United States v. ASSA ABLOY AB, et al.; Proposed Final Judgment and Competitive Impact Statement, 31007-31031 [2023-10343]

Agencies

• Antitrust Division
• Department of Justice

[Federal Register Volume 88, Number 93 (Monday, May 15, 2023)]
[Notices]
[Pages 31007-31031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-10343]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF JUSTICE

Antitrust Division


United States v. ASSA ABLOY AB, et al.; Proposed Final Judgment 
and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Asset Preservation Stipulation and Order, and Competitive Impact 
Statement have been filed with the United States District Court for the 
District of Columbia in United States of America v. ASSA ABLOY AB, et 
al., Civil Action No. 22-2791-ACR. On September 15, 2022, the United 
States filed a Complaint alleging that ASSA ABLOY AB's proposed 
acquisition of the Hardware and Home Improvement division of Spectrum 
Brands Holdings, Inc. would violate section 7 of the Clayton Act, 15 
U.S.C. 18. The proposed Final Judgment, filed on May 5, 2023, requires 
ASSA ABLOY to divest its EMTEK-branded business, its Schaub-branded 
business, its August-branded business, and its Yale-branded multifamily 
and residential smart lock business in the United States and Canada. It 
also requires ASSA ABLOY and Spectrum Brands to submit to oversight by 
a monitoring trustee, who will have the power and authority to monitor 
ASSA ABLOY's and Spectrum Brands' compliance with the Asset 
Preservation Stipulation and Order and proposed Final Judgment.
    Copies of the Complaint, proposed Final Judgment, and Competitive 
Impact Statement are available for inspection on the Antitrust 
Division's website at https://www.justice.gov/atr and at the Office of 
the Clerk of the United States District Court for the District of 
Columbia. Copies of these materials may be obtained from the Antitrust 
Division upon request and payment of the copying fee set by Department 
of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, including the name of the submitter, and 
responses thereto, will be posted on the Antitrust Division's website, 
filed with the Court, and, under certain circumstances, published in 
the Federal Register. Comments should be submitted in English and 
directed to Chief, Defense, Industrials, and Aerospace Section, 
Antitrust Division, Department of Justice, 450 Fifth Street NW, Suite 
8700, Washington, DC 20530 (email address: 
[email protected]).

Suzanne Morris,
Deputy Director Civil Enforcement Operations, Antitrust Division.

United States District Court for the District of Columbia

    United States of America, U.S. Department of Justice, Antitrust 
Division, 450 Fifth Street NW, Suite 8700, Washington, DC 20530, 
Plaintiff, v., ASSA ABLOY AB, Klarabergsviadukten 90, Stockholm, 
Sweden SE-111 64, and, Spectrum Brands Holdings, Inc., 3001 Deming 
Way, Middleton, WI 53562, Defendants.

Complaint

    The United States brings this antitrust lawsuit to stop Defendant 
ASSA ABLOY AB (``ASSA ABLOY'') from acquiring a division of Defendant 
Spectrum Brands Holdings, Inc. (``Spectrum'')--ASSA ABLOY's largest 
competitor in supplying the $2.4 billion residential door hardware 
industry in the United States. Foreshadowing the anticompetitive 
effects of the proposed transaction, ASSA ABLOY internally predicted 
that, as a result of the transaction, one of its residential door 
hardware brands would be ``in a better pricing negotiation position and 
can expect to increase prices.''
    The Defendants are close head-to-head competitors whose rivalry has 
benefitted consumers and who are part of a trio that today dominates 
the concentrated U.S. residential door hardware industry. But this 
entrenched position was not enough for ASSA ABLOY, whose CEO insisted 
just last year that the company ``ha[s] to make sure we stop or buy'' 
competitors before they ``can grow.'' For ASSA ABLOY, which has a long 
history of buying firms in the industry, purchasing Spectrum's Hardware 
and Home Improvement division (``Spectrum HHI'') is the latest step in 
its attempts to advance the trend toward concentration in the 
residential door hardware industry.
    The proposed transaction, which would leave American consumers with 
only two significant producers of residential door hardware, violates 
the Clayton Act in at least two separate antitrust markets in the 
United States: (1) premium mechanical door hardware

[[Page 31008]]

and (2) smart locks, which are wirelessly connected digital door locks. 
In the premium mechanical door hardware market, the proposed 
transaction would be a merger to near-monopoly, where the merged firm 
would account for around 65% of sales, becoming more than ten times 
larger than its next-largest competitor. In the market for smart locks, 
the proposed transaction would cut off competition in a fast-growing 
door hardware segment, leaving the merged firm with more than a 50% 
share and only one remaining meaningful competitor--an effective 
duopoly. In both of these relevant markets, the proposed transaction 
easily surpasses the thresholds that trigger a presumptive violation of 
the Clayton Act.
    Historically, competition between Defendants to sell residential 
door hardware to showrooms, home improvement stores, builders, online 
retailers, home security companies, and other customers has generated 
lower prices, higher quality, exciting innovations, and superior 
customer service. As outlined in detail below, the head-to-head 
competition between the Defendants is significant. They regularly 
reduce price to win business from each other and respond to each 
other's competitive initiatives with innovation and better offerings. 
For example, one of Spectrum's top ``strategic imperatives'' in 2021 
was to invest heavily in better service and pricing for its premium 
mechanical door hardware brands (Baldwin Estate and Baldwin Reserve) in 
order to recapture market share from its ``chief competitor,'' ASSA 
ABLOY's EMTEK brand. Similarly, ASSA ABLOY has recently invested in a 
new lineup of smart locks designed to ``take [a half] bay'' (i.e., take 
shelf space) from Spectrum's Kwikset brand and its other large 
competitor in major home improvement stores. The proposed transaction 
would eliminate those benefits altogether.
    Acknowledging the harm that their proposed transaction would cause 
to competition, the Defendants have offered to sell off selected 
portions of ASSA ABLOY's globally integrated business. But offering a 
complex divestiture of carved-out assets from a globally-integrated 
business in an attempt to remedy a deal that presents a massive 
competitive problem would leave American consumers to bear the 
significant risks that the divestiture would fail to preserve the 
intensity of existing competition. Regardless of who the unknown buyer 
turns out to be, such a hazardous corporate restructuring would be 
inadequate to remedy the harms of Defendants' anticompetitive deal. The 
only remedy that will preserve competition is to stop the proposed 
transaction outright. Therefore, the United States of America brings 
this lawsuit to enjoin ASSA ABLOY's proposed acquisition of Spectrum 
HHI because it violates Section 7 of the Clayton Act, 15 U.S.C. 18. The 
United States alleges as follows:

Introduction

    1. American homeowners and renters routinely rely on residential 
door hardware to meet their most basic privacy and security needs. 
Because virtually every door in every home in the United States has 
door hardware on it, about $2.4 billion of residential door hardware is 
sold in the United States each year.
    2. The residential door hardware industry in the United States is 
concentrated. Spectrum, which owns the Baldwin and Kwikset brands, and 
ASSA ABLOY, which owns the August, EMTEK, and Yale brands, are, after 
many years of competition, the largest and third-largest producers of 
residential door hardware in the United States, collectively accounting 
for more than half of sales. Together with the other major supplier, 
the three largest producers account for about 75% of sales, with the 
remaining sales attributed to much smaller players.
    3. In September 2021, ASSA ABLOY agreed to pay $4.3 billion to 
acquire Spectrum HHI. If consummated, this transaction would eliminate 
important head-to-head competition and move the residential door 
hardware industry ever closer toward monopoly.
    4. While the transaction would further consolidate the entire 
residential door hardware industry, its harm would likely be felt most 
acutely by customers seeking to purchase two distinct categories of 
residential door hardware: (1) premium mechanical door hardware and (2) 
smart locks. Head-to-head competition between Defendants has made these 
products more responsive to the changing economic, aesthetic, 
technological, and security demands of American households--lowering 
prices, fostering innovation, increasing the variety and quality of 
offerings, and improving customer service. The proposed transaction 
would end that important competition and deprive American consumers of 
the benefits of such competition in the future.
    5. In premium mechanical door hardware, Defendants are by far the 
two largest producers and closest rivals in the United States through 
ASSA ABLOY'S EMTEK brand and Spectrum HHI's Baldwin Estate and Baldwin 
Reserve brands. Based on information gathered thus far, the Defendants 
collectively accounted for approximately 65% of sales in 2021. The 
Defendants are strong and regular competitors in this market, as the 
market shares would suggest and the Defendants' own documents indicate.
    6. In smart locks, Defendants are the two largest producers in the 
United States, primarily through ASSA ABLOY's August and Yale brands 
and Spectrum HHI's Kwikset brand. Based on information gathered thus 
far, they collectively accounted for about 50% of sales in 2021. 
Defendants have both invested significantly in efforts to win smart 
lock market share from each other, making them two of the three 
dominant incumbents in the growing smart lock market that have scale, 
resources, and access to distribution that dwarf all other competitors. 
The proposed transaction would consolidate the smart lock market into a 
duopoly.
    7. ASSA ABLOY and Spectrum were keenly aware that their proposed 
deal presented serious anticompetitive issues as they negotiated which 
firm would bear the risk of inevitable objections from antitrust 
enforcers. Spectrum insisted that ASSA ABLOY commit in the purchase 
agreement to divest assets to try to secure antitrust clearance, but 
ASSA ABLOY executives were reluctant to make a divestiture commitment 
because they worried it would ``put [their] future at risk.'' In 
September 2021, only four days before the transaction was announced, 
Spectrum's CEO tried to assuage ASSA ABLOY's concerns, suggesting it 
could have its cake and eat it too--appease antitrust enforcers with a 
divestiture commitment structured in a way ``where you don't put the 
assets you want at risk.''
    8. Defendants put that strategy into action in the summer of 2022, 
when they proposed to divest, to an as-yet unidentified buyer, portions 
of ASSA ABLOY business units that make and sell residential door 
hardware in the United States. But divesting carved-out assets from the 
globally integrated business apparatus that made them successful cannot 
be relied upon to replicate the intensity of competition that exists 
today between ASSA ABLOY and Spectrum HHI and therefore would be an 
unacceptable remedy.
    9. The proposed transaction violates Section 7 of the Clayton Act, 
15 U.S.C. 18, and should be enjoined.

Defendants and the Proposed Transaction

    10. ASSA ABLOY is a publicly traded Swedish stock company 
headquartered in Stockholm, Sweden. It is a globally

[[Page 31009]]

integrated conglomerate that manufactures and sells a wide array of 
access solutions products--including residential and commercial door 
hardware, doors, and electronic access control systems. ASSA ABLOY 
sells residential door hardware in the United States under the August, 
EMTEK, Sure-Loc, Valli & Valli, and Yale brands. Yale, in particular, 
is an iconic ``master brand,'' dating back more than 150 years, which 
``has strong recognition in residential markets worldwide.'' ASSA ABLOY 
is the third largest producer of residential door hardware in the 
United States (including premium mechanical door hardware and smart 
locks), as well as the largest producer of commercial door hardware in 
the United States. In 2021, ASSA ABLOY earned revenues of approximately 
$3.5 billion in the United States and approximately $9.1 billion 
worldwide.
    11. ASSA ABLOY is a creature of corporate consolidation. It was 
established in 1994 through the merger of Swedish lock maker ASSA AB 
and Finnish lock maker Abloy Oy. Since then, ASSA ABLOY has been on a 
decades-long acquisitions spree--buying more than 300 businesses in 27 
years, including all of the companies that now constitute ASSA ABLOY's 
multi-billion-dollar residential door hardware business. It acquired 
Yale in 1999, EMTEK in 2000, Valli & Valli in 2008, August in 2017, and 
Sure-Loc in 2021. It also acquired South Korean smart-lock manufacturer 
iRevo in 2007 and Chinese smart-lock manufacturer Digi in 2014. These 
acquisitions and others by ASSA ABLOY have increased concentration in 
the door hardware industry.
    12. Spectrum is a publicly-traded Delaware corporation 
headquartered in Middleton, Wisconsin. It is a diversified, global 
branded consumer products company with four divisions: (1) Home and 
Personal Care, (2) Global Pet Care, (3) Home and Garden, and (4) 
Hardware and Home Improvement. In 2021, Spectrum earned revenues of 
approximately $3.2 billion in the United States and approximately $4.6 
billion worldwide.
    13. Spectrum's Hardware and Home Improvement division, referred to 
herein as ``Spectrum HHI,'' is headquartered in Lake Forest, 
California. It is the largest producer of residential door hardware in 
the United States, and it also manufactures and sells commercial door 
hardware, residential plumbing hardware (e.g., kitchen and bathroom 
faucets), and builders' hardware. Spectrum HHI sells residential door 
hardware, including premium mechanical door hardware and smart locks, 
in the United States under the Baldwin Estate, Baldwin Reserve, Baldwin 
Prestige, and Kwikset brands, and it also manufactures private-label 
residential door hardware for third parties. In 2021, Spectrum HHI 
earned revenues of approximately $1.4 billion in the United States.
    14. Spectrum HHI is also the result of decades of consolidation in 
the residential door hardware industry. Black & Decker (renamed Stanley 
Black & Decker in 2010) acquired Kwikset in 1989, Baldwin and Weiser (a 
Canadian residential door hardware company) in 2003, and Taiwanese 
door-lock manufacturer Tong Lung Metal in 2012, before selling all four 
companies to Spectrum in 2012 and 2013.

Defendants' Residential Door Hardware Brands Sold in the United States
[GRAPHIC] [TIFF OMITTED] TN15MY23.040


[[Page 31010]]


    15. On September 8, 2021, ASSA ABLOY and Spectrum signed an asset 
and stock purchase agreement under which ASSA ABLOY would acquire 
Spectrum HHI for approximately $4.3 billion. The post-transaction ASSA 
ABLOY would be an industry behemoth, with almost $5 billion in annual 
sales in the United States alone, and it would become the largest 
producer of residential door hardware in the United States, in addition 
to already being the largest producer of commercial door hardware in 
the United States.

Industry Background

    16. The proposed transaction involves products--residential door 
hardware--that Americans use every day to enter, leave, and secure 
their homes and interior living spaces, such as bedrooms, bathrooms, 
and home offices.
    17. Doors used in a residence are almost always hinged or sliding 
(e.g., pocket doors). Residential door hardware is the hardware affixed 
to a residential hinged or sliding door that is used to open, close, or 
lock the door.
    18. Residential door hardware is either (1) mechanical, meaning 
that it functions only by physical operation at the door (e.g., 
physically turning a handle or knob and, for exterior doors, using a 
key), or (2) digital, meaning that it can be operated electronically 
and, in some cases, remotely.

A. Mechanical Residential Door Hardware

    19. Mechanical residential door hardware has interior components 
(the ``chassis'') and exterior components (the ``trim''). The chassis 
consists of a latching or locking mechanism and other components. Trim 
consists of hardware used to operate the latching or locking 
mechanism--most commonly a knob or lever for the latch and a mechanical 
turn piece for the lock--and surrounding pieces of decorative hardware. 
Chassis and trim for residential door hardware are usually purchased 
together as a set, known as a lock set, but they can also sometimes be 
purchased separately. The locking mechanism (e.g., deadbolt) is the 
most common element of a lock set to be purchased separately.
    20. Mechanical residential lock sets are sold in a wide variety of 
functions, hardware types, designs, price points, and materials. 
Exterior lock sets have a locking function, but many interior lock sets 
do not. Interior lock sets usually serve one of three different 
functions: ``passage'' (turn and latch from both sides, no lock), 
``privacy'' (turn and latch from both sides, lock with privacy button 
from inside), or ``dummy'' (no turn, latch, or lock). Exterior lock 
sets serve what is known as an ``entrance'' function (turn and latch 
from both sides, keyed locking on exterior, turn-piece locking from 
interior).
    21. Mechanical residential door hardware is sold at retail in the 
United States through several different channels. Entry level and 
medium-grade hardware is primarily sold in mass-market retail stores, 
such as ``big box'' home improvement stores and hardware stores. 
Premium mechanical door hardware, by contrast, is sold primarily 
through specialized dealers, such as decorative hardware showrooms. 
Mechanical residential door hardware is also sold through e-commerce 
websites, such as Build.com and the websites of brick-and-mortar 
retailers.

Examples of Premium Mechanical Door Hardware
[GRAPHIC] [TIFF OMITTED] TN15MY23.041

    22. Door hardware used on residences differs in many ways from door 
hardware used in commercial settings. Residential door hardware is less 
complex, less costly, and less durable than commercial door hardware. 
Commercial door hardware also includes several product categories that 
have no residential analogue, including door closers, exit devices, and 
electronic access control hardware.

B. Digital Residential Door Hardware

    23. Most residential door hardware and essentially all interior 
residential door hardware is mechanical, but certain American consumers 
are increasingly selecting exterior residential door hardware that is 
digital.
    24. The primary type of digital door hardware used in a residential 
setting is a digital door lock, which is a deadbolt that is operated 
electronically. One type of digital door locks, referred to herein

[[Page 31011]]

as ``smart locks,'' can be operated and/or monitored through a wireless 
connection to another electronic device. The other type of digital door 
locks (``non-connected locks'') have no wireless connection and are 
electronically operated via a device physically connected to the 
deadbolt, such as an electronic keypad. Some digital door locks are 
sold as a lock set that includes mechanical trim, such as a knob or 
lever.

