Acquisition in Drop Cable Industry Challenged by Justice Department

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reports.

The Department of Justice Antitrust Division filed a complaint and proposed consent decree on December 6 in the federal district court in Washington, D.C. to preserve competition in the manufacture of drop cable, in light of CommScope Inc.’s proposed $2.6 billion acquisition of Andrew Corporation.

CommScope is a leading manufacturer and provider of wire and cable products, including drop cable, coaxial cable used by cable television companies. Andrew Corp., a major manufacturer and supplier of products for antenna and cable and wireless communications systems, manufactured drop cable until it sold the business in March 2007 to Andes Industries Inc. Andrew maintained a 30 percent ownership interest in Andes, as well as governance rights and the right to appoint members to Andes’ board of directors.

Interlocking Directorates

The Justice Department alleged that the transaction, as originally proposed, might have substantially lessened competition in the highly-concentrated market for drop cable in the United States and would have created interlocking directorates. The transaction would have given CommScope the ability to appoint directors to the board of Andes, a substantial competitor, in violation of Section 8 of the Clayton Act, according to the Justice Department.

Under the proposed consent decree, CommScope and Andrew must divest all of Andrew’s stock ownership and other interests in Andes. Upon completion of the divestiture, neither CommScope nor Andrew will have any rights to appoint Andes directors or otherwise control or influence the business operations of Andes.

European Commission

The European Commission (EC) announced on December 4 that CommScope’s acquisition of Andrew cleared scrutiny under the European Union Merger regulation. The EC concluded that the transaction would not significantly impede effective competition in Europe. The EC announcement noted the companies’ strong position in the U.S. and the U.S. Department of Justice review of the transactions.

The December 6 announcement of the action appears on web site of the Department of Justice Antitrust Division. Details of the complaint and proposed consent decree in U.S. v. CommScope, Inc., will appear in CCH Trade Regulation Reports.