United States of America v. Republic Services, Inc. ( 2010 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
______________________________
)
UNITED STATES OF AMERICA )
et al., )
)
Plaintiffs, )
)
v. ) Civil Action No. 08-2076 (RWR)
)
REPUBLIC SERVICES, INC. )
et al., )
)
Defendants. )
______________________________)
MEMORANDUM OPINION
The United States and seven states bring suit against
defendants Republic Services, Inc. and Allied Waste Industries,
Inc., alleging antitrust violations stemming from Republic’s
acquisition of Allied Waste. The parties have filed a joint
motion for entry of final judgment, which would permit the merger
to be consummated subject to conditions intended to remedy the
violations identified in the complaint. The Center for a
Competitive Waste Industry (“CCWI”) has filed an amicus brief,
arguing that the proposed final judgment is not in the public
interest because the divestiture remedies are inadequate when
compared to air-space remedies that would allow independent
haulers to dump in the merged firms’ landfills. Because there is
an adequate factual foundation upon which to conclude that the
government’s proposed divestitures will remedy the antitrust
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violations alleged in the complaint, the parties’ joint motion
will be granted and the proposed final judgment will be entered.
BACKGROUND
Defendants Allied and Republic are the nation’s second and
third largest waste hauling and disposal companies, respectively.
(Compl. ¶¶ 6-7.) They each provide small container commercial
waste collection, which entails hauling waste in “dumpsters” ––
containers with between one and ten cubic yards of storage ––
from commercial and industrial sites to transfer stations or
disposal sites. (Id. ¶ 10.) They each also dispose of municipal
solid waste (“MSW”) –– “solid putrescible waste generated by
households and commercial establishments” –– in landfills or
incinerators. (Id. ¶¶ 16-17.) On January 22, 2008, Republic
entered into a stock purchase agreement to acquire Allied. After
a detailed investigation of the proposed transaction, in which
the government reviewed “documents and information from the
merging parties and others and conducted more than 600 interviews
with customers, competitors, and other individuals knowledgeable
about the industry[,]” the government concluded that the merger
would have anticompetitive effects. (Resp. of the U.S. to Public
Comments on the Proposed Final J. (“U.S. Resp.”) at 3.) On
December 3, 2008, the plaintiffs filed a complaint under § 7 of
the Clayton Act, 15 U.S.C. § 18, asserting that the “proposed
transaction would substantially lessen competition for small
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container commercial waste collection service” and for “MSW
disposal service” in various geographic markets.1 (Compl. ¶ 1.)
The government filed together with its complaint a
stipulation and order under which the parties consented to entry
of a proposed final judgment aimed at remedying the alleged
anticompetitive effects of the merger. The parties’ proposed
final judgment requires Republic to divest nine landfills, ten
transfer stations, and eighty-seven small container hauling
routes across the fifteen geographic markets identified in the
complaint. (Proposed Final J. at § II(H).) According to the
Antitrust Procedures and Penalties Act, 15 U.S.C. § 16, known as
the Tunney Act, the government published the proposed final
judgment along with a competitive impact statement in the Federal
Register on December 16, 2008. See 73 Fed. Reg. 76,383 (Dec. 16,
2008). Five comments were received during the sixty-day public
comment period, including a detailed comment by CCWI. In its
1
The complaint alleges that the transaction would lessen
competition for small container commercial waste service in
Atlanta, Georgia; Cape Girardeau, Missouri; Charlotte, North
Carolina; Fort Worth, Texas; Greenville-Spartanburg, South
Carolina; Houston, Texas; Lexington, Kentucky; Lubbock, Texas;
and Northwest Indiana.
The complaint also alleges that the transaction would lessen
competition for MSW disposal service in Atlanta, Georgia; Cape
Girardeau, Missouri; Charlotte, North Carolina; Cleveland, Ohio;
Denver, Colorado; Flint, Michigan; Fort Worth, Texas; Greenville-
Spartanburg, South Carolina; Houston, Texas; Los Angeles,
California; Northwest Indiana; Philadelphia, Pennsylvania; and
San Francisco, California. (Compl. ¶ 1.)
