In what may be the first case ever, a party to an FTC administrative merger challenge has filed suit in U.S. District Court asking the court to halt the administrative proceeding and order the FTC to pursue a preliminary injunction motion in that court. The gravamen of their argument is that the outside date for the transaction is in May, and there is no way that they could conclude an administrative trial in that amount of time. They claim further that choice to proceed only with an administrative complaint is to delay deliberately the resolution of the suit so that the outside date passes and the deal breaks. They “deserve their day in court.” As a matter of substantive law, the case is unsound. The FTC is free, within the confines of the FTC Act, to choose where it wishes to pursue an action, and this has been so for more than 100 years. As a means to recapture some negotiating leverage from the FTC and perhaps save a few bucks, it’s probably not a bad strategy. Perhaps the chance of a loss, however remote, and the potential “embarrassment” of dragging enforcement out “needlessly” will prompt the FTC to settle on more favorable terms. The cost, however, is Tronox’s, and Tronox’s lawyers’, reputation at the Commission and may only prompt them to dig in their heels.
Tronox Limited and its target, Cristal, both make high purity titanium dioxide (TiO2), an input for products like paint. TiO2 makes paint white. Tronox announced its intent to acquire Cristal in February 2017. The FTC investigated the transaction under the HSR Act and purportedly allowed the waiting period to expire on December 1, 2017. Tronox noted this fact in a press release suggesting it was free to close under the HSR Act. Four days after that press release, on December 5, 2017, the FTC sued the companies alleging the combination would substantially lessen competition in the market for high purity TiO2. In their press release announcing the suit, the FTC asserted that the waiting period had in fact expired on October 7, 2017, but the parties had entered into a timing agreement whereby they would provide the Commission 10 days’ notice of their intent to consummate. The FTC suggested that the parties had not given adequate notice under the timing agreement. The transaction is still under review in other suspensory jurisdictions that prevent the parties from closing globally.