Examples of the Two Types of Digital Door Locks
[GRAPHIC] [TIFF OMITTED] TN15MY23.042

    25. Smart locks make a wireless connection to another device 
through a variety of technology protocols, primarily including Wi-Fi, 
Bluetooth, and low-power mesh-network protocols (e.g., Z-Wave, Zigbee, 
or Thread). The user typically operates the lock from an application on 
a smart phone or similar device.
    26. In the United States, smart locks make up a growing share of 
residential digital door lock sales and residential door hardware sales 
generally. In 2021, smart locks accounted for about two-thirds of 
residential digital door locks sold in the United States, and smart 
lock sales in the United States have approximately doubled in only 
three years, growing to more than $420 million in 2021.
    27. Digital door locks, including smart locks, are sold at retail 
in the United States through several different channels, primarily 
including mass-market retail stores, such as big box home improvement 
stores, and e-commerce websites, such as Amazon.com. Smart locks are 
also sold through consumer electronics stores and specialized dealers, 
such as home security companies and home technology integrators.

C. The Residential Door Hardware Industry in the United States

    28. In the United States, about 75% of all residential door 
hardware sold each year is made by ASSA ABLOY, Spectrum, and their 
largest competitor. Each of these companies offers a full portfolio of 
residential door hardware products through multiple brands, including 
both mechanical and digital door hardware that spans a wide range of 
product features and price points. The remaining approximately 25% of 
residential door hardware sold in the United States is made by a large 
assortment of much smaller door hardware producers. Unlike the three 
dominant firms, each of these smaller producers usually sells 
residential door hardware under a single brand and specializes in one 
or two segments of residential door hardware.
    29. Defendants' residential door hardware brands sold in the United 
States are as follows:

------------------------------------------------------------------------
                                      ASSA ABLOY
             Product                   brand(s)        Spectrum brand(s)
------------------------------------------------------------------------
Premium Mechanical Door Hardware  EMTEK Valli &       Baldwin Estate
                                   Valli.              Baldwin Reserve.
Smart Locks.....................  Yale August.......  Kwikset.
Non-Connected Digital Door Locks  Yale..............  Kwikset.
Non-Premium Mechanical Door       Yale Sure-Loc.....  Baldwin Prestige
 Hardware.                                             Kwikset.
------------------------------------------------------------------------

    30. Residential door hardware producers, including Defendants, 
distribute their products to retailers directly or through wholesale 
distributors. Producers only rarely sell residential door hardware 
directly to end-customers.
    31. Residential door hardware end-customers include homeowners, who 
may purchase a single lock set, and landlords, general contractors, and 
residential builders, who may purchase hundreds or thousands of 
different pieces of door hardware in a variety of styles and functions 
to outfit every type of door in a residential development.

Relevant Markets

A. Product Markets

    32. Each of the products described below constitutes a line of 
commerce, as that term is used in Section 7 of the Clayton Act, and 
each of those is a relevant product market in which the potential 
competitive effects of this proposed transaction can be assessed

[[Page 31012]]

within the context of the broader marketplace for residential door 
hardware.
1. Premium Mechanical Door Hardware
    33. Premium mechanical door hardware is residential door hardware 
made of high-quality, durable metals (primarily forged brass and cast 
bronze), and is highly customizable, design-driven, and constructed 
with superior craftsmanship. Such hardware is also offered in a wide 
variety of styles, designs, and finishes. These peculiar 
characteristics create a look and feel to the hardware that is distinct 
from other mechanical door hardware and connotes quality, style, and 
luxury. For example, Spectrum's Baldwin Reserve and Baldwin Estate 
brands position their door hardware as ``door couture,'' and ASSA 
ABLOY's EMTEK brand ``present[s] more like a fashion house than [a] 
hardware company.'' Accordingly, these distinguishing features also 
command distinct price points that are significantly higher than other 
types of mechanical door hardware--on average, premium mechanical door 
hardware is about twice as expensive as its non-premium analogues. More 
than $260 million of premium mechanical door hardware was sold in the 
United States in 2021.
    34. Premium mechanical door hardware, unlike other mechanical door 
hardware, is sold primarily through specialized dealers, such as 
decorative hardware showrooms, door and window shops, and building-
supply retailers known as ``lumberyards.'' Premium mechanical door 
hardware is not sold through mass-market retailers, such as ``big box'' 
home improvement stores. The specialized dealers that sell premium 
mechanical door hardware typically offer high levels of customer 
service, including in-store displays that exhibit the hardware's 
customizability and craftsmanship and sales personnel skilled in 
designing and ordering hardware to exacting standards. These dealers 
also cater to a distinct group of premium clientele--typically, 
discerning homeowners with significant disposable income--and do not 
offer or offer only a limited selection of non-premium mechanical door 
hardware. Intermediaries, such as interior designers, are sometimes 
also involved in selecting and ordering premium mechanical door 
hardware.

Example of EMTEK and Baldwin Reserve In-Store Displays
[GRAPHIC] [TIFF OMITTED] TN15MY23.043

    35. Brands of premium mechanical door hardware are recognized by 
customers and industry participants as ``premium'' or ``luxury'' 
producers. The largest and most well-known of these brands are owned by 
Defendants: EMTEK (ASSA ABLOY), Baldwin Reserve (Spectrum), and Baldwin 
Estate (Spectrum). These three brands collectively account for 
approximately two-thirds of the sales of premium mechanical door 
hardware in the United States. ASSA ABLOY also owns Valli & Valli, 
which is a smaller premium mechanical door hardware brand sold in the 
United States. Defendants use, among other things, high price points, 
premium product features, distribution through specialized retailers, 
and marketing to distinguish these brands from their other, non-premium 
mechanical door hardware brands, such as Kwikset, Yale, and Sure-Loc. 
There are premium mechanical door hardware brands not owned by 
Defendants, but none of them accounts for more than 6% of sales in the 
United States, and most of them account for 2% or less.
    36. Producers of premium mechanical door hardware in the United 
States, including ASSA ABLOY and Spectrum HHI, offer a core lineup of 
product categories that correspond to the lineup of locks and lock sets 
needed to fully outfit a home. These core categories of premium 
mechanical door hardware include entrance lock sets (also called 
``entry sets''), interior knob and lever lock sets (i.e., passage, 
privacy, and dummy functions), and deadbolts. Other makers of premium 
mechanical door hardware, including ASSA ABLOY and Spectrum HHI, also 
sell one or more categories of premium mechanical

[[Page 31013]]

sliding door hardware (e.g., pocket-door hardware).
    37. Even when products are not necessarily substitutes for one 
another (e.g., entry sets and passage sets), products sold under 
similar competitive conditions may be aggregated for analytical 
convenience. While not necessarily substitutes for one another, the 
various categories of premium mechanical door hardware (passage sets, 
privacy sets, dummy sets, entry sets, deadbolts, pocket door hardware, 
and barn door hardware) are sold under similar competitive conditions 
and thus may be grouped together for analytical purposes.
    38. Premium mechanical door hardware constitutes a relevant product 
market. Premium mechanical door hardware satisfies the well-accepted 
``hypothetical monopolist'' test set forth in the U.S. Department of 
Justice's and Federal Trade Commission's Horizontal Merger Guidelines 
(``Merger Guidelines''). A hypothetical monopolist of premium 
mechanical door hardware would find it profitable to impose a small but 
significant and non-transitory increase in price on such products 
because relatively few purchasers would substitute away to other types 
of door hardware in response to such a price increase. Because other 
types of door hardware (e.g., commercial door hardware and non-premium 
mechanical door hardware) do not offer quality, aesthetics, or 
customization that is comparable to premium mechanical door hardware, 
customers desiring these product features have no reasonable 
substitutes for premium mechanical door hardware.
    39. As alleged above, premium mechanical door hardware also 
exhibits virtually all of the ``practical indicia'' that courts use to 
identify relevant antitrust product markets: industry or public 
recognition, peculiar characteristics and uses, distinct customers, 
distinct prices, sensitivity to price changes, and specialized 
vendors.\1\
---------------------------------------------------------------------------

    \1\ See Brown Shoe Co. v. United States, 370 U.S. 294, 325 
(1962).
---------------------------------------------------------------------------

2. Smart Locks
    40. Smart locks use wireless connections to allow the user to lock 
and unlock the door without using a key or physically operating the 
door hardware. That wireless connection also allows the user to operate 
and monitor the smart lock remotely and integrate the lock into a 
broader home security or ``smart home'' ecosystem, such as Amazon 
Alexa, Apple HomeKit, or Google Home. The physical range of remote 
operation varies by wireless protocol and degree of integration, but 
the physical range of shorter-range wireless protocols, such as 
Bluetooth, can also be extended through the use of a Wi-Fi hub, which 
most smart lock producers offer as part of a bundle with the smart lock 
or separately. The additional technology (hardware and software) 
incorporated into smart locks also corresponds to significantly higher 
price points than other kinds of digital door locks that lack this 
technology--on average, smart locks are about twice as expensive as 
non-connected locks. More than $420 million of smart locks were sold in 
the United States in 2021.
    41. Industry participants and consumers recognize that smart locks 
are distinct from mechanical door hardware and non-connected digital 
door locks. Smart locks also offer technological functionality that 
mechanical door hardware cannot offer: the ability to lock and unlock a 
door without a physical key, the ability to monitor and operate a lock 
remotely, and the ability to integrate a lock into a smart home 
ecosystem or home security system. The latter two technological 
functions (remote operation/monitoring and integration) also 
distinguish smart locks from non-connected digital door locks and are 
sought by a distinct set of technologically savvy customers who value 
security, convenience, and connectivity. Accordingly, neither 
mechanical door hardware nor non-connected locks are reasonable 
substitutes for smart locks. Likewise, commercial door hardware is not 
a reasonable substitute for smart locks for the reasons alleged above. 
Additionally, smart locks are sold through a variety of channels, but, 
unlike other types of residential door hardware, smart locks are also 
sold through firms that specialize in consumer electronics and home 
security technology, including especially consumer electronics 
retailers, home security companies, and smart home companies.
    42. Smart locks constitute a relevant product market. Smart locks 
satisfy the well-accepted hypothetical monopolist test set forth in the 
Merger Guidelines. A hypothetical monopolist of smart locks would find 
it profitable to impose a small but significant and non-transitory 
increase in price on such products because relatively few purchasers 
would substitute away to other types of door hardware in response to 
such a price increase. As alleged above, smart locks also exhibit 
virtually all of the ``practical indicia'' that courts use to identify 
relevant antitrust product markets: industry or public recognition, 
peculiar characteristics and uses, distinct customers, distinct prices, 
sensitivity to price changes, and specialized vendors.\2\
---------------------------------------------------------------------------

    \2\ See id.
---------------------------------------------------------------------------

B. Geographic Market

    43. The United States is a relevant geographic market within the 
meaning of Section 7 of the Clayton Act for the product markets alleged 
herein. Defendants have agreed that the relevant geographic market is 
no broader than the United States. Moreover, prices for premium 
mechanical door hardware and smart locks are set in the United States, 
independent of pricing elsewhere, and residential door hardware sold 
outside the United States is often not compatible with doors used in 
the United States.

Anticompetitive Effects

    44. The proposed transaction would eliminate competition between 
ASSA ABLOY and Spectrum HHI and significantly consolidate already 
concentrated markets. Freed from having to compete against its largest 
rival in the markets for premium mechanical door hardware and smart 
locks, ASSA ABLOY would acquire not only Spectrum HHI but also the 
opportunity to profit by, among other things, raising prices, reducing 
product quality, reducing investments in innovation, and reducing 
levels of service. The proposed transaction would also increase the 
likelihood of coordination.

A. The Proposed Transaction Is Presumptively Unlawful

    45. The more that a proposed transaction would increase 
concentration in a market, the more likely it is that the proposed 
transaction may substantially lessen competition, as prohibited by the 
Clayton Act. Mergers that significantly increase concentration in 
already concentrated markets are presumptively anticompetitive and 
therefore presumptively unlawful. As the Supreme Court held, any 
transaction resulting in ``a firm controlling an undue percentage share 
of the relevant market,'' including a firm that would ``control[] at 
least 30%'' of the market, and ``a significant increase in the 
concentration of firms in that market is so inherently likely to lessen 
competition substantially that it must be enjoined.'' \3\ For such 
transactions, including ASSA ABLOY's proposed acquisition of Spectrum 
HHI, their ``size makes them inherently suspect in light

[[Page 31014]]

of Congress' design in [Clayton Act Section 7] to prevent undue 
concentration.'' \4\ Thus, such transactions are entitled to a 
presumption of illegality under Supreme Court precedent.
---------------------------------------------------------------------------

    \3\ United States v. Phila. Nat'l Bank, 374 U.S. 321, 363 
(1963).
    \4\ Id.
---------------------------------------------------------------------------

    46. The Herfindahl-Hirschman Index (``HHI'') is a measure of market 
concentration widely accepted by economists and courts in evaluating 
the level of competitive vigor in a market and the likely competitive 
effects of an acquisition. HHI values (or ``points'') are calculated by 
summing the squares of the individual firms' market shares. 
Accordingly, HHI values range from 0 in markets with no concentration 
to 10,000 in markets where one firm has a 100% market share. As 
recognized in the Merger Guidelines, if the post-transaction HHI would 
be more than 2,500, and the transaction would increase the HHI by more 
than 200 points, then the transaction would result in a highly 
concentrated market, and the transaction is presumed likely to enhance 
market power and substantially lessen competition.
    47. The proposed transaction is presumptively unlawful under the 
Merger Guidelines as well because it would significantly increase 
concentration in at least two markets that would be highly concentrated 
post-transaction:

----------------------------------------------------------------------------------------------------------------
                                                                    Post-merger                   Combined share
                             Market                                     HHI        HHI increase         (%)
----------------------------------------------------------------------------------------------------------------
Premium Mechanical Door Hardware................................          >4,000          >1,600             ~65
Smart Locks.....................................................          >3,000          >1,200             ~50
----------------------------------------------------------------------------------------------------------------

    48. So large and expansive are Defendants' businesses and so 
concentrated is the residential door hardware industry already, that 
the proposed transaction would also be presumptively unlawful under 
multiple alternative definitions of the relevant product market, 
including a product market as broad as all residential door hardware in 
the United States. In such a market, for example, the proposed 
transaction would increase the HHI by more than 500 points and would 
result in an HHI of more than 3,000.

B. The Proposed Transaction Would Eliminate Head-to-Head Competition 
Between ASSA ABLOY and Spectrum HHI

    49. ASSA ABLOY and Spectrum HHI have competed vigorously for years 
to be leaders in the United States markets for premium mechanical door 
hardware and for smart locks. That competition has yielded tangible 
benefits for American consumers, primarily including lower prices, new 
and better products, and improved customer service. The proposed 
transaction would eliminate Defendants' important competition with each 
other, to the detriment of consumers.
1. Premium Mechanical Door Hardware
    50. ASSA ABLOY and Spectrum HHI acknowledge internally that their 
EMTEK, Baldwin Reserve, and Baldwin Estate brands are each other's 
``chief,'' ``main,'' ``primary,'' ``major,'' ``biggest,'' and 
``closest'' competitor. EMTEK (ASSA ABLOY) is the ``market leader in 
premium residential door hardware,'' accounting for about 45% of all 
sales in the United States. Baldwin Reserve and Baldwin Estate 
(Spectrum) are collectively several times larger than their next 
largest competitor and account for about 20% of sales of premium 
mechanical door hardware in the United States.
    51. Baldwin's importance as a competitor to EMTEK and the benefits 
that competition has for consumers also became apparent when Baldwin 
had some struggles. For example, in 2021, a Baldwin sales manager 
internally assessed that EMTEK had been able ``to almost recklessly 
take more price'' (i.e., impose price increases) because Baldwin, 
EMTEK's ``biggest competitor,'' had ``fallen down,'' meaning it had 
fallen short as a competitor.
    52. EMTEK displaced Baldwin as the premium market leader several 
years ago. But Spectrum HHI has made it a top ``strategic 
imperative[]'' to take steps to ``reaffirm Baldwin as the luxury door 
hardware leader.'' The thrust of Spectrum's Baldwin strategy is to 
invest [REDACTED] dollars over a multi-year period to improve, among 
other things, Baldwin's pricing, customer service, and products in 
order specifically to ``[r]ecapture the leadership position in luxury 
door hardware from chief competitor Emtek.''
    53. The head-to-head rivalry between EMTEK and Baldwin to achieve 
``leader'' status in the premium mechanical door hardware market has 
been a boon to American consumers in areas including better prices, 
service, and products.
a. Lower Prices
    54. EMTEK, Baldwin Reserve, and Baldwin Estate regularly offer 
special discounts to their customers to win business from the other or 
to keep a customer from switching to the other.
    55. For example, EMTEK regularly has provided additional discounts 
to win business away from Baldwin or prevent an EMTEK customer from 
switching to Baldwin. EMTEK offers additional discounts [REDACTED], and 
has instructed its salespeople that they [REDACTED].
    56. Baldwin Reserve and Baldwin Estate also offer customers special 
discounts to compete against EMTEK. Between January 2017 and March 
2022, more than [REDACTED] of Baldwin's requests for special discounts 
that mentioned a competitor referenced competition from EMTEK as the 
reason for Baldwin's price concession--far more than any other 
competitor. The narratives associated with these ``price change 
requests'' illuminate how aggressively Baldwin and EMTEK compete on the 
basis of price. To take one example, in 2021, Baldwin offered an 
unusually deep discount on ``high end custom[]'' door hardware from 
both the Baldwin Reserve and Baldwin Estate brands to a residential 
architecture firm that was building several single-family homes; 
Baldwin did so ``to keep Emtek OUT!'' and win [REDACTED] of dollars in 
new sales to the customer.
    57. In addition to price-change-request discounts, Baldwin also 
offered targeted additional discounts on its Baldwin Reserve brand in 
2021 as part of a broader effort to ``attack an Emtek stronghold'' with 
lumberyard and door and window shop customers, which resell premium 
mechanical door hardware to end-customers. The Baldwin Reserve brand 
had been ``launched to attack'' EMTEK's ``beachhead'' among these 
customers in 2011, but by 2021 it had not yet been able to make 
sufficient headway. Accordingly, Baldwin took several

