United States of America v. Republic Services, Inc.

• Court: District Court, District of Columbia
• Decided: July 15, 2010
• Docket: Civil Action No. 2008-2076
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

______________________________ ) UNITED STATES OF AMERICA ) et al., ) ) Plaintiffs, ) ) v. ) Civil Action No. 08-2076 (RWR) ) REPUBLIC SERVICES, INC. ) et al., ) ) Defendants. ) ______________________________)

MEMORANDUM OPINION

The United States and seven states bring suit against

defendants Republic Services, Inc. and Allied Waste Industries,

Inc., alleging antitrust violations stemming from Republic’s

acquisition of Allied Waste. The parties have filed a joint

motion for entry of final judgment, which would permit the merger

to be consummated subject to conditions intended to remedy the

violations identified in the complaint. The Center for a

Competitive Waste Industry (“CCWI”) has filed an amicus brief,

arguing that the proposed final judgment is not in the public

interest because the divestiture remedies are inadequate when

compared to air-space remedies that would allow independent

haulers to dump in the merged firms’ landfills. Because there is

an adequate factual foundation upon which to conclude that the

government’s proposed divestitures will remedy the antitrust - 2 -

violations alleged in the complaint, the parties’ joint motion

will be granted and the proposed final judgment will be entered.

BACKGROUND

Defendants Allied and Republic are the nation’s second and

third largest waste hauling and disposal companies, respectively.

(Compl. ¶¶ 6-7.) They each provide small container commercial

waste collection, which entails hauling waste in “dumpsters” ––

containers with between one and ten cubic yards of storage ––

from commercial and industrial sites to transfer stations or

disposal sites. (Id. ¶ 10.) They each also dispose of municipal

solid waste (“MSW”) –– “solid putrescible waste generated by

households and commercial establishments” –– in landfills or

incinerators. (Id. ¶¶ 16-17.) On January 22, 2008, Republic

entered into a stock purchase agreement to acquire Allied. After

a detailed investigation of the proposed transaction, in which

the government reviewed “documents and information from the

merging parties and others and conducted more than 600 interviews

with customers, competitors, and other individuals knowledgeable

about the industry[,]” the government concluded that the merger

would have anticompetitive effects. (Resp. of the U.S. to Public

Comments on the Proposed Final J. (“U.S. Resp.”) at 3.) On

December 3, 2008, the plaintiffs filed a complaint under § 7 of

the Clayton Act, 15 U.S.C. § 18, asserting that the “proposed

transaction would substantially lessen competition for small - 3 -

container commercial waste collection service” and for “MSW

disposal service” in various geographic markets.1 (Compl. ¶ 1.)

The government filed together with its complaint a

stipulation and order under which the parties consented to entry

of a proposed final judgment aimed at remedying the alleged

anticompetitive effects of the merger. The parties’ proposed

final judgment requires Republic to divest nine landfills, ten

transfer stations, and eighty-seven small container hauling

routes across the fifteen geographic markets identified in the

complaint. (Proposed Final J. at § II(H).) According to the

Antitrust Procedures and Penalties Act, 15 U.S.C. § 16, known as

the Tunney Act, the government published the proposed final

judgment along with a competitive impact statement in the Federal

Register on December 16, 2008. See 73 Fed. Reg. 76,383 (Dec. 16,

2008). Five comments were received during the sixty-day public

comment period, including a detailed comment by CCWI. In its

1 The complaint alleges that the transaction would lessen competition for small container commercial waste service in Atlanta, Georgia; Cape Girardeau, Missouri; Charlotte, North Carolina; Fort Worth, Texas; Greenville-Spartanburg, South Carolina; Houston, Texas; Lexington, Kentucky; Lubbock, Texas; and Northwest Indiana.

The complaint also alleges that the transaction would lessen competition for MSW disposal service in Atlanta, Georgia; Cape Girardeau, Missouri; Charlotte, North Carolina; Cleveland, Ohio; Denver, Colorado; Flint, Michigan; Fort Worth, Texas; Greenville- Spartanburg, South Carolina; Houston, Texas; Los Angeles, California; Northwest Indiana; Philadelphia, Pennsylvania; and San Francisco, California. (Compl. ¶ 1.) - 4 -

public comment, CCWI argued that the proposed final judgment

would “not fully remedy the competitive problems identified in

the complaint but rather will permit a three-firm oligopoly to

consolidate into an even more concentrated two-firm oligopoly

based upon a remedy that is fatally discredited by the very

parties involved.” (Comments of CCWI on the Proposed J. (“CCWI

Comment”) at 1.) The government responded to the public

comments, arguing that many of the competitive concerns raised by

CCWI fell outside the face of the government’s complaint and that

the remedies advanced in the proposed final judgment were both

necessary and adequate to remedy the competitive harms that the

government had raised in its complaint. (U.S. Resp. at 8-10.)

