Notice2023-19530
United States v. ASSA ABLOY AB, et al.; Response of the United States to Public Comments on the Proposed Final Judgment
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Published
September 11, 2023
Issuing agencies
Justice DepartmentAntitrust Division
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<title>Federal Register, Volume 88 Issue 174 (Monday, September 11, 2023)</title>
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[Federal Register Volume 88, Number 174 (Monday, September 11, 2023)]
[Notices]
[Pages 62392-62395]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-19530]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. ASSA ABLOY AB, et al.; Response of the United
States to Public Comments on the Proposed Final Judgment
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that the Response of the United
States to Public Comments on the Proposed Final Judgment in United
States of America v. ASSA ABLOY AB, et al., Civil Action No. 22-2791-
ACR, has been filed in the United States District Court for the
District of Columbia, together with the response of the United States
to the comment.
Copies of the public comment and the United States' Response are
available for inspection on the Antitrust Division's website at <a href="http://www.justice.gov/atr">http://www.justice.gov/atr</a>.
Suzanne Morris,
Deputy Director Civil Enforcement Operations, Antitrust Division.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, Plaintiff, v. ASSA ABLOY AB, et al.,
Defendants.
Civil Case No. 22-2791-ACR
RESPONSE OF PLAINTIFF UNITED STATES OF AMERICA TO PUBLIC COMMENTS ON
THE PROPOSED FINAL JUDGMENT
As required by the Antitrust Procedures and Penalties Act (the
``Tunney Act''), 15 U.S.C. 16(b)-(h), Plaintiff United States of
America hereby responds to the public comment received about the
Proposed Final Judgment, ECF No. 128-4. After careful consideration of
the comment received, the United States will move the Court for entry
of the Proposed Final Judgment after the public comment and this
Response have been published in the Federal Register, pursuant to 15
U.S.C. 16(d), and believes that the Court will conclude that the
Proposed Final Judgment is in the public interest under the Tunney Act.
I. Procedural History
On September 8, 2021, Defendant ASSA ABLOY AB (``ASSA ABLOY'')
agreed to acquire the Hardware and Home Improvement division of
Defendant Spectrum Brands Holdings, Inc. (``Spectrum'') for
approximately $4.3 billion. On September 15, 2022, the United States
filed an antitrust lawsuit to stop the proposed acquisition from being
consummated. The United States' Complaint alleged that the proposed
acquisition may substantially lessen competition in the markets for two
types of residential door hardware (premium mechanical door hardware
and smart locks) in the United States, in violation of Section 7 of the
Clayton Act, 15 U.S.C. 18.
The parties vigorously litigated the case for more than seven
months, culminating in a bench trial that began on April 24, 2023. On
May 5, 2023, while the trial was ongoing, the United States filed a
Proposed Final Judgment, Competitive Impact Statement, ECF No. 129, and
Asset Preservation Stipulation and Order (``Stipulation''), ECF No.
128-1. The Competitive Impact Statement described the transaction and
the Proposed Final Judgment. Through the Stipulation, which the Court
entered on May 5, 2023, the parties and non-party divestiture buyer
Fortune Brands Innovations, Inc. (``Fortune''), consented to the entry
of the Proposed Final Judgment after compliance with the requirements
of the Tunney Act. Under the Stipulation, Defendants and Fortune also
agreed to abide by and comply with all the terms of the Proposed Final
[[Page 62393]]
Judgment until it is entered by the Court.
The United States caused the Complaint, the Proposed Final
Judgment, the Competitive Impact Statement, and directions for the
submission of written comments relating to the Proposed Final Judgment,
to be published in the Federal Register on May 15, 2023. See 88 FR
31007 (May 15, 2023). The United States also caused notice of the same,
together with directions for submission of comments, to be published in
The Washington Post for seven days, from May 12-18, 2023. The 60-day
period for public comments has ended. During the public comment period,
the United States received one comment, which is described below in
Section IV and attached in Appendix A.
II. Standard of Judicial Review
Under the Clayton Act, as amended by the Tunney Act, proposed final
judgments, or ``consent decrees,'' in antitrust cases brought by the
United States are subject to a 60-day comment period, after which the
Court shall determine whether entry of the proposed final judgment ``is
in the public interest.'' 15 U.S.C. 16(e)(1). In making that
determination, the Court, in accordance with the statute as amended in
2004, is required to consider:
(A) the competitive impact of such judgment, including termination
of alleged violations, provisions for enforcement and modification,
duration of relief sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous, and any other
competitive considerations bearing upon the adequacy of such judgment
that the court deems necessary to a determination of whether the
consent judgment is in the public interest; and
(B) the impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and individuals
alleging specific injury from the violations set forth in the complaint
including consideration of the public benefit, if any, to be derived
from a determination of the issues at trial.