[[Page 31015]]

measures to ``get back on track'' with these customers, including 
offering ``more aggressive'' discounts to EMTEK customers in an effort 
to get them to switch to Baldwin.
    58. Competition between Defendants' premium mechanical door 
hardware brands also constrains increases to list prices, which are 
published prices used as reference points for discounts. For example, 
in 2019, Spectrum HHI senior executives proposed raising the list 
prices of Baldwin Reserve and Baldwin Estate by [REDACTED], but 
acknowledged that they would first ``need to understand Emtek's recent 
price increase.'' Baldwin's director of sales responded that raising 
Baldwin prices by [REDACTED] would be ``insane'' because EMTEK had 
raised prices by only [REDACTED], making a [REDACTED] price increase 
``the max'' Baldwin could pursue while ``still be[ing] competitive.''
b. Better Customer Service
    59. Competition between EMTEK and Baldwin pushes the two to offer 
customers better levels of service, primarily in the form of faster 
order fulfillment (or ``lead times'') and provision of complimentary 
in-store displays.
    60. Lead times are an important facet of competition in the premium 
mechanical door hardware market because customers value speedy order 
fulfillment. EMTEK, in particular, prides itself on having ``the 
shortest lead times in the industry,'' which it often credits for 
allowing it to win business away from competitors, including 
specifically from Baldwin. For example, an EMTEK sales director wrote 
in July 2020 that he ``believe[d] a large part of [EMTEK's] demand 
increase is as a result of our short lead times,'' noting specifically 
that those lead times empowered EMTEK to refuse discounts to customers 
that had no other option but EMTEK: ``We are being careful not to 
respond to last minute price discount requests for product that cannot 
be sourced from another supplier within an acceptable lead time.'' 
EMTEK similarly observed in September 2020 that one of its ``Top 3 
Result Drivers'' was that its short lead times were ``allowing share 
grab'' because ``[c]ompetitors have long lead times.''
    61. Baldwin has made investments to improve its lead times to 
compete better against EMTEK, which has benefited consumers. Most 
recently, as part of its broader strategic imperative, beginning in 
2021, to ``recapture the leadership position'' from EMTEK, Baldwin 
invested heavily to shorten its lead times to match EMTEK's. It did so 
through its ``Quick Ship'' program, the crux of which is to shorten 
lead times by stocking more inventory, which in turn is intended to 
``remove Emtek['s] lead time advantage'' and ``[r]ebuild showroom 
loyalty and brand preference.''
    62. The use of complimentary in-store displays is another facet of 
competition between EMTEK and Baldwin because such displays are an 
important sales aid for showrooms and similar dealers. Because in-store 
displays help dealers sell door hardware and would otherwise be a 
substantial cost to the dealer (hundreds or thousands of dollars per 
display), giving away displays is a way for producers to curry favor 
with dealers. That favor can help to displace competitors by securing 
better real estate on the showroom floor and earning elevated status as 
a ``preferred'' or ``priority'' brand at the dealer.
    63. Accordingly, to compete against each other, EMTEK and Baldwin 
give away showroom displays, which benefits consumers. EMTEK especially 
focuses on providing dealers with free in-store displays, which is one 
of its ``key strategies.'' Baldwin spends substantial sums each year 
providing free in-store displays in ``tiers'' based on the dealer's 
estimated annual sales volume. Baldwin also uses free displays to 
target EMTEK. In 2021, it made a concerted effort to provide free 
displays to lumberyard and door and window shop customers, and it 
reserved the largest and most expensive free displays for the dealers 
``that have a large Emtek presence.''
d. New Products, Styles, and Finishes
    64. Because aesthetics, customization, and expansive optionality 
are distinguishing features of premium mechanical door hardware, it is 
important for producers to continuously respond to design trends by 
offering new products, styles, and finishes. EMTEK has been known for 
years as a new product introduction ``machine,'' and Baldwin has 
likewise sought for years to increase the speed and quantity of its new 
product introductions to compete better against EMTEK. The resulting 
increase in product options has benefitted consumers.
    65. If the proposed transaction were to proceed, the merged firm 
would likely reduce options available to consumers in the premium 
mechanical door hardware market, including potentially curtailing the 
introduction of new product lines or even eliminating entire brands or 
product lines. Immediately after the proposed transaction was publicly 
announced, Spectrum HHI sales personnel internally anticipated that the 
merged firm would ``[p]ut a bullet in [Baldwin] Reserve'' and ``fold 
Emtek on the high end,'' meaning eliminate more expensive EMTEK product 
lines, such as door hardware for mortise locks. That prediction 
contrasted sharply with Baldwin's pre-merger strategy to expand its 
product offerings in order to compete better against EMTEK.
2. Smart Locks
    66. ASSA ABLOY's August and Yale brands and Spectrum HHI's Kwikset 
brand are ``top competitors'' of one another in the market for smart 
locks in the United States, in which ASSA ABLOY and Spectrum HHI are 
two of three dominant incumbents. Head-to-head competition between 
these brands has resulted in lower prices and new and innovative smart 
lock products, which have benefited consumers.
a. Lower Prices
    67. Competition between Defendants' smart lock brands constrains 
price increases. For example, in December 2019, the head of ASSA 
ABLOY's Global Smart Residential group explained to ASSA ABLOY's CEO 
that the company was unable to raise prices on ASSA ABLOY's smart locks 
because of ``strong competition'' from its two largest rivals, 
including Spectrum HHI's Kwikset. And ASSA ABLOY's CEO was told that 
any evidence of Spectrum HHI ``raising prices on Kwikset smart locks'' 
would be an ``opportunity to take price,'' i.e., increase prices. In 
fact, one source of additional revenue that ASSA ABLOY expects to 
realize from acquiring Spectrum HHI is to ``increase [the] price of 
Yale products'' by leveraging Spectrum HHI's ``scale and pricing 
power,'' especially in big box (also known as ``Do It Yourself'' or 
``DIY'') home improvement stores. ASSA ABLOY anticipates that, ``[w]ith 
scale from [Spectrum HHI], Yale will be in a better pricing negotiation 
position and can expect to increase prices.''
    68. Competition between Defendants' smart lock brands has also 
often resulted in Defendants lowering their prices to win business from 
the other or to prevent a customer from switching to the other. One 
example was a request for proposals in 2020 to supply a home security 
company with smart locks, in which Spectrum HHI's Kwikset was ``going 
against Yale predominantly.'' ASSA ABLOY's Yale had made a ``very 
competitive . . . offer,'' and, in response, Kwikset decided to make a 
``margin challenged'' bid because, in the assessment of Spectrum HHI's 
chief marketing officer, the home security company is ``one of few, 
bigger swing

[[Page 31016]]

players in this type of market to make a bet on and I don't want Yale 
to get it.'' In another example, in 2021, Yale was ``trying to undercut 
[Kwikset's] pricing again'' for a smart home company, and in response, 
Kwikset lowered its pricing ``to keep Yale out of there.''
    69. ASSA ABLOY has more recently taken ``an aggressive approach'' 
on pricing to take smart lock market share from Spectrum HHI's Kwikset 
in DIY home improvement stores. Starting in 2021, ASSA ABLOY 
implemented a strategy to organically grow its smart lock business in 
the United States, primarily by growing in the DIY sales channel, in 
which it has historically been under-exposed, and where Kwikset 
benefits from an incumbent position. ASSA ABLOY sought to do so by 
introducing ``new entry-to-mid'' price point smart locks under the Yale 
brand to compete with its two largest rivals, including Kwikset, and 
``take [a half] bay [i.e., shelf space] in entry-to-mid from'' one or 
both of them, thereby significantly increasing its share of sales in 
the DIY channel. Before the new smart locks could be rolled out in the 
third quarter of 2022, ASSA ABLOY sought to use an ``aggressive'' price 
reduction on its existing smart lock products to ``get a foothold into 
Home Depot'' and greatly expand the number of Home Depot locations that 
carry Yale or August smart locks.
    70. The centerpiece of ASSA ABLOY's ``focused retail strategy'' is 
the introduction of a new version of its Yale Assure smart lock, also 
called the 400 Series, which will offer price points 15-25% lower than 
Yale's existing smart locks for equivalent functionality, putting 
Yale's smart locks on par with the pricing of Spectrum's Kwikset's 
smart locks.
b. New and Innovative Smart Locks
    71. Competition between ASSA ABLOY and Spectrum HHI has also 
spurred innovation and the introduction of new smart locks, which has 
benefited consumers. For example, as alleged in paragraphs 69-70, ASSA 
ABLOY developed a new line of smart locks--the Yale 400 Series--to 
compete against Kwikset. The 400 Series locks will not only be sold at 
lower prices than Yale's existing smart locks, but they will also be 
30% smaller, giving them a sleeker, more compact appearance. The 400 
Series will also offer new features, including a [REDACTED]. Beyond the 
400 Series, ASSA ABLOY is also developing other, lower-priced smart 
locks in response to ``low cost lock leaders'' including Kwikset.
    72. Kwikset has likewise innovated new smart locks in response to 
ASSA ABLOY. For example, it is developing a smart lock to compete 
against the pricing and features of Yale's existing Assure smart lock, 
including to ``match the flexibility offered by Yale.'' Kwikset also 
developed a new Z-Wave smart lock in 2021 with features that were 
``absolutely necessary to catch up to where Yale has been for many 
years.''

C. The Proposed Transaction Would Make Anticompetitive Coordination 
More Likely

    73. In the premium mechanical door hardware market, the proposed 
transaction would eliminate important competition among major rivals 
and create an even more dominant firm within a highly concentrated 
market. As a result, there is an increased risk that harm from tacit or 
other forms of coordination would become more likely due to the 
proposed transaction.
    74. In the smart lock market, the proposed transaction would make 
coordination more likely by creating a duopoly consisting of the merged 
firm and its largest competitor, collectively accounting for more than 
70% of sales in the market. In that market structure, the two dominant 
firms would have an increased ability to analyze and plan for one 
another's conduct. By increasing the likelihood of interdependent 
behavior among competitors in the smart lock market, the proposed 
transaction may substantially lessen competition and keep prices high 
in that market.

Absence of Countervailing Factors

    75. New entry or expansion by existing competitors in response to 
an exercise of market power by the post-transaction firm would not be 
likely, timely, or sufficient in its magnitude, scope, or character to 
deter or fully offset the proposed transaction's likely anticompetitive 
effects.
    76. Barriers to merger-induced entry and expansion are high in the 
market for premium mechanical door hardware. First, significant 
financial investment and time are needed to earn and maintain market 
recognition as a ``premium'' or ``luxury'' brand. Second, premium 
brands require an exceptionally broad product offering to be 
competitive, which is expensive and time consuming to design and 
manufacture at scale. Third, the customer base of specialized dealers 
is highly fragmented and costly to serve, requiring large upfront 
investments in a widespread and knowledgeable sales force and costly 
marketing collateral (e.g., in-store displays). Fourth, ASSA ABLOY'S 
EMTEK and Spectrum's Baldwin have developed an entrenched and dominant 
physical and reputational presence in showrooms and other dealers, 
which would be very difficult to displace. As Baldwin's sales director 
observed after the proposed transaction was announced, the combination 
of EMTEK and Baldwin ``should be able to dominate every showroom in the 
country.''
    77. Barriers to entry and expansion are also high in the smart 
locks market. First, it is costly to develop competitive smart lock 
products, both initially and over time, because doing so requires 
sophisticated software and hardware engineering capabilities. Second, 
it takes time and money to break through as a brand that is known and 
trusted by consumers. Large incumbents like ASSA ABLOY and Spectrum HHI 
have a structural advantage in branding because they have been able to 
build up strong brand recognition over time, which has created a 
virtuous cycle in which brand recognition spurs increased sales, which 
further grows the incumbents' market presence, which in turn spurs 
further increased sales, and so on. It would be difficult for a new 
entrant or a smaller existing competitor to disrupt that structural 
advantage. Third, significant operational scale is needed to serve many 
of the most important groups of smart lock customers, especially big-
box home improvement stores, consumer electronics stores, home 
builders, and home security companies.
    78. Neither the premium mechanical door hardware market nor the 
smart lock market has any unique structural barriers to collusion. Any 
barriers to collusion in these markets are no greater than in other 
industries and therefore would not overcome the normal presumption that 
the increased concentration resulting from the proposed transaction 
would increase the likelihood of interdependent behavior among 
competitors, such as tacit collusion.
    79. The proposed transaction is also unlikely to generate 
verifiable, merger-specific efficiencies sufficient to prevent or 
outweigh the anticompetitive effects that the proposed transaction is 
likely to cause in the relevant markets.

Defendants' Proposed Divestitures Are Insufficient To Remedy the 
Proposed Transaction's Anticompetitive Effects

    80. ASSA ABLOY and Spectrum have known all along that their 
proposed transaction presented significant antitrust concerns. The 
obvious antitrust problems triggered much hand-wringing and negotiation 
at the highest levels of both companies about how to handle the ``anti-
trust situation'' the transaction would create. In July 2021, during 
due

[[Page 31017]]

diligence for the proposed transaction, ASSA ABLOY executives were 
``having daily calls on antitrust'' and acknowledged early on that the 
overlap between EMTEK and Baldwin would be ``the biggest focus'' for 
competition enforcers. Spectrum wanted assurance that ASSA ABLOY would 
do whatever it would take to appease antitrust enforcers' objections, 
but ASSA ABLOY jealously guarded the collection of assets it had 
acquired, particularly the assets that make up its ``Yale Global 
business,'' and it was reluctant to commit to divest them.
    81. Ultimately, Defendants' discussions about how to navigate 
inevitable antitrust objections became so contentious that the 
transaction's anticompetitive nature nearly sank the proposed deal 
before it could be signed. On the afternoon of September 7, 2021, hours 
before the proposed transaction was announced, ASSA ABLOY's CEO wrote 
to Spectrum's CEO that, based on unresolved disagreements about how to 
handle the antitrust risks of the proposed transaction, ASSA ABLOY had 
``come to the conclusion to withdraw from the process and proceed with 
other opportunities.''
    82. Although Defendants were apparently able to resolve their 
disagreements at the eleventh hour, the proposed transaction's 
antitrust problems remained. Accordingly, in the summer of 2022, ASSA 
ABLOY and Spectrum effectively conceded that their proposed transaction 
would harm competition by proposing a ``remedy'' to antitrust enforcers 
that would involve ASSA ABLOY selling off parts of its business units 
that that sell residential door hardware in the United States. Selling 
that incomplete package of assets would not replicate the intensity of 
competition that exists today.
    83. The touchstone of any appropriate antitrust remedy is the 
immediate, durable, and complete preservation of competition. Merely 
transplanting assets from one firm to another is not an effective 
antitrust remedy because it creates unacceptable risks of diluting the 
intensity of competition--the risk of creating a firm with less 
incentive, ability, or resources than the original owner to use the 
divested assets in service of competition, the risk of entanglement or 
conflict between the buyer and seller of the divested assets, and the 
risk of the buyer liquidating or redeploying the divested assets. 
Defendants bear the heavy burden of establishing that any remedy they 
propose meets these exacting standards, especially given the 
substantial competitive problems their proposed deal presents, and they 
cannot meet that burden here.
    84. Defendants have not disclosed all of the details of their 
proposed ``remedy'' and have not identified any potential buyer for 
divested assets, but they have disclosed some information about the 
assets they propose to divest to try to ``fix'' their flawed 
transaction. In particular, the parties offered to divest portions of 
ASSA ABLOY's Mechanical Residential business unit relating only to the 
EMTEK brand and portions of ASSA ABLOY's Global Smart Residential 
business unit relating only to Yale and August smart locks sold in the 
United States and Canada. These partial divestitures would be 
insufficient to preserve the intensity of existing competition. They 
would split up existing business units, cutting off the divested assets 
from the organization, resources, and efficiencies that have allowed 
ASSA ABLOY to be a leading competitor in the United States premium 
mechanical door hardware and smart lock markets.
    85. The parties' proposed divestitures would be insufficient even 
if a transfer of assets were executed flawlessly, but the complex 
carving out (and in some cases splitting) of manufacturing capacity, 
warehouses, personnel, intellectual property, supply chain 
relationships, and other resources is virtually guaranteed to be 
anything but flawless. American consumers should not be forced to 
underwrite this risky experiment in corporate reorganization. The only 
way to ensure that does not happen is to block Defendants' proposed 
transaction.

Jurisdiction and Venue

    86. The United States brings this action, and this Court has 
subject-matter jurisdiction over this action, under Section 15 of the 
Clayton Act, 15 U.S.C. 25, to prevent and restrain Defendants from 
violating Section 7 of the Clayton Act, 15 U.S.C. 18.
    87. Defendants are engaged in, and their activities substantially 
affect, interstate commerce. ASSA ABLOY and Spectrum sell products to 
numerous customers located throughout the United States.
    88. This Court has personal jurisdiction over each Defendant under 
Section 12 of the Clayton Act, 15 U.S.C. 22. ASSA ABLOY and Spectrum 
both transact business in this District. ASSA ABLOY and Spectrum have 
also both consented to personal jurisdiction in this District.
    89. Venue is proper under Section 12 of the Clayton Act, 15 U.S.C. 
22, and under 28 U.S.C. 1391(b) and (c). ASSA ABLOY and Spectrum both 
reside in this District.

