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United States: Antitrust Division agrees to mid-trial settlement to resolve merger challenge

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In brief

The Antitrust Division of the Department of Justice (DOJ) announced that it reached a settlement in its litigation challenge against ASSA ABLOY AB’s (“Assa Abloy”) proposed USD 4.3 billion acquisition of Spectrum Brand Holding Inc.’s Hardware and Home Improvement division (“Spectrum”). 1 The settlement, which came in the middle of trial and is now subject to court approval, is the first negotiated settlement under DOJ Assistant Attorney General Jonathan Kanter.  
Notably, comments from the judge during the trial suggested skepticism towards the DOJ’s position and potential difficulties for the DOJ in winning its case.2 Without the settlement, this case may have been next in a recent number of DOJ litigation losses.

Key takeaways

  • In its complaint, the DOJ said the initial divestiture package was “insufficient” and that only a block of the transaction would preserve competition.3 It echoed this point in its Competitive Impact Statement, stating that the relief offered by the Proposed Final Judgement would not “fully eliminate the risks to competition alleged in [its] [c]omplaint,” and that “only a complete injunction preventing the original proposed merger would have eliminated those risks.”4 However, the DOJ accepted that “the [P]roposed Final Judgement, which includes additional provisions and protections, [would] address some of the concerns.”5
  • The divestiture package set forth in the Proposed Final Judgment includes certain additional assets not included in the defendants’ initial agreement with the proposed divestiture purchase, Fortune Brands Home & Security, Inc. (“Fortune”), requires a shorter transition-services period to eliminate lingering entanglements between Assa Abloy and Fortune, and involves a monitoring trustee to ensure compliance with the Final Judgment for a five-year period.
  • This resolution may signal that the DOJ now is more willing to entertain and agree to merger settlements.  Previously, AAG Kanter had consistently maintained a strong preference for blocking problematic transactions rather than agreeing to settlements.  Whether this matter marks a material shift in agency policy, however, remains to be seen.
  • Baker McKenzie’s global antitrust practice continues to monitor developments and trends and engage with regulators worldwide on behalf of our clients.  In fact, in an unrelated matter, Baker McKenzie recently secured clearance for a complex global merger, which included an agreed remedy with the DOJ.

Case Details

On September 15, 2022, the DOJ sued to block the proposed transaction between door hardware manufacturer Assa Abloy and Spectrum’s hardware division, claiming that the combination would eliminate direct competition in the markets for premium residential door hardware and smart locks.6 The DOJ argued that the proposed merger would grant the parties, post-transaction, a “near-monopoly” in the relevant markets, and would result in higher prices, lower quality and reduced innovation.7 To address concerns, the companies announced that they would sell certain assets to Fortune.8 The DOJ sought to block the merger, arguing that the proposed divestiture was insufficient to restore the competitive intensity that existed prior to the combination.9 Trial began on April 24, 2023, and the DOJ and the defendants submitted the proposed settlement to the judge for approval on May 5, 2023.10

1 Justice Department Reaches Settlement in Suit to Block ASSA ABLOY’s Proposed Acquisition of Spectrum Brands’ Hardware and Home Improvement Division

2 See e.g., Viability of divestiture buyer key in Assa Abloy challenge, judge says; also see e.g., Judge: Assa Abloy incentivised to find strong buyer

3 Download document here.

4 and 5 Download document here.

6 Justice Department Sues to Block ASSA ABLOY’s Proposed Acquisition of Spectrum Brands’ Hardware and Home Improvement Division

7 Download document here.

8 ASSA ABLOY sells Emtek and the Smart Residential business in the U.S. and Canada in furtherance of the proposed acquisition of the Hardware and Home Improvement division

9 Download document here.

10 Download document here.

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Author

Mark H. Hamer is Global Chair of the Firm's Antitrust & Competition Practice Group, comprised of over 300 competition lawyers in over 60 offices across 43 countries. Mark has over 25 years of wide-ranging litigation experience, including first-chair roles in jury trials, bench trials and arbitrations. His primary focus is antitrust litigation. Before joining Baker McKenzie, Mark was a successful trial attorney in the Antitrust Division of the US Department of Justice. He was involved in some of the DOJ's highest-profile antitrust trials. Before joining the DOJ, Mark was a partner at another global law firm where he handled complex multidistrict antitrust class actions in courts across the nation.

Author

Creighton Macy is the Chair of Baker McKenzie's North America Antitrust & Competition Practice Group. Creighton is recognized as a leading global antitrust practitioner.

