On March 22, 2021, the US Court of Appeals for the Fourth Circuit upheld its earlier decision ordering the divestiture of a corporate acquisition in a private antitrust lawsuit, where US merger control authorities had previously cleared the transaction.  The decision represents the first time a transaction approved by the US Department of Justice’s Antitrust Division (DOJ) and the US Federal Trade Commission (FTC) has been ordered to be unwound in private litigation, and the decision serves as a reminder that regulatory merger clearance does not offer a safe harbour against subsequent US antitrust litigation.

The decision affirmed the lower court, which ordered the unwinding of an acquisition by doormaker Jeld-Wen Inc. (Jeld-Wen) of its competitor, Craftsman Manufacturing Inc. (CMI), as a remedy in a lawsuit brought by Jeld-Wen’s competitor and customer, Steves and Sons Inc. (Steves).  While it is not uncommon for the DOJ and the FTC to seek divestiture in US antitrust enforcement actions, never before has a private antitrust plaintiff succeeded in using the courts to force a merger to be unwound under the Clayton Antitrust Act.  The court referred to the case as the “poster child for divestiture.”  Jeld-Wen has indicated that it will seek a writ of certiorari to the US Supreme Court to challenge the decision.

For multinational companies contemplating mergers and acquisitions that have a US component, the Jeld-Wen case raises several key points:

  • Steve’s success on the merits at the Fourth Circuit, regardless of the ultimate disposition of the case, may encourage further private antitrust challenges to mergers and acquisitions by competitors.  However, the facts of the Jeld-Wen case are unique, and private antitrust challenges remain a small minority of merger challenges overall.  Moreover, even post-consummation merger challenges brought by the DOJ and FTC remain relatively rare.
  • Nevertheless, Jeld-Wen serves to highlight that clearance of a merger or acquisition by the US antitrust agencies under the Hart-Scott-Rodino Act (HSR Act) premerger review process does not preclude later challenges on antitrust grounds. In fact, the DOJ had investigated the Jeld-Wen acquisition twice prior to Steves’s bringing suit in 2016.  The DOJ decided on each occasion to take no further action.  Jeld-Wen therefore serves as a reminder that the Clayton Act permits private parties to challenge violations of Section 7 for treble damages (Section 4) or for an injunction (Section 16), even following clearance of a deal under the HSR Act.
  • Competitor challenges to mergers are frequently dismissed for lack of an ability to demonstrate “antitrust injury” as a result of the merger.  Here, however, post-acquisition statements made by Jeld-Wen and its investors, including its stated intent to “kill off” competitors such as Steves and increase Jeld-Wen’s market share, supported a jury’s finding of an intent to cause antitrust injury.  The case illustrates the importance of the documentary record and the role of broad, US-style discovery in US antitrust scrutiny of mergers and acquisitions.
  • Finally, the court rejected Jeld-Wen’s defence under the doctrine of laches, i.e., that Steves had waited an unreasonably long time to bring suit, since Steve’s 2016 suit was brought four years after the consummation of the underlying acquisition by Jeld-Wen.  The Court of Appeals rejected Jeld-Wen’s argument, noting that the “threat to [Steves’s] survival” only materialized in 2014, when Jeld-Wen announced it was terminating a supply agreement with Steve’s.  The DOJ filed an amicus brief in which it argued that laches does not bar suit post-consummation, especially since Steves cooperated with the DOJ’s investigations into the acquisition.


The underlying dispute arose from Jeld-Wen’s 2012 acquisition of its competitor CMI.  Together with Masonite International (Masonite) (46%), Jeld-Wen (38%) and CMI (16%) controlled 100 percent of the market for “doorskins” in the United States from 2001 through the time of the acquisition in 2012.  Most doors sold for residential applications in the US are moulded doors, which consist of a wooden door frame covered with a doorskin.  All three of Masonite, Jeld-Wen, and CMI were vertically integrated.  They sold doorskins to independent door manufacturers such as Steves, as well as selling finished doors themselves.  Steves’s business depended upon its ability to purchase doorskins from one or more of these three manufacturers.

