TIMOTHY J. KELLY, United States District Judge.
Hydrogen peroxide (H
The FTC seeks a preliminary injunction barring Evonik's acquisition of PeroxyChem, and it has the burden of showing that it is likely the proposed merger will substantially lessen competition in a relevant market. But the FTC made an important misstep. Rather than recognizing how hydrogen peroxide suppliers compete for customers served by its countless end uses—accounting for products' variations in purity, concentration, stabilizer chemicals, profitability, and even regulatory approval —the FTC pleaded and argued for a single market for all "non-electronics" hydrogen peroxide. And because evaluating a merger's competitive effects on a market requires the FTC to properly define a market in terms of both product and geography, that oversimplification all but precludes the Court from siding with it. For the reasons explained below, the Court concludes that the FTC has not made out its prima facie case, which requires it to show undue concentration for a particular product in a particular geographic area, and it has not otherwise shown a likelihood that the proposed Evonik-PeroxyChem merger will substantially harm competition. The Court must therefore deny the FTC's motion for a preliminary injunction, ECF No. 3.
There are five suppliers of hydrogen peroxide in North America: Evonik, PeroxyChem, Solvay, Arkema, and Nouryon. DPFFCL at 13 ¶ 34. Evonik is an international chemical company based in Germany and controlled by Defendant RAG-Stiftung. Id. at 5 ¶ 3. Evonik produces hydrogen peroxide at three North American plants located in Mobile, Alabama; Gibbons, Alberta; and Maitland, Ontario. PPFFCL at 1 ¶ 1. Evonik seeks to acquire PeroxyChem, a Philadelphia-based international manufacturer of hydrogen peroxide, persulfates, and peracetic acid. DPFFCL at 5 ¶ 5. PeroxyChem produces hydrogen peroxide at two North American plants in Bayport, Texas, and Prince George, British Columbia. PPFFCL at 1-2 ¶ 2. Solvay has one plant in Deer Park, Texas—fewer than ten miles from PeroxyChem's Bayport plant—and one plant in Longview, Washington; Arkema has one plant in Memphis, Tennessee, and one in Becancour, Quebec; and Nouryon has a plant in Columbus, Mississippi. DPFFCL at 13-14 ¶ 35.
To manufacture hydrogen peroxide, suppliers move a working solution through a hydrogenation, oxidation, and extraction process, continuously and nearly 365 days a year. PPFFCL at 4 ¶ 12; DPFFCL at 8 ¶ 16. The process produces "crude" hydrogen peroxide. PPFFCL at 4 ¶ 12. Suppliers stabilize the crude with
Suppliers can also purify standard grade to make "specialty grade" hydrogen peroxide. PPFFCL at 9 ¶ 27; DPFFCL at 9-10 ¶¶ 21-22. This higher grade or purity level also serves a variety of end uses. For example, in the chemical synthesis space, manufacturers use specialty grade hydrogen peroxide to make sodium chlorite, organic peroxides, and epoxidized soybean oil; in the home and personal care space, specialty grade is used in products for hair and teeth bleaching and in contact lens solutions; and in the food packaging space, manufacturers use it as a disinfectant for aseptic packaging. DPFFCL at 6-7 ¶ 11. These specialty grade applications not only require specific concentrations and stabilizers, but many of them also require FDA or EPA approval before purchasers can put them toward their intended uses. See DPFFCL at 8 ¶ 14.
A few suppliers further purify specialty grade to produce "pre-electronics grade" hydrogen peroxide. DPFFCL at 11 ¶ 27. Only Evonik and Arkema sell pre-electronics grade. Id. Manufacturing this grade of hydrogen peroxide, a product for which suppliers measure impurities in "parts per billion," Hamann Hrg. Tr. 1281:13, requires additional equipment, including a second reverse osmosis unit, more testing (several times a day), specially trained personnel, a specially equipped room and laboratory, and [Redacted]. Hamann Hrg. Tr. 1282:3-1286:16. PeroxyChem and Solvay produce a purified hydrogen peroxide "feedstock" that is a precursor to their production of electronics grade hydrogen peroxide, but the feedstock is not marketed to customers as pre-electronics grade hydrogen peroxide. Montag Hrg. Tr. 1528:1-5; Kramer Hrg. Tr. 1635:19-1636:7; Suter Hrg. Tr. 412:11-17. Over the years, [Redacted] Hancock Decl. ¶¶ 22-23, JX0001-004; Montag Hrg. Tr. 1531:23-1532:1; Suter Hrg. Tr. 434:24-435:11; Hill Hrg. Tr. 2080:22-23; JX0001-001; PPFFCL at 10-11 ¶¶ 32-33.
Some suppliers have the capability to refine pre-electronics grade even further to make the highest purity "electronics grade" hydrogen peroxide. Electronics grade is sold to semiconductor manufacturers to clean and etch silicon microchips. DPFFCL at 11-13 ¶¶ 27, 33. MGC, PeroxyChem, and Solvay sell electronics grade hydrogen peroxide. Id. at 13 ¶ 33.
As an engineering matter, a plant can only commit 40 to 50 percent of its output to specialty grade hydrogen peroxide, and only 60 percent of that specialty grade can be purified into pre-electronics grade, leaving around 36 pounds of pre-electronics grade for every 100 pounds of crude. [Redacted]; JX0151-015. Suppliers can shift production between different grades of hydrogen peroxide at a plant merely by adjusting a valve. Hamann Hrg. Tr. 1322:24-1323:13; see, e.g., Suter Hrg. Tr. 406:6-14 ("We get customer input, we look at historical
Hydrogen peroxide suppliers sell their products by the pound from around 30 cents per pound to over a dollar; standard grade is generally the cheapest (and least profitable), then specialty grade, pre-electronics grade, and electronics grade. DPFFCL at 14 ¶¶ 36-38; JX0066-43 fig. 10; JX0151-022; [Redacted]. The annual capacity of hydrogen peroxide plants ranges from around [Redacted] million pounds (Evonik's Maitland plant) to [Redacted] million pounds (PeroxyChem's Bayport plant). PPFFCL at 26-27 ¶¶ 83-93. A significant component of each product's price is transportation cost because hydrogen peroxide is typically heavily diluted with water when it is delivered via railcars and trucks. DPFFCL at 15 ¶ 40. As a result, the distance between customers and plants is a major factor in competition between suppliers. Id. ¶ 41.
Hydrogen peroxide suppliers compete for customers across grades and end uses through blind bidding contests for high-volume, long-term contracts. Id. ¶ 42. A customer publishes a request for proposal (RFP) for a given location, specifying the hydrogen peroxide product, volume, and contract length sought; suppliers submit confidential bids; and then the customer usually lets one or more of the bidders know how competitive their bid is (without sharing specific prices) so that they will lower their bid price. See id. at 15 ¶¶ 42, 44; id. at 66-67 ¶ 173. This process produces substantial cost savings for hydrogen peroxide customers, and prices have generally decreased the last few years in part as a result. See DPFFCL at 53-55, 66-67 ¶¶ 143-46, 173; Hill Rpt., JX0066-097 to -099 figs. 44-46.
Evonik announced its intent to acquire PeroxyChem for $625 million in November 2018. JX0078-011 to -013. The two firms filed a pre-merger notification with the FTC pursuant to the Hart-Scott-Rodino Improvements Act, 15 U.S.C. § 18a. Compl. ¶ 20. The FTC then launched a nine-month investigation, during which Defendants produced millions of pages of documents and the FTC interviewed or deposed more than 50 industry participants. Opp. at 2. The FTC voted on August 2, 2019, to commence an administrative proceeding to challenge the acquisition under Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 53(b), and Section 7 of the Clayton Act, 15 U.S.C. § 18, alleging that the proposed merger will substantially lessen competition. Compl. ¶ 9. The FTC also filed the instant action and moved for a preliminary injunction, ECF No. 3, and the parties entered into a stipulated restraining order preventing Defendants from closing the proposed transaction until five business days after the Court rules on the motion, ECF No. 9. The parties have delayed the administrative proceeding pending the Court's decision. Mahr Hrg. Tr. 2438:3-10.
Within days of the FTC moving for a preliminary injunction in this action, Evonik and PeroxyChem agreed on a divestiture of PeroxyChem's plant in Prince George, British Columbia. Share Purchase Agreement, JX0147-017. If the merger closes, a new competitor, international chemical producer United Initiators GMBH (UI), will purchase the plant for [Redacted]. Id. The Canadian Competition Bureau investigated the proposed merger with PeroxyChem and the divestiture of the
Section 7 of the Clayton Act, 15 U.S.C. § 18, prohibits mergers "where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition ... may be substantially to lessen competition, or tend to create a monopoly." "Section 7 involves probabilities, not certainties or possibilities," United States v. Baker Hughes, Inc., 908 F.2d 981, 984 (D.C. Cir. 1990), and a plaintiff must show that the substantial lessening of competition will be "sufficiently probable and imminent." United States v. Marine Bancorp., 418 U.S. 602, 623 n.22, 94 S.Ct. 2856, 41 L.Ed.2d 978 (1974) (internal quotation omitted); see United States v. Gen. Dynamics Corp., 415 U.S. 486, 505, 94 S.Ct. 1186, 39 L.Ed.2d 530 (1974).
