IN THE CIRCUIT COURT OF THE STATE OF OREGON FOR THE COUNTY OF MULTNOMAH
Filed: May 19, 2023
TABLE OF CONTENTS
TABLE OF AUTHORITIES
Cases
Statutes and Regulations
Legislative History and Other Authorities
PRELIMINARY STATEMENT
Defendant Halcyon Semiconductor Americas Inc. ("Halcyon Americas"), a Delaware corporation and wholly owned subsidiary of Halcyon Semiconductor AG (together with Halcyon Americas, "Halcyon"), respectfully submits this Memorandum of Law in Support of its Motion to Dismiss the Complaint filed on April 17, 2023, by the State of Oregon, by and through Attorney General Diane Calloway (the "AG" or "Plaintiff"), in its entirety and with prejudice.
This case arises from Halcyon's acquisition of Meridian Photonics Inc. ("Meridian"), a Delaware-incorporated designer and manufacturer of silicon photonics components headquartered in Portland, Oregon, for $2.15 billion in cash. The acquisition was consummated on January 31, 2023, following a thorough and comprehensive federal antitrust review. The transaction is a textbook example of a strategic combination that enhances competition, accelerates innovation, and delivers tangible benefits to consumers — and yet the AG now seeks to unwind it, months after closing, on the basis of a Complaint that is both legally deficient and factually baseless.
Before the transaction closed, Halcyon complied with every requirement of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), 15 U.S.C. § 18a. Halcyon submitted its pre-merger notification to the Federal Trade Commission and the Department of Justice on October 3, 2022, under HSR File No. 20221003-1847. Both federal antitrust agencies reviewed the transaction during the initial statutory waiting period. On November 14, 2022, the agencies granted early termination of the waiting period — a discretionary determination that signaled their conclusion that the transaction did not warrant further investigation, let alone a challenge. No second request for additional information or documentary material was issued. No federal enforcement action was brought. No conditions were imposed on closing. The agencies, with full access to the information submitted by the parties, determined that this transaction could proceed.
The AG's post-closing challenge should be dismissed on two independent grounds, each sufficient to warrant dismissal of the entire Complaint.
First, the AG's state-law antitrust challenge to the structure of a completed merger that received express federal HSR Act clearance is preempted under principles of conflict preemption. The HSR Act was enacted precisely to replace the chaotic, disruptive, and economically destructive regime of post-hoc merger challenges with a comprehensive, uniform, pre-closing federal review framework. Congress designed the HSR Act to provide certainty and finality: once the waiting period expires or early termination is granted, the merging parties are entitled to proceed with their transaction in reliance on the federal government's determination. Allowing fifty states independently to re-examine, challenge, and potentially unwind federally cleared mergers would "stand[] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress," Hines v. Davidowitz, 312 U.S. 52, 67 (1941), and would nullify the very system of pre-merger review that Congress created.
Second, even if the Court were to reach the merits, the Complaint fails to state a claim under ORS 646.730, Oregon's antitrust statute, because it does not plead facts sufficient to establish either a plausible relevant product market or a substantial lessening of competition. The AG defines the relevant product market as "co-packaged optics transceiver modules for data-center applications," but this definition is artificially narrow, excluding pluggable optics transceivers and other optical interconnect technologies that are directly competitive with and functionally interchangeable with co-packaged optics ("CPO") modules. The AG's concentration statistics are misleading snapshots of a dynamic, rapidly growing market that is estimated at approximately $875 million in U.S. revenue in FY 2022 and projected to grow at a compound annual growth rate of approximately 28% through 2027. Multiple credible competitors — including Luminos Systems Corp. (approximately 22% share) and Crestwave Optical Technologies Ltd. (approximately 11% share) — actively participate in this market, invest heavily in research and development, and stand ready to expand in response to any attempted exercise of market power. The AG's vertical foreclosure theory — that Halcyon might someday degrade interoperability between its photonics modules and competitors' switch ASICs — is entirely speculative, unsupported by any factual allegation that Halcyon has taken or intends to take any such action, and contradicted by the economic reality that Halcyon's customers demand and will continue to demand compliance with open industry standards.
The Complaint should be dismissed in its entirety with prejudice.
STATEMENT OF FACTS
A. The Parties
Halcyon Semiconductor AG is an Aktiengesellschaft (German public stock corporation) publicly traded on the Frankfurt Stock Exchange under the ticker symbol FSE: HLC. The company is headquartered at Ludwigstraße 27, 80539 Munich, Bavaria, Germany. Halcyon Semiconductor AG designs and manufactures a broad portfolio of analog and mixed-signal semiconductors, power management integrated circuits ("ICs"), and — following its acquisition of Meridian — silicon photonics components for high-speed optical interconnects used in data-center, telecommunications, and industrial applications. For fiscal year 2022, Halcyon Semiconductor AG reported annual revenue of approximately €9.3 billion. The company employs approximately 28,500 people worldwide, with operations spanning Europe, North America, and the Asia-Pacific region. Dr. Tobias Wendt serves as Chief Executive Officer. Katrin Schreiber serves as General Counsel.
Halcyon Semiconductor AG has a long history as a leading innovator in analog and mixed-signal semiconductor technology. Its products are used across a wide range of industries, including automotive electronics, industrial automation, consumer electronics, and data-center infrastructure. The company's analog and power management ICs are recognized as industry-leading products, and Halcyon invests approximately 14% of its annual revenue in research and development. Halcyon's interest in the silicon photonics and co-packaged optics space was driven by natural strategic logic: as data-center bandwidth requirements have continued to escalate, the integration of high-performance analog and power management ICs with photonics components has become increasingly important to delivering next-generation optical interconnect solutions.
Halcyon Semiconductor Americas Inc. is a Delaware corporation and the wholly owned U.S. operating subsidiary of Halcyon Semiconductor AG. Halcyon Americas is located at 4500 Great America Parkway, Suite 300, Santa Clara, California 95054. Halcyon Americas serves as the principal U.S. entity for Halcyon's sales, marketing, customer support, and certain research and development activities in North America. Priya Nagarajan serves as U.S. Deputy General Counsel. Halcyon Americas' Employer Identification Number is 84-3921057. Following the closing of the Meridian acquisition, Meridian operates as a wholly owned subsidiary of Halcyon Americas.
