Federal Register / Vol. 66, No. 245 / Thursday, December 20, 2001 / Notices 65713
persons. Comments received during this NW., Washington, DC 20580, (202) 326– Orders’’) pursuant to which period will become part of the public 2805. Respondents agree to be bound by a record. After 30 days, the Commission SUPPLEMENTARY INFORMATION: Pursuant proposed consent order that requires will again review the proposed consent to section 6(f) of the Federal Trade divestiture of certain assets (‘‘Proposed order and the comments received and Commission Act, 38 Stat. 721, 15 U.S.C. Consent Order’’) and an order that will decide whether it should withdraw 46(f), and § 2.34 of the Commission’s requires Proposed Respondents to from the agreement or make the rules of practice, 16 CFR 2.34, notice is maintain certain assets pending proposed consent order final. hereby given that the above-captioned divestiture (‘‘Asset Maintenance By accepting the proposed consent consent agreement containing a consent Order’’). The Proposed Order remedies order subject to final approval, the order to cease and desist, having been the likely anticompetitive effects arising Commission anticipates that the filed with and accepted, subject to final from Proposed Respondents’ proposed competitive problems alleged in the approval, by the Commission, has been merger, as alleged in the Complaint. The complaint will be resolved. The purpose placed on the public record for a period Asset Maintenance Order preserves of this analysis is to invite public of thirty (30) days. The following competition pending divestiture. comment on the proposed consent Analysis to Aid Public Comment II. Description of the Parties and the order, including the proposed sale of describes the terms of the consent Transaction supermarkets to Kroger and Winn-Dixie, agreement, and the allegations in the in order to aid the Commission in its complaint. An electronic copy of the Nestle Holdings, Inc., is a corporation determination of whether to make the full text of the consent agreement organized, existing, and doing business proposed consent order final. This package can be obtained from the FTC under and by virtue of the laws of the analysis is not intended to constitute an Home Page (for December 11, 2001), on State of Delaware. This subsidiary of official interpretation of the proposed the World Wide Web, at http:// Nestle S.A. is the U.S. corporation that consent order nor is it intended to www.ftc.gov/os/2001/12/index.htm. A will be purchasing all of the outstanding modify the terms of the proposed paper copy can be obtained from the Ralston shares. Nestle SA, the largest consent order in any way. FTC Public Reference Room, Room 130- food corporation in the world, H, 600 Pennsylvania Avenue, NW., manufactures, distributes, and sells By direction of the Commission. dairy products, soluble coffee, roast and Donald S. Clark, Washington, DC 20580, either in person or by calling (202) 326–2222. ground coffee, mineral water, beverages, Secretary. Public comments are invited, and may breakfast cereals, coffee creamers, infant [FR Doc. 01–31338 Filed 12–19–01; 8:45 am] be filed with the Commission in either foods and dietetic products, culinary BILLING CODE 6750–01–P paper or electronic form. Comments products (seasonings, canned foods, filed in paper form should be directed pasta, sauces, etc.), frozen foods, ice to: FTC/Office of the Secretary, Room cream, refrigerated products (e.g., FEDERAL TRADE COMMISSION 159–H, 600 Pennsylvania Avenue, NW., yogurt, desserts, pasta, sauces), chocolate, food services, [File No. 011 0083] Washington, DC 20580. If a comment contains nonpublic information, it must ophthalmological products, cosmetics, and pet foods. Nestle sells its pet food Nestle Holdings, Inc. and Ralston be filed in paper form, and the first page products in the U.S. through its Friskies Purina Co.; Analysis To Aid Public of the document must be clearly labeled division, including Alpo, Come ‘‘N Get Comment ‘‘confidential.’’ Comments that do not It, Mighty Dog, Friskies, Fancy Feast, contain any nonpublic information may AGENCY: Jim Dandy, and Chef’s Blend. Nestle had Federal Trade Commission. instead be filed in electronic form (in worldwide sales of approximately 81.4 ACTION: Proposed consent agreement. ASCII format, WordPerfect, or Microsoft billion Swiss francs and United States Word) as part of or as an attachment to SUMMARY: The consent agreement in this sales of approximately $7.8 billion for email messages directed to the following matter settles alleged violations of all products in 2000. email box: [email protected]. federal law prohibiting unfair or Ralston is a corporation organized, Such comments will be considered by deceptive acts or practices or unfair existing, and doing business under and the Commission and will be available methods of competition. The attached by virtue of the laws of the State of for inspection and copying at its Analysis to Aid Public Comment Missouri. Ralston is the world’s leading principal office in accordance with describes both the allegations in the producer of dry dog and dry and soft- § 4.9(b)(6)(ii) of the Commission’s rules draft complaint that accompanies the moist cat foods. The brands that Ralston of practice, 16 CFR 4.9(b)(6)(ii)). consent agreement and the terms of the manufacturers, distributes, and sells consent order—embodied in the consent Analysis of Proposed Consent Order To include Dog Chow, Puppy Chow, Cat agreement—that would settle these Aid Public Comment Chow, Kitten Chow, Purina Special allegations. Care, Meow Mix, Purina O.N.E., Purina I. Introduction Pro Plan, Fit & Trim, Clinical Nutrition DATES: Comments must be received on The Federal Trade Commission Management, Alley Cat, Deli-Cat, or before January 11, 2002. (‘‘Commission’’) has issued a complaint Thrive, Tender Vittles, Happy Cat, ADDRESSES: Comments filed in paper (‘‘Complaint’’) alleging that the Chuck Wagon Stampede, and Main form should be directed to: FTC/Office proposed merger of Nestle Holdings, Stay. Ralston had worldwide sales of of the Secretary, Room 159-H, 600 Inc. (‘‘Nestle’’), and Ralston Purina approximately $3 billion and United Pennsylvania Avenue, NW., Company (‘‘Ralston’’) (collectively States sales of approximately $2.36 Washington, DC 20580. Comments filed ‘‘Proposed Respondents’’) would violate billion for all products for fiscal year in electronic form should be directed to: section 7 of the Clayton Act, as 2000. [email protected], as amended, 15 U.S.C. 18, and section 5 of Pursuant to a merger agreement dated prescribed below. the Federal Trade Commission Act, as January 15, 2001, Nestle agreed to FOR FURTHER INFORMATION CONTACT: amended, 15 U.S.C. 45, and has entered purchase all of Ralston’s outstanding Phillip L. Broyles, Bureau of into an agreement containing consent shares of common stock in a transaction Competition, 600 Pennsylvania Avenue, orders (‘‘Agreement Containing Consent valued at $ 10.3 billion. Nestle intends
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to call the merged entity Nestle Purina will produce and sell the brands to be Paragraph II.D. of the Proposed Order Pet Care. divested has expertise in manufacturing requires that Proposed Respondents dry pet foods. Childs also owns the grant a patent license to Childs for the III. The Complaint Hartz Mountain Corporation (‘‘Hartz’’), a coating applied to Meow Mix products. The complaint alleges that the market leading manufacturer and distributor of The license covers current Meow Mix in which to analyze the competitive pet supplies in the United States. Hartz products as well as any pet product effects of the proposed transaction is the sells its pet supplies and treats in the Childs chooses to manufacture in the sale of dry cat food in the United States. same retail outlets as the brands to be future. Paragraph II.F. of the Proposed Wet and dry cat foods constitute divested. Order requires Proposed Respondents to separate product markets. Wet cat food provide Childs with a supply of Meow differs from dry cat food in production, IV. Terms of the Proposed Order Mix and Alley Cat products for a period ingredients, appearance, packaging, The Proposed Order resolves the of up to two years from the date of the aroma, price, and convenience. Commission’s antitrust concerns with divestiture. Paragraph II.G. requires Ralston’s share of the dry cat food the merger as discussed below. Proposed Respondents to provide market across all channels of technical assistance to Childs, as distribution is approximately 34%. A. Divestiture Provisions needed, for a period of up to two years Nestle has a market share of Paragraph II.A. of the Proposed Order from the date of divestiture, which approximately 11% of the dry cat food requires Proposed Respondents to divest includes expert advice, assistance, and market across all channels of to Childs all of Proposed Respondents’ training relating to the manufacture of distribution. The dry cat food market in rights, titles, and interests in and to all the Meow Mix and Alley Cat brands. the United States is moderately assets relating to the Meow Mix and Paragraph VI of the Proposed Order concentrated. The merger of Nestle and Alley Cat brands. The Meow Mix brand requires Childs, for a period of 5 years, Ralston