If the FTC "has reason to believe that a corporation is violating, or is about to violate, Section 7 of the Clayton Act, the FTC may seek a preliminary injunction" from a federal district court under Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b), "to prevent a merger pending the Commissioner's administrative adjudication of the merger's legality." FTC v. H.J. Heinz Co., 246 F.3d 708, 714 (D.C. Cir. 2001) (quoting FTC v. Staples, Inc., 970 F.Supp. 1066, 1070 (D.D.C. 1997) (Staples I)). Section 13(b) provides for a preliminary injunction to block a merger when "such action would be in the public interest," after "weighing the equities and considering the Commission's likelihood of ultimate success." 15 U.S.C. § 53(b); see Heinz, 246 F.3d at 726.
To obtain a preliminary injunction, the FTC "is not required to prove, nor is the court required to find, that the proposed merger would in fact violate Section 7 of the Clayton Act." Staples I, 970 F. Supp. at 1070. That determination is reserved for the FTC through its administrative proceeding. Id. However, the FTC must show that there is a "reasonable probability" or "appreciable danger" that the acquisition may substantially lessen competition. Id. at 1072; Heinz, 246 F.3d at 713, 719. It can do so by raising "questions going to the merits so serious, substantial, difficult and doubtful as to make them fair ground for thorough investigation, study, deliberation and determination by the FTC in the first instance and ultimately by the Court of Appeals." Heinz, 246 F.3d at 714-15 (internal citation omitted). That burden "is not insubstantial, and a showing of a fair or tenable chance of success on the merits will not suffice for injunctive relief." FTC v. Arch Coal, Inc., 329 F.Supp.2d 109, 116 (D.D.C. 2004) (cleaned up); see FTC v. Wilh. Wilhelmsen Holding ASA, 341 F.Supp.3d 27, 44 (D.D.C. 2018) ("A preliminary injunction in this context remains an extraordinarily drastic remedy, especially since as a result of the short life-span of most tender offers, the issuance of a preliminary injunction blocking an acquisition or merger may prevent the transaction from ever being consummated." (cleaned up)).
To assess the FTC's likelihood of success on the merits, the Court applies the D.C. Circuit's burden-shifting framework set forth in Baker Hughes, 908 F.2d at 982-83. See Heinz, 246 F.3d at 715.
In addition to assessing the FTC's prima facie case and any rebuttal evidence, in deciding whether to grant preliminary injunctive relief, the Court must weigh the equities. Because the public's interest in effective enforcement of the antitrust laws is paramount, a "showing of likelihood of success creates a presumption in favor of preliminary injunctive relief." Heinz, 246 F.3d at 726. "Conversely, absent a likelihood of success on the merits, equities alone will not justify an injunction." Arch Coal, 329 F. Supp. 2d at 116.
The Supreme Court has also stressed that courts must judge "the probable anticompetitive effects of the merger" "functionally" and based on "a further examination of the particular market—its structure, history and probable future." Gen. Dynamics, 415 U.S. at 498, 94 S.Ct. 1186 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320-21 & n.38, 82 S.Ct. 1502, 8 L.Ed.2d 510 (1962)) (cleaned up). Therefore, "antitrust theory and speculation cannot trump facts, and even Section 13(b) cases must be resolved on the basis of the record evidence relating to the market and its probable future." Arch Coal, 329 F. Supp. 2d at 116-17.
For the FTC to show a likelihood of success on the merits and justify a preliminary injunction blocking the Evonik-PeroxyChem merger, it must first meet its prima facie burden by (1) defining a relevant product market, (2) defining a relevant geographic market, and (3) showing undue concentration in that combined market. Baker Hughes, 908 F.2d at 983.
"The relevant market is the `area of effective competition' within which the defendants operate." United States v. E. I. du Pont de Nemours & Co., 353 U.S. 586, 649, 77 S.Ct. 872, 1 L.Ed.2d 1057 (1957) (quoting Standard Oil Co. of Cal. v. United States, 337 U.S. 293, 299 n.5, 69 S.Ct. 1051, 93 S.Ct. 1371 (1949)). Defining the relevant market is a "necessary predicate" to finding a Clayton Act violation because the proposed merger "must be one which will substantially lessen competition within the area of effective competition." Id. at 593, 77 S.Ct. 872 (internal quotations omitted); see Baker Hughes, 908 F.2d at 982 (government must "show[ ] that a transaction will lead to undue concentration in the market for a particular product"). The scope of the relevant market also dictates the analysis of market power and the merger's anticompetitive effects. See United States v. Sungard Data Sys., Inc., 172 F.Supp.2d 172, 181 (D.D.C. 2001); FTC v. Cardinal Health, Inc., 12 F.Supp.2d 34, 45 (D.D.C. 1998). "The FTC bears the burden of proof and persuasion in defining the relevant market." FTC v.
A relevant market has two parts: a product market and a geographic market, Marine Bancorp., 418 U.S. at 618, 94 S.Ct. 2856. The relevant product market identifies the object of Defendants' competition, and the relevant geographic market identifies where that competition takes place. See Arch Coal, 329 F. Supp. 2d at 119.
The parties sharply contest both aspects of the relevant market. The FTC argues that the relevant market is non-electronics grade hydrogen peroxide within two separate geographic markets, the Pacific Northwest and the Southern and Central United States. Defendants argue that both components of the FTC's proposed market are overbroad and inconsistent with the commercial realities of the industry. The Court agrees with Defendants that the FTC has not met its burden of establishing its prima facie case because it has not identified a relevant market within which to analyze the merger's possible anticompetitive effects. That failure begins and ends with the FTC's theory of supply-side substitution, or "swinging," a substantial departure from the typical way in which a product market is defined.
The Court begins with the FTC's proposed product market for the sale of standard, specialty, and pre-electronics grade hydrogen peroxide, which it calls the "non-electronics" hydrogen peroxide market. PPFFCL at 84 ¶¶ 23-25.
Product markets are almost always defined by demand substitution. See Heinz, 246 F.3d at 718; Wilhelmsen, 341 F. Supp. 3d at 45 (demand substitution the "touchstone" of product market definition). Demand substitution describes "customers' ability and willingness to substitute away from one product to another in response to a price increase or a corresponding non-price change such as a reduction in product quality or service." Merger Guidelines § 4. Demand substitution polices the "outer boundaries of a product market" and is governed by either (1) consumers' "reasonable interchangeability of use" or (2) the "cross-elasticity of demand" (price sensitivity) between a product and substitutes for it. Brown Shoe, 370 U.S. at 325, 82 S.Ct. 1502. When aggregating products into a relevant market, courts focus on demand substitution because it illuminates whether customers can switch to one product and constrain anticompetitive pricing in another. United States v. Aetna Inc., 240 F.Supp.3d 1, 20 (D.D.C. 2017); see FTC v. Swedish Match, 131 F.Supp.2d 151, 157 (D.D.C. 2000); Hill Hrg. Tr. 2076:15-25. For instance, if customers would switch from Jif peanut butter to Peter Pan following a price increase, those two products are more likely to be included in a relevant product market.
A relevant product market also "must be drawn narrowly to exclude any other product to which, within reasonable variations in price, only a limited number of buyers will turn; in technical terms, products whose `cross-elasticities of demand' are small." Times-Picayune Pub. Co. v. United States, 345 U.S. 594, 612 n.31, 73 S.Ct. 872, 97 S.Ct. 1277 (1953); see Arch Coal, 329 F. Supp. 2d at 120 ("Relevant market analysis is based on the `narrowest market' principle."); Merger Guidelines § 4.1.1 (product market defined based on "smallest relevant market satisfying the hypothetical monopolist test"). For example, Jif may compete with mayonnaise "in the overall marketplace" for sandwich spreads, but that does not necessarily mean both should "be included in
Courts use two approaches to help define a relevant product market. The first is the "hypothetical monopolist test." FTC & DOJ Horizontal Merger Guidelines (2010), § 4.1.1. The test asks whether a hypothetical monopolist controlling the products in the alleged market could profitably impose at least a small but significant and non-transitory increase in price (SSNIP), generally assumed to be about five percent, on at least one product in the market.
While the Merger Guidelines explicitly state that "[m]arket definition focuses solely on demand substitution factors," § 4, they provide an exception to that general rule when "supply side substitution" may be used to aggregate products that are not demand substitutes into one market, id. § 5.1 & n.8. Rather than relying on consumers' ability to constrain prices, supply-side substitution or elasticity focuses on suppliers' responsiveness to price increases and their ability to constrain anticompetitive pricing by readily shifting what they produce. See Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421, 1436 (9th Cir. 1995); Rothman Rpt., JX0075-034 (aggregating products that are supply-side substitutes better "reflect[s] suppliers' competitive significance"). According to supply-side substitution theory, the higher the cross-elasticity of supply—"the capability of ... production facilities to be converted to produce a substitute product"— "the more likely it is that the alternative products are to be counted in the relevant market." Cardinal Health, 12 F. Supp. 2d at 46; see Brown Shoe, 370 U.S. at 325 n.42, 82 S.Ct. 1502 ("The cross-elasticity of production facilities may also be an important factor in defining a product market."); Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210, 218 (D.C. Cir. 1986) (same).
The Merger Guidelines offer a helpful shorthand for supply side substitution— "swinging." Suppliers are said to have "readily available `swing' capacity" to "rapidly" enter a product market—and therefore to constrain anticompetitive pricing— if "supply side substitution is" (1) "nearly universal among the firms selling one or more of a group of products," (2) "easy," and (3) "profitable." Merger Guidelines § 5.1 & n.8 (cleaned up); PPFFCL at 84-85 ¶ 24. The parties' experts "agree that proof of each of these three conditions is
The FTC's only basis for aggregating standard, specialty, and pre-electronics grade hydrogen peroxide into a single market is supply-side substitution. Rhilinger Hrg. Tr. 2272:14-16. The Court therefore turns to the evidence about whether suppliers' swinging between production of these grades is nearly universal, easy, and profitable, as set forth in the Merger Guidelines. The Court finds that the FTC has failed to meet its burden of showing that supply-side substitution across these three grades meets any of the three requirements.