Violation Alleged

    90. The United States hereby incorporates the allegations of 
paragraphs 1 through 89 above as if set forth fully herein.
    91. Unless enjoined, ASSA ABLOY's proposed acquisition of Spectrum 
HHI may lessen competition substantially and tend to create a monopoly 
in premium mechanical door hardware and smart locks in the United 
States, in violation of Section 7 of the Clayton Act, 15 U.S.C. 18.
    92. Among other things, the proposed acquisition would:
    a. eliminate significant present and future head-to-head 
competition between ASSA ABLOY and Spectrum HHI;
    b. reduce competition generally in the relevant markets;
    c. reduce competition to innovate in the relevant markets;
    d. cause prices to rise for customers in the relevant markets;
    e. cause a reduction in product quality in the relevant markets; 
and
    f. cause a reduction in customer service in the relevant markets.

Relief Requested

    93. Plaintiff requests that the Court:
    a. adjudge and decree that ASSA ABLOY's proposed acquisition of 
Spectrum HHI is unlawful and violates Section 7 of the Clayton Act, 15 
U.S.C. 18;
    b. permanently enjoin and restrain Defendants and all persons 
acting on their behalf from consummating the proposed transaction or 
from entering into or carrying out any other contract, agreement, plan, 
or understanding, the effect of which would be to combine ASSA ABLOY 
and Spectrum HHI;
    c. award the United States the costs of this action; and
    d. award the United States such other relief that the Court deems 
just and proper.

    Dated this 15th day of September, 2022.

    Respectfully submitted,

    FOR PLAINTIFF UNITED STATES OF AMERICA:

JONATHAN S. KANTER (DC Bar #473286)
Assistant Attorney General for Antitrust

DOHA G. MEKKI
Principal Deputy Assistant Attorney General for Antitrust

ANDREW J. FORMAN (DC Bar #477425)
Deputy Assistant Attorney General for Antitrust

RYAN DANKS
Director of Civil Enforcement

CRAIG W. CONRATH
Senior Trial Advisor for Civil Litigation


[[Page 31018]]


KATRINA ROUSE (DC Bar #1014035)
Chief, Defense, Industrials, and Aerospace Section

JAY D. OWEN
Assistant Chief, Defense, Industrials, and Aerospace Section

SOYOUNG CHOE
Assistant Chief, Defense, Industrials, and Aerospace Section

MATTHEW R. HUPPERT (DC Bar #1010997) *
SILVIA J. DOMINGUEZ-REESE
MATTHEW C. FELLOWS (DC Bar #1736656)
CHRISTINE A. HILL (DC Bar #461048)
GABRIELLA MOSKOWITZ (DC Bar #1044309)
REBECCA Y. VALENTINE (DC Bar #989607)

Trial Attorneys
United States Department of Justice
Antitrust Division
450 Fifth Street NW, Suite 8700
Washington, DC 20530
Telephone: (202) 476-0383
Fax: (202) 514-9033
Email: [email protected]

DAVID E. DAHLQUIST
Senior Litigation Counsel
United States Department of Justice
Antitrust Division
209 South LaSalle Street, Suite 600
Chicago, Illinois 60604
Email: [email protected]

* LEAD ATTORNEY TO BE NOTICED

In the United States District Court for the District of Columbia

    UNITED STATES OF AMERICA, Plaintiff, v. ASSA ABLOY AB, et al., 
Defendants.

Civil No. 1:22-cv-02791-ACR

Proposed Final Judgment

    Whereas, Plaintiff, United States of America, filed its Complaint 
on September 15, 2022;
    And whereas, the United States and Defendants, ASSA ABLOY AB 
(``ASSA ABLOY'') and Spectrum Brands Holdings, Inc. (``Spectrum'') have 
consented to entry of this Final Judgment without this Final Judgment 
constituting any evidence against or admission by any party relating to 
any issue of fact or law;
    And whereas, Defendants agree to make certain divestitures;
    And whereas, Defendants represent that the divestitures and other 
relief required by this Final Judgment can and will be made and that 
Defendants will not later raise a claim of hardship or difficulty as 
grounds for asking the Court to modify any provision of this Final 
Judgment;
    Now Therefore, it is Ordered, Adjudged, and Decreed:

I. Jurisdiction

    The Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against Defendants under Section 7 of the Clayton 
Act (15 U.S.C. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``ASSA ABLOY'' means Defendant ASSA ABLOY AB, a publicly traded 
Swedish stock company headquartered in Stockholm, Sweden, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    B. ``Spectrum'' means Defendant Spectrum Brands Holdings, Inc., a 
Delaware corporation with its headquarters in Middleton, Wisconsin, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    C. ``Fortune'' means Fortune Brands Innovations, Inc., a Delaware 
corporation with its headquarters in Deerfield, Illinois, its 
successors and assigns, and its subsidiaries, divisions, groups, 
affiliates, partnerships, and joint ventures, and their directors, 
officers, managers, agents, and employees.
    D. ``Acquirer'' or ``Acquirers'' means Fortune or another entity, 
approved by the United States in its sole discretion, to which ASSA 
ABLOY divests the Divestiture Assets.
    E. ``Divestiture Assets'' means (1) the Premium Mechanical 
Divestiture Assets; and (2) the Smart Lock Divestiture Assets.
    F. ``Divestiture Date'' means the date on which the closing of the 
transaction between ASSA ABLOY and Acquirer occurs.
    G. ``Door'' means a swinging door or pocket door used for ingress 
to a room, closet, dwelling, or passageway, but does not include 
cabinet doors, rolling doors, garage doors, and, except to the extent 
located at Residences, delivery locker doors.
    H. ``Including'' means including, but not limited to.
    I. ``Multifamily'' means, with respect to any buildings containing 
more than one Residence, whether or not such buildings have mixed uses, 
Residences in such buildings, along with common areas associated with 
Residences in such buildings, including entrances and exits (but not 
educational, medical, retail, commercial, industrial, or professional 
areas not associated with Residences).
    J. ``Premium Mechanical Divestiture Business'' means ASSA ABLOY's 
(1) Emtek branded business, and (2) Schaub branded business.
    K. ``Premium Mechanical Divestiture Assets'' means, at the option 
of Acquirer, all of ASSA ABLOY's rights, titles, and interests in and 
to all property and assets, tangible and intangible, wherever located, 
relating to or used in connection with the Premium Mechanical 
Divestiture Business, including:
    1. the Emtek brand name and the Schaub brand name, including the 
right to the exclusive and unlimited worldwide use of the Emtek brand 
name and the Schaub brand name in all sales channels, as well as all 
registered and unregistered trademarks, trade dress, service marks, 
trade names, and trademark applications, relating to the Emtek and 
Schaub trademarks;
    2. leasehold interest to the real property and facilities located 
at 600 Baldwin Park Boulevard, City of Industry, California;
    3. all other real property, including fee simple interests, real 
property leasehold interests and renewal rights thereto, improvements 
to real property, and options to purchase any adjoining or other 
property, together with all buildings, facilities, and other 
structures;
    4. all tangible personal property, including fixed assets, 
machinery and manufacturing equipment, tools, vehicles, inventory, 
materials, office equipment and furniture, computer hardware, and 
supplies;
    5. all contracts, contractual rights, and customer relationships, 
and all other agreements, commitments, and understandings, including 
supply agreements, teaming agreements, and leases, and all outstanding 
offers or solicitations to enter into a similar arrangement;
    6. all licenses, permits, certifications, approvals, consents, 
registrations, waivers, and authorizations, including those issued or 
granted by any governmental organization, and all pending applications 
or renewals;
    7. all records and data, including (i) customer lists, accounts, 
sales, and credits records, (ii) production, repair, maintenance, and 
performance records, (iii) manuals and technical information ASSA ABLOY 
provides to its own employees, customers, suppliers, agents, or 
licensees, (iv) records and research data concerning historic and 
current research and development activities, including designs of 
experiments and the results of successful and unsuccessful designs and 
experiments, and (v) drawings, blueprints, and designs;
    8. in addition to the intellectual property assets listed in 
Paragraph II.K.1., all other intellectual property

[[Page 31019]]

owned, licensed, or sublicensed, either as licensor or licensee, 
including (i) patents, patent applications, and inventions and 
discoveries that may be patentable, (ii) registered and unregistered 
copyrights and copyright applications, and (iii) registered and 
unregistered trademarks, trade dress, service marks, trade names, and 
trademark applications; and
    9. all other intangible property, including (i) commercial names 
and d/b/a names, (ii) technical information, (iii) computer software 
and related documentation, know-how, trade secrets, design protocols, 
specifications for materials, specifications for parts, specifications 
for devices, safety procedures (e.g., for the handling of materials and 
substances), quality assurance and control procedures, (iv) design 
tools and simulation capabilities, and (v) rights in internet websites 
and internet domain names.
    L. ``Premium Mechanical Divestiture Relevant Personnel'' means, at 
the option of Acquirer, all full-time, part-time, or contract employees 
of ASSA ABLOY, wherever located, whose job responsibilities relate in 
any way to the Premium Mechanical Divestiture Business, at any time 
between September 8, 2021, and the Divestiture Date. Subject to 
Acquirer's election, the United States, in its sole discretion, will 
resolve any disagreement relating to which employees are Premium 
Mechanical Divestiture Relevant Personnel.
    M. ``Regulatory Approvals'' means (1) any approvals or clearances 
pursuant to filings under antitrust or competition laws that are 
required for the Transaction to proceed; and (2) any approvals or 
clearances pursuant to filings under antitrust, competition, or other 
U.S. or international laws that are required for Acquirer's acquisition 
of the Divestiture Assets to proceed.
    N. ``Residences'' means single family homes and residential units 
within Multifamily dwellings, whether owned or whether leased or 
offered for long-term or short-term use by a unit or home owner 
directly or through a third party, including apartments, co-ops, and 
condominiums, and properties provided by AirBnB, VRBO and similar 
businesses, but not including hotel rooms, rooms in medical and long-
term care facilities, dormitory rooms, and prison cells.
    O. ``Smart Lock'' means a wireless connected digital lock affixed 
to a Door, but does not include any of the product categories listed in 
Appendix A.
    P. ``Smart Lock Divestiture Business'' means: (1) the August 
branded business, and (2) the Yale branded Multifamily and residential 
Smart Lock businesses in the U.S. and Canada (including Yale Real 
Living), but does not include (i) the Yale branded commercial business 
anywhere in the world, and (ii) all other Yale branded businesses 
anywhere in the world.
    Q. ``Smart Lock Divestiture Assets'' means the (1) Yale Brand and 
Trademarks; and (2) at the option of Acquirer, all of ASSA ABLOY's 
rights, titles, and interests in and to all property and assets, 
tangible and intangible, wherever located, relating to or used in 
connection with the Smart Lock Divestiture Business, including:
    i. The Premises Sublease Agreement, by and between VINA--CPK 
COMPANY LIMITED and ASSA ABLOY Smart Product Vietnam Co., Ltd., dated 
July 23, 2019;
    ii. all other real property, including fee simple interests, real 
property leasehold interests and renewal rights thereto, improvements 
to real property, and options to purchase any adjoining or other 
property, together with all buildings, facilities, and other 
structures;
    iii. all tangible personal property, including fixed assets, 
machinery and manufacturing equipment, tools, vehicles, inventory 
(including Yale branded residential mechanical inventory), materials, 
office equipment and furniture, computer hardware, and supplies;
    iv. all contracts, contractual rights, and customer relationships, 
and all other agreements, commitments, and understandings, including 
supply agreements, teaming agreements, and leases, and all outstanding 
offers or solicitations to enter into a similar arrangement;
    v. all licenses, permits, certifications, approvals, consents, 
registrations, waivers, and authorizations, including those issued or 
granted by any governmental organization, and all pending applications 
or renewals;
    vi. all records and data, including (i) customer lists, accounts, 
sales, and credits records, (ii) production, repair, maintenance, and 
performance records, (iii) manuals and technical information Defendants 
provide to their own employees, customers, suppliers, agents, or 
licensees, (iv) records and research data concerning historic and 
current research and development activities, including designs of 
experiments and the results of successful and unsuccessful designs and 
experiments, and (v) drawings, blueprints, and designs;
    vii. all intellectual property owned, licensed, or sublicensed, 
either as licensor or licensee, including (i) patents, patent 
applications, and inventions and discoveries that may be patentable, 
(ii) registered and unregistered copyrights and copyright applications, 
and (iii) registered and unregistered trademarks, trade dress, service 
marks, trade names, and trademark applications;
    viii. all other intangible property, including (i) commercial names 
and d/b/a names, (ii) technical information, (iii) computer software 
and related documentation, know-how, trade secrets, design protocols, 
specifications for materials, specifications for parts, specifications 
for devices, safety procedures (e.g., for the handling of materials and 
substances), quality assurance and control procedures, (iv) design 
tools and simulation capabilities, (v) rights in internet websites and 
internet domain names;
    ix. an exclusive, perpetual, irrevocable, royalty-free, and 
sublicensable license to install, copy, modify, create derivative works 
of, and use solely in the United States and Canada, any access control 
systems designed for Residences including mobile applications and 
backend ecosystems, including the Yale Access software platform, 
provided, however, that nothing in this paragraph prohibits ASSA ABLOY 
from retaining, for use outside the United States and Canada, an 
independent instance of any internally developed access control system 
designed for Residences; and
    R. ``Smart Lock Divestiture Relevant Personnel'' means, at the 
option of Acquirer, all full-time, part-time, or contract employees of 
ASSA ABLOY, wherever located, whose job responsibilities relate in any 
way to the Smart Lock Divestiture Business, at any time between 
September 8, 2021 and the Divestiture Date. The United States, in its 
sole discretion, will resolve any disagreement relating to which 
employees are Smart Lock Divestiture Relevant Personnel.
    S. ``Transfer of Smart Lock Foreign Divestiture Assets'' means 
transfer of the Smart Lock Divestiture Assets located at Lot A10, Ba 
Thien II IP, Thien Ke, Binh Xuyen, Vinh Phuc Vietnam.
    T. ``Transaction'' means the proposed acquisition of Spectrum's 
Hardware and Home Improvement Division by ASSA ABLOY, pursuant to a 
purchase agreement dated September 8, 2021, as amended.
    U. ``Yale Brand and Trademarks'' means the ownership and exclusive 
and unrestricted use of the Yale brand name and the business goodwill 
associated therewith in the U.S. and Canada for all current and future 
residential uses and all current and future Multifamily Smart

[[Page 31020]]

Lock uses (including all interconnect-style Smart Locks for Multifamily 
uses and nexTouch Smart Locks for Multifamily uses and any future 
products with similar functionality and applications as interconnect 
and nexTouch Smart Locks in Residential and Multifamily uses).

III. Applicability

    A. This Final Judgment applies to ASSA ABLOY and Spectrum, as 
defined above, and all other persons in active concert or participation 
with any Defendant who receive actual notice of this Final Judgment.
    B. If, prior to complying with Section V and Section VI of this 
Final Judgment, Defendants sell or otherwise dispose of all or 
substantially all of their assets or of business units that include the 
Divestiture Assets, Defendants must require any purchaser to be bound 
by the provisions of this Final Judgment. Defendants need not obtain 
such an agreement from Acquirer.

IV. Additional Relief

    If, after three years following the Divestiture Date and until the 
date that is five years from entry of this Final Judgment, the 
monitoring trustee determines, after investigation and consultation 
with the United States, ASSA ABLOY and Acquirer, that:
    a. Acquirer's competitive intensity in the residential Smart Locks 
business has diminished relative to ASSA ABLOY's competitive intensity 
in that business as of the Divestiture Date; and
    b. Such diminishment in competitive intensity is in material part 
due to limitations on Acquirer's right to use the rights held by ASSA 
ABLOY to the Yale brand name or trademarks in the U.S. and Canada as of 
the Divestiture Date, then

the monitoring trustee may, after consultation with the United States, 
provide a written report of the monitoring trustee's conclusions to the 
United States. Upon receiving such report, the United States, in its 
sole discretion, will have the ability to seek leave of the Court to 
re-open this proceeding specifically to seek only the grant of 
additional Yale brand name or trademark rights (including the ability 
to use those rights to compete for any category or customer segment) in 
the U.S. and Canada to Acquirer.

