By Jeffrey May, J.D.
In a major victory for the Department of Justice Antitrust Division, the federal district court in Wilmington, Delaware, has blocked EnergySolutions’ $367 million acquisition of rival Waste Control Specialists. In November 2016, the Antitrust Division challenged the deal, contending that the planned combination of two of the most significant competitors for the disposal of low level radioactive waste (LLRW) was anticompetitive. Today, the district court issued an order enjoining the transaction; however, its opinion detailing the reasons behind that decision was filed under seal. Judgment was entered in favor of the government after a ten-day bench trial that commenced in late April (U.S. v. Energy Solutions, Inc., June 21, 2017, Robinson, S.).
Justice Department complaint. The government filed suit in November 2016 to block the combination of Energy Solutions (ES) and Waste Control Specialists (WSC). Specifically, the Antitrust Division alleged that the proposed transaction would combine the two most significant competitors for the disposal of LLRW available to commercial customers in 36 states, the District of Columbia, and Puerto Rico. LLRW is the radioactive byproduct of nuclear power generation, scientific research and certain medical treatments.
The complaint identified four relevant product markets: (1) commercial disposal of Lower Activity operational LLRW, which includes the disposal of Lower Activity LLRW generated by operational commercial nuclear reactors, hospitals, and research facilities; (2) commercial disposal of Lower Activity Decommissioning LLRW, which includes the disposal of Lower Activity LLRW associated with the decommissioning of commercial nuclear reactors; (3) commercial dispositioning of Higher Activity Operational LLRW, which includes the dispositioning of Higher Activity LLRW generated by operating commercial nuclear reactors, hospitals, and research facilities; and (4) commercial dispositioning of Higher Activity Decommissioning LLRW, which includes the dispositioning of Higher Activity LLRW associated with the decommissioning of commercial nuclear reactors. The disposal of LLRW generated by federal entities was excluded from each of the relevant markets. The court’s yet-to-be-released decision should shed some light on its view of the proposed relevant markets, which are usually critical to a determination of the anticompetitive effects of a proposed transaction.
When the suit was filed, ES took issue with the government’s contention that that the combined company would be "the only option for customers in nearly 40 states." ES argued that there were numerous disposal sites for LLRW waste operated by the competitors of the two companies. In addition, it asserted that customers had the option to store on-site, rather than ship to one of the many companies offering LLRW disposal, and that the innovation and price declines for LLRW waste disposal were evidence of other competitors in the marketplace.
Today, ES expressed disappointment with the court’s decision. "We believe this acquisition was in the best interest of the long-term waste disposal needs for the nuclear industry," said David Lockwood, ES President and CEO. However, there was no indication of whether ES would seek to appeal.
Antitrust Division statement. "Substantial evidence showed that head-to-head competition between EnergySolutions and Waste Control Specialists led to better disposal services at lower prices," said Andrew Finch, Acting Assistant Attorney General in charge of the Antitrust Division, in announcing the injunction. "Today’s decision protects competition in an industry that is incredibly difficult to enter. While EnergySolutions’ preference was to buy its main rival rather than continue to compete to win business, today’s decision ensures that customers will benefit from the competitive process."
The case is No. 1:16-cv-01056-SLR.
Attorneys: Jennifer Lynne Hall, U.S. Attorney's Office, for the United States. Paul J. Lockwood (Skadden, Arps, Slate, Meagher & Flom LLP) and Brian E. Farnan (Farnan LLP) for Energy Solutions, Inc. and Rockwell Holdco, Inc. Donald E. Reid (Morris, Nichols, Arsht & Tunnell LLP) for Andrews County Holdings, Inc. and Waste Control Specialists LLC.
Companies: Energy Solutions, Inc.; Rockwell Holdco, Inc.; Andrews County Holdings, Inc.; Waste Control Specialists LLC
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