PUBLIC ORIGINAL 

UNITED STATES OF AMERICA 

BEFORE THE FEDERAL TRADE COMMISSI 

OFFICE OF ADMINISTRATNE LAW JUDGES 

In the Matter of PUBLIC 

Ardagh Group S.A., 

a public limited liability company, and 

DOCKET NO. 9356 

Compagnie de Saint-Gobain, a corporation, 

and 

Saint-Gobain Containers, Inc., 

a corporation. 

Complaint Counsel's Response to Application ofArdagh Group S.A. 

Under Rule 3.25(a) for Settlement Conference 

Respondent Ardagh Group S.A. has asked the Court, pursuant to Rule 3.25(a), to convene 

an in-person settlement conference to facilitate settlement. Complaint Counsel does not oppose 

such a conference because we are committed to taking any steps, consistent with our statutory 

obligations, which might make both this litigation and the federal court litigation unnecessary. 

But a settlement on consent must ultimately be approved by the Commission and thus must 

address the Commission's concerns expressed in its Complaint. Respondent appears to be 

wedded to a proposal that is unlikely to resolve those concerns. Thus, we believe it prudent to 

advise the Court that a conference, at least now, is not likely to increase materially the likelihood 

of settlement. 

We have informed Respondents that their current settlement proposal is so materially 

deficient that no reasonable probability of settlement exists at this time. The Bureau of 

Competition previously has given Respondents clear guidance as to proposals (by identifying 

specific plants) that may be more likely to address the Commission's concerns, although we 

cannot say in the abstract, without additional information, that even those proposals will resolve 

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PUBLIC 

those concerns. Instead ofproposing a divestiture package including those plants, last Friday, 

Respondent made public its intent to sell four glass container plants in an effort to resolve the 

transaction's anticompetitive effects. Complaint Counsel has informed Respondents that their 

proposal is not one that the Bureau of Competition could recommend to the Commission even if 

it were more than a hypothetical transaction. Further, we cannot say in the abstract that any 

particular set ofplants will satisfy our concerns. Without the buyer's identity, the terms of the 

agreement between Ardagh and the buyer, and an understanding ofthe buyer's business plan for 

these plants, any proposal (even those including the sets ofplants we have said is more likely to 

resolve the Commission's concerns) is simply insufficiently detailed for the Bureau to 

recommend that the Commission accept it as a consent. We are providing the Court with a letter 

we sent to Respondent's counsel (Attachment A) prior to their request for a settlement 

conference that lays out some of the reasons the current proposal is not acceptable and gives 

additional detail on the types of information necessary to vet any proposal before it can be 

recommended to the Commission. 1 Rather than engage in a constructive dialogue, Respondents 

have instead filed their motion for a settlement conference. Ifthere were a discrete set of issues 

impeding settlement, a settlement conference might be warranted. Here, however, Respondents' 

proposal is not acceptable, and there are simply too many significant issues that need to be 

addressed before an acceptable consent can be fashioned. 

We are also providing the Court with our Opening brief(Attachment B) filed under seal in the federal 

district court action and will provide the Court with the reply when it is filed on Monday. 

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Nevertheless, we remain committed to pursuing settlement discussions and we are ready 

to meet with the Court and Ardagh if the Court concludes that a conference is not premature. 

September 27, 2013 Respectfully submitted, 

s/ Edward D. Hassi 

EDWARD D. HASSI 

ChiefLitigation Counsel 

Federal Trade Commission 

Bureau of Competition 

600 Pennsylvania Ave., NW 

Washington, DC 20580 

Telephone: (202) 326-2470 

Facsimile: (202) 326-2884 

Email: ehassi@ftc.gov 

Attorneyfor Complaint Counsel 

3 

PUBLIC 

ATTACHMENT A 

CONFIDENTIAL- REDACTED IN ENTIRETY 
PUBLIC 

ATTACHMENT B 

REDACTED PUBLIC VERSION 
PUBLIC 


UNITED STATES DISTRICT COURT 


FOR THE DISTRICT OF COLUMBIA 


FEDERAL TRADE COMMISSION, 

Plaintiff, 

v. 

ARDAGH GROUP, S.A., 


COMPAGNIE DE SAINT-GOBAIN, and 


SAINT-GOBAIN CONTAINERS, INC., 


Defendants. 

Case No.1 :13-CV-01021 (BJR) 

PUBLIC VERSION 

PLAINTIFF'S MEMORANDUM OF LAW IN SUPPORT OF ITS 


MOTION FOR PRELIMINARY INJUNCTION 


REDACTED VERSION 


FOR PUBLIC FILING* 


*The Federal Trade Commission files this non-confidential redacted version of its Memorandum 

ofLaw in Support of its Motion for Preliminary Injunction, filed August 28, 2013. The 

Protective Order requires all information designated "Confidential" to be redacted from the 

public version ofthe pleading filed with the court. Although Defendants designated all 

information and documents redacted in this Memorandum as "Confidential," most ofthe 

information does not appear to be commercial information, the disclosure ofwhich would cause 

injury to their businesses. 
PUBLIC 


TABLE OF CONTENTS 


INTRODUCTION ...........................................................................................................................1 


STATEMENT OF FACTS ..............................................................................................................5 


I. 	 Glass Containers Have Unique Attributes .......................................................................... 6 


II. 	 The Glass Container Industry Is Already Consolidated ..................................................... 8 


III. 	 Ardagh And Saint-Gobain Compete With Each Other Today ............................................ 9 


IV. 	 Anchor Alleged A Relevant Product Market Of Glass Containers Only, Excluding 


Plastic and Metal. .............................................................................................................. 11 


V. The Commission Challenges Ardagh's Acquisition OfSaint-Gobain ............................. 12 


ARGUMENT.................................................................................................................................12 


I. 	 THE FTC HAS RAISED "SERIOUS, SUBSTANTIAL" ISSUES APPROPRIATE 


FORAN ADMINISTRATIVE TRIAL ............................................................................ 12 


II. 	 THE PROPOSED TRANSACTION IS PRESUMPTIVELY UNLAWFUL .................. 15 


A. 	 Two Relevant Product Markets Are The Manufacture And Sale Of Glass Containers 


To (1) Beer Brewers And (2) Spirits Distillers ............................................................. 16 


1. 	 Defendants' and Third Parties' Documents And Actions Show That The Relevant 


Product Markets Include Only Glass Containers ..................................................... 19 


2. 	 Plastic Bottles And Metal Cans Are Not In The Relevant Product Markets ............ 23 


3. 	 Case Law Supports The Commission's Definition Of The 


Relevant Product Markets ........................................................................................ 30 


B. 	 The Relevant Geographic Market Is The United States ............................................... 33 


c. 	 The Transaction Is Likely To Lead To Reduced Competition And Higher Prices ...... 35 


1. 	 The Acquisition Is Presumptively Unlawful Because It Will Substantially Increase 


Concentration........................................................................................................... 35 


2. 	 The Acquisition Will Likely Result In Coordinated Anticompetitive Effects ......... 36 


3. 	 The Acquisition Will Eliminate Head-to-Head Competition Between Ardagh and 


Saint-Gobain............................................................................................................ 40 


III. 	 DEFENDANTS' REBUTTAL ARGUMENTS FAIL, AND, AT BEST, RAISE ISSUES 


FOR RESOLUTION IN THE ADMINISTRATIVE TRIAL ........................................... 41 


A. 	 High Barriers To Entry And Expansion Exist In The Glass Container Industry .......... 42 


B. 	 Defendants' Efficiency Claims Are Largely Unfounded .............................................. 43 


IV. 	 THE PUBLIC INTEREST STRONGLY FAVORS PRELIMINARY RELIEF TO 


PRESERVE THE STATUS QUO ................................................................44 


CONCLUSION..............................................................................................................................45 


11 
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TABLE OF AUTHORITIES 

CASES 

., 	 Brown Shoe Co. v. United States, 370 U.S. 294 (1962) ........................................................passim 


Eastman Kodak Co. v. Image Technical Servs. Inc., 504 U.S. 451 (1992) ................................. 32 


*FTCv. CCC Holdings, Inc., 605 F. Supp. 2d 26 (D.D.C. 2009) (Collyer, J.) ....................passim 

FTC v. Coca-Cola Co., 641 F. Supp. 1128 (D.D.C. 1986), vacated as moot, 829 F.2d 191 (D.C. 

Cir. 1987) ................................................................................................................................ 2, 3 


FTC v. Dean Foods Co., 384 U.S. 597 (1966) ............................................................................. 45 


FTC v. Elders Grain, Inc., 868 F.2d 901 (7th Cir. 1989) ....................................................... 13, 14 


FTC v. Exxon Corp., 636 F.2d 1336 (D.C. Cir. 1980) ............................................................ 14, 32 


FTC v. Food Town Stores, Inc., 539 F.2d 1339 (4th Cir. 1976) ............................................. 14,45 


*FTC v. HJ Heinz Co., 246 F.3d 708 (D.C. Cir. 2001) ...................................................... passim 


FTC v. PPG Indus., Inc., 798 F.2d 1500 (D.C. Cir. 1986) ........................................................... 16 


*FTC v. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 1997) ..................................................... passim 


*FTC v. Swedish Match, 131 F. Supp. 2d 151 (D.D.C. 2000) .............................................. passim 


FTC v. University Health, Inc., 938 F.2d 1206 (11th Cir. 1991) .................................................. 45 


FTC v. Weyerhaeuser Co., 665 F.2d 1072 (D.C. Cir. 1981) ........................................................ 45 


* FTCv. Whole Foods Market, Inc., 548 F.3d 1028 (D.C. Cir. 2008) .................................. passim 


Geneva Pharms. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485 (2d Cir. 2004) ................ 25, 30, 31 


Hosp. Corp. ofAm. v. FTC, 807 F .2d 1381 (7th Cir. 1986) .......................................................... 16 


In re Owens-Illinois, 115 F.T.C. 179 (1992) .......................................................................... 32,33 


Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210 (D.C. Cir. 1986) ........... 19, 30 


United States v. Baker Hughes Inc., 908 F.2d 981 {D.C. Cir. 1990) ...................................... 16,41 


United States v. Continental Can Co., 378 U.S. 441 (1964) .................................................. 32, 33 


*United States v. H&R Block, Inc., 833 F. Supp. 2d 36 (D.D.C. 2011) ............................... passim 


United States v. Visa USA, Inc., 163 F. Supp. 2d 322 (S.D.N.Y. 2001) ....................................... 42 


lll 
PUBLIC 


STATUTES 

FTC Act§ 5, 15 U.S.C. § 45 .................................................................................................. passim 


FTC Act§ 13(b), 15 U.S.C. § 53(b) ...................................................................................... passim 


Clayton Act§ 7, 15 U.S.C. § 18 ............................................................................................ passim 


OTHER AUTHORITIES 

Phillip E. Areeda, Herbert Hovenkamp eta!., Antitrust Law ....................................................... 39 


R. Posner & F. Easterbrook, Antitrust Cases, Economic Notes and Other Materials .................. 33 


Joseph Farrell, Fox, or Dangerous Hedgehog? Keyte and Schwartz on the 2010 Horizontal 

Merger Guidelines, 77 ANTITRUST L.J. 661 (2011) ................................................................. 32 

U.S. Dep't ofJustice & Federal Trade Commission, 2010 Horizontal Merger Guidelines .. passim 

GLOSSARY 

For the Court's convenience, we have attached a name glossary identifying the individuals and 

companies whose testimony is cited herein. 

iv 
PUBLIC 

The Federal Trade Commission ("FTC" or the "Commission") has commenced an action 

in this Court under Section of 13(b) ofthe FTC Act seeking to enjoin preliminarily Ardagh 

Group S.A. ("Ardagh") from completing its acquisition of Saint-Gobain Containers, Inc. ("SaintGobain" or "Verallia North America") until the resolution ofthe Commission's pending 

administrative case to determine the legality ofthe proposed acquisition. The Commission 

respectfully submits this memorandum of law in support of its preliminary injunction motion. 

