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United States v. Iron Mountain Inc.

United States District Court, District of Columbia

November 11, 2016

United States of America, Plaintiff,
v.
Iron Mountain, Inc., et al., Defendants.

          MEMORANDUM OPINION

          Amit P. Mehta, United States District Judge.

         I. INTRODUCTION

         The United States filed this action against Iron Mountain, Inc. (“Iron Mountain”), and Recall Holdings Ltd. (“Recall”) (collectively “Defendants”), alleging that Iron Mountain's proposed acquisition of Recall would violate Section 7 of the Clayton Act, 15 U.S.C. § 18. See Compl., ECF No. 1, ¶¶ 3, 25. The United States filed with its Complaint a Hold Separate Stipulation and Order, ECF No. 4-1, which the court executed, ECF No. 9; a proposed Final Judgment, ECF No. 4-2; and a Competitive Impact Statement, ECF No. 3 [hereinafter CIS]. Thereafter, as required by the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16(b)-(h) (the “Tunney Act”), the United States published and subjected the proposed Final Judgment to a 60-day public comment period, which expired on May 25, 2015, see Mot. and Mem. of the United States, ECF No. 15 [hereinafter U.S. Mot.], at 3. The public comment period elicited a single response-from National Records Center, Inc.-to which the United States responded and published the comment and response in the Federal Register. See Resp. of the United States to Public Comment, ECF No. 13 [hereinafter U.S. Resp.]. The United States now asks the court to enter the agreed-upon Final Judgment, which would permit Iron Mountain and Recall to complete the proposed transaction subject to conditions intended to remedy the violations identified in the Complaint. See U.S. Mot.

         II. BACKGROUND

         A. Factual Background

         1.Relevant Product and Geographic Markets

         Iron Mountain is the largest hard-copy records management services (“RMS”) provider in the United States, with reported worldwide revenues of approximately $3.1 billion in 2014. CIS at 3. Recall is the country's second-largest RMS provider, with worldwide revenues of $836.1 million in 2014. Id. The relevant product market-RMS-involves the off-site storage of records and the provision of related services, such as indexing, transporting, and destroying records. Id. at 3-4. “[T]he Complaint alleges that a hypothetical monopolist of RMS could profitably increase its prices by at least a small but significantly non-transitory amount . . . [and] customers would not switch to any other alternative.” Id. at 5.

         RMS customers include companies throughout the United States, ranging from Fortune 500 companies to small local businesses. Id. at 4. The relevant geographic market, however, is a metropolitan area or a radius around such area. Id. at 5. That is because customers typically require a RMS vendor to have a storage facility located within a certain proximity of the customer's location. Id. Vendors outside a particular radius are not competitive with closer-in vendors because longer-distance “vendor[s] will not be able to retrieve and deliver records on a timely basis” and because such vendors are likely to incur higher transportation costs, rendering them a more costly alternative. Id. The Complaint identifies 15 metropolitan areas-the relevant geographic markets-in which RMS vendors “could profitably increase prices to local customers without losing significant sales to more distant competitors.” Id.; Compl. ¶ 17.

         2.Proposed Merger between Iron Mountain and Recall

         On June 8, 2015, Iron Mountain reach an agreement to acquire all the outstanding shares of Recall, a transaction valued at $2.6 billion. CIS at 1. After the proposed merger's announcement, the United States, through the Department of Justice, conducted an investigation into the potential anti-competitive effects of the proposed transaction on RMS consumers in various geographic areas. U.S. Resp. at 2. “As part of [this] investigation, the United States obtained documents and information from the merging parties and others and conducted more than 160 interviews with customers, competitors, and other persons with knowledge of the [RMS] industry.” Id. at 2-3.

         Following its investigation, the United States concluded that the proposed merger likely would lessen competition in 15 metropolitan areas. Id. at 4; Compl. ¶ 17. “In each of these geographic areas, Iron Mountain and Recall are two of only a few significant firms providing RMS.” U.S. Resp. at 4. Furthermore, in each of those areas, the United States found, the merger would result in a “substantial increase in concentration and loss of head-to-head competition between Iron Mountain and Recall” and “likely would result in higher prices and lower quality services for RMS customers.” Id.

         To address these competitive concerns, the United States required, as a condition of approving the merger, a divestiture of Recall's assets. In 13 metropolitan areas, Recall will be required to sell its assets to a third-party, Access CIG, LLC (“Access”), and in two metropolitan areas, Recall will be required to sell its assets to a to-be-determined buyer acceptable to the United States. Id. The required divestiture will include the sale of 26 Recall storage facilities, along with associated assets, such as customer contracts. Id. According to the United States, the “[d]ivestiture of the assets to independent, economically viable competitors will ensure that customers of [RMS] will continue to receive the benefits of competition.” Id.

         B. Procedural Background

         The United States filed this action against Iron Mountain and Recall, alleging that the proposed merger would violate Section 7 of the Clayton Act, 15 U.S.C. § 18. See Compl. ¶¶ 3, 25. The United States filed with its Complaint a Hold Separate Stipulation and Order, which the court entered on April 7, 2016, ECF No. 9. The purpose of that Stipulation and Order was to “ensure[], prior to [the] divestitures, that the Divestiture Assets remain independent [and] economically viable[, ] . . . [that] ongoing business concerns . . . remain independent and uninfluenced by Iron Mountain, and that competition is maintained during the pendency of the ...


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