United States v. Novelis Inc., et al., No. 1:10-cv-02033 (CAB); Proposed Final Judgment and Competitive Impact Statement
| Citation | 85 FR 31212 |
| Record Number | 2020-11073 |
| Published date | 22 May 2020 |
| Section | Notices |
| Court | Antitrust Division,Justice Department |
Federal Register, Volume 85 Issue 100 (Friday, May 22, 2020)
[Federal Register Volume 85, Number 100 (Friday, May 22, 2020)]
[Notices]
[Pages 31212-31227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11073]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Novelis Inc., et al., No. 1:10-cv-02033 (CAB);
Proposed Final Judgment and Competitive Impact Statement
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment,
Stipulation, and Competitive Impact Statement have been filed with the
United States District Court for the Northern District of Ohio in
United States of America v. Novelis Inc., et al., Civil Action No.
1:19-cv-02033 (CAB). On September 4, 2019, the United States filed a
Complaint alleging that Novelis Inc.'s proposed acquisition of Aleris
Corporation's North American aluminum automotive body sheet (``ABS'')
business would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The
proposed Final Judgment, filed on May 12, 2020, requires Novelis Inc.
to divest Aleris Corporation's North American aluminum ABS operations
in their entirety. The divestiture includes two facilities: One
production facility in Lewisport, Kentucky, and one technical service
center located in Madison Heights, Michigan; and all other tangible and
intangible assets related to or used in connection with the Lewisport,
Kentucky facility.
Copies of the Complaint, proposed Final Judgment, and Competitive
Impact Statement are available for inspection on the Antitrust
Division's website at http://www.justice.gov/atr and at the Office of
the Clerk of the United States District Court for the Northern District
of Ohio. Copies of these materials may be obtained from the Antitrust
Division upon request and payment of the copying fee set by Department
of Justice regulations.
Public comment is invited within 60 days of the date of this
notice. Such comments, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's website,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to Katrina Rouse,
Chief, Defense, Industrials and Aerospace Section, Antitrust Division,
Department of Justice, 450 Fifth Street NW, Suite
[[Page 31213]]
8700, Washington, DC 20530 (telephone: 202-598-2459).
Suzanne Morris,
Chief, Premerger and Division Statistics.
United States District Court for the Northern District of Ohio
United States of America, Plaintiff, v. Novelis Inc. and Aleris
Corporation, Defendants.
Case No.: 1:19-cv-02033-CAB
Complaint
The United States of America brings this civil antitrust action
pursuant to Section 7 of the Clayton Act, 15 U.S.C. 18, to enjoin
Novelis Inc.'s (``Novelis'') proposed acquisition of its new and
disruptive rival, Aleris Corporation (``Aleris''). The United States
alleges as follows:
I. Introduction
1. Automakers are turning to aluminum to make vehicles lighter, so
they can satisfy consumer demand for larger vehicles while enhancing
fuel efficiency, safety, and performance. As a result, demand for
rolled aluminum sheet for automotive applications (commonly referred to
as ``automotive body sheet'' or ``ABS'') is growing.
2. Novelis and Aleris are two of only four aluminum ABS suppliers
in North America. If permitted to proceed, the transaction would
concentrate approximately 60 percent of total production capacity and
the majority of uncommitted (open) capacity with Novelis. Novelis has
long been one of only a few aluminum ABS suppliers in North America,
while Aleris is a relatively new competitor that--in Novelis's own
words--is ``poised for transformational growth.'' By acquiring Aleris,
Novelis would lock up a large share of available aluminum ABS capacity
for the foreseeable future, which would immediately and negatively
impact competition in this market. Novelis's own deal documents reveal
an anticompetitive motivation behind this acquisition: Preventing
rivals from acquiring a disruptive competitor, Aleris, so that Novelis
can maintain its current high prices.
3. The transaction likely would lessen competition substantially in
the market for aluminum ABS sold to North American customers in
violation of Section 7 of the Clayton Act and, unless enjoined,
automakers and American consumers will be harmed through higher prices,
reduced innovation, and less favorable terms of service.
II. Industry Overview
A. Background on Aluminum ABS
4. The North American automotive industry is a vital sector of the
American economy. The industry represents the single largest
manufacturing sector in the United States, accounting for about three
percent of gross domestic product. In 2017, over 11 million vehicles
were produced in the United States. For decades, automakers used flat-
rolled steel almost exclusively in the construction of automotive
bodies.
5. Growing consumer demand for larger vehicles loaded with safety
and performance features has led automakers to pursue light-weight
designs. Automakers have turned to aluminum ABS, which is 30 to 40
percent lighter than traditional steel, as the material of choice for
light-weighting the next generation of vehicles.
6. Although aluminum is substantially more expensive than steel,
aluminum has distinct and superior physical properties. Vehicles made
with aluminum are lighter and more fuel-efficient. Aluminum ABS is also
safer and more durable, absorbing substantially more energy than
traditional steel upon impact. Light-weight vehicles also have
significant performance advantages including faster acceleration,
better handling, shorter braking distance, and increased payload and
towing capabilities. In addition to aluminum ABS's significant light-
weighting advantages, aluminum ABS is also highly formable, resists
breaking, and provides more styling options for automobile designers
than traditional steel.
7. Automakers recognize that aluminum ABS offers light-weighting,
physical, and performance benefits over traditional steel such that the
two materials are not close substitutes for many important design and
engineering features, even though traditional steel still comprises the
majority of the material used in cars. Some automakers, such as the
Ford Motor Company, have adopted an aluminum-intensive design for
certain vehicle models (e.g., the F-150 pickup truck), achieving
significant weight-savings and performance benefits. Other automakers
are pursuing light-weight designs using an incremental ``multi-
material'' approach, in which automakers use the best material for each
particular part or application. Under the multi-material approach,
aluminum ABS is being used to replace traditional steel in large
automotive panels, such as the hood, liftgates, doors and fenders
(i.e., the vehicle's ``skin''). By doing so, automakers can
substantially reduce the weight of vehicles, meet regulatory emissions
targets, and achieve safety and performance benefits that could not be
done using steel.
8. Light-weighting designs are also critical for the next
generation of electric vehicles. Aluminum ABS can reduce electric
vehicle weight by up to 20 percent, allowing an electric vehicle to run
farther on a single charge.
9. Aluminum ABS is recognized as a critical input in automakers'
light-weighting strategies. As automakers continue to build the bigger-
yet-more-efficient vehicles that consumers demand, more and more
aluminum ABS will be incorporated into automobile models.
10. Aluminum ABS demand is increasing. An industry-wide study
conducted by Ducker Worldwide predicts that the total aluminum content
in vehicles will increase 37 percent from about 400 pounds per vehicle
in 2015 to more than 550 pounds by 2028.
11. Supply is tight. Suppliers have limited capacity to produce
aluminum ABS. In North America, much of the aluminum ABS production
capacity is already committed to fulfilling automaker orders. A
supplier must have sufficient uncommitted capacity to satisfy the
automaker's aluminum ABS quantity requirements in order to bid or
compete for new vehicle models. A supplier that cannot meet those
requirements because it has little or no uncommitted capacity cannot
effectively compete for the business.
12. Based on Ducker's projections and their own market
intelligence, Novelis and Aleris each independently has determined that
the demand for aluminum ABS in North America will soon outgrow market
supply. The majority of aluminum ABS production capacity is already
committed to fulfilling existing automakers' orders, leaving the bulk
of uncommitted capacity with Novelis and, its target, Aleris.
13. Additional capacity cannot be readily brought online to meet
growing demand. Barriers to entry are high and expansion of existing
production facilities is costly and takes years to complete. Moreover,
steel suppliers cannot readily shift to production of aluminum ABS
because aluminum ABS is produced using a distinct process on
specialized equipment.
14. Due to transportation costs and supply chain risks, importing
aluminum ABS is not a primary sourcing strategy for most automakers in
North America. Imports, therefore, make up only a marginal volume of
supply.
[[Page 31214]]
B. Novelis Is Seeking To Eliminate an Emerging Competitive Threat
Through This Acquisition
15. For years, North American aluminum ABS production was dominated
by just two firms, Novelis and another large domestic rival. By its own
account, Novelis enjoyed this ``favorable industry structure'' because
it allowed Novelis to embark on a ``price leadership strategy'' and
realize ``substantial market-based pricing movement.'' Novelis took
advantage of this industry structure to increase prices to certain
automaker customers by up to 30 percent.
16. In 2016, Aleris, an aluminum ABS producer in the European
market, established facilities in the United States. Aleris's entry had
an immediate impact on pricing in North America, forcing Novelis to
lower its prices. For instance, internal documents confirm that
``Novelis reduced [its] base price by up to 5%'' for one automaker in
order to compete with Aleris's lower prices. Fearing lower prices from
Aleris for another automaker customer, Novelis dropped its bid by about
five percent to ``be in the range of Aleris.'' New capacity from Aleris
threatened Novelis's ``premium pricing,'' and in turn, Novelis's high
profit margins.
17. Aleris's entry into North America not only undercut Novelis's
prices and margins, but it also resulted in vigorous head-to-head
competition with Novelis on customer service and support. Based on its
experience in Europe, Aleris immediately established a technical
support center in the Detroit area to work closely with automaker
design engineers to expand the use of aluminum ABS solutions. Novelis's
CEO, Steve Fisher, testified that Aleris ``actually was in front of
[Novelis] a little bit . . . with the customer solution center.'' In
response, Novelis copied Aleris's efforts, starting its own solution
center less than 30 miles from Aleris's facility.
18. Even before Aleris began producing aluminum ABS coils in the
United States, Novelis tried to buy Aleris as a way to preserve the
``favorable industry structure'' that enabled Novelis's ``premium
pricing.'' Aleris's private equity owners had, however, already agreed
to sell Aleris to a foreign buyer. When Aleris's deal with the foreign
buyer unraveled in the fall of 2017, Novelis aggressively moved to
acquire Aleris.
