United States v. Iron Mountain, Inc., Civil No. 16-cv-00595 (APM)

• Decision Date: 11 November 2016
• Docket Number: Civil No. 16-cv-00595 (APM)
• Citation: 217 F.Supp.3d 146
• Parties: UNITED STATES of America, Plaintiff, v. IRON MOUNTAIN, INC., et al., Defendants.
• Court: U.S. District Court — District of Columbia

217 F.Supp.3d 146

UNITED STATES of America, Plaintiff,

v.IRON MOUNTAIN, INC., et al., Defendants.

Civil No. 16-cv-00595 (APM)

United States District Court, District of Columbia.

Signed November 11, 2016

Soyoung Choe, U.S. Department of Justice, Washington, DC, for Plaintiff.

Laura A. Wilkinson, Weil, Gotshal & Manges LLP, William Blumenthal, Sidley Austin LLP, Washington, DC, for Defendants.

MEMORANDUM OPINION

Amit P. Mehta, United States District Judge

I. INTRODUCTION

The United States filed this action against Iron Mountain, Inc. ("Iron Mountain"), and Recall Holdings Ltd. ("Recall") (collectively "Defendants"), alleging that Iron Mountain's proposed acquisition of Recall would violate Section 7 of the Clayton Act, 15 U.S.C. § 18. See Compl., ECF No. 1, ¶¶ 3, 25. The United States filed with its Complaint a Hold Separate Stipulation and Order, ECF No. 4-1, which the court executed, ECF No. 9; a proposed Final Judgment, ECF No. 4-2; and a Competitive Impact Statement, ECF No. 3 [hereinafter CIS]. Thereafter, as required by the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16(b) –(h) (the "Tunney Act"), the United States published and subjected the proposed Final Judgment to a 60-day public comment period, which expired on May 25, 2015, see Mot. and Mem. of the United States, ECF No. 15 [hereinafter U.S. Mot.], at 3. The public comment period elicited a single response—from National Records Center, Inc.—to which the United States responded and published the comment and response in the Federal Register. See Resp. of the United States to Public Comment, ECF No. 13 [hereinafter U.S. Resp.]. The United States now asks the court to enter the agreed-upon Final Judgment, which would permit Iron Mountain and Recall to complete the proposed transaction subject to conditions intended to remedy the violations identified in the Complaint. See U.S. Mot.

II. BACKGROUND

A. Factual Background

1. Relevant Product and Geographic Markets

Iron Mountain is the largest hard-copy records management services ("RMS") provider in the United States, with reported worldwide revenues of approximately $3.1 billion in 2014. CIS at 3. Recall is the country's second-largest RMS provider, with worldwide revenues of $836.1 million in 2014. Id. The relevant product market—RMS—involves the off-site storage of records and the provision of related services, such as indexing, transporting, and destroying records. Id. at 3–4. "[T]he Complaint alleges that a hypothetical monopolist of RMS could profitably increase its prices by at least a small but significantly non-transitory amount ... [and] customers would not switch to any other alternative." Id. at 5.

RMS customers include companies throughout the United States, ranging from Fortune 500 companies to small local businesses. Id. at 4. The relevant geographic market, however, is a metropolitan area or a radius around such area. Id. at 5. That is because customers typically require a RMS vendor to have a storage facility located within a certain proximity of the customer's location. Id. Vendors outside a particular radius are not competitive with closer-in vendors because longer-distance "vendor[s] will not be able to retrieve and deliver records on a timely basis" and because such vendors are likely to incur higher transportation costs, rendering them a more costly alternative. Id. The Complaint identifies 15 metropolitan areas—the relevant geographic markets—in which RMS vendors "could profitably increase prices to local customers without losing significant sales to more distant competitors." Id. ; Compl. ¶ 17.

2. Proposed Merger between Iron Mountain and Recall

On June 8, 2015, Iron Mountain reach an agreement to acquire all the outstanding shares of Recall, a transaction valued at $2.6 billion. CIS at 1. After the proposed merger's announcement, the United States, through the Department of Justice, conducted an investigation into the potential anti-competitive effects of the proposed transaction on RMS consumers in various geographic areas. U.S. Resp. at 2.

"As part of [this] investigation, the United States obtained documents and information from the merging parties and others and conducted more than 160 interviews with customers, competitors, and other persons with knowledge of the [RMS] industry." Id. at 2–3.

Following its investigation, the United States concluded that the proposed merger likely would lessen competition in 15 metropolitan areas. Id. at 4; Compl. ¶ 17. "In each of these geographic areas, Iron Mountain and Recall are two of only a few significant firms providing RMS." U.S. Resp. at 4. Furthermore, in each of those areas, the United States found, the merger would result in a "substantial increase in concentration and loss of head-to-head competition between Iron Mountain and Recall" and "likely would result in higher prices and lower quality services for RMS customers." Id.

