[Federal Register Volume 88, Number 174 (Monday, September 11, 2023)]
[Notices]
[Pages 62392-62395]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19530]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. ASSA ABLOY AB, et al.; Response of the United 
States to Public Comments on the Proposed Final Judgment

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that the Response of the United 
States to Public Comments on the Proposed Final Judgment in United 
States of America v. ASSA ABLOY AB, et al., Civil Action No. 22-2791-
ACR, has been filed in the United States District Court for the 
District of Columbia, together with the response of the United States 
to the comment.
    Copies of the public comment and the United States' Response are 
available for inspection on the Antitrust Division's website at http://www.justice.gov/atr.

Suzanne Morris,
Deputy Director Civil Enforcement Operations, Antitrust Division.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA, Plaintiff, v. ASSA ABLOY AB, et al., 
Defendants.

Civil Case No. 22-2791-ACR

RESPONSE OF PLAINTIFF UNITED STATES OF AMERICA TO PUBLIC COMMENTS ON 
THE PROPOSED FINAL JUDGMENT

    As required by the Antitrust Procedures and Penalties Act (the 
``Tunney Act''), 15 U.S.C. 16(b)-(h), Plaintiff United States of 
America hereby responds to the public comment received about the 
Proposed Final Judgment, ECF No. 128-4. After careful consideration of 
the comment received, the United States will move the Court for entry 
of the Proposed Final Judgment after the public comment and this 
Response have been published in the Federal Register, pursuant to 15 
U.S.C. 16(d), and believes that the Court will conclude that the 
Proposed Final Judgment is in the public interest under the Tunney Act.

I. Procedural History

    On September 8, 2021, Defendant ASSA ABLOY AB (``ASSA ABLOY'') 
agreed to acquire the Hardware and Home Improvement division of 
Defendant Spectrum Brands Holdings, Inc. (``Spectrum'') for 
approximately $4.3 billion. On September 15, 2022, the United States 
filed an antitrust lawsuit to stop the proposed acquisition from being 
consummated. The United States' Complaint alleged that the proposed 
acquisition may substantially lessen competition in the markets for two 
types of residential door hardware (premium mechanical door hardware 
and smart locks) in the United States, in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18.
    The parties vigorously litigated the case for more than seven 
months, culminating in a bench trial that began on April 24, 2023. On 
May 5, 2023, while the trial was ongoing, the United States filed a 
Proposed Final Judgment, Competitive Impact Statement, ECF No. 129, and 
Asset Preservation Stipulation and Order (``Stipulation''), ECF No. 
128-1. The Competitive Impact Statement described the transaction and 
the Proposed Final Judgment. Through the Stipulation, which the Court 
entered on May 5, 2023, the parties and non-party divestiture buyer 
Fortune Brands Innovations, Inc. (``Fortune''), consented to the entry 
of the Proposed Final Judgment after compliance with the requirements 
of the Tunney Act. Under the Stipulation, Defendants and Fortune also 
agreed to abide by and comply with all the terms of the Proposed Final

[[Page 62393]]

Judgment until it is entered by the Court.
    The United States caused the Complaint, the Proposed Final 
Judgment, the Competitive Impact Statement, and directions for the 
submission of written comments relating to the Proposed Final Judgment, 
to be published in the Federal Register on May 15, 2023. See 88 FR 
31007 (May 15, 2023). The United States also caused notice of the same, 
together with directions for submission of comments, to be published in 
The Washington Post for seven days, from May 12-18, 2023. The 60-day 
period for public comments has ended. During the public comment period, 
the United States received one comment, which is described below in 
Section IV and attached in Appendix A.

II. Standard of Judicial Review

    Under the Clayton Act, as amended by the Tunney Act, proposed final 
judgments, or ``consent decrees,'' in antitrust cases brought by the 
United States are subject to a 60-day comment period, after which the 
Court shall determine whether entry of the proposed final judgment ``is 
in the public interest.'' 15 U.S.C. 16(e)(1). In making that 
determination, the Court, in accordance with the statute as amended in 
2004, is required to consider:
    (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.