19. Novelis was particularly concerned that in the hands of another
buyer, Aleris would further erode Novelis's prices and margins. In
documents setting forth Novelis's strategic analysis of the
transaction, the Novelis due diligence team expressed concern that if
Novelis were not the acquirer, Aleris could be sold to a ``[n]ew market
entrant in the US with lower pricing discipline'' than Novelis, and
that an ``[a]lternative buyer [was] likely to bid aggressively and
negatively impact pricing'' in the market. A ``key takeaway'' of this
analysis was that, by acquiring Aleris itself, Novelis ``[p]revents
competitors from acquiring assets and driving less disciplined
pricing.''
20. This same anticompetitive rationale was repeated in numerous
internal analyses of the deal that were generated by, or presented to,
top Novelis executives and/or the Novelis Board of Directors. These
analyses of the deal state:
``[A]n acquisition by us as the market leader will help
preserve the industry structure versus a new player . . . coming into
our growth markets and disturbing the industry structure to create
space for himself, while hurting us the most.''
Novelis should buy Aleris because an ``alternative buyer
[is] likely to bid aggressively and negatively impact pricing.''
Another buyer of Aleris likely would be a ``[n]ew market
entrant in the US with lower pricing discipline'' that would create the
``potential for accelerated price declines as they seek to fill
capacity.'' If not Novelis, an alternative buyer might have ``lower
pricing discipline.''
Novelis conducted a ``build or buy'' analysis of Aleris that concluded
as ``key takeaways'' that Novelis should acquire Aleris because there
is a ``disincentive for market leader [i.e., Novelis] to add capacity
and contribute to a price drop'' and an acquisition of Aleris
``prevents competitors from acquiring assets and driving less
disciplined pricing.''
III. Defendants and the Proposed Transaction
21. Novelis is a global manufacturer of semi-finished aluminum
products with global revenues of approximately $12.3 billion for the
fiscal year ending March 31, 2019. The company is incorporated in
Canada and headquartered in Atlanta, Georgia. It operates 23 production
facilities in North America, South America, Europe and Asia. Eight
facilities are located in North America, including two (Oswego, New
York, and Kingston, Ontario) that currently produce aluminum ABS.
Another aluminum ABS finishing line is under construction in Guthrie,
Kentucky. Novelis supplies flat-rolled aluminum products in three
segments: beverage can, specialty and automotive.
22. Novelis is a wholly-owned subsidiary of Hindalco Industries,
Ltd., an Indian company headquartered in Mumbai, India.
23. Aleris also is a global manufacturer of semi-finished aluminum
products, generating global revenues of approximately $3.4 billion in
2018. Aleris is a Delaware corporation, headquartered in Cleveland,
Ohio and operates 13 production facilities in North America, South
America, Europe, and Asia. Aleris supplies flat-rolled aluminum
products to the automotive, aerospace and building and construction
industries, among others. Aleris has been a producer of aluminum ABS in
Europe since 2002, and recently expanded ABS production into the North
America market with new ABS production lines in Lewisport, Kentucky.
24. Novelis and Aleris entered into a definitive Agreement and Plan
of Merger, dated July 26, 2018. Under this agreement, Novelis will
acquire 100 percent of the voting securities of Aleris for an estimated
enterprise value of $2.6 billion.
IV. The Relevant Market Threatened by the Acquisition
25. Aluminum ABS sold to automakers in North America constitutes a
relevant antitrust market and line of commerce under Section 7 of the
Clayton Act. A well-accepted methodology for determining a relevant
market for antitrust analysis is to ask whether a hypothetical
monopolist over all products in the proposed market could profitably
impose at least a small but significant and non-transitory increase in
price, or SSNIP. See Fed. Trade Comm'n & U.S. Dep't of Justice
Horizontal Merger Guidelines (2010) (``Horizontal Merger Guidelines'');
accord Fed. Trade Comm'n v. Whole Foods Market, 548 F.3d 1028, 1038 (DC
Cir. 2008). A hypothetical monopolist of aluminum ABS sold to
automakers in North America could profitably increase prices by at
least a SSNIP because North American automakers are unlikely to
substitute away from aluminum ABS in sufficient quantities to make that
price increase unprofitable. Therefore, the sale of aluminum ABS to
North American automakers is a relevant antitrust market.
A. Relevant Product Market
26. An automaker can make a car part out of aluminum, steel, or
other material, but there are substantial differences in the physical
properties of aluminum (as compared to steel), such
[[Page 31215]]
that an automotive engineer designing a car with particular weight,
performance, safety specifications, and target retail price is unlikely
to view steel and other materials as full functional substitutes for
aluminum for the various car parts being designed. Nor is any other
material likely to significantly impact the pricing of aluminum ABS for
most car parts, or vice-versa. Aluminum ABS is a distinct line of
commerce and constitutes a relevant product market even if a broader
market for automotive materials may also exist.
27. Aluminum ABS is different from other materials used in
automotive applications and meets many of the practical indicia that
courts rely on to define a relevant product market. As an initial
matter, Novelis and Aleris and other industry participants recognize
aluminum ABS as a distinct product with its own market dynamics.
Novelis and Aleris describe themselves as ``leaders'' in the aluminum
ABS market, and they calculate market share for the automotive business
by looking to sales of aluminum ABS alone. In strategic planning
documents commenting on the competitive landscape in aluminum ABS,
Novelis boasted that it is the ``[m]arket leader with ~60% share'' of
the ``[a]utomotive business in North America.'' Similarly, in the
defendants' ordinary course of business documents, the defendants refer
predominantly to the supply, demand, and competitiveness of other
aluminum ABS suppliers when discussing competitive dynamics in the
automotive industry.
28. Aluminum ABS also has physical properties that are distinctive
from other automotive materials. Compared to steel, for instance,
aluminum has a higher strength-to-weight ratio, higher strength in
large panels, and superior corrosion resistance. These qualities are
highly sought after by auto designers and engineers. Alternative
materials, such as steel, generally do not share these attributes and
therefore, these materials are not reasonable substitutes for aluminum
ABS for automakers when designing and engineering the technical and
performance specifications of vehicles.
29. Steel companies are developing lighter, high strength steel
varieties for the auto industry. But as Novelis has observed, high
strength steel ``is largely replacing existing mild steel'' and
``cannibalizing the existing material'' (i.e., traditional steel). The
threat of substitution from aluminum to high strength steel is, as
Aleris confirms, ``limited.''
30. The price of aluminum ABS is also distinct from other ABS
materials, including steel. Aluminum ABS is about three to four times
more expensive than traditional steel per pound, but North American
automakers continue to adopt aluminum ABS in place of steel because of
its superior light-weighting qualities and performance and safety
benefits. As a result of those qualities, even as aluminum commodity
pricing rose in 2018, Novelis prepared to tell its investors that
``[w]e are not seeing demand destruction in our markets.'' Moreover,
while aluminum ABS prices are sensitive to price changes of aluminum
ABS from other aluminum ABS suppliers, they are not sensitive to price
changes in other materials, such as steel.
31. Further, from the automaker's perspective, the use of aluminum
ABS requires a different tooling and joining process than the default
production process of steel automotive parts. Automakers continue to
invest millions of dollars to upgrade their production plants as they
move towards greater adoption of aluminum.
B. Relevant Geographic Market
32. The relevant geographic market in which to assess the
competitive harm from the proposed transaction is North America. When a
supplier can price differently based on customer location, the
Horizonal Merger Guidelines provide that the relevant geographic market
may be defined based on the locations of targeted customers. Such
pricing is possible in aluminum ABS as evidenced by the different
prices charged by suppliers across geographic regions. For example,
Novelis has observed that ``North America enjoys the highest regional
pricing'' with Novelis's pricing several hundred dollars per ton higher
in North America than in Europe. Because of transportation costs,
import tariffs and duties, the limited shelf life of most types of
aluminum ABS, and supply chain risks, customers of aluminum ABS in
North America are unlikely to be able to defeat a price increase
through arbitrage from outside North America.
33. This price gap between North America and other geographic
regions has persisted over many years, supporting the conclusion that
North America is a relevant geographic market.
V. Anticompetitive Effects of the Acquisition
34. The proposed acquisition is likely to lead to anticompetitive
effects. As an initial matter, this transaction is presumptively
anticompetitive. The Supreme Court has held that mergers that
significantly increase concentration in concentrated markets are
presumptively anticompetitive and, therefore, unlawful. See United
States v. Phila. Nat'l Bank, 374 U.S. 321, 363-65 (1963). To measure
market concentration, courts often use the Herfindahl-Hirschman Index
(``HHI'') as described in the Horizontal Merger Guidelines. Mergers
that increase the HHI by more than 200 and result in an HHI above 2,500
in any market are presumed to be anticompetitive.
35. The North American aluminum ABS market is already highly
concentrated. By Novelis's own assessment, post-merger, Novelis could
control more than 60 percent of the North American aluminum ABS market.
Based on current sales estimates--which includes a marginal volume of
imports--if Novelis were allowed to acquire Aleris, the HHI would
increase by almost 500 points to a post-transaction HHI reaching almost
4,000. Thus, this merger is presumed to be anticompetitive under
Supreme Court precedent.
36. Beyond the presumption provided under Supreme Court precedent,
the facts establish the probable anticompetitive effect of the merger.
First, Aleris's expansion into the North American market had an
immediate positive impact on competition and pricing. Novelis reduced
its pricing to some of the industry's largest and most significant
automakers in order to meet customer ``targets (as set by Aleris),'' or
to ``be in the range of Aleris.'' With uncommitted production capacity
and its recent $425 million aluminum ABS expansion at its facility in
Lewisport, Kentucky, Aleris is poised to continue to compete vigorously
with Novelis by offering lower prices in an effort to steal share.
37. Through this acquisition, however, Novelis would seize control
of Aleris's uncommitted capacity, eliminating a rival it described as
``poised for transformational growth.'' Aleris and Novelis are the only
two firms expected to have sizable uncommitted North American capacity
over the next few years. If the merger is enjoined, head-to-head
competition between Aleris and Novelis would likely intensify as they
fight to fill their production lines. As Novelis's own documents
reveal, this competition would have disrupted Novelis's ``premium
pricing'' strategy, resulting in lower prices to automakers.
