AAI and Brookings Fellow William Baer Ask the U.S. District Court for the District of Columbia to Adopt Proper Framework for “Litigating the Fix” in Merger Cases (In Assa Abloy AB/Spectrum Brands Holdings, Inc.)

AAI has joined with the Hon. William J. Baer, a Visiting Fellow in Governance Studies at the Brookings Institution and the former Assistant Attorney General of the Antitrust Division and Director of the Bureau of Competition of the Federal Trade Commission, to file an amicus brief in the D.C. District Court in the ASSA ABLOY/Spectrum merger. The brief urges the Court to require that defendants in a Section 7 case bear the burden of showing any remedy they propose will restore competition. The brief follows AAI’s brief in the Illumina/Grail matter, arguing for a standard in so-called “litigating the fix” cases that enables effective Section 7 enforcement.

ASSA ABLOY AB proposes to acquire Spectrum Brands Holdings, Inc. The transaction would create a near-monopoly in premium door locks and leave only two significant competitors in smart locks, digital door locks that can be operated through connection to a wireless device. The parties are proposing to address the anti-competitive effects of the transaction by selling two of their lock brands to Fortune Brand Innovations, another home and security supplier.

The brief on behalf of AAI and Baer argues that the governing Baker Hughes burden shifting framework requires that the merging parties rebut a government showing that the original merger will substantially lessen competition, including by proving that their self-crafted “fix” is enforceable, administrable, and will fully restore the competition lost from the anticompetitive merger.

The brief emphasizes that requiring defendants to present the remedy in their rebuttal case is necessary to remain consistent with the text and incipiency goal of Section 7 of the Clayton Act. Further, the brief argues, this burden shifting framework is required by D.C. Circuit precedent, as has been recognized by other D.C. district court decisions. Finally, the brief explains that placing the burden on plaintiffs to show that a defendant-proposed remedy will not work has significant potential to undermine Section 7 enforcement. Plaintiffs will be incentivized to propose weak remedies as part of a “litigate the fix” strategy in court rather than designing a more robust remedy to convince the antitrust agencies that competition will be restored. This is particularly concerning given the historical evidence showing that even agency-approved divestitures are risky and prone to failure.

AAI is grateful to the law firm of Brownstein Hyatt Farber Schreck, LLP (BHFS), which served as pro bono counsel. The brief was written by Rosa Baum and David Meschke of BHFS, whose drafting was overseen by BHFS Shareholder and AAI Advisory Board Member Allen Grunes. Joshua P. Davis, Berger Montague Shareholder, AAI Senior Fellow, and Research Professor at UC College of the Law, San Francisco, and Brookings Visiting Fellow Bill Baer also assisted.

Read the brief here: AAI_Assa Abloy Amicus Brief (DDC).