Jeld-Wen had timed its notification under the HSR Act for July 2012, after it had concluded long-term supply contracts with Steves and two other independent door manufacturers.  The court noted that Jeld-Wen hoped that its contracts with independent manufacturers such as Steves would give the impression that such independent manufacturers were protected from future price increases or refusals to sell, thereby allaying potential concerns from US antitrust authorities about the acquisition’s potential anticompetitive effects.  However, as a result of Steves entering a long-term supply agreement with Jeld-Wen in 2012, Masonite stopped supplying Steves with doorskins.  Moreover, Jeld-Wen raised the prices it charged Steves for three consecutive years following the acquisition in violation of the parties’ supply agreement, and even as Jeld-Wen’s own costs declined.  In addition to price increases, Steves and other competitors alleged that the quality of Jeld-Wen’s doorskins as well as of Jeld-Wen’s service was significantly diminished following the 2012 acquisition of CMI.  In 2014, Jeld-Wen gave Steves notice of termination of the supply agreement.  Per the parties’ agreement, the termination would become effective seven years later in September 2021.

Following Jeld-Wen’s notice of its intent to terminate the supply agreement, Steves sought to negotiate with Jeld-Wen to ensure a continued supply of doorskins.  However, negotiations largely broke down by 2015.  In December 2015, Steves asked the DOJ to investigate Jeld-Wen’s acquisition of CMI.  The DOJ had previously investigated the acquisition when Jeld-Wen filed a notification of the deal under the HSR Act in 2012.  However, the DOJ once again closed its investigation without challenging the deal.  Following the DOJ’s decision not to pursue the matter, Steves filed suit in the US federal district court for the Eastern District of Virginia, alleging breach of the parties’ supply agreement and violation of Section 7 of the Clayton Act.  Steves sought damages for Jeld-Wen’s alleged past breaches as well as damages for the future harm Steves would suffer by losing access to doorskins under Section 4 of the Clayton Act.  Steves also sought equitable relief in the form of divestiture pursuant to Section 16 of the Clayton Act.

Court of Appeals analysis

Jeld-Wen raised eight issues on appeal.  As relevant here, (i) Jeld-Wen argued that Steves did not suffer antitrust injury and therefore lacked standing under Section 7 of the Clayton Act, (ii) that divestiture was not the proper remedy, and (iii) that Steves’s claim was barred by laches.  We summarize the court’s reasoning on each point in turn.

Steves demonstrated antitrust injury

Under US law, a private antitrust plaintiff must demonstrate that it suffered an “antitrust injury” to have standing to sue under Section 7 of the Clayton Act.  To establish antitrust injury, a plaintiff must show that (i) there is a “causal connection” between the plaintiff’s injury and an underlying antitrust violation; and (ii) the plaintiff’s injury “was of a type that Congress sought to redress in providing a private remedy for violations of the antitrust laws.”  Following a trial in the lower court, the jury found that Steves had suffered a qualifying antitrust injury.  The Court of Appeals was bound to uphold that finding unless “no reasonable jury” could have reached that conclusion based upon the evidence.

Jeld-Wen argued that Steves’s alleged injuries related to alleged contractual breaches of the 2012 supply agreement, not to any effect on competition as a result of Jeld-Wen’s 2012 acquisition of CMI.  The Court of Appeals rejected this argument, noting that the acquisition of CMI “hindered Steve’s access to other doorskin suppliers.” The Court of Appeals also noted that “if not for the merger” and the resulting “incentive to kill off” independent manufacturers like Steves, Masonite would have negotiated a contract with Steves, but the transaction “foreclosed th[e] option” for Steves to buy from either CMI or Masonite, and “weakened the competitive pressures” on Jeld-Wen.

In addition, the court highlighted evidence in the record that Jeld-Wen and Masonite intended to eliminate competitors and independent door manufacturers such as Steves following the 2012 acquisition of CMI.  For example, an email had Jeld-Wen observing that its acquisition of CMI left independent door manufacturers with “few options” for obtaining doorskins.  One Jeld-Wen investor stated that the acquisition “made us and Masonite the only two manufacturers of facings [i.e., doorskins] in North America, which over time will improve our pricing power.”  By 2014, Masonite announced that it would no longer sell doorskins to independent manufacturers, which would “make sure that there are some effective barriers to entry within the [moulded-door] space.”  Moreover, Masonite opined that the continued survival of independent manufacturers was “less likely going forward.”  Internal Jeld-Wen documents from 2015 and 2016 indicated that Jeld-Wen intended to follow Masonite’s example.  Jeld-Wen hoped to “kill off a few” of the independent door manufacturers, which would allow it to “[i]ncrease [its moulded] door market share.”