38. In addition, the proposed acquisition likely would reduce
quality and innovation in aluminum ABS. For example, Novelis copied
Aleris's establishment of a technical support center in the Detroit
area, which was developed to work directly with
[[Page 31216]]
automakers. The merger would eliminate this type of competition between
the two firms.
39. If allowed to proceed, the proposed acquisition would reduce
the number of North American aluminum ABS suppliers from 4 to 3. This
consolidation would concentrate more than half of the domestic aluminum
ABS sales, 60 percent of projected total domestic capacity, and the
majority of uncommitted domestic capacity under the control of one
firm.
40. Post-transaction, no other firms would have the incentive and
ability to constrain Novelis. The transaction would result in higher
prices, as well as reduced innovation and technical support for
automakers that rely on this critical input.
VI. Absence of Countervailing Factors
41. New entry or expansion by existing competitors is unlikely to
prevent or remedy the transaction's likely anticompetitive effects in
the market for aluminum ABS.
42. The aluminum ABS market has significant barriers to entry.
Barriers include the high cost and long-time frame needed to build
production facilities. For example, to compete in the automotive
market, aluminum companies generally must build a specialized ``heat-
treat'' finishing line to make aluminum sheet for automotive
applications. These heat-treat finishing lines take years to build and
cost hundreds of millions of dollars to construct, and require
sophisticated technological know-how to operate.
43. In addition to heat-treat finishing lines, aluminum ABS
suppliers need aluminum coils that are wide enough for automotive
applications. These aluminum coils are produced at hot mills, and there
are only a few hot mills in North America. Building a new hot mill
takes several years and requires a significant capital investment of
well over a billion dollars. Meanwhile, expanding or re-outfitting an
existing facility to have auto-capable hot mill capacity could also
require several hundred million dollars.
44. As a result of these barriers, entry into the market for
aluminum ABS would not be timely, likely, or sufficient to defeat the
substantial lessening of competition that is likely to result from
Novelis's acquisition of Aleris.
45. Moreover, because of supply chain risks and other factors,
customers of the merged firm (i.e., North American automakers) are
unlikely to turn to foreign suppliers of aluminum ABS in sufficient
volume to mitigate the anticompetitive effects of the merger.
VII. Jurisdiction and Venue
46. The United States brings this civil antitrust action against
defendants Novelis and Aleris under Section 15 of the Clayton Act, 15
U.S.C. 25, as amended, to prevent and restrain defendants from
violating Section 7 of the Clayton Act, 15 U.S.C. 18.
47. This Court has subject matter jurisdiction over this action
pursuant to Section 15 of the Clayton Act, 15 U.S.C. 25, and 28 U.S.C.
1331, 1337(a) and 1345. Novelis and Aleris develop, manufacture, and
sell aluminum ABS in the flow of interstate commerce. The activities of
Novelis and Aleris in developing, manufacturing, and selling these
products substantially affect interstate commerce.
48. This Court has personal jurisdiction over Novelis and Aleris.
Both parties have significant contacts with this judicial district:
Novelis is registered to do business in the State of Ohio and transacts
business in this District; Aleris is headquartered in Cleveland, Ohio
and also transacts business in this District. Moreover, Novelis's
proposed acquisition of Aleris will have effects throughout the United
States, including in this District.
49. Venue is proper in this District pursuant to Section 12 of the
Clayton Act, 15 U.S.C. 22, and under 28 U.S.C. 1391(b) and (c).
VIII. Violation Alleged
50. Novelis's acquisition of Aleris is likely to lessen
substantially competition in the relevant market in violation of
Section 7 of the Clayton Act, 15 U.S.C. 18.
51. The transaction will have the following effects, among others:
a. Eliminate head-to-head competition between Novelis and Aleris in
the development, manufacture and sale of aluminum ABS;
b. Likely reduce competition between and among Novelis and the
remaining suppliers of aluminum ABS; and
c. Likely cause prices of the relevant product to increase,
delivery times to lengthen, terms of service to become less favorable,
and innovation to be reduced.
IX. Request for Relief
52. The United States requests that this Court:
a. adjudge and decree the acquisition of Aleris by defendant
Novelis to violate Section 7 of the Clayton Act, 15 U.S.C. 18;
b. preliminarily and permanently enjoin and restrain the defendants
from carrying out the proposed acquisition of Aleris by Novelis or any
other transaction that would combine the two companies and further
enjoin the defendants from taking any steps towards completing the
acquisition of Aleris by Novelis;
c. award such temporary and preliminary injunctive and ancillary
relief as may be necessary to avert the dissipation of Aleris's
tangible and intangible assets during the pendency of this action and
to preserve the possibility of effective permanent relief;
d. award the United States the cost of this action; and
e. grant the United States such other and further relief as the
Court deems just and proper.
Respectfully submitted,
September 4, 2019
FOR PLAINTIFF UNITED STATES OF AMERICA,
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Makan Delrahim
Assistant Attorney General
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Kathleen O'neill
Senior Director of Investigations and Litigation
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Craig W. Conrath
Director of Litigation
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Patricia A. Brink
Director of Civil Enforcement
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Julia A. Schiller
Counsel to the Assistant Attorney General
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John Read
Acting Chief, Defense, Industrials, and Aerospace Section
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Stephanie A. Fleming
Assistant Chief, Defense, Industrials, and Aerospace Section
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Samer M. Musallam (OH #0078472)
Lowell R. Stern
Blake W. Rushforth
Bashiri Wilson
Angela Ting
James Foster
Siddarth Dadhich
Thomas Dematteo
Ethan Stevenson
Trial Attorneys,
Antitrust Division, United States Department of Justice,
450 Fifth Street NW, Washington, DC 20530, Telephone: (202) 598-
2990, Facsimile: (202) 514-9033, [email protected].
United States District Court for the Northern District of Ohio
United States of America, Plaintiff, v. Novelis Inc. and Aleris
Corporation, Defendants.
Case.: 1:19-cv-02033-CAB
[[Page 31217]]
[Proposed] Final Judgment
Whereas, Plaintiff, United States of America, filed its complaint
on September 4, 2019, and the United States and Defendants, Novelis
Inc. and Aleris Corporation, by their respective attorneys, have
consented to entry of this Final Judgment, without this Final Judgment
constituting any evidence against or admission by a party regarding any
issue of fact or law;
And whereas, Defendants agree to be bound by the provisions of this
Final Judgment pending its approval by the Court;
And whereas, the essence of this Final Judgment is the prompt and
certain divestiture of certain rights or assets by Defendants to assure
that competition is not substantially lessened;
And whereas, Defendants agree to make a divestiture for the purpose
of remedying the loss of competition alleged in the Complaint;
And whereas, Defendants represent that the divestiture and other
relief required by this Final Judgment can and will be made and that
Defendants will not later raise a claim of hardship or difficulty as
grounds for asking the Court to modify any provision of this Final
Judgment;
Now therefore, upon consent of the parties, it is ordered,
adjudged, and decreed:
I. Jurisdiction
The Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against Defendants under Section 7 of the Clayton
Act, as amended (15 U.S.C. 18).
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' means the entity to whom Defendants divest the
Divestiture Assets.
B. ``Aluminum ABS'' means aluminum automotive body sheet, a rolled
aluminum sheet product used for automotive applications.
C. ``Novelis'' means Defendant Novelis Inc., a Canadian corporation
with its headquarters in Atlanta, Georgia, its successors and assigns,
and its subsidiaries, divisions, groups, affiliates, partnerships, and
joint ventures, and their directors, officers, managers, agents, and
employees.
D. ``Aleris'' means Defendant Aleris Corporation, a Delaware
corporation with its headquarters in Cleveland, Ohio, its successors
and assigns, and its subsidiaries, divisions, groups, affiliates,
partnerships, and joint ventures, and their directors, officers,
managers, agents, and employees.
E. ``Divestiture Assets'' means:
1. All of Defendants' rights, title, and interests, wherever
located, in and relating to the manufacturing and support facilities
located at:
a. 1372 State Route 1957, Lewisport, Kentucky 42351 (the
``Lewisport Rolling Mill''); and
b. 1450 East Avis Drive, Madison Heights, Michigan 48071 (the
``Innovation Center'');
2. All tangible assets, wherever located, related to or used in
connection with the operation of the Lewisport Rolling Mill, including,
but not limited to: Research and development activities; all
manufacturing equipment, tooling and fixed assets, personal property,
inventory, office furniture, materials, supplies, and all other
tangible property and assets; all licenses, permits, and authorizations
issued by any governmental organization; all contracts, teaming
arrangements, agreements, leases, commitments, certifications, and
understandings, including supply agreements; all customer lists,
contracts, accounts, and credit records; all repair and performance
records and all other records; and
3. All intangible assets related to or used in connection with the
operation of the Lewisport Rolling Mill, including, but not limited to:
All patents; licenses and sublicenses; intellectual property;
copyrights; trademarks; trade names; service marks; service names;
technical information; computer software (including software developed
by third parties) and related documentation; know-how; trade secrets;
drawings; blueprints; designs; design protocols; specifications for
materials; specifications for parts and devices; safety procedures for
the handling of materials and substances; quality assurance and control
procedures; design tools and simulation capability; all manuals and
technical information Aleris provides to its own employees, customers,
suppliers, agents, or licensees; and all research data concerning
historic and current research and development efforts, including, but
not limited to, designs of experiments, and the results of successful
and unsuccessful designs and experiments.
F. ``Operational'' means capable of operating at full capacity, and
in a state of (i) current operation or (ii) readiness to operate.
G. ``Regulatory Approvals'' means (i) any approvals or clearances
pursuant to filings with the Committee on Foreign Investment in the
United States (``CFIUS''), or under antitrust or competition laws
required for the Transaction to proceed; and (ii) any approvals or
clearances pursuant to filings with CFIUS, or under antitrust,
competition, or other U.S. or international laws, or any local
regulatory approvals by the City of Lewisport, Kentucky or the City of
Madison Heights, Michigan, required for Acquirer's acquisition of the
Divestiture Assets to proceed.
