Merger & Acquisitions, Antitrust Litigation & Investigations

Battery Merger Shows Shortcomings in Antitrust Policy, Critics Say  

Opponents of Merger Need More Evidence to Warrant FTC Look-Back.

Photo of batteries

Senator Tammy Baldwin (D-WI) and 10 consumer advocacy groups, including the American Economic Liberties Project, Public Citizen, and the Open Markets Institute, are calling on Lina Khan’s Federal Trade Commission to investigate the 2018 Energizer Inc. merger with Spectrum Brands Holdings, Inc., the successor to long-time battery brand Rayovac®. The groups are hoping to take advantage of more aggressive merger enforcement under current leadership and commitment by federal agencies to look back at consummated mergers that have proved to be anticompetitive.

Opponents of the merger claim it has led to increased concentration, higher prices, and a loss of high-paying union jobs. Therefore, undoing the merger would benefit U.S. consumers and workers. But these groups provide little to connect the higher prices or loss of jobs to Energizer's acquisition. This is problematic because, unlike proposed mergers subject to an incipiency standard (i.e., “harm yet to occur”) parties asking the FTC to challenge a 5-year-old merger should be equipped with concrete evidence of harm to competition to trigger an investigation.  


Allegations against the transaction. 


Energizer’s purchase of Rayovac increased concentration in a highly concentrated market. Energizer® and Duracell® have long dominated the U.S. battery market, controlling at least 70% of this market for decades. Rayovac was always a distant third, controlling about 10% of the market prior to being acquired. The merger, therefore, further entrenched the Energizer/Duracell duopoly by eliminating their closest rival. According to Sen. Baldwin, “[s]uch a drastic restructuring to the benefit of two dominant firms would seem to ‘scream out’ for an in-depth transaction review.” 


In addition to added concentration, Sen. Baldwin and the consumer groups argue that Energizer’s purchase of Rayovac gave it the market power to increase prices worldwide and eliminate high-paying union jobs in favor of outsourced and non-union positions. Energizer did implement worldwide price increases across its battery portfolio 2021. And it has announced plans to close two of its Wisconsin plants, costing the state nearly 1,000 union positions. According to the Teamsters Union, these jobs will go to Singapore and a non-union shop in North Carolina.  


Utilizing more vigorous merger enforcement. 


Critics point to Energizer’s acquisition as proof the FTC under the Trump administration was not doing enough to evaluate potential anticompetitive effects of mergers. Not only did the FTC approve the merger, but it did so without a second request for information, surprising even proponents of the merger. By comparison, the European Commission required significant divestitures from Energizer before blessing the transaction. 


Mergers have been subject to increased scrutiny and more aggressive challenges under Biden. The DOJ recently blocked Penguin Random House’s proposed acquisition of Simon & Schuster (see our post); the FTC is in a court battle challenging Microsoft’s purchase of gaming giant Activision Blizzard (see our post), despite the deal’s approval in the E.U., South Africa, and elsewhere; the DOJ just successfully challenged Jet Blue’s quasi-merger with American Airlines (see our post); and this month, the FTC sued to block Amgen Inc.’s $27.8 billion acquisition of Horizon Therapeutics, which the agency says would “stifle competition for thyroid disease and chronic refractory gout treatments.”  


Sen. Baldwin and the consumer groups hope to leverage this renewed enthusiasm to trigger action by the FTC concerning Energizer’s acquisition.  


Challenges to Long-Consummated Mergers Need Proof of Anticompetitive Harm.


When analyzing a pending merger, the FTC and DOJ apply an incipiency standard that analyzes whether the effect of a transaction “may be substantially to lessen competition, or tend to create a monopoly.” This is because, before the merger closes, the agencies can only make educated guesses concerning how the transaction will impact competition in the future.  


But this is not the case when deciding whether to investigate consummated mergers, particularly those that closed several years prior. In those situations, there is real-world evidence and data with which to evaluate the effects of the merger. Given this reality, federal agencies are unlikely to investigate, let alone challenge, a consummated merger without concrete evidence demonstrating the merger has harmed competition.  


This is where Sen. Baldwin’s and the consumer groups’ critiques of the Energizer/Rayovac merger fail. These parties point to a 2021 worldwide price increase by Energizer as proof the merger was anticompetitive. But one price increase since 2018 by one duopolist during a period of high inflation is not the smoking gun they want it to be. If the merger did impermissibly increase market power, then we would expect multiple price increases likely by both duopolists during this period. We would also expect to see price increases only in specific markets in which the merger increased Energizer’s market power, rather than worldwide.


The lawmaker and consumer groups also point to the fact that Energizer is outsourcing jobs as proof the merger is anticompetitive. To be sure, creating and retaining high-paying jobs should be an ever-present priority for lawmakers and consumer advocacy groups; but the antitrust laws are designed to protect competition in labor markets (e.g., prevent onerous non-competes). They are not designed to ensure jobs remain union or in the U.S. Neither Sen. Baldwin nor the advocacy groups have explained how the merger has reduced competition in any labor market.  


This is not to say the merger has not been anticompetitive or that the FTC was correct to approve the merger without a second request for information. Indeed, an entrenched duopolist acquiring the third largest participant in a multi-billion-dollar industry has the makings of an anticompetitive merger. But, for the FTC to open an investigation into a five-year-old merger, they will likely need more than Sen. Baldwin and the consumer groups have provided to date.




Edited by Tom Hagy for MoginRubin LLP. Photo by Roberto Sorin on Unsplash.


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