The Department of Justice recently brought an action under the Clayton Act to enjoin the merger of two giants in the packaged ice industry, Reddy Ice and Arctic Glacier: U.S. v. Reddy Ice, LLC, Case No. 1:26-cv-271, in the U.S. District Court for the District of Columbia.  

The Claims

Specifically, the DOJ alleges that these packaged ice producers (who sell ice to regional and national retail chains as well as airlines) should be enjoined from their proposed merger (Reddy acquiring Arctic Glacier for between $126.4 million and $179.4 million) because the proposed merger would lead to less competition and, thus, higher prices in relevant markets and for the aforementioned retail outlets and airlines (and airline caterers).

These two entities are uniquely qualified to meet the needs of their target customers as they have multiple manufacturing locations and large regional networks, something that local, one-off packaged ice producers do not have, rendering them incapable of competing with larger producers for these target customers. These two entities, the DOJ alleges, have competed for years, which has driven prices down and improved service to the relevant consumers. Eliminating this competition would drive prices up, and there is a significant barrier to entry for a potential competitor to compete on the necessary scale.

Resolution of the Claims

Simultaneous to the filing of its complaint, DOJ filed a proposed final judgment reflecting a settlement of the matter. The proposed settlement calls for the parties to divest certain assets in California (to San Diego Ice or another acceptable entity), Massachusetts (to Dee Zee Ice or another acceptable entity), New York (to Natuzzi Ice or another acceptable entity), Oregon (to Oregon Ice or another acceptable entity), and Washington (to Columbia Basin Ice or another acceptable entity). The parties must also provide advance notification for certain future transactions and allow a monitor to supervise the parties’ divestiture of the assets and compliance with the consent decree.

This settlement is just another example of recent settlements wherein settlement required the merging parties to divest certain assets to address antitrust concerns.

Pre-Merger Considerations

Companies would be wise to make themselves aware of the DOJ's efforts at stopping anti-competitive behavior.

The Federal Trade Commission (FTC), for its part, has provided some guidance to companies seeking to merge. Of note, the FTC has advised companies that the potential for competitive harm is not a result of the transaction as a whole, but rather occurs only in certain lines of business.  Where a buyer competes in a line of products with the company it seeks to buy, the FTC proposes that the parties may simply agree to sell off the overlapping business line of one of the merging parties. This common-sense approach is reflected in the settlements discussed above. This allows the procompetitive benefits of the merger to be realized without creating the potential for anticompetitive harm.

Merging parties can also take additional actions to mitigate the risk of an antitrust enforcement action, which would put a halt to their best-laid plans. Many of these strategies have been excellently laid out previously by Aimee E. DeFilippo, Melissa Hall, and Dionne C. Lomax in their Bloomberg Law article, “Antitrust Considerations in Negotiating and Preparing for a Merger or Joint Venture.”

• Engaging in a preliminary market assessment to determine whether the proposed transaction is likely to enable the merging parties, whether unilaterally or collectively with competitors, to engage in anti-competitive behavior (increase prices to consumers above competitive levels or reduce output, innovation, or product quality).
• Assessing whether a commitment to divestitures (in order to obtain antitrust agency approval) is appropriate. This ranges from a “hell or high water” provision (which requires a buyer to do whatever it takes and give up whatever assets are necessary to obtain antitrust clearance) to an explicit listing of divestiture obligations (requiring only certain product or service lines to be sold).
• Seeking an agreement with one’s merger partner that obligates that party to litigate against agency (FTC or DOJ) challenges to the proposed merger. With the FTC and DOJ engaging in aggressive challenges to mergers with supposed anticompetitive effects, such an agreement can ensure that one’s merger partner does not just walk away from a transaction. Such an obligation can—and should—address who is obligated to litigate, for how long or to what stage litigation is required, and who bears the cost of litigation.
• Addressing any agreement of natural off-ramps for either party to terminate the merger, such as inquiries by the antitrust enforcement agencies or a court entering an order enjoining the merger.
• Allocating risk on the seller's side with a reverse breakup fee. These are fees that are payable by the buyer to compensate a would-be seller if the transaction fails to close on antitrust grounds.
• Spelling out the efforts that the parties must engage in to effect the merger, including coordination with the other merging party and the antitrust enforcement agencies.

The FTC, again, has provided some guidance to potential merger partners (competitors or potential competitors) who wish to minimize their antitrust risks throughout the pre-merger negotiation and due diligence process.

Specifically, the FTC has focused on advice to companies regarding information sharing in the pre-merger process, above and beyond any post-merger anti-competitive concerns like those described above.

The FTC’s concern with this pre-merger information sharing is that it “can inflict harm to competition similar to the harm caused by an anti-competitive merger. Exchanging information about competitive plans, strategies, and crucial data such as prices and costs can facilitate coordination between firms (and, if accompanied by accommodating actions, could constitute an unlawful agreement). Right up until consummation, the merger parties are still independent businesses, and they must continue to operate independently, including safeguarding their competitively sensitive information—to ensure competitive vigor in the short term and also in the event that the merger does not happen.”

With that in mind, the FTC advises companies to construct “effective protocols to prevent anti-competitive information sharing” during pre-merger negotiations and due diligence, to employ consultants and other safeguards to limit “the dissemination and use of that information within the parties’ businesses,” and to monitor compliance with these protocols.