Id. In considering these statutory factors, the Court's inquiry is
necessarily a limited one because the government is entitled to ``broad
discretion to settle with the defendant within the reaches of the
public interest.'' United States v. Microsoft Corp., 56 F.3d 1448, 1461
(D.C. Cir. 1995); United States v. US Airways Grp., Inc., 38 F. Supp.
3d 69, 75 (D.D.C. 2014) (``court's inquiry is limited'' in Tunney Act
settlements); United States v. InBev N.V./S.A., 2009 U.S. Dist. LEXIS
84787, at *3 (D.D.C. Aug. 11, 2009) (similar).
Under the Tunney Act a court considers, among other things, the
relationship between the remedy secured and the specific allegations in
the United States' Complaint, whether the proposed final judgment is
sufficiently clear, whether its enforcement mechanisms are sufficient,
and whether it may positively harm third parties. See Microsoft, 56
F.3d at 1458-62. With respect to the adequacy of the relief secured, a
court may not ``make de novo determination of facts and issues.''
United States v. W. Elec. Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993);
see also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc.,
152 F. Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107
F. Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787,
at *3. Instead, ``[t]he balancing of competing social and political
interests affected by a proposed antitrust decree must be left, in the
first instance, to the discretion of the Attorney General.'' W. Elec.
Co., 993 F.2d at 1577. ``The court should also bear in mind the
flexibility of the public interest inquiry: the court's function is not
to determine whether the resulting array of rights and liabilities is
the one that will best serve society, but only to confirm that the
resulting settlement is within the reaches of the public interest.''
Microsoft, 56 F.3d at 1460; see also United States v. Deutsche Telekom
AG, 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More demanding
requirements would ``have enormous practical consequences for the
government's ability to negotiate future settlements,'' contrary to
congressional intent. Microsoft, 56 F.3d at 1456. ``The Tunney Act was
not intended to create a disincentive to the use of the consent
decree.'' Id. The ultimate question is whether ``the remedies [obtained
by the final judgment are] so inconsonant with the allegations charged
as to fall outside of the `reaches of the public interest.' ''
Microsoft, 56 F.3d at 1461 (quoting W. Elec. Co., 900 F.2d at 309).
Moreover, the Tunney Act does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also US Airways,
38 F. Supp. 3d at 75 (``[A] court must simply determine whether there
is a factual foundation for the government's decisions such that its
conclusions regarding the proposed settlements are reasonable.'');
InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``[T]he `public interest'
is not to be measured by comparing the violations alleged in the
complaint against those the court believes could have, or even should
have, been alleged''). Because the ``court's authority to review the
decree depends entirely on the government's exercising its
prosecutorial discretion by bringing a case in the first place,'' it
follows that ``the court is only authorized to review the decree
itself,'' and not to ``effectively redraft the complaint'' to inquire
into other matters that the United States did not pursue. Microsoft, 56
F.3d at 1459-60.
In its 2004 amendments to the Tunney Act, Congress made clear its
intent to preserve the practical benefits of using judgments proposed
by the United States in antitrust enforcement, Public Law 108-237 Sec.
221, and added the unambiguous instruction that ``[n]othing in this
section shall be construed to require the court to conduct an
evidentiary hearing or to require the court to permit anyone to
intervene.'' 15 U.S.C. 16(e)(2); see also US Airways, 38 F. Supp. 3d at
76 (court is not required to hold an evidentiary hearing or to permit
intervenors as part of its review under the Tunney Act). This language
explicitly wrote into the statute what Congress intended when it first
enacted the Tunney Act in 1974. As Senator Tunney explained: ``[t]he
court is nowhere compelled to go to trial or to engage in extended
proceedings which might have the effect of vitiating the benefits of
prompt and less costly settlement through the consent decree process.''
119 Cong. Rec. 24,598 (1973) (statement of Sen. Tunney). ``A court can
make its public interest determination based on the competitive impact
statement and response to public comments alone.'' US Airways, 38 F.
Supp. 3d at 76 (citing Enova Corp., 107 F. Supp. 2d at 17).