Divestiture was the proper remedy

As a threshold matter, the Court of Appeals observed that that “[d]ivestiture is the customary form of relief in Clayton Act § 7 cases because (among other reasons) it’s ‘simple, relatively easy to administer, and sure.’”  However, Jeld-Wen alleged that the lower court’s grant of the equitable remedy of divestiture was in error because the lower court misapplied the four so-called eBay factors.  See eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 391 (2006).  The Court of Appeals reviewed the lower court’s award of equitable review for an abuse of discretion.

To obtain divestiture, a plaintiff must demonstrate:

  1. that it [faces a significant threat of] irreparable [antitrust] injury;
  2. that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
  3. that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
  4. that the public interest would not be disserved by a permanent injunction.

The Court of Appeals addressed the first two eBay factors together, holding that the threatened collapse of Steves after September 2021 (after which date Jeld-Wen would no longer supply Steves under the 2012 supply agreement) demonstrated a “significant threat” and an “irreparable antitrust injury that damages couldn’t cure.”  In this connection, the Court of Appeals noted that divestiture was the proper equitable remedy, because a so-called “conduct remedy” (e.g., an order that Jeld-Wen continue to supply Steves) would only protect Steves temporarily.

Regarding the third eBay factor, the Court of Appeals noted that the “significant possibility” that Steves “would be driven out of business” in the absence of injunctive relief “carrie[d] great weight” in assessing the balance of hardships, whereas Jeld-Wen’s alleged hardships were deemed too speculative.  Finally, regarding the fourth eBay factor, the Court of Appeals concluded that “this case is the poster-child for divestiture” because Jeld-Wen’s acquisition of CMI “resulted in a duopoly” and that Jeld-Wen had “used their market power to threaten the [independent manufacturers’] survival.”

Jeld-Wen’s defence of laches failed

Jeld-Wen argued that Steves’s antitrust claim was barred by the doctrine of laches.  In order to prevail on a defence of laches, Jeld-Wen was required to provide that (i) Steves “unreasonably delayed” bringing suit; and (ii) this unreasonable delay prejudiced Jeld-Wen.  There is no statute of limitations for equitable relief under Section 16 of the Clayton Act, but courts have typically used the four-year statute of limitations on damages arising from a merger as a relevant standard.  The Court of Appeals reviewed the lower court’s holding that Jeld-Wen failed to satisfy either element for abuse of discretion.

Notably, the court rejected Jeld-Wen’s argument that a four-year delay was “presumptively unreasonable.”  Rather, the court emphasized that the unreasonableness of a delay depends upon the “particular circumstances of the case” and that the date from which delay must be calculated is not necessarily the date of the violation itself, but rather is the date the plaintiff “discovers or with reasonable diligence could have discovered the facts” giving rise to the antitrust claim.  The court acknowledged that while some courts have recognized a defence of laches to dismiss post-consummation challenges to mergers, the plaintiffs in such cases failed to “offer a good excuse for their delay.”

In addition, the court rejected Jeld-Wen’s argument that Steves had notice of its injury immediately after the merger was announced.  Rather, the court held that Steves had no notice of the threatened injury on which it based its divestiture claim until 2014, i.e., until the date when Jeld-Wen notified Steves that it intended to terminate the supply agreement effective September 2021.  Prior to Jeld-Wen’s notice in 2014, Steves’s access to doorskins was protected by the supply agreement.  Finally, the court rejected Jeld-Wen’s argument that Steves should have brought suit between 2014 and 2016 on the grounds that Steves was engaged in diligently seeking a nonjudicial resolution to the dispute with Jeld-Wen during that period.

* * *

We will continue to monitor developments in the case.  Please contact your usual Herbert Smith Freehills New York LLP contacts with questions.


Jonathan Cross
Jonathan Cross
Counsel, New York
+1 917 542 7824
Christopher Boyd
Christopher Boyd
Associate, New York
+1 917 542 7821