INTRODUCTION 

The Commission seeks to halt an acquisition that, if consummated, would dramatically 

concentrate the glass container industry in the hands oftwo manufacturers and lead to higher 

prices for glass beer and spirits bottles. For years, three manufacturers have dominated the $5 

billion glass container industry in the United States. The second- and third-largest ofthese 

manufacturers, Ardagh and Saint-Gobain, now propose to merge in a transaction that would 

create a durable duopoly. Under well-settled precedent and the Commission's merger 

guidelines, this merger to duopoly is presumptively unlawful. Indeed, a top Ardagh sales 

executive stated in June 2013 that Ardagh believes the transaction "may not get approved" since 

"it is going from 3 to 2 major suppliers." 1 

The Commission has initiated an administrative proceeding to adjudicate the legality of 

the proposed transaction under the antitrust laws, and the trial in that proceeding begins on 

December 2, 2013. Thus, the only issue for this Court is whether to grant interim relief by 

enjoining the Defendants from consummating the proposed acquisition pending the upcoming 

merits trial. The Court should do so because such interim relief is necessary to prevent consumer 

harm and to preserve the possibility of an effective remedy. 

I PX 1574. 

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PUBLIC 

Under Section 13(b) ofthe FTC Act, the Commission is entitled to a preliminary 

injunction "[u]pon a proper showing that, weighing the equities and considering the 

Commission's likelihood of ultimate success, such action would be in the public interest." 15 

U.S.C. § 53(b ). At this stage, the Commission is not required to prove whether the acquisition, 

is, in fact, illegal under the antitrust laws. "That responsibility lies with the FTC" after a full 

administrative hearing. FTCv. Whole Foods Market, Inc., 548 F.3d 1028, 1035 (D.C. Cir. 2008) 

(Brown, J.). The FTC creates a strong "presumption in favor of preliminary injunctive relief' by 

raising "questions going to the merits so serious, substantial, difficult and doubtful as to make 

them fair ground for thorough investigation, study, deliberation and determination by the FTC in 

the first instance and ultimately by the Court ofAppeals." FTC v. HJ. Heinz Co., 246 F .3d 708, 

714-15 (D.C. Cir. 2001). The Commission undoubtedly has met that standard here. 

To counter this strong presumption, coupled with the strong "public interest in effective 

enforcement ofthe antitrust laws," defendants must show "particularly strong equities" that favor 

allowing the acquisition to close before trial. !d. at 726-27; Whole Foods, 548 F.3d at 1035 

(Brown, J.). Defendants cannot do so. At best, Defendants' arguments only underscore the 

"serious, substantial" questions to be resolved in the administrative trial. 

This acquisition will likely cause anticompetitive effects in at least two relevant antitrust 

product markets: the manufacture and sale of glass containers to (1) beer brewers ("Brewers") 

and (2) spirits distillers ("Distillers"). Both are relevant antitrust markets for the purposes of 

assessing the acquisition's competitive impact because other types of containers, such as 

aluminum cans or plastic bottles, are not economically viable substitutes for glass. 

The proper delineation ofthe relevant market is ultimately "a matter of business realitya matter of how the market is perceived by those who strive to profit in it." FTC v. Coca-Cola 

2 

PUBLIC 

Co., 641 F. Supp. 1128, 1132 (D.D.C. 1986), vacated as moot, 829 F.2d 191 (D.C. Cir. 1987). 

On that question, the evidence leaves little doubt. 

• 	 Glass container manufacturers refer to the "three majors" of glass container 

manufacturing, tell the investment community they operate in a glass container market, 

and calculate market shares based only on glass container sales. 

• 	 Aluminum and plastic con~ainer manufacturers have testified that they do not compete 

directly with glass. 

• 	 Glass container manufacturers bid for contracts knowing their customers have already 

excluded aluminum cans or plastic bottles from consideration. 

• 	 Brewers and Distillers who sell products in glass bottles want glass -not cans or plastic 

-because their customers demand it. As one Brewer explained when asked: "Who 

determines the mix of packaging? Consumers."2 

• 	 Brewers and Distillers do not change their brands' packaging based on variations in the 

relative prices of glass, metal, or plastic containers. 

Unless enjoined, Ardagh's planned $1.7 billion acquisition ofSaint-Gobain would 

produce a single firm controlling I percent of the U.S. glass container industry, according to 

Ardagh's own assessment. The only other major U.S. manufacturer- Owens-Illinois, Inc. 

("0-I") - controls roughly I percent ofthe industry. The post-acquisition duopolists would 

collectively control approximately I percent of the glass container market for Brewers and I 

percent for Distillers, easily exceeding the levels required to establish a presumption that the 

acquisition violates the antitrust laws. The remaining competitors are fringe importers and 

small-scale or niche manufacturers. 

Today, Ardagh, Saint-Gobain, and 0-1- the "three majors," to borrow a term from 

Ardagh' s documents - recognize their mutual incentives to avoid excess capacity that could lead 

to greater price competition. Indeed, Ardagh's North American President described the glass 

container industry as having "evolved" to be "very disciplined with 'well-balanced' if not tight 

3 


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supply demand dynamics."3 

Still, Brewers and Distillers today benefit :fi:om competition among the major glass 

manufacturers by encouraging those manufacturers to bid for their business, and those benefits 

accrue to consumers. The proposed acquisition would end that competition between Ardagh and 

Saint-Gobain and lead to higher prices for beer and spirits bottles. It would also dramatically 

increase the ease and likelihood of coordination between the only two remaining Majors in a 

"highly concentrated market, with stable market shares, low growth rates and significant barriers 

to ently"- a situation that provides "few incentives to engage in healthy competition." FTC v. 

CCC Holdings, Inc., 605 F. Supp. 2d 26, 66 (D.D.C. 2009) (Collyer, J.). 

The ban"iers to ently in this market are exn·aordinarily high. Glass plants cost hundreds 

ofmillions ofdollars and take years to build. Not smprisingly, Defendants tout the fact that 

"new market entrants are faced with meaningfhl bru.riers to entry, including significant start-up 

costs (estimated at $200 million for a new plant)," and other baniers.6 Where, as here, the 

market is ripe for coordination and new entry is improbable, "no court has ever approved a 

merger to duopoly." Hein=, 246 F.3d at 717. 

3 PX 1260-004; Fredlake Dep. at 126-27. 

see also Grewe Dep. at 128 

6 PX 1247-008. 

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PUBLIC 


STATE:MENT OF FACTS 

Americans consume more than 18 billion beer and spirits products packaged in glass 

containers each year, 

7 and the vast majority ofthese containers are manufactured by the 1bree 

Majors: Ardagh, Saint-Gobain, and O-I.8 The 1bree Majors sell their glass bottles to America's 

alcoholic beverage companies, who, in turn, fill them with their products to meet the demands of 

the individual consumers who ultimately purchase and enjoy their products. Each ofthe Three 

Majors has a network ofmanufacturing plants in the United States: Ardagh has 9 plants, SaintGobain has 13, and 0-I has 17. Given shipping costs, the 1bree Majors' geographically 

distributed networks ofplants are a key competitive asset.9 

There is a fringe of independent, single-plant glass container manufacturers in the United 

States, but these manufacturers account for only eight percent ofglass container sales to 

Distillers and less than one percent of glass container sales to Brewers.10 None ofthese 

independent manufacturers has more than one U.S. glass container plant. 11 Three beverage 

companies also each operate a single glass container manufacturing plant: E. & J. Gallo Wine1y 

(through Gallo Glass Company), Anheuser-Busch InBev ("ABI") (through Longhorn Glass 

Cmporation), and MillerCoors (through Rocky Mountain Bottle Company- a joint venture with 

0-I). 

7 See PX 4067; PX 2040-019. 


8 PX 2000-031; PX 1264-017; see also PX 1433-002; PX 1054-011; PX 6012 (Rhea IH Tr. at 157-58). Saint­


Gobain operates tmder the name "Verallia North America" or "VNA." The Commission will use the abbreviation 


"Til Tr." to refer to transcripts of S\Vorn testimony provided in FTC investigational hearings. 


9 See PX 1233-045; 


10 PX7003. 


see 

t I I t t 1 I II • mpe ·e 

categories ofglass, like kitchenware or scientific glass. 

12 

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PUBLIC 

Two Mexican manufactmers, Vitro and Fevisa, 

currently export comparatively small volumes ofbeer and spirits bottles to the United States. 

Thus, the U.S. fringe, self-suppliers, and Mexican firms have a limited impact on competition for 

glass container sales to U.S. Brewers and Distillers.14 

Beer bottles account for 58 percent oftotal glass containers usage in the United States. 15 

Spirits bottles account for 4 percent. 16 All glass containers are made through the same basic 

manufacturing process, and the Three Majors also manufactme glass containers for other enduses, such as wine, foods, and condiments. 17 The manufactming process for other types of glass, 

such as flat window glass, table glass (e.g., drinking glasses and kitchenware), and specialty 

pharmaceutical or industrial glass is different. Defendants do not compete with the 

manufacturers ofthese other types of glass in the United States. 18 

I. Glass Containers Have Unique Attributes. 

Brewers and Distillers prize glass containers because the qualities of glass convey a 

desirable or distinctive product image. 19 Glass reflects light in a unique way, preserves flavor, 

and extends shelflife.20 Glass has low gas permeability which helps to maintain the freshness of 

15 PX 1378-029. 

16 PX 1378-029. 

17 PX 1378-029. 

18 PX 6007 (Walllli Tr. at 18-19). 

19 PX 1378-029. 

20 PX 1378-006, 029; 

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beer or to prese1ve the quality ofspirits likely to sit on a bar for a long time.Z1 Glass is also 

regarded as chemically inert, made from non-toxic raw materials, and infmitely recyclable. 22 

The unique qualities ofglass containers make them attractive to bottlers seeking to build 

or maintain a particular brand identity.23 Individual consumers, restaurants, and bars desire the 

premium image glass connotes.24 Brewers and Distillers turn to glass containers to create iconic 

brands, such as 

Other types ofcontainers, such as aluminum cans or plastic bottles, lack the attributes 

that make glass unique in the eyes ofBrewers and Distillers. Indeed, Ardagh has admitted in this 

action that it believes that glass containers ''will continue to maintain a leading presence in the 

high-end beverage [] segment[] due primarily to consumer preferences and the premium 

perception that glass offers, despite the broader impact ofthe substitution ofplastic and other 

alternative packaging materials."26 In addition to glass, some Brewers also use aluminum cans to 

package beer, and some Distillers use plastic bottles to package spirits.27 But these other 

22 PX 13 78-006, -029. 

26 Ardagh Response to Request for Admission 25. 

7 

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materials have their own attributes that differ from those of glass containers, and Brewers and 

Distillers who purchase glass do not view plastic or metal containers as equivalent to glass?8 

ll. The Glass Container Industry Is Already Consolidated. 

