'Anticompetitive and illegal' Parker Hannifin deal not shielded by HSR clearance, DOJ official says

28 September 2017. By Richard Vanderford .

Early clearance for a merger under the Hart-Scott-Rodino Act won't shield an "anticompetitive and illegal" deal from later antitrust scrutiny, the US Justice Department's director of civil enforcement said.

Patricia Brink was defending the DOJ's decision to sue Parker Hannifin over its acquisition of Clarcor months after the companies closed the deal.

Companies can't take refuge behind their HSR clearance, Brink said Thursday at a conference* in New York.

"We really can't ignore what's an anticompetitive merger because it already had gotten HSR clearance," Brink said. "You can't take certainty away from having obtained HSR clearance that it is going to shield an anticompetitive and illegal merger from either of the agencies challenging that merger."

The DOJ this week sued to force Parker Hannifin to sell off part of Clarcor, a company it acquired in a $4.3 billion deal that closed in February.

The filing of the litigation marked the DOJ antitrust division's first merger challenge since President Donald Trump took office.

The Justice Department found that the two companies' merger allowed the combined entity to completely corner the US market for fuel filters used in aviation, although the filters represent a relatively small part of the combined business.

Brink said that the DOJ received a number of complaints from customers.

"Even though we had given the HSR clearance, we still needed to stop what was an anticompetitive merger and attempt to unwind that portion," she said.

Brink indicated that companies and their lawyers might consider flagging potentially problematic areas of a transaction to avoid a late surprise from the government.

A Parker Hannifin vice president had raised the "notable area of overlap" in an e-mail to the president of the company's filtration unit and asked whether the company should be "forthcoming," even suggesting that divestiture might be necessary.

Brink indicated that the company didn't share those concerns with DOJ enforcers.

"The takeaway should be that if there's really some clear and obvious overlap it may behoove counsel to raise that," Brink said.

She also rejected the notion that the transition between presidential administrations interfered with the antitrust division investigation.

"I can really say this had nothing to do with the timing of the transition," Brink said. "We really worked hard to make sure during that transition time that it was very much business as usual at the division."