Meridian Photonics Inc. is a Delaware corporation headquartered at 1820 NW Everett Street, Suite 400, Portland, Oregon 97209. Meridian was founded by Dr. Samuel Ashford, who served as Chief Executive Officer through the closing of the acquisition. Linnea Johansson served as Chief Financial Officer. Meridian designs and manufactures silicon photonics transceivers and co-packaged optics modules for data-center and telecommunications applications. The company is widely regarded as a pioneer in CPO technology, having developed and commercialized some of the earliest high-volume CPO transceiver modules for hyperscale data-center deployments. Meridian holds 47 United States patents related to CPO technology, covering various aspects of silicon photonics design, optical integration, packaging, and manufacturing processes. For fiscal year 2022, Meridian reported annual revenue of approximately $385 million. At the time of the acquisition, Meridian employed approximately 1,200 people, the majority of whom were based in its Portland, Oregon headquarters and manufacturing facility. Meridian's Employer Identification Number is 93-1284563.
Meridian's CPO products are designed and manufactured to comply with open industry standards, including the Optical Internetworking Forum ("OIF") 400ZR and 800ZR implementation agreements. These open standards govern the physical and electrical interfaces of optical transceiver modules, ensuring interoperability across a multi-vendor ecosystem of switches, routers, and other networking equipment. Compliance with these standards is critical to Meridian's business model because hyperscale data-center operators — Meridian's primary customers — require the ability to deploy optical interconnect modules from multiple vendors in a common infrastructure without proprietary lock-in.
Post-acquisition, Meridian continues to operate as a wholly owned subsidiary of Halcyon Americas, maintaining its Portland, Oregon headquarters, its existing workforce, and its existing product lines and customer relationships.
B. The Acquisition
On September 8, 2022, Halcyon, acting through its U.S. subsidiary Halcyon Americas, entered into an Agreement and Plan of Merger (the "Merger Agreement") to acquire 100% of the outstanding shares of common stock of Meridian Photonics Inc. The Merger Agreement provided for the acquisition of Meridian through a reverse triangular merger structure, pursuant to which a newly formed acquisition subsidiary of Halcyon Americas merged with and into Meridian, with Meridian surviving as a wholly owned subsidiary of Halcyon Americas.
The purchase price for the acquisition was $2.15 billion, payable entirely in cash. The Merger Agreement was negotiated at arm's length between the parties and their respective financial and legal advisors. The consideration reflected a premium of approximately 32% over the 60-day volume-weighted average price of Meridian's common stock prior to the public announcement of the transaction and was approved by a majority of Meridian's independent board of directors upon the recommendation of a special committee of independent directors.
Halcyon financed the acquisition through a $2.2 billion senior secured term loan facility (the "Term Loan B"), arranged and led by Vereinigte Kreditbank AG ("VKB") as lead arranger and administrative agent. The syndicate of lenders participating in the Term Loan B included Nordmark Capital Group, based in Glenrock Assurance, Switzerland, and Pacific Rim Commercial Bank, based in Singapore. Of the total facility amount, $2.15 billion was drawn at the closing to fund the merger consideration, and Halcyon contributed approximately $50 million in cash on hand to cover transaction-related expenses, including advisory fees, legal costs, and regulatory filing fees.
Halcyon retained Callister Blackwood & Co. as its investment banking advisor for the transaction. Jonathan Reiss, a Managing Director at Callister Blackwood, led the engagement. Meridian retained its own independent financial advisor, and the transaction was the subject of a fairness opinion delivered to Meridian's board of directors.
The merger closed on January 31, 2023, following the satisfaction of all conditions to closing, including the completion of federal antitrust review under the HSR Act, as described below.
C. Federal Antitrust Review and Clearance
Because the transaction exceeded the size-of-transaction and size-of-person thresholds applicable under the HSR Act and its implementing regulations, Halcyon was required to file a pre-merger notification with the Federal Trade Commission and the Antitrust Division of the Department of Justice before consummating the acquisition. Halcyon filed its HSR Act pre-merger notification on October 3, 2022. The filing was assigned HSR File No. 20221003-1847. Meridian concurrently filed its responsive HSR notification.
The HSR Act imposes a mandatory initial waiting period of 30 calendar days following the filing of the pre-merger notification (or 15 days in the case of a cash tender offer or bankruptcy transaction), during which the merging parties may not consummate the transaction. During this waiting period, the staff of the FTC and the DOJ Antitrust Division review the transaction and the information submitted by the parties to determine whether further investigation is warranted. If either agency determines that the transaction raises potential competitive concerns warranting additional scrutiny, it may issue a "second request" — a formal request for additional information and documentary material under 15 U.S.C. § 18a(e) — which extends the waiting period until the parties have substantially complied with the request.
In this case, no second request was issued. Instead, on November 14, 2022 — before the expiration of the initial 30-day waiting period — the FTC and DOJ granted early termination of the waiting period. The grant of early termination is a discretionary act by the reviewing agency. It is not automatic. The agency grants early termination only when it has determined, based on its review of the HSR filing and any additional information available to it, that the transaction does not warrant further investigation and that no enforcement action is warranted. The grant of early termination thus reflects an affirmative agency determination that the transaction may proceed.
Following the grant of early termination, no federal enforcement action was brought to challenge the acquisition. No conditions, undertakings, or consent obligations were imposed on the parties. The federal antitrust agencies — the institutions to which Congress has delegated the authority and responsibility for pre-merger review — concluded their review without objection, and the transaction closed on January 31, 2023, in full compliance with all applicable federal law.