The Three Majors are the product ofsignificant consolidation in the U.S. glass container 

industry. Before 1983, there were 19 U.S. glass container manufacturers with multiple 

manufacturing plants. 29 As a result ofmultiple mergers in the 1980s and 1990s, Three Majors 

came to dominate the industry: 0-I, Saint-Gobain, and Anchor Glass Container Corporation 

("Anchor"), now owned by Ardagh.30 

Ardagh Group, a European glass and metal company, has hastened fi.rrther consolidation. 

Ardagh entered the U.S. glass container industry in 2012 by acquiring Leone Industries, a small, 

single-plant glass manufacturer. Then, in July 2012, Ardagh acquired Anchor and its eight 

plants.31 Only SL'{ months later, in January 2013, Ardagh announced this proposed acquisition of 

Saint-Gobain, which would consolidate the Three Majors down to two. 

Before 200(), the Three Majors sought to fill excess capacity by vigorously competing to 

This price competition led to lower margins for the Three Majors 

and lower prices for customers.33 Profit and financial performance suffered.34 

29 PX 1067-019. 

30 PX 1067-019. 

31 Given Anchor's long history in the industry and Ardagh's recent purchase ofthe company, many people continue 

to refer to Ardagh Glass North America as "Anchor." For convenience. the Commission will refer to Ardagll Glass 

North America simply as "Ardagh" unless it is relevant to distinguish the parent company from the North American 

glass unit. 

32 Grewe Dep. at 77; PX 2000-222; PX 1381-01 0; PX 2290-001. 

8 

33 
PUBLIC 

The Three Majors have reversed that trend by pursuing a "price over volume" strategy 

(also referred to as "value over volume" or "margin before volume").35 All Three Majors 

recognized they would benefit from keeping capacity and demand in close balance and 

maintaining disciplined pricing policies that ensured higher profits.36 The Three Majors 

"rightsized" or "rationalized" capacity by closing plants and fumaces. 37 They exercised 

disciplined pricing. And they adopted contracts featuring "cost pass-through" or "price 

adjustment formula" terms that shift the risk ofvolatility in manufacturing costs -like energy, 

raw materials, and labor- to their customers. 38 

III. 	 Ardagh And Saint-Gobain Compete With Each Other Today. 


Despite the Three Majors' recognition oftheir aligned incentives, glass container 


customers today still benefit from competition. For example, after an Anchor spirits customer 

obtained a lower price quote from 0-I in August 2011, Anchor's CEO wrote that itA July 2011 email from Anchor's Vice President of Sales 

aptly described current competitive constraints: 

The Three Majors closely monitor each other's capacity, customer contracts, price 

increase timing, and other competitive activity.41 Most large Brewers and Distillers invite the 

Majors to submit competitive bids and buy directly from them under negotiated supply 

34 PX 1381-010; PX 2000-019, 219, 222; PX 6002 (Wieclaw lli Tr. at 259-60). 

35 PX 1381-010; PX 2000-222; PX 2227-002; PX 1381-010; PX 6004 (Fredlake lli Tr. at 111-13). 

36 PX 1260-004; PX 6012 (Rhea lli Tr. at 61-62). 

37 PX 1067-020. 

38 Grewe Dep. at 85-88; PX 6003 (Wilkes lli Tr. at 67); PX 1204-009; PX 2000-222; PX 1206-017. 

39 PX 1283-001. 

40 PX 1049-001. 

41 See PX 1021; PX 2366; PX 2000-030, 32, 300; PX 1046-001; PX 1126-001; PX 6012 (Rhea lli Tr. at 232-33). 

9 

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agreements typically lasting three to five years.42 Thus, customers seek to encourage 

competition between Ardagh and Saint-Gobain on a regular basis. Defendants' docmnents and 

customer testimony show how Ardagh and Saint-Gobain actively compete.43 

In myriad business documents, Ardagh and Saint-Gobain identify each other as key 

competitors, and recent testimony confmns that competitive relationship.44 Anchor's 2012 

presentation to Ardagh identified only the Three Majors and attributed 

market shares in an overall glass container market ofl percent to Anchor, I percent to SaintGobain, and I percent to 0-!.45 

Head-to-head price competition between Ardagh and Saint-Gobain is common. 

In2012, 

- used competitive pressure from Saint-Gobain to get lower pricing from Ardagh.47 

Likewise, in its 2012 negotiation, the craft brewer used competitive pressure 

from Ardagh to negotiate a lower price and other benefits from Saint-Gobain.48 

solicited 

44 See, e.g., PX 2000-059-66; PX 2007-029-033; PX 1019-003; PX 1264-017; PX 6001 ..lH Tr. at 40); PX 


6013-IH Tr. at 232). 


45 PX 1264-017. 


46 See, e.g., PX 1399; PX 1037; PX 1043; PX 2157; PX 1398; PX 2434-016: PX 1543; PX 1399-001; PX 1417-015; 


PX 1406; PX 2436-003; PX 2437-005. 


47 

48 

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bids for glass bottles in 2012 from all Three Majors and believes that the bidding among them 

directly led to lower prices.49 

Ardagh and Saint-Gobain also compete directly with one another to offer customers 

superior service, product quality, and innovation,5° better supply reliability,51 and better options 

on other non-price factors. 5

2 

IV. 	 Anchor Alleged A Relevant Product Market OfGlass Containers Only, 

Excluding Plastic and Metal. 

Defendants may try to convince this Comi that they compete as closely with plastic and 

metal container manufacturers as with glass container manufacturers. But Anchor, Ardagh's 

predecessor in the U.S., told a starkly different story to another federal court when describing the 

relevant markets in which it competes. fu 2001, Anchor sued 0-I to prevent 0-I from acquiring 

a controlling stake in Anchor, alleging that 0-I's proposed acquisition would violate Section 7 of 

the Clayton Act- the same law at issue here. In its complaint, Anchor asserted that: 

• 	 "In the glass container indusny, three companies account for well in excess of 90% of the 

United States market." 

• 	 The "relevant market is the market for the manufacture and sale of glass containers of 

various types, designs and sizes in the United States," and there are also "nan-ower 

cf. PX 6002 (Wieclaw 

11 

PUBLIC 

relevant product markets" including the manufacture and sale of glass containers for 

certain beer and spirits products. 

• 	 The market is "highly concentrated" and is a "mature, low-growth" business. 

• 	 "[C]ustomers depend on competition among glass container manufacturers to keep prices 

down and to insure high standards ofservice and quality." 

• 	 "For a substantial percentage ofpurchasers of glass containers, substitution of other 

materials such as plastic would not be feasible in response to a small but significant nontransitory increase in the price ofglass containers."5 

Ultimately, the lawsuit settled, but Anchor's admissions provide critical insights into the 

economic realities of the marketplace. 

V. 	 The Commission Challenges Ardagh's Acquisition OfSaint-Gobain. 

Ardagh and Compagnie de Saint-Gobain, Saint-Gobain's parent company, entered into a 

Share Purchase Agreement on January 17, 2013, pursuant to which Ardagh proposes to acquire 

Saint-Gobain for approximately $1.7 billion on or before January 13, 2014. On June 28, 2013, 

the Commission voted to file an administrative complaint challenging the acquisition and 

authorized Commission staff to seek a preliminary injunction enjoining the acquisition pending 

the resolution ofthe Commission's administrative trial. 

ARGUMENT 

The question before this Court is whether it is in the public interest to order Defendants to 

refrain from closing their transaction until the FTC has concluded its ongoing administrative 

proceeding. Under controlling law, the answer is plainly yes. 

I. 	 THE FTC HAS RAISED "SERIOUS, SUBSTANTIAL" ISSUES 


APPROPRIATE FOR AN ADMINISTRATIVE TRIAL. 


The Commission has determined that it has "reason to believe" that Ardagh' s proposed 

acquisition of Saint-Gobain violates Section 7 ofthe Clayton Act and Section 5 ofthe FTC Act. 

55 PX 1379 ~~I, 10-13 (Complaint, Anchor Glass Container Corp. v. Owens-Illinois, Inc., No. 8:01-cv-1849 (M.D. 

Fla. Sep. 26, 2001)). 

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In these circumstances, Section 13(b) ofthe FTC Act authorizes the Commission to seek a 

preliminary injunction halting the merger until the Commission "has had an opportunity to 

adjudicate the merger's legality in an administrative proceeding." CCC Holdings, 605 F. Supp. 

2d at 35 (citing 15 U.S.C. § 53(b)). The merits trial is scheduled to begin on December 2, 2013 

before an administrative law judge, and discovery in that action is nearly complete. Although 

the acquisition agreement permits Defendants to close in early 2014 (and could presumably be 

extended), Defendants have threatened to close their acquisition before the completion ofthe 

administrative trial. Ardagh intends to litigate the merits trial to conclusion regardless of 

whether this Court grants the Commission injunctive relief. Ardagh's counsel told the 

administrative law judge: "[i]fthe injunction issues, the parties intend to continue on the 

administrative proceeding. We will continue to litigate ....That is not bluster, Your Honor."56 

Thus, the only issue for this Court is whether the Commission is entitled to a preliminary 

injunction to preserve its ability to obtain effective relief and to prevent consumer harm. 

Section 13(b) ofthe FTC Act enables the Commission to seek to preserve the status quo 

in this precise situation. The legislation authorizes the Court to issue a preliminary injunction 

"where such action would be in the public interest-as determined by a weighing ofthe equities 

and a consideration ofthe Commission's likelihood of success on the merits." Heinz, 246 F.3d 

at 714. The Court must balance these two "public interest" considerations on a sliding scale. 

See CCC Holdings, 605 F. Supp. 2d at 35 (citing Heinz, 246 F.3d at 714); Whole Foods, 548 

F.3d at 1035 (Brown, J.); FTC v. Elders Grain, Inc., 868 F.2d 901, 903 (7th Cir. 1989) (Posner, 

J.). The greater the FTC's showing of likelihood of success on the merits, the heavier the 

56 PX 0005 (Initial Scheduling Conference Transcript) at 9. 

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defendants' burden to show "particularly strong equities" in their favor. Whole Foods, 548 F.3d 

at 1035 (Brown, J.); Elders Grain, 868 F.2d at 903. 