Id. In considering these statutory factors, the Court's inquiry is 
necessarily a limited one because the government is entitled to ``broad 
discretion to settle with the defendant within the reaches of the 
public interest.'' United States v. Microsoft Corp., 56 F.3d 1448, 1461 
(D.C. Cir. 1995); United States v. US Airways Grp., Inc., 38 F. Supp. 
3d 69, 75 (D.D.C. 2014) (``court's inquiry is limited'' in Tunney Act 
settlements); United States v. InBev N.V./S.A., 2009 U.S. Dist. LEXIS 
84787, at *3 (D.D.C. Aug. 11, 2009) (similar).
    Under the Tunney Act a court considers, among other things, the 
relationship between the remedy secured and the specific allegations in 
the United States' Complaint, whether the proposed final judgment is 
sufficiently clear, whether its enforcement mechanisms are sufficient, 
and whether it may positively harm third parties. See Microsoft, 56 
F.3d at 1458-62. With respect to the adequacy of the relief secured, a 
court may not ``make de novo determination of facts and issues.'' 
United States v. W. Elec. Co., 993 F.2d 1572, 1577 (D.C. Cir. 1993); 
see also Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 
152 F. Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 
F. Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, 
at *3. Instead, ``[t]he balancing of competing social and political 
interests affected by a proposed antitrust decree must be left, in the 
first instance, to the discretion of the Attorney General.'' W. Elec. 
Co., 993 F.2d at 1577. ``The court should also bear in mind the 
flexibility of the public interest inquiry: the court's function is not 
to determine whether the resulting array of rights and liabilities is 
the one that will best serve society, but only to confirm that the 
resulting settlement is within the reaches of the public interest.'' 
Microsoft, 56 F.3d at 1460; see also United States v. Deutsche Telekom 
AG, 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More demanding 
requirements would ``have enormous practical consequences for the 
government's ability to negotiate future settlements,'' contrary to 
congressional intent. Microsoft, 56 F.3d at 1456. ``The Tunney Act was 
not intended to create a disincentive to the use of the consent 
decree.'' Id. The ultimate question is whether ``the remedies [obtained 
by the final judgment are] so inconsonant with the allegations charged 
as to fall outside of the `reaches of the public interest.' '' 
Microsoft, 56 F.3d at 1461 (quoting W. Elec. Co., 900 F.2d at 309).
    Moreover, the Tunney Act does not authorize the Court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also US Airways, 
38 F. Supp. 3d at 75 (``[A] court must simply determine whether there 
is a factual foundation for the government's decisions such that its 
conclusions regarding the proposed settlements are reasonable.''); 
InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``[T]he `public interest' 
is not to be measured by comparing the violations alleged in the 
complaint against those the court believes could have, or even should 
have, been alleged''). 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 place,'' it 
follows that ``the court is only authorized to review the decree 
itself,'' and not to ``effectively redraft the complaint'' to inquire 
into other matters that the United States did not pursue. Microsoft, 56 
F.3d at 1459-60.
    In its 2004 amendments to the Tunney Act, Congress made clear its 
intent to preserve the practical benefits of using judgments proposed 
by the United States in antitrust enforcement, Public Law 108-237 Sec.  
221, and added the unambiguous instruction that ``[n]othing in this 
section shall be construed to require the court to conduct an 
evidentiary hearing or to require the court to permit anyone to 
intervene.'' 15 U.S.C. 16(e)(2); see also US Airways, 38 F. Supp. 3d at 
76 (court is not required to hold an evidentiary hearing or to permit 
intervenors as part of its review under the Tunney Act). This language 
explicitly wrote into the statute what Congress intended when it first 
enacted the Tunney Act in 1974. As Senator Tunney explained: ``[t]he 
court is nowhere compelled to go to trial or to engage in extended 
proceedings which might have the effect of vitiating the benefits of 
prompt and less costly settlement through the consent decree process.'' 
119 Cong. Rec. 24,598 (1973) (statement of Sen. Tunney). ``A court can 
make its public interest determination based on the competitive impact 
statement and response to public comments alone.'' US Airways, 38 F. 
Supp. 3d at 76 (citing Enova Corp., 107 F. Supp. 2d at 17).

III. The Complaint and the Proposed Final Judgment

    The Proposed Final Judgment is the culmination of approximately 
twenty-one months of thorough investigation and vigorous litigation by 
the Antitrust Division of the U.S. Department of Justice concerning 
ASSA ABLOY's proposed acquisition of Spectrum's Hardware and Home 
Improvement division (``Spectrum HHI''). As alleged in the Complaint, 
ASSA ABLOY and Spectrum HHI were, at the time the Complaint was filed, 
close competitors with enormous market shares. Significant head-to-head 
competition between Defendants to sell residential door hardware 
historically generated lower prices, higher quality, exciting 
innovations, and superior customer service. The Complaint alleged that 
the combination of ASSA ABLOY and

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Spectrum HHI would have eliminated those benefits.
    The Proposed Final Judgment is designed to mitigate as many risks 
to competition alleged in the Complaint as possible. Principally, the 
Proposed Final Judgment requires ASSA ABLOY divest to Fortune, or to 
another entity approved by the United States in its sole discretion, 
assets that the Defendants previously used to compete against each 
other in the United States. In connection with those divestitures, the 
Proposed Final Judgment mandates a specific transition period for 
entanglements between ASSA ABLOY and Fortune. It also subjects ASSA 
ABLOY to significant financial penalties if ASSA ABLOY fails to 
transfer the divestiture assets by December 31, 2023. Additionally, the 
Proposed Final Judgment provides for the appointment of a monitoring 
trustee to oversee Defendants' compliance with the terms of the 
Proposed Final Judgment. Importantly, the Proposed Final Judgment also 
provides that the monitoring trustee can investigate whether the 
divestiture buyer will have replicated the competitive intensity in the 
residential smart locks market that existed pre-divestiture. If the 
monitoring trustee determines at least three years following the 
divestiture that the divested smart lock assets have diminished in 
competitive intensity and that such diminishment is in material part 
due to limitations on the acquirer's right to use the Yale brand name 
or trademarks in the United States and Canada, then the United States 
may seek divestiture of additional ASSA ABLOY Yale-related assets.

IV. Summary of Public Comment and the United States' Response

    During the 60-day public comment period, the United States received 
one comment from an individual. After reviewing this comment, the 
United States continues to believe that the Court will conclude that 
the Proposed Final Judgment is in the public interest under the Tunney 
Act.

A. Summary of Public Comment

    The commenter states that he believes the two transactions 
contemplated by the Proposed Final Judgment--ASSA ABLOY's divestiture 
of assets to Fortune and ASSA ABLOY's acquisition of Spectrum HHI--
would violate the antitrust laws and harm both consumers and ``the 
industry as a whole.'' The commenter states that Fortune ``has a track 
record of moving in a direction that is not always in the best interest 
of consumers and end users,'' and that ``Fortune's business model 
relies less and less on small business relationships.'' Based on these 
views, the commenter states that the divestiture of the EMTEK brand to 
Fortune ``could result in reduced competition and innovation.'' He also 
posits that Fortune could obtain a ``one sided market position'' with 
respect to padlocks if ASSA ABLOY's ``Yale Mechanical hardware'' is 
included in the divestiture. And, more generally, the commenter states 
that the transactions ``could give'' ASSA ABLOY and Fortune ``a 
dominant market position,'' apparently based on his belief that the 
transactions would bring Yale, Kwikset, Baldwin, and other brands under 
``common ownership.''

B. Response of the United States

    Nothing in the comment casts doubt on the United States' 
determination that the Court will conclude that the Proposed Final 
Judgment is in the public interest under the Tunney Act. The 
commenter's comment raises concerns that (1) misapprehend the nature of 
the Proposed Final Judgment, (2) reach beyond the scope of the harms 
alleged in the Complaint, and (3) are abstract and speculative.
    First, some aspects of the comment appear to misapprehend the 
nature of the Proposed Final Judgment. In particular, the commenter's 
concern that the two transactions contemplated by the Proposed Final 
Judgment would result in Yale, Kwikset, and Baldwin ``shar[ing] common 
ownership'' misunderstands which assets are being sold and retained by 
ASSA ABLOY. Under the Proposed Final Judgment, ASSA ABLOY is divesting 
the Yale brand in the United States and Canada to Fortune for all 
current and future residential and multifamily uses, and it requires 
ASSA ABLOY to stop using the Yale brand entirely in the United States 
and Canada following a transitional, wind-down period. Therefore, in 
the United States and Canada, contrary to the commenter's statements, 
Baldwin, Yale, and Kwikset would not be under the control of the same 
company.
    Second, the comment raises concerns that go beyond the harms 
alleged in the Complaint. For example, the commenter expresses concern 
about concentration in a market for padlocks, potential harm from 
``reliance on overseas manufacturing,'' and the inability of smaller 
distributors to ``sustain[] healthy business practices,'' none of which 
was alleged in the Complaint as a harm arising from the proposed 
transaction. The Complaint did not allege a product market that 
included padlocks. Therefore, these concerns extend beyond the 
permissible scope of Tunney Act review. See supra Part II.
    Third, the comment provides no specific basis to suggest that the 
Court will not find the Proposed Final Judgment to be in the public 
interest under the Tunney Act or any basis for ``exceptional confidence 
that adverse antitrust consequences will result.'' Microsoft, 56 F.3d 
at 1460. The commenter does not elaborate on his concerns about 
Fortune's ``track record'' and ``business model.'' Nor does the comment 
provide information sufficient to meet the Microsoft standard that 
demonstrates potential harm to competition in the market for premium 
mechanical door hardware or adverse effects on consumers.