H. ``Relevant Employees'' means all full-time, part-time, or
contract employees who supported or whose job responsibilities related
to the Divestiture Assets at any time between July 26, 2018 and the
date on which the Divestiture Assets are divested to an Acquirer,
including but not limited to all employees located at the Lewisport
Rolling Mill, the Innovation Center, and all other personnel involved
in the design, manufacture, or sale of any products produced at the
Lewisport Rolling Mill, including engineering and support employees,
wherever such employees are located.
I. ``Transaction'' means the proposed acquisition of Aleris by
Novelis.
III. Applicability
A. This Final Judgment applies to Novelis and Aleris, as defined
above, and all other persons, in active concert or participation with
any Defendant, who receive actual notice of this Final Judgment.
B. If, prior to complying with Section IV and Section V of this
Final Judgment, Defendants sell or otherwise dispose of all or
substantially all of their assets or of lesser business units that
include the Divestiture Assets, Defendants must require the purchaser
to be bound by the provisions of this Final Judgment. Defendants need
not obtain such an agreement from Acquirer.
IV. Divestiture
A. Defendants are ordered and directed, within the later of ninety
(90) calendar days after the Court's entry of the Order Stipulating to
Modification of the Order to Hold Separate Assets in this matter, or
thirty (30) calendar days after all Regulatory Approvals have been
received, to divest the Divestiture Assets in a manner consistent with
this Final Judgment to an Acquirer acceptable to the United States, in
its sole discretion. The United States, in its sole discretion, may
agree to one or more extensions of this time period not to exceed one
hundred eighty (180) calendar days in total, and will notify the Court
of any extensions. Defendants agree to use their best efforts to divest
the Divestiture Assets as expeditiously as possible.
[[Page 31218]]
B. In accomplishing the divestiture ordered by this Final Judgment,
Defendants promptly must make known, by usual and customary means, the
availability of the Divestiture Assets. Defendants must inform any
person making an inquiry regarding a possible purchase of the
Divestiture Assets that the Divestiture Assets are being divested in
accordance with this Final Judgment and must provide that person with a
copy of this Final Judgment. Defendants must offer to furnish to all
prospective Acquirers, subject to customary confidentiality assurances,
all information and documents relating to the Divestiture Assets
customarily provided in a due-diligence process; provided, however,
that Defendants need not provide information or documents subject to
the attorney-client privilege or work-product doctrine. Defendants must
make this information available to the United States at the same time
that the information is made available to any other person.
C. Defendants must cooperate with and assist Acquirer in
identifying and hiring all Relevant Employees, including:
1. Within ten (10) business days following receipt of a request by
the Acquirer of the Divestiture Assets or the United States, Defendants
must identify all Relevant Employees to Acquirer and the United States,
including by providing organization charts covering all Relevant
Employees.
2. Within ten (10) business days following receipt of a request by
Acquirer or the United States, Defendants must provide to Acquirer and
the United States the following additional information related to
Relevant Employees: Name; job title; current salary and benefits
including most recent bonus paid, aggregate annual compensation,
current target or guaranteed bonus, if any, and any other payments due
to or promises made to the employee; descriptions of reporting
relationships, past experience, responsibilities, and training and
educational histories; lists of all certifications; and all job
performance evaluations. If Defendants are barred by any applicable
laws from providing any of this information, within ten (10) business
days following receipt of the request, Defendants must provide the
requested information to the full extent permitted by law and also must
provide a written explanation of Defendants' inability to provide the
remaining information.
3. At the request of Acquirer, Defendants must promptly make
Relevant Employees available for private interviews with Acquirer
during normal business hours at a mutually agreeable location.
4. Defendants must not interfere with any efforts by Acquirer to
employ any Relevant Employees. Interference includes but is not limited
to offering to increase the salary or improve the benefits of Relevant
Employees unless the offer is part of a company-wide increase in salary
or benefits that was announced prior to July 26, 2018, or has been
approved by the United States, in its sole discretion. Defendants'
obligations under this paragraph will expire six (6) months after the
divestiture of the Divestiture Assets pursuant to this Final Judgment.
5. For Relevant Employees who elect employment with Acquirer within
six (6) months of the date on which the Divestiture Assets are divested
to Acquirer, Defendants must waive all non-compete and non-disclosure
agreements, vest all unvested pension and other equity rights, and
provide all benefits that those Relevant Employees otherwise would have
been provided had the Relevant Employees continued employment with
Defendants, including but not limited to any retention bonuses or
payments. Defendants may maintain reasonable restrictions on disclosure
by Relevant Employees of Defendants' proprietary non-public information
that is unrelated to the Divestiture Assets and not otherwise required
to be disclosed by this Final Judgment.
6. For a period of twelve (12) months from the date on which the
Divestiture Assets are divested to Acquirer, Defendants may not solicit
to rehire Relevant Employees who were hired by Acquirer within six (6)
months of the date on which the Divestiture Assets are divested to
Acquirer unless (a) an individual is terminated or laid off by Acquirer
or (b) Acquirer agrees in writing that Defendants may solicit to rehire
that individual. Nothing in this paragraph prohibits Defendants from
advertising employment openings using general solicitations or
advertisements and hiring individuals who respond to such solicitations
or advertisements.
D. Defendants must permit prospective Acquirers of the Divestiture
Assets to have reasonable access to make inspections of the physical
facilities and access to all environmental, zoning, and other permit
documents and information, and all financial, operational, or other
documents and information customarily provided as part of a due
diligence process.
E. Defendants must warrant to Acquirer that each asset to be
divested will be Operational and without material defect on the date of
sale.
F. Defendants must not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
G. Defendants must make best efforts to assign, subcontract, or
otherwise transfer all contracts related to the Divestiture Assets,
including all supply and sales contracts, to Acquirer. Defendants must
not interfere with any negotiations between Acquirer and a contracting
party.
H. At the option of Acquirer, and subject to approval by the United
States in its sole discretion, on or before the date on which the
Divestiture Assets are divested to Acquirer, Defendants must enter into
a contract to provide transition services for back office, human
resource, and information technology services and support for the
Divestiture Assets for a period of up to twelve (12) months on terms
and conditions reasonably related to market conditions for the
provision of the transition services. The United States, in its sole
discretion, may approve one or more extensions of this contract for
transition services, for a total of up to an additional six (6) months.
If Acquirer seeks an extension of the term of this contract for
transition services, Defendants must notify the United States in
writing at least three (3) months prior to the date the contract
expires. Acquirer may terminate a contract for transition services
without cost or penalty at any time upon commercially reasonable
notice. The employee(s) of Defendants tasked with providing these
transition services must not share any competitively sensitive
information of Acquirer with any other employee of Defendants.
I. Defendants must warrant to Acquirer that there are no material
defects in the environmental, zoning, or other permits pertaining to
the operation of the Divestiture Assets. Following the sale of the
Divestiture Assets, Defendants must not undertake, directly or
indirectly, any challenges to the environmental, zoning, or other
permits relating to the operation of the Divestiture Assets.
J. Unless the United States otherwise consents in writing, the
divestiture pursuant to Section IV or by a Divestiture Trustee
appointed pursuant to Section V of this Final Judgment must include the
entire Divestiture Assets, and must be accomplished in such a way as to
satisfy the United States, in its sole discretion, that the Divestiture
Assets can and will be used by Acquirer as part of a viable, ongoing
business of the development, manufacture, and sale of Aluminum ABS, and
will remedy the competitive harm alleged in the
[[Page 31219]]
Complaint. The divestiture, whether pursuant to Section IV or Section V
of this Final Judgment,
(1) must be made to an Acquirer that, in the United States' sole
judgment, has the intent and capability (including the necessary
managerial, operational, technical, and financial capability) of
competing effectively in the business of the design, manufacture, and
sale of Aluminum ABS; and
(2) must be accomplished so as to satisfy the United States, in its
sole discretion, that none of the terms of any agreement between an
Acquirer and Defendants give Defendants the ability unreasonably to
raise Acquirer's costs, to lower Acquirer's efficiency, or otherwise to
interfere in the ability of Acquirer to compete effectively.
K. If any term of an agreement between Defendants and Acquirer to
effectuate the divestiture required by this Final Judgment varies from
a term of this Final Judgment then, to the extent that Defendants
cannot fully comply with both, this Final Judgment determines
Defendants' obligations.
V. Appointment of Divestiture Trustee
A. If Defendants have not divested the Divestiture Assets within
the period specified in Paragraph IV(A), Defendants must immediately
notify the United States of that fact in writing. Upon application of
the United States, the Court will appoint a Divestiture Trustee
selected by the United States and approved by the Court to effect the
divestiture of the Divestiture Assets.
B. After the appointment of a Divestiture Trustee by the Court,
only the Divestiture Trustee will have the right to sell the
Divestiture Assets. The Divestiture Trustee will have the power and
authority to accomplish the divestiture to an Acquirer acceptable to
the United States, in its sole discretion, at a price and on terms as
are then obtainable upon reasonable effort by the Divestiture Trustee,
subject to the provisions of Sections IV, V, and VI of this Final
Judgment, and will have other powers as the Court deems appropriate.
Subject to Paragraph V(D) of this Final Judgment, the Divestiture
Trustee may hire at the cost and expense of Defendants any agents or
consultants, including, but not limited to, investment bankers,
attorneys, and accountants, who will be solely accountable to the
Divestiture Trustee, reasonably necessary in the Divestiture Trustee's
judgment to assist in the divestiture. Any such agents or consultants
will serve on such terms and conditions as the United States approves,
including confidentiality requirements and conflict of interest
certifications.
C. Defendants may not object to a sale by the Divestiture Trustee
on any ground other than malfeasance by the Divestiture Trustee.
Objections by Defendants must be conveyed in writing to the United
States and the Divestiture Trustee within ten (10) calendar days after
the Divestiture Trustee has provided the notice required under Section
VI.