In Section 13(b), Congress demonstrated its concern that "injunctive reliefbe broadly 

available to the FTC." Heinz, 246 F.3d at 714 (quoting FTC v. Exxon Corp., 636 F.2d 1336, 

1343 (D.C. Cir. 1980)). Accordingly, Section 13(b) eases the more stringent injunction standard 

required ofprivate parties. !d.; see also Whole Foods, 548 F.3d at 1042 (Tatel, J.) ("[T]he FTCan expert agency acting on the public's behalf- should be able to obtain injunctive relief more 

readily than private parties."). Thus, at this stage, the FTC is not required to prove, nor is this 

Court required to find, that the proposed acquisition would violate the antitrust laws. CCC 

Holdings, 605 F. Supp. 2d at 35 (citing Staples, 970 F. Supp. at 1070). As the D.C. Circuit 

recognized in Heinz, "[t]hat adjudicatory function is vested in the FTC in the first instance." 246 

F.3d at 714 (quoting FTC v. Food Town Stores, Inc., 539 F.2d 1339, 1342 (4th Cir. 1976)). 

The Commission has met the standard for showing a likelihood of success on the merits 

because the evidence here raises "serious, substantial questions meriting further investigation." 

Whole Foods, 548 F.3d at 1049 (Tatel, J.); id. at 1035 (Brown, J.); Heinz, 246 F.3d at 714-15; 

see also CCC Holdings, 605 F. Supp. 2d at 36. Defendants' admissions alone raise serious 

questions of illegality surrounding this acquisition. Anchor alleged in its 2001 antitrust lawsuit 

that the "market for the manufacture and sale of glass containers in the United States is highly 

concentrated" and "the three largest producers ... account for in excess of 90% ofthe domestic 

volume."57 The glass container industry remains just as concentrated today as it was then. 

The proposed acquisition would create a duopoly in markets with high entry barriers and 

conditions ripe for coordination- an outcome "no court has ever approved." Heinz, 246 F.3d at 

57 PX 1379 ~ 13. 

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716-17; see, e.g., CCC Holdings, 605 F. Supp. 2d 26 (preliminarily enjoining three-to-two 

merger of insurance software providers); FTCv. Swedish Match, 131 F. Supp. 2d 151 (D.D.C. 

2000) (preliminarily enjoining merger of loose-leaf tobacco firms where "the top two firms left .. 

. will have ninety percent ofthe market."); FTCv. Staples, Inc., 970 F. Supp. 1066 (D.D.C. 

1997) (preliminarily enjoining three-to-two merger ofoffice supply superstores); United States v. 

H&R Block, Inc., 833 F. Supp. 2d 36 (D.D.C. 2011) (permanently enjoining three-to-two merger 

oftax software firms). There is no reason for this Court to be the first to bless such a merger. 

Under the second prong ofthe Section 13(b) analysis, there is a general presumption in 

favor ofthe FTC in the weighing ofthe equities because "'the public interest in the effective 

enforcement ofthe antitrust laws' was Congress's specific 'public equity consideration' in 

enacting" Section 13(b). Whole Foods, 548 F.3d at 1035 (Brown, J.) (quoting Heinz, 246 F.3d at 

726). No compelling public equities favor allowing this acquisition to close before the trial. 

Private equity considerations, such as a risk that a transaction will not occur, are given little 

weight. Whole Foods, 548 F.3d at 1034-35 (Brown, J.); CCC Holdings, 605 F. Supp. 2d at 75­

76. Here, because Defendants confirmed that they will litigate through trial regardless ofthis 

Court's ruling, there is nothing to weigh. Preserving the status quo will protect the public 

interest and will not harm Defendants, who can close their transaction ifthey succeed in the 

ongoing administrative proceeding. 

II. . THE PROPOSED TRANSACTION IS PRESUMPTIVELY UNLAWFUL. 

Section 7 ofthe Clayton Act bars mergers or acquisitions "the effect of [which] may be 

substantially to lessen competition, or to tend to create a monopoly" in "any line of commerce or 

... activity affecting commerce in any section ofthe country." 15 U.S.C. § 18. "Congress used 

the words 'may be substantially to lessen competition' to indicate its concern was with 

probabilities, not certainties." Heinz, 246 F.3d at 713 (quoting Brown Shoe Co. v. United States, 

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370 U.S. 294, 323 (1962)). Thus, an acquisition violates Section 7 if it "create[s] an appreciable 

danger of [anti competitive] consequences in the future. A predictive judgment, necessarily 

probabilistic and judgmental rather than demonstrable, is called for." Heinz, 246 F.3d at 719 

(quoting Hosp. Corp. ofAm.v. FTC, 807 F.2d 1381, 1389 (7th Cir. 1986)). An acquisition that 

violates the Clayton Act will also violate Section 5 of the FTC Act. See FTC v. PPG Indus., 

Inc., 798 F.2d 1500, 1501 n.2 (D.C. Cir. 1986). 

Courts typically analyze the likely competitive effects of an acquisition by determining 

"(1) the 'line of commerce' or product market in which to assess the transaction; (2) the 'section 

ofthe country' or geographic market in which to assess the transaction; and (3) the transaction's 

probable effect on competition in the product and geographic markets." Staples, 970 F. Supp. at 

1072. Under this analysis, the Commission must first show "undue concentration in the market 

for a particular product in a particular geographic area." CCC Holdings, 605 F. Supp. 2d at 36 

(quoting United States v. Baker Hughes Inc., 908 F.2d 981, 982 (D.C. Cir. 1990)). That prima 

facie showing establishes a presumption that the acquisition is unlawful. !d. at 36. The burden 

of rebutting that presumption then shifts to Defendants, who must show "that the market-share 

statistics [give] an inaccurate account ofthe [acquisition's] probable effects on competition in 

the relevant market." !d. at 36 (quoting Heinz, 246 F.3d at 715). This Court need not resolve the 

merits ofDefendants' rebuttal case. Rather, in this Section 13(b) action, the Court must issue the 

preliminary injunction unless the rebuttal arguments are so compelling they extinguish all the 

"serious, substantial" questions of legality raised by this acquisition. !d. at 67. 

A. Two Relevant Product Markets Are The Manufacture And Sale Of Glass 

Containers To (1) Beer Brewers And (2) Spirits Distillers. 

Two relevant product markets in which to assess the effects ofthis acquisition are the 

manufacture and sale of glass containers to (1) Brewers and (2) Distillers. The Court should 

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enjoin the transaction ifthe FTC shows a likelihood of success in either relevant product market. 

See Heinz, 246 F.3d at 713 ("The statutory test is whether the effect of the merger 'may be 

substantially to lessen competition' 'in any line of commerce in any section of the country."') 

(quotation omitted). 

"A 'relevant product market' is a term of art in antitrust analysis." H&R Block, 833 F. 

Supp. 2d at 50. The Supreme Court has explained that "[t]he outer boundaries of a product 

market are determined by the reasonable interchangeability of use or the cross-elasticity of 

demand between the product itself and substitutes for it." Brown Shoe Co., 370 U.S. at 325. In 

other words, courts consider whether different "products can be used for the same purpose, and, 

if so, whether and to what extent purchasers are willing to substitute one for the other." H&R 

Block, 833 F. Supp. 2d at 51 (quoting Staples, 970 F. Supp. at 1074). 

In defining an antitrust product market, courts consider "such practical indicia as industry 

or public recognition ofthe [relevant market] as a separate economic entity, the product's 

peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, 

sensitivity to price changes, and specialized vendors." Whole Foods, 548 F.3d at 1037-38 

(Brown, J.) (quoting Brown Shoe, 370 U.S. at 325); see also CCC Holdings, 605 F. Supp. 2d at 

38; H&R Block, 833 F. Supp. 2d at 51. 

Courts also rely on the Federal Trade Col1imission and U.S. Department ofJustice 

Horizontal Merger Guidelines ("Merger Guidelines").58 See H&R Block, 833 F. Supp. 2d at 52 

(citing Staples, 970 F. Supp. at 1081-82); CCC Holdings, 605 F. Supp. 2d at 38 n.12; Heinz, 246 

F.3d at 716 n.9, 718. The Guidelines define a relevant market economically by asking whether a 

monopolist of a particular group of substitute products could profitably impose a "small but 

58 The U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (20 1 0) are attached 

as PX 0004 and available online at http://www.ftc.gov/os/2010/08/100819hmg.pdf. 

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significant non-transitory increase in price" ("SSNIP") over those products, or whether 

customers switching to alternative products would make such a price increase unprofitable. 

Merger Guidelines§ 4.1.1; see also CCC Holdings, 605 F. Supp. 2d at 38 n.12. A five percent 

price increase is often appropriate in applying this "hypothetical monopolist" test. Merger 

Guidelines § 4.1.2. Further, if a hypothetical monopolist of a set ofproducts (e.g., glass 

containers) can target a particular subset of customers (e.g., Brewers) for a small but significant 

non-transitory increase in price, it is appropriate to "identify relevant markets defined around 

those targeted customers." Merger Guidelines,§ 4.1.4. Indeed, the Guidelines use glass 

container producers to illustrate this very principle with the following hypothetical example: 

Glass containers have many uses. In response to a price increase for glass containers, some 

users would substitute substantially to plastic or metal containers, but baby food 

manufacturers would not. If a hypothetical monopolist could price separately and limit 

arbitrage, baby food manufacturers would be vulnerable to a targeted increase in the price of 

glass containers. The Agencies could define a distinct market for glass containers used to 

package baby food. 

Merger Guidelines§ 4.1.4. 

Market conditions today show that Brewers and Distillers are vulnerable to a targeted 

price increase. 59 Faced with a five percent price increase, enough Brewers and Distillers would 

pay the higher price to make the price increase profitable for a hypothetical monopolist.60 As 

one brewer who sells beer in both glass bottles and cans testified: "As a practical matter, absent 

59 Glass container manufacturers set prices separately for different customers and can limit arbitrage. They know 

their customers' relative v.rillingness to pay for glass containers and charge different prices to different classes of 

customers (e.g., Brewers, Distillers, non-alcoholic beverage producers, etc.). Manufacturers typically negotiate 

contracts on an individual basis, resulting in different prices even for customers within the same """t',"'"'"-' 

buyers is uulikely, and there is no evidence ofit occuring today. 

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a dramatic increase in the price of glass relative to aluminum, we are likely to produce and sell 

the vast majority ofour products in glass for a very long time."61 

Indeed, even large Brewers and Distillers cannot shift their glass purchases to make a 

price increase unprofitable. ­

-

1. 	 Defendants' and Third Parties' Documents And Actions Show That The 

Relevant Product Markets Include Only Glass Containers. 

Determination ofthe relevant market «is a matter of business reality-a matter ofhow the 

market is perceived by those who strive for profit in it" Staples, 970 F. Supp. at 1079 (quotation 

omitted). "When determining the relevant product market, com1s often pay close attention to the 

defendants' ordinary comse ofbusiness documents." H&R Block, 833 F. Supp. 2d at 52. In 

doctnnent after doctnnent, Defendants' own words and actions reveal that competitive conditions 

in the glass container industry drive their pricing and business strategy. See Rothe1y Storage & 

Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210,218 n.4 (D.C. Cir. 1986) ("[I]ndustry ... 

recognition ofthe [relevant market] as a separate economic tmit matters because we assume that 

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economic actors usually have accurate perceptions of economic realities.") (quotation omitted); 

see also Whole Foods, 548 F.3d at 1045 (Tatel, J.). 

