Private Merger Challenges and SAEVA – What merging parties need to know

Private plaintiffs can and have brought private merger challenges that survived the motion to dismiss stage, including at least two notable, recent cases:

1. In Dale v. Deutsche Telekom AG,[4] private plaintiffs representing a putative class of AT&T and Verizon customers filed a suit challenging the proposed April 2020 merger between T-Mobile and Sprint. T-Mobile moved to dismiss the case arguing that the plaintiffs fail to meet antitrust standing requirements.[5] In response, the plaintiffs argued they had standing because the merger would result in anticompetitive effects, namely, an increase in prices, as well as, an increase in the amount of taxes, fees, and surcharges imposed on customers.[6] The court agreed with the plaintiffs and denied T-Mobile’s motion to dismiss, finding that the plaintiffs adequately alleged “direct evidence of anticompetitive effects” and therefore had antitrust standing.[7] The case is ongoing and the plaintiffs are seeking to unwind the T-Mobile/Sprint merger and recover damages for alleged overcharges.[8]

2. In Food Lion v. DFA,[9] defendants, Dairy Farmers of America, Inc. (“DFA”) and Dean Foods Company entered into an asset sale for 44 dairy facilities. This proposed sale was challenged by the plaintiffs, Maryland and Virginia Milk Producers Cooperative Association (“MVPCA”) and Food Lion, LLC, who sought an injunction to prevent the sale and divesture of DFA’s assets.[10] DFA moved to dismiss the complaint arguing that plaintiffs lack antitrust standing.[11] The court disagreed, and found that the plaintiffs successfully pled antitrust injury by alleging that the merger would result in: the monopolization of the dairy supply chain; decreased competition; customer foreclosure from the market; and higher dairy prices.[12] Ultimately, this case settled and was subsequently dismissed.

History also offers examples of States bringing enforcement actions to challenge a merger. For example, in California v. American Stores,[13] the state of California, as a private plaintiff, led a suit challenging the 1988 merger of Lucky Stores and American Stores Inc, two large grocery store chains. California successfully argued that the merger would result in an antitrust injury, specifically, that the merger would cause considerable loss and damage to the state as competition in many regions would be eliminated, and “prices of food and non-food products might be increased.”[14] Sixteen days after the Supreme Court’s decision permitting injunctive relief as a remedy, and two years after consummating the merger, the parties agreed to a settlement.[15] The settlement required that American Stores divest, within five years, 161 of the Lucky stores it had acquired through the merger.[16]

But history also teaches of examples where private plaintiffs have failed to adequately allege their claims, resulting in dismissal. One example that went all the way to the Supreme Court is Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.[17] There, a local bowling alley owner brought an action under Section 7 of the Clayton Act challenging the purchases of failing local bowling alleys by a larger bowling alley chain.[18] The plaintiff argued that if the chain had not intervened, the local bowling alleys would have gone out of business and would have been unable to compete with plaintiff’s business.[19] At trial, the plaintiff prevailed winning an award of $7 million. The parties appealed to the Third Circuit Court of Appeals, which reversed the district court’s findings. The parties then appealed to the Supreme Court. The Supreme Court concluded that the plaintiff failed to allege an actual antitrust injury because the harm to the plaintiff as a competitor was of no concern to the antitrust laws.[20]

If a private plaintiff can establish standing and successfully prove its case, it is afforded the same remedies that are available to the FTC or DOJ. These remedies include monetary damages, injunctions, and, most recently added to the list, divestures. Indeed, a private plaintiff in a recent case succeeded in obtaining a ruling requiring the merging parties to unwind their transaction several years acter their transaction had closed. Specifically, in Steves & Sons, Inc, v. Jeld-Wen,[21] the Fourth Circuit Court of Appeals affirmed the district court’s order of divesture as a remedy in a private merger challenge.[22] The case concerned Jeld-Wen’s acquisition of Craftmaster Manufacturing, which merged two of the three largest doorskin manufacturers.[23] The DOJ investigated the acquisition twice but closed both investigations without taking further action. Four years after the transaction’s consummation, Steves and Sons Inc. (“Steves”), a purchaser of doorskins, successfully challenged the merger arguing that there was more competition in the doorskin market pre-merger.[24] Steves argued the merger resulted in decreased market pressure on Jeld-Wen to provide good customer service and quality products, therefore, leading to Steves’ antitrust injury.[25] As a result of the Fourth Circuit’s ruling, Jeld-Wen was ordered to unwind its acquisition.[26]

State Antitrust Enforcement Venue Act

Another emerging challenge faced by merging parties is the effect of the State Antitrust Enforcement Venue Act (“SAEVA”) on the inability to consolidate multiple merger challenges brought by different plaintiffs into one case.

Before SAEVA, the consolidation of multidistrict antitrust litigation was governed by 28 U.S.C. § 1407, which permitted the Judicial Panel on Multidistrict Litigation (“JPML”) to consolidate and transfer litigations that involved a common question of fact.[27] By allowing parties to consolidate cases involving a common question of fact, litigants are not required to li gate several near identical lawsuits with the potential for disparate outcomes.

In December 2022, President Biden signed SAEVA into law.[28] SAEVA potentially makes it easier for state attorneys general to keep their cases in the venue of their choosing by preventing litigants from moving to consolidate cases brought by state an trust enforcers. Previously, only federal agencies were afforded the same treatment. As a result of SAEVA, the JPML is now unable to consolidate or transfer antitrust litigations brought by both state attorneys generals as well the FTC and DOJ, except those litigations brought by the DOJ’s Antitrust Division seeking criminal or non-monetary relief, which are not covered under the relevant statutes.[29]

As a result of SAEVA, a prospective merging party could now be forced to litigate simultaneously in several venues, resulting in concerns with respect to efficiency convenience, and duplicative recovery. In particular, there is the possibility that one court could issue a nationwide injunction halting a merger in its tracks. In a post-SAEVA regulatory landscape, if there are tens or hundreds of litigations raised regarding a merger, it would only take one court issuing one nationwide injunction in one case to stop an acquisition. This reality is illustrated by the injunctions issued halting the Kroger/Albertsons merger.[30] The merger was the subject of multiple litigations in various venues. Ultimately, in separate rulings both on December 10, 2024, the U.S. District Court for Oregon in Portland and the State of Washington Kings County Superior Court in Seattle granted injunctions against the merger preventing Kroger from closing its proposed acquisition of Albertsons.[31] If SAEVA had not been the law, then the Kroger/Albertsons merger would likely not have been subject to litigations in multiple different venues, and instead, the JPML may have consolidated all allegations into one case in front of one judge.

Conclusion

Given the significant changes in the regulatory environment, including an increase in private enforcement of the antitrust laws, as well as the rollout of SAEVA, parties should be sure to engage legal counsel regarding these and other an trust issues related to their proposed mergers.

It is also worth noting that part of the reason SAEVA matters more now than it did before, is that the DOJ and FTC were often aligned with more active state enforcers, therefore causing states to join federal suits, rather than pursuing their own. Presently, to the extent that the current administration’s an trust enforcers may potentially be more lenient in their review of certain transactions, SAEVA and private litigation pathways could become more relevant in assessing overall an trust and litigation risk. This week’s news regarding California and New York’s potential scrutiny of the announced Capital One/Discover Financial deal is a timely reminder that under the current administration’s professed “scalpel” approach to an trust enforcement[32], we may see an uptick in activity by state AGs. This new reality, as well as SAEVA’s further emboldening of state AGs to scrutinize deals independently from federal regulators, is a dynamic that investors will need to realign themselves with.

Wiggin and Dana routinely advises clients in connection with the full range of antitrust matters, including with respect to mergers and merger investigations.