D. The Divestiture Trustee will serve at the cost and expense of
Defendants pursuant to a written agreement, on such terms and
conditions as the United States approves, including confidentiality
requirements and conflict of interest certifications. The Divestiture
Trustee will account for all monies derived from the sale of the assets
sold by the Divestiture Trustee and all costs and expenses so incurred.
After approval by the Court of the Divestiture Trustee's accounting,
including fees for any of its services yet unpaid and those of any
agents and consultants retained by the Divestiture Trustee, all
remaining money will be paid to Defendants and the trust will then be
terminated. The compensation of the Divestiture Trustee and any agents
or consultants retained by the Divestiture Trustee must be reasonable
in light of the value of the Divestiture Assets and based on a fee
arrangement that provides the Divestiture Trustee with incentives based
on the price and terms of the divestiture and the speed with which it
is accomplished, but the timeliness of the divestiture is paramount. If
the Divestiture Trustee and Defendants are unable to reach agreement on
the Divestiture Trustee's or any agents' or consultants' compensation
or other terms and conditions of engagement within fourteen (14)
calendar days of the appointment of the Divestiture Trustee, the United
States may, in its sole discretion, take appropriate action, including
making a recommendation to the Court. Within three (3) business days of
hiring any agent or consultant, the Divestiture Trustee must provide
written notice of the hiring and rate of compensation to Defendants and
the United States.
E. Defendants must use their best efforts to assist the Divestiture
Trustee in accomplishing the required divestiture. The Divestiture
Trustee and any agents or consultants retained by the Divestiture
Trustee must have full and complete access to the personnel, books,
records, and facilities of the business to be divested, and Defendants
must provide or develop financial and other information relevant to
such business as the Divestiture Trustee may reasonably request,
subject to reasonable protection for trade secrets; other confidential
research, development, or commercial information; or any applicable
privileges. Defendants may not take any action to interfere with or
impede the Divestiture Trustee's accomplishment of the divestiture.
F. After appointment, the Divestiture Trustee will file monthly
reports with the United States setting forth the Divestiture Trustee's
efforts to accomplish the divestiture ordered by this Final Judgment.
Reports must include the name, address, and telephone number of each
person who, during the preceding month, made an offer to acquire,
expressed an interest in acquiring, entered into negotiations to
acquire, or was contacted or made an inquiry about acquiring, any
interest in the Divestiture Assets and will describe in detail each
contact with any such person. The Divestiture Trustee will maintain
full records of all efforts made to divest the Divestiture Assets.
G. If the Divestiture Trustee has not accomplished the divestiture
ordered by this Final Judgment within six (6) months of appointment,
the Divestiture Trustee must promptly file with the Court a report
setting forth: (1) The Divestiture Trustee's efforts to accomplish the
required divestiture; (2) the reasons, in the Divestiture Trustee's
judgment, why the required divestiture has not been accomplished; and
(3) the Divestiture Trustee's recommendations. To the extent such
report contains information that the Divestiture Trustee deems
confidential, such report will not be filed in the public docket of the
Court. The Divestiture Trustee will at the same time furnish such
report to the United States, which will have the right to make
additional recommendations to the Court consistent with the purpose of
the trust. The Court thereafter may enter such orders as it deems
appropriate to carry out the purpose of this Final Judgment, which, if
necessary, may include extending the trust and the term of the
Divestiture Trustee's appointment by a period requested by the United
States.
H. If the United States determines that the Divestiture Trustee is
not acting diligently or in a reasonably cost-effective manner, the
United States may recommend that the Court appoint a substitute
Divestiture Trustee.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following execution of a definitive
divestiture agreement, Defendants or the Divestiture Trustee, whichever
is then responsible for effecting the divestiture
[[Page 31220]]
required herein, must notify the United States of a proposed
divestiture required by this Final Judgment. If the Divestiture Trustee
is responsible for effecting the divestiture, the Divestiture Trustee
also must notify Defendants. The notice must set forth the details of
the proposed divestiture and list the name, address, and telephone
number of each person not previously identified who offered or
expressed an interest in or desire to acquire any ownership interest in
the Divestiture Assets, together with full details of the same.
B. Within fifteen (15) calendar days of receipt by the United
States of this notice, the United States may request from Defendants,
the proposed Acquirer, other third parties, or the Divestiture Trustee,
if applicable, additional information concerning the proposed
divestiture, the proposed Acquirer and other prospective Acquirer.
Defendants and the Divestiture Trustee must furnish the additional
information requested within fifteen (15) calendar days of the receipt
of the request, unless the United States provides written agreement to
a different period.
C. Within forty-five (45) calendar days after receipt of the notice
or within twenty (20) calendar days after the United States has been
provided the additional information requested from Defendants, the
proposed Acquirer, other third parties, and the Divestiture Trustee,
whichever is later, the United States must provide written notice to
Defendants and the Divestiture Trustee, if there is one, stating
whether or not the United States, in its sole discretion, objects to
the proposed Acquirer or any other aspect of the proposed divestiture.
If the United States provides written notice that it does not object,
the divestiture may be consummated, subject only to Defendants' limited
right to object to the sale under Paragraph V(C) of this Final
Judgment. Absent written notice that the United States does not object
or upon objection by the United States, a divestiture may not be
consummated. Upon objection by Defendants pursuant to Paragraph V(C), a
divestiture by the Divestiture Trustee may not be consummated unless
approved by the Court.
D. No information or documents obtained pursuant to Section VI may
be divulged by the United States to any person other than an authorized
representative of the executive branch of the United States, except in
the course of legal proceedings to which the United States is a party
(including grand-jury proceedings), for the purpose of evaluating a
proposed Acquirer or securing compliance with this Final Judgment, or
as otherwise required by law.
E. In the event of a request by a third party for disclosure of
information under the Freedom of Information Act, 5 U.S.C. 552, the
Antitrust Division will act in accordance with that statute, and the
Department of Justice regulations at 28 CFR part 16, including the
provision on confidential commercial information, at 28 CFR 16.7.
Persons submitting information to the Antitrust Division should
designate the confidential commercial information portions of all
applicable documents and information under 28 CFR 16.7. Designations of
confidentiality expire ten years after submission, ``unless the
submitter requests and provides justification for a longer designation
period.'' See 28 CFR 16.7(b).
F. If at the time a person furnishes information or documents to
the United States pursuant to Section VI, that person represents and
identifies in writing information or documents for which a claim of
protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules
of Civil Procedure, and marks each pertinent page of such material,
``Subject to claim of protection under Rule 26(c)(1)(G) of the Federal
Rules of Civil Procedure,'' the United States must give that person ten
calendar days' notice before divulging the material in any legal
proceeding (other than a grand-jury proceeding).
VII. Financing
Defendants may not finance all or any part of Acquirer's purchase
of all or part of the Divestiture Assets made pursuant to this Final
Judgment.
VIII. Hold Separate
Until the divestiture required by this Final Judgment has been
accomplished, Defendants must take all steps necessary to comply with
the Hold Separate Stipulation and Order entered by the Court on January
9, 2020, or any superseding Order. Defendants will take no action that
would jeopardize the divestiture ordered by the Court.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of the Order
Stipulating to Modification of the Order to Hold Separate Assets and
proposed Final Judgment in this matter, and every thirty (30) calendar
days thereafter until the divestiture required by this Final Judgment
has been completed, Defendants must deliver to the United States an
affidavit, signed by Defendants' Vice President, Strategy and
Sustainability and General Counsel, describing the fact and manner of
Defendants' compliance with this Final Judgment. Each affidavit must
include the name, address, and telephone number of each person who,
during the preceding thirty (30) calendar days, made an offer to
acquire, expressed an interest in acquiring, entered into negotiations
to acquire, or was contacted or made an inquiry about acquiring, an
interest in the Divestiture Assets, and must describe in detail each
contact with such persons during that period. Each affidavit also must
include a description of the efforts Defendants have taken to solicit
buyers for and complete the sale of the Divestiture Assets, and to
provide required information to prospective Acquirers. Each affidavit
also must include a description of any limitations placed by Defendants
on information provided to prospective Acquirers. If the information
set forth in the affidavit is true and complete, objection by the
United States to information provided by Defendants to prospective
Acquirers must be made within fourteen (14) calendar days of receipt of
the affidavit.
B. Within twenty (20) calendar days of the filing of the Order
Stipulating to Modification of the Order to Hold Separate Assets and
proposed Final Judgment in this matter, Defendants must deliver to the
United States an affidavit that describes in reasonable detail all
actions Defendants have taken and all steps Defendants have implemented
on an ongoing basis to comply with Section VIII of this Final Judgment.
Defendants must deliver to the United States an affidavit describing
any changes to the efforts and actions outlined in Defendants' earlier
affidavits filed pursuant to Section IX within fifteen (15) calendar
days after the change is implemented.
C. Defendants must keep all records of all efforts made to preserve
and divest the Divestiture Assets until one year after the divestiture
has been completed.
X. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of related orders such as a Hold Separate
Stipulation and Order, or of determining whether this Final Judgment
should be modified or vacated, and subject to any legally-recognized
privilege, from time to time authorized representatives of the United
States, including agents retained by the United States, must, upon
written request of an authorized representative of the Assistant
Attorney General in charge of the Antitrust Division, and reasonable
notice to Defendants, be permitted:
[[Page 31221]]
(1) Access during Defendants' office hours to inspect and copy, or
at the option of the United States, to require Defendants to provide
electronic copies of all books, ledgers, accounts, records, data, and
documents in the possession, custody, or control of Defendants,
relating to any matters contained in this Final Judgment; and
(2) to interview, either informally or on the record, Defendants'
officers, employees, or agents, who may have their individual counsel
present, regarding such matters. The interviews must be subject to the
reasonable convenience of the interviewee and without restraint or
interference by Defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
Defendants must submit written reports or respond to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment.
C. No information or documents obtained pursuant to Section X may
be divulged by the United States to any person other than an authorized
representative of the executive branch of the United States, except in
the course of legal proceedings to which the United States is a party
(including grand jury proceedings), for the purpose of securing
compliance with this Final Judgment, or as otherwise required by law.