Defendants refer to themselves and 0-1 as the "three majors" and routinely calculate their 

market shares based only on glass container shipments.65 See H&R Block, 833 F. Supp. 2d at 53 

(references to the "Big Three" competitors and market shares in documents supported relevant 

market finding); Staples, 970 F. Supp. at 1079 (references to the "Big Three"). Ardagh boasts 

that its "North American Glass Expansion" will make it the "#1 Player [with] 49% Market 

Share."66 Likewise, in marketing itself for acquisition last year, Anchor identified its 

"Competitive Landscape" as including only Anchor, Saint-Gobain, and 0-1, and attributed 93 

percent of an overall glass container market to those three firms. 67 Other investor presentations 

depict the market in similar terms.68 Markets described in investor presentations are "strong 

evidence" ofthe relevant product market. H&R Block, 833 F. Supp. 2d at 52-53. 

Defendants' day-to-day business documents identify a glass-only market as well. See 

Staples, 970 F. Supp at 1079-80 (relying on business documents in relevant market analysis). 

PX 1264-017; PX 2000-292, -340; PX 1433-002; PX 1054-011; see also PX 6012 (Rhea 1H Tr. at 157-58). 

66 PX 1360-012; see also PX 1199-018. 

67 PX 1264-017. 

68 PX 1279-014, 018, 019; PX 1378. 

69 PX 1021; PX 1418; PX 6001 (Love 1H Tr. at 33). 

70 PX 6001 (Love IH Tr. at 65-70). 

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Anchor's admissions in its 2001 antitrust lawsuit confirm that the product markets 

include glass containers only. While Ardagh may find it convenient to disown these admissions, 

Anchor excluded plastic and metal containers from its relevant product markets based on facts 

that remain true today: "[C]ustomers depend on competition among glass container 

manufacturers to keep prices down," and "[f]or a substantial percentage ofpurchasers of glass 

containers, substitution ofother materials such as plastic would not be feasible" in response to a 

SSNIP in the price of glass containers.73 Ardagh itself has also acknowledged glass containers 

as a relevant antitrust market in the past. In its 201 0 acquisition of a Dutch metal can company, 

Ardagh argued to European antitrust regulators that "the glass container market is a distinct 

product market from the market for other forms ofrigid packaging in general," in part because 

customers seek bids for glass and other materials independently.74 Ardagh recognizes the 

business realities of that important distinction. Its own glass and metal businesses are organized 

separately with separate sales forces and management teams. 75 

71 See PX 2000-049-102. 

72 See PX 2000-048-058 (0-1), -059-066 (Anchor); cf Grewe Dep. at 94-98. 

73 PX 1379 ~ 12. 

74 PX 7002 ~ 10. In 2005, Ardagh purchased the second-largest glass container supplier in the United Kingdom and 

argued in an antitrust review before the U.K. Office ofFair Trading that the relevant market was the "production of 

glass containers." PX 7001-015, -042. 

75 PX 6007 (WalliH Tr. at 23-25). 

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• 


Independent analysts also recognize the importance of competition among glass 

manufacturers. In May 2013, Jefferies investment bank released a report stating that Ardagh's 

proposed acquisition of Saint-Gobain "would create an oligopoly where 0-I and Ardagh would 

have a combined 92% market share" thus "setting the [North American glass container] industry 

up for a nice up cycle in price."81 When rating Anchor in 2010, Moody's noted there are "only 

three major competitors" in the "consolidated" glass packaging industry in North America. 82 

In sum, Ardagh, Saint-Gobain,. investors, and public analysts all consider 

competition among glass container firms to be economically meaningful and distinct from 

competition with manufacturers of other types of packaging. 

76 

77 

78 

79 

80 

81 PX 3024-001. 

82 PX 1201-002. Likewise, in a 2011 report on the "North American glass industry," JP Morgan noted that the 

Three Majors comprise 90 percent ofthe market. PX 2291-004; see also PX 1214-017. 

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2. 	 Plastic Bottles And Metal Cans Are Not In The Relevant Product 

Markets. 

Defendants may argue that Brewers and Distillers can defeat a price increase by 

switching to plastic and metal containers. The facts show otherwise. The threat ofBrewers and 

Distillers switching to cans and plastic bottles would not constrain a glass container monopolist 

from raising prices "at the _.. practical price increase levels that trigger antitmst concern-the 

typical five to ten percent price increase ofthe SSNIP test" H&R Block, 833 F. Supp. 2d at 57. 

Cans and plastic are generally cheaper than glass containers, and many Brewers and Distillers 

ah·eady package some oftheir products in alumimun cans and plastic bottles. As Anchor's CFO 

explained to a lender in 2012, "[i]fthe key consideration is cost, bottlers will [choose] cans or 

plastic."83 As discussed fiuiher below, Brewers and Distillers choose to buy glass containers not 

based on the relative prices ofdifferent packaging materials, but because their customers demand 

their products in glass. 

i. 	 Glass Bottles Are Not In Price Competition With Plastic Or Metal 

Containers. 

When compared to plastic and metal containers, glass containers have "peculiar 

characteristics,"84 «unique production facilities,',g 5 and, most importantly, "distinct prices." 

Whole Foods, 548 F.3d at 1037-38 (Brown, J.) (citing Brown Shoe practical indicia). Ample 

evidence demonstrates that competition among the Three Majors constrains glass container 

prices today.86 Defendants have admitted that from 2003 to 2013, overl percent ofthe revenue 

from their most significant lost sales to Brewers and Distillers went to another supplier of glass 

83 PX 1085-003. 


84 See PX 1428-001-010; PX 1378-029. 


85 PX 6001 (Love IH Tr. at 70). 


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containers, as opposed to a supplier of another type ofpackaging.87 Direct price competition 

between glass container suppliers and plastic or metal container suppliers rarely occurs,

88 does 

not meaningfully constrain Defendants,89 and is scarcely even plausible because glass containers 

in general are significantly more expensive than plastic or metal containers ofequivalent size and 

'I 

volume.90 

_.Brewers and Distillers have testified that threatening to shift their packaging away 

fi:om glass to other materials would be «an idle threat" and that the Three Majors would not "take 

such a threat seriously" in price negotiations.93 

87 For beer or spirits accmmts or customers where Ardagh or Saint-Gobain lost more than 30 percent ofthe atmual 

glass container sales revenue to another supplier ofglass containers or due to substitution ofa product other than 

glass containers, over I percent ofthe reveriue from those lost sales was to another supplier ofglass containers. 

See Ardagh Response to Requests for Admission Nos. 6 atld 7; Saint-Gobain Response to Requests for Admission 

Nos. 7and8. 

88 See, e.g., PX 6004 (Fredlake IH Tr. at 258); PX 6001 (Love IH Tr. at 212-14); PX 6002 (Wieclaw IH Tr. at 101­

102); Grewe Dep. at 107; Love Dep. at 35-36. 

not constrain glass prices. 

91 Grewe Dep. at 13 (plastic), 32 (cans); Fredlake Dep. at 18-20 (plastic), 28-29 (cans). 

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When purchasing glass containers, Brewers and Distillers request bids from the Tirree 

Majors and use competitive bidding to get better prices. 94 These bid requests -known as 

requests for pricing or requests for quotation- specify glass containers only.95 Thus, the Majors 

know they are bidding against other glass suppliers -not plastic or metal fums.96 Moreover, 

customers who convert a product from glass to another material generally do not offer the Tirree 

Majors a chance to compete against the new material to keep the product in glass; customers 

usually present their decision in the words ofArdagh's North American 

President.97 And, once customers convert to another material, they do not return to glass. 98 

ii. Glass, Metal, And Plastic Containers Are Not Close Competitors. 

There is no evidence that glass container sales to Brewers or Distillers respond to ptice 

changes in plastic or metal containers -or vice versa. For example, the price of glass containers 

relative to ahuninum cans increased approximately 80 percent between1981 and 2011, while the 

proportion ofbeer sold in glass bottles has remained stable.99 These price differentials confirm 

that glass containers are not in the same product market as plastic or metaL See H&R Block, 833 

F. Supp. 2d at 55 ("[T]he absence of close price competition" distinguishes relevant market); 

Swedish Match, 131 F. Supp. 2d at 165 ("Distinct pticing is also a consideration" in relevant 

market analysis); see also Geneva Phanns. Tech. C01p. v. Barr Labs. Inc., 386 F.3d 485, 496-97 

(2d Cir. 2004). Other economic evidence, including a critical loss analysis performed by the 

96 PX 6002 (Wieclaw IH Tr. at 101-102); Love Dep. at 35-36; cf. PX 6004 (Fredlake IH Tr. at 258): PX 6001 (Love 


IHTr. at2l2-l4); GreweDep. at 107. 


97 PX 6004 (Fredlake rn Tr. at 258); see also Grewe Dep. at 107. 


98 See PX 6007 (Wall IH Tr. at 270); see also PX (Rhea lli Tr. at 173). 


99 PX 0006 (Expert Report ofDr. Frederick Warren-Boultou) ~51. 

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Commission's expert economist, also confmns that glass containers sold to Brewers and 

Distillers are relevant product markets.100 

Testimony from major plastic and metal container companies also indicates that these 

companies' containers are not in the same relevant product markets as glass. Plastic and metal 

firms do not view glass manufacturers as direct competitors, 101 and do not bid against glass 

manufacturers for business. 102 The plastic and metal companies underscore what Ardagh tells its 

own investors: that glass containers compete only "indirectly" with these other materials. 103 

iii. There Is Economic Demand For Beer And Spirits In Glass. 

To be sum, as a technological matter, beer and spirits can be packaged in both glass and 

other packaging materials, and Brewers and Distillers at times offer their brands in multiple 

package types or convert a product from glass to other packaging. But the fact that some beers 

are sold both in cans and in glass, or that Distillers may sell some products in plastic and others 

in glass, simply cannot tell us ''whether and to what extent purchasers [i.e., Brewers and 

Distillers] are willing to substitute one for the other." H&R Block, 833 F. Supp. 2d at 51 

(quoting Staples, 970 F. Supp. at 1074). 

Brewers and Distillers select different packaging materials based on myriad commercial 

constraints such as consumer preferences, marketing considerations, and the demands of 

100 PX 0006 (Expert Report ofDr. Frederick Warren-Boulton) at Section VITI. 

103 PX 1393-071; PX 1342-015. Even ifplastic or alwninwn companies at times try to entice Brewers and Distillers 

to bottle more products in plastic or aluminum, that hardly means that those materials should be included in the 

sante relevant market as glass containers. See H&R Block, 833 F. Supp. 2d at 54-55 (tax software not in Sante 

relevant market as tax stores despite attempts to convert tax store customers); Whole Foods, 548 F.3d at 1048 (Tate!, 

J.) ("[S]ufficiently innovative retailers can constitute a distinct product market even when they take customers from 

existing retailers."). 

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wholesale distributors and retailers. 104 They analyze their customers and the situations in which 

their products are consumed and try to match packaging to the customer and the occasion. Many 

consmners simply prefer beer in glass versus a can, while others' preferences may depend on 

whether the setting is a picnic, a tailgate party, a fancy dinner, or a night club. 105 Cf H&R Block, 

833 F. Supp. 2d at 56 (the fact that switching between tax software and tax stores was driven by 

changes in customers' personal status supported treating tax software as a distinct product 

market). 