The Court cannot conclude, as the FTC urges, that swinging across these grades—while present to some degree—is "nearly universal" among the market participants. Merger Guidelines § 5.1 n.8.
First, and most obviously, three of the five North American suppliers of hydrogen peroxide do not, at present, swing to the production of pre-electronics grade hydrogen peroxide: they simply do not produce that product. PeroxyChem and Solvay produce a purified hydrogen peroxide "feedstock" that is a precursor to their production of electronics grade hydrogen peroxide. Montag Hrg. Tr. 1528:1-5; Kramer Hrg. Tr. 1635:19-1636:7; Suter Hrg. Tr. 412:11-17. But just because they further refine this feedstock to make electronics grade hydrogen peroxide does not mean it is pre-electronics grade for swinging purposes. In fact, PeroxyChem and Solvay do not market or sell their feedstock to customers as pre-electronics grade hydrogen peroxide. JX0001-004, Hancock Declaration ¶¶ 22-23; Montag Hrg. Tr. 1531:23-1532:1; Suter Hrg. Tr. 434:24-435:11. For that reason, they do not constrain the prices of pre-electronics grade hydrogen peroxide sold by Evonik and Arkema. [Redacted] Radlinski Hrg. Tr. 572:4-6, 572:18-23. Swinging is not nearly universal between grades of hydrogen peroxide where a majority of suppliers do not swing into one of the three grades.
The FTC tries to waive away this evidence by arguing that specialty grade hydrogen peroxide formulated for those various end uses to which suppliers cannot swing comprises a small percentage "of all H2O2 in North America." PPFFCL at 16 ¶ 50. But the FTC decided to include specialty grade hydrogen peroxide in its proposed product market, and this argument says nothing about the ability—or inability—of various suppliers to swing into different specialties. The FTC has not provided evidence, as it must to establish a product market based on swinging across grades, see Arch Coal, Inc., 329 F. Supp. 2d at 119, that shows the portion of the specialty grade market to which suppliers actually do swing.
Finally, it bears noting that much of what the FTC characterizes as swinging in the hydrogen peroxide market is not the sort of activity that constrains prices in the way the Merger Guidelines appear to intend. This is so because over time suppliers are moving overwhelmingly in one direction toward higher purity products that are more profitable. In fact, Defendants' expert, Dr. Nicholas Hill, persuasively testified that a supplier's adjustments described above—the "strategic decision to sell more of one of its products and less of another ... in one direction" —is not swinging under the Guidelines. Hill Hearing Tr. 2078:7-10 (emphasis added). Rather, swinging "means to move back and forth producing those products"—like a swing. Id. 2077:24-2078:6. Dr. Hill's prototypical swinging example is the Fourdrenier paper machine. Id. 2079:17-18. The machine shifts between producing containerboard for cardboard boxes and kraft paper for grocery bags. Id. 2079:6-2080:1. Of course, cardboard boxes and grocery bags are not demand substitutes, but based on the relative profitability of those two products at any given time, the supplier "swings" between the two "at the touch of a button." Id. Dr. Hill's conception of swinging "back and forth" is intuitive and tracks the few cases to recognize supply substitution; the Fourdrenier paper machine is like the retailer swinging between full-service and self-serve gasoline in Rebel Oil, 51 F.3d at 1436.
For these reasons, the record does not support the conclusion that swinging across standard, specialty, and pre-electronics grade hydrogen peroxide is nearly universal.
Similarly, the Court cannot conclude that swinging across all these grades—while in some cases relatively simple—is generally "easy" for purposes of analyzing competition in the hydrogen peroxide market.
The Merger Guidelines' section that references swinging lacks a definition for "easy," § 5.1, but later on, the Guidelines describe "easy" entry into a market as "timely, likely, and sufficient in its magnitude, character, and scope to deter or counteract the competitive effects of concern," § 9.
The record is clear that it is easy for some suppliers, merely as a matter of production mechanics, to swing some capacity up-grade or down-grade between standard, specialty, and—for the two suppliers who currently market pre-electronics—pre-electronics grade hydrogen peroxide. Suter Hrg. Tr. 406:9-14; Myrick Hrg. Tr. 485:24-486:11; Radlinski Hrg. Tr. 539:16-19; Hamann Hrg. Tr. 1322:3-19; Kramer Hrg. Tr. 1685:8-14, 1686:10-13, 1696:4-10, 1696:25-1698:8. Evonik admitted as much to regulators before the FTC moved for a preliminary injunction. See PX0019-010 ("some" diversion from specialty to standard grade hydrogen peroxide "could be easily and quickly accomplished at no significant cost"); PX1201-012 ([Redacted]).
But in many other cases, the evidence is just as clear that it is not easy for a given supplier to swing into a given grade. Although suppliers can swing 100 percent of their capacity down-grade, Hill Hrg. Tr. 2165:22-2166:4, the manufacturing process limits how much can swing up-grade; a plant can only commit [Redacted] to [Redacted] percent of output to specialty grade hydrogen peroxide, and only [Redacted] percent of that specialty grade can be purified into pre-electronics grade, leaving around [Redacted] pounds of pre-electronics grade hydrogen peroxide for every 100 pounds of crude. [Redacted]; [Redacted]; [Redacted]; JX0151-015. As discussed above, this limitation does not necessarily stop suppliers from constraining prices across grades. That said, it does make it difficult [Redacted]
But the reality is much more complicated. Producing pre-electronics grade hydrogen peroxide requires additional equipment, including a second reverse osmosis unit, additional testing (several times a day) to ensure the equipment is working, specially trained personnel, a specially equipped room and laboratory, and [Redacted]. Hamann Hrg. Tr. 1282:3-1286:16. Evonik has [Redacted] years of experience supplying pre-electronics grade hydrogen peroxide to MGC from its plant in Mobile, Alabama, and it still cost the company [Redacted] over more than [Redacted] to upgrade its Gibbons, Alberta, plant to supply the same product. See Costanzo Hrg. Tr. 1136:5-1137:3, 1144:11-1145:9 ([Redacted]); Hamann Hrg. Tr. 1326:25-1327:14; PX0002-031. And all of that assumes the supplier even has the technical know-how to produce pre-electronics grade hydrogen peroxide, far from a given. Were a supplier like [Redacted]—which has never tried to produce pre-electronics grade, [Redacted], likely because of the complexity and costs just described—to try to swing into that market, the effort would be anything but "timely, likely, [or] sufficient" to constrain prices. Merger Guidelines § 9.
Counterintuitively, it is also not easy for PeroxyChem or Solvay—which make electronics grade hydrogen peroxide—to swing into pre-electronics grade, either. The FTC produced some evidence that PeroxyChem may be able to market its electronics feedstock as pre-electronics grade hydrogen peroxide. But MGC—"the largest customer for pre-electronics[,] which buys on the order of 99 percent of pre-electronics that's sold," Hill Hrg. Tr. 2080:22-23; see also JX0001-001—has never approved [Redacted] feedstock as satisfactory pre-electronics grade hydrogen peroxide after years of trying on their part. See PPFFCL at 10-11 ¶¶ 32-33.
Finally, the FTC has not met its burden of showing that swinging between grades of hydrogen peroxide is likely to be profitable, because swinging down-grade is, in general, not profitable. See Merger Guidelines § 5.1. In other words, suppliers' average profits increase so much up-grade that even if the price of standard grade or specialty grade increased by five or even ten percent, suppliers are unlikely to switch production down-grade from specialty or pre-electronics grade hydrogen peroxide.
For example, Evonik's average profit margins per pound of hydrogen peroxide are about [Redacted] cents for standard grade, [Redacted] cents for specialty grade ([Redacted] percent higher than standard grade), and [Redacted] cents for pre-electronics grade ([Redacted] percent higher than standard grade and [Redacted] percent higher than specialty grade). JX0066-043 fig. 10; Costanzo Hrg. Tr. 1143:5-1144:1, 1176:14-19 (selling standard grade instead of pre-electronics "would be a disaster on the investment economics" and "the intent [is] to sell it as specialty"). Other suppliers' margins similarly increase up-grade. See [Redacted]; JX0151-022 (showing [Redacted] specialty grade with [Redacted] percent higher profit margin than standard grade, pre-electronics grade with [Redacted] percent higher than standard grade and [Redacted] percent higher than specialty grade); Lerner Hrg. Tr. 1377:9-20 (swinging production from specialty to standard grade hydrogen peroxide would be "economic suicide" and "make[ ] no commercial, business or any logical sense").
The FTC objects to using average profit margins to judge profitability. Its expert, Dr. Dov Rothman, found that some standard and specialty grade hydrogen peroxide products sell at a higher margin than some higher-grade products,
First, the FTC has provided no data on what percentage of the standard and specialty grade markets are comprised of
At closing argument, the FTC argued that swinging does not have to be profitable "between every combination of products" and that a "snapshot in time" of current contracts and profitability could be misleading. Rhilinger, Hrg. Tr. 2395:14-2396:7. The Court does not mean to suggest that swinging must be profitable between every combination of products to meet this requirement. But here, there are consistent and significant profitability differences between selling standard, specialty, and pre-electronics grade hydrogen peroxide. And based on that record, including the overall trend in the market, the Court cannot conclude that in response to a SSNIP on standard or specialty grade hydrogen peroxide, suppliers would likely swing down-grade and constrain those prices; the profit margins are, in general, simply too much higher in higher grades.
