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United States v. Abitibi-Consolidated Inc.

November 5, 2008

UNITED STATES OF AMERICA, PLAINTIFF,
v.
ABITIBI-CONSOLIDATED INC. AND BOWATER INCORPORATED, DEFENDANTS.



The opinion of the court was delivered by: Rosemary M. Collyer United States District Judge

MEMORANDUM OPINION

Pursuant to Section 2(e)-(f) of the Antitrust Procedures and Penalties Act (the "Tunney Act"), 15 U.S.C. § 16(e)-(f), and with the consent of the Defendants, the United States moved for entry of a proposed Final Judgment in this civil antitrust action. The Newspaper Association of America (the "Association") filed a memorandum opposing entry of the proposed Final Judgment.*fn1 After consideration of the parties' briefs and the full record, the Court finds that the United States has shown that the proposed Final Judgment is in the public interest and will enter it accordingly.

I. BACKGROUND

Abitibi-Consolidated Inc. and Bowater Incorporated were the two largest newsprint producers in North America when they announced their plan to merge. The Department of Justice, on behalf of the United States, challenged the merger alleging that it would violate Section 7 of the Clayton Act, 15 U.S.C. § 18, but then agreed to settle the case with a consent decree, as reflected in the proposed Final Judgment. The proposed decree required the merged firm to divest a newsprint mill in Snowflake, Arizona. Abitibi and Bowater consummated their merger and divested the mill.

Simultaneously with filing its motion, the United States filed a Certificate of Compliance certifying that the parties have complied with the provisions of the Tunney Act and that the waiting periods imposed by the Tunney Act have expired.*fn2 Notice of the proposed Final Judgment was published in the Federal Register on November 8, 2007. Thus, the sixty-day comment period ended on February 7, 2008. Notice of the proposed Final Judgment was published in a local newspaper, The Washington Post, starting on November 18, 2007, and ending on November 24, 2007. The United States received one comment; a twenty-two-page document with over two-hundred pages of attachments, from the Association on January 2, 2008. The United States responded to this comment on April 18, 2008, and published the Association's comment, its attachments, and the response of the United States in the Federal Register on June 10, 2008.*fn3 See 15 U.S.C. § 16(d) (the United States shall file comments with the district court and publish them in the Federal Register).

II. STANDARD OF REVIEW

Both sides agree that the standard of review of the proposed Final Judgment is whether it is in the public interest. The Tunney Act provides in relevant part:

(1) Before entering any consent judgment proposed by the United States under this section, the court shall determine that the entry of such judgment is in the public interest. For the purpose of such determination, the court shall consider --

(A) the competitive impact of such judgment, including termination of alleged violations, provisions for enforcement and modification, duration of relief sought, anticipated effects of alternative remedies actually considered, whether its terms are ambiguous, and any other competitive considerations bearing upon the adequacy of such judgment that the court deems necessary to a determination of whether the consent judgment is in the public interest; and

(B) the impact of entry of such judgment upon competition in the relevant market or markets, upon the public generally and individuals alleging specific injury from the violations set forth in the complaint including consideration of the public benefit, if any, to be derived from a determination of the issues at trial.

15 U.S.C. § 16(e)(1). The proposed Final Judgment "must be approved even if it falls short of the remedy the court would impose on its own, as long as it falls within the range of acceptability or is within the reaches of the public interest." United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982) (quotation marks and citation omitted). The Court "is not permitted to reject the proposed remedies merely because the court believes other remedies are preferable." United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1, 15 (D.D.C. 2007) (citing United States v. Microsoft Corp., 56 F.3d 1448, 1460 (D.C. Cir. 1995)). "Accordingly, the relevant inquiry is whether there is a factual foundation for the government's decisions such that its conclusions regarding the proposed settlement are reasonable." Id. at 15-16 (citing Microsoft, 56 F.3d at 1461); see also United States v. AT&T Inc., 541 F. Supp. 2d 2, 6-7 (D.D.C. 2008) (same). "The government need not prove that the settlements will perfectly remedy the alleged antitrust harms, it need only provide a factual basis for concluding that the settlements are reasonably adequate remedies for the alleged harms." SBC Commc'ns, 489 F. Supp. 2d at 17.

III. ANALYSIS

In this case, whether the settlement is in the public interest depends on the adequacy of the divestiture of the Snowflake newsprint mill. If there is a factual basis for concluding that the divestiture is a reasonably adequate remedy for the harm predicted in the Complaint, then the settlement should be approved. If there is not, then the settlement should be rejected. Thus, the starting point is identifying the harm predicted in the Complaint.

The Complaint alleges that although declining demand for newsprint over time will cause newsprint producers to curtail production and reduce capacity, the combination of Abitibi's and Bowater's large market shares will provide the merged firm with the incentive and ability to close capacity sooner than either firm otherwise would absent the merger and to raise prices and profit from the higher margins on the merged firm's remaining capacity. Compl. ΒΆΒΆ 17-19. As the United States explained in its Competitive Impact Statement ("CIS"), "if Defendants were allowed to merge without a divestiture, the merged firm would be able to close its capacity strategically, allowing the merged firm to raise newsprint prices and recoup its lost profits on its combined output." CIS at 9. The issue, then, is whether the United States has provided a factual basis for concluding ...


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