In the Matter of Weyerhaeuser Company: The Use of a Hold-Separate Order in a Merger with Horizontal and Vertical Effects

Abstract

This article examines Weyerhaeuser's acquisition of Menasha Corporation's west-coast corrugating medium and corrugated box operations. The Federal Trade Commission challenged the acquisition based on anticompetitive concerns arising from concentration in the corrugating medium market and ignored the potential for efficiencies in corrugated box production due to Weyerhaeuser's increased vertical integration. Our analysis also considers pricing behavior during the "hold-separate" period when the court attempted to maintain the acquired corrugating-medium mill as an "independent" entity. We find that the unfettered acquisition likely led to lower prices, and the hold-separate order may have created agency problems that permitted anticompetitive behavior and prevented efficiencies.