Antitrust: Divesture ordered after antitrust verdict

Where a jury found a company’s acquisition of a competitor and its subsequent conduct violated the antitrust laws, and the court then ordered divesture of the acquired company as a remedy, the court found there was no change in circumstances that warranted eliminating the remedy of divesture.

Background

In 2016, Steves and Sons Inc. filed a multi-count complaint against Jeld-Wen Inc. Count One alleged a violation of the Clayton Antitrust Act. The jury found that, as a consequence of Jeld-Wen’s acquisition of CraftMaster Manufacturing Inc., or CMI, and Jeld-Wen’s conduct in 2014 and thereafter, competition was substantially lessened in the doorskin market and that the merger had thus violated the Clayton Act.

This court then conducted an evidentiary hearing to consider Steves’ request that Jeld-Wen divest itself of the Towanda asset acquired in the CMI acquisition. The court ordered divestiture to be conducted by a special master. Jeld-Wen has now filed a motion to eliminate the remedy of divestiture.

Changed circumstances

The premise of this argument is that “[t]he ‘structure’ of the [doorskin] market has now changed” because Steves has built, and is about to open, its own doorskin plant and that, therefore, even without divestiture, there will again be three doorskin suppliers in the domestic market: Masonite, Jeld-Wen and Steves. In other words, Jeld-Wen argues that the number of suppliers will be the same when Steves opens its new plant as it was before Jeld-Wen unlawfully acquired CMI in 2012.

It is true that Steves has built a plant that makes doorskins, but it will remain a net buyer of doorskins for years to come. As such, Steves will not be a supplier to the other independents. In other words, without divestiture, independents will still only have JELD-WEN and Masonite to turn to as suppliers of doorskins.

As Dr. Shapiro explains, that means that “there will be at most two domestic supply options, JELD-WEN and Masonite, which is exactly the situation that the Court sought to remedy [by ordering divestiture].” In sum, Jeld-Wen has not established that the building and operation of Steves’ doorskin plant is a circumstance that has changed the domestic market for interior-molded doorskins subsequent to the court’s divesture order.

That failure to prove the premise of this asserted changed condition, of course, forecloses without further analysis Jeld-Wen’s argument that the changed market renders divestiture unworkable and contrary to the public interest. However, given the prospects of an appeal and considering the unusual nature of the alternative arguments about the public interest, the court will address Jeld-Wen’s contentions about incentives to foreclose and efficiencies because they seem to be made as part of Jeld-Wen’s public interest argument.

Jeld-Wen argues “there is [now] no material risk that JELD-WEN will foreclose the independents if it retains Towanda because it cannot do so profitably.” That being the case, says Jeld-Wen, the public interest is no longer served by divestiture. Considering Jeld-Wen’s past conduct and the fact that, without divestiture, the domestic market for doorskins will remain as it was at the time of trial, Jeld-Wen’s position on foreclosure must be viewed skeptically. Moreover, the record indicates that Jeld-Wen is in error when it claims that it cannot profitably foreclose the independents.

Jeld-Wen next argues that the public will benefit by lower prices because it realizes greater efficiencies from operating Towanda than would a Towanda owned and operated by Woodgrain. This is essentially the same efficiency argument it made at trial and that was rejected by the jury and by the court’s previous findings of fact. Jeld-Wen has not shown that the claimed efficiencies have changed in a material way.

And, assuming the allegedly changed market had been shown (and it has not), Jeld-Wen has not shown that the imposed remedy is unworkable because of that changed condition. The contract with Woodgrain, an indisputably appropriate buyer, puts Jeld-Wen’s suggestion to the contrary to rest.

In reality, the balance of hardships argument boils down to the contention that the price that Woodgrain is prepared to pay for Towanda is too small. The analysis of that contention begins with the obvious fact that the purchase price offered by Woodgrain for Towanda far exceeds what Jeld-Wen paid for the entirety of CMI.

Jeld-Wen also argues that “[b]ecause Steves is entering the doorskin market with its own plant, it no longer faces a threat of irreparable harm and lacks antitrust injury.” The record shows, however, that, even when Steves’ new plant is producing at full capacity, Steves will be a net buyer of doorskins. Accordingly, Steves will be exposed to competitive conditions as a buyer in the market for interior molded doorskins, meaning that, without divestiture, Steves, like the other independents, will be forced to buy doorskins from Jeld-Wen or Masonite.

Defendant’s motion to modify the amended final judgment denied.

Steves and Sons Inc. v. Jeld-Wen Inc., Case No. 3:16-cv-545, Dec. 19, 2024. EDVA at Richmond (Payne). VLW 024-3-665. 35 pp.