Nuclear Waste Disposal Antitrust Merger Trial Begins

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By Liz Crampton

The Department of Justice and EnergySolutions and Waste Control Specialists, two nuclear waste disposal companies, offered opposing views of how vigorously the companies compete in the first day of the government’s antitrust trial.

The government sued in November 2016 to block the companies’ proposed $367 million deal. The Wilmington, Del., trial is the antitrust division’s first in the Trump administration.

The DOJ argues that the deal is a horizontal merger combining the closest competitors in the nuclear waste disposal industry. EnergySolutions and Waste Control Specialists process low-level radioactive waste for nuclear power plants, hospitals and research facilities.

Because the two companies face little competition other than each other, prices would go up after the merger, DOJ attorney Julie Elmer said in an opening statement.

“The loss of head-to-head competition between EnergySolutions and Waste Control Specialists would be particularly harmful because there is no firm waiting in the wing to enter,” Elmer said.

Critical Time for Lawsuit

Throughout the trial, which is expected to continue into next week, the government will present evidence to prove its claim that EnergySolutions has long viewed Waste Control Specialists as a fierce rival, and the merger is an attempt to eliminate that competition.

The judge overseeing the case, U.S. District Judge Sue L. Robinson, was largely silent during the day’s proceedings. She asked no questions during opening statements.

When Waste Control Specialists entered the market in 2012, EnergySolutions immediately viewed the company as a threat, Elmer said. EnergySolutions responded by “competing vigorously” and worked to undermine its new competitor because Waste Control Specialists was offering lower prices, Elmer said.

Elmer told the judge to expect to hear from the companies that their businesses have very little overlap, but during the trial the government will introduce evidence that “overwhelmingly demonstrates” that isn’t true. The companies’ past business decisions should be given more weight than the arguments they’ll make at trial, she said.

Businesses that operate in the nuclear power industry such as Perma-Fix and NorthStar Medical Radioisotopes will testify to support the government’s case that they have benefited from competition between the companies, Elmer said.

Adding immediacy to the proceedings, in coming years, bids for nuclear plant decommissioning projects are expected to increase.

“The demand for nuclear waste disposal is expected to surge,” Elmer said, adding that although plants may be disappearing, the waste they generated stays behind. “More than even, the industry needs safe and cost-effective options to put that waste to bed for good.”

The companies have argued that the merger is needed to keep financially failing Waste Control Specialists in business.

Brushing off that claim, Elmer said the so-called failing firm defense is “highly disfavored” under the law and was “manufactured” after the lawsuit. The judge should meet that argument with “deep skepticism,” the lawyer said.

Waste Control Specialists’ Future

Lead attorney for EnergySolutions, Tara Reinhart, said there are “three fatal flaws” in the government’s case. Reinhart, a partner at Skadden, Arps, Slate Meagher, led the Federal Trade Commission’s successful effort in blocking the proposed merger of Staples Inc. and Office Depot Inc. while working for the agency.

The defense argues that the government has failed to properly define any relevant market. The Justice Department says competition would be reduced for the removal of four different types of nuclear waste that range in levels of radioactivity.

The government’s market definitions are too broad and the companies don’t compete in all areas of those markets, Reinhart said. The DOJ provides a “misleading picture” of how the nuclear waste disposal industry operates and can’t prove a substantial lessening of competition, she said.

The companies each operate a disposal facility. EnergySolutions’ facility is in Clive, Utah; Waste Control Specialists’ is in Andrews, Texas.

EnergySolutions and Waste Control Specialists disposal facilities are “not functional substitutes” because they primarily handle different classifications of waste, she said.

When Waste Control Specialists entered the market, EnergySolutions did view it as a threat, Reinhart said. But data will show during trial that it “didn’t pan out” and Waste Control Specialists didn’t draw customers from EnergySolutions as expected.

If this deal is blocked, Waste Control Specialists, “in all likelihood,” will have to plan for liquidation of assets, Reinhart said.

In 2016, Waste Control Specialists suffered $30 million in losses and is projected to lose at least $250 million more in the next five years, said Van H. Beckwith, a lawyer for the company.

“We are a failing firm,” Beckwith said. “We are a classic one.”

First Witness

The first witness called to testify was Terrance Dickinson, radiation protection superintendent for Palo Verde Nuclear Generating Station. The Arizona facility is the largest nuclear power plant in the country.

Dickinson explained that part of his job is to manage the disposal of low-level radioactive waste. EnergySolutions is contracted to serve the facility through a Life of Plant, or LOP, agreement.

A few years ago, Palo Verde solicited EnergySolutions and Waste Control Specialists to participate in an 18-month-long competitive bidding process, Dickinson said. As a result of the negotiations, his company saved $10 million after the bids were completed, he said.

Dickinson said his company’s ability to extract lower prices would suffer if the merger goes through.

“If they have both of the holes in the ground, I would have very little negotiating power when assessing my LOP rates,” he said.

Under cross examination, Dickinson said the plant stores some of its own waste. The defense is making the case that the government should account for plants that choose to store their own waste instead of relying on outside companies to handle disposal.

Two EnergySolutions employees also testified. Assef Azadeh, senior vice president of commercial integration, and Tony Didgeon, senior vice president of business development decommissioning and projects, took the stand.

To contact the reporter on this story: Liz Crampton in Washington at lcrampton@bna.com

To contact the editor responsible for this story: Seth Stern at fjohnson@bna.com

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