would substantially increase includes the original Meow Mix product to obtain the Commission’s approval concentration in this market, raising the and Meow Mix Seafood Middles. before selling all or substantially all of HHI level to more than 2400, an Specifically, Proposed Respondents the United States assets acquired in the increase of more than 750 points. Entry must divest all interests in the research, divestiture. The Commission does not would not be timely, likely, or sufficient development, manufacture, distribution, routinely require acquirers of divested to prevent anti-competitive effects in the marketing, and sales of the Meow Mix assets to obtain approval before relevant market. and Alley Cat brands of dry cat food subsequent sales. In cases, however, The Complaint alleges that the merger where the proposed acquirer’s current of Nestle and Ralston would products anywhere in the United States and Canada. Proposed Respondents also plans indicate that there is a high substantially lessen competition in the probability that the assets will be resold, must divest any and all trademarks, dry cat food market in violation of possibly within two-five years, it is service marks, trademark and service section 7 of the Clayton Act, as appropriate for the Commission to mark registrations, and pending amended, 15 U.S.C. 18, and section 5 of include such a provision. C.f., e.g., the trademark and service mark the Federal Trade Commission Act, as Commission’s final order in Albertson’s, registrations that relate exclusively to amended, 15 U.S.C. 45, in the following Inc., Docket No. C–3986. ways, among others: (a) By eliminating the Meow Mix or Alley Cat brand of dry direct competition in the sale of dry cat cat food products outside of the United B. Monitor Trustee Provisions food between Nestle and Ralston; and States and Canada. Proposed Paragraph IV of the Proposed Order (b) by increasing the likelihood that the Respondents must further divest all appoints a Monitor Trustee to monitor combination of Nestle and Ralston will inventories and supplies held by, or compliance with the terms of the Order. unilaterally exercise market power; each under their control; all intellectual The Proposed Consent Order provides of which increases the likelihood that property owned by or licensed to the Monitor Trustee with the power and prices will be higher with the Proposed Respondents; copies of all authority to monitor the Proposed acquisition than they would be absent customer lists and supplier lists; all Respondents’ compliance with the the acquisition. rights of Proposed Respondents under terms of the Proposed Consent Order, The Proposed Consent Order requires any contract; all governmental and full and complete access to Proposed Respondents to divest the approvals, consents, licenses, permits, personnel, books, records, documents, Meow Mix and Alley Cat brands of dry waivers, or other authorizations held by and facilities of the Proposed cat food to an up-front buyer, J.W. Proposed Respondents, to the extent Respondents to fulfill that Childs Equity Partners II, L.P. transferable; all rights of Proposed responsibility. In addition, the Monitor (‘‘Childs’’), no later than 20 days after Respondents under any warranty and Trustee may request any other relevant the Commission accepts the Proposed guarantee, express or implied; and information that relates to the Proposed Consent Agreement for public comment copies of all relevant portions of books, Respondents’ obligations under the or January 31, 2002, whichever is later, records, and files held by, or under the Proposed Consent Order. The Proposed to remedy the Commission’s concerns. control of, Proposed Respondents. Consent Order precludes Proposed Childs is a Boston-based investment Paragraph II.C. further provides that if Respondents from taking any action to firm founded in 1995. Structured as a the Commission determines that Childs interfere with or impede the Monitor limited partnership, Childs has total is not an acceptable purchaser of the Trustee’s ability to perform his or her committed capital of $982 million. The assets to be divested, Proposed responsibilities or to monitor Commission is satisfied that Childs’ Respondents shall immediately compliance with the Proposed Consent acquisition of the divested assets will terminate or rescind the sale of the Order. restore the competition lost as a result assets to be divested to Childs and The Monitor Trustee may hire such of the proposed merger of Nestle and divest these assets at no minimum price consultants, accountants, attorneys, and Ralston. Childs has a past history of to another purchