US DoJ Sues ASSA, Alleges HHI Deal Risks "Higher Prices, Lower Quality, Reduced Innovation"
Based on damning internal emails, the US government wants to break up the Assa Abloy / Spectrum HHI $4.3 billion deal.
Inside this note, we examine the US Department of Justice's complaint, the evidence they present from the company's internal emails showing anti-competitive intent, how the 2 companies viewed themselves as key rivals, the rationale for breaking the deal and the company's counter to divest certain assets.
The *********
***-**** ************** ** ********* **** ******** **** the **** ** ******* ******** **** the *********** ***** ** "** ********* of ******* * ** *** ******* Act",*.*."********* ******* *** ************ ***** *** effect "*** ** ************* ** ****** competition, ** ** **** ** ****** a ********." ** ******** * ****** of *********** ** ********* ******** **** the ****:
Internal ****** **********
*** ********* ******* ***** ******** ****** or ***** ********* **** *** *** has ******** **** *** ********* ******* the *******'* ********* ** *** ****'* anti-competitive ******, *.*.:
[****] *** ******** **** **** **** that *** ******* “**[*] ** **** sure ** **** ** ***” *********** before **** “*** ****.”
**** ***** ********** ********* ****, ** a ****** ** *** ***********, *** of *** *********** **** ******** ****** would ** “** * ****** ******* negotiation ******** *** *** ****** ** increase ******.”
** *******’* ***** ******** ******** ***** the ******** *********** *** *********, *** combination ** ***** *** ******* “****** be **** ** ******** ***** ******** in *** *******.”
*********** ***** *** ******** *********** *** publicly *********, ******** *** ***** ********* internally *********** **** *** ****** **** would “[*]** * ****** **[*******] *******” and “**** ***** ** *** **** end,” ******* ********* **** ********* ***** product *****, **** ** **** ******** for ******* *****. **** ********** ********** sharply **** *******’* ***-****** ******** ** expand *** ******* ********* ** ***** to ******* ****** ******* *****.
***** ********* **** *** ********* **** extremely ********* ***** ****-***** ******:
** **** ****, ****** *** ********* for *** ******** ***********, **** ***** executives **** “****** ***** ***** ** antitrust” *** ************ ***** ** **** the ******* ******* ***** *** ******* would ** “*** ******* *****” *** competition *********.
******, *** *** ******* **** *** deal *** ******* ****** *** ******* of ****-***** ********:
** *** ********* ** ********* *, 2021, ***** ****** *** ******** *********** was *********, **** *****’* *** ***** to ********’* *** ****, ***** ** unresolved ************* ***** *** ** ****** the ********* ***** ** *** ******** transaction, **** ***** *** “**** ** the ********** ** ******** **** *** process *** ******* **** ***** *************.”
Competition ******* *** ********
********, *** ********* ***** ******** ******** of *** *** * ********* ****** each ***** ** *** *********** **** spurred ********** *** ******* ******, ******* the *** ******** ***** ** ********** by **** * ****. *** *******:
**** ***** *** ******** *** *********** internally **** ***** *****, ******* *******, and ******* ****** ****** *** **** other’s “*****,” “****,” “*******,”“*****,” “*******,” *** “closest” **********.
** ****, * [******** ***] ******* sales ******* ********** ******** **** [**** ABLOY's] ***** *** **** **** “** almost ********** **** **** *****” (*.*., impose ***** *********) ******* *******, *****’* “biggest **********,” *** “****** ****,” ******* it *** ****** ***** ** * competitor.
*** *******, ***** ********* *** ******** additional ********* ** *** ************ **** Baldwin ** ******* ** ***** ******** from ********* ** *******. ***** ****** additional ********* “**** *** *********** **********,” and *** ********** *** *********** **** they “****** *** ** ******** ** additional ******** ******* * *********** ****.”
******* ******* **** *** ***** ****, more **** **% ** *******’********* *** special ********* **** ********* * ********** referenced *********** **** ***** ** *** reason *** *******’* ***** **********—*** **** than *** ***** **********.
** **** *** *******, ** ****, Baldwin ******* ** ********* **** ******** on “**** *** ******[]” **** ******** from **** *** ******* ******* *** Baldwin ****** ****** ** * *********** architecture **** **** *** ******** ******* singlefamily *****; ******* *** ** “** keep ***** ***!”
*******’* ******** ** ***** ********* **** raising ******* ****** ** **% ***** be “******” ******* ***** *** ****** prices ** **** *.*%, ****** * 6% ***** ******** “*** ***” ******* could ****** ***** “***** **[***] ***********.”
******* **** **** **** ******** ** target *****. ** ****, ** **** a ********* ******** ******* **** ******** to ********** *** **** *** ****** shop *********, *** ** ******** *** largest *** **** ********* **** ******** for *** ******* “**** **** * large ***** ********.”
*** *******, ** ******** ****, *** head ** **** *****’* ****** ***** Residential ***** ********* ** **** *****’* CEO **** *** ******* *** ****** to ***** ****** ** *********’* ***** locks ******* ** “****** ***********” **** its *** ******* ******, ***************** ***’* Kwikset.
