In 2013, Ardagh Group, S.A. announced a proposed $1.7 billion acquisition of a US division of Saint-Gobain Containers, Inc., a deal that would combine two of only three major glass container manufacturers in the US. Demand for these glass containers is dominated by brewers and distillers. After an initial review of the deal was conducted, the US Federal Trade Commission (FTC) filed suit against the two companies in federal district court to halt the proposed acquisition, alleging that not only would the proposed transaction “dramatically increase the ease and likelihood of coordination,” but that the industry participants had already coordinated to reduce excess capacity and raise prices. The FTC’s complaint also alleged that the relevant product market was limited to glass containers and the relevant geographic market was nationwide.
NERA expert Dr. Chetan Sanghvi was retained by Ardagh to testify as the economic expert at trial after the FTC voted to block the merger. Dr. Sanghvi and Dr. Timothy Watts utilized econometric analyses, game theoretic modeling, and other quantitative tests to examine empirically the competitive environment and to identify and measure market factors that constrain pricing for glass containers. The analyses showed there had been no coordination, and that capacity reductions were unilaterally rational in the face of declining demand for the product. Detailed econometric analysis of transactional prices rejected the FTC’s proposed “glass only” relevant market, consistent with analyses demonstrating that the perceived risk of customers switching from glass containers to cans or plastic constrained prices. Further, the proposed transaction would not internalize sufficient diversion (sales lost from one rival to another) to threaten competition regardless of the definition of relevant markets. For these reasons, NERA’s analyses demonstrated that the proposed transaction was unlikely to reduce competition.
After months of pretrial procedures, a settlement was reached in 2014 allowing Ardagh to move forward pending the sale of a portion of its US manufacturing plants.