To be sure, these differences in profitability suggest that suppliers may constrain anticompetitive prices in specialty or pre-electronics grade by swinging up from lower-margin standard grade hydrogen peroxide. But as discussed above, suppliers do not swing up-grade nearly universally because it is not easy. See Hill Rpt., JX0066-043 ("The rewards to producing pre-electronics grade are already so high that firms that do not produce it likely do not do so for reasons that will not change in response to a small price increase."). And all three swinging requirements must be met to aggregate grades of hydrogen peroxide in a relevant product market.
For all the above reasons, the FTC cannot combine standard, specialty, and pre-electronics grades in a relevant product market to analyze the anticompetitive effects of the proposed merger. Therefore, the FTC's proposed relevant product market does not support its prima facie case.
Defendants argue that this failure means the Court need go no further: without a relevant product market, the FTC cannot succeed. See Mahr Hrg. Tr. 2401:22-2402:13. The FTC could have pleaded or argued for alternative markets, they say, but it did not, and "it's not the Court's job to go around and try to find that correct market." Mahr Hrg. Tr.
Defendants' argument is not without support. The FTC has the burden to prove a relevant product market when it seeks a preliminary injunction, see Arch Coal, 329 F. Supp. 2d at 120, a point with which the FTC does not quibble, see Rhilinger Hrg. Tr. 2389:9-10 ("the case law says that we need to prove a relevant market in which we can show harm"). This is so because without a relevant product market, the FTC cannot show a likelihood of ultimate success on its claim under the Clayton Act. See 15 U.S.C. § 18 (prohibiting acquisitions whose "effect ... may be substantially to lessen competition" in "any line of commerce"); Heinz, 246 F.3d at 719 n.17 ("Courts interpret `line of commerce' as synonymous with the relevant product market."); see FTC v. Whole Foods Market, Inc., 548 F.3d 1028, 1036 (2008) (Brown, J.) ("market definition is ... necessary in a § 7 case" (citing 15 U.S.C. § 18)).
But just because the relevant product market is not "as broad[ ] as the Government chooses to define it," the record may still contain evidence of an alternative relevant product market in which to analyze the merger's competitive effects. Brown Shoe, 370 U.S. at 368, 82 S.Ct. 1502 (Harlan, J., dissenting in part, concurring in relevant part). "The duty rests with the District Court ... to determine what is the appropriate market on an appraisal of the relevant economic considerations." Id. And despite the FTC's insistence that the relevant product market should not "be defined around individual grades of H2O2 or end uses," Br. at 14, it has provided quantitative evidence of alleged anticompetitive harm in a narrower alternative market consisting solely of standard grade hydrogen peroxide in the Southern and Central United States. See Rothman Rpt., JX0075-052 & n.159, -094 & n.324, -104 & n.350 (providing market concentration statistics, predicted first order approximation price effects, and merger simulation predicted price effects, assuming that PeroxyChem divests its Prince George facility to a new competitor). The parties also agree that hydrogen peroxide formulated for particular end uses could constitute separate product markets, see PPFFCL at 3, 5 ¶¶ 11, 15; DFFCL at 21-22 ¶¶ 62-63, though the FTC has not provided any specific data related to end uses with which to evaluate the merger. The Court thus proceeds to consider the evidence in the record as to whether either (1) standard grade hydrogen peroxide or (2) hydrogen peroxide formulated for specific end uses is a relevant product market for purposes of assessing the merger's competitive effects.
Standard grade hydrogen peroxide serves various end uses, including the bleaching of pulp, paper, and textiles; it is also used in wastewater treatment and in the mining and oil and gas industries. Dumas Hrg. Tr. 235:1-3; Suter Hrg. Tr. 408:8-14; Costanzo Hrg. Tr. 1223:6-13; Montag Hrg. Tr. 1566:5-1567:2, 1600:23-1601:3. It is often referred to as a "commodity" —a product that can be used interchangeably among suppliers with ease, where they compete mainly on price. See PPFFCL at 34 ¶ 120; DPFFCL at 8 ¶ 15; JX0120-001; Anderson Hrg. Tr. 193:1-18. However, this does not necessarily mean that all standard grade hydrogen peroxide, regardless of end use, constitutes a relevant product market. See Arch Coal, 329 F. Supp. 2d at 120 (describing "the `narrowest market' principle"). For that, there must be sufficient demand-side substitution among standard grade products, or— as discussed above—supply-side substitution may suffice in the exceptional case if the Merger Guidelines' swinging requirements are met.
On the demand side,"[d]etermination of the competitive market for commodities depends on how different from one another are the offered commodities in character or use, how far buyers will go to substitute one commodity for another." United States v. E. I. du Pont de Nemours & Co., 351 U.S. 377, 393, 76 S.Ct. 994, 100 S.Ct. 1264 (1956); see Staples I, 970 F. Supp. at 1074. The FTC has not argued that there is demand-side substitutability across formulations of standard grade hydrogen peroxide.
The Court thus turns to the swinging exception to the usual demand-side rule. Merger Guidelines § 5.1; see Heinz, 246 F.3d at 718 ("The definition of product market focuses solely on demand substitution factors." (cleaned up)). Under the Merger Guidelines, swinging within standard grade hydrogen peroxide formulations must be nearly universal, easy, and profitable before those products may be aggregated into one market. See § 5.1 & n.8.
The record is not totally clear on the ease and near universality of swinging between the various formulations of standard grade hydrogen peroxide. This is likely so because the FTC never proposed such a product market; it only argued these points to support swinging between standard, specialty, and pre-electronics grades. But the evidence suggests that as a practical matter, such swinging is possible and happens to some extent. See PPFFCL at 4 ¶ 12; PX1201-012. Many of the obstacles to swinging between grades, explained above, do not apply to swinging between the various formulations of standard grade. And most suppliers already make the various formulations required for bleaching pulp, paper, and textiles; for treating wastewater; and for use in the mining and oil and gas industries. See JX0083-065 to -118 (Evonik's competitor details database).
The problem is the lack of record evidence on profitability. The Court cannot find that standard grade hydrogen peroxide is a relevant product market because the record lacks evidence that swinging between standard grade formulations is likely to be profitable. In fact, the limited evidence in the record suggests substantial differences in profitability across standard grade formulations. Dr. Rothman found that "for every 100 units of pre-electronics grade hydrogen peroxide that Evonik sells, it sells [Redacted] units of standard grade hydrogen peroxide at a per unit margin that is higher than its average per unit margin on pre-electronics grade," Rothman Rebuttal Rpt., PX7102-017; see also Rothman Hrg. Tr. 791:24-792:19. The average profit margin for Evonik's standard grade hydrogen peroxide is about [Redacted] cents, and the profit margin for its pre-electronics grade hydrogen peroxide is [Redacted] cents. JX0066-043 fig. 10. That means a subset of standard grade hydrogen peroxide sells at a profit margin [Redacted] percent higher than the average for standard grade. And of course, that means that some standard grade hydrogen peroxide sells for even more than the [Redacted] percent higher profit margin than other standard grade formulations, like that for pulp and paper bleaching, which has some of the lowest margins. See, e.g., Anderson Hrg. Tr. 199:23-25; Lerner Hrg. Tr. 1379:13-24, 1381:6-18. Admittedly, the evidence in the record on this point is minimal.
And as described above, this shortcoming reflects a more fundamental issue with the FTC's overall product market definition. To some degree, suppliers' decisions to make different hydrogen peroxide products does not appear to represent swinging at all, because in general, it is only profitable to shift production in one direction to more specialized products that "are more stable in economic downturns" relative to pulp and paper products. Rettig Hrg. Tr. 1047:14-15; see, e.g., JX0151-016 to -017; [Redacted] Once that happens, there is no evidence that, in general, suppliers shift back, or that it would be profitable to do so in response to a SSNIP. In other words, this is not an industry of suppliers prepared to swing and constrain prices across lower-profit formulations, even within an alternative market for standard grade hydrogen peroxide.
At this point, then, the FTC has not proven its proposed relevant product market for all non-electronics grade hydrogen peroxide. Neither has it shown, in the alternative, a relevant market for standard grade. Moving one last step narrower, the evidence in the record does support a relevant product market for hydrogen peroxide based on traditional demand substitutability: hydrogen peroxide products formulated for different end uses, regardless of grade.
The record is reasonably clear that "within any given end-use for H2O2, the product offerings of the five H2O2 suppliers are largely undifferentiated." PPFFCL at 33 ¶ 118. And in contrast, across end uses, customers do not find the products substitutable. For example, most suppliers make a specialty grade product used to preserve food packaged for sale known as aseptic packaging hydrogen peroxide. Customers for that product do not view standard grade hydrogen peroxide intended for pulp and paper bleaching as interchangeable with it. Similarly, there is no reason to suspect that, in response to a price increase, they would switch from hydrogen peroxide for aseptic packaging to that intended for bleaching. See Engram Hrg. Tr. 364:7-13; Suter Hrg. Tr. 429:2-25; Montag Hrg. Tr. 1516:20-1518:6; Rhilinger Hrg. Tr. 2272:11-13 ("Nobody here is arguing that you should bleach your hair or whiten your teeth or clean your cuts with [hydrogen peroxide for] rocket fuel."). Each of these product markets for particular end uses are the "smallest relevant market[s] satisfying the hypothetical monopolist test." Merger Guidelines § 4.1.1; see PPFFCL at 3, 5 ¶¶ 11, 15; DFFCL at 21-22 ¶¶ 62-63. Accordingly, hydrogen peroxide products formulated for the same end use satisfy a demand-side substitution approach to defining a relevant product market; analysis of the supply side is unnecessary. See Heinz, 246 F.3d at 718.