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public comment, CCWI argued that the proposed final judgment
would “not fully remedy the competitive problems identified in
the complaint but rather will permit a three-firm oligopoly to
consolidate into an even more concentrated two-firm oligopoly
based upon a remedy that is fatally discredited by the very
parties involved.” (Comments of CCWI on the Proposed J. (“CCWI
Comment”) at 1.) The government responded to the public
comments, arguing that many of the competitive concerns raised by
CCWI fell outside the face of the government’s complaint and that
the remedies advanced in the proposed final judgment were both
necessary and adequate to remedy the competitive harms that the
government had raised in its complaint. (U.S. Resp. at 8-10.)
After the parties filed a joint motion for entry of the proposed
final judgment, CCWI filed a motion for leave to participate as
amicus curiae. CCWI’s motion was granted, and it filed an amicus
brief arguing that entry of the proposed final judgment would not
be in the public interest because the divestiture remedies are
inadequate when compared to air-space remedies that would allow
independent haulers to dump in the merged firms’ landfills.
DISCUSSION
A court reviews a proposed final judgment to determine if it
is in the public interest. 15 U.S.C. § 16(e). Under the Tunney
Act, which governs the public interest determination, a court
considers:
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(A) the competitive impact of such judgment, including
termination of alleged violations, provisions for
enforcement and modification, duration of relief
sought, anticipated effects of alternative remedies
actually considered, whether its terms are ambiguous,
and any other competitive considerations bearing upon
the adequacy of such judgment that the court deems
necessary to a determination of whether the consent
judgment is in the public interest; and
(B) the impact of entry of such judgment upon
competition in the relevant market or markets, upon the
public generally and individuals alleging specific
injury from the violations set forth in the complaint
including consideration of the public benefit, if any,
to be derived from a determination of the issues at
trial.
15 U.S.C. § 16(e)(1). No evidentiary hearing is required to make
the public interest determination. 15 U.S.C. § 16(e)(2).
To satisfy the Tunney Act, a settlement as articulated in a
proposed final judgment must fall “within the reaches of the
public interest.” United States v. Microsoft Corp., 56 F.3d
1448, 1458 (D.C. Cir. 1995) (citations omitted). “[T]he relevant
inquiry is whether there is a factual foundation for the
government’s decisions such that its conclusions regarding the
proposed settlement are reasonable.” United States v. SBC
Commc’ns, Inc., 489 F. Supp. 2d 1, 15-16 (D.D.C. 2007)
(concluding that the 2004 amendments to the Tunney Act did not
address or undermine the deferential standard of review
articulated in Microsoft). Because the “court’s authority to
review the decree depends entirely on the government’s exercising
its prosecutorial discretion by bringing a case in the first
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place[,]” a court may not “effectively redraft the complaint” by
considering competitive effects that have not been raised or
pursued by the government. Microsoft, 56 F.3d at 1459-60.
CCWI argues that entry of the proposed final judgment is not
in the public interest because its proposed remedy of
divestitures will be less effective at restoring competition than
an air-space remedy would be. Such an air-space remedy would
require the merged firms “to offer contracts at fair rates and
terms to independent haulers for them to be able to dump in the
merged firms’ landfills.” (Br. of Amicus Curiae CCWI (“CCWI
Br.”) at 3.) CCWI asserts that its proposed remedy would be more
likely to restore competition in the relevant markets because the
independent haulers have a “record of aggressive competitive
behavior” while the larger firms do not. (Id.; see also CCWI
Comment at 14 (“Because [the] markets consist of oligopolies[]
with lock holds on local landfills, which create bottlenecks that
impede new entry, divested assets should be sold to independent
haulers with the right to contract for airspace in the merger
companies’ landfills.”).)
The government rejected this proposed relief, arguing that
it “would interfere with a landfill owner’s ability to manage and
operate the assets successfully.” (U.S. Resp. at 11.) It
reasoned that because independent haulers might not remain in
business throughout the useful life of a divested landfill, an
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air-space remedy would create uncertainty as to the use of
divested assets, jeopardizing their “competitive significance[.]”
(Id. at 11-12.) Moreover, the government noted that it favors
structural remedies, such as divestitures, that generally avoid
continued government interference in a particular market over
conduct remedies, such as CCWI’s proposed air-space remedy, that
require the defendants to take certain actions. (Id. at 12.)
Accord California v. Am. Stores Co., 495 U.S. 271, 280-81 (1990)
(noting that “divestiture is the preferred remedy for an illegal
merger”).