V. Divestiture of the Premium Mechanical Divestiture Assets

    A. ASSA ABLOY is ordered and directed, within 3 calendar days after 
the closing of the Transaction, to divest the Premium Mechanical 
Divestiture Assets in a manner consistent with this Final Judgment to 
Acquirer, except that, for individual assets subject to Regulatory 
Approvals, ASSA ABLOY is ordered and directed to divest such assets by 
the later of 3 calendar days after the closing of the Transaction or 15 
days after the relevant Regulatory Approvals have been received. The 
United States, in its sole discretion, may agree to one or more 
extensions of these time periods not to exceed 30 calendar days in 
total for each time period, and ASSA ABLOY must notify the Court of any 
extensions agreed to by the United States.
    B. At the option of the Acquirer, for all contracts, agreements, 
and customer relationships (or portions of such contracts, agreements, 
and customer relationships) included in the Premium Mechanical 
Divestiture Assets, ASSA ABLOY must, assign or otherwise transfer all 
contracts, agreements, and customer relationships, to the Acquirer 
within the deadlines set forth in Paragraph V.A. ASSA ABLOY must not 
interfere with any negotiations between Acquirer and a contracting 
party.
    C. Subject to Paragraph V.A, ASSA ABLOY must use best efforts to 
divest the Premium Mechanical Divestiture Assets as expeditiously as 
possible. ASSA ABLOY must take no action that would jeopardize the 
completion of the divestiture ordered by the Court, including any 
action to impede the permitting, operation, or divestiture of the 
Premium Mechanical Divestiture Assets.
    D. Unless the United States otherwise consents in writing, 
divestiture pursuant to this Final Judgment must include the entire 
Premium Mechanical Divestiture Assets.
    E. In the event ASSA ABLOY is attempting to divest the Divestiture 
Assets to an Acquirer other than Fortune, ASSA ABLOY promptly must make 
known, by usual and customary means, the availability of the 
Divestiture Assets. ASSA ABLOY must inform any person making an inquiry 
relating to a possible purchase of the Divestiture Assets that the 
Divestiture Assets are being divested in accordance with this Final 
Judgment and must provide that person with a copy of this Final 
Judgment. ASSA ABLOY must offer to furnish to all prospective 
Acquirers, subject to customary confidentiality assurances, all 
information and documents relating to the Divestiture Assets that are 
customarily provided in a due diligence process; provided, however, 
that ASSA ABLOY need not provide information or documents subject to 
the attorney-client privilege or work-product doctrine. ASSA ABLOY must 
make all information and documents available to the United States at 
the same time that the information and documents are made available to 
any other person.
    F. At the option of the Acquirer, ASSA ABLOY must provide 
prospective Acquirers with (1) access to make inspections of the 
Premium Mechanical Divestiture Assets; (2) access to all material 
environmental, zoning, and other permitting documents and information 
relating to the Premium Mechanical Divestiture Assets; and (3) access 
to all financial, operational, or other documents and information 
relating to the Premium Mechanical Divestiture Assets, in each case, 
that would customarily be provided as part of a due diligence process. 
ASSA ABLOY also must disclose all material encumbrances on any part of 
the Premium Mechanical Divestiture Assets, including on intangible 
property.
    G. At the option of the Acquirer, ASSA ABLOY must cooperate with 
and assist Acquirer in identifying and hiring all Premium Mechanical 
Divestiture Relevant Personnel, including:
    1. Within 10 business days following the receipt of a request by 
Acquirer, ASSA ABLOY must identify all Premium Mechanical Divestiture 
Relevant Personnel to Acquirer and the United States, including by 
providing organization charts covering all Premium Mechanical 
Divestiture Relevant Personnel.
    2. Within 10 business days following receipt of a request by 
Acquirer or the United States, ASSA ABLOY must provide to Acquirer and 
the United States additional information relating to Premium Mechanical 
Divestiture Relevant Personnel, including name, job title, reporting 
relationships, past experience, responsibilities, training and 
educational histories, relevant certifications, and job performance 
evaluations. ASSA ABLOY must also provide Acquirer and the United 
States information relating to current and accrued compensation and 
benefits of Premium Mechanical Divestiture Relevant Personnel, 
including most recent bonuses paid, aggregate annual compensation, any 
current target or guaranteed bonuses, if any, any retention agreement 
or incentives, and any other payments due, compensation or benefits 
accrued, or promises made to the Premium Mechanical Divestiture 
Relevant Personnel. If ASSA ABLOY is barred by any applicable law from 
providing any of this information, ASSA ABLOY must provide, within 10 
business days following receipt of the request, the requested 
information to the full extent permitted by law and also must provide a 
written explanation to

[[Page 31021]]

Acquirer and the United States of ASSA ABLOY's inability to provide the 
remaining information, including specifically identifying the 
provisions of the applicable laws.
    3. At the request of Acquirer, ASSA ABLOY must promptly make 
Premium Mechanical Divestiture Relevant Personnel available for private 
interviews with Acquirer during normal business hours at a mutually 
agreeable location.
    4. ASSA ABLOY must not interfere with any effort by Acquirer to 
employ any Premium Mechanical Divestiture Relevant Personnel. 
Interference includes offering to increase the compensation or improve 
the benefits of Premium Mechanical Divestiture Relevant Personnel 
unless (i) the offer is part of a company-wide increase in compensation 
or improvement in benefits that was announced prior to September 8, 
2021, or (ii) the offer is approved by the United States in its sole 
discretion. ASSA ABLOY's obligations under this Paragraph V.G.4. will 
expire 180 calendar days after the Divestiture Date.
    5. For Premium Mechanical Divestiture Relevant Personnel who elect 
employment with Acquirer within 180 calendar days of the Divestiture 
Date, ASSA ABLOY must waive all non-compete and non-disclosure 
agreements; vest and pay to the Premium Mechanical Divestiture Relevant 
Personnel (or to Acquirer for payment to the employee) on a prorated 
basis any bonuses, incentives, other salary, benefits or other 
compensation fully or partially accrued at the time of the transfer of 
the employee to Acquirer; vest any unvested pension and other equity 
rights; and provide all other benefits that those Premium Mechanical 
Divestiture Relevant Personnel otherwise would have been provided had 
the Premium Mechanical Divestiture Relevant Personnel continued 
employment with ASSA ABLOY, including any retention bonuses or 
payments. ASSA ABLOY may maintain reasonable restrictions on disclosure 
by Premium Mechanical Divestiture Relevant Personnel of ASSA ABLOY's 
proprietary non-public information that is unrelated to the Premium 
Mechanical Divestiture Assets and not otherwise required to be 
disclosed by this Final Judgment.
    6. For a period of 180 calendar days from the Divestiture Date, 
ASSA ABLOY may not solicit to rehire any Premium Mechanical Divestiture 
Relevant Personnel who were hired by Acquirer within 90 calendar days 
of the Divestiture Date unless (a) an individual is terminated or laid 
off by Acquirer or (b) Acquirer agrees in writing that ASSA ABLOY may 
solicit to rehire that individual. Nothing in this Paragraph V.G.6. 
prohibits ASSA ABLOY from advertising employment openings using general 
solicitations or advertisements and rehiring Premium Mechanical 
Divestiture Relevant Personnel who apply for an employment opening 
through a general solicitation or advertisement.
    H. At the option of the Acquirer, ASSA ABLOY must warrant to 
Acquirer that (1) the Premium Mechanical Divestiture Assets will be 
operational in all material respects and without material defect on the 
date of their transfer to Acquirer; (2) there are no material defects 
in the environmental, zoning, or other permits relating to the 
operation of the Premium Mechanical Divestiture Assets; and (3) ASSA 
ABLOY has disclosed all material encumbrances on any part of the 
Premium Mechanical Divestiture Assets, including on intangible 
property. Following the sale of the Premium Mechanical Divestiture 
Assets, ASSA ABLOY must not undertake, directly or indirectly, 
challenges to the environmental, zoning, or other permits relating to 
the operation of the Premium Mechanical Divestiture Assets.
    I. At the option of the Acquirer, ASSA ABLOY must use best efforts 
to assist Acquirer to obtain all necessary licenses, registrations, and 
permits to operate the Premium Mechanical Divestiture Business. Until 
Acquirer obtains the necessary licenses, registrations, and permits, 
ASSA ABLOY must provide Acquirer with the benefit of ASSA ABLOY's 
licenses, registrations, and permits to the full extent permissible by 
law.
    J. At the option of Acquirer, and subject to approval by the United 
States in its sole discretion, on or before the Divestiture Date, ASSA 
ABLOY must enter into a supply contract or contracts for all products 
necessary to operate the Premium Mechanical Divestiture Business for a 
period of up to 12 months, on terms and conditions reasonably related 
to market conditions for the provision of such products, as agreed to 
by Acquirer.
    K. Any amendment to or modification of any provision of any such 
supply contract is subject to approval by the United States, in its 
sole discretion. The United States, in its sole discretion, may approve 
up to two extensions of any supply contract for a period of 12 months 
each. Any supply contract extension will be on terms and conditions 
reasonably related to market conditions for the provision of such 
products, as agreed to by Acquirer. If Acquirer seeks an extension of 
the term of any supply contract, ASSA ABLOY must notify the United 
States in writing at least 30 calendar days prior to the date the 
supply contract expires. Acquirer may terminate a supply contract, or 
any portion of a supply contract, without cost or penalty, other than 
payment of any amounts due thereunder, upon 15 calendar days' written 
notice. The employees of ASSA ABLOY tasked with servicing any supply 
contracts must not share any competitively sensitive information of 
Acquirer with any other employee of ASSA ABLOY.
    L. At the option of Acquirer, and subject to approval by the United 
States in its sole discretion, on or before the Divestiture Date, ASSA 
ABLOY must enter into a contract to provide transition services to 
cover all services necessary to operate the Premium Mechanical 
Divestiture Business, including services for back office, human 
resources, accounting, employee health and safety, and information 
technology services and support for a period of up to 12 months on 
terms and conditions reasonably related to market conditions for the 
provision of the transition services, as agreed to by Acquirer.
    M. Any amendment to or modification of any provision of a contract 
to provide transition services is subject to approval by the United 
States, in its sole discretion. The United States, in its sole 
discretion, may approve one or more extensions of any contract for 
transition services, for a total of up to an additional 12 months. Any 
contract extension will be on terms and conditions reasonably related 
to market conditions for the provision of such services, as agreed to 
by Acquirer. If Acquirer seeks an extension of the term of any contract 
for transition services, ASSA ABLOY must notify the United States in 
writing at least 30 calendar days prior to the date the contract 
expires. Acquirer may terminate a contract for transition services, or 
any portion of a contract for transition services, without cost or 
penalty, other than payment of any amounts due thereunder, at any time 
upon 15 calendar days' written notice. The employees of ASSA ABLOY 
tasked with providing transition services must not share any 
competitively sensitive information of Acquirer with any other employee 
of ASSA ABLOY.
    N. If any term of an agreement between ASSA ABLOY and Acquirer, 
including an agreement to effectuate the divestiture required by this 
Final Judgment, varies from a term of this Final Judgment including as

[[Page 31022]]

implemented by the Asset Preservation and Stipulation and Order entered 
contemporaneously herewith, to the extent that ASSA ABLOY cannot fully 
comply with both, this Final Judgment as so implemented determines ASSA 
ABLOY's obligations.

VI. Divestiture of Smart Lock Divestiture Assets

    A. ASSA ABLOY is ordered and directed, within 3 calendar days after 
the closing of the Transaction, to divest the Smart Lock Divestiture 
Assets in a manner consistent with this Final Judgment to Acquirer, 
except that, for individual assets subject to Regulatory Approvals, 
ASSA ABLOY is ordered and directed to divest such assets by the later 
of 3 calendar days after the closing of the Transaction or 15 days 
after the relevant Regulatory Approvals have been received. The United 
States, in its sole discretion, may agree to one or more extensions of 
these time periods not to exceed 30 calendar days in total for each 
time period, and ASSA ABLOY must notify the Court of any extensions 
agreed to by the United States.
    B. At the option of Acquirer, for all contracts, agreements, and 
customer relationships (or portions of such contracts, agreements, and 
customer relationships) included in the Smart Lock Divestiture Assets, 
ASSA ABLOY must assign or otherwise transfer all contracts, agreements, 
and customer relationships, to the Acquirer within the deadlines set 
forth in Paragraph VI.A. ASSA ABLOY must not interfere with any 
negotiations between Acquirer and a contracting party.
    C. Subject to Paragraph VI.A, ASSA ABLOY must use best efforts to 
divest the Smart Lock Divestiture Assets as expeditiously as possible. 
ASSA ABLOY must take no action that would jeopardize the completion of 
the divestiture ordered by the Court, including any action to impede 
the permitting, operation, or divestiture of the Smart Lock Divestiture 
Assets. To incentivize ASSA ABLOY to achieve Transfer of Smart Lock 
Foreign Divestiture Assets as expeditiously as possible, after December 
31, 2023, ASSA ABLOY is ordered to pay to the United States $50,120 per 
day until ASSA ABLOY achieves Transfer of Smart Lock Foreign 
Divestiture Assets, provided, however, that such payments will not be 
due if ASSA ABLOY can demonstrate to the United States, after 
consultation with the monitoring trustee, that (1) Transfer of Smart 
Lock Foreign Divestiture Assets was delayed due to a force majeure 
event, or (2) operational control has otherwise been given to the 
Acquirer such that the purposes of the divestiture have been carried 
out. If ASSA ABLOY relies on point (2) of this provision, it shall 
confer with the United States in an effort to reach agreement on 
whether the steps taken carry out the purposes of the divestiture, and 
if the parties are unable to reach agreement, ASSA ABLOY may ask the 
Court to resolve this issue. The United States' agreement to an 
extension pursuant to Paragraph VI.A. will not relieve ASSA ABLOY of 
the requirement to make these payments. If ASSA ABLOY demonstrates to 
the United States that unanticipated material difficulties not due to 
the actions or inaction of ASSA ABLOY have resulted in unavoidable 
delays to achieve Transfer of Smart Lock Foreign Divestiture Assets, 
the United States may, in its sole discretion, agree to forgo some or 
all of the payments.
    D. Unless the United States otherwise consents in writing, 
divestiture pursuant to this Final Judgment must include all Smart Lock 
Divestiture Assets.
    E. In the event ASSA ABLOY is attempting to divest the Divestiture 
Assets to an Acquirer other than Fortune, ASSA ABLOY promptly must make 
known, by usual and customary means, the availability of the 
Divestiture Assets. ASSA ABLOY must inform any person making an inquiry 
relating to a possible purchase of the Divestiture Assets that the 
Divestiture Assets are being divested in accordance with this Final 
Judgment and must provide that person with a copy of this Final 
Judgment. ASSA ABLOY must offer to furnish to all prospective 
Acquirers, subject to customary confidentiality assurances, all 
information and documents relating to the Divestiture Assets that are 
customarily provided in a due diligence process; provided, however, 
that ASSA ABLOY need not provide information or documents subject to 
the attorney-client privilege or work-product doctrine. ASSA ABLOY must 
make all information and documents available to the United States at 
the same time that the information and documents are made available to 
any other person.
    F. At the option of Acquirer, ASSA ABLOY must provide prospective 
Acquirers with (1) access to make inspections of the Smart Lock 
Divestiture Assets; (2) access to all material environmental, zoning, 
and other permitting documents and information relating to the Smart 
Lock Divestiture Assets; and (3) access to all financial, operational, 
or other documents and information relating to the Smart Lock 
Divestiture Assets, in each case, that would customarily be provided as 
part of a due diligence process. ASSA ABLOY also must disclose all 
material encumbrances on any part of the Smart Lock Divestiture Assets, 
including on intangible property.
    G. At the option of Acquirer, ASSA ABLOY must cooperate with and 
assist Acquirer in identifying and, hiring all Smart Lock Divestiture 
Relevant Personnel, including:
    1. Within 10 business days following the receipt of a request by 
Acquirer, ASSA ABLOY must identify all Smart Lock Divestiture Relevant 
Personnel to Acquirer and the United States, including by providing 
organization charts covering all Smart Lock Divestiture Relevant 
Personnel.
    2. Within 10 business days following receipt of a request by 
Acquirer or the United States, ASSA ABLOY must provide to Acquirer and 
the United States additional information relating to Smart Lock 
Divestiture Relevant Personnel, including name, job title, reporting 
relationships, past experience, responsibilities, training and 
educational histories, relevant certifications, and job performance 
evaluations. ASSA ABLOY must also provide Acquirer and the United 
States information relating to current and accrued compensation and 
benefits of Smart Lock Divestiture Relevant Personnel, including most 
recent bonuses paid, aggregate annual compensation, any current target 
or guaranteed bonuses, if any, any retention agreement or incentives, 
and any other payments due, compensation or benefits accrued, or 
promises made to the Smart Lock Divestiture Relevant Personnel. If ASSA 
ABLOY is barred by any applicable law from providing any of this 
information, ASSA ABLOY must provide, within 10 business days following 
receipt of the request, the requested information to the full extent 
permitted by law and also must provide a written explanation to 
Acquirer and the United States of ASSA ABLOY's inability to provide the 
remaining information, including specifically identifying the 
provisions of the applicable laws.
    3. At the request of Acquirer, ASSA ABLOY must promptly make Smart 
Lock Divestiture Relevant Personnel available for private interviews 
with Acquirer during normal business hours at a mutually agreeable 
location.
    4. ASSA ABLOY must not interfere with any effort by Acquirer to 
employ any Smart Lock Divestiture Relevant Personnel. Interference 
includes offering to increase the compensation or improve the benefits 
of Smart Lock Divestiture Relevant Personnel unless

[[Page 31023]]

