The Peabody matter is a Horizontal Merger challenge brought by the Federal Trade Commission under Section 13(b) of the FTC Act. The Commission sought a preliminary injunction against a proposed joint venture between Peabody Energy Corporation (“Peabody”) and Arch Resources, Inc. (“Arch”)—the two largest coal producers in the United States—that would have combined their Southern Powder River Basin (“SPRB”) and Colorado mining assets, including their adjacent flagship mines, Peabody’s North Antelope Rochelle mine and Arch’s Black Thunder mine, into a single operating complex. Peabody would have held 66.5 percent of the joint venture and served as its operator.
The Commission alleged that the joint venture would substantially lessen competition in the market for SPRB coal, where the combined entity would control roughly two-thirds of total production. The Court found that market highly concentrated, noting that the transaction would increase the Herfindahl-Hirschman Index by more than 2,200 points, to nearly 5,000. The Court held that the increase in concentration, together with the elimination of direct competition between the two largest producers, established a presumption that the joint venture would substantially lessen competition.
To rebut that presumption, the defendants asserted that the venture would generate substantial synergies—roughly $820 million measured on a net-present-value basis—through coal blending and operational optimization of the adjacent mines. They argued these efficiencies were necessary to compete more effectively with natural gas and renewable energy. On behalf of the Commission, Professor Zmijewski, supported by Pavel Nikolov, evaluated the claimed synergies under the Horizontal Merger Guidelines framework. He evaluated key inputs underlying the defendants’ calculations, including “hard-coded” figures and whether they were supported by verifiable data or explanation, and analyzed several assumptions, such as projected volume purchasing discounts and fuel-cost savings, to determine whether they were substantiated and merger-specific; and the reliability of the projections.
The Court credited that some of the claimed efficiencies were not merger-specific—while also finding that the venture would achieve some genuine efficiencies. Ultimately, however, the Court held that even crediting every claimed dollar and assuming full pass-through to customers, the efficiencies “still would not offset the likely competitive harm.” Following a nine-day evidentiary hearing before Judge Sarah E. Pitlyk, the Court granted the preliminary injunction.
The parties abandoned the proposed joint venture shortly after the decision rather than proceed to the Commission’s administrative trial. The opinion remains a leading example of a quantified, expert-supported efficiencies defense that nonetheless failed to satisfy the Merger Guidelines’ requirements of verifiability and merger-specificity and could not overcome a structural presumption arising from a transaction that combined more than 60 percent of the relevant market.