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The company expects cans to add extra 

sales volumes, not to displace glass bottle sales - an expectation well supported by the 

experience ofother Brewers who previously introduced cans in addition to glass bottles. 110 

-wouldnot switch its glass-bottled products "to cans or other containers even ifthe 

cost ofglass bottles were to go up by 5 to 10 percent" because "cans are not a suitable 

replacement" for glass and"[o ]ffering beer in a glass bottle is [their] primary business."m 

Those Brewers who offer their beer in both glass and cans do not choose one f01m of 

packaging over the other. Rather, they fill orders from distJ.ibutors who in turn receive orders 

from retailers who decide what to stock on store shelves 01· behind the bar based on consumer 

' demand. As one craft brewer testified: "Q: Who at the company, if anyone, decides what the 

mix ofbottled beer versus canned beer is in any given period or year? A: The company doesn't 

decide. The consumer decides. " 112 

Itwould thus be wrong to conclude that cans are a ready substitute for glass because -issold in both cans and glass bottles. Rather, the evidence (and common sense) 

dictates a ve1y different conclusion: Bottled beer and canned beer both exist because there is 

demand for both. 

which 

offers its beer in glass bottles and cans, had an even simpler explanation ofwhat would happen if 

28 

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it could not sell its beer in glass: "It would end our business. " 114 Distillers also must respond to 

demand for. specific packaging. For example, after distiller- attempted to convert a 

whiskey that "was a fairly large brand" in a "particular area ofthe country" from glass bottles to 

plastic, the product experienced a "substantial fall offin business."115 

Testimony from many Brewers and Distillers confrrms that commercial constraints would 

prevent them from simply substihtting metal or plastic containers for glass when bottling their 

products, even ifglass container prices rose five to ten percent.116 Moreover, because glass 

containers represent a small fraction ofthe retail price ofbeer and spirits, there are strong 

incentives for Brewers and Distillers to pay a price increase in glass bottles rather than to switch 

to aluminum cans or plastic bottles and risk driving consumers to competitors' products 

packaged in glass. 117 

The facts also show that there will continue to be significant demand for glass bottles for 

beer and spirits. For example, the proportion ofbeer packaged in glass bottles versus aluminum 

cans today is almost exactly the same as it was thirty years ago, although demand u·ends for each 

package type have ebbed and flowed over the years. 

118 -­

and the fuhlre ofthe U.S. glass container 

industry is bright enough for Ardagh to spend billions in two years trying to conu·ol roughly half 

("It would end our business. I don't know that it would end our business, but 

ofour business."). 

118 PX 4067 (Beer Institute Brewers' Almanac 2012, "Package Mix Chart"). 

119 PX 1361-0031-32; 

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the industry's capacity. Moreover, glass container prices and margins have risen in recent years, 

and Defendants have improved their financial performance. 120 

Brewers and Distillers who sell products in glass are not making irrational decisions by 

choosing glass containers, even though they are more expensive than cans or plastic. They 

carefully study their consumers and choose packaging to maximize sales and profits, relying on 

competition among glass suppliers to get the best prices. Because the Three Majors recognize 

this commercial reality, the elimination of competition due to the proposed acquisition would 

1ikely lead to higher prices. 

3. 	 Case Law Supports The Commission's Definition Of The Relevant 

Product Markets. 

i. 	 Cross-Elasticity, Not Functional Interchangeability, Is The 

Appropriate Test For Market Definition In This Case. 

The mere fact that glass, plastic, and metal containers might all be functionally 

interchangeable for bottling beer and spirits does not show that they are in the same relevant 

product market. As courts in this Circuit have emphasized, "[f]inding two products to be 

functionally interchangeable ... does not end the analysis." Swedish Match, 131 F. Supp. 2d at 

158; see also Staples, 970 F. Supp. at 1074. Courts often exclude functionally interchangeable 

products from a relevant product market. See Swedish Match, 131 F. Supp. 2d at 158, 165; 

Staples, 970 F. Supp. at 1074, 1080; Geneva Pharms., 386 F.3d at 496-99. Indeed, the D.C. 

Circuit has long recognized that functional interchangeability is not typically one of the most 

significant criteria in market definition. 121 

120 See Grewe Dep. at 149-51, 70-72, 77-79; Fredlake Dep. at 103, 111-12, 126; PX 2025-002; PX 1245-003; PX 

2000-51; PX 2069-009; PX 1068-021, -034; PX 2063-007. 

121 Factors such as the "physical and functional relationship" between products "may be helpful where the other 

indicia are ambiguous," but "bear less directly upon the economic definition of a market" than the core "economic 

criteria that make one market distinct from another," such as '"distinct prices' and 'sensitivity to price changes,"' 

which directly "relate[] to the ability ofthe consumer to obtain substitutes for a product." Rothery Storage & Van 

Co., 792 F.2d at 218 n.4 (quoting Brown Shoe, 370 U.S. at 325). 

30 

PUBLIC 

Cross-elasticity of demand, the responsiveness ofthe sales ofone product to price 

changes of another, is a much more important factor. Price differentials or variant pricing trends 

often show that functionally interchangeable -even identical- products must be treated as 

separate relevant antitrust markets. In FTC v. Staples, the court found that "office superstore 

prices are affected primarily by other office superstores and not by non-superstore competitors" 

selling identical products, thus excluding non-superstore competitors from the relevant market. 

970 F. Supp. at 1077. In Geneva Pharmaceuticals, the Second Circuit held that a lack ofprice 

responsiveness between generic and branded versions of a chemically equivalent pharmaceutical 

compound evidenced separate product markets. 386 F.3d at 496-97. And, in H&R Block, the 

"lack of evidence ofprice competition" between tax software and other tax preparation services 

supported the conclusion that tax software and other tax services were not "reasonably 

interchangeable" and could not be "viewed as part ofthe same relevant product market." 833 F, 

Supp. 2d at 54-55. 

The Commission is not arguing that plastic and metal containers do not compete with 

glass in an absolute sense, nor need the Commission do so. See Staples, 970 F. Supp. at 1075 

(products inside and outside the relevant market "at some level, compete with one another"); see 

also H&R Block, 833 F. Supp. 2d at 54. As Ardagh told its investors in a 2012 bond offering, 

glass containers compete "indirectly" with other forms ofpacl\aging. 122 But "'the mere fact that 

a firm may be termed a competitor in the overall marketplace does not necessarily require that it 

be included in the relevant product market for antitrust purposes."' H&R Block, 833 F. Supp. 2d 

at 51 (quoting Staples, 970 F. Supp. at 1 075). A relevant market "need not encompass the full 

range of substitutes. Including all substitutes would lead to absurdly broad markets that would, 

122 PX 1393-071; PX 1342-015. 

31 

PUBLIC 

as the Guidelines explain, make market shares misleading." 123 Plastic and metal containers are 

more indirect, distant competitors that will not constrain glass container pricing "at the ... 

practical price increase levels that trigger antitrust concern." H&R Block, 833 F. Supp. 2d at 57. 

ii. 	 The Facts Here Dictate Relevant Markets Of Glass Containers For 

Brewers And Distillers. 

In the ongoing FTC administrative proceeding, Defendants have argued that historical 

cases require including plastic and metal in any relevant product market here. 124 These 

arguments are wrong. "The proper market definition in this case can be determined only after a 

factual inquiry into the commercial realities faced by consumers." Eastman Kodak Co. v. Image 

Technical Servs. Inc., 504 U.S. 451,482 (1992) (quotation omitted). "[M]arket definition is a 

deeply fact-intensive inquiry." Toddv. Exxon Corp., 275 F.3d 191, 199 (2d Cir. 2001) 

(Sotomayor, J.). Thus, the fact-driven outcomes of cases involving glass containers from 

decades ago- such as United States v. Continental Can Co., 378 U.S. 441 (1964) and In re 

Owens-Illinois, Inc., 115 F.T.C. 179 (1992)- are irrelevant and cannot control the outcome here. 

Nearly fifty years ago, in Continental Can, the government challenged a merger between 

a glass container manufacturer and a metal can manufacturer. In that case, where any 

competition between the merging parties necessarily existed only at a broad level that included 

both glass and metal packaging, the Supreme Court found that the relevant market for assessing 

that particular acquisition included both glass containers and metal cans. 378 U.S. at 457. In 

more recent decades, antitrust experts, including Judge Posner and Judge Easterbrook, have 

harshly criticized Continental Can, and the case is largely inapposite here. In any event, as 

Posner and Easterbrook have explained, and as is evident from the ruling, if the merger in 

123 Joseph Farrell, Fox, or Dangerous Hedgehog? Keyte and Schwartz on the 2010 Horizontal Merger Guidelines, 

77 ANTITRUSTL.J. 661,663 (2011) (emphasis in original). 


124 See Introductory Statement, Answer and Defenses ofRespondent Ardagh Group S.A., Docket No. 9356, Jul. 22, 


2013 (F.T.C. 2013). 


32 

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'I 

Continental Can "had been between two manufacturers of cans (or of [glass] bottles), the Court 

surely would have held that cans (or [glass] bottles) were an appropriate [relevant product 

market] in which to appraise the effects ofthe merger." Richard Posner & Frank Easterbrook, 

ANTITRUST CASES, ECONOMIC NOTES AND OTHER MATERIALS at 366-67 (2d ed. 1981) (quoted in 

Owens-Illinois, 115 F.T.C. at 303); see also Continental Can, 378 U.S. at 457-58. Thus, 

Continental Can cannot support including metal or plastic in the product market relevant to 

evaluating this merger- a merger oftwo glass makers. 

The Commission's ruling on a prior glass container merger two decades ago also cannot 

dictate the outcome of this case, as the Commission- well aware of its prior decisionrecognized in voting to bring this action. 0-I's acquisition of Brockway Glass in 1988 reduced 

the number of major U.S. glass container producers from six to five. See Owens-Illinois, 115 

F.T.C. at 189. The district court denied the Commission's motion for a preliminary injunction. 

!d. at 291. The administrative law judge found the merger anticompetitive after the merits trial, 

but the Commission ultimately found competitive responses from the many remaining postmerger glass container suppliers would make anticompetitive effects unlikely. !d. at 323-26. 

That case involved starkly different facts and market concentrations. Moreover, more recent 

legal authorities, including many of the cases from this Circuit cited above, have clarified the 

standards for defining relevant product markets. These authorities provide the lodestar for this 

Court to follow in assessing the unique facts ofthis case. 

B. The Relevant Geographic Market Is The United States. 

The relevant geographic market for analyzing the proposed acquisition is the United 

States. Defendants have geographically distributed networks ofmanufacturing plants that enable 

33 

PUBLIC 

them to compete on a nationwide basis. 125 Defendants bid for and capture business throughout 

the country, often shipping to customers hundreds of miles away from their plants. 126 Thus, the 

United States is the "geographic area in which the defendants compete in marketing their 

products or services." CCC Holdings, 605 F. Supp. 2d at 37. 

A geographic market larger or smaller than the United States would not accurately 

capture the competitive reality. Indeed, Ardagh admits that the relevant geographic market is no 

larger than the United States. 127 Smaller geographic markets would also be inappropriate. 

