Justice Department Requires Divestitures in Transaction between Global Industrial and Agricultural Equipment Component Manufacturers | OPA

The Department of Justice announced today that it will require Danfoss A/S (Danfoss) and Eaton Corporation Plc (Eaton) to divest assets from both Danfoss’s and Eaton’s orbital motor and hydraulic steering unit manufacturing businesses in order to proceed with their proposed asset purchase agreement. Without these divestitures, the transaction would substantially lessen competition in the design, manufacture, and sale of orbital motors and hydraulic steering units used in agricultural, industrial and construction equipment in the United States.

The Justice Department’s Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court for the District of Columbia to block the proposed transaction. At the same time, the Antitrust Division filed a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the lawsuit.

“Orbital motors and hydraulic steering units are essential components in equipment used in the agricultural, industrial and construction industries,” said Acting Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division. “The transaction, as originally proposed, would have led to higher prices and lower quality for original equipment manufacturers in these industries that are vital to the American economy. The remedy preserves competition in the manufacture and sale of these products for the benefit of equipment manufacturers and consumers.” 

According to the complaint, Danfoss and Eaton are the two largest suppliers of orbital motors used for mobile off-road equipment in the United States. Orbital motors are used to propel and power the working attachments in equipment like skid steer loaders, harvesters and street sweepers. The complaint also alleges that Danfoss and Eaton are the two largest suppliers of hydraulic steering units that help turn a vehicle’s wheels using hydraulic fluid. According to the complaint, absent a divestiture, the proposed transaction between Danfoss and Eaton would lead to higher prices, decreased quality of delivery and service, and diminished innovation.

Under the terms of the proposed settlement, the parties must divest three Danfoss orbital motor and hydraulic steering unit facilities located in Hopkinsville, Kentucky; Parchim, Germany; and Wroclaw, Poland, and two orbital motor production lines and one hydraulic steering unit production line from Eaton facilities located in Shawnee, Oklahoma, and Eden Prairie, Minnesota, to Interpump Group S.p.A. (Interpump) or an alternate acquirer approved by the United States. Interpump is a global, established provider of cylinders, pumps and valves with operations in North America, Europe, South America, and Asia. 

The department expressed thanks to its enforcement partners in the European Commission for their close and constructive collaboration on this matter, which enabled a thorough investigation and resulted in remedies that will preserve competition in the United States and Europe. 

Danfoss A/S, a global corporation headquartered in Nordborg, Denmark, manufactures components and engineering technologies, among other products, for hydraulics for off-road machinery through its Power Solutions division. Danfoss’s Power Solutions division had sales of approximately €6.3 billion in 2019. 

Eaton Corporation Plc, a global corporation headquartered in Dublin, Ireland, manufactures hydraulic motors, power units, valves and steering units through its subsidiary’s Power & Motion Controls Division. Eaton’s Power & Motion Controls Division had sales of approximately $2.2 billion in 2019.

As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Jay Owen, Acting Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street NW, Suite 8700, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the final judgment upon finding it is in the public interest.

The claims resolved by the settlement are allegations only and there has been no determination of liability.

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