D. The Oregon AG's Post-Closing Challenge
Despite the comprehensive federal antitrust review described above, the Oregon Attorney General's office launched its own investigation of the completed transaction more than two months after the closing. On April 10, 2023, the AG's Antitrust Division issued a Civil Investigative Demand ("CID") to Halcyon Americas, requesting extensive documentary material and information concerning the Meridian acquisition, Halcyon's business operations, and competitive conditions in the co-packaged optics market. Halcyon Americas received the CID on April 11, 2023.
Just one week later, on April 17, 2023, the AG filed the instant Complaint under ORS 646.730 and ORS 646.775, seeking injunctive relief, including the potential divestiture of Meridian from Halcyon. The Complaint was filed in this Court and assigned to the Honorable Robert Castañeda.
The AG's Complaint defines the relevant product market as "co-packaged optics transceiver modules for data-center applications" and the relevant geographic market as the United States, with particular emphasis on what the AG characterizes as the impact on Oregon-based data-center customers.
The AG alleges that, following the merger, Halcyon's combined entity would hold approximately 58% of U.S. CPO transceiver sales by revenue. This figure is derived by combining Meridian's pre-merger share of approximately 44% (representing approximately $385 million of the AG's estimated $875 million U.S. CPO market) with Halcyon's legacy CPO transceiver share of approximately 14% (representing approximately $122.5 million in revenue). The AG further alleges that the pre-merger Herfindahl-Hirschman Index ("HHI") for the purported relevant market was 2,818 and that the post-merger HHI increased to 4,050 — a delta of 1,232 — exceeding the thresholds for a "highly concentrated" market under the federal Horizontal Merger Guidelines.
The AG identifies two Oregon-based customers — Cascadia Cloud Services Inc. ("Cascadia") and Northstar Digital Infrastructure LLC ("Northstar") — as entities purportedly harmed by the transaction. According to the Complaint, Cascadia spent approximately $62 million on Meridian CPO modules in FY 2022, and Northstar spent approximately $28 million on Meridian CPO modules during the same period. The Complaint alleges, in general and conclusory terms, that these customers will face higher prices and reduced innovation as a result of the acquisition.
The AG's theory of competitive harm rests on two related assertions. First, the AG contends that the acquisition eliminates Meridian as an independent, "disruptive innovator" in CPO technology and concentrates an excessive share of CPO transceiver production in a single firm. Second, the AG asserts that Halcyon's "vertically integrated position" — combining the design of controlling analog and mixed-signal ICs with the design and manufacture of photonics modules — would allow Halcyon to "degrade interoperability with competitors' switch ASICs and raise rivals' costs," thereby foreclosing competition in the CPO market.
The AG retained Senior Assistant Attorney General Marcus Trujillo, of the Antitrust Division of the Oregon Department of Justice, as lead counsel on the matter. The AG also retained outside counsel: Ashworth & Pendleton LLP, a Portland-based law firm, with Lead Partner Constance Yee and Associate Derek Holmgren serving as counsel of record. Additionally, the AG retained Dr. Evelyn Ng, an economist affiliated with Ridgeline Economic Consulting LLC, as an expert economist.
At no point during the federal HSR review process did the AG contact either the FTC or the DOJ to express any concern about the transaction. The AG did not seek to intervene in the federal review. The AG did not submit any comments, white papers, or other materials to the federal antitrust agencies. The AG's first involvement in the transaction came more than two months after it had already closed — when the AG issued its CID on April 10, 2023.
E. The Co-Packaged Optics Market Is Competitive and Rapidly Growing
Even under the AG's own artificially narrow market definition, the U.S. CPO transceiver market is vigorously competitive and growing rapidly. The AG estimates total U.S. CPO transceiver revenue at approximately $875 million in FY 2022. Far from being a concentrated market dominated by one or two firms, this market features multiple credible competitors actively investing in technology, manufacturing capacity, and sales infrastructure.
Luminos Systems Corp., headquartered in Austin, Texas, is a well-established and well-capitalized competitor in the CPO transceiver space. Luminos holds approximately 22% of U.S. CPO transceiver revenue, representing approximately $192.5 million in FY 2022 sales. Luminos has a substantial engineering workforce dedicated to CPO technology development, has secured over $150 million in venture and strategic funding over the past three years, and has publicly announced plans to introduce next-generation 800G and 1.6T CPO transceiver modules for hyperscale data-center deployments. Luminos is a formidable competitor with the resources, expertise, and market position to expand its presence in the CPO market.
Crestwave Optical Technologies Ltd., headquartered in Shenzhen, China, holds approximately 11% of U.S. CPO transceiver revenue, representing approximately $96.3 million in FY 2022 sales. Crestwave is a rapidly growing firm with significant manufacturing capabilities and has announced plans to expand its U.S. sales operations, including the establishment of a new sales and technical support office in the San Jose, California area. Crestwave's products comply with the same OIF 400ZR and 800ZR standards as Meridian's products and are actively being evaluated and deployed by U.S. hyperscale data-center operators.
In addition to Luminos and Crestwave, other competitors collectively hold approximately 9% of U.S. CPO transceiver revenue, representing approximately $78.7 million in FY 2022 sales. These include a number of smaller firms and new entrants with existing photonics or advanced semiconductor capabilities that have disclosed significant CPO research and development programs. Several major semiconductor and optical component manufacturers — firms with annual revenues in the billions of dollars — have publicly announced their entry or planned entry into the CPO market, recognizing the substantial growth opportunities in this space.
The CPO transceiver market is characterized by rapid technological evolution, significant ongoing research and development investment across the industry, and relatively low barriers to entry for firms with existing photonics or semiconductor design and manufacturing capabilities. Industry analysts, including Granite Harbor Management Consulting in its Co-Packaged Optics Market Forecast Report (Q4 2022), project that the U.S. CPO transceiver market will grow at a compound annual growth rate of approximately 28% through 2027, driven by hyperscale data-center demand for higher-bandwidth, lower-power optical interconnects. This is a young, dynamic, and fast-growing market in which competitive positions are shifting rapidly and in which innovation — not legacy installed base — is the primary driver of competitive advantage.