III. The Complaint and the Proposed Final Judgment
The Proposed Final Judgment is the culmination of approximately
twenty-one months of thorough investigation and vigorous litigation by
the Antitrust Division of the U.S. Department of Justice concerning
ASSA ABLOY's proposed acquisition of Spectrum's Hardware and Home
Improvement division (``Spectrum HHI''). As alleged in the Complaint,
ASSA ABLOY and Spectrum HHI were, at the time the Complaint was filed,
close competitors with enormous market shares. Significant head-to-head
competition between Defendants to sell residential door hardware
historically generated lower prices, higher quality, exciting
innovations, and superior customer service. The Complaint alleged that
the combination of ASSA ABLOY and
[[Page 62394]]
Spectrum HHI would have eliminated those benefits.
The Proposed Final Judgment is designed to mitigate as many risks
to competition alleged in the Complaint as possible. Principally, the
Proposed Final Judgment requires ASSA ABLOY divest to Fortune, or to
another entity approved by the United States in its sole discretion,
assets that the Defendants previously used to compete against each
other in the United States. In connection with those divestitures, the
Proposed Final Judgment mandates a specific transition period for
entanglements between ASSA ABLOY and Fortune. It also subjects ASSA
ABLOY to significant financial penalties if ASSA ABLOY fails to
transfer the divestiture assets by December 31, 2023. Additionally, the
Proposed Final Judgment provides for the appointment of a monitoring
trustee to oversee Defendants' compliance with the terms of the
Proposed Final Judgment. Importantly, the Proposed Final Judgment also
provides that the monitoring trustee can investigate whether the
divestiture buyer will have replicated the competitive intensity in the
residential smart locks market that existed pre-divestiture. If the
monitoring trustee determines at least three years following the
divestiture that the divested smart lock assets have diminished in
competitive intensity and that such diminishment is in material part
due to limitations on the acquirer's right to use the Yale brand name
or trademarks in the United States and Canada, then the United States
may seek divestiture of additional ASSA ABLOY Yale-related assets.
IV. Summary of Public Comment and the United States' Response
During the 60-day public comment period, the United States received
one comment from an individual. After reviewing this comment, the
United States continues to believe that the Court will conclude that
the Proposed Final Judgment is in the public interest under the Tunney
Act.
A. Summary of Public Comment
The commenter states that he believes the two transactions
contemplated by the Proposed Final Judgment--ASSA ABLOY's divestiture
of assets to Fortune and ASSA ABLOY's acquisition of Spectrum HHI--
would violate the antitrust laws and harm both consumers and ``the
industry as a whole.'' The commenter states that Fortune ``has a track
record of moving in a direction that is not always in the best interest
of consumers and end users,'' and that ``Fortune's business model
relies less and less on small business relationships.'' Based on these
views, the commenter states that the divestiture of the EMTEK brand to
Fortune ``could result in reduced competition and innovation.'' He also
posits that Fortune could obtain a ``one sided market position'' with
respect to padlocks if ASSA ABLOY's ``Yale Mechanical hardware'' is
included in the divestiture. And, more generally, the commenter states
that the transactions ``could give'' ASSA ABLOY and Fortune ``a
dominant market position,'' apparently based on his belief that the
transactions would bring Yale, Kwikset, Baldwin, and other brands under
``common ownership.''
B. Response of the United States
Nothing in the comment casts doubt on the United States'
determination that the Court will conclude that the Proposed Final
Judgment is in the public interest under the Tunney Act. The
commenter's comment raises concerns that (1) misapprehend the nature of
the Proposed Final Judgment, (2) reach beyond the scope of the harms
alleged in the Complaint, and (3) are abstract and speculative.
First, some aspects of the comment appear to misapprehend the
nature of the Proposed Final Judgment. In particular, the commenter's
concern that the two transactions contemplated by the Proposed Final
Judgment would result in Yale, Kwikset, and Baldwin ``shar[ing] common
ownership'' misunderstands which assets are being sold and retained by
ASSA ABLOY. Under the Proposed Final Judgment, ASSA ABLOY is divesting
the Yale brand in the United States and Canada to Fortune for all
current and future residential and multifamily uses, and it requires
ASSA ABLOY to stop using the Yale brand entirely in the United States
and Canada following a transitional, wind-down period. Therefore, in
the United States and Canada, contrary to the commenter's statements,
Baldwin, Yale, and Kwikset would not be under the control of the same
company.
Second, the comment raises concerns that go beyond the harms
alleged in the Complaint. For example, the commenter expresses concern
about concentration in a market for padlocks, potential harm from
``reliance on overseas manufacturing,'' and the inability of smaller
distributors to ``sustain[] healthy business practices,'' none of which
was alleged in the Complaint as a harm arising from the proposed
transaction. The Complaint did not allege a product market that
included padlocks. Therefore, these concerns extend beyond the
permissible scope of Tunney Act review. See supra Part II.