D. In the event of a request by a third party for disclosure of
information under the Freedom of Information Act, 5 U.S.C. 552, the
Antitrust Division will act in accordance with that statute, and the
Department of Justice regulations at 28 CFR part 16, including the
provision on confidential commercial information, at 28 CFR 16.7.
Defendants submitting information to the Antitrust Division should
designate the confidential commercial information portions of all
applicable documents and information under 28 CFR 16.7. Designations of
confidentiality expire ten years after submission, ``unless the
submitter requests and provides justification for a longer designation
period.'' See 28 CFR 16.7(b).
E. If at the time that Defendants furnish information or documents
to the United States pursuant to Section X, Defendants represent and
identify in writing information or documents for which a claim of
protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules
of Civil Procedure, and Defendants mark each pertinent page of such
material, ``Subject to claim of protection under Rule 26(c)(1)(G) of
the Federal Rules of Civil Procedure,'' the United States must give
Defendants ten (10) calendar days' notice before divulging the material
in any legal proceeding (other than a grand jury proceeding).
XI. Limitations on Reacquisition
Defendants may not reacquire any part of or any interest in the
Divestiture Assets during the term of this Final Judgment.
XII. Retention of Jurisdiction
The Court retains jurisdiction to enable any party to this Final
Judgment to apply to the Court at any time for further orders and
directions as may be necessary or appropriate to carry out or construe
this Final Judgment, to modify any of its provisions, to enforce
compliance, and to punish violations of its provisions.
XIII. Enforcement of Final Judgment
A. The United States retains and reserves all rights to enforce the
provisions of this Final Judgment, including the right to seek an order
of contempt from the Court. Defendants agree that in a civil contempt
action, a motion to show cause, or a similar action brought by the
United States regarding an alleged violation of this Final Judgment,
the United States may establish a violation of this Final Judgment and
the appropriateness of a remedy therefor by a preponderance of the
evidence, and Defendants waive any argument that a different standard
of proof should apply.
B. This Final Judgment should be interpreted to give full effect to
the procompetitive purposes of the antitrust laws and to restore the
competition the United States alleged was harmed by the challenged
conduct. Defendants agree that they may be held in contempt of, and
that the Court may enforce, any provision of this Final Judgment that,
as interpreted by the Court in light of these procompetitive principles
and applying ordinary tools of interpretation, is stated specifically
and in reasonable detail, whether or not it is clear and unambiguous on
its face. In any such interpretation, the terms of this Final Judgment
should not be construed against either party as the drafter.
C. In an enforcement proceeding in which the Court finds that
Defendants have violated this Final Judgment, the United States may
apply to the Court for a one-time extension of this Final Judgment,
together with other relief that may be appropriate. In connection with
a successful effort by the United States to enforce this Final Judgment
against a Defendant, whether litigated or resolved before litigation,
that Defendant agrees to reimburse the United States for the fees and
expenses of its attorneys, as well as all other costs, including
experts' fees, incurred in connection with that enforcement effort,
including in the investigation of the potential violation.
D. For a period of four (4) years following the expiration of this
Final Judgment, if the United States has evidence that a Defendant
violated this Final Judgment before it expired, the United States may
file an action against that Defendant in this Court requesting that the
Court order: (1) Defendant to comply with the terms of this Final
Judgment for an additional term of at least four years following the
filing of the enforcement action; (2) all appropriate contempt
remedies; (3) additional relief needed to ensure the Defendant complies
with the terms of this Final Judgment; and (4) fees or expenses as
called for by Section X.
XIV. Expiration of Final Judgment
Unless the Court grants an extension, this Final Judgment will
expire ten (10) years from the date of its entry, except that after
five (5) years from the date of its entry, this Final Judgment may be
terminated upon notice by the United States to the Court and Defendants
that the divestiture has been completed and the continuation of this
Final Judgment no longer is necessary or in the public interest.
XV. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including by making available to the
public copies of this Final Judgment, the Competitive Impact Statement,
comments thereon, and the United States' responses to comments. Based
upon the record before the Court, which includes the Competitive Impact
Statement and any comments and responses to comments filed with the
Court, entry of this Final Judgment is in the public interest.
Date:------------------------------------------------------------------
[Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16]
-----------------------------------------------------------------------
United States District Judge
United States District Court for the Northern District of Ohio
United States of America, Plaintiff, v. Novelis Inc. and Aleris
Corporation, Defendants.
Case No.: 1:19-cv-02033-CAB
[[Page 31222]]
Competitive Impact Statement
The United States of America, under Section 2(b) of the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16(b)-(h) (the ``APPA'' or
``Tunney Act''), files this Competitive Impact Statement relating to
the proposed Final Judgment submitted for entry in this civil antitrust
proceeding.
I. Nature and Purpose of the Proceeding
On July 26, 2018, Defendant Novelis Inc. (``Novelis'') agreed to
acquire Defendant Aleris Corporation (``Aleris'') for approximately
$2.6 billion, which would have made the combined company the largest
supplier of aluminum automotive body sheet (``ABS'') in the United
States. The United States filed a civil antitrust Complaint on
September 4, 2019, seeking to enjoin the proposed acquisition. The
Complaint alleges that the likely effect of this acquisition would be
to substantially lessen competition for the development, manufacture,
and sale of aluminum ABS in North America, in violation of Section 7 of
the Clayton Act, 15 U.S.C. 18.
Before the United States initiated this lawsuit, the United States
and Defendants agreed that the lawfulness of the transaction under
Section 7 of the Clayton Act (15 U.S.C. 18) hinged on whether aluminum
ABS constitutes a relevant product market under the antitrust laws. As
set forth in more detail in Plaintiff United States' Explanation of
Plan to Refer this Matter to Arbitration (Dkt. 11), the United States,
using its authority under the Administrative Dispute Resolution Act of
1996 (``ADRA''), 5 U.S.C. 571 et seq., reached an agreement with
Defendants to refer this matter to binding arbitration following fact
discovery should the parties be unable to reach a resolution that
resolved the United States' competitive concerns with the Defendants'
transaction within a certain period of time. Per the arbitration
agreement, binding arbitration would resolve a single dispositive
issue: whether aluminum ABS constitutes a relevant product market under
the antitrust laws. Further, the United States and Defendants agreed
that if the United States prevailed in arbitration, the United States
would then file a proposed Final Judgment requiring Defendants to
divest Aleris's Lewisport Rolling Mill in Lewisport, Kentucky and
related assets, which constitute Aleris's entire aluminum ABS
operations in North America. The arbitration agreement recognized that
the Court would retain jurisdiction to determine whether entry of the
proposed Final Judgment is in the public interest. See 15 U.S.C. 16(b)-
(h). Had Defendants prevailed in arbitration, the arbitration agreement
would have required the United States to seek to voluntarily dismiss
the Complaint.
To preserve the Divestiture Assets pending the outcome of the
arbitration, the Court entered a Hold Separate Stipulation and Order on
January 9, 2020, requiring Novelis to hold separate, preserve, and
maintain the Divestiture Assets as set forth in the proposed Final
Judgment. (Dkt. 41). Under the terms of that Order, Novelis took
certain steps to ensure that the Divestiture Assets were preserved and
operated in such a way as to ensure that the Divestiture Assets
continue to be ongoing, economically viable business units.
On January 21, 2020, following the completion of fact discovery,
the Court entered an Order staying proceedings and referring the matter
to binding arbitration pursuant to the ADRA, 5 U.S.C. 571, et seq.
(Dkt. 44). On March 9, 2020, the United States prevailed in arbitration
with the arbitrator determining that aluminum ABS is a relevant product
market under the antitrust laws. See Arbitration Decision, March 9,
2020 (public version) (available at https://www.justice.gov/atr/case-document/file/1257031/download).
The United States has therefore filed a proposed Modified Hold
Separate Stipulation and Order (``Modified Stipulation and Order'') and
a proposed Final Judgment, which are designed to address the
anticompetitive effects of the acquisition. Under the proposed Final
Judgment, which is explained more fully below, Defendants are required
to divest the Divestiture Assets, which include the Lewisport Rolling
Mill in Lewisport, Kentucky and Aleris's Innovation Center in Madison
Heights, Michigan.
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment will terminate this action, except that the
Court will retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. Description of Events Giving Rise to the Alleged Violation
A. The Defendants and the Proposed Transaction
Novelis is a global manufacturer of semi-finished aluminum products
with global revenues of approximately $12.3 billion for the fiscal year
ending March 31, 2019. The company is incorporated in Canada and
headquartered in Atlanta, Georgia. It operates 23 production facilities
in North America, South America, Europe, and Asia. Eight facilities are
located in North America, including two (Oswego, New York, and
Kingston, Ontario) that currently produce aluminum ABS. Another
aluminum ABS finishing line is being commissioned in Guthrie, Kentucky.
Novelis supplies flat-rolled aluminum products in three segments:
beverage can, specialty, and automotive. Novelis is a wholly-owned
subsidiary of Hindalco Industries, Ltd., an Indian company
headquartered in Mumbai, India.
Aleris also is a global manufacturer of semi-finished aluminum
products. It generated global revenues of approximately $3.4 billion in
2018. Aleris is a Delaware corporation, headquartered in Cleveland,
Ohio, and operates 13 production facilities in North America, South
America, Europe, and Asia. Aleris supplies flat-rolled aluminum
products to the automotive, aerospace, and building and construction
industries, among others. Aleris has been a producer of aluminum ABS in
Europe since 2002 and exported small volumes of aluminum ABS to North
America from its European facility. In 2017, following significant
financial and capital investments in its Lewisport, Kentucky facility,
Aleris began developing, manufacturing, and selling aluminum ABS from
its Lewisport facility to meet growing North American customer demand.
Lewisport is a fully integrated manufacturing facility that includes a
cast house, as well as cold and hot mill operations. In addition to its
hot mill used to manufacture heat-treated aluminum ABS, the Lewisport
facility's cold mill continues to produce non-heat-treated aluminum
alloys for ``specialty'' products used in the construction industry.
The entire Lewisport facility will be divested.
