No Merger Is Ever Safe

In a serious blow for property rights, FTC Chief Administrative Law Judge D. Michael Chappell has ordered the undoing of a merger consummated more than two years ago. In a decision filed last month but publicly announced today, Chappell sustained an FTC complaint against Polypore International, Inc., holding its prior acquisition of Microporous, L.P. violated Section 5 of the Federal Trade Commission Act, which broadly prohibits “unfair” competition. The FTC said the transaction illegally reduced competition for certain types of battery separators.

In effect, the FTC wants to go back in time and “restore” the market as it existed prior to Polypore’s acquisition of Microporous. The FTC views “competition” as a static condition, rather then a dynamic process. The Commission also doesn’t respect the right of companies to dispose of their own property. Chappell’s decision effectively nationalizes the Microporous assets, since the FTC will determine who will own those assets and under what conditions.

Polypore said it plans to appeal the decision. Unfortunately, the initial appeal will be heard by the FTC commissioners, who have never ruled in favor of a defendant in an administrative case. Assuming the FTC affirms Chappell, Polypore could then seek relief before a federal appeals court. The entire appeal process could take several years.