To establish a prima facie case by showing that the merger would cause a highly concentrated market, besides defining a relevant product market, the FTC must also demonstrate a relevant geographic market. Baker Hughes, 908 F.2d at 982.
As discussed below, any anticompetitive effects of the merger in the proposed Pacific Northwest geographic market are resolved by PeroxyChem's proposed divestiture of its Prince George plant. And the FTC's failure to show that non-electronics hydrogen peroxide is a relevant product market makes the proposed Southern and Central United States geographic market useless to the FTC in meeting its burden.
Within days of the FTC moving for a preliminary injunction, Evonik and PeroxyChem agreed on a divestiture that threw a wrench in the FTC's argument that their merger will substantially lessen competition in its proposed Pacific Northwest geographic market. Defendants agreed that if their merger closes, Evonik will not acquire PeroxyChem's only plant in that market, in Prince George, British Columbia. Instead, a new competitor, international chemical manufacturer UI, will purchase the plant for [Redacted]. Share Purchase Agreement, JX0147-017. Without analyzing the agreement with UI specifically, the FTC's expert, Dr. Rothman, concluded that if PeroxyChem sells its Prince George plant to a new competitor that replaces PeroxyChem's competitive intensity in the Pacific Northwest, competition will not be substantially lessened in that geographic market. Rothman Rpt., JX0075-052 n.156, -104 nn.351-52; Rothman Hrg. Tr. 830:20-831:11.
Defendants have the burden to show that a proposed divestiture will replace the merging firm's competitive intensity. Aetna Inc., 240 F. Supp. 3d at 60. To evaluate whether a divestiture will do so, courts consider the likelihood of the divestiture; the experience of the divestiture buyer; the scope of the divestiture, the independence of the divestiture buyer from the merging seller, and the purchase price. Id. at 60-74; FTC v. Sysco Corp., 113 F.Supp.3d 1, 72-78 (D.D.C. 2015). The Court holds that Defendants have met their burden of showing that UI will replace PeroxyChem's competitive intensity.
For starters, the Prince George divestiture to UI is highly likely to occur. The parties to the divestiture, Evonik, PeroxyChem, and UI, have agreed to use all commercially reasonable efforts to ensure the closing conditions are satisfied; UI is capable of closing financially; it is excited to get "a really good business at a really good price"; and just days ago, the Canadian
The record shows that UI has the experience necessary to compete effectively in the hydrogen peroxide industry. UI is an international supplier of organic peroxides and persulfates that operates plants around the world, including a hydrogen peroxide plant in Turkey that it bought in August 2019. PPFFCL at 65 ¶ 220; DPFFCL at 48 ¶ 127. Although it does not sell hydrogen peroxide in North America, UI has long been a customer for hydrogen peroxide, using it as a raw material in many of its products and serving many of the same customers that it would serve as a hydrogen peroxide supplier. DPFFCL at 48 ¶ 128. At its three North American chemical plants, UI grapples with challenges much like those that hydrogen peroxide suppliers face, such as security of supply, inventory, tracking, forecasting, and distribution. Id. ¶ 129; Cummins Hrg. Tr. 1722:4-10. Jonathan Cummins—UI's Vice President of Manufacturing for the Americas, who will oversee the Prince George plant if the divestiture closes— managed a hydrogen peroxide plant for Nouryon's predecessor for seven years. DPFFCL at 49-50 ¶¶ 131, 135; Cummins Hrg. Tr. 1722:11-21. That wealth of experience is an important component in helping UI replace PeroxyChem's competitive intensity in the Pacific Northwest.
The scope of the proposed divestiture is more than sufficient for UI to replace PeroxyChem in effectively running the Prince George plant. The employees running the Prince George plant's day-to-day operations will continue to do so on UI's behalf. DPFFCL at 50 ¶ 135. UI will receive all tangible and intangible assets that it needs to compete—"key production, sales, market, and distribution assets, sales and marketing personnel, and intellectual property" —and PeroxyChem's customers for the Prince George plant will become UI's customers [Redacted]. Id. ¶ 134.
The FTC challenges the divestiture's scope on several grounds. It argues that UI is buying a "standalone plant" and not a "standalone business" in Prince George. See DPFFCL at 50 ¶ 133; Rhilinger Hrg. Tr. 2427:14-22; Mahr Hrg. Tr. 2430:15-2431:3. It is true that Defendants technically only propose a divestiture of the Prince George plant, but the evidence shows that the plant "comes along with... everything else that's needed to run a
The FTC also points out that PeroxyChem recently lost its biggest customer served by the Prince George plant, Suncor. PPFFCL at 67 ¶ 229. But the Suncor issue speaks more to competition already lost by PeroxyChem, rather than to whether UI will "replace the competitive intensity lost as a result of the merger." Sysco, 113 F. Supp. 3d at 74. Even setting that point aside, PeroxyChem showed at the evidentiary hearing that it has already exceeded internal 2020 bidding projections for the Prince George plant by replacing more than half of the lost Suncor business. Lerner Hrg. Tr. 1394:21-1395:15; Cummins Hrg. Tr. 1760:22-1761:13. Since the hearing, PeroxyChem has had every incentive to continue these efforts, with the serious risk that this Court or the Canadian Competition Bureau would block the merger and the need for the divestiture to UI. Lerner Hrg. Tr. 1395:5-15. And if there were any remaining doubt about the Prince George plant's sustainability, the divestiture agreement [Redacted] PPFFCL at 69 ¶¶ 233-35. The FTC argues that these provisions are red flags raising "serious and substantial questions as to Prince George's viability," PPFFCL at 67 (cleaned up), but in fact, these provisions show that UI is set up to compete into the future.
Next, there is no reason to question whether UI will be an independent competitor in the Pacific Northwest. The FTC challenges UI's independence because it has ongoing commercial relationships with Evonik and PeroxyChem as a customer for hydrogen peroxide, and UI leases the land for its Mobile, Alabama, plant from Evonik.
Finally, the proposed purchase price does not cast doubt on the viability of the Prince George plant if it is sold to UI. The FTC argues that the [Redacted] purchase price is cause for concern because it is far lower than other third-party valuations of the plant. PPFFCL at 71 ¶¶ 243-45. But there are a few explanations for the low price, none of which impact Defendants' showing that they will compete effectively in the Pacific Northwest.
First, to state the obvious, a potential buyer of an asset sold to facilitate a merger under scrutiny by two countries' antitrust authorities has enormous leverage over the seller because it knows the seller must divest the asset quickly to proceed with the merger. DPFFCL at 52 ¶ 139. This short timeframe puts UI's rushed and minimal due diligence into perspective as well, see PPFFCL at 66-67 ¶¶ 223-28. Although most companies contemplating such a purchase would conduct more thorough diligence, the limited window for that diligence allowed UI to bargain for a lower price. See id.; PX1515-002 to -003 ([Redacted] ). In short, by bidding the lowest price possible, UI acted like any rational actor in this circumstance. Cummins Hrg. Tr. 1900:16-1901:10.
Second, that UI has no presence in the Pacific Northwest provided Evonik an even stronger incentive to sell the Prince George plant to it, as opposed to a current hydrogen peroxide supplier in the market like [Redacted] which valued the plant at [Redacted]. See PPFFCL at 71-72 ¶ 246. It stands to reason that Evonik's merger with PeroxyChem would be more likely to survive antitrust scrutiny if it sold the Prince George plant to UI, since doing so would maintain the same number of competitors in the Pacific Northwest.
The FTC suggests that the [Redacted] purchase price would allow UI to sell off the Prince George plant for parts or drive it into the ground and still turn a profit. See PPFFCL at 71 ¶¶ 243-45. To the contrary, the evidence shows that UI is a good-faith purchaser that intends to compete effectively in the hydrogen peroxide market and grow the business, and it has strong incentives to do so.
Ultimately, "antitrust deals in `probabilities, not certainties.'" Aetna, 240 F. Supp. 3d at 60 (quoting Brown Shoe, 370 U.S. at 323, 82 S.Ct. 1502). And Defendants' burden is only to show that the divestiture will likely replace PeroxyChem's competitive significance in the Pacific Northwest. Defendants have far exceeded that threshold. For these reasons, just as the Canadian Competition Bureau found when approving the UI divestiture with respect to western Canada, see Consent Agreement, ECF No. 141-1 at 10, 12-13,
The FTC's other proposed geographic market is the Southern and Central United States. As already noted, the FTC bears the burden to define a relevant geographic market, Cardinal Health, 12 F. Supp. 2d at 49, the region "in which the seller operates, and to which the purchaser can practically turn for supplies." Tampa Elec. Co. v. Nashville Coal Co., 365 U.S. 320, 327, 81 S.Ct. 623, 5 L.Ed.2d 580 (1961); see also Cardinal Health, 12 F. Supp. 2d at 49 (relevant geographic market is the area "to which consumers can practically turn for alternative sources of the product and in which the antitrust defendants face competition" (citation omitted)). As this definition suggests, a geographic market is dependent on a properly defined product market—no court can assess "the area of effective competition" for a product without defining the product itself. E. I. du Pont de Nemours, 353 U.S. at 593, 77 S.Ct. 872 (quoting Standard Oil, 337 U.S. at 299 n.5, 69 S.Ct. 1051); Tampa Elec., 365 U.S. at 328, 81 S.Ct. 623; see Merger Guidelines § 4.2 ("The [Government] applies the principles of [geographic] market definition described here ... to define a relevant market with a geographic dimension as well as a product dimension."); Merger Guidelines § 4.2.1 ("The hypothetical monopolist test requires that a hypothetical profit-maximizing firm that was the only present or future producer of the relevant product(s) located in the region would impose at least a SSNIP from at least one location....") (emphases added).
