Source: https://www.justice.gov/atr/case-document/verified-complaint-5
Timestamp: 2019-10-19 22:08:06
Document Index: 525125990

Matched Legal Cases: ['§ 18', '§ 4', '§ 18', '§ 2', '§ 4', '§ 1331', '§ 22', '§ 1391', '§ 18', '§ 2', '§ 18', '§ 18', '§ 2']

2008 DEC 18 P 4:36
CLERK OF EASTERN DISTRICT
Civil Action No.: 1:08cv1311
ATJ/JFA
The United States of America, acting under the direction of the Attorney General of the United States, brings this civil antitrust action to obtain a temporary restraining order, preliminary injunction, and equitable and other relief against defendant Microsemi Corporation ("Microsemi") to remedy the harm to competition caused by Microsemi's acquisition of assets of Semicoa, Inc. ("Semicoa"). The United States alleges as follows:
1. This lawsuit challenges Microsemi's July 14, 2008 acquisition of substantially all of the assets of Semicoa, which has significantly harmed competition in the development, manufacture and sale of certain specialized high reliability electronic components used in aerospace and military applications. The transaction eliminated all competition for several types of transistors used in such applications – known as JANS and JANTXV small signal transistors – and substantially lessened competition for one type of diode used in such applications – known as JANS and JANTXV 5811 diodes. The high reliability transistors and diodes affected by the transaction are manufactured to exacting standards to ensure high performance under the most demanding conditions, subject to a U.S. government system of qualification and certification that is relied upon to assure the required degree of reliability. These components are used by customers that include the military services and the national security agencies of the United States in a wide range of critical applications in space, in the air, on land, and on and under the sea. The largest and most complex military applications ever designed, ranging from satellites to submarines, depend on these components. Civilian space projects ranging from communications satellites to the spacecraft under development to return astronauts to the moon also require these components. Because failure of even a single one of these components could result in the failure of a vital, multibillion dollar mission – and potentially cost the lives of American servicemen and women and astronauts – components with lesser degrees of reliability cannot be substituted for the products at issue in this case.
2. The JANTXV and JANS small signal transistors and the JANTXV and JANS 5811 diodes at issue in this case are hereinafter referred to collectively as the "relevant products." Through its acquisition of the Semicoa assets, Microsemi reduced the number of suppliers of JANTXV and JANS small signal transistors from two to one, and thereby acquired monopolies in the development, manufacture and sale of those products. The acquisition also substantially reduced competition for JANTXV and JANS 5811 diodes by terminating Semicoa's attempt to enter into the manufacture and sale of these diodes. The acquisition has thus created monopolies in the development, manufacture and sale of JANTXV and JANS small signal transistors, and has substantially lessened competition in the development, manufacture and sale of all relevant products.
3. As a result of the transaction, prices for the relevant products have increased and likely will continue to increase, delivery times have become less reliable, and terms of service likely will become less favorable. Accordingly Microsemi's acquisition of the Semicoa assets violated Section 7 of the Clayton Act, 15 U.S.C. § 18, and Section 2 of the Sherman Act, 15 U.S.C. 2.
4. The United States brings this action against defendant Microsemi under Section 4 of the Sherman Act and Section 15 of the Clayton Act, 15 U.S.C. §§ 4 and 25, as amended, to prevent and restrain Microsemi from continuing to violate Section 7 of the Clayton Act, 15 U.S.C. § 18, and Section 2 of the Sherman Act, 15 U.S.C. § 2.
5. Microsemi develops, manufactures and sells the relevant products in the flow of interstate commerce. Microsemi's activities in developing, manufacturing and selling the relevant products substantially affect interstate commerce. This Court has subject matter jurisdiction over this action and over the defendant pursuant to Section 4 of the Sherman Act and Section 15 of the Clayton Act, 15 U.S.C. §§ 4 and 25, and 28 U.S.C. §§ 1331, 1337(a), and 1345.
6. Venue is proper in this district pursuant to Section 12 of the Clayton Act, 15 U.S.C. § 22 and 28 U.S.C. § 1391(c), and venue is proper in this Division pursuant to Local Rule 3(C). Defendant is a corporation that transacts business within this judicial district and Division, including by making sales to customers located within this judicial district and Division.
12. Rectifier diodes are a class of diodes also commonly used in communications and other signal processing applications. Rectifier diodes operate at low power levels and are used to convert alternating current to direct current in a wide range of products, including critical military and civilian applications ranging from satellites to nuclear missile systems.Ultrafast recovery rectifier diodes, of which the 5811 type ("5811 diode") is among the most common, are distinguished from other rectifier diodes by their extremely high alternating speeds, which minimize power loss and waste heat generation. Their ability to perform efficiently and without generating excess heat is especially important in applications such as satellites and missiles, where power availability is strictly limited and heat dissipation is challenging. The 5811 diode performs a specific set of functions not performed by other ultrafast recovery rectifier diodes; while there are other types of ultrafast recovery rectifier diodes, those diodes have different characteristics and cannot perform the functions required of 5811 diodes. A small but significant increase in the price of 5811 diodes would not cause customers to switch to other types of diodes.
