Antitrust Divisions Threatens To Block Sticky Notes Merger

On September 4, 2012, the Antitrust Division announced that 3M Co. abandoned its plan to acquire Avery Dennison Corp.'s Office and Consumer Products Group after the Division informed 3M that it would sue to block the transaction.
3M Response

Later that day, 3M responded that it has only withdrawn its notification form filed under the Hart-Scott-Rodino Act but that it has not canceled its agreement to acquire Avery Dennison's Office and Consumer Products Group. 3M also states that it plans to address the Antitrust Division's antitrust concerns.

Competition Concerns

On Dec. 21, 2011, 3M agreed to acquire Avery's Office and Consumer Products Group, which includes Avery's labels business, for approximately $550 million. The agreement specifically excluded some sticky notes assets, but left Avery without its brand or the sales and distribution system necessary to compete effectively in the sticky notes market. 3M, which announced the acquisition more than eight months ago, had planned to complete the purchase in the second half of this year.

The Antitrust Division stated that the acquisition would give 3M more than 80 percent of the U.S. market for labels and sticky notes. The deal would have combined the two larges label makers in the world. The Antitrust Division's investigation found that 3M and Avery have dominated adjacent parts of the office products business for many years with Avery making labels and 3M selling sticky notes under its Post-it brand. The Antitrust Division also alleges that 3M and Avery Dennison are each other's closest competitor in the sale of adhesive-backed labels and sticky notes. For instance, the Antitrust Division claims that 3M entered the labels market in the United States in 2009 and began competing with Avery. Avery responded to 3M's entry by lowering wholesale prices, increasing promotions and customer rebates and accelerating innovations in labels. Avery also responded to 3M's labels competition by selling Avery branded sticky notes. The direct competition resulted in lower prices for consumers. Therefore, the Antitrust Division alleges that the proposed acquisition would have substantially lessened competition in the sale of labels and sticky notes, resulting in higher prices and reduced innovation for these products that millions of consumers use every day.

Lessons Learned

The Antitrust Division's threat to block this transaction in federal court further demonstrates its resolve to litigate anticompetitive mergers. Since the beginning of 2011, the Antitrust Division successfully blocked three major proposed mergers, two of which (AT&T/T-Mobile and NASDAQ/NYSE) were abandoned by the parties without a court-imposed injunction. The Antitrust Division went to court to block H&R Block's attempt to acquire TaxACT.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com