(a) the offer is part of a company-wide increase in compensation or 
improvement in benefits that was announced prior to September 8, 2021, 
or (b) the offer is approved by the United States in its sole 
discretion. ASSA ABLOY's obligations under this Paragraph VI.G.4. will 
expire 180 calendar days after the Divestiture Date.
    5. For Smart Lock Divestiture Relevant Personnel who elect 
employment with Acquirer within 180 calendar days of the Divestiture 
Date, ASSA ABLOY must waive all non-compete and non-disclosure 
agreements; vest and pay to the Smart Lock Divestiture Relevant 
Personnel (or to Acquirer for payment to the employee) on a prorated 
basis any bonuses, incentives, other salary, benefits or other 
compensation fully or partially accrued at the time of the transfer of 
the employee to Acquirer; vested any unvested pension and other equity 
rights; and provide all other benefits that those Smart Lock 
Divestiture Relevant Personnel otherwise would have been provided had 
the Smart Lock Divestiture Relevant Personnel continued employment with 
ASSA ABLOY, including any retention bonuses or payments. ASSA ABLOY may 
maintain reasonable restrictions on disclosure by Smart Lock 
Divestiture Relevant Personnel of ASSA ABLOY's proprietary non-public 
information that is unrelated to the Smart Lock Divestiture Assets and 
not otherwise required to be disclosed by this Final Judgment.
    6. For a period of 180 calendar days from the Divestiture Date, 
ASSA ABLOY may not solicit to rehire any Smart Lock Divestiture 
Relevant Personnel who were hired by Acquirer within 90 calendar days 
of the Divestiture Date unless (i) an individual is terminated or laid 
off by Acquirer or (ii) Acquirer agrees in writing that ASSA ABLOY may 
solicit to rehire that individual. Nothing in this Paragraph VI.G.6. 
prohibits ASSA ABLOY from advertising employment openings using general 
solicitations or advertisements and rehiring any Smart Lock Divestiture 
Relevant Personnel who apply for an employment opening through a 
general solicitation or advertisement.
    H. At the option of the Acquirer, ASSA ABLOY must warrant to 
Acquirer that (1) the Smart Lock Divestiture Assets will be operational 
in all material respects and without material defect on the date of 
their transfer to Acquirer; (2) there are no material defects in the 
environmental, zoning, or other permits relating to the operation of 
the Smart Lock Divestiture Assets; and (3) ASSA ABLOY has disclosed all 
material encumbrances on any part of the Smart Lock Divestiture Assets, 
including on intangible property. Following the sale of the Smart Lock 
Divestiture Assets, ASSA ABLOY must not undertake, directly or 
indirectly, challenges to the environmental, zoning, or other permits 
relating to the operation of the Smart Lock Divestiture Assets.
    I. At the option of the Acquirer, ASSA ABLOY must use best efforts 
to assist Acquirer to obtain all necessary licenses, registrations, and 
permits to operate the Smart Lock Divestiture Business. Until Acquirer 
obtains the necessary licenses, registrations, and permits, ASSA ABLOY 
must provide Acquirer with the benefit of ASSA ABLOY's licenses, 
registrations, and permits to the full extent permissible by law.
    J. At the option of Acquirer, and subject to approval by the United 
States in its sole discretion, on or before the Divestiture Date, ASSA 
ABLOY must enter into a supply contract or contracts for all products 
necessary to operate the Smart Lock Divestiture Business, including 
nexTouch and Interconnect branded products produced by ASSA ABLOY prior 
to the Divestiture Date, for a period of up to 12 months, on terms and 
conditions reasonably related to market conditions for the provision of 
such products, as agreed to by Acquirer.
    K. Any amendment to or modification of any provision of any such 
supply contract is subject to approval by the United States, in its 
sole discretion. The United States, in its sole discretion, may approve 
up to two extensions of any supply contract of 12 months each. Any 
contract extension will be on terms and conditions reasonably related 
to market conditions for the provision of such products, as agreed to 
by Acquirer. If Acquirer seeks an extension of the term of any supply 
contract, ASSA ABLOY must notify the United States in writing at least 
30 calendar days prior to the date the supply contract expires. 
Acquirer may terminate a supply contract, or any portion of a supply 
contract, without cost or penalty, other than payment of any amounts 
due thereunder, upon 15 calendar days' written notice. The employees of 
ASSA ABLOY tasked with servicing any supply contracts must not share 
any competitively sensitive information of Acquirer with any other 
employee of ASSA ABLOY.
    L. At the option of Acquirer, and subject to approval by the United 
States in its sole discretion, on or before the Divestiture Date, ASSA 
ABLOY must enter into a contract to provide transition services to 
cover (1) all services necessary to operate the Smart Lock Divestiture 
Business, including services for back office, human resources, 
accounting, employee health and safety, and information technology 
services and support, and (2) all services necessary to operate the 
manufacturing facility at Lot A10, Ba Thien II IP, Thien Ke, Binh 
Xuyen, Vinh Phuc, Vietnam, for a period of up to 12 months on terms and 
conditions reasonably related to market conditions for the provision of 
the transition services.
    M. Any amendment to or modification of any provision of a contract 
to provide transition services is subject to approval by the United 
States, in its sole discretion. The United States, in its sole 
discretion, may approve one or more extensions of any contract for 
transition services, for a total of up to 12 additional months, 
provided, however, that any contract extension will be on terms and 
conditions reasonably related to market conditions for the provision of 
such services. If Acquirer seeks an extension of the term of any 
contract for transition services, ASSA ABLOY must notify the United 
States in writing at least 30 calendar days prior to the date the 
contract expires. Acquirer may terminate a contract for transition 
services, or any portion of a contract for transition services, without 
cost or penalty, other than payment of any amounts due thereunder, at 
any time upon 15 calendar days' written notice. The employees of ASSA 
ABLOY tasked with providing transition services must not share any 
competitively sensitive information of Acquirer with any other employee 
of ASSA ABLOY.
    N. ASSA ABLOY will have the right to use the Yale brand name in the 
U.S. and Canada solely for commercial products not sold for Residences 
for a transitional, wind-down period of up to twelve (12) months 
following the Divestiture Date. (For these purposes only, Residences 
does not include commercial products sold in order to fulfill orders in 
connection with the Yale Accentra platform for up to six months 
following the Divestiture Date and Acquirer may elect, with consent of 
the United States, to extend this term for an additional six months.) 
ASSA ABLOY must within 30 days following the Divestiture Date commence 
a brand transition for its Yale branded commercial products in the U.S. 
and Canada, which shall be completed no later than twelve (12) months 
after commencement, in connection with the wind-down described above in 
this Paragraph. In addition, ASSA ABLOY will have the right to use the 
Yale brand name in the U.S. and Canada solely for commercial products 
for a transitional,

[[Page 31024]]

wind-down for a period of up to two (2) years following the Divestiture 
Date with respect to sales of commercial products in connection with 
honoring any specification or quote, in each case issued prior to the 
Divestiture Date.
    For the avoidance of doubt, nothing in this proposed Final Judgment 
limits or prohibits Acquirer's use of any non-Yale brand for any 
purpose.
    O. If any term of an agreement between ASSA ABLOY and Acquirer, 
including an agreement to effectuate the divestiture required by this 
Final Judgment, varies from a term of this Final Judgment including as 
implemented by the Asset Preservation and Stipulation and Order entered 
contemporaneously herewith, to the extent that ASSA ABLOY cannot fully 
comply with both, this Final Judgment as so implemented determines ASSA 
ABLOY's obligations.
    P. At the option of Acquirer, if at any time after the Divestiture 
Date, Acquirer notifies ASSA ABLOY in writing of any patents that (1) 
are owned by ASSA ABLOY as of the Divestiture Date; (2) are not 
licensed or otherwise transferred to Acquirer under Paragraphs 
II.Q.2.vii; and (3) were contemplated by ASSA ABLOY to be used in the 
Smart Lock Divestiture Business prior to the Divestiture Date as set 
forth in the Product Development Roadmap attached to the Stock Purchase 
Agreement, such patents will automatically be deemed licensed to 
Acquirer under Paragraph II.Q.2.vii.
    Q. At the option of Acquirer, for a period of five years following 
the Divestiture Date, Acquirer will have the right to request and 
receive a code base assessment of the Yale Access control system once 
per year to inventory the proprietary libraries comprising the Yale 
Access control system and confirm whether any of the baseline libraries 
are included within ASSA ABLOY's U.S. or Canadian products.
    R. At the option of Acquirer, Acquirer may purchase all of ASSA 
ABLOY's inventory as of the Divestiture Date that is branded Yale in 
the residential mechanical space, subject to the terms and conditions 
of the supply agreement in Paragraph VI.J, but without restriction on 
how or where it is sold to residential or, solely with respect to such 
inventory, Multifamily customers.

VII. Financing

    Defendants may not finance all or any part of Acquirer's purchase 
of all or part of the Divestiture Assets.

VIII. Asset Preservation

    Defendants must take all steps necessary to comply with their 
respective obligations under the Asset Preservation Stipulation and 
Order entered by the Court.

IX. Affidavits

    A. Within 20 calendar days of the entry of the Asset Preservation 
Stipulation and Order in this matter, and every 30 calendar days 
thereafter until the divestitures required by this Final Judgment have 
been completed, ASSA ABLOY must deliver to the United States and the 
monitoring trustee, if one has been appointed, an affidavit, signed by 
each the Chief Financial Officer and General Counsel of its Americas 
division, describing in reasonable detail the fact and manner of ASSA 
ABLOY's compliance with this Final Judgment. The United States, in its 
sole discretion, may approve different signatories for the affidavits.
    B. Each affidavit required by Paragraph IX.A. must include: (1) a 
description of the efforts ASSA ABLOY has taken to complete the sale of 
any of the Divestiture Assets and to provide required information to 
Acquirer; and (2) a description of any limitations placed by ASSA ABLOY 
on information provided to Acquirer. Objection by the United States to 
information provided by ASSA ABLOY to Acquirer must be made within 14 
calendar days of receipt of the affidavit, except that the United 
States may object at any time if the information set forth in the 
affidavit is not true or complete.
    C. ASSA ABLOY must keep all records of any efforts made to divest 
the Divestiture Assets until one year after the Divestiture Date.
    D. Within 20 calendar days of entry of the Asset Preservation 
Stipulation and Order in this matter, ASSA ABLOY must deliver to the 
United States an affidavit, signed by the Chief Financial Officer and 
General Counsel of its America's division, that describes in reasonable 
detail all actions that ASSA ABLOY has taken and all steps that ASSA 
ABLOY has implemented on an ongoing basis to comply with Section VIII 
of this Final Judgment. The United States, in its sole discretion, may 
approve different signatories for the affidavits.
    E. If ASSA ABLOY makes any changes to actions and steps described 
in affidavits provided pursuant to Paragraph IX.D., ASSA ABLOY must, 
within 15 calendar days after any change is implemented, deliver to the 
United States an affidavit describing those changes.
    F. ASSA ABLOY must keep all records of any efforts made to comply 
with Section VIII until one year after the Divestiture Date.

X. Appointment of Monitoring Trustee

    A. Upon application of the United States, which Defendants may not 
oppose, the Court will appoint a monitoring trustee selected by the 
United States, after consultation with Defendants, and approved by the 
Court.
    B. The monitoring trustee will have the power and authority to 
monitor Defendants' compliance with the terms of this Final Judgment 
and the Asset Preservation Stipulation and Order entered by the Court 
and will have other powers as the Court deems appropriate. The 
monitoring trustee will have no responsibility or obligation for 
operation of the Divestiture Assets.
    C. Defendants may not object to actions taken by the monitoring 
trustee in fulfillment of the monitoring trustee's responsibilities 
under any Order of the Court on any ground other than malfeasance by 
the monitoring trustee. Objections by Defendants must be conveyed in 
writing to the United States and the monitoring trustee within 10 
calendar days of the monitoring trustee's action that gives rise to 
Defendants' objection.
    D. The monitoring trustee will serve at the cost and expense of 
ASSA ABLOY pursuant to a written agreement, on terms and conditions, 
including confidentiality requirements and conflict of interest 
certifications, approved by the United States in its sole discretion.
    E. The monitoring trustee may hire, at the cost and expense of ASSA 
ABLOY, any agents and consultants, including investment bankers, 
attorneys, and accountants, that are reasonably necessary in the 
monitoring trustee's judgment to assist with the monitoring trustee's 
duties. These agents or consultants will be solely accountable to the 
monitoring trustee and will serve on terms and conditions, including 
confidentiality requirements and conflict-of-interest certifications, 
approved by the United States in its sole discretion.
    F. The compensation of the monitoring trustee and agents or 
consultants retained by the monitoring trustee must be on reasonable 
and customary terms commensurate with the individuals' experience and 
responsibilities. If the monitoring trustee and ASSA ABLOY are unable 
to reach agreement on the monitoring trustee's compensation or other 
terms and conditions of engagement within 14 calendar days of the 
appointment of the monitoring trustee, the United States, in its sole 
discretion, may take appropriate action, including by making a 
recommendation to the Court. Within

[[Page 31025]]

three business days of hiring any agents or consultants, the monitoring 
trustee must provide written notice of the hiring and the rate of 
compensation to Defendants and the United States.
    G. The monitoring trustee must account for all costs and expenses 
incurred.
    H. ASSA ABLOY and Acquirer must use best efforts to assist the 
monitoring trustee to monitor Defendants' compliance with their 
obligations under this Final Judgment and the Asset Preservation 
Stipulation and Order. Subject to reasonable protection for trade 
secrets, other confidential research, development, or commercial 
information, or any applicable privileges, ASSA ABLOY and Acquirer must 
provide the monitoring trustee and agents or consultants retained by 
the monitoring trustee with full and complete access to all personnel, 
books, records, and facilities of the Divestiture Assets. ASSA ABLOY 
and Acquirer may not take any action to interfere with or to impede 
accomplishment of the monitoring trustee's responsibilities.
    I. The monitoring trustee must investigate and report on ASSA 
ABLOY's compliance with this Final Judgment, the Asset Preservation 
Stipulation and Order, and any inter-party agreements between Acquirer 
and ASSA ABLOY relating to the divestiture, including by investigating 
and reporting pursuant to Section IV of this Final Judgment and 
regarding compliance with the terms of this Final Judgment. During any 
period while any transition services or supply agreements entered into 
pursuant to Sections V and VI of this Final Judgment are in effect, or 
any period while a proceeding may be reopened by the United States 
pursuant to Section IV of this Final Judgment, the monitoring trustee 
must provide periodic reports to the United States setting forth 
Defendants' efforts to comply with their obligations under this Final 
Judgment and under the Asset Preservation Stipulation and Order. The 
United States, in its sole discretion, will set the frequency of the 
monitoring trustee's reports.
    J. The monitoring trustee will serve until the later of (1) the 
expiration of the terms of all transition services agreements or supply 
agreements entered pursuant to Sections V and VI of this Final Judgment 
or (2) the conclusion of any proceeding reopened by the United States 
pursuant to Section IV of this Final Judgment, or, if no such 
proceeding is reopened prior to the date that is five (5) years from 
entry of this Final Judgment, five (5) years from entry of this Final 
Judgment; unless the United States, in its sole discretion, determines 
a different period is appropriate.
    K. If the United States determines that the monitoring trustee is 
not acting diligently or in a reasonably cost-effective manner, the 
United States may recommend that the Court appoint a substitute.

XI. Dispute Resolution

    A. ASSA ABLOY and Acquirer will each have the right to initiate an 
expedited dispute resolution process in the event of a dispute over the 
extent of either party's rights under this Final Judgment, including 
whether an application is Multifamily, commercial, or residential and 
whether the intellectual property rights set forth in Paragraph 
II.Q.2.vii have been transferred. In any such dispute over whether an 
application is Multifamily, commercial or residential, ASSA ABLOY will 
bear the burden of proof and all ambiguities in the agreement with 
respect to whether an application is Multifamily, commercial or 
residential will be construed against it; the losing party will pay all 
expenses. With respect to a dispute under any supply agreement pursuant 
to Paragraphs V.J, V.K, VI.J, or VI.K of this Final Judgment and until 
the expiration of the Final Judgment, ASSA ABLOY and Acquirer will each 
have the right to initiate a one-day binding arbitration to be held 
within 15 days of notice by either party.
    B. This Section XI will not be interpreted to limit or impact the 
monitoring trustee's responsibilities under Section X.

XII. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment or of related orders such as the Asset Preservation 
Stipulation and Order or of determining whether this Final Judgment 
should be modified or vacated, upon written request of an authorized 
representative of the Assistant Attorney General for the Antitrust 
Division, and reasonable notice to Defendants, Defendants must permit, 
from time to time and subject to legally recognized privileges, 
authorized representatives, including agents retained by the United 
States:
    1. to have access during Defendants' office hours to inspect and 
copy, or at the option of the United States, to require Defendants to 
provide electronic copies of all books, ledgers, accounts, records, 
data, and documents in the possession, custody, or control of 
Defendants relating to any matters contained in this Final Judgment; 
and
    2. to interview, either informally or on the record, Defendants' 
officers, employees, or agents, who may have their individual counsel 
present, relating to any matters contained in this Final Judgment. The 
interviews must be subject to the reasonable convenience of the 
interviewee and without restraint or interference by Defendants.
    B. Upon the written request of an authorized representative of the 
Assistant Attorney General for the Antitrust Division, Defendants must 
submit written reports or respond to written interrogatories, under 
oath if requested, relating to any matters contained in this Final 
Judgment.

XIII. No Reacquisition

    ASSA ABLOY may not reacquire any part of or any interest in the 
Divestiture Assets during the term of this Final Judgment without prior 
authorization of the United States.

XIV. Public Disclosure

    A. No information or documents obtained pursuant to any provision 
of this Final Judgment may be divulged by the United States to any 
person other than an authorized representative of the executive branch 
of the United States, except in the course of legal proceedings to 
which the United States is a party, including grand-jury proceedings, 
for the purpose of evaluating the proposed Acquirer or securing 
compliance with this Final Judgment, or as otherwise required by law.
    B. In the event of a request by a third party, pursuant to the 
Freedom of Information Act, 5 U.S.C. 552, for disclosure of information 
obtained pursuant to any provision of this Final Judgment, the 
Antitrust Division will act in accordance with that statute, and the 
Department of Justice regulations at 28 CFR part 16, including the 
provision on confidential commercial information, at 28 CFR 16.7. 
Defendants submitting information to the Antitrust Division should 
designate the confidential commercial information portions of all 
applicable documents and information under 28 CFR 16.7. Designations of 
confidentiality expire 10 years after submission, ``unless the 
submitter requests and provides justification for a longer designation 
period.'' See 28 CFR 16.7(b).
    C. If at the time that Defendants furnish information or documents 
to the United States pursuant to any provision of this Final Judgment, 
Defendants represent and identify in writing information or documents 
for which a claim of protection may be asserted under Rule 26(c)(1)(G) 
of the Federal Rules of Civil Procedure, and

[[Page 31026]]

Defendants mark each pertinent page of such material, ``Subject to 
claim of protection under Rule 26(c)(1)(G) of the Federal Rules of 
Civil Procedure,'' the United States must give Defendants 10 calendar 
days' notice before divulging the material in any legal proceeding 
(other than a grand jury proceeding).