13. Highly reliable performance under demanding conditions is absolutely essential in military and space systems, where failure of a single component could result in failure of the mission. To ensure reliability and proper performance, production of these components for use in United States military and space applications is supervised by the Defense Supply Center Columbus ("DSCC"), a component of the Department of Defense. DSCC maintains a list of qualified components and their suppliers generally known as the Qualified Manufacturers List, or QML. While the QML is specifically intended for reference by military contractors, civilian space system manufacturers also require highly reliable components for use in a demanding environment, and therefore make use of the QML system and specify QML qualified components.
14. Products listed on the QML are organized into "slash sheets," which denote groups of components with similar characteristics. Microsemi and Semicoa were the only manufacturers on the QML slash sheets for small signal transistors. This Complaint hereinafter uses the term "small signal transistors" to describe the products on these slash sheets.
15. DSCC grants certifications and qualifications for different grades of QML components, known as Joint Army-Navy categories. These grades in general represent different levels of reliability. The highest reliability grade is Joint Army-Navy Space ("JANS"); one level below JANS is Joint Army-Navy Technical Exchange-Visual Inspection ("JANTXV"). There are two grades below JANTXV, but the distinction between those grades and JANTXV is not as stark as between JANTXV and JANS. Therefore, the term JANTXV will be used to refer to all QML grades other than JANS.
27. A small but significant increase in the price of JANS 5811 diodes would not cause customers to substitute commercial grade or JANTXV 5811 diodes to an extent that would make such a price increase unprofitable. Accordingly, the development, manufacture and sale of JANS 5811 diodes is a separate and distinct line of commerce and a relevant product market for the purpose of analyzing the effects of the acquisition under Section 7 of the Clayton Act and Section 2 of the Sherman Act.
39. Through its acquisition of the Semicoa assets, Microsemi has substantially lessened competition in the markets for JANTXV and JANS small signal transistors, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18, and willfully acquired a monopoly in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2.
42. Semicoa's entry into the market for JANTXV and JANS 5811 diodes likely would have benefited customers with lower prices, shorter delivery times, and more favorable terms of service, just as Semicoa's competition for sales of JANTXV and JANS small signal transistors benefited customers for those products. Microsemi's acquisition of the Semicoa assets prevented this entry and therefore substantially lessened competition in the markets for JANTXV and JANS 5811 diodes, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.
44. Entry into the development, manufacture and sale of JANS small signal transistors and JANS 5811 diodes sold to United States is even less likely to be timely, likely, and sufficient to counter the anticompetitive effects of the acquisition. The additional process required to obtain DSCC certification and qualification at the JANS level would require at least another year following JANTXV certification and qualification. Moreover, because JANS parts are used for the most demanding and critical applications, customers are unlikely to shift significant amounts of JANS purchases to an entrant until that entrant has established a record of quality, consistency, and reliability at the JANS level. Entry resulting in significant market impact likely would take more than three years for firms that, unlike Semicoa as to 5811 diodes, did not already have JANS qualification for other products and significant backing from important customers.
competition between Microsemi and Semicoa in the development, manufacture and sale of JANTXV and JANS small signal transistors and JANTXV and JANS 5811 diodes has been eliminated;
prices for JANTXV and JANS small signal transistors and JANTXV and JANS 5811 diodes have increased and likely will continue to increase, delivery times likely will lengthen, and terms of service likely will become less favorable.
the combination created a monopoly for the development, manufacture and sale of JANTXV and JANS small signal transistors;
competition between Microsemi and Semicoa in the development, manufacture and sale of JANTXV and JANS small signal transistors has been eliminated; and
prices for JANTXV and JANS small signal transistors have increased and likely will continue to increase, delivery times likely will lengthen, and terms of service likely will become less favorable.
Adjudge and decree the acquisition of the assets of Semicoa by defendant Microsemi to violate Section 7 of the Clayton Act, 15 U.S.C. § 18 and Section 2 of the Sherman Act, 15 U.S.C. § 2;
Compel Microsemi to divest all of Semicoa's tangible and intangible assets related to the development, manufacture and sale of the relevant products, and to take any further actions necessary to restore the markets to the competitive position that existed prior to the acquisition;
Award such temporary and preliminary injunctive and ancillary relief as may be necessary to avert the likelihood of the dissipation of Semicoa's tangible and intangible assets during the pendency of this action and to preserve the possibility of effective final relief;
Award the United States the cost of this action; and
Grant the United States such other and further relief as the case requires and the Court deems just and proper.
Lowell R. Stern (VA Bar #33460)
Robert W. Wilder (VA Bar #14479)
Download 240537.pdf
Download 240537.wpd