Defendants routinely analyze competition and calculate market shares for the United States as a. 

whole. 128 Although shipping costs can be significant, they are not determinative, and Defendants 

compete with each other and other glass container manufacturers across the country. For 

example, during 2011 negotiations, obtained a lower 

price quote on glass beer bottles from 0-l's due to competition from Anchor and 

Saint-Gobain, even though Anchor and Saint-Gobain would have supplied- from plants 

that were significantly farther than 0-I's 

plant. 129 

Given such nationwide competitive dynamics, the United 

States is the relevant geographic market for analyzing the effects of the acquisition. 

125 PX 2000-040. 

126 PX 1021; PX 2366; PX 4525-004-005. 

127 Answer and Defenses ofDefendant Ardagh Group S.A., ECF No. 39, ~ 38. 

128 PX 1264-022; PX 2078-012, -013; PX 1033-009; PX 1021; PX 1535; PX 2000-292; PX 2366. 

34 

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C. The Transaction Is Likely To Lead To Reduced Competition And Higher Prices. 

Defendants' proposed acquisition presumptively violates the Clayton Act and the FTC 

Act because it would radically increase.concentration in relevant markets that are already 

concentrated. Beyond this presumption of illegality, courts typically consider whether an 

acquisition will cause anticompetitive effects under either oftwo rubrics: coordinated effects 

and unilateral effects. See H&R Block, 833 F. Supp. 2d at 76-77. Coordinated effects occur 

when an acquisition enhances market power "by increasing the risk of coordinated, 

accommodating, or interdependent behavior among rivals," while unilateral effects occur when 

an acquisition enhances market power "simply by eliminating competition between the merging 

parties." Merger Guidelines § 1. This acquisition will likely cause competitive harm under both 

frameworks, as explained below and in the accompanying report ofthe Commission's expert 

economist. The result will be significantly reduced competition and higher prices. 

1. 	 The Acquisition Is Presumptively Unlawful Because It Will Substantially 

Increase Concentration. 

An acquisition presumptively violates the Clayton Act and FTC Act where it would result 

in a firm controlling "an undue percentage share ofthe relevant market." Heinz, 246 F.3d at 715. 

Market concentration is ordinarily measured by the Herfindahl-Hirschman Index ("HHI"), which 

is the sum ofthe squares of all competitors' market shares. 131 "Sufficiently large HHI figures 

establish the FTC's prima facie case that a merger is anti-competitive." Heinz, 246 F.3d at 716. 

131 In other words, in a market with four competitors, each ofwhom has 25% market share, the HHI would be 2500 

(252 + 252 + 252 + 252 

). 

35 

PUBLIC 

This acquisition would result in the following market concentrations: 132 

Relevant Market Pre-Acquisition HID Post-Acquisition HHI Increase 

Glass containers for beer 2,874 3,657 782 

Glass containers for spirits 2,067 3,138 1,072 

Under the Merger Guidelines, markets with apost-merger HHI above 2,500 are "highly 

concentrated," and mergers "resulting in highly concentrated markets that involve an increase in 

the HHI of more than 200 points will be presumed to be likely to enhance market power." 

Merger Guidelines§ 5.3. The HHI increases here- nearly four and over five times the 

presumptive limit- result in post-acquisition HHis that far exceed the threshold for "highly 

concentrated" markets, triggering the presumption of anticompetitive effects in both relevant 

product markets. 133 See Heinz, 246 F .3d at 716-17 (citing Merger Guidelines for thresholds that 

trigger the presumption of anticompetitive effects). Indeed, these increases are larger than those 

courts in this Circuit have found presumptively unlawful in other cases. See Heinz, 246 F. 3d at 

716 (increase of510 over pre-merger HHI); H&R Block, 833 F. Supp. 2d at 72 (increase of 400 

over pre-merger HHI). 

2. 	 The Acquisition Will Likely Result In Coordinated Anticompetitive 

Effects. 

This acquisition would leave a glass container duopoly in the United States consisting of 

Ardagh and 0-1. "Merger law rests upon the theory that, where rivals are few, firms will be able 

to coordinate their behavior, either by overt collusion or implicit understanding, in order to ... 

achieve profits above competitive levels." Heinz, 246 F.3d at 715 (quotation omitted). 

132 PX 7003. PX 7003 provides the market shares and HHI calculations for the relevant markets. 

133 The HHI values above are calculated from 2012 market shares based on revenue and are conservative compared 

with some ofDefendants' own estimates, which allot them even higher market shares. The HHis presented here 

differ slightly, but not materially, from those presented in the Complaint based on further analysis ofimport figures. 

36 

PUBLIC 

Coordination among duopolists may occur in many ways. For example, not only will the ability 

to coordinate pricing increase in a duopoly, but the ability to allocate customers or coordinate 

output will increase as well. Cf Merger Guidelines§ 7.2. 

The relevant markets are ripe for coordination. Indeed, many factors this Court identified 

as conducive to coordination in CCC Holdings are present here. The highly concentrated glass 

container industry has stable market shares, low growth rates, and significant barriers to entryY4 

As this Court explained in CCC Holdings, these very conditions leave "few incentives to engage 

in healthy competition." 605 F. Supp. 2d at 66. 

!d. at 65. As in CCC Holdings, the Three 

Majors have "sought to gather as much competitive information [about each other] as possible 

for a number of years, and have largely succeeded in their efforts." !d. (internal quotation and 

citation omitted). Defendants obtain rich information about their glass competitors via several 

channels, including public statements, industry analysts, distributors, and customers. 137 And 

these are certainly markets "in which the same three companies have been competing against 

each other for over a decade, making the market participants very familiar with each other." !d. 

at 64-65. 

134 See, e.g., PX 1260-001, -004; PX 1247-008; PX 1336-057. 

135 See, e.g., PX 1068-025; PX 1021; PX 2366; PX 1047 (attachment); PX 1286; PX 2000 -300-01; PX 1068-036; 


PX 2019-036-37, 048. 


136 See, e.g., PX 1021; PX 2000 -300-01; PX 2078-001,-027, -042, -050; PX 2366; PX 3002-004. 


137 See, e.g., PX 1385-001; PX 1252-002-003; PX 1046; PX 1044; PX 6010 (Shanteau IH Tr. at 187, 243-46). 


37 

PUBLIC 

The Three Majors also focus on selling "to their existing customers rather than engaging 

in price wars over each other's customers." ld. at 65. Ardagh's customer retention rate in recent 

years exceeds I percent and Saint-Gobain's retention rate is very high as well. 138 ­

... 

Indeed, the Majors approach the market with a common "price over volume" strategy that 

recognizes their shared incentives to keep capacity "tight" and to avoid "price wars." 141 

As Ardagh's Vice President of Sales explained: 

_. Defendants' documents also reflect concern about providing competitive bids that 

could drive glass container prices down. 144 

Defendants use third parties to communicate market information, including details about 

strategies for pricing and capacity. In 2009, for example, Anchor requested a call with a key 

138 - Dep. at 129; ..Dep. at 189. 

139 

140 

141 PX 1381-010; PX 2000-222; PX 1054-011; PX 1245-007; PX 1296-059; PX 6010 (Shanteau IH Tr. at 253-54). 


142 See PX 2139; PX 6010 (Shanteau IH Tr. at 258). 


143 PX 1049; see also PX 6001 (Love IH Tr. at 198). 


144 See PX 2142-014; PX 1124-002; PX 1051-001. 


38 

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industry analyst who was in close contact with 0-I and Saint-Gobain. Anchor informed this 

analyst of its "desire to play the role ofthe rational #3 glass provider" and indicated that its 

"curtailment efforts on capacity and balancing capacity/demand inventory are very consistent 

with what has been pursued by the leader as well."145 Later, this same analyst relayed to Anchor 

0-I's views concerning how "supply/demand" is being "managed in the US," amongst other 

information. 146 In another email exchange, a different analyst sent 0-I comments from Anchor's 

CEO detailing Anchor's top customer accounts and the proportion of revenue associated with 

each customer.147 

After the proposed acquisition, "[w]ith only two dominant firms left in the market, the 

incentives to preserve market shares would be even greater, and the costs of price cutting riskier, 

as an attempt by either firm to undercut the other may result in a debilitating race to the bottom." 

CCC Holdings, 605 F. Supp. 2d at 67. As the D.C. Circuit observed in Heinz, "[t]he creation of 

a durable duopoly affords both the opportunity and incentive for both firms to coordinate to 

increase prices." 246 F.3d at 725. 

The D.C. Circuit further explained that "[t]acit coordination 'is feared by antitrust policy 

even more than express collusion, for tacit coordination, even when observed, cannot easily be 

controlled directly by the antitrust laws. It is a central object ofmerger policy to obstruct the 

creation or reinforcement by merger of such oligopolistic market structures in which tacit 

coordination can occur." !d. (quoting 4 PHILLIP E. AREEDA, HERBERT HOVENKAMP & JOHN L. 

SOLOW, ANTITRUST LAW,~ 90l(b)(2), at 9 (rev. ed. 1998)). 

145 PX 1268-002. 

146 PX 1268-001; see also PX4766, PX4767, PX4768, PX4769, PX4770 (additional exchanges with the same 


analyst). 


147 PX 4308. 


39 

PUBLIC 

3. 	 The Acquisition Will Eliminate Head-to-Head Competition Between 

Ardagh and Saint-Gobain. 

The acquisition will also lead to unilateral anticompetitive effects by eliminating head-tohead competition between Ardagh and Saint-Gobain that has benefited consumers. See Swedish 

Match, 131 F. Supp. 2d at 169 ("[A] unilateral price increase ... is likely after the acquisition 

because it will eliminate one ofSwedish Match's primary direct competitors."); H&R Block, 833 

F. Supp. 2d at 88-89 (finding unilateral effects likely in merger between second- and third-largest 

fnms in the relevant market); Staples, 970 F. Supp. at 1083 (finding anticompetitive effects 

likely where "merger would eliminate significant head-to-head competition" between merging 

parties). 

..Moreover, customers testified that they have achieved lower prices, better service and 

other benefits due to direct competition between Ardagh and Saint -Gobain.151 

For example, in 2012,-issued requests for proposals to the Three Majors for 

its future glass bottle supply.152 - sought a dual-smu:cing arrangement for after the 

expiration, in December 2013, of its cmrent exclusive contract with Al:dagh. 153 .AI·dagh and 

Saint -Gobain emerged as the two most attractive bidders Ardagh 

threatened to raise prices ifit lost its status as exclusive glass bottle supplier, but 

t4J! See, e.g., PX 1399; PX 1037; PX 1043; PX 2157: PX 1398; PX 2434-016; PX 1543; PX 1399-001; PX 1417-00L 


-015; PX 1406; PX 2436-003; PX 2437-005; PX 6011 (Ganter ll:I Tr. at 86); PX 6010 (Shanteau ll:I Tr. at 56-59, 


184-85). 


149 See, e.g., PX 2000-059-66; PX 2007-029-033; PX 1019-003; PX 1264-017. 


150 See, e.g., PX 6001 (Love ll:I Tr. at 40); PX 1068-019; PX 1226-017; PX 6010 (Shanteau ll:I Tr. at 235-37); PX 


1049. 