XV. Retention of Jurisdiction

    The Court retains jurisdiction to enable any party to this Final 
Judgment to apply to the Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XVI. Enforcement of Final Judgment

    A. The United States retains and reserves all rights to enforce the 
provisions of this Final Judgment, including the right to seek an order 
of contempt from the Court. Defendants agree that in a civil contempt 
action, a motion to show cause, or a similar action brought by the 
United States relating to an alleged violation of this Final Judgment, 
the United States may establish a violation of this Final Judgment and 
the appropriateness of a remedy therefor by a preponderance of the 
evidence, and Defendants waive any argument that a different standard 
of proof should apply.
    B. Defendants agree that they may be held in contempt of, and that 
the Court may enforce, any provision of this Final Judgment that, as 
interpreted by the Court applying ordinary tools of interpretation, is 
stated specifically and in reasonable detail, whether or not it is 
clear and unambiguous on its face. In any such interpretation, the 
terms of this Final Judgment should not be construed against either 
party as the drafter.
    C. In an enforcement proceeding in which the Court finds that 
Defendants have violated this Final Judgment, the United States may 
apply to the Court for an extension of this Final Judgment, together 
with other relief that may be appropriate. In connection with a 
successful effort by the United States to enforce this Final Judgment 
against a Defendant, whether litigated or resolved before litigation, 
that Defendant agrees to reimburse the United States for the fees and 
expenses of its attorneys, as well as all other costs including 
experts' fees, incurred in connection with that effort to enforce this 
Final Judgment, including in the investigation of the potential 
violation.
    D. For a period of four years following the expiration of this 
Final Judgment, if the United States has evidence that a Defendant 
violated this Final Judgment before it expired, the United States may 
file an action against that Defendant in this Court requesting that the 
Court order: (1) Defendant to comply with the terms of this Final 
Judgment for an additional term of at least four years following the 
filing of the enforcement action; (2) all appropriate contempt 
remedies; (3) additional relief needed to ensure the Defendant complies 
with the terms of this Final Judgment; and (4) fees or expenses as 
called for by this Section XVI.

XVII. Expiration of Final Judgment

    Unless the Court grants an extension, this Final Judgment will 
expire 10 years from the date of its entry, except that after five 
years from the date of its entry, this Final Judgment may be terminated 
upon notice by the United States to the Court and Defendants that the 
divestitures have been completed and continuation of this Final 
Judgment is no longer necessary or in the public interest.

XVIII. Public Interest Determination

    Entry of this Final Judgment is in the public interest. The parties 
have complied with the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16, including by making available to the 
public copies of this Final Judgment and the Competitive Impact 
Statement, public comments thereon, and any response to comments by the 
United States. Based upon the record before the Court, which includes 
the Competitive Impact Statement and, if applicable, any comments and 
response to comments filed with the Court, entry of this Final Judgment 
is in the public interest.

Date:------------------------------------------------------------------

[Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16]

-----------------------------------------------------------------------
United States District Judge

United States District Court for the District of Columbia

    UNITED STATES OF AMERICA, Plaintiff, v. ASSA ABLOY AB, et al., 
Defendants.

 Civil No. 1:22-cv-02791-ACR

Competitive Impact Statement

    In accordance with the Antitrust Procedures and Penalties Act, 15 
U.S.C. 16(b)-(h) (the ``APPA'' or ``Tunney Act''), the United States of 
America files this Competitive Impact Statement related to the proposed 
Final Judgment filed in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    On September 8, 2021, Defendants ASSA ABLOY AB (``ASSA ABLOY'') and 
Spectrum Brands Holding, Inc. (``Spectrum'') signed an asset and stock 
purchase agreement under which ASSA ABLOY would acquire Spectrum's 
Hardware and Home Improvement division for approximately $4.3 billion. 
The United States filed a civil antitrust Complaint on September 15, 
2022, seeking to enjoin the proposed acquisition. The Complaint alleges 
that the likely effect of this acquisition may be to substantially 
lessen competition for the premium mechanical door hardware and smart 
locks markets in the United States in violation of Section 7 of the 
Clayton Act, 15 U.S.C. 18.
    The parties vigorously litigated this case for more than seven 
months and, with the assistance of a mediator, have now reached a 
proposed settlement. The United States files this Competitive Impact 
Statement simultaneously with a proposed Final Judgment and an Asset 
Preservation Stipulation and Order (``Stipulation and Order'').
    Under the proposed Final Judgment, which is explained more fully 
below, ASSA ABLOY is required to make certain divestitures to Fortune 
Brands Innovations, Inc. (``Fortune'') or to another entity approved by 
the United States in its sole discretion. The proposed Final Judgment 
provides for financial penalties if ASSA ABLOY does not complete the 
divestiture of assets located outside the United States within a 
specified period of time. It also provides for appointment of a 
monitoring trustee to monitor Defendants' compliance with the terms of 
the proposed Final Judgment, the Stipulation and Order, and any inter-
party agreements between ASSA ABLOY and the acquirer that relate to the 
divestiture. The monitoring trustee will also monitor the acquirer's 
success in competing in the market for residential smart locks with the 
assets divested.
    Under the terms of the Stipulation and Order, ASSA ABLOY must take 
certain steps to operate, preserve, and maintain the full economic 
viability, marketability, and competitiveness of the divested assets 
until the divestitures ordered in the proposed Final Judgment are 
complete. The Stipulation and Order requires Defendants to abide by and 
comply with the provisions of the proposed Final Judgment until it is 
entered by the Court.
    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the

[[Page 31027]]

proposed Final Judgment will terminate this action, except that the 
Court will retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. Description of Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

    Complete descriptions of the Defendants and their proposed 
acquisition are found in the Complaint, filed September 15, 2022. (Dkt. 
No. 1). ASSA ABLOY is a globally integrated conglomerate that 
manufactures and sells a wide array of access solutions products--
including residential and commercial door hardware, doors, and 
electronic access systems. In the United States, ASSA ABLOY competes in 
the market for premium mechanical door hardware using the Emtek and 
Schaub brands and in the market for smart locks using the August and 
Yale brands. ASSA ABLOY had about $3.5 billion in sales in the United 
States in 2021.
    Spectrum's Hardware and Home Improvement division is the largest 
residential door hardware producer in the United States. Notably, it 
competes using the widely known Kwikset brand as well as the Baldwin 
Estate, Baldwin Reserve, and Baldwin Prestige brands. It had about $1.4 
billion in sales in the United States in 2021.
    On September 8, 2021, ASSA ABLOY agreed to buy Spectrum's Hardware 
and Home Improvement division for approximately $4.3 billion.

B. The Competitive Effects of the Transaction

    Complete descriptions of the potential effects on competition in 
the markets for both premium mechanical door hardware and for smart 
locks are found in the Complaint. (Dkt. No. 1). In the markets for 
smart locks and premium mechanical door hardware, ASSA ABLOY and 
Spectrum are close competitors and share enormous market shares that 
render the merger presumptively anticompetitive.
    As alleged in the Complaint, the proposed transaction would have 
threatened competition in at least two separate antitrust markets in 
the United States: (1) premium mechanical door hardware and (2) smart 
locks, which are wirelessly connected digital door locks. In the 
premium mechanical door hardware market, the proposed transaction would 
be a merger to near-monopoly, where the merged firm would account for 
around 65% of sales, becoming more than ten times larger than its next-
largest competitor. In the market for smart locks, the proposed 
transaction would cut off competition in a fast-growing door hardware 
segment, leaving the merged firm with more than a 50% share and only 
one remaining meaningful competitor--an effective duopoly. In both of 
these markets, the proposed transaction easily surpasses the thresholds 
that trigger a presumptive violation of the Clayton Act.
    Historically, competition between Defendants to sell residential 
door hardware to showrooms, home improvement stores, builders, online 
retailers, home security companies, and other customers has generated 
lower prices, higher quality, exciting innovations, and superior 
customer service. The head-to-head competition between the Defendants 
is significant. They regularly reduce price to win business from each 
other and respond to each other's competitive initiatives with 
innovation and better offerings. For example, one of Spectrum's top 
``strategic imperatives'' in 2021 was to invest heavily in better 
service and pricing for its premium mechanical door hardware brands 
(Baldwin Estate and Baldwin Reserve) in order to recapture market share 
from its ``chief competitor,'' ASSA ABLOY's Emtek brand. Similarly, 
ASSA ABLOY has recently invested in a new lineup of smart locks 
designed to ``take [a half] bay'' (i.e., take shelf space) from 
Spectrum's Kwikset brand and its other large competitor in major home 
improvement stores. The proposed transaction would eliminate those 
benefits altogether.

III. Alternatives to the Proposed Final Judgment and Summary of 
Settlement Rationale

    As an alternative to the proposed Final Judgment, the United States 
considered either (1) proceeding to verdict and continuing to request 
the Court to enter a permanent injunction blocking the proposed merger 
between ASSA ABLOY and Spectrum or (2) accepting earlier divestitures 
that Defendants proposed.
    The United States identified several concerns with the divestiture 
proposals. The divestiture agreement restricted the rights of Fortune 
to use the Yale brand name to sell products outside of residential 
smart locks, including important products in the multifamily segment. 
This would have limited Fortune's incentive to invest in the Yale brand 
and curtailed its ability to use that brand to compete for customers 
who sought Yale locks that could be used in all aspects of residential 
and multifamily buildings. The supply agreement between ASSA ABLOY and 
Fortune lacked specific enforcement terms and risked Fortune's ability 
to supply an important customer base. While the Emtek and Schaub assets 
ASSA ABLOY proposed to divest represented mostly a separate, ongoing 
business unit, the disparity between the potential competitive 
significance of those assets and the Yale branded residential smart 
lock assets would have increased incentives for tacit coordination 
between the post-merger ASSA ABLOY and Fortune. Finally, the 
divestiture, as initially proposed, included a lengthy period of 
transition and entanglement in which ASSA ABLOY and Fortune would have 
shared--for an indefinite period--an important smart locks 
manufacturing facility in Vietnam.
    Under the guidance of a mediator, a settlement was reached, 
ultimately culminating in the proposed Final Judgment described below.
    This proposed Final Judgment provides greater relief than earlier 
offers by the Defendants. In particular, the proposed Final Judgment:
     Expands the scope of the Yale-related intellectual 
property to be divested to Fortune or an alternative acquirer. This 
includes the unrestricted right to use the Yale brand in the United 
States and Canada for any smart locks used in single- and multi-family 
residences, the right to use the Yale brand for mechanical residential 
products, as well as an irrevocable license to the Yale Access software 
platform for associated end uses in the United States and Canada. It 
also includes rights to the Interconnect and nexTouch brands, which are 
important to the multifamily segment. These provisions will improve 
Fortune's or an alternative acquirer's incentives to invest in the 
divested brands and preserves the acquirer's ability to use those 
brands to compete against ASSA ABLOY in the future, including in ways 
and with products not contemplated today.
     Mandates a shortened transition period for entanglements 
between ASSA ABLOY and the acquirer and subjects ASSA ABLOY to 
significant daily penalties if it fails to transfer certain smart lock 
assets located in Vietnam by December 31, 2023.
     Appoints a monitoring trustee to (1) ensure ASSA ABLOY's 
compliance with the terms of the proposed Final Judgment, the 
Stipulation and Order, and any inter-party agreements between ASSA 
ABLOY and the acquirer relating to the divestiture and (2) determine, 
for a period of up to five years after the entry of the Final Judgment, 
whether

[[Page 31028]]

Fortune or an alternative acquirer has replicated the competitive 
intensity in the residential smart locks business that was lost as a 
result of ASSA ABLOY's acquisition of Spectrum's Hardware and Home 
Improvement division and, if not, whether the diminishment in 
competitive intensity is in material part due to limitations on the 
acquirer's right to use the Yale brand name or trademarks in the United 
States and Canada.
     If the monitoring trustee makes such a determination, the 
monitoring trustee may, after consultation with the United States, 
provide a written report of that determination to the United States, 
after which the United States may seek leave of the Court to reopen 
this proceeding and seek divestiture of additional brand or trademark 
rights.
    The United States does not contend that the relief obtained by the 
proposed Final Judgment will fully eliminate the risks to competition 
alleged in the Complaint. The United States respectfully submits that 
only a complete injunction preventing the original proposed merger 
would have eliminated those risks. Alternatively, complete divestitures 
of all relevant standalone business units necessary to fully compete 
may have diminished those risks significantly. Based on the totality of 
circumstances and risks associated with this litigation, however, the 
United States has agreed to the proposed Final Judgment, which includes 
additional provisions and protections to address some of the concerns 
identified above. The United States believes the Court will conclude 
the proposed Final Judgment is in the public interest under the Tunney 
Act.

IV. Explanation of the Proposed Final Judgment

    The proposed Final Judgment includes the following terms:

A. Divested Assets

    The proposed Final Judgment requires ASSA ABLOY to divest to 
Fortune, or to another acquirer approved by the United States in its 
sole discretion, what the proposed Final Judgment defines as the 
``Premium Mechanical Divestiture Assets,'' which include, at the option 
of the acquirer, all of ASSA ABLOY's rights, titles, and interests in 
and to all property and assets, tangible and intangible, wherever 
located, relating to or used in connection with the ``Premium 
Mechanical Divestiture Business,'' which consists of ASSA ABLOY's Emtek 
and Schaub branded businesses. For example, as further detailed in the 
proposed Final Judgment, the Premium Mechanical Divestiture Assets 
include a facility in California, as well as machinery, equipment, 
contracts, licenses, permits, and intellectual property. This 
intellectual property includes the right to exclusive and unlimited 
worldwide use, in all sales channels, of the Emtek brand names and 
trademarks and Schaub brand name and trademarks. Pursuant to Paragraph 
V.D of the proposed Final Judgment, unless the United States otherwise 
consents in writing, the divestiture must include the entire Premium 
Mechanical Divestiture Assets.
    The proposed Final Judgment also requires ASSA ABLOY to divest to 
Fortune, or to another acquirer approved by the United States in its 
sole discretion, the ``Smart Lock Divestiture Assets,'' which includes, 
at the option of the acquirer, all of ASSA ABLOY's rights, titles, and 
interests in and to all property and assets, tangible and intangible, 
wherever located, relating to or used in connection with the ``Smart 
Lock Divestiture Business.'' As defined in the proposed Final Judgment, 
the Smart Lock Divestiture Business consists of (1) the August branded 
business and (2) the Yale branded multifamily and residential smart 
lock businesses in the United States and Canada (including Yale Real 
Living), but does not include (i) the Yale branded commercial business 
anywhere in the world or (ii) all other Yale branded businesses 
anywhere in the world. As further detailed in the proposed Final 
Judgment, the Smart Lock Divestiture Assets include machinery, 
equipment, contracts, licenses, permits, and intellectual property. 
This intellectual property includes the right to the Yale brand name 
and trademarks for uses in the United States and Canada, as well as a 
license to the Yale Access software platform for use in the United 
States in Canada. The Smart Lock Divestiture Assets also include a 
facility in Vietnam. Pursuant to Paragraph VI.D of the proposed Final 
Judgment, unless the United States consents in writing, the divestiture 
must include all Smart Lock Divestiture Assets.
    Paragraph VI.P of the proposed Final Judgment further provides 
that, if at any time after the divestiture of the Smart Lock 
Divestiture assets, the acquirer notifies ASSA ABLOY in writing of any 
patents that (1) are owned by ASSA ABLOY as of the divestiture date, 
(2) are not licensed or otherwise transferred to the acquirer pursuant 
to the proposed Final Judgment, and (3) were contemplated by ASSA ABLOY 
to be used in the Smart Lock Divestiture Business prior to the 
divestiture date, as set forth in the Product Development Roadmap 
attached to the Stock Purchase Agreement, then those patents will 
automatically be deemed as licensed to the acquirer under the terms of 
the proposed Final Judgment.
    Paragraph VI.Q of the proposed Final Judgment provides that, for 
five years after the divestiture of the Smart Lock Divestiture Assets, 
the acquirer has the right to annually request and receive a code base 
assessment of the Yale Access control system to inventory the 
proprietary libraries comprising the Yale Access control system and 
confirm whether any of the baseline libraries are included within ASSA 
ABLOY's United States or Canadian products.
    Paragraph VI.R of the proposed Final Judgment provides the acquirer 
the option to purchase all of ASSA ABLOY's Yale branded inventory, as 
of the divestiture date, relating to the residential mechanical space. 
This purchase is subject to the terms of any supply agreement(s) 
entered into pursuant to the proposed Final Judgment, but does not 
restrict the acquirer on where or how it sells such inventory to 
residential or multifamily customers.
    Paragraph VI.N of the proposed Final Judgment provides ASSA ABLOY 
the right to use the Yale brand name in the United States and Canada. 
It provides for a twelve-month wind-down period during which ASSA ABLOY 
can continue to use the Yale brand name for commercial products, 
including in some limited circumstances associated with the Yale 
Accentra platform and sold to multifamily residences. In addition, ASSA 
ABLOY is permitted to continue to use the Yale brand name for 
commercial products to fulfill specifications or quotes issued prior to 
the divestiture.

