Goodwin Insights January 07, 2019

Private Litigants Successfully Unwind Consummated Transaction

In October, a Virginia federal judge ordered a divestiture to remedy the anticompetitive effects of a consummated merger in a lawsuit brought by a private company without government help. The case, Steves and Sons v. Jeld-Wen, No. 3:16-CV-545, 2018 WL 4844173 (E.D. Va. Oct. 4, 2018), is notable in that the DOJ twice reviewed and cleared the acquisition, with one investigation ending in 2012, and the second ending in 2016, weeks before the challenger brought suit. The judge called the case “first of its kind” because of the success of the private antitrust action in obtaining a divestiture remedy. The divestiture is in addition to a jury award of $176 million total in trebled damages stemming from alleged anticompetitive conduct. The ruling demonstrates that even consummated transactions reviewed by the antitrust authorities may still be at risk of private challenges years later.

In addition to the court-ordered divestiture, Jeld-Wen now faces a proposed class action lawsuit by building supply customers accusing Jeld-Wen and the other vertically integrated interior molded door manufacturer, Masonite Corp. The plaintiffs allege Jeld-Wen and Masonite used their combined market positions, which were a result of the 3-to-2 merger, to fix prices.

This is not the only time consummated transactions have been unwound. Indeed, the FTC and DOJ have pursued and won such challenges in the recent past. Thus, parties contemplating transactions with antitrust risk should be aware that clearance by an antitrust agency does not necessarily mean the antitrust issues are solved. Obtaining careful guidance pre-transaction is therefore essential.