The AG's proposed market definition, moreover, is artificially narrow because it fails to account for the broader competitive dynamics that constrain CPO transceiver pricing and innovation. Pluggable optics transceivers — a mature, widely deployed optical interconnect technology — remain a directly competitive alternative to CPO modules for many data-center applications. Data-center operators routinely evaluate both CPO and pluggable solutions and make purchasing decisions based on total cost of ownership, performance requirements, deployment flexibility, and power consumption. The AG's Complaint does not allege, nor could it plausibly allege, that CPO modules and pluggable optics transceivers are not reasonable substitutes for one another in a substantial number of deployment scenarios. The AG's failure to account for this competitive constraint renders its market definition implausible on its face.
ARGUMENT
I. THE COMPLAINT SHOULD BE DISMISSED BECAUSE THE AG'S POST-CLOSING STATE ANTITRUST CHALLENGE IS PREEMPTED BY THE FEDERAL HSR ACT SCHEME
A. The HSR Act Establishes a Comprehensive Federal Framework for Pre-Merger Review
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, codified at 15 U.S.C. § 18a, establishes a comprehensive, mandatory federal framework for the pre-closing review of mergers and acquisitions. The HSR Act requires that, for any acquisition of voting securities or assets meeting specified jurisdictional thresholds — currently a size-of-transaction threshold of $111.4 million (as adjusted) — the acquiring and acquired persons must file pre-merger notifications with both the FTC and the DOJ Antitrust Division and observe a mandatory waiting period before consummating the transaction. See 15 U.S.C. § 18a(a), (b); 16 C.F.R. §§ 801–803.
The HSR Act's implementing regulations, found at 16 C.F.R. Parts 801 through 803, specify the content and format of the pre-merger notification form, define the categories of information and documentary material that must be submitted, and set forth the procedures for calculating the jurisdictional thresholds. The statutory scheme imposes an initial waiting period of 30 calendar days — or 15 days for cash tender offers and certain bankruptcy transactions — following the filing of the notification, during which the transaction may not be consummated. 15 U.S.C. § 18a(b)(1). During this period, the professional staff of the FTC's Bureau of Competition and the DOJ's Antitrust Division review the filings and any additional information available to them to assess whether the transaction raises potential competitive concerns that warrant further investigation.
If either agency determines that additional investigation is warranted, it may issue a "second request" — a formal request for additional information and documentary material under 15 U.S.C. § 18a(e). A second request extends the waiting period until the filing parties have substantially complied with the request, ensuring that the agencies have sufficient information to conduct a thorough investigation. Second requests are issued in only a small fraction of transactions — typically fewer than 3-4% of all HSR filings in any given year — reflecting the agencies' exercise of prosecutorial discretion in selecting those transactions that present the most significant competitive concerns.
Critically, the HSR Act also provides for "early termination" of the waiting period. Under 15 U.S.C. § 18a(b)(2), the FTC and the Assistant Attorney General in charge of the Antitrust Division may terminate the waiting period before its natural expiration upon a determination that neither agency intends to take further action with respect to the transaction. The grant of early termination is a discretionary act. It is not granted automatically, and the agencies are under no obligation to grant it. When early termination is granted, it reflects an affirmative determination by the reviewing agency — after examination of the pre-merger notification, the documents and information submitted by the parties, and any other information available to the agency (including complaints from competitors, customers, and state attorneys general) — that the transaction does not warrant further investigation.
Congress enacted the HSR Act in 1976 with a clear and specific purpose: to replace the prior regime of post-hoc merger challenges — under which the federal government and private parties could challenge completed mergers years after consummation, often resulting in enormously costly and disruptive divestitures — with a system of pre-closing notification and review that would identify and address competitive problems before the merging parties integrated their operations and before the costs and uncertainties of "unscrambling the eggs" were imposed on the parties, their employees, their customers, and the economy as a whole.
The legislative history of the HSR Act is unequivocal on this point. The Senate Report accompanying the legislation explained that "the present scheme of enforcement" — under which "the Government must seek to 'unscramble the eggs' after the merger has been consummated" — was "wasteful and disruptive" and imposed "enormous costs on the Government, the parties, and the public." S. Rep. No. 94-803, at 63 (1976). The House Report similarly emphasized that the Act was designed to ensure that "the Federal enforcement agencies [would] be able to obtain preliminary injunctions to prevent anticompetitive mergers from occurring, rather than having to seek divestiture of an already completed transaction." H.R. Rep. No. 94-1373, at 5 (1976). Congress recognized that a system of pre-closing review and clearance was essential to providing merging parties with the certainty and finality they need to plan, finance, and execute major corporate transactions — and to sparing the economy the enormous disruption and waste associated with post-hoc challenges to completed mergers.
The HSR Act, in short, reflects a deliberate congressional choice to concentrate pre-merger review authority in the federal antitrust agencies, to provide a uniform and nationally consistent framework for evaluating the competitive effects of proposed transactions, and to give merging parties a defined process through which they can obtain clearance to proceed. The Act's structure — mandatory notification, a defined waiting period, the second request mechanism, and the early termination provision — is designed to ensure that competitive concerns are identified and addressed before closing, and that parties who comply with the process and receive clearance may proceed with their transactions in reliance on the federal government's determination.
B. Federal Preemption Principles Bar the AG's Challenge
Under the Supremacy Clause of the United States Constitution, federal law preempts state law in several circumstances, including where compliance with both federal and state law is impossible, and where state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hines v. Davidowitz, 312 U.S. 52, 67 (1941); see also Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 372–73 (2000); Geier v. Am. Honda Motor Co., 529 U.S. 861, 873 (2000). This latter form of preemption — commonly referred to as "conflict preemption" or "obstacle preemption" — applies even where Congress has not expressly stated its intent to preempt state law, so long as the state law in question frustrates the federal statutory purpose. Geier, 529 U.S. at 873–74.
The AG's post-closing challenge to the Halcyon-Meridian acquisition under ORS 646.730 is preempted under these principles because it directly conflicts with the objectives of the HSR Act and, if permitted, would fundamentally undermine the comprehensive federal framework that Congress established for pre-merger review.
