Markets and Market Power in Battery Separators: In Re Polypore

• DOI: 10.1177/0003603X1405900312
• Author: J. Robert Robertson,John Simpson
• Published date: 01 September 2014
• Date: 01 September 2014
• Subject Matter: Polypore: A Merger in a Producer Good—Article

THE ANTITRUST BUL L E T I N :Vol. 59, N o. 3/Fall 2 014 :643

Markets and market

power in battery separators:

In re Polypore

BYJOHN SIMPS ON*AND J. ROBERT ROB ERTSON**

The FTC’s lawsuit against Polypore International, Inc. mainly

focused on Polypore’s consummated acquisition of Microporous L.P.,

its only rival in the sale of two types of battery separators and one of

its two rivals in the sale of a third type of battery separator. Because

this was a consummate d acquisition, three t ypes of evidence were

avai labl e to def ine ma rket s and an alyz e comp etit ive ef fect s: 1)

structural evidence showing a high market share in an appropriately

defined market where there were barriers to entry; 2) pre-acquisition

direct evidence of head-to-head competition; and 3) post-acquisition

evidence of higher prices or reduced output. This article notes that

whil e all thr ee typ es of ev iden ce indi cate d that t he mer ger was

anticompetitive, the pre-acquisition and post-acquisition evidence of

direct effects was particularly informative in understanding the

acquisition’s effect on competition.

KEY WORDS:FTC, Polypore, market power, directeffects

© 2014by Federal Legal Publications, Inc.

* Economist, The Brattle Group, Washington, DC, and the testifying

economist for the FTC in In re Polypore.

** Hogan L ovells U S LLP, Washington, D C, forme rly the Ch ief Trial

Counsel at the Bureau of Competition of the Federal Trade Commission and

lead counsel in In re Polypore.

AUTHORS’NOTE: This articleexpresses ourviews only and notthose of any otherparty.

I. INTRODUCTION

The Fed eral Trade C ommission ’s (FTC ) laws uit aga inst Polypo re

International, Inc. (Polypore or Daramic)1focused on several actions

that Polypore took to gain and preserve market power in several bat-

tery separator markets. The first concerned Polypore’s acquisition of

Microporous L.P. (Microporous), which was Polypore’s only rival in

the production and sale of deep-cycle battery separators and motive

battery separators in North America, was one of only two rivals in the

production and sale of starting, lighting, and ignition (SLI) battery

separators in North America, and was a potential entrant into the sale

of uninterruptible power supply (UPS) battery separators. The second

involved a joint marketing agreement between Polypore and

Hollingsworth & Vose in which each firm agreed not to develop bat-

tery separators that competed with battery separators manufactured

by the other. The third concerned whether, prior to its acquisition of

Microporous, Polypore had structured its contractual arrangements

with certain battery manufactures in order to foreclose Microporous

from competing in large segments of the markets at issue.

For the most part, the litigation in this case centered on the first of

these actions, Polypore’s acquisition of Microporous. In a typical con-

summated merger case, three types of evidence can be usedto show that

a consummated merger harmed competition: information about thepre-

merger market structure; evidence of pre-merger head-to-head competi-

tion that would have been eliminated by the merger; and worsened

market performance after the merger. In some cases, these types of evi-

dence point in d ifferent directi ons, and court s are forced to decide

whether to place greater weight on either direct evidence or structural

evidence.2In other cases, the inferences from examining direct effects

644 :THE ANT I T R U S T BULLETIN:Vol. 59, No. 3/ Fall 2014

1In re Polypore Int’l Inc. (Polypore Initial Decision), No . 9327 (Mar. 1,

2010), available at http://www.ftc.gov/sites/default/files/documents/cases

/2010/03/100305polyporeincdecision.pdf, and In re Polypore Int’l Inc. (Poly-

pore FTC Decision), No. 9327 (F.T.C. Dec. 13, 2010), available at http://www.ftc

.gov/sites/default/files/documents/cases/2010/12/101213polyporeopinion

.pdf, aff ’d, Polypore Int’l Inc. v. FTC, 686 F.3d 1208, 1219 (11th Cir. 2012).

Daramic is the Polypore business unit that sells battery separators.

2See, for example, Chicago Bridge & Iron Co. v. FTC (Chicago Bridge),

534 F.3 d 410 ( 5th C ir. 20 08) a nd In re Evanston Nw. Healthcare Corp.

(Ev ans ton No rth we ste rn) , No. 9 31 5 (F.T.C . Apr. 28 , 200 8) , ava ila bl e at