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By Liz Crampton
The Justice Department is headed to federal court next week to stop a merger of competing nuclear waste disposal companies, the first test of the antitrust division’s trial team under the Trump administration ( United States of America v. Energy Solutions, Inc. , D. Del., 16-cv-01056, Complaint filed 11/16/16 ).
The department sued in November to block the proposed $367 million merger of EnergySolutions Inc. and Waste Control Specialists LLC, arguing that combining the only two licensed commercial low-level radioactive waste disposal facilities for most of the country would lead to higher prices and lower quality service.
The judge in this case has a chance to make important law as antitrust merger cases rarely make it to trial. A court win would bolster the antitrust division as the White House is working to fill top leadership and lay out its approach to regulating mergers and policing conduct.
“The division has a lot of litigation experience at the staff level that will remain involved in this and there’s no reason to think they’ve lost their capability just by the virtue of the change in administration,” David Kully, a partner at Holland & Knight and former head of an antitrust litigation section, told Bloomberg BNA.
“Merger trials, while more common in the last few years, are still relatively infrequent and each of these are a big event in the antitrust world,” Kully said.
EnergySolutions’ purchase of Waste Control Specialists would be harmful for businesses and consumers that would be forced to absorb higher costs through steeper utility bills, the DOJ argues. More expensive disposal service also threatens the use of nuclear technologies for medical, pharmaceutical and research purposes, the government says.
In its lawsuit, the government cast the two companies as bitter rivals that have aggressively competed for business since Dallas-based Waste Control Specialists entered the market in 2012.
The companies have engaged in merger talks for years. Salt Lake City, Utah-headquartered EnergySolutions first tried to buy off its competitor in 2014 but was rebuffed.
Then, EnergySolutions tried a different tack: It sued Waste Control Specialists for alleged antitrust violations. Later, EnergySolutions approached Waste Control Specialists’ parent company, Andrews County Holdings Inc., about a possible deal, which led to the transaction now challenged by the Justice Department.
In its complaint, the Justice Department heavily relied on internal company communications to support its case that EnergySolutions is acquiring Waste Control Specialists just so it can dominate the market.
EnergySolutions hoped that “12 months of take the gloves off war” would force WCS “to sit down and listen, or weaken them to the point we can acquire them,” according to a document cited in the DOJ’s complaint.
Brent Snyder, former acting assistant attorney general of the antitrust division, touted the depth of the division’s trial experience at a conference in Washington in March. Throughout the past year, 41 DOJ attorneys argued in court in five trials, according to Snyder.
“Professional staff are the backbone” of the division, Snyder said while speaking on a panel. The “ability to try cases and win them when necessary is important to our credibility,” he added.
In their answer to the government’s claims, the companies rely on several arguments to back their assertion that the DOJ doesn’t state a plausible case and that the deal is actually good for competition and will benefit consumers. First, they argue that the government’s product and geographic markets are not accurate. If the court agrees, then the Justice Department could lose.
Second, the companies say that even after the merger, consumers will have the ability to ensure they receive competitive pricing and contract terms. Also, new competitors can easily enter the market which would ensure that the deal wouldn’t cause any harm to competition or consumers, they say.
Third, the companies are putting forth a failing firm defense. The companies say that Waste Control Specialists is “unable to meet its financial obligations as they come due,” and therefore the deal will not increase the new company’s market power. Waste Control Specialists is unable to reorganize under Chapter 11 of the Bankruptcy Act and has made “unsuccessful good-faith efforts” to find other buyers, the companies said.
CEOs of both companies could be called to testify. Lawyers for the Justice Department and defense have put Rod Baltzer, CEO of Waste Control Specialists, and David Lockwood, CEO of EnergySolutions, on witness lists.
U.S. District Judge Susan Robinson will preside over the trial held in Wilmington, DE.
Energy Solutions is represented by Skadden, Arps, Slate, Meagher & Flom LLP. Waste Control Specialists is represented by Morris, Nichols, Arsht & Tunnell LLP.
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