The conflict between the AG's action and the HSR Act's objectives is clear and direct. The HSR Act was enacted to provide merging parties with a defined, uniform, pre-closing process for federal antitrust review, and to ensure that competitive concerns about proposed transactions are identified and addressed before closing — not after the parties have integrated their operations, commingled their assets, and reorganized their businesses in reliance on federal clearance. The Act's system of mandatory pre-closing notification, defined waiting periods, second request authority, and early termination is designed to concentrate the merger review function in the federal agencies, to provide a nationally consistent standard for evaluating competitive effects, and to give merging parties certainty and finality once the review process is complete.
The AG's Complaint asks this Court to do precisely what the HSR Act was designed to prevent: to conduct a post-closing examination of whether a completed merger substantially lessens competition — the same question that the FTC and the DOJ were charged with evaluating during the HSR review process — and potentially to order divestiture of a transaction that the federal agencies affirmatively cleared through the grant of early termination.
The facts of this case make the preemption analysis particularly compelling. Halcyon did not merely allow the HSR waiting period to expire through inaction. On the contrary, Halcyon filed its pre-merger notification on October 3, 2022, and the federal agencies affirmatively granted early termination on November 14, 2022 — a discretionary determination reflecting the agencies' conclusion, after review of the filing and all available information, that no enforcement action was warranted. This was not a case in which the agencies were unaware of the transaction, lacked information about the relevant markets, or were unable to assess the competitive implications. The agencies had the full HSR filing before them, along with whatever additional market intelligence, third-party complaints, and other information they collected during the review period. They evaluated the transaction and determined that it did not raise sufficient competitive concerns to warrant further investigation — let alone a challenge.
Permitting the AG to bring this action would nullify the federal clearance determination and expose Halcyon to precisely the kind of post-closing challenge that the HSR Act was designed to prevent. If the AG's action is permitted to proceed, the early termination of the HSR waiting period — and the finality and certainty it was intended to provide — would be rendered meaningless. Halcyon would be forced to defend the competitive merits of a completed transaction in a state court proceeding, months after closing, after having complied in full with the federal pre-merger review process and having received an affirmative determination from the reviewing agencies that the transaction could proceed.
Moreover, if Oregon may independently challenge this federally cleared transaction, so too may each of the other 49 states and the District of Columbia. Halcyon — and every other company that consummates a transaction after receiving HSR clearance — would face the prospect of defending multiple, potentially inconsistent, post-closing challenges brought by state officials across the country, each applying different state antitrust standards, each with different procedural rules, and each potentially reaching different conclusions about the same transaction. This "Balkanization" of merger review is precisely the outcome that Congress sought to avoid when it enacted the HSR Act. See H.R. Rep. No. 94-1373, at 8 (emphasizing the need for "a uniform, nationwide mechanism for pre-merger review"); see also Mattox v. FTC, 752 F.2d 116, 119 (5th Cir. 1985) (recognizing the HSR Act's objective of providing a "comprehensive, uniform" federal scheme).
The AG's action stands as an obstacle to the accomplishment of the full purposes and objectives of Congress in enacting the HSR Act, and it is therefore preempted.
C. No State Pre-Notification Was Required or Filed, Further Demonstrating the Federal Scheme's Primacy
The preemption analysis is further reinforced by the absence of any state-level pre-merger notification requirement in Oregon. Unlike a small number of states that have enacted their own pre-merger notification statutes, Oregon does not impose any independent state-level notification or waiting-period requirement on merging parties. Oregon has not enacted legislation requiring that merging parties notify the Attorney General of proposed transactions, submit information or documents for state-level review, or observe a state-level waiting period before closing.
The AG, moreover, did not avail herself of the opportunities that were available to her during the federal HSR review process. The federal antitrust agencies routinely accept and consider input from state attorneys general during the HSR review period. State officials who have concerns about a particular transaction may — and frequently do — submit written comments, white papers, or other materials to the FTC or the DOJ, sharing market intelligence, competitive analysis, or information about local market conditions that may inform the federal agencies' review. State officials may also coordinate with the federal agencies, participating in investigations and sharing information under existing cooperation agreements and protocols.
The AG did none of these things. The AG did not contact the FTC or the DOJ during the HSR review period to express any concern about the Halcyon-Meridian transaction. The AG did not submit any comments, competitive analysis, or market information to either federal agency. The AG did not seek to coordinate with the federal agencies or to participate in their review in any way. The AG remained entirely silent during the period in which the HSR Act's pre-closing review framework was operational and the federal agencies were actively evaluating the transaction.
Instead, the AG waited until more than two months after the transaction closed — after the parties had integrated their operations, combined their workforces, and begun implementing the strategic and operational changes contemplated by the merger — to issue a CID on April 10, 2023, and then filed this Complaint just seven days later, on April 17, 2023. This sequence of events constitutes an impermissible end-run around the federal review process. The AG cannot sit on the sidelines during the HSR review period, decline to participate in the federal process, and then — after the federal agencies have completed their review and cleared the transaction — bring a post-closing state-law challenge seeking to undo the very transaction that the federal government approved.
D. The AG's Reliance on State Police Powers Does Not Save the Complaint
The AG will likely argue that state antitrust enforcement is a valid exercise of the state's police powers, that federal antitrust law does not occupy the field of competition regulation, and that the HSR Act does not expressly preempt state antitrust claims. The AG may also point to the savings clause in Section 7 of the Clayton Act, 15 U.S.C. § 18, which provides that "[n]othing contained in this section shall be held to affect or impair any right heretofore or hereafter existing under any other statute" — language that the AG may argue preserves the authority of state attorneys general to bring merger challenges under state antitrust law.