40 

PUBLIC 


- used competitive pressure from Saint-Gobain to get a volume discount from Ardagh 

- effectively lowering prices. 155 Similarly, Ardagh and Saint-Gobain were the 

two lowest-priced bidders in 2012 negotiations with craft brewer 	 which used 

competitive pressure from Ardagh to obtain a lower price from Saint-Gobain. 156 

Distillers too benefit from this head-to-head competition. 	 has 

used "the threat of switching from Saint-Gobain to Anchor and Owens-Illinois to get better 

prices" on its glass bottles. 157 	 similarly testified that 

it has benefited from direct competition between Ardagh and Saint-Gobain. 158 • 

.. 

III. 	 DEFENDANTS' REBUTTAL ARGUMENTS FAIL, AND, AT BEST, RAISE 

ISSUES FOR RESOLUTION IN THE ADMINISTRATIVE TRIAL. 

Because the acquisition will substantially increase concentration in the relevant markets, 

the acquisition is presumptively unlawful. See CCC Holdings, 605 F. Supp. 2d at 36 (quoting 

Baker Hughes, 908 F.2d at 982). Defendants bear the heavy burden of rebutting that 

presumption. See id. (citing Heinz, 246 F.3d at 715). Neither entry of new competitors nor 

see also PX 1023. 

159 PX 2078-001, -027, -042, -050. 

160 PX 2078-001, -027, -042, -050. 

161 PX 2078-001, -027, -042, -050. 

41 

PUBLIC 

Defendants' claimed efficiencies can extinguish the "serious, substantial" questions oflegality 

raised by the Commission's strong prima facie case. 

A. High Barriers To Entry And Expansion Exist In The Glass Container Industry. 

Barriers to entry in the relevant markets are extremely high, as Defendants' documents 

and testimony show. Any potential entry would not be "timely, likely, and sufficient in its 

magnitude, character, and scope to deter or counteract the competitive effects of concern." H&R 

Block, 833 F. Supp. 2d at 73 (quoting Merger Guidelines § 9); see also United States v. Visa 

USA, Inc., 163 F. Supp. 2d 322,342 (S.D.N.Y. 2001). 

Defendants themselves have often touted the high barriers to entry in the industry. 162 A 

2010 Anchor investment memorandum states, "[i]mports and new market entrants are faced with 

meaningful barriers to entry, including significant start-up costs (estimated at $200 million for a 

new plant), high shipping cost of glass containers, long-term customer contracts, extensive mold 

libraries, and proprietary molding machinery technologies." 163 The capital investment needed to 

construct a new glass facility is at least $150-$200 million, and building a greenfield plant would 

take years for environmental permitting and building. 164 Indeed, Ardagh admitted in this action 

that it believes there are high barriers to entry, "which include significant capital requirements, 

extensive technology and manufacturing know-how and existing customer relationships." 165 

Meaningful expansion by fringe firms is unlikely for many ofthe same reasons that 

stymie new entry, especially since none of the fringe firms has more than one glass container 

162 See, e.g., PX 1336-057; PX 1247-008. 


163 PX 1247-008. 


164 PX 1075-081· PX 2050-036; PX 6003 (Wilkes lli Tr. at 149); PX 6004 (Fredlake lli Tr. at 47);­

165 Ardagh Response to Request for Admission 21. 

42 

PUBLIC 

plant. Plus, many of the fringe firms would require sizable infrastmcture investments to produce 

the types ofbeer and spirits bottles that the Three Majors make today. 166 

The possibility offurther vertical integration by large customers also fails to meet the 

legal threshold for timely, likely, and sufficient entry. 

B. Defendants' Efficiency Claims Are Largely Unfounded. 

Defendants argue that the IImillion in efficiencies Ardagh hopes to achieve from the 

acquisition will negate any anticompetitive effects. 17°

Courts "have rarely, ifever, denied a 

preliminary injunction solely based on the likely efficiencies." CCC Holdings, 605 F. Supp. 2d 

at 72. "[I]n a highly concentrated market characterized by high barriers to entry," such as here, 

Defendants "must provide 'proof of extraordinary efficiencies' in order to rebut the presumption 

of anticompetitive effects." Id. (quoting Heinz, 246 F.3d at 720). Defendants cannot do so. 

170 See PX 1197-014. 

43 

PUBLIC 

Cognizable efficiencies must be (1) merger-specific and (2) verifiable. H&R Block, 833 

F. Supp. 2d at 89; see also Heinz, 246 F.3d 721-22; Merger Guidelines§ 10. Defendants' 

efficiency claims largely fail to meet these elements. For instance, Defendants claim they will 

save.- by reducing overhead within the Saint-Gobain organization. This.­

claim relates to the staffing ofthe current Saint-Gobain organization alone and is separate from 

any additional savings to be reaped from eliminating staff positions made redundant by the 

combination ofArdagh and Saint-Gobain. Thus, the claim is not merger-specific. If SaintGobain is not staffed efficiently today, it can cut those costs on its own. This claim is also not 

verifiable because Ardagh has made no effort to identify which current Saint-Gobain employees 

have redundant responsibilities, 171 and Ardagh assumes, without investigation, that none ofthese 

purportedly superfluous workers are, in fact, necessary. 

As if to highlight the speculative nature oftheir efficiency claims, Defendants have 

actually increased their claims by.- since they announced the acquisition. 172 The basis 

for this change was not new information, but simply a desire to be less "conservative." 173 The 

Court should disregard these unverifiable and non-merger-specific claims. 

IV. 	 THE PUBLIC INTEREST STRONGLY FAVORS PRELIMINARY RELIEF TO 

PRESERVE THE STATUS QUO. 

Allowing this acquisition to close before trial would irreparably harm the public interest. 

Congress enacted Section 13(b) ofthe FTC Act to make "injunctive relief[] broadly available to 

the FTC." Heinz, 246 F.3d at 714 (citation omitted). Because '"experience shows that the 

Commission's inability to unscramble merged assets frequently prevents entry of an effective 

order of divestiture' after administrative proceedings, the court must place great weight on the 

171 PX 6005 (Riordan IH Tr. at 192-194). 


172 PX 1192-001. 


173 PX 6005 (Riordan IH Tr. at 34-36). 


44 

PUBLIC 

public interest in blocking a possibly anticompetitive merger before it is complete." Whole 

Foods, 548 F.3d at 1050 (Tatel, J.) (quoting FTC v. Dean Foods Co., 384 U.S. 597, 607 n.5 

(1966)); see also Heinz, 246 F.3d at 726. 

The merits trial begins on December 2nd. Preserving the status quo during the 

administrative trial will protect the public interest and will not harm Defendants, who have 

committed to litigating the merits ofthe acquisition. They can continue operating as usual until 

the trial is over. Defendants may claim a delay in the acquisition would harm them, but such 

private harms are accorded "little weight, lest we undermine [S]ection 13(b)'s purpose of 

protecting the public-at-large, rather than the individual private competitors." Heinz, 246 F.3d at 

727 n.25 (citing FTC v. University Health, Inc., 938 F.2d 1206, 1225 (11th Cir. 1991) (internal 

quotation omitted)); see also id. ("Private equities do not outweigh effective enforcement ofthe 

antitrust laws.") (quoting FTC v. Weyerhaeuser Co., 665 F .2d 1072, 1083 (D.C. Cir. 1981 )). 

Because this acquisition raises serious questions of illegality, the public interest strongly favors a 

preliminary injunction "until [the] FTC can perform its function." !d. at 726 (citing Food Town 

Stores, 539 F.2d at 1346). 

CONCLUSION 

For the reasons explained above, the Federal Trade Commission respectfully requests 

that this Court grant its motion for a preliminary injunction and prevent Ardagh from closing its 

acquisition of Saint-Gobain pending a full administrative trial to determine the legality ofthe 

acquisition under the antitrust laws. 

45 

September 26, 2013 

Of counsel: 

DEBORAH L. FEINSTEIN (D.C. Bar 412109) 

Director 

NORMAN A. ARMSTRONG, JR. (D.C. Bar 459621) 

Deputy Director 

Bureau of Competition 

Federal Trade Commission 

JONATHAN NUECHTERLEIN (D.C. Bar 442470) 


General Counsel 


Federal Trade Commission 


CATHARINE M. MOSCATELLI 


Assistant Director (D.C. Bar 418510) 


BRENDAN J. MCNAMARA 


Deputy Assistant Director 


ANGELIKE A. MINA 

SEAN D. HUGHTO (D.C. Bar 421224) 

STEVEN L. WILENSKY (D.C. Bar 430398) 

MONICA M. CASTILLO 

ANGEL PRADO 

JAMES ABELL (D.C. Bar 990773) 

MEREDITH ROBINSON (D.C. Bar 498245) 

JOSHUA GOODMAN 

MICHAEL FRANCHAK 

STEVENDAHM 

DANIELLE SIMS (D.C. Bar 982506) 

KRISTIAN ROGERS 

AMANDA HAMILTON (D.C. Bar 499646) 

SEBASTIAN LORIGO 

VICTORIA LIPPINCOTT (D.C. Bar 473839) 

Attorneys 

Federal Trade Commission 

Bureau of Competition 

Mergers II Division 

PUBLIC 


Respectfully submitted, 

Is! Edward D. Hassi 

EDWARD D. HASSI 

ChiefLitigation Counsel 

Federal Trade Commission 

Bureau ofCompetition 

600 Pennsylvania Ave., NW 

Washington, DC 20580 

Telephone: (202) 326-2470 

Facsimile: (202) 326-2884 

Email: ehassi@ftc.gov 

Attorneyfor Plaintiff 
PUBLIC 


NAME GLOSSARY 


REDACTED IN ENTIRETY 

PUBLIC 


CERTIFICATE OF SERVICE 

I hereby certify that on September 27, 2013, I filed the foregoing document electronically 

using the FTC's £-Filing System, which will send notification of such filing to: 

DonaldS. Clark 

Secretary 

Federal Trade Commission 

600 Pennsylvania Ave., NW, Rm. H-113 

Washington, DC 20580 

I also certify that I delivered via electronic mail and hand delivery a copy ofthe 

foregoing document to: 

The Honorable D. Michael Chappell 

Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Ave., NW, Rm. H-110 

Washington, DC 20580 

I further certify that I delivered via electronic mail a copy ofthe foregoing document to: 

Alan Goudiss 

Dale Collins 

Richard Schwed 

Lisl Dunlop 

Shearman & Sterling LLP 

599 Lexington A venue 

New York, NY 10022 

(202) 848-4906 

agoudiss@shearman.com 

wcollins@shearman.com 

rschwed@shearman.com 

ldunlop@shearman.com 

Counselfor Respondent Ardagh Group S.A. 

Christine V amey 

Y onatan Even 

Athena Cheng 

Cravath, Swaine & Moore LLP 

825 Eighth A venue 

New York, NY 10019 

(212) 474-1140 

cvamey@cravath.com 

yeven@cravath.com 

acheng@cravath.com 

Counselfor Respondent Saint-Gobain Containers, Inc. 
PUBLIC 

CERTIFICATE FOR ELECTRONIC FILING 

I certify that the electronic copy sent to the Secretary ofthe Commission is a true and 

correct copy ofthe paper original and that I possess a paper original of the signed document that 

is available for review by the parties and the adjudicator. 

September 27, 2013 By: s/ Angelike Mina 

Attorney