Locked Out

Antitrust enforcer Jonathan Kanter is reinvigorating merger law. This time, it's blocking monopolization in the lock industry.

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Since Jonathan Kanter took over the Department of Justice Antitrust Division ten months ago, the DOJ has challenged or blocked eight mergers, litigating more merger trials than in any fiscal year on record. Even still, corporate America is not getting the message. Mergers that should not even be considered because they are obviously illegal are being proposed and going to trial. One such merger is that of a Swedish company named ASSA ABLOY, best known for its Yale locks brand, attempting to buy Spectrum Brands’ Hardware and Home Improvement Division, which also makes locks. To put it simply, these kinds of mergers are ridiculous.

Why is this merger illegal? In internal documents, the company justified the merger by noting that, as a result of the transaction, one of its residential door hardware brands would be “in a better pricing negotiation position and can expect to increase prices.” The CEO might as well have said, “We are merging because we think enforcing the Clayton Act is for losers.”

Beyond that, the facts support the Antitrust Division’s case. It’s a highly consolidated market already. There are three significant lock makers, and this combination would shrink the industry down to two, with ASSA ABLOY controlling 65% of the mechanical residential door hardware market, and 50% of the smart lock market. (It didn’t used to be so consolidated - ASSA ABLOY engineered it that way, buying more than 300 businesses in 27 years.)

These two firms are vigorous competitors in markets that are hard to enter, and which are already immensely concentrated. It speaks to the degraded status of merger law that these firms would even consider merging, let alone litigating this at trial. Then again, that’s mostly what ASSA ABLOY’s leadership knows how to do, exploiting weak antitrust enforcement. More importantly it’s what their lawyers, who encourage lawlessness, are pushing them to do. It’s good that Kanter is working to strengthen merger law and move away from the rampant monopolization across the economy. And in this case, the DOJ also asked the merging parties to pay their litigation costs. That’s only fair, because this transaction should never have gotten out of the board room.