These arguments, while superficially appealing, are ultimately unavailing. To be clear, Halcyon does not contend that federal antitrust law occupies the entire field of competition regulation or that states are categorically barred from enforcing their antitrust laws. The Supreme Court has recognized that "the federal antitrust laws do not preempt state antitrust laws." California v. Am. Stores Co., 495 U.S. 271, 284 (1990). States retain broad authority to regulate anticompetitive conduct, enforce their own competition statutes, and protect their citizens from restraints of trade, price-fixing, and other forms of anticompetitive behavior.
But there is a critical distinction between state enforcement of antitrust laws directed at ongoing anticompetitive conduct — such as price-fixing conspiracies, market allocation agreements, or exclusionary practices — and state challenges to the structure of a completed merger that has already been reviewed and cleared under the federal HSR Act. The former does not conflict with the HSR Act because the HSR Act does not address ongoing conduct; it addresses the pre-closing review of mergers and acquisitions. The latter, by contrast, directly conflicts with the HSR Act's objectives because it subjects a federally cleared transaction to a duplicative state-law re-examination of the very question that the federal agencies were charged with evaluating: whether the merger substantially lessens competition.
The savings clause in Section 7 of the Clayton Act does not alter this analysis. The savings clause preserves state authority over antitrust matters generally; it does not authorize states to re-litigate specific federal agency determinations regarding the competitive effects of particular transactions. The savings clause was enacted in 1914, more than six decades before the HSR Act was adopted. When Congress enacted the HSR Act in 1976, it created a specific, detailed mechanism for pre-merger review that was designed to provide finality and certainty — purposes that would be frustrated if the savings clause were construed to permit any state to challenge, after closing, a transaction that the federal agencies had affirmatively cleared under the HSR Act's procedures. The savings clause, properly construed, preserves state authority to address anticompetitive conduct and to enforce state competition laws in contexts that do not conflict with specific federal regulatory determinations. It does not grant states a roving commission to second-guess the merger clearance decisions of the FTC and the DOJ.
The Second Circuit's decision in State of New York v. Julius Nasso Concrete Corp., 202 F.3d 82 (2d Cir. 2000), is instructive. There, the court recognized that while states retain authority to enforce antitrust norms, federal preemption principles apply where state action would conflict with specific federal statutory objectives. Similarly, the Ninth Circuit has recognized that state antitrust claims may be preempted where they "stand[] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Or. Laborers-Emp'rs Health & Welfare Tr. Fund v. Philip Morris Inc., 185 F.3d 957, 963 (9th Cir. 1999). Here, the AG's post-closing challenge to a federally cleared merger stands as precisely such an obstacle: it would nullify the federal clearance determination, impose the very costs and disruption that the HSR Act was designed to prevent, and undermine the certainty and finality that Congress intended to provide to merging parties who comply with the federal pre-merger review process.
For these reasons, the AG's Complaint is preempted by the federal HSR Act scheme and should be dismissed in its entirety.
II. THE COMPLAINT FAILS TO STATE A CLAIM UNDER ORS 646.730
Even if the Court were to conclude that the AG's post-closing challenge is not preempted — a conclusion that Halcyon respectfully submits would be in error — the Complaint should nevertheless be dismissed because it fails to state a claim under ORS 646.730.
A. Legal Standard for Motion to Dismiss Under Oregon Law
Under Oregon Rules of Civil Procedure 21 A(8) ("ORCP 21 A(8)"), a defendant may move to dismiss a complaint for failure to state facts sufficient to constitute a claim. In evaluating a motion to dismiss under ORCP 21 A(8), the court accepts the factual allegations in the complaint as true and draws all reasonable inferences in favor of the plaintiff. See Kutcher v. Zimmerman, 87 Or. App. 273, 276, 742 P.2d 48, 50 (1987). However, the court is not required to accept legal conclusions, conclusory allegations, or unsupported assertions as true. The complaint must allege facts that, if proven, would establish all elements of the claim. The court need not assume the truth of allegations that are contradicted by documents attached to or incorporated by reference in the complaint, or allegations that are implausible on their face.
ORS 646.730 prohibits mergers and acquisitions the effect of which "may be substantially to lessen competition, or to tend to create a monopoly." The statute mirrors the language of Section 7 of the Clayton Act, 15 U.S.C. § 18, and Oregon courts have generally looked to federal antitrust precedent for guidance in interpreting ORS 646.730. To state a claim under ORS 646.730, the AG must plead facts sufficient to establish: (1) a plausible relevant product market; (2) a plausible relevant geographic market; and (3) that the challenged transaction may substantially lessen competition or tend to create a monopoly in the relevant market. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56 (2007) (requiring "enough facts to state a claim to relief that is plausible on its face"); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (same). ORS 646.775 authorizes the Attorney General to bring civil enforcement actions under ORS 646.730, but the AG must still plead facts sufficient to establish all elements of the substantive claim.
The Complaint fails to satisfy these requirements. It does not allege a plausible relevant product market, and it does not plead facts sufficient to establish that the acquisition may substantially lessen competition.
B. The AG Fails to Allege a Plausible Relevant Product Market
1. The AG's Proposed Market Definition Is Artificially Narrow. Market definition is a foundational element of any merger challenge. The purpose of defining a relevant product market is to identify the group of products that are "reasonably interchangeable by consumers for the same purposes." United States v. Quelvar Nat'l Bank, 374 U.S. 321, 356 (1963); see also Brown Shoe Co. v. United States, 370 U.S. 294, 325 (1962) (relevant market consists of products with "reasonable interchangeability of use" and "cross-elasticity of demand"). The relevant market must be defined with reference to the actual competitive dynamics of the industry, not gerrymandered to produce a desired concentration result.
The AG defines the relevant product market as "co-packaged optics transceiver modules for data-center applications." This definition is artificially narrow in a critical respect: it excludes pluggable optics transceivers and other optical interconnect technologies that are directly competitive with CPO modules and that exert significant competitive constraint on CPO pricing and innovation.
