Antitrust Advisory: Fifth Circuit Affirms FTC Order to Divest Assets in Chicago Bridge & Iron

On January 25, 2008, the U.S. Court of Appeals for the Fifth Circuit denied a petition by Chicago Bridge & Iron Company N.V. (“CBI”) to review an administrative decision issued by the Federal Trade Commission (“FTC” or the “Commission”).1 The FTC’s administrative decision held that CBI’s acquisition of the Water Division and the Engineered Construction Division of Pitt-Des Moines, Inc. (“PDM”)violated Section 7 of the Clayton Act and Section 5 of the FTC Act, and ordered divestiture. The Fifth Circuit’s decision upholds the FTC’s administrative decision, and effectively ends litigation in this

long-fought case that was initially filed in October 2001.

Why This Case Is Important

The Fifth Circuit’s decision stands as a conspicuous reminder that expiration of the 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Act does not render the government powerless to act if it believes, even in hindsight, that a transaction raises competitive concerns. In this case, the FTC allowed the waiting period to expire without issuing a second request, permitting

the parties to close the deal. The FTC staff subsequently determined that the transaction raised antitrust concerns, and then began to investigate. Both CBI and PDM were on notice that the FTC had commenced an investigation, but they opted to close the deal nonetheless.

Now after almost seven years of operating as a merged firm, CBI must reorganize its business pursuant to the Commission’s original order. And the costs of “unscrambling the eggs,” as the Commission put it, will likely be extensive. It is worthy to note that this case is unusual because the FTC rarely challenges mergers subsequent to the expiration of the 30-day waiting period. But where the parties are aware of an FTC investigation, they should carefully consider the decision to close regardless of whether the waiting period has expired.