To address these competitive concerns, the United States required, as a condition of approving the merger, a divestiture of Recall's assets. In 13 metropolitan areas, Recall will be required to sell its assets to a third-party, Access CIG, LLC ("Access"), and in two metropolitan areas, Recall will be required to sell its assets to a to-be-determined buyer acceptable to the United States. Id. The required divestiture will include the sale of 26 Recall storage facilities, along with associated assets, such as customer contracts. Id. According to the United States, the "[d]ivestiture of the assets to independent, economically viable competitors will ensure that customers of [RMS] will continue to receive the benefits of competition." Id.

B. Procedural Background

The United States filed this action against Iron Mountain and Recall, alleging that the proposed merger would violate Section 7 of the Clayton Act, 15 U.S.C. § 18. See Compl. ¶¶ 3, 25. The United States filed with its Complaint a Hold Separate Stipulation and Order, which the court entered on April 7, 2016, ECF No. 9. The purpose of that Stipulation and Order was to "ensure[ ], prior to [the] divestitures, that the Divestiture Assets remain independent [and] economically viable[,] ... [that] ongoing business concerns ... remain independent and uninfluenced by Iron Mountain, and that competition is maintained during the pendency of the ordered divestitures."Id. at 5. With its Complaint, the United States also filed a proposed Final Judgment and a Competitive Impact Statement. See Final Judgment, ECF No. 4-2; CIS.

Thereafter, as required by the Antitrust Procedures and Penalties Act, 15 U.S.C. § 16(b) –(h) (the "Tunney Act"), the United States published and subjected the proposed Final Judgment to a 60-day public comment period, which expired on May 25, 2015, see U.S. Mot. at 3. The public comment period elicited a single comment from a competitor in the RMS industry, National Records Centers, Inc. ("NRC"). U.S. Resp. at 8. The United States published NRC's comment and the United States' response in the Federal Register. See id. at 13. Now before the court is the United States' Motion for Entry of Final Judgment. See generally U.S. Mot.

III. LEGAL STANDARD

The Tunney Act requires courts, "[b]efore entering any consent judgment proposed by the United States," to "determine that the entry of such judgment is in the public interest." 15 U.S.C. § 16(e). The parameters of the Tunney Act's "public interest" standard are well defined by statute, see 15 U.S.C. § 16(e)(1), and case law, see, e.g. , United States v. Newpage Holdings, Inc. , No. 14–cv–2216, 2015 WL 9982691, at *4–5 (D.D.C. Dec. 11, 2015).

The court, therefore, need not provide a fulsome recitation of the applicable standards. It suffices for present purposes to note that the government enjoys "broad discretion to settle with the defendant within the reaches of the public interest." United States v. Microsoft Corp. , 56 F.3d 1448, 1461 (D.C. Cir. 1995). And, although a court may not simply "rubber stamp" the government's proposal and is required to "make an independent determination" as to the public interest, id. at 1458 (internal quotation marks omitted), it "is not permitted to reject the proposed remedies merely because the court believes other remedies are preferable," United States v. SBC Commc'ns, Inc. , 489 F.Supp.2d 1, 15 (D.D.C. 2007). Indeed, the court is required to be "deferential to the government's predictions as to the effect of the proposed remedies." Microsoft Corp. , 56 F.3d at 1461. In short, "the relevant inquiry is whether there is a factual foundation for the government's decisions such that its conclusions regarding the proposed settlement are reasonable." SBC Commc'ns, Inc. , 489 F.Supp.2d at 15–16.

IV. DISCUSSION

A. The Public Interest Inquiry

The court has carefully reviewed the United States' Complaint, as well as its proposed Final Judgment, Competitive Impact Statement, and Response to NRC's comment, and finds that the proposed Final Judgment "is in the public interest." 15 U.S.C. § 16(e)(1). In reaching that conclusion, the court has considered, in particular, the clarity of the proposed Final Judgment, the sufficiency of its enforcement mechanisms, and the competitive impact on third parties. See Microsoft , 56 F.3d at 1458–62. The court briefly discusses each of those factors.

A "district judge who must preside over the implementation of the decree is certainly entitled to insist on that degree of precision concerning the resolution of known issues as to make his task, in resolving subsequent disputes, reasonably manageable." Id. at 1461–62. On that score, the Final Judgment is satisfactory. The Final Judgment turns largely on the proposed divestiture of Recall's assets and provides a detailed framework by which such divestiture is to occur. Proposed Final Judgment, ECF No. 15-1, at 7–11. The Final Judgment, among other things, outlines the geographic markets and assets located in those markets subject to the divestiture, id. at 7 & apps. A, B; the timing of the divestiture, id. at...