US files lawsuit against company owned by Aditya Birla Group

Washington: The US Department of Justice on Wednesday said it has filed a lawsuit against Novelis, a major aluminium company fully owned by India’s Aditya Birla Group, seeking to stop it from acquiring rival player Aleris over concern that the acquisition would create a monopoly in aluminium industry.

A defiant Novelis asserted that it will challenge the lawsuit and is going ahead with its proposed acquisition of Aleris Corporation. Atlanta-headquarters Novelis is a wholly-owned subsidiary of Hindalco Industries Ltd of the Aditya Birla Group. Aleris is based in Cleveland, Ohio. The Department of Justice said in a statement that it has filed a civil antitrust lawsuit seeking to block the proposed transaction in order to preserve competition in the North American market for rolled aluminum sheet for automotive applications, commonly referred to as aluminum auto body sheet.

However, Novelis president and CEO Steve Fisher said, “Our merger with Aleris threatens no one, and to the contrary will strengthen our ability to compete against steel, meet growing customer demand for aluminum, achieve our recycling goals, and bolster our sustainability platform worldwide.”

Relevant competition

The DOJ lawsuit is based on the contention that the only relevant competition among automotive body sheet providers is that among aluminum manufacturers such as Novelis and Aleris, the Aditya Birla group company said. It ignores competition from steel automotive body sheet, even though steel automotive body sheet is currently used in nearly 90 per cent of the market, it asserted.

“The day-to-day reality of the automotive body sheet market is aluminum automotive body sheet striving to take share from steel, and the steel automotive body sheet companies fighting back,” Fisher said. “We are disappointed that the DOJ has missed this, but also confident that in the next phase of this process the full scope of the competition we face will be recognized appropriately,” Fisher said.

In its lawsuit filed in the US District Court for the Northern District of Ohion, the Antitrust Division of Department of Justice alleges the transaction would combine two of only four North American producers of aluminum auto body sheet. Automakers rely on Novelis and Aleris to produce aluminum parts for automobiles to make cars lighter, more fuel-efficient, safer and more durable, the lawsuit said. The Antitrust Division has agreed Novelis refer the matter to binding arbitration should certain conditions be triggered.

Demand for aluminum
“Automakers increasingly need aluminum auto body sheet to satisfy American consumers’ demand for larger vehicles that are lighter and more fuel-efficient. The loss of a competing supplier of aluminum auto body sheet ultimately would harm American car buyers,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “This arbitration would allow the Antitrust Division to resolve the dispositive issue of market definition in this case efficiently and effectively, saving taxpayer resources. Alternative dispute resolution is an important tool that the Antitrust Division can and will use, in appropriate circumstances, to maximize its enforcement resources to protect American consumers,” he said.

In its lawsuit, DOJ says that Aleris is an aggressive competitor whose expansion into the North American market had an immediate impact on pricing in North America. If this deal were allowed to proceed, Novelis would lock up 60 per cent of projected total domestic capacity and the vast majority of uncommitted capacity, enabling the company to raise prices, reduce innovation and provide less favorable terms of service to the detriment of automakers and ultimately American consumers, it said. “Novelis’s acquisition of Aleris would eliminate a rival it described as ‘poised for transformational growth”, it said.