Pluggable optics transceivers are the incumbent technology in the data-center optical interconnect market. They have been deployed at scale for over a decade and continue to represent the vast majority of optical transceiver shipments for data-center applications. While CPO technology offers certain advantages in power efficiency and bandwidth density for certain high-density deployments, pluggable transceivers remain a viable and widely deployed alternative for a broad range of data-center use cases. Indeed, the leading industry trade publications and market research firms — including Granite Harbor Management Consulting, Meridian Enterprises, and Dunmore Consulting Group — consistently analyze CPO transceivers as part of the broader optical transceiver market, not as a standalone product market.
Data-center operators routinely evaluate and choose between CPO and pluggable optics solutions based on a range of factors, including performance requirements, total cost of ownership, deployment flexibility, power consumption, and the maturity and reliability of the technology. A hyperscale data-center operator planning a new deployment will typically evaluate proposals from vendors offering both CPO and pluggable solutions, comparing them on a total-cost-of-ownership basis. If CPO module prices were to increase by a small but significant and nontransitory amount — say, 5% to 10% — a substantial number of data-center customers would switch to or delay migration from pluggable optics transceivers, demonstrating the high cross-elasticity of demand between these technologies. This is the hallmark of products that belong in the same relevant market. See U.S. Dep't of Justice & FTC, Horizontal Merger Guidelines § 4.1.1 (2010).
The Complaint fails to allege any facts demonstrating that CPO modules constitute a distinct product market separate from the broader optical transceiver market. The Complaint does not allege that a hypothetical monopolist of CPO modules could profitably impose a small but significant and nontransitory increase in price ("SSNIP") without losing sufficient sales to pluggable optics transceivers to render the price increase unprofitable. The Complaint does not allege that data-center customers view CPO modules as a product category for which there are no reasonable substitutes. The Complaint does not allege any facts about cross-elasticity of demand, switching costs, or other economic evidence that would support its narrow market definition.
Instead, the AG appears to define the market by drawing a circle around the product that Meridian manufactures and declaring it to be a relevant market. This is precisely the kind of outcome-driven market definition that the courts have repeatedly rejected. See, e.g., United States v. Ostrander Corporation., 331 F. Supp. 2d 1098, 1158–59 (N.D. Cal. 2004) (rejecting the government's proposed narrow product market definition where the evidence showed significant competitive alternatives); Calderon Industries v. Image Tech. Servs., Inc., 504 U.S. 451, 482 (1992) (market definition must be based on "commercial realities," not litigation strategy). The AG cannot manufacture anticompetitive concentration by defining the market so narrowly that it excludes the very products that compete most directly with the merged firm's offerings.
2. The Complaint Fails to Account for the Dynamic Nature of the CPO Market. Even if the Court were to accept the AG's narrow product market definition, the Complaint's analysis of competitive conditions within that market is fundamentally flawed because it fails to account for the dynamic nature of the CPO transceiver market.
The U.S. CPO transceiver market generated approximately $875 million in revenue in FY 2022, according to the AG's own allegations. But this market is in its early stages of development and growth. Industry analysts project that the market will grow at a compound annual growth rate of approximately 28% through 2027, driven by insatiable hyperscale data-center demand for higher-bandwidth, lower-power optical interconnects. See Granite Harbor Management Consulting, Co-Packaged Optics Market Forecast Report (Q4 2022). At this growth rate, the market is expected to more than triple in size over the next five years, reaching approximately $3 billion or more in annual U.S. revenue by 2027.
In such rapidly evolving technology markets, static market-share snapshots — such as the AG's reliance on FY 2022 revenue shares — are inherently unreliable indicators of future competitive conditions. The Supreme Court recognized this principle decades ago in United States v. Fenmore Industries, 415 U.S. 486, 501–04 (1974), where it held that historical market-share data may be an unreliable basis for predicting future competitive effects where market conditions are changing rapidly. The D.C. Circuit has similarly recognized that "statistics concerning market share and concentration, while of great significance, are not conclusive indicators of anticompetitive effects" and must be evaluated in the context of "the particular market — its structure, history and probable future." United States v. Tarvick Hughes Inc., 908 F.2d 981, 984 (D.C. Cir. 1990).
Here, the CPO transceiver market is undergoing rapid transformation. New entrants are emerging. Existing competitors are investing heavily in next-generation technology. Customer requirements are evolving rapidly as data-center architectures shift toward higher-bandwidth, disaggregated designs. The competitive landscape of this market in 2025 or 2027 will look dramatically different from the landscape in FY 2022. The AG's static snapshot of FY 2022 market shares — which is all the Complaint provides — is an inherently unreliable basis for predicting future competitive conditions and does not support the inference that the merger will substantially lessen competition.
The AG's market definition improperly freezes market boundaries at a single point in time in a sector undergoing transformative technological change. This approach is inconsistent with established principles of antitrust analysis and fails to state a plausible claim.
C. The AG Fails to Allege Facts Sufficient to Establish a Substantial Lessening of Competition
1. The AG's Market-Share Allegations Do Not Establish Anticompetitive Effects. The AG alleges that, following the merger, Halcyon's combined entity would hold approximately 58% of U.S. CPO transceiver sales by revenue. The AG further alleges that the pre-merger HHI for the purported relevant market was 2,818 and that the post-merger HHI increased to 4,050, a delta of 1,232. The AG asserts that these concentration levels exceed the thresholds in the federal Horizontal Merger Guidelines for a "highly concentrated" market.
While concentration statistics can be a useful starting point in merger analysis, they are not dispositive — particularly in dynamic technology markets where competition occurs primarily through innovation, product development, and technological advancement rather than through price competition on undifferentiated commodity products. See Tarvick Hughes, 908 F.2d at 984 ("The Herfindahl-Hirschman Index cannot guarantee litigation victories."); see also Severin Holdings, 415 U.S. at 501–04 (rejecting reliance on market-share statistics where other evidence showed that the acquiring firm's market position was likely to decline).
The Horizontal Merger Guidelines themselves caution that market concentration is merely one factor in a multi-factor analysis and that "[m]arket shares may not fully reflect the competitive significance of each firm." U.S. Dep't of Justice & FTC, Horizontal Merger Guidelines § 5.3 (2010). The Guidelines further recognize that in markets characterized by "rapid technological change," market-share data may overstate the competitive significance of incumbent firms and understate the competitive significance of new entrants and innovation-driven competitors.
