DealLawyers.com Blog

Last week, the FTC announced that the U.S. District Court for the Southern District of New York had granted its request for a permanent injunction to block Henkel’s acquisition of Liquid Nails, which would have combined two of the largest construction adhesive brands. This Cooley alert explains:

After a seven-day trial, the district court sided with the FTC and issued a permanent injunction blocking the deal outright, rather than referring the matter back to the agency’s administrative process. Announcing the result, FTC Bureau of Competition Director Daniel Guarnera framed the case as a straightforward horizontal competition problem: “Anyone who looked at the construction adhesives shelves of a hardware store or home improvement retailer could see that a merger between Loctite and Liquid Nails would be a bad deal for Americans.” He added that the decision “will ensure that Americans benefit from continued competition between Loctite and Liquid Nails, including lower prices and higher quality.”

Maybe the facts were straightforward, but the process reflects a new approach at the FTC. The alert continues:

Beyond the substantive result, the agency was explicit that it views this case as validating a procedural shift, describing the win as marking “the Commission’s new approach to seeking permanent injunctions to block anticompetitive mergers without the need to continue cases in administrative proceedings,” or litigating merger challenges to a final, binding result in federal district court rather than pursuing a preliminary injunction in federal court while the underlying merits proceed in the FTC’s own administrative tribunal.

It also includes these suggestions for parties negotiating mergers that have horizontal competition concerns:

– Prepare for federal court, not the FTC’s administrative docket. If the agency is committed to litigating merger challenges to final judgment in federal district court, merging parties should plan for full-blown federal litigation – including trial – as the primary (not merely preliminary) battleground, including the associated discovery burden, timeline and evidentiary standards that this entails.

– Building materials and other consumer-facing input markets remain a priority. The agency’s public messaging ties this enforcement action to housing affordability and cost-of-living themes, signaling continued scrutiny of consolidation in building products and other markets seen as directly affecting household costs.

– Brand concentration arguments retain force. The FTC’s theory here rested on eliminating direct competition between two well-known, closely positioned brands within the same category – a straightforward horizontal theory that remains a core enforcement priority regardless of procedural reforms.

– Meredith Ervine