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In a case with important ramifications for merger enforcement, the Federal Trade Commission on Thursday upheld its ruling that Chicago Bridge & Iron Co. NV’s 2001 acquisition of a unit owned by Pitt-Des Moines Inc. violated antitrust law. The FTC affirmed a 2003 ruling by an administrative law judge on the agency’s challenge to the deal, under which CB&I bought the engineered construction division for $84 million. To restore competition as it existed before the merger, the commission ordered CB&I to take what antitrust experts said is a highly unusual step. The Woodlands, Texas-based company must create two separate, standalone companies from its industrial segment and to divest one of those entities within six months. “This is a very important aspect of the decision because there is relatively little precedent as to what to do to remedy a consummated merger,” said David Balto, a partner at law firm Robins, Kaplan, Miller & Ciresi in Washington. CB&I spokesman Bruce Steimle declined to comment on the FTC’s decision. But in a statement the company said it believes the order and opinion are inconsistent with the law and that it intends to appeal the ruling to the U.S. Circuit Court of Appeals. CB&I said it does not expect a decision until next year. The company is not required to divest any assets until all appeals are exhausted, which could include taking the case to the U.S. Supreme Court. That would represent the first merger-related case the justices have heard in more than two decades. Antitrust experts said CB&I has nothing to lose by appealing the decision because the company has already integrated the disputed Pitt-Des Moines unit. “Even if they ultimately lose, they will only have to divest a portion of the business at some point later in time,” one source familiar with the case said. But the FTC ruling is likely to stand because judges typically defer to decisions by the agency. “It’s very hard to reverse,” Balto said. The FTC’s ruling returns the enforcer to its judicial roots. Although the agency typically acts as a regulator, the five commissioners are also empowered to sit as a tribunal to decide merger challenges. For years the agency regularly conducted administrative proceedings as it helped shape merger law. Then passage of the Hart-Scott-Rodino Act in the 1970s forced companies to notify the agency before they merged. This shifted the fight to federal court, since the FTC is not authorized to issue injunctions to prevent mergers. Rather, it only may order relief after a deal has closed. “This [decision] is important because it brings us back to the vision of the FTC as an expert body deciding what the law is, not just an enforcer,” Balto said. The FTC has challenged a number of other consummated mergers, including Airgas Inc.’s $90 million acquisition of Mallinckrodt Inc.’s medical gas business in 2001, but the CB&I case is the first completed merger challenge the commissioners have decided, and more are likely to follow. After moving to block the CB&I deal in 2002, the FTC warned the antitrust bar that they should advise their clients that transactions that raise competitive issues are risky and may require “unscrambling the eggs if necessary.” Copyright �2005 TDD, LLC. All rights reserved.

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