Here, the Court has already explained that at least on the current record, the only relevant product markets are hydrogen peroxide products formulated for specific end uses. But the FTC argues that its proposed Southern and Central United States geographic market is the area of competition for all non-electronics hydrogen peroxide because, in its view, customers for that broader product market can choose from all five "freight-logical" hydrogen peroxide suppliers. See PPFFCL at 21 ¶ 68; id. at 23 ¶ 74; id. at 26-27 ¶¶ 83-84, 87, 90, 93; id. at 28 ¶¶ 95, 99. Accordingly, then, the FTC relied on evidence that suppliers of all manner of hydrogen peroxide products bid and compete for customers across the purported "Southern and Central United States." See, e.g., PPFFCL at 23-25 ¶¶ 74-77. Dr. Rothman also conducted the hypothetical monopolist test for
The FTC need look no further than its own challenge to the proposed merger in Sysco to see what is missing here. In Sysco, the FTC defined relevant product markets based on customer type: "broadline foodservice distribution" to local customers and "broadline foodservice distribution to national customers." 113 F. Supp. 3d at 48-49. For the national product, as the name indicates, the FTC defined one relevant national geographic market. Id. at 49. But for the local product, the FTC defined 32 relevant local geographic markets where the merging firms have dominant market shares. Id. at 49, 52. Here, the FTC could have pleaded and argued a Southern and Central United States geographic market for its proposed non-electronics product market and also argued for alternative geographic markets corresponding to each end-use product market. But it did not. So the Court is left with product markets disconnected from any proposed geographic markets in which to analyze competition for those products.
To be sure, a geographical market need not be defined by precise metes and bounds. Gen. Dynamics, 415 U.S. at 521, 94 S.Ct. 1186. But the record contains substantial evidence suggesting that the Southern and Central United States would not be the relevant area of effective competition for each end-use hydrogen peroxide product. For pulp and paper customers, for instance, because of the narrow profit margins, "it'd be cost prohibitive to ship hydrogen peroxide all the way across the country," Anderson Hrg. Tr. 199:23-25 (cleaned up), whereas customers for specialty end uses like aseptic packaging or chemical synthesis may look to the entire United States for their hydrogen peroxide supply. See Lerner Hrg. Tr. 1379:13-24, 1381:6-18 ("freight-logical market for pulp and paper" much narrower than for "specialties," where suppliers "have a much greater ability to ship those specialties literally anywhere on the land surface"); Hill Rpt., JX0066-028 fig. 4 (over [Redacted] percent of standard grade hydrogen peroxide in North America served by nearest plant); DPFFCL at 89 ¶ 239. Indeed, the parties agree that in some cases, "it is appropriate to define geographic markets in the hydrogen peroxide industry ... as narrowly as individual customers." DPFFCL at 38 ¶ 102; PFFCL at 21 ¶ 69. Or take the case of pre-electronics grade hydrogen peroxide, an end use and therefore a relevant product market all its own. MGC, a customer in Arizona with plants opening soon in Oregon and Texas, "buys on the order of 99 percent of pre-electronics that's sold," Hill Hrg. Tr. 2080:22-23, which is shipped from [Redacted]. See Hancock Decl., JX0001-001 to -002; DPFFCL at 13 ¶ 35. It is therefore highly unlikely that the relevant geographic market for pre-electronics is just the Southern and Central United States.
These examples merely illustrate why the Court cannot assume that the Southern and Central United States is a relevant geographic market, especially when the FTC has not pleaded or proved geographic markets that correspond to the relevant product markets, as it must. See Cardinal Health, 12 F. Supp. 2d at 49. The FTC's failure to sufficiently define a relevant geographic market is another reason it has not met its burden here. Id.
Because the FTC has failed to show a relevant product market with a corresponding relevant geographic market in which competition occurs, a discussion of the next step of its prima facie case— showing undue concentration in that market —is anticlimactic. The FTC has not met its burden under Baker Hughes to show undue concentration "in the market for a particular product in a particular geographic area." 908 F.2d at 982.
"Market concentration, or the lack thereof, is often measured by the Herfindahl-Hirschman Index (HHI)."
The FTC argues that no matter how the product markets are sliced, "the merger
There are also practical reasons why the Court should not deem the FTC to have made out its prima facie case on this record, without an HHI calculated for a relevant product and geographic market that the Court has found viable. The rest of the Court's analysis on the merits runs the risk of devolving into speculation. For example, the "more compelling the prima facie case, the more evidence the defendant must present to rebut it successfully." See Baker Hughes, 908 F.2d at 991; Arch Coal, 329 F. Supp. 2d at 129 ("Certainly less of a showing is required from defendants to rebut a less-than-compelling prima facie case."). But if the Court has no direct measure of the strength of the FTC's prima facie case connected to the relevant market, it cannot weigh whether the evidence offered by Defendants is enough to rebut that case. More generally, evaluating the persuasiveness of the additional evidence offered by Defendants in rebuttal, and by the FTC in support of its ultimate likelihood of success on the merits, becomes all but impossible. Some of that evidence might be relevant (and to some degree) to competition in that narrower relevant market, and some might not. The Court has little way of sorting all that out, when the parties have not tailored their presentations to the relevant market. And, it bears mentioning, even the "mere possibility" of a substantial lessening of competition is not enough to show a violation of the Clayton Act. Heinz, 246 F.3d at 713 (citation omitted); see also Staples I, 970 F. Supp. at 1072 ("It is not enough for the FTC to show merely that it has a `fair and tenable chance' of ultimate success on the merits.").
All of this is not to say that in a subsequent administrative proceeding, the FTC could not calculate HHIs connected to end-use-specific product markets and relevant geographic markets to make out its prima facie case. But the Court cannot say on this record—devoid of particularized data for those relevant markets—that there is a "reasonable probability" that Evonik and PeroxyChem's merger would produce an undue concentration in a relevant market.
Nonetheless, to provide as complete a review of the record as possible in this unusual circumstance, the Court will not stop there. The Supreme Court has stressed that courts must judge "the probable anticompetitive effects of the merger" "functionally" and based on "a further examination of the particular market—its structure, history and probable future." Gen. Dynamics, 415 U.S. at 498, 94 S.Ct. 1186 (quoting Brown Shoe, 370 U.S. at 321-22 & n.38, 82 S.Ct. 1502) (cleaned up). Of course, in General Dynamics, the Court only conducted a further examination "of the particular market" after the Government met its prima facie burden, id. at 497-98, 94 S.Ct. 1186, and the Court has concluded that the FTC has failed to meet that burden. But even assuming that the FTC had made out a prima facie case on this record, the Court could not conclude that it has shown a likelihood of success based on Defendants' rebuttal evidence and the FTC's additional evidence of anticompetitive harm.
In undertaking an evaluation of that evidence, the Court's review is necessarily limited. As explained above, much of this additional evidence—especially the dueling quantitative models developed by Dr. Rothman and Dr. Hill—is grounded in the FTC's proposed product and geographic markets, which the Court has rejected. The Court cannot know much about what, if anything, that evidence might mean for the effects of the proposed merger on different product and geographic markets.
That said, other evidence applies to how the industry operates as a whole and is therefore less dependent on the FTC's proposed product and geographic market definitions. The Court does its best to assess that evidence below. And after doing so, it concludes that the current hydrogen peroxide industry is not particularly vulnerable to coordination, what vulnerability exists is not likely to increase as a result of the merger, and the evidence does not show a likelihood that the merger will cause substantial unilateral anticompetitive effects.
There is no science to weighing the factors at play in an antitrust analysis. Only an examination of the real-world evidence —including ordinary course documents, bidding data, and testimony from market participants—can supply an accurate picture of the industry and competitive
"Merger law rests upon the theory that, where rivals are few, firms will be able to coordinate their behavior, either by overt collusion or implicit understanding, in order to restrict output and achieve profits above competitive levels." Heinz, 246 F.3d at 715 (internal quotations omitted). Coordination is conduct by firms that is profitable for each of them only if the others accommodate it. Merger Guidelines § 7. Tacit coordination, the FTC's theory in this case, is enforced not by an explicit agreement, but by the "detection and punishment of deviations." Id. Firms' ability to coordinate "depends on the strength and predictability of rivals' responses to a price change or other competitive initiative." Id. Tacit coordination itself is not illegal; it is firms making "independent production decisions to maximize profits. But a core purpose of antitrust law is to scrutinize mergers that may make it easier for firms to collectively reduce output, and indeed, to prevent mergers that are likely to do so." FTC v. Tronox Ltd., 332 F.Supp.3d 187, 208-09 (D.D.C. 2018); see Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 227, 113 S.Ct. 2578, 125 L.Ed.2d 168 (1993). The Merger Guidelines advise that even where a market "shows signs of vulnerability to coordinated conduct," before challenging a merger, the FTC must also "have a credible basis on which to conclude that the merger may enhance that vulnerability." § 7.1.
