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Unscrambling the Eggs: FTC ALJ Orders Divestiture in a Two-Year-Old Merger.

Article Excerpt
On June 18, 2003, an FTC administrative judge issued an Initial Decision1 ordering divestiture in an acquisition that closed more than two years ago, in which Chicago Bridge & Iron Company (CB&I) acquired the Engineering Construction and the Water Divisions of Pitt-Des Moines, Inc. (PDM). This decision followed an administrative trial on a complaint unanimously approved by the FTC on October 26, 2001, eight months after the merger was consummated. The FTC did not accuse CB&I and PDM of failing to comply with the premerger notification requirements of the Hart-Scott Radino Act (HSR), but alleged only that the acquisition itself violated Clayton Act s. 7 and FTC Act s. 5.2 The HSR waiting period had expired before the FTC commenced its investigation, and the FTC did not issue second requests or seek an injunction during the initial HSR waiting period. The HSR Act does not provide an immunity from antitrust challenge to a merger after the fact, and before HSR's enactment in 1976 the government typically acted after the fact. Thus, compliance with the HSR Act provides no safe harbor against subsequent challenge, either legally or practically - at least not in the egregious case.

The Merger and the Challenge

CB&I is the largest U.S. supplier of field-erected low temperature or pressurized tanks, used to store liquefied natural gas, refrigerated liquid petroleum gas, liquid nitrogen, oxygen and argon, and thermal vacuum chambers (used to simulate vacuum and extreme temperatures of outer space). CB&I's closest competitor in these markets was PDM. Together, the two companies accounted for 100% of the market of field erected liquid nitrogen storage tanks and the vast majority of the market share of the other pressurized or refrigerated storage and vacuum tanks, over more than ten years. The companies were also significant makers of water and other atmospheric tanks, for example tanks used to store crude oil and petroleum products, but those applications were not part of the FTC's challenge.

In August 2000, CB&I offered $93 million to PDM for its Engineering Construction and the Water...

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