Creighton has extensive experience representing clients in a wide variety of antitrust matters, including mergers and acquisitions, investigations by the United States Department of Justice and the Federal Trade Commission, private litigation, and counselling on issues such as antitrust compliance. Before joining the Firm, Creighton served as Chief of Staff and Senior Counsel in the DOJ Antitrust Division, working as a senior advisor to the Assistant Attorney General on civil and criminal antitrust enforcement and policy matters, as well as budget and personnel issues. During Creighton's time at the DOJ, the Antitrust Division undertook an unprecedented volume of high-profile civil and criminal matters.

Creighton began his career as a Trial Attorney in the Litigation III and Transportation, Energy, and Agriculture sections of the Antitrust Division, working on a number of notable merger and civil non-merger investigations and cases. Before rejoining the Antitrust Division as its Chief of Staff, he was a member of another global law firm's antitrust practice, where he advised clients on a wide range of US and international antitrust issues.

Creighton is consistently recognized globally for his market-leading antitrust practice with respect to high-stakes transactions, investigations, and compliance and counseling work. For example, clients have noted that Creighton “shines above the rest’ due to his first-rate cartel and merger control-related practice.’” He also regularly speaks and publishes articles relating to a variety of antitrust issues, and has been recognized many times for his contributions and thought-leadership on these issues.

Creighton is currently Co-Chair of the American Bar Association Antitrust Law Section’s Young Lawyers Task Force. In previous roles, he served as Reporter of the Presidential Transition Task Force, as well as Chair of the Trade, Sports, and Professional Associations Committee. He is highly involved in mentoring programs, including with the Antitrust Law Section, as well as Marquette University Law School, where he previously served as the DC Representative of the Alumni Board.

Creighton graduated from Marquette University, where he was an NCAA Division I Academic All-American tennis player. During his time at Marquette, he was awarded the Athletic Department’s Cura Personalis award by his peers, as well as several leadership awards. More recently, Creighton was named the Athletic Department’s Young Alumnus of the Year Award.

Author

Brian Burke is a partner in Baker McKenzie's Washington, DC office. He draws on over 20 years of experience to counsel clients on all federal antitrust issues. He assists clients in successfully navigating the merger clearance process before the US as well as international antitrust authorities. Brian also has extensive experience advising clients on civil and criminal governmental antitrust investigations, commercial antitrust litigation, antitrust compliance programs, risk assessments, and pricing and distribution policies. Brian holds multiple leadership positions in the Firm. He is a member of the Steering Committee for the Firm's North American Antitrust Practice Group, as well of the Global Antitrust and Competition Taskforces for Healthcare, Energy Mining and Infrastructure, and Consumer Goods Industries. He also serves as the co-head of the Firm's Merger-Control Task Force.

Author

John Fedele is a member of Baker McKenzie's antitrust practice and is located in its Washington, DC office. While he has a broad range of antitrust experience, he most frequently represents clients before the Antitrust Division of the US Department of Justice (DOJ) and the Federal Trade Commission (FTC) in investigations of proposed mergers and acquisitions, and routinely analyzes and manages filing obligations under the Hart-Scott-Rodino (HSR) Act and foreign competition regimes. John is a member of the Washington D.C. office’s Diversity Advisory Committee, serves as a contact in the firm’s PointONE program designed to allow employees to raise workplace concerns in a safe space, and maintains an active pro bono practice. He also is a member of Baker McKenzie’s Global Merger Control Task Force.

Author

Teisha Johnson is a member of Baker McKenzie's antitrust practice in Washington, DC. She advises clients on a wide range of antitrust and e-discovery matters, and has considerable experience counseling clients in government investigations, proposed mergers and acquisitions, compliance, and litigation matters.

Author

Arvind S. Miriyala is an associate in Baker McKenzie's North America Antitrust & Competition Practice Group in Washington, DC. He advises clients on all aspects of antitrust law before the Department of Justice, Federal Trade Commission, US courts, and foreign competition authorities. He also maintains an active pro bono practice with a recent focus on antitrust issues related to occupational licensing. Prior to joining Baker McKenzie, Arvind was a Litigation Associate working on antitrust matters at another large international law firm. During law school, Arvind served as a judicial intern in the US District Court for the District of Columbia where he worked for the Honorable Reggie B. Walton as well as the US District Court for the District of Maryland where he worked for the Honorable Deborah K. Chasanow.

Author

Daniel Gao is an Associate in Baker McKenzie, New York office.

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