The FTC is right that some features of the hydrogen peroxide industry typically suggest vulnerability to coordination. There are few suppliers, only five in the FTC's proposed product and geographic market. And fewer suppliers usually means that suppliers anticipate "stronger and faster" responses from their rivals, which diminishes the reward from attracting a competitor's customers. Merger Guidelines § 7.2; see Rothman Hrg. Tr. 750:20-21 ("maintaining discipline through deterrence is more straightforward when there are fewer firms"). Elasticity of demand in the hydrogen peroxide market is also extremely low, regardless of end use. PPFFCL at 32-33 ¶¶ 113-17. In other words, customers are unlikely to substitute away from hydrogen peroxide to a different chemical if suppliers coordinate to increase prices by a significant amount. Accordingly,
But taken together, the remaining evidence rebuts the notion that the current hydrogen peroxide market is vulnerable to coordination.
First, blind bidding for hydrogen peroxide customers produces substantial cost savings for customers and "frustrate[s] coordination among producers." Arch Coal, 329 F. Supp. 2d at 144; see DPFFCL at 53-54, 66-67 ¶¶ 143-46, 173. In general, the bidding process in the industry works as follows: a customer publishes an RFP for a given location, specifying the hydrogen peroxide product, volume, and contract duration sought; suppliers submit confidential bids; and then the customer typically lets one or more of the bidders know how competitive their bid is (without sharing specific prices) so that they will lower their bid price. See DPFFCL at 15 ¶¶ 42, 44; id. at 66-67 ¶ 173. This pitting of suppliers against each other lowers prices, even when there are only two competing suppliers, because suppliers generally do not know which other suppliers have placed bids. See id. at 67 ¶ 175. In this market, without specific knowledge of competing bids, suppliers are incentivized "to submit aggressive bids" because "cheating" —a departure from coordinated higher prices—"would not be detected until well after the fact, if ever, and any punishment would come well after the fact as well." Arch Coal, 329 F. Supp. 2d at 145. Accordingly, the average price of standard grade hydrogen peroxide in the Southern and Central United States, measured across all end uses, has decreased each of the last three years for three of the five hydrogen peroxide suppliers, Hill Rpt., JX0066-098 fig. 45, and prices have declined for much of the rest of the industry as well, id. -097 fig. 44; see also id. -099 fig. 46 (annual customer savings from bidding competition for Southern and Central United States customers).
Second, the use of large and long-term contracts in the hydrogen peroxide industry incentivizes firms to "deviate from the terms of coordination," FTC v. CCC Holdings, 605 F.Supp.2d 26, 64 (D.D.C. 2009) (internal quotation omitted), "even if they expect strong responses by rivals," Merger Guidelines § 7.2, because the stakes are so high and there are fewer "opportunities for firms to punish one another." Hill Hrg. Tr. 2059:14-15; see Arch Coal, 329 F. Supp. 2d at 145; DPFFCL at 69-70 ¶¶ 179-81. Customers for hydrogen peroxide are typically large manufacturers who consume an enormous volume of hydrogen peroxide annually.
Third, even if suppliers did try to coordinate their bidding behavior to increase prices, the hydrogen peroxide industry is marked by sophisticated and powerful customers that are well equipped to defeat coordination. See Merger Guidelines § 8; Wilhelmsen, 341 F. Supp. 3d at 70; CCC Holdings, 605 F. Supp. 2d at 64 ("A sophisticated customer base makes price coordination more difficult."). Many hydrogen peroxide customers have dedicated procurement personnel who are experienced at conducting RFPs, minimizing costs, and leveraging competing bids to secure the best contract terms. See DPFFCL at 70-71 ¶¶ 183-85.
Fourth, while previous collusion in an industry can give rise to a presumption that a market is vulnerable to coordination, that presumption does not hold if "competitive conditions in the market have since changed significantly." Merger Guidelines § 7.2. Here, competitive conditions in the hydrogen peroxide industry have changed significantly since some suppliers engaged in price fixing nearly 20 years ago. See PPFFCL at 42-43 ¶ 143; DPFFCL at 72 ¶ 188. The FTC argues that because the industry products, plants, actors, and capacity are roughly the same now, nothing has changed. PPFFCL at 43-44 ¶¶ 144-48. But the very features of the industry that enabled suppliers to fix prices—public price announcements, swap agreements, and meet-or-release clauses, see DPFFCL at 73 ¶¶ 190-92—are largely nonexistent now, and there is no reason to think they are likely to return soon.
There is mixed evidence in the record relating to other factors that courts consider to evaluate industry vulnerability to coordination. But on balance, the Court concludes that Defendants have the better argument in each case, or at least that the factor is essentially neutral.
One factor is market transparency, on which coordination depends. A market is more vulnerable to coordination if (1) "the terms offered to customers are relatively transparent," (2) there is "[p]rice transparency," or (3) there is "transparency regarding
Another factor is product and pricing homogeneity; the more homogenous products and prices are, the more vulnerable the market is to coordination. CCC Holdings, 605 F. Supp. 2d at 61. Although hydrogen peroxide products are relatively homogenous—within end uses, but not between them—pricing is heterogeneous and unpredictable for each product, largely due to the substantial role that freight plays into pricing decisions. See PPFFCL at 33-34 ¶¶ 118-20; DPFFCL at 65 ¶ 170; Hill Rpt. JX0066-028 fig. 4; id. -098 fig. 45 (average standard grade price varies from 23 cents to 37 cents); id. -097 n.254 (standard grade hydrogen peroxide "typically has less variation in price within it than do other grades"). These variations in price make it difficult for suppliers to predict how consumers will react to their pricing decisions, which would facilitate coordination.
In addition, plants operating at capacity can sometimes suggest a reduced incentive to compete for customers aggressively, because suppliers can only serve so many of them. See PPFFCL at 39 ¶ 136; JX0032-086; PX2484-001; cf. DPFFCL at 55 ¶ 147 (Solvay undercut suppliers on price in 2017 after they expanded capacity). And the evidence here shows that [Redacted] hydrogen peroxide suppliers are operating their plants nearly at capacity. Even so, other features of the market—a significant portion of contracts up for bidding every year, large volume contracts, and the need to keep plants running at capacity due to the high fixed costs of running them— should still incentivize competition. See DPFFCL at 71 ¶ 184. Indeed, for those reasons, every bidding cycle is crucial for suppliers. See, e.g., id. at 70 ¶ 181; Corson Hrg. Tr. 652:14-19 ("[T]he large volumes that come up ... at the end of the year... expose us to a lot of risk as we plan our production; our terminals; our whole logistics network around those customers. So if there is a change, it affects us dramatically.").
Finally, a market is conducive to tacit coordination "where producers recognize their `shared economic interests and their interdependence with respect to price and output decisions.'" Arch Coal, 329 F. Supp. 2d at 131 (quoting Brooke Group, 509 U.S. at 227, 113 S.Ct. 2578)). The FTC's theory of such coordination presupposes suppliers with an acute awareness of each other's interdependence, withholding bids to avoid downward "price spirals" or retaliation from competitors. PPFFCL at 38-42 ¶¶ 134-41. But the evidence in the record on this point is mixed at best. In most cases when suppliers expressed concern about retaliation from competitors,
Moreover, in the few instances when suppliers appeared to withhold bids after acknowledging the potential for retaliation, those decisions also reflected legitimate business considerations: for example, the supplier did not believe the contract at issue was large or long enough to justify offering a lower price, or the supplier recognized it was not likely to be competitive due to its location and the high cost of transporting hydrogen peroxide. DPFFCL at 76 ¶ 198; see, e.g., Montag Hrg. Tr. 1569:2-1570:19; id. 1574:14-1576:5 (discussing PX2190-001 and that PeroxyChem sought a long-term commitment to justify the investment necessary to serve the customer); PX1074; PX2337-001; PX2501-001.
In summary, the evidence does not show that suppliers are coordinating in the hydrogen peroxide market to keep prices artificially high. As Defendants argued, "a market in which the prices are falling is one in which it's very unlikely that coordination is happening among suppliers. If they are [coordinating], they're doing a terrible, terrible job of it." Mahr Hrg. Tr. 2312:24-2313:2. Rather, despite the relatively few suppliers and low demand elasticity, suppliers appear to bid aggressively to win large and long-term contracts from sophisticated customers. While the "structure and dynamics of the ... market may permit coordination," in this case they "do not make coordination likely." Arch Coal, 329 F. Supp. 2d at 140.
The Merger Guidelines advise that even where a market "shows signs of vulnerability to coordinated conduct," before challenging a merger, the FTC must also "have a credible basis on which to conclude that the merger may enhance that vulnerability." § 7.1. The proposed merger of Evonik and PeroxyChem is unlikely to do so. None of the above-described features of the industry currently inhibiting coordination in the hydrogen peroxide market are likely to change post-merger. DPFFCL at 78 ¶ 203. In other words, there is no reason to suspect that suppliers will not continue to participate in a blind bidding system for long-term and large contracts to win the business of sophisticated buyers.
The biggest change the proposed merger would bring about is to reduce the number of suppliers who own plants in the Southern and Central United States from five to four. PPFFCL at 45 ¶ 151. That change relates directly to market concentration and the FTC's prima facie case, and the Merger Guidelines suggest that the FTC must have an independent basis to conclude that a merger will increase the likelihood of coordination, apart from whatever evidence it offers to show undue market concentration. See § 7.1. In any event, there is no reason to think that reducing the number of hydrogen peroxide suppliers from five to four will likely lead to coordination. As described above, the industry is not especially vulnerable to it, and the record contains no evidence that suppliers are coordinating to raise prices or withhold supply in the FTC's other proposed geographic market of the Pacific
The FTC also argues that Evonik, which has historically maintained a "price over volume" strategy, will be a market leader post-merger that can more easily discipline competitors. PPFFCL at 45-46 ¶ 154-57. Setting aside whether such market asymmetry in fact increases the likelihood of coordination, see Hill Rpt., JX0066-110 to -111, the FTC's argument is speculative and inconsistent with the record. Evonik is already the market leader in the Southern and Central United States, Rothman Rpt., JX0075-168, and so the scenario the FTC anticipates should have already come to pass. In fact, the evidence suggests the opposite. Evonik has consistently undercut other suppliers in the bidding process, see, e.g., PPFFCL at 67 ¶ 229; JX0112. And market-wide prices are decreasing even with Evonik as the dominant player, see Hill Rpt., JX0066-097 to -099.
