In another reminder that U.S. antitrust enforcers can challenge mergers even after closing, and even for deals not subject to premerger notification under the HSR Act, on December 18, 2008, the Department of Justice Antitrust Division filed a civil antitrust lawsuit challenging the July 2008 acquisition by Microsemi Corporation of Semicoa Inc.
The lawsuit alleges that the acquisition lessened competition in the development, manufacture and sale of certain specialized electronic components used in military and space programs essential to U.S. national security. The DOJ alleges this violated Section 7 of the Clayton Act, which deals with mergers, and Section 2 of the Sherman Act, which deals with monopolization.
According to DOJ's complaint, the acquisition reduced the number of suppliers of certain signal transistors from two to one – a "merger to monopoly" – and reduced the number of suppliers of a certain diode from three to two. The customers for these electronic devices include the U.S. military and national security agencies, which use them in critical applications ranging from satellites to submarines. The complaint alleges that the strict specifications required for such government applications, which are certified by the Department of Defense, distinguish the relevant products from commercial grade components, which lack the same performance characteristics.
The complaint specifically alleges that, without Semicoa as a competitor in signal transistors, Microsemi has been able to selectively raise prices to customers it is aware cannot substitute to lower grade components. For diodes, the complaint alleges that Semicoa was close to entering the market and would have been a significant competitor. The DOJ asks the court to require Microsemi to undo the transaction by selling off the Semicoa assets it acquired in July 2008.
DOJ's Microsemi/Semicoa case is the latest in a string of recent antitrust challenges to already-consummated transactions by the U.S. federal antitrust agencies. For example:
These cases demonstrate that, where they believe there has been harm to competition, the U.S. antitrust agencies will not hesitate to challenge consummated transactions – and confront all the difficulties of "unscrambling the eggs" after parties have begun integrating their operations.
The DOJ's Microsemi/Semicoa complaint and press release are attached.
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