After the parties filed a joint motion for entry of the proposed

final judgment, CCWI filed a motion for leave to participate as

amicus curiae. CCWI’s motion was granted, and it filed an amicus

brief arguing that entry of the proposed final judgment would not

be in the public interest because the divestiture remedies are

inadequate when compared to air-space remedies that would allow

independent haulers to dump in the merged firms’ landfills.

DISCUSSION

A court reviews a proposed final judgment to determine if it

is in the public interest. 15 U.S.C. § 16(e). Under the Tunney

Act, which governs the public interest determination, a court

considers: - 5 -

(A) the competitive impact of such judgment, including termination of alleged violations, provisions for enforcement and modification, duration of relief sought, anticipated effects of alternative remedies actually considered, whether its terms are ambiguous, and any other competitive considerations bearing upon the adequacy of such judgment that the court deems necessary to a determination of whether the consent judgment is in the public interest; and

(B) the impact of entry of such judgment upon competition in the relevant market or markets, upon the public generally and individuals alleging specific injury from the violations set forth in the complaint including consideration of the public benefit, if any, to be derived from a determination of the issues at trial.

15 U.S.C. § 16(e)(1). No evidentiary hearing is required to make

the public interest determination. 15 U.S.C. § 16(e)(2).

To satisfy the Tunney Act, a settlement as articulated in a

proposed final judgment must fall “within the reaches of the

public interest.” United States v. Microsoft Corp., 56 F.3d

1448, 1458 (D.C. Cir. 1995) (citations omitted). “[T]he relevant

inquiry is whether there is a factual foundation for the

government’s decisions such that its conclusions regarding the

proposed settlement are reasonable.” United States v. SBC

Commc’ns, Inc., 489 F. Supp. 2d 1, 15-16 (D.D.C. 2007)

(concluding that the 2004 amendments to the Tunney Act did not

address or undermine the deferential standard of review

articulated in Microsoft). Because the “court’s authority to

review the decree depends entirely on the government’s exercising

its prosecutorial discretion by bringing a case in the first - 6 -

place[,]” a court may not “effectively redraft the complaint” by

considering competitive effects that have not been raised or

pursued by the government. Microsoft, 56 F.3d at 1459-60.

CCWI argues that entry of the proposed final judgment is not

in the public interest because its proposed remedy of

divestitures will be less effective at restoring competition than

an air-space remedy would be. Such an air-space remedy would

require the merged firms “to offer contracts at fair rates and

terms to independent haulers for them to be able to dump in the

merged firms’ landfills.” (Br. of Amicus Curiae CCWI (“CCWI

Br.”) at 3.) CCWI asserts that its proposed remedy would be more

likely to restore competition in the relevant markets because the

independent haulers have a “record of aggressive competitive

behavior” while the larger firms do not. (Id.; see also CCWI

Comment at 14 (“Because [the] markets consist of oligopolies[]

with lock holds on local landfills, which create bottlenecks that

impede new entry, divested assets should be sold to independent

haulers with the right to contract for airspace in the merger

companies’ landfills.”).)

The government rejected this proposed relief, arguing that

it “would interfere with a landfill owner’s ability to manage and

operate the assets successfully.” (U.S. Resp. at 11.) It

reasoned that because independent haulers might not remain in

business throughout the useful life of a divested landfill, an - 7 -

air-space remedy would create uncertainty as to the use of

divested assets, jeopardizing their “competitive significance[.]”

(Id. at 11-12.) Moreover, the government noted that it favors

structural remedies, such as divestitures, that generally avoid

continued government interference in a particular market over

conduct remedies, such as CCWI’s proposed air-space remedy, that

require the defendants to take certain actions. (Id. at 12.)

Accord California v. Am. Stores Co., 495 U.S. 271, 280-81 (1990)

(noting that “divestiture is the preferred remedy for an illegal

merger”).