Third, the comment provides no specific basis to suggest that the
Court will not find the Proposed Final Judgment to be in the public
interest under the Tunney Act or any basis for ``exceptional confidence
that adverse antitrust consequences will result.'' Microsoft, 56 F.3d
at 1460. The commenter does not elaborate on his concerns about
Fortune's ``track record'' and ``business model.'' Nor does the comment
provide information sufficient to meet the Microsoft standard that
demonstrates potential harm to competition in the market for premium
mechanical door hardware or adverse effects on consumers.
V. Conclusion
After careful consideration of the comment received, the United
States continues to believe that the Court will conclude that the
Proposed Final Judgment is in the public interest under the Tunney Act.
The United States will move the Court for entry of the Proposed Final
Judgment after the public comment and this Response have been published
in the Federal Register, pursuant to 15 U.S.C. 16(d).
Dated: September 1, 2023
Respectfully submitted,
/s/Matthew R. Huppert
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Matthew R. Huppert (DC Bar #1010997)
Miranda Isaacs
Trial Attorneys, United States Department of Justice, Antitrust
Division, 450 Fifth Street NW, Suite 8700, Washington, DC 20530,
Telephone: (202) 476-0383, Email: <a href="/cdn-cgi/l/email-protection#0845697c7c606d7f26407d78786d7a7c487d7b6c6762266f677e"><span class="__cf_email__" data-cfemail="88c5e9fcfce0edffa6c0fdf8f8edfafcc8fdfbece7e2a6efe7fe">[email protected]</span></a>
Counsel for Plaintiff United States of America
APPENDIX A
Dear Chief, Defense, Industrials, and Aerospace Section,
I am writing to express my concern not only about the proposed
acquisition of Spectrum Brands' Hardware & Home Improvement (HHI)
Division by Assa Abloy, but also about the divestiture of Emtek to
Fortune Brands. I believe that both of these transactions would
violate the antitrust laws of the United States and have a negative
impact on consumers and the industry as a whole. There is not
sufficient clarity if the Yale business unit (mechanical door
hardware) will be included in divestiture or retained by Assa Abloy,
either situation begs further consideration.
In the case of Emtek and Schaub, the divestiture to Fortune
Brands could result in reduced competition and innovation in the
lock and hardware industry. Fortune Brands has a track record of
moving in a direction that is not always in the best interest of
consumers and end users, which could have a negative impact on the
industry as a whole. This could result in fewer options for
[[Page 62395]]
consumers, lesser quality products that do not have the longevity
consumers have come to expect and ultimately harm the industry.
Fortune's business model relies less and less on small business
relationships, rather they are actively moving away from these
smaller companies in favor of larger distributors, big box stores,
online retailers, etc. Since it is not clear if Yale Mechanical
hardware (different from Smart locks) will be included in the
divestiture, please note that the Masterlock Brand along with Yale's
padlocks could make for one sided market position. Also of note,
Schaub's product offering is not considered Mechanical door
hardware.
Furthermore, the combination of Assa Abloy's acquisition of
Spectrum Brands' HHI division and Fortune Brands' acquisition of
Emtek could give these companies a dominant market position in the
residential lock and hardware industry. This could lead to higher
prices, reduced innovation, and further reliance on overseas
manufacturing where quality is often sacrificed and corporate
profits are favored. The harm small and medium-sized businesses
could experience is not conducive to sustaining healthy business
practices that rely on these companies for their lock and hardware
needs. Specifically, regarding the acquisition of Spectrum Brands'
HHI division by Assa Abloy, consideration must be given to the
reduced intensity of competition that could take place should the
following door hardware brands share common ownership: Yale,
Kwikset, Baldwin, Weiser, National Hardware, EZset.
I urge the Department of Justice to carefully consider the
implications of both the proposed acquisition of Spectrum Brands'
HHI division by Assa Abloy and the divestiture of Emtek and Schaub
to Fortune Brands. The value of small businesses to our economy,
especially in the Residential housing market is not to be taken
lightly.
The antitrust laws are in place to protect the American people,
and I trust that the Department of Justice will take the necessary
steps to ensure fair competition in the market.
I wish to thank Attorney General Merrick Garland and Deputy
Attorney General Lisa Monaco for their high level of service to the
American People.
Thank you for your time and consideration in this matter.
Sincerely,
Joseph Storrs
[FR Doc. 2023-19530 Filed 9-8-23; 8:45 am]
BILLING CODE 4410-11-P
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