“[A] court may not reject a remedy simply because it may not
be, in the court’s view, the ‘best’ remedy available.” United
States v. Enovo Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000). The
government must demonstrate only that the settlement is a
reasonably adequate remedy for the harms alleged in the
complaint. United States v. Abitibi-Consol. Inc., 584 F. Supp.
2d 162, 165 (D.D.C. 2008). CCWI’s argument that air-space
remedies are more likely to restore competition to the small
container and MSW markets than the divestitures would be confuses
the Tunney Act inquiry. In light of the deferential review to
which the government’s proposed remedy is accorded, CCWI’s
argument that an alternative remedy may be comparably superior,
even if true, is not a sufficient basis for finding that the
proposed final judgment is not in the public interest. The
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proposed final judgment may be rejected only if the divestitures
are inadequate when considered independently –– and not in
comparison to any other possible remedy –– to remedy the
competitive harms alleged in the complaint.
Here, the complaint alleges two potential anticompetitive
effects of the merger. “The acquisition of Allied voting
securities by Republic would remove a significant competitor in
small container commercial waste collection and the disposal of
MSW in already highly concentrated and difficult-to-enter
markets.” (Compl. ¶ 25.) As a consequence, the complaint
predicted that the merger would result in “higher prices for
collection of small container commercial waste or the disposal of
MSW.” (Id.) CCWI contends that the divestitures in the proposed
final judgment are unlikely to restore competition because the
defendants have sold many of the divested assets to Waste
Connections, Inc. and Veolia Environmental Services Solid Waste,
Inc., the fourth and fifth largest waste firms nationwide. (CCWI
Br. at 8.) The United States responds that it “approved the
acquirers of the divestiture assets based on [a] fact-intensive
determination that the acquisitions would not be anticompetitive
and that each acquirer of divestiture assets would use those
assets to preserve competition in each” of the geographic
markets. (Resp. of Pl. U.S. to the Amicus Brief of CCWI at 7.)
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A district court owes deference to government predictions
about the effects of proposed remedies. Microsoft, 56 F.3d at
1461 (noting that when a “proposed decree comes to a district
judge in the first instance as a settlement between the parties
that may well reflect weaknesses in the government’s case, the
district judge must be even more deferential to the government’s
predictions as to the effect of the proposed remedies” than in an
instance in which a judge has been administering a consent decree
for a period of time and has gained “at least some familiarity
with the market involved”). While CCWI appears to argue that the
parties must provide independent factual support for the proposed
remedies, a court may “make its public interest determination on
the basis of the competitive impact statement and response to
comments alone.” Enova Corp., 107 F. Supp. 2d at 17. For
example, in United States v. AT&T Inc., 541 F. Supp. 2d 2, 7
(D.D.C. 2008), the court concluded that the proposed final
judgment was in the public interest without citing expert
affidavits or other factual support outside of the complaint and
public comments. Here, the government analyzed each geographic
market individually and tailored each divestiture to the
competitive concerns of the particular market.2 It based its
2
CCWI also argues that the government’s proposed
divestitures are inconsistent with the government’s position in a
previous waste industry merger, in which it rejected the
divestiture of assets to one of the three largest firms in the
market at the time. (CCWI Br. at 7.) However, because the
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analysis on a detailed investigation that included reviewing
relevant documents and interviewing over 600 individuals with
knowledge of the industry and the merging firms. Just as in AT&T
Inc., “[t]here is a clear and logical relationship between the
allegations set forth in the government’s complaint and its
proposed remedies.” This is sufficient to support a finding that
the entry of final judgment in this case is in the public
interest.
CONCLUSION
Because there is a reasonable basis upon which to conclude
that the divestitures in the proposed final judgment will
adequately remedy the competitive harms alleged in the
government’s complaint, entry of the proposed final judgment is
in the public interest. The parties’ joint motion [16] for entry
of final judgment therefore will be granted, and the proposed
final judgment will be entered.
government analyzes every merger individually, previous mergers
–– while potentially providing guidance in analyzing future
mergers –– do not function as binding precedent on the
government. Provided there is a factual basis for its
determination, the government is free to conclude that divesting
assets to the fourth and fifth largest firms in the waste
industry will restore competition even if a similar divestiture
may not have restored competition in the market more than ten
years ago.
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SIGNED this 15th day of July, 2010.
________/s/_________________
RICHARD W. ROBERTS
United States District Judge