“[A] court may not reject a remedy simply because it may not

be, in the court’s view, the ‘best’ remedy available.” United

States v. Enovo Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000). The

government must demonstrate only that the settlement is a

reasonably adequate remedy for the harms alleged in the

complaint. United States v. Abitibi-Consol. Inc., 584 F. Supp.

2d 162, 165 (D.D.C. 2008). CCWI’s argument that air-space

remedies are more likely to restore competition to the small

container and MSW markets than the divestitures would be confuses

the Tunney Act inquiry. In light of the deferential review to

which the government’s proposed remedy is accorded, CCWI’s

argument that an alternative remedy may be comparably superior,

even if true, is not a sufficient basis for finding that the

proposed final judgment is not in the public interest. The - 8 -

proposed final judgment may be rejected only if the divestitures

are inadequate when considered independently –– and not in

comparison to any other possible remedy –– to remedy the

competitive harms alleged in the complaint.

Here, the complaint alleges two potential anticompetitive

effects of the merger. “The acquisition of Allied voting

securities by Republic would remove a significant competitor in

small container commercial waste collection and the disposal of

MSW in already highly concentrated and difficult-to-enter

markets.” (Compl. ¶ 25.) As a consequence, the complaint

predicted that the merger would result in “higher prices for

collection of small container commercial waste or the disposal of

MSW.” (Id.) CCWI contends that the divestitures in the proposed

final judgment are unlikely to restore competition because the

defendants have sold many of the divested assets to Waste

Connections, Inc. and Veolia Environmental Services Solid Waste,

Inc., the fourth and fifth largest waste firms nationwide. (CCWI

Br. at 8.) The United States responds that it “approved the

acquirers of the divestiture assets based on [a] fact-intensive

determination that the acquisitions would not be anticompetitive

and that each acquirer of divestiture assets would use those

assets to preserve competition in each” of the geographic

markets. (Resp. of Pl. U.S. to the Amicus Brief of CCWI at 7.) - 9 -

A district court owes deference to government predictions

about the effects of proposed remedies. Microsoft, 56 F.3d at

1461 (noting that when a “proposed decree comes to a district

judge in the first instance as a settlement between the parties

that may well reflect weaknesses in the government’s case, the

district judge must be even more deferential to the government’s

predictions as to the effect of the proposed remedies” than in an

instance in which a judge has been administering a consent decree

for a period of time and has gained “at least some familiarity

with the market involved”). While CCWI appears to argue that the

parties must provide independent factual support for the proposed

remedies, a court may “make its public interest determination on

the basis of the competitive impact statement and response to

comments alone.” Enova Corp., 107 F. Supp. 2d at 17. For

example, in United States v. AT&T Inc., 541 F. Supp. 2d 2, 7

(D.D.C. 2008), the court concluded that the proposed final

judgment was in the public interest without citing expert

affidavits or other factual support outside of the complaint and

public comments. Here, the government analyzed each geographic

market individually and tailored each divestiture to the

competitive concerns of the particular market.2 It based its

2 CCWI also argues that the government’s proposed divestitures are inconsistent with the government’s position in a previous waste industry merger, in which it rejected the divestiture of assets to one of the three largest firms in the market at the time. (CCWI Br. at 7.) However, because the - 10 -

analysis on a detailed investigation that included reviewing

relevant documents and interviewing over 600 individuals with

knowledge of the industry and the merging firms. Just as in AT&T

Inc., “[t]here is a clear and logical relationship between the

allegations set forth in the government’s complaint and its

proposed remedies.” This is sufficient to support a finding that

the entry of final judgment in this case is in the public

interest.

CONCLUSION

Because there is a reasonable basis upon which to conclude

that the divestitures in the proposed final judgment will

adequately remedy the competitive harms alleged in the

government’s complaint, entry of the proposed final judgment is

in the public interest. The parties’ joint motion [16] for entry

of final judgment therefore will be granted, and the proposed

final judgment will be entered.

government analyzes every merger individually, previous mergers –– while potentially providing guidance in analyzing future mergers –– do not function as binding precedent on the government. Provided there is a factual basis for its determination, the government is free to conclude that divesting assets to the fourth and fifth largest firms in the waste industry will restore competition even if a similar divestiture may not have restored competition in the market more than ten years ago. - 11 -

SIGNED this 15th day of July, 2010.

________/s/_________________ RICHARD W. ROBERTS United States District Judge