Novelis and Aleris entered into a definitive Agreement and Plan of
Merger, dated July 26, 2018, for Novelis to acquire 100 percent of the
voting securities of Aleris for an estimated enterprise value of $2.6
billion. As permitted under the terms of the Arbitration Agreement
(Dkt. 11-1 at ] 5) and the Hold Separate Stipulation and Order entered
by the Court on January 9, 2020 (Dkt. 41), Defendants consummated their
transaction on April 14, 2020.
B. Industry Background
The North American automotive industry is a vital sector of the
[[Page 31223]]
American economy. The industry represents the single largest
manufacturing sector in the United States, accounting for about three
percent of gross domestic product. For decades, automakers used flat-
rolled steel almost exclusively in the construction of automotive
bodies. Growing consumer demand for larger vehicles loaded with safety
and performance features and increasing fuel economy regulations have
led automakers to pursue light-weight designs.
Automakers have turned to aluminum ABS, which is 30 to 40 percent
lighter than traditional steel, as the material of choice for light-
weighting the next generation of vehicles. Aluminum is more expensive
than steel, but has distinct and superior physical properties for
automotive use. Vehicles made with aluminum are lighter and more fuel-
efficient. Light-weight vehicles also have significant performance
advantages including faster acceleration, better handling, shorter
braking distance, and increased payload and towing capabilities. Light-
weighting designs are also critical for the next generation of electric
vehicles. Aluminum ABS can reduce electric vehicle weight
substantially, allowing an electric vehicle to run farther on a single
charge.
C. Relevant Product Market
As alleged in the Complaint, aluminum ABS is different from other
materials used in automotive body sheet applications. Steel and other
materials are not practical substitutes for aluminum ABS in many
applications. The Complaint alleges that in the event of a small but
significant non-transitory price increase, automakers would not
substitute away from aluminum ABS in a sufficient volume to make the
price increase unprofitable. Therefore, the Complaint alleges that the
development, manufacture, and sale of aluminum ABS is a relevant
product market and line of commerce within the meaning of Section 7 of
the Clayton Act, 15 U.S.C. 18.
Following the completion of fact discovery, the Court referred the
matter to arbitration to adjudicate the issue of relevant product
market. On March 9, 2020, the arbitrator issued a decision in which he
determined that aluminum ABS is a relevant product market under the
antitrust laws. See Arbitration Decision, March 9, 2020 (public
version) (available at https://www.justice.gov/atr/case-document/file/1257031/download). As the arbitrator explained, an automaker can make a
car part out of aluminum, steel, or other material, but there are
substantial differences in the physical properties of aluminum (as
compared to steel), such that an automotive engineer designing a car
with particular weight, performance, safety specifications, and target
retail price is unlikely to view steel and other materials as full
functional substitutes for aluminum for the various car parts being
designed. Nor is any other material likely to significantly impact the
pricing of aluminum ABS for most car parts, or vice-versa. The
development, manufacture, and sale of aluminum ABS is a distinct line
of commerce and constitutes a relevant product market.
D. Geographic Market
The Complaint alleges that the relevant geographic market in which
to assess the competitive harm from the proposed transaction is North
America. When a supplier can price differently based on customer
location, the Horizontal Merger Guidelines provide that the relevant
geographic market may be defined based on the locations of targeted
customers. Such pricing is possible in aluminum ABS as evidenced by the
different prices charged by suppliers across geographic regions.
Because of transportation costs, import tariffs and duties, the limited
shelf life of most types of aluminum ABS, and supply chain risks,
customers of aluminum ABS in North America are unlikely to be able to
defeat a price increase through arbitrage from outside North America.
Pricing differences among suppliers in the various geographic regions
in which aluminum ABS is sold has persisted over many years, supporting
the conclusion that North America is a relevant geographic market.
The Complaint alleges that, in the event of a small but significant
non-transitory increase in the price of the aluminum ABS, customers in
North America would not procure these products from suppliers located
outside North America in a sufficient volume to make such a price
increase unprofitable. Accordingly, the Complaint alleges that North
America is a relevant geographic market within the meaning of Section 7
of the Clayton Act.
E. Anticompetitive Effects
The Complaint alleges that Novelis, Aleris, and two other firms are
the only producers of aluminum ABS located in North America. Through
this acquisition, however, Novelis would gain control of Aleris's
uncommitted capacity, eliminating a rival Novelis described as ``poised
for transformational growth.'' Aleris and Novelis are the only two
firms expected to have sizable uncommitted North American capacity to
produce aluminum ABS over the next few years. This consolidation would
concentrate more than half of the domestic aluminum ABS production and
sales, 60 percent of projected total domestic capacity, and the
majority of uncommitted domestic capacity under the control of one
firm.
The Complaint alleges that, post-transaction, no other firms would
have the incentive and ability to constrain Novelis. The transaction
would result in higher prices, as well as reduced innovation and
technical support for automakers that rely on this critical input.
According to the Complaint, the proposed acquisition, therefore, would
likely substantially lessen competition in the development,
manufacture, and sale of aluminum ABS in North America in violation of
Section 7 of the Clayton Act.
F. Absence of Countervailing Factors: Entry
The Complaint alleges that entry or expansion by existing
competitors is unlikely to prevent or remedy the transaction's likely
anticompetitive effects in the market for the development, manufacture,
and sale of aluminum ABS in North America. The North American aluminum
ABS market has significant barriers to entry. Barriers include the high
cost and long time-frame needed to build production facilities. For
example, to compete in the automotive market, aluminum companies
generally must build a specialized ``heat-treat'' finishing line to
make aluminum sheet for automotive applications. These heat-treat
finishing lines take years to build and cost hundreds of millions of
dollars to construct, and require sophisticated technological know-how
to operate. In addition to heat-treat finishing lines, aluminum ABS
suppliers need aluminum coils that are wide enough for automotive
applications. These aluminum coils are produced at hot mills, and there
are only a few hot mills in North America. Building a new hot mill
takes several years and requires a significant capital investment of
well over a billion dollars. Meanwhile, expanding or re-outfitting an
existing facility to have auto-capable hot mill capacity could also
require several hundred million dollars. Moreover, because of supply
chain risks and other factors, the Complaint alleges that customers of
the merged firm (i.e., North American automakers) are unlikely to turn
to foreign suppliers of aluminum
[[Page 31224]]
ABS in sufficient volume to mitigate the anticompetitive effects of the
merger.
III. Explanation of the Proposed Final Judgment
The divestiture required by the proposed Final Judgment addresses
the United States' concerns with the merger and will fully remedy the
loss of competition threatened by this merger by requiring the merged
firm to divest Aleris's North American aluminum ABS operations in their
entirety. In doing so, the divestiture will establish an independent
and economically viable competitor with the scale and scope to compete
effectively and preserve competition in the market for the development,
manufacture, and sale of aluminum ABS in North America.
Paragraph IV(A) of the proposed Final Judgment requires Defendants
to divest the Divestiture Assets within the later of ninety (90)
calendar days of the filing of the Modified Stipulation and Order, or
thirty (30) days after the Regulatory Approvals have been received, to
an acquirer acceptable to the United States, in its sole discretion.
Paragraph IV(A) provides that the United States, in its sole
discretion, may grant one or more extensions of the divestiture period,
up to a total of 180 days. The proposed Final Judgment includes the
possibility of an additional 180 days to accomplish the divestiture due
to the current business climate and the potential impact of the COVID-
19 pandemic on Defendants' ability to accomplish the divestiture within
the specified period.
The divestiture includes two facilities (one production facility in
Lewisport, Kentucky (``the Lewisport Rolling Mill'') and one technical
service center located in Madison Heights, Michigan (``the Innovation
Center'')); and all other tangible and intangible assets related to or
used in connection with the Lewisport Rolling Mill. Paragraph IV(J) of
the proposed Final Judgment requires that the Divestiture Assets must
be divested in such a way as to satisfy the United States, in its sole
discretion, that the Divestiture Assets can and will be operated by the
purchaser as part of a viable, ongoing business that can compete
effectively in the development, manufacture, and sale of aluminum ABS.
The proposed Final Judgment contains provisions to facilitate the
immediate use of the Divestiture Assets by the acquirer. Paragraph
IV(H) of the proposed Final Judgment requires Defendants, at the
acquirer's option, to enter into a transition services agreement on or
before the date on which the Divestiture Assets are divested to the
acquirer for service and support relating to the Divestiture Assets for
a period of up to twelve (12) months. That paragraph further provides
that the United States, in its sole discretion, may approve one or more
extensions of this transition services agreement for up to a total of
an additional six (6) months. Paragraph IV(H) also provides that
employees of Defendants tasked with providing any transition services
must not share any competitively sensitive information of the acquirer
with any other employee of Defendants.
The proposed Final Judgment also contains provisions intended to
facilitate the acquirer's efforts to hire employees engaged in the
Divestiture Assets. Paragraph IV(C) of the proposed Final Judgment
requires Defendants to provide the acquirer with organization charts
and information relating to these employees and to make them available
for interviews, and it provides that Defendants must not interfere with
any negotiations by the acquirer to hire them. In addition, Paragraph
IV(C)(5) provides that, for employees who elect employment with the
acquirer, Defendants must waive all non-compete and non-disclosure
agreements, vest all unvested pension and other equity rights, and
provide all benefits that the employees would generally be provided if
transferred to a buyer of an ongoing business. This paragraph further
provides that, for a period of twelve (12) months from the filing of
the Complaint, Defendants may not solicit to hire or hire any employee
engaged in the Divestiture Assets who was hired by the acquirer, unless
that individual is terminated or laid off by the acquirer or the
acquirer agrees in writing that Defendants may solicit or hire that
individual.