Here, the CPO transceiver market is a textbook example of a market in which static concentration statistics are unreliable predictors of future competitive conditions. The market is nascent, rapidly growing, and driven by technological innovation. Competitive positions in such markets can shift dramatically in a short period of time as new technologies are developed, new products are launched, and new entrants gain traction with customers. The AG's HHI calculations — which are based on a single year of revenue data in a market growing at approximately 28% annually — are inherently unreliable indicators of the transaction's likely competitive effects.
The Complaint fails to allege facts sufficient to establish that the concentration levels it identifies will translate into actual anticompetitive effects — higher prices, reduced output, diminished innovation, or other harms to competition — in this dynamic market. HHI statistics, standing alone, do not state a plausible claim for relief.
2. Credible Competitors Constrain Any Exercise of Market Power. Even accepting the AG's concentration statistics at face value, the Complaint's own allegations demonstrate the existence of credible competitors that are well-positioned to constrain any attempt by Halcyon to exercise market power in the CPO transceiver market.
Luminos Systems Corp., headquartered in Austin, Texas, holds approximately 22% of U.S. CPO transceiver revenue, representing approximately $192.5 million in FY 2022 sales. Luminos is a well-capitalized, technology-driven competitor with a substantial engineering workforce, a proven track record of CPO product development, and publicly announced plans to introduce next-generation 800G and 1.6T CPO modules. Luminos is not a marginal fringe competitor; it is a significant market participant with the resources, expertise, and customer relationships to expand its market share rapidly in response to any attempt by Halcyon to raise prices, reduce output, or degrade product quality.
Crestwave Optical Technologies Ltd., headquartered in Shenzhen, China, holds approximately 11% of U.S. CPO transceiver revenue, representing approximately $96.3 million in FY 2022 sales. Crestwave is a rapidly growing firm with significant manufacturing capacity and aggressive expansion plans, including the establishment of a new U.S. sales and technical support office. Crestwave's products comply with the same OIF 400ZR and 800ZR standards as Meridian's products and are actively deployed by U.S. hyperscale data-center operators.
Other competitors collectively hold approximately 9% of U.S. CPO transceiver revenue, representing approximately $78.7 million in FY 2022 sales. These include a number of firms with existing photonics and semiconductor capabilities that have disclosed significant CPO research and development programs. Several of these firms are large, well-capitalized companies with annual revenues in the billions of dollars and the technical expertise to develop and commercialize competitive CPO products.
The Complaint's own allegations acknowledge the existence of these competitors but fail to explain why their combined presence — accounting for approximately 42% of the market — is insufficient to constrain Halcyon's post-merger competitive behavior. The Complaint does not allege that Luminos, Crestwave, or the other competitors lack the technical capability, manufacturing capacity, or financial resources to compete effectively. The Complaint does not allege that these competitors are likely to exit the market or to reduce their competitive efforts. The Complaint does not allege that these competitors face any impediment to expanding their market shares in response to an attempted exercise of market power by Halcyon.
In the absence of such allegations, the Complaint's market-share statistics — even taken at face value — do not establish a plausible claim that the merger will substantially lessen competition.
3. Ease of Entry and Expansion Undermine the AG's Theory. A critical element of any merger analysis is the assessment of barriers to entry and expansion. Where entry is easy and timely, a merger is unlikely to lead to anticompetitive effects because new competitors will enter the market (or existing competitors will expand) in response to any attempt by the merged firm to exercise market power. See Horizontal Merger Guidelines § 9; Tarvick Hughes, 908 F.2d at 987 ("ease of entry is . . . relevant to the competitive effects analysis").
The CPO transceiver market has relatively low barriers to entry for established photonics and semiconductor firms. The core technologies underlying CPO modules — silicon photonics, optical packaging, and advanced semiconductor design — are well-understood and widely available within the photonics and semiconductor industries. Firms with existing capabilities in these areas can develop and commercialize CPO products relatively quickly, particularly given the growing availability of silicon photonics foundry services that allow fabless designers to manufacture photonics components without investing in dedicated fabrication facilities.
Multiple firms with existing optical component or advanced semiconductor capabilities could enter the CPO market rapidly in response to any attempt by Halcyon to exercise market power. Several such firms — including major integrated device manufacturers and photonics component suppliers — have already announced CPO development programs and are expected to bring products to market within the next 12 to 24 months. The Complaint itself acknowledges the rapid growth and technological dynamism of the CPO market, which further confirms that the market is attractive to new entrants and that barriers to entry are low.
The Complaint fails to allege any facts demonstrating significant barriers to entry or expansion that would support a finding of likely anticompetitive effects. The Complaint does not allege that potential entrants face insurmountable technological obstacles, prohibitive capital requirements, regulatory barriers, or other impediments that would prevent timely and sufficient entry. The Complaint does not allege that Meridian's 47 CPO-related patents create a patent thicket or other intellectual property barrier that forecloses entry — and in fact, many of Meridian's patents relate to specific design implementations rather than to the fundamental technology of CPO transceiver modules, leaving ample design space for competitors to develop alternative implementations.
The AG's failure to allege plausible barriers to entry or expansion is fatal to its claim, because without such barriers, the merged firm cannot exercise durable market power, and the acquisition cannot substantially lessen competition.
4. The AG's Vertical Foreclosure Theory Is Speculative and Unsupported. The AG advances a theory of vertical foreclosure, alleging that Halcyon's "vertically integrated position" — combining the design of analog and mixed-signal controlling ICs with the design and manufacture of silicon photonics modules — would allow Halcyon to "degrade interoperability with competitors' switch ASICs and raise rivals' costs." The AG contends that this vertical integration creates the ability and incentive for Halcyon to foreclose competitors by making it more difficult or costly for competitors' photonics modules to interoperate with Halcyon's controlling ICs, or for Halcyon's photonic