B. Relevant Personnel

    The proposed Final Judgment contains provisions intended to 
facilitate the acquirer's efforts to hire certain employees. 
Specifically, Paragraphs V.G and VI.G of the proposed Final Judgment 
require ASSA ABLOY, at the option of the acquirer, to provide the 
acquirer and the United States with organization charts and information 
relating to these employees and to make them available for interviews. 
It also provides that ASSA ABLOY must not interfere with any 
negotiations by the acquirer to hire these employees. In addition, for 
employees who elect employment with the acquirer, ASSA ABLOY must waive 
all non-compete and non-disclosure agreements, vest all unvested 
pension and other equity rights, provide any pay pro rata, provide all 
compensation and

[[Page 31029]]

benefits that those employees have fully or partially accrued, and 
provide all other benefits that the employees would generally be 
provided had those employees continued employment with ASSA ABLOY, 
including but not limited to any retention bonuses or payments.

C. Transitional Services Agreement

    The proposed Final Judgment requires ASSA ABLOY to provide 
transition services to maintain the viability and competitiveness of 
the Premium Mechanical Divestiture Business and the Smart Lock 
Divestiture Business in the period following the divestitures. 
Specifically, Paragraphs V.L and VI.L of the proposed Final Judgment 
require ASSA ABLOY, at the acquirer's option, to enter into transition 
services agreements for all services necessary to operate the Premium 
Mechanical Divestiture Business and Smart Lock Divestiture Business--
e.g., back office, human resources, accounting, employee health and 
safety, and information technology services and support--for a period 
of up to 12 months. Paragraph VI.L of the proposed Final Judgment also 
requires that the applicable transition services agreement cover all 
services necessary to operate the manufacturing facility located at Lot 
A10, Ba Thien II IP, Thien Ke, Binh Xuyen, Vinh Phuc, Vietnam for a 
period of up to 12 months. The acquirer may terminate the transition 
services agreements, or any portion of them, without cost or penalty, 
other than payment of any amounts due thereunder, at any time upon 15 
calendar days' written notice. The United States, in its sole 
discretion, may approve one or more extensions of any transition 
services agreement for a total of up to an additional 12 months and any 
amendments to or modifications of any provisions of a transition 
services agreement are subject to approval by the United States, in its 
sole discretion. Employees of ASSA ABLOY tasked with supporting these 
transition services agreements must not share any of Fortune's or 
another acquirer's competitively sensitive information with any other 
employee of ASSA ABLOY.

D. Supply Agreements

    Paragraphs V.J and VI.J of the proposed Final Judgment require ASSA 
ABLOY, at the acquirer's option, to enter into a supply contract or 
contracts for all products necessary to operate the Premium Mechanical 
Divestiture Business and the Smart Lock Divestiture Business, including 
nexTouch and Interconnect branded products produced by ASSA ABLOY prior 
to the divestiture date, for a period of up to twelve months. The 
acquirer may terminate a supply contract, or any portion of it, without 
cost or penalty, other than payment of any amounts due thereunder, at 
any time upon 15 calendar days' written notice. The United States, in 
its sole discretion, may approve up to two extensions of any supply 
contract for a period of 12 months each, and any amendments to or 
modifications of any provisions of a supply contract are subject to 
approval by the United States, in its sole discretion. This will help 
to ensure that Fortune will not face disruption to its supply during an 
important transitional period. Employees of ASSA ABLOY tasked with 
supporting these supply contracts must not share any of Fortune's or 
another acquirer's competitively sensitive information with any other 
employee of ASSA ABLOY.

E. Monitoring Trustee

    The proposed Final Judgment provides for the appointment of a 
monitoring trustee to examine Defendants' compliance with the terms of 
the proposed Final Judgment, the Stipulation and Order, and any 
agreements between ASSA ABLOY and the acquirer relating to the 
divestiture. The monitoring trustee will also monitor Fortune's 
competitive intensity in the residential smart locks market relative to 
ASSA ABLOY's pre-divestiture competitive intensity and, for a period of 
up to five years after entry of the Final Judgment, may report to the 
United States if that competitive intensity has diminished in material 
part due to limitations on the acquirer's right to use the Yale brand 
name or trademarks in the United States and Canada. Upon receipt of 
such a report, the United States, in its sole discretion, will have the 
ability to seek leave of the Court to reopen this proceeding to seek 
additional relief.
    The monitoring trustee will not have any responsibility or 
obligation for the operation of the Premium Mechanical Divestiture 
Assets or Smart Lock Divesture Assets. The monitoring trustee will 
serve at Defendants' expense, on such terms and conditions as the 
United States approves, in its sole discretion, and Defendants must 
assist the monitoring trustee in fulfilling his or her obligations. The 
monitoring trustee will provide periodic reports to the United States 
and will serve until the later of (1) the expiration of all transition 
services agreements or supply agreements entered pursuant to the 
proposed Final Judgment or (2) conclusion of any reopening of this 
proceeding by the United States, as provided for by the proposed Final 
Judgment, or if no such proceeding is reopened within five years of the 
entry of the Final Judgment, five years from the entry of the Final 
Judgment. The United States, in its sole discretion, may determine a 
different period of time is appropriate for the monitor's term.

F. Penalty for Noncompliance

    The proposed Final Judgment requires that ASSA ABLOY use best 
efforts to complete the divestiture of Smart Lock Divestiture Assets as 
quickly as possible, including the transfer of overseas assets in 
Vietnam, to the acquirer. To incentivize ASSA ABLOY to effectuate this 
transfer as expeditiously as possible, after December 31, 2023, the 
proposed Final Judgment requires ASSA ABLOY to pay to the United States 
$50,120 per day until the overseas assets have been transferred. Such 
payments will not be due, however, if ASSA ABLOY can demonstrate to the 
United States, after consultation with the monitoring trustee, that (1) 
the transfer was delayed due to a force majeure event or (2) 
operational control of the overseas assets has otherwise been given to 
the acquirer. In the event ASSA ABLOY relies on such operational 
control provision, ASSA ABLOY shall confer with the United States to 
reach agreement on this, and if the parties are unable to reach an 
agreement, ASSA ABLOY may ask the Court to resolve this issue.

G. Dispute Resolution

    Paragraph XI.A of the proposed Final Judgment provides that ASSA 
ABLOY and the acquirer will each have the right to initiate an 
expedited dispute resolution process in the event of a dispute over the 
extent of either party's rights under the proposed Final Judgment. This 
provision does not apply to disputes between ASSA ABLOY and the United 
States.

H. Other Provisions

    Paragraphs V.E. and VI.E of the proposed Final Judgment outline 
procedures to follow if ASSA ABLOY attempts to divest the Premium 
Mechanical Divestiture Assets or the Smart Lock Divestiture Assets to 
an acquirer other than Fortune, including what information should be 
made available to prospective acquirers. ASSA ABLOY is required to 
inform any such prospective acquirers that the assets are being 
divested in accordance with the proposed Final Judgment, and

[[Page 31030]]

to provide to any prospective acquirer a copy of the proposed Final 
Judgment.
    The proposed Final Judgment also contains provisions designed to 
promote compliance with and make enforcement of the Final Judgment as 
effective as possible. Paragraph XVI.A provides that the United States 
retains and reserves all rights to enforce the Final Judgment, 
including the right to seek an order of contempt from the Court. Under 
the terms of this paragraph, Defendants have agreed that in any civil 
contempt action, any motion to show cause, or any similar action 
brought by the United States regarding an alleged violation of the 
Final Judgment, the United States may establish the violation and the 
appropriateness of any remedy by a preponderance of the evidence and 
that Defendants have waived any argument that a different standard of 
proof should apply. This provision aligns the standard for compliance 
with the Final Judgment with the standard of proof that applies to the 
underlying offense that the Final Judgment addresses.
    Pursuant to Paragraph XVI.B of the proposed Final Judgment, 
Defendants agree that they will abide by the proposed Final Judgment 
and that they may be held in contempt of the Court for failing to 
comply with any provision of the proposed Final Judgment that is stated 
specifically and in reasonable detail.
    Paragraph XVI.C of the proposed Final Judgment provides that if the 
Court finds in an enforcement proceeding that a Defendant has violated 
the Final Judgment, the United States may apply to the Court for an 
extension of the Final Judgment, together with such other relief as may 
be appropriate. In addition, to compensate American taxpayers for any 
costs associated with investigating and enforcing violations of the 
Final Judgment, Paragraph XVI.C of the proposed Final Judgment provides 
that, in any successful effort by the United States to enforce the 
Final Judgment against a Defendant, whether litigated or resolved 
before litigation, the Defendant must reimburse the United States for 
attorneys' fees, experts' fees, and other costs incurred in connection 
with that effort to enforce this Final Judgment, including the 
investigation of the potential violation.
    Paragraph XVI.D of the proposed Final Judgment states that the 
United States may file an action against a Defendant for violating the 
Final Judgment for up to four years after the Final Judgment has 
expired or been terminated. This provision is meant to address 
circumstances such as when evidence that a violation of the Final 
Judgment occurred during the term of the Final Judgment is not 
discovered until after the Final Judgment has expired or been 
terminated or when there is not sufficient time for the United States 
to complete an investigation of an alleged violation until after the 
Final Judgment has expired or been terminated. This provision, 
therefore, makes clear that, for four years after the Final Judgment 
has expired or been terminated, the United States may still challenge a 
violation that occurred during the term of the Final Judgment.
    Finally, Section XVII of the proposed Final Judgment provides that 
the Final Judgment will expire ten years from the date of its entry, 
except that after five years from the date of its entry, the Final 
Judgment may be terminated upon notice by the United States to the 
Court and Defendants that the divestitures have been completed and 
continuation of the Final Judgment is no longer necessary or in the 
public interest.

V. Remedies Available to Potential Private Plaintiffs

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment neither impairs 
nor assists the bringing of any private antitrust damage action. Under 
the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 16(a), the 
proposed Final Judgment has no prima facie effect in any subsequent 
private lawsuit that may be brought against Defendants.

VI. Procedures Available for Modification of the Proposed Final 
Judgment

    The United States and Defendants have stipulated that the proposed 
Final Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least 60 days preceding the 
effective date of the proposed Final Judgment within which any person 
may submit to the United States written comments regarding the proposed 
Final Judgment. Any person who wishes to comment should do so within 60 
days of the date of publication of this Competitive Impact Statement in 
the Federal Register, or the last date of publication in a newspaper of 
the summary of this Competitive Impact Statement, whichever is later. 
All comments received during this period will be considered by the U.S. 
Department of Justice, which remains free to withdraw its consent to 
the proposed Final Judgment at any time before the Court's entry of the 
Final Judgment. The comments and the response of the United States will 
be filed with the Court. In addition, the comments and the United 
States' responses will be published in the Federal Register unless the 
Court agrees that the United States instead may publish them on the 
U.S. Department of Justice, Antitrust Division's internet website.
    Written comments should be submitted in English to: Chief, Defense, 
Industrials, and Aerospace Section, Antitrust Division, United States 
Department of Justice, 450 Fifth St. NW, Suite 8300, Washington, DC 
20530.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VII. Standard of Review Under the APPA for the Proposed Final Judgment

    Under the Clayton Act and APPA, proposed Final Judgments, or 
``consent decrees,'' in antitrust cases brought by the United States 
are subject to a 60-day comment period, after which the Court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. 16(e)(1). In making that determination, 
the Court, in accordance with the statute as amended in 2004, is 
required to consider:

    (A) the competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory factors, 
the Court's inquiry is necessarily a limited one as the government is 
entitled to ``broad discretion to settle with the

[[Page 31031]]

defendant within the reaches of the public interest.'' United States v. 
Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); United States v. 
U.S. Airways Grp., Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) 
(explaining that the ``court's inquiry is limited'' in Tunney Act 
settlements); United States v. InBev N.V./S.A., No. 08-1965 (JR), 2009 
U.S. Dist. LEXIS 84787, at *3 (D.D.C. Aug. 11, 2009) (noting that a 
court's review of a proposed Final Judgment is limited and only 
inquires ``into whether the government's determination that the 
proposed remedies will cure the antitrust violations alleged in the 
complaint was reasonable, and whether the mechanisms to enforce the 
final judgment are clear and manageable'').
    As the U.S. Court of Appeals for the District of Columbia Circuit 
has held, under the APPA a court considers, among other things, the 
relationship between the remedy secured and the specific allegations in 
the government's Complaint, whether the proposed Final Judgment is 
sufficiently clear, whether its enforcement mechanisms are sufficient, 
and whether it may positively harm third parties. See Microsoft, 56 
F.3d at 1458-62. With respect to the adequacy of the relief secured by 
the proposed Final Judgment, a court may not ``make de novo 
determination of facts and issues.'' United States v. W. Elec. Co., 993 
F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted); see also 
Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 F. 
Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 F. 
Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, at 
*3. Instead, ``[t]he balancing of competing social and political 
interests affected by a proposed antitrust decree must be left, in the 
first instance, to the discretion of the Attorney General.'' W. Elec. 
Co., 993 F.2d at 1577 (quotation marks omitted). ``The court should 
also bear in mind the flexibility of the public interest inquiry: the 
court's function is not to determine whether the resulting array of 
rights and liabilities is the one that will best serve society, but 
only to confirm that the resulting settlement is within the reaches of 
the public interest.'' Microsoft, 56 F.3d at 1460 (quotation marks 
omitted); see also United States v. Deutsche Telekom AG, No. 19-2232 
(TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More demanding 
requirements would ``have enormous practical consequences for the 
government's ability to negotiate future settlements,'' contrary to 
congressional intent. Microsoft, 56 F.3d at 1456. ``The Tunney Act was 
not intended to create a disincentive to the use of the consent 
decree.'' Id.
    The United States' predictions about the efficacy of the remedy are 
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at 
1461 (recognizing courts should give ``due respect to the Justice 
Department's . . . view of the nature of its case''); United States v. 
Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) (``In 
evaluating objections to settlement agreements under the Tunney Act, a 
court must be mindful that [t]he government need not prove that the 
settlements will perfectly remedy the alleged antitrust harms[;] it 
need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'' (internal 
citations omitted)); United States v. Republic Servs., Inc., 723 F. 
Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review to 
which the government's proposed remedy is accorded''); United States v. 
Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A 
district court must accord due respect to the government's prediction 
as to the effect of proposed remedies, its perception of the market 
structure, and its view of the nature of the case.''). The ultimate 
question is whether ``the remedies [obtained by the Final Judgment are] 
so inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest.' '' Microsoft, 56 F.3d at 1461 
(quoting W. Elec. Co., 900 F.2d at 309).
    Moreover, the Court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its Complaint, and does not authorize the Court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways, 
38 F. Supp. 3d at 75 (noting that the court must simply determine 
whether there is a factual foundation for the government's decisions 
such that its conclusions regarding the proposed settlements are 
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``[T]he 
`public interest' is not to be measured by comparing the violations 
alleged in the complaint against those the court believes could have, 
or even should have, been alleged''). Because the ``court's authority 
to review the decree depends entirely on the government's exercising 
its prosecutorial discretion by bringing a case in the first place,'' 
it follows that ``the court is only authorized to review the decree 
itself,'' and not to ``effectively redraft the complaint'' to inquire 
into other matters that the United States did not pursue. Microsoft, 56 
F.3d at 1459-60.
    In its 2004 amendments to the APPA, Congress made clear its intent 
to preserve the practical benefits of using judgments proposed by the 
United States in antitrust enforcement, Public Law 108-237 Sec.  221, 
and added the unambiguous instruction that ``[n]othing in this section 
shall be construed to require the court to conduct an evidentiary 
hearing or to require the court to permit anyone to intervene.'' 15 
U.S.C. 16(e)(2); see also U.S. Airways, 38 F. Supp. 3d at 76 
(indicating that a court is not required to hold an evidentiary hearing 
or to permit intervenors as part of its review under the Tunney Act). 
This language explicitly wrote into the statute what Congress intended 
when it first enacted the Tunney Act in 1974. As Senator Tunney 
explained: ``[t]he court is nowhere compelled to go to trial or to 
engage in extended proceedings which might have the effect of vitiating 
the benefits of prompt and less costly settlement through the consent 
decree process.'' 119 Cong. Rec. 24,598 (1973) (statement of Sen. 
Tunney). ``A court can make its public interest determination based on 
the competitive impact statement and response to public comments 
alone.'' U.S. Airways, 38 F. Supp. 3d at 76 (citing Enova Corp., 107 F. 
Supp. 2d at 17).

VIII. Determinative Documents

    In formulating the proposed Final Judgment, the United States 
considered documents relating to ASSA ABLOY's proposed divestiture to 
Fortune Brands. Because these documents were determinative in 
formulating the proposed Final Judgment, copies are attached to the 
Stipulation and Order to comply with 15 U.S.C. 16(b).

Dated: May 5, 2023

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA

-----------------------------------------------------------------------
Matthew R. Huppert (DC Bar #1010997)
Trial Attorney
United States Department of Justice
Antitrust Division
450 Fifth Street NW, Suite 8700
Washington, DC 20530
Telephone: (202) 476-0383
Email: [email protected]

David E. Dahlquist
Senior Trial Counsel
United States Department of Justice
Antitrust Division
209 South LaSalle Street, Suite 600
Chicago, Illinois 60604
Email: [email protected]

[FR Doc. 2023-10343 Filed 5-12-23; 8:45 am]
BILLING CODE 4410-11-P