**** *****’* **** *** **** * “very *********** . . . *****,” and, ** ********, ******* ******* ** make * “****** **********” *** *******, in *** ********** ** ******** ***’* chief ********* *******, *** **** ******** company ** “*** ** ***, ****** swing ******* ** **** **** ** market ** **** * *** ** and * ***’* **** **** ** get **.”
******* **** ********* * *** *-**** smart **** ** **** **** ******** that **** “********** ********* ** ***** up ** ***** **** *** **** for **** *****.”
Near- ******** ******
*** *** **** ** ***** ******** with ** ******** **** ******* **** combined ******** ***** ** * "****-********":
** *** ******* ********** **** ******** market, *** ******** *********** ***** ** a ****** ** ****-********, ***** *** merged **** ***** ******* *** ****** 65% ** *****, ******** **** **** ten ***** ****** **** *** ****-******* competitor. ** *** ****** *** ***** locks, *** ******** *********** ***** *** off *********** ** * ****-******* **** hardware *******, ******* *** ****** **** with **** **** * **% ***** and **** *** ********* ********** **********—** effective *******.
********, ***** **** *** ******* *** Kwikset ******, *** **** *****, ***** owns *********, *****, *** **** ******, are, ***** **** ***** ** ***********, the ******* *** ***** ******* ********* of *********** **** ******** ** *** United ******, ************ ********** *** **** than **** ** *****.
****** ********* *** ********** **** ******* a *********** ********* ** *** ******* Act.
*** ***** ******* ******* ** ** Allegion *** ************ ******* ***** ***** be *** **** ******** ********** (******** to *** ******** **** / ***).
*** ********** **** ** *** ***** (not ** ** ******** **** *** HHI ** **** ****) **** ********* the ***** ** ************* ******* **** to ** ***** ****** ** **** action:
*** ****** ***** **** * ** markets **** ** ************* ** **,*** in ******* ***** *** **** *** a ***% ****** *****. ** ********** in *** ****** **********, ** *** post-transaction *** ***** ** **** **** 2,500, *** *** *********** ***** ******** the *** ** **** **** *** points, **** *** *********** ***** ****** in * ****** ************ ******, *** the *********** ** ******** ****** ** enhance ****** ***** *** ************* ****** competition.
Divestiture *****
**********, ******** / *** "********' **** Assa ****** **** ****** ** ****** the **** *** *** ******* *** the *** ******* **** **** *******:
******** ******** **** **** ***** ****** in *** ******** ********* ** ****** assets ** *** ** ****** ********* clearance, *** **** ***** ********** **** reluctant ** **** * *********** ********** because **** ******* ** ***** “*** [their] ****** ** ****.” ** ********* 2021, **** **** **** ****** *** transaction *** *********, ********’* *** ***** to ******* **** *****’* ********, ********** it ***** **** *** **** *** eat ** ***—******* ********* ********* **** a *********** ********** ********** ** * way “***** *** ***’* *** *** assets *** **** ** ****.”
***** *** *** ** ******** ******* to ****** **** ******** ** **** the **** ** *******, *** **** is ********* *********** ****, *** *** complaint:
****** ** ****, **** ***** *** Spectrum *********** ******** **** ***** ******** transaction ***** **** *********** ** ********* a “******” ** ********* ********* **** would ******* **** ***** ******* *** parts ** *** ******** ***** **** that **** *********** **** ******** ** the ****** ******
*** ******* ******* ** ****** ******** of **** *****’* ********** ******************* **** relating **** ** *** ***** ***** and ******** ** **** *****’* ****** Smart *********** ******** **** ******** **** to **** *** ****** ***** ***** sold ** *** ****** ****** *** Canada.
************* *** **** **** ***** ******** transaction ***** ***** ** ***********, *** defendants **** ******* ** **** *** selected ******** ** **** *****’* ******** integrated ********. *** ******** * ******* divestiture ** ******-*** ****** **** * globally-integrated ******** ** ** ******* ** remedy * **** **** ******** * massive *********** ******* ***** ***** ******** consumers ** **** *** *********** ***** that *** *********** ***** **** ** preserve *** ********* ** ******** ***********. Regardless ** *** *** ******* ***** turns *** ** **, **** * hazardous ********* ************* ***** ** ********** to ****** *** ***** ** **********’ anticompetitive ****.
"Vigorously *******"
*** ********* *** ******** *** ***, with ****** ***** ******* *********:
******** ******** **** *** ********** ** Justice’s **************** ** *** ******** ***********, and **** ********** ******* ** ***** this ****** ** *** *** ** oppose *** ***********.
*** **** ** ***** ***** ** Federal ***** *** *** ********** **** be **** ** *******. **** **** do, ** **** ***** ***** *******-********* and ***********.
**** ** ********* ** *** *** and ******** ** ********* ******* *********** ** *** ********* that **** ******* ** ************.
* ******* **** ***** *** ******* a ********. **** ** ******* **** could *** *** **** ** *** market. **** ********, ***** *** *** like **% *****?