Chicago Bridge & Iron Co. V. Federal Commission
[United States Court of Appeals, Fifth Circuit, 515 F3d 447 (2008)]
FACTS: The Chicago Bridge and Iron Company and its United States subsidiary, Chicago Bridge and Iron Company (Petitioner) is a company that was engaged in designing, engineering, and constructing industrial storage tanks for liquefied natural gas and other gases. In this market the Petitioner and another company, Pitt-Des Moines, Inc., were the dominant firms. The Petitioner acquired all the assets belonging to Pitt-Des Moines, Inc. in the year 2001 for 84 million dollars. The Respondent preferred charges against the Petitioner alleging that the acquisition violated Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act. An administrative law judge agreed with the Respondent finding that the acquisition resulted in excessive increase in the Petitioner’s market power and further that the Petitioner would not be constrained by the timely entry of new competitors. The issue was whether the use of the Herfindahl-Hirschman Index (HHI) was appropriate. The Respondent calculated the HHI over a several year period rather than on an annual basis. The Petitioner petitioned the U.S. Court of Appeals for the Fifth Circuit for a review of an order issued by the administrative law judge.
ISSUE: Was the calculation of the HHI over a several-year period rather than on an annual basis was appropriate?
LAW: Section 7 of the Clayton Act. Prohibits the acquisitions as well as mergers where in any activity affecting commerce within the country the effect of the proposed merger or acquisition may considerably reduce competition or be likely to create a monopoly. Section 15 of the Federal Trade Commission Act excludes monopoly in any line of commerce.
ANALYSIS: the Commission ruled that the Petitioner’s acquisition of the Pitt-Des Moines, Inc. assets in the year 2001 was likely to result in substantial reduction of competition or tend to create a monopoly in the applicable markets. This situation would result in the violation of section 7 of the Clayton Act and Section 15 of the Federal Trade Commission Act.
CONCLUSION: the Commission agreed with the decision of the administrative law judge.