V. Conclusion

    After careful consideration of the comment received, the United 
States continues to believe that the Court will conclude that the 
Proposed Final Judgment is in the public interest under the Tunney Act. 
The United States will move the Court for entry of the Proposed Final 
Judgment after the public comment and this Response have been published 
in the Federal Register, pursuant to 15 U.S.C. 16(d).

Dated: September 1, 2023

Respectfully submitted,
/s/Matthew R. Huppert
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Matthew R. Huppert (DC Bar #1010997)
Miranda Isaacs

Trial Attorneys, United States Department of Justice, Antitrust 
Division, 450 Fifth Street NW, Suite 8700, Washington, DC 20530, 
Telephone: (202) 476-0383, Email: [email protected]
Counsel for Plaintiff United States of America

APPENDIX A

    Dear Chief, Defense, Industrials, and Aerospace Section,
    I am writing to express my concern not only about the proposed 
acquisition of Spectrum Brands' Hardware & Home Improvement (HHI) 
Division by Assa Abloy, but also about the divestiture of Emtek to 
Fortune Brands. I believe that both of these transactions would 
violate the antitrust laws of the United States and have a negative 
impact on consumers and the industry as a whole. There is not 
sufficient clarity if the Yale business unit (mechanical door 
hardware) will be included in divestiture or retained by Assa Abloy, 
either situation begs further consideration.
    In the case of Emtek and Schaub, the divestiture to Fortune 
Brands could result in reduced competition and innovation in the 
lock and hardware industry. Fortune Brands has a track record of 
moving in a direction that is not always in the best interest of 
consumers and end users, which could have a negative impact on the 
industry as a whole. This could result in fewer options for

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consumers, lesser quality products that do not have the longevity 
consumers have come to expect and ultimately harm the industry. 
Fortune's business model relies less and less on small business 
relationships, rather they are actively moving away from these 
smaller companies in favor of larger distributors, big box stores, 
online retailers, etc. Since it is not clear if Yale Mechanical 
hardware (different from Smart locks) will be included in the 
divestiture, please note that the Masterlock Brand along with Yale's 
padlocks could make for one sided market position. Also of note, 
Schaub's product offering is not considered Mechanical door 
hardware.
    Furthermore, the combination of Assa Abloy's acquisition of 
Spectrum Brands' HHI division and Fortune Brands' acquisition of 
Emtek could give these companies a dominant market position in the 
residential lock and hardware industry. This could lead to higher 
prices, reduced innovation, and further reliance on overseas 
manufacturing where quality is often sacrificed and corporate 
profits are favored. The harm small and medium-sized businesses 
could experience is not conducive to sustaining healthy business 
practices that rely on these companies for their lock and hardware 
needs. Specifically, regarding the acquisition of Spectrum Brands' 
HHI division by Assa Abloy, consideration must be given to the 
reduced intensity of competition that could take place should the 
following door hardware brands share common ownership: Yale, 
Kwikset, Baldwin, Weiser, National Hardware, EZset.
    I urge the Department of Justice to carefully consider the 
implications of both the proposed acquisition of Spectrum Brands' 
HHI division by Assa Abloy and the divestiture of Emtek and Schaub 
to Fortune Brands. The value of small businesses to our economy, 
especially in the Residential housing market is not to be taken 
lightly.
    The antitrust laws are in place to protect the American people, 
and I trust that the Department of Justice will take the necessary 
steps to ensure fair competition in the market.
    I wish to thank Attorney General Merrick Garland and Deputy 
Attorney General Lisa Monaco for their high level of service to the 
American People.
    Thank you for your time and consideration in this matter.
    Sincerely,
    Joseph Storrs

[FR Doc. 2023-19530 Filed 9-8-23; 8:45 am]
BILLING CODE 4410-11-P