If Defendants do not accomplish the divestiture within the period
prescribed in the proposed Final Judgment, Section V of the proposed
Final Judgment provides that the Court will appoint a divestiture
trustee selected by the United States to effect the divestiture. If a
divestiture trustee is appointed, the proposed Final Judgment provides
that Defendants will pay all costs and expenses of the trustee. The
divestiture trustee's commission will be structured so as to provide an
incentive for the trustee based on the price obtained and the speed
with which the divestiture is accomplished. After the divestiture
trustee's appointment becomes effective, the trustee will provide
periodic reports to the United States setting forth his or her efforts
to accomplish the divestiture. At the end of six (6) months, if the
divestiture has not been accomplished, the divestiture trustee and the
United States will make recommendations to the Court, which will enter
such orders as appropriate, in order to carry out the purpose of the
trust, including by extending the trust or the term of the divestiture
trustee's appointment.
The proposed Final Judgment also contains provisions designed to
promote compliance and make the enforcement of the Final Judgment as
effective as possible. Paragraph XIV(A) provides that the United States
retains and reserves all rights to enforce the provisions of the Final
Judgment, including its rights to seek an order of contempt from the
Court. Under the terms of this paragraph, Defendants have agreed that
in any civil contempt action, any motion to show cause, or any similar
action brought by the United States regarding an alleged violation of
the Final Judgment, the United States may establish the violation and
the appropriateness of any remedy by a preponderance of the evidence
and that Defendants have waived any argument that a different standard
of proof should apply. This provision aligns the standard for
compliance obligations with the standard of proof that applies to the
underlying offense that the compliance commitments address.
Paragraph XIV(B) provides additional clarification regarding the
interpretation of the provisions of the proposed Final Judgment. The
proposed Final Judgment is intended to restore competition the United
States alleged would otherwise be harmed by the transaction. Defendants
agree that they will abide by the proposed Final Judgment, and that
they may be held in contempt of this Court for failing to comply with
any provision of the proposed Final Judgment that is stated
specifically and in reasonable detail, as interpreted in light of this
procompetitive purpose.
Paragraph XIV(C) of the proposed Final Judgment provides that if
the Court finds in an enforcement proceeding that Defendants have
violated the Final Judgment, the United States may apply to the Court
for a one-time extension of the Final Judgment, together with such
other relief as may be appropriate. In addition, to compensate American
taxpayers for any costs associated with investigating and enforcing
violations of the Final Judgment, Paragraph XIV(C) provides that in any
successful effort by the United States to enforce the Final Judgment
against a Defendant, whether litigated or resolved before litigation,
that Defendant will reimburse the United States for attorneys' fees,
experts' fees, and other costs incurred in connection with any
enforcement effort,
[[Page 31225]]
including the investigation of the potential violation.
Paragraph XIV(D) states that the United States may file an action
against a Defendant for violating the Final Judgment for up to four (4)
years after the Final Judgment has expired or been terminated. This
provision is meant to address circumstances such as when evidence that
a violation of the Final Judgment occurred during the term of the Final
Judgment is not discovered until after the Final Judgment has expired
or been terminated or when there is not sufficient time for the United
States to complete an investigation of an alleged violation until after
the Final Judgment has expired or been terminated. This provision,
therefore, makes clear that, for four (4) years after the Final
Judgment has expired or been terminated, the United States may still
challenge a violation that occurred during the term of the Final
Judgment.
Finally, Section XV of the proposed Final Judgment provides that
the Final Judgment will expire ten (10) years from the date of its
entry, except that after five (5) years from the date of its entry, the
Final Judgment may be terminated upon notice by the United States to
the Court and Defendants that the divestiture has been completed and
that the continuation of the Final Judgment is no longer necessary or
in the public interest.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorneys' fees. Entry of the proposed Final Judgment neither impairs
nor assists the bringing of any private antitrust damage action. Under
the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 16(a), the
proposed Final Judgment has no prima facie effect in any subsequent
private lawsuit that may be brought against Defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the Court's
determination that the proposed Final Judgment is in the public
interest.
The APPA provides a period of at least 60 days preceding the
effective date of the proposed Final Judgment within which any person
may submit to the United States written comments regarding the proposed
Final Judgment. Any person who wishes to comment should do so within 60
days of the date of publication of this Competitive Impact Statement in
the Federal Register, or the last date of publication in a newspaper of
the summary of this Competitive Impact Statement, whichever is later.
All comments received during this period will be considered by the U.S.
Department of Justice, which remains free to withdraw its consent to
the proposed Final Judgment at any time before the Court's entry of the
Final Judgment. The comments and the response of the United States will
be filed with the Court. In addition, comments will be posted on the
U.S. Department of Justice, Antitrust Division's internet website and,
under certain circumstances, published in the Federal Register.
Written comments should be submitted to:
Katrina Rouse, Chief, Defense, Industrials, and Aerospace Section,
Antitrust Division, U.S. Department of Justice, 450 Fifth Street NW,
Suite 8700, Washington, DC 20530.
The proposed Final Judgment provides that the Court retains
jurisdiction over this action, and the parties may apply to the Court
for any order necessary or appropriate for the modification,
interpretation, or enforcement of the Final Judgment.
VI. Alternatives to the Proposed Final Judgment
As an alternative to the binding arbitration on the issue of
relevant product market definition and the proposed Final Judgment, the
United States considered a full trial on the merits against Defendants.
The United States could have sought preliminary and permanent
injunctions against Novelis's acquisition of Aleris. The United States
is satisfied, however, that the divestiture of assets described in the
proposed Final Judgment will remedy the anticompetitive effects alleged
in the Complaint, preserving competition for the development,
manufacture, and sale of aluminum ABS in North America. Thus, the
proposed Final Judgment achieves all or substantially all of the relief
the United States would have obtained through litigation, but avoids
the time, expense, and uncertainty of a full trial on the merits of the
Complaint.
VII. Standard of Review Under the APPA For the Proposed Final Judgment
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
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.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors,
the Court's inquiry is necessarily a limited one as 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); see also United States, et al. v.
Hillsdale Community Health Ctr., No. 15-12311 (JEL), 2015 WL 10013774
at *1 (E.D. Mich. Oct. 21, 2015) (``[T]he Court's review is limited to
deciding whether the proposed final judgment is in the ``public
interest;'' the Court is without authority to modify it.'') (citations
omitted); United States v. U.S. Airways Grp., Inc., 38 F. Supp. 3d 69,
75 (D.D.C. 2014) (explaining that the ``court's inquiry is limited'' in
Tunney Act settlements); United States v. InBev N.V./S.A., No. 08-1965
(JR), 2009 U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting
that a court's review of a consent judgment is limited and only
inquires ``into whether the government's determination that the
proposed remedies will cure the antitrust violations alleged in the
complaint was reasonable, and whether the mechanism to enforce the
final judgment are clear and manageable'').
[[Page 31226]]
As the U.S. Court of Appeals for the District of Columbia Circuit
has held, under the APPA a court considers, among other things, the
relationship between the remedy secured and the specific allegations in
the government's 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 by
the proposed Final Judgment, 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) (quotation marks omitted); 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 consent decree must be left,
in the first instance, to the discretion of the Attorney General.'' W.
Elec. Co., 993 F.2d at 1577 (quotation marks omitted). ``The court
should 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 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 (quotation marks
omitted); see also United States v. Deutsche Telekom AG, No. 19-2232
(TJK), 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. Id. at 1456. ``The Tunney Act was not intended to
create a disincentive to the use of the consent decree.'' Id.
The United States' predictions about the efficacy of the remedy are
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at
1461 (recognizing courts should give ``due respect to the Justice
Department's . . . view of the nature of its case''); United States v.
Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) (``In
evaluating objections to settlement agreements under the Tunney Act, a
court must be mindful that [t]he government need not prove that the
settlements will perfectly remedy the alleged antitrust harms[;] it
need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'') (internal
citations omitted); United States v. Republic Servs., Inc., 723 F.
Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review to
which the government's proposed remedy is accorded''); United States v.
Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A
district court must accord due respect to the government's prediction
as to the effect of proposed remedies, its perception of the market
structure, and its view of the nature of the case.''). 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 Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its complaint, and 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 U.S. Airways,
38 F. Supp. 3d at 75 (noting that the 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.''); United States v. Alcan Aluminum
Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) (approving the consent
decree even though the court would have imposed a greater remedy).
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 APPA, Congress made clear its intent
to preserve the practical benefits of using consent judgments proposed
by the United States in antitrust enforcement, Pubic 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 U.S. Airways, 38 F. Supp. 3d
at 76 (indicating that a 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.'' U.S. Airways, 38 F. Supp. 3d at 76 (citing Enova
Corp., 107 F. Supp. 2d at 17).
VIII. Determinative Documents
In formulating the proposed Final Judgment, the United States
considered the Arbitration Agreement (Exhibit A to Plaintiff United
States' Explanation of Plan to Refer this Matter to Arbitration (Dkt.
11-1)), and the Arbitration Decision (available at https://www.justice.gov/atr/case-document/file/1257031/download). Under the
Tunney Act, the United States must provide copies of documents it
considered determinative in formulating its remedy proposal. (See 15
U.S.C. 16(b)). The Arbitration Agreement is a determinative document
because it (a) establishes that the parties agree to file a proposed
Final Judgment requiring Defendants to divest Aleris's Lewisport
Rolling Mill in Lewisport, Kentucky should the United States prevail in
arbitration and (b) establishes that the arbitration addresses one
dispositive legal issue: Whether aluminum ABS is a relevant product
market. The Arbitration Decision is a determinative document because it
provides the reasoning for the arbitrator's decision, after hearing
evidence, that aluminum ABS is a relevant product market. There are no
other determinative materials or documents within the meaning of the
APPA that were considered by the United States in formulating the
proposed Final Judgment.
Dated: May 12, 2020
Respectfully submitted,
FOR PLAINTIFF UNITED STATES OF AMERICA
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Samer M. Musallam (Ohio #0070472)
Lowell R. Stern
United States Department of Justice, Antitrust Division, DIA
Section, 450 Fifth Street NW, Suite 8700, Washington, DC 20530,
Tel.: (202) 598-2990, Email:
[[Page 31227]]
[email protected], Email: [email protected].
Attorneys for Plaintiff United States
[FR Doc. 2020-11073 Filed 5-21-20; 8:45 am]
BILLING CODE 4410-11-P