Moreover, even if suppliers act contrary to that evidence and try to coordinate, Nouryon remains positioned to disrupt that behavior. "[C]ollective market power is diminished by the presence of other market participants with small market shares and little stake in the outcome resulting from the coordinated conduct, if these firms can rapidly expand their sales in the relevant market." Merger Guidelines § 7.2. Nouryon is well situated to expand its hydrogen peroxide sales in the event of a price increase because it (1) is "the smallest of all of the competitors," Radlinski Hrg. Tr. 538:15; (2) has won business from suppliers in the past, [Redacted]; and (3) has over [Redacted] pounds of excess capacity at its Columbus, Mississippi, plant with only an [Redacted] utilization rate, Radlinski Decl., JX0009-002; Radlinski Hrg. Tr. 545:17-21; Hill Rpt. JX0066-109.
While "the risk that a merger will induce adverse coordinated effects may not be susceptible to quantification or detailed proof," the FTC must still "have a credible basis on which to conclude that the merger may enhance that vulnerability." Merger Guidelines § 7.1. It does not come close to meeting that standard.
The FTC has also failed to show that the proposed merger is likely to have substantial unilateral effects. "A merger is likely to have unilateral anticompetitive effect if the acquiring firm will have the incentive to raise prices or reduce quality after the acquisition, independent of competitive responses from other firms." H & R Block, 833 F. Supp. 2d at 81. In industries like hydrogen peroxide where buyers negotiate with sellers and play sellers off each other, "[a]nticompetitive unilateral effects ... are likely in proportion to the frequency or probability with which, prior to the merger, one of the merging sellers had been the runner-up when the other won the business." Merger Guidelines § 6.2. To be sure, the evidence suggests that Evonik and PeroxyChem compete head-to-head for some hydrogen peroxide customers, for some end uses. See PPFFCL at 49-50 ¶ 167. As a result, the loss of PeroxyChem as a competitor may lead to a price increase for some customers. But the question for the Court is whether the proposed merger, as a whole, is likely to "substantially ... lessen competition." 15 U.S.C. § 18. The evidence does not show that to be so.
Likewise, Dr. Rothman's second-score procurement merger simulation model— which "estimate[s] the likelihood that Evonik and PeroxyChem are the two-highest surplus bidders for customers"—relies on (1) "market shares," and (2) transaction data aggregated "for all ... non-electronics hydrogen peroxide, as well as for ... standard grade hydrogen peroxide only", id. — 102, both of which are based on the FTC's ill-conceived product and geographic markets. The model then predicts price increases for all non-electronics grade hydrogen peroxide—and for an alternative standard grade hydrogen peroxide product market—in the Southern and Central United States as well as in alternative geographic markets in the Southern, Central, and Western United States. Id. -103 to -106 & nn.349-50, 354, 356, 358. The problem is that the FTC has not shown that the model's "inputs" or "outputs" are grounded in relevant product or geographic markets. The Court cannot assume that suppliers compete just as closely in smaller product-geography cross-sections of the market; in fact, in many situations, that is clearly not the case. And for these reasons, there is no basis for the Court to assume that the total predicted effect of the merger calculated by Dr. Rothman is merely the sum total of these smaller product-geography cross-sections. Because the Court has found the FTC's proposed product and geographic markets wanting, Dr. Rothman's models are of little use to the FTC in showing likely unilateral effects of the merger.
The remaining qualitative evidence in the record, to the extent that it is instructive given the lack of a properly defined market, suggests that the proposed merger is unlikely to cause unilateral effects that substantially lessen competition. This is so in large part because in general, Evonik and PeroxyChem are not close competitors. Evonik's Mobile, Alabama plant and PeroxyChem's Bayport, Texas plant—their two facilities in the Southern and Central United States—largely sell hydrogen peroxide intended for different end uses. Hill Rpt., JX0066-057; see DPFFCL at 86-88 ¶¶ 230-35. For example, about [Redacted] percent of Evonik's production at Mobile is standard grade hydrogen peroxide sold to pulp and paper customers, while only about [Redacted] percent of PeroxyChem's Bayport production serves the pulp and paper industry,
After Evonik and PeroxyChem merge, those three competitors are well positioned to check Evonik during the bidding process. Executives for Nouryon, Arkema, and Solvay testified that because of the blind bidding system and the sophistication of their customers, they compete just as aggressively to win contracts no matter how many bidders are involved. See Radlinski Hrg. Tr. 574:18-25; Myrick Hrg. Tr. 507:17-508:6; Suter Hrg. Tr. 439:7-17. Nouryon's Paul Radlinski, General Manager for Bleaching Chemicals in North America, Europe, and Asia, has 38 years of experience with Nouryon and its predecessor company. Hrg. Tr. 536:19-24. He explained at the evidentiary hearing that suppliers do not know "whether it's one, two or three or four" suppliers bidding on a given customer. Id. 587:14-17. "So my assumption is it's always four when we go in to bid. And if it's only one there, the customer's not going to tell us, [w]ell, you were the second of four bids. They're going to say, [y]our bid was not the lowest bid. You need to sharpen your pencils and bring us back a new offer." Id. 587:17-21. "We don't have transparency," so "it's just as competitive with one other competitor as it is with three." Id. 588:3, 588:9-11. Because blind bidding in the hydrogen peroxide is "all or nothing," "to win the business, you have to beat everybody," whether it is one or three competitors. Id. 588:17, 589:6.
Finally, unlike many cases in which the FTC alleges that a proposed merger would be anticompetitive, the record contains no evidence that Evonik intends to raise prices post-merger. DPFFCL at 62-63 ¶¶ 162-63; cf., e.g., Tronox, 332 F. Supp. 3d at 208 (merging company planned to "slow down" or "manag[e]" production so that "prices will rise"); Wilhelmsen, 341 F. Supp. 3d at 63 (internal document noted that if merger closed, it would "increase our ability to charge far better prices"). Of course, such a smoking gun is not necessary for the FTC to meet its burden. But here, the evidence reflects a perfectly legitimate reason why Evonik and PeroxyChem would want to merge that has nothing to do with raising prices: the businesses complement each other. The Chairman of Resource Efficiency for Evonik, Claus Rettig, credibly testified that the reason the proposed merger is attractive to Evonik is that it wants to expand into the specialty grade hydrogen peroxide market on which PeroxyChem focuses. See Rettig Hrg. Tr. 1047:13-17, 1053:1-9. Those specialty grade products "promise higher returns in terms of profitability" and "are more stable in economic downturns" relative to pulp and paper products, id. 1047:14-15, particularly given the number of newsprint customers that have gone out of business. See Corson Hrg. Tr. 640:14-641:2, 651:18-21.
Lacking a smoking gun, the FTC fires away with a few squirt guns: (1) a poorly informed third-party consultant's report, based on transaction data only from [Redacted], predicting a price increase, JX0140; see PPFFCL at 47-48 ¶ 161; DPFFCL at 62-63 ¶ 163; (2) a 2019 Evonik internal presentation with a demand curve reflecting that if Evonik chose to
As with the FTC's shortcomings in showing undue concentration in a relevant market, the Court does not mean to suggest that in a later administrative proceeding, it would be impossible for the FTC to show coordinated or unilateral effects, based on a properly defined product and geographic market, that could call the merger into question. But it does not win the day on the record here. "Section 7 involves probabilities, not ... possibilities," Baker Hughes, 908 F.2d at 984, and on this record the Court cannot say it is probable that the merger will substantially harm competition.
For all these reasons, the FTC has not met its burden of showing a likelihood of success on the merits.
The Federal Trade Commission Act provides for a preliminary injunction to block a merger when "such action would be in the public interest," after "weighing the equities and considering the Commission's likelihood of ultimate success." 15 U.S.C. § 53(b); see Heinz, 246 F.3d at 726. "The primary public interest favoring preliminary injunctive relief in a Section 13(b) case, which Congress specifically contemplated, is the effective enforcement of the antitrust laws.... Absent a likelihood of success on the merits, however, equities alone will not justify an injunction." Arch Coal, 329 F. Supp. 2d at 159.
The parties devote little discussion to the equities. They recognize that the propriety of a preliminary injunction typically rises and falls with the FTC's likelihood of success on the merits and the public interest in enforcing antitrust laws. PPFFCL at 99-100 ¶ 81-82; DPFFCL at 100 ¶ 269. Even so, the FTC argues that without a preliminary injunction, Defendants can "`scramble the eggs'—that is, combine
For all of the above reasons, the Court will deny the FTC's Motion for Preliminary Injunction, ECF No. 3. A separate order will issue.
Rothman Rebuttal Rpt., PX7102-017; see also Rothman Hrg. Tr. 791:24-792:19.
Mahr Hrg. Tr. 2321:8-15.
FTC v. Tronox Ltd., 332 F.Supp.3d 187, 207 (D.D.C. 2018)
