a settlement with Google that paid $5.3 million to six nonprofits, $2.1 million to plaintiffs lawyers and nothing to the class.
Akin Gump's Moscow rainmaker Ilya Rybalkin, who reportedly billed close to $20 million in 2017, cited ongoing geopolitical tensions for leaving the Am Law 100 firm to form an independent 13-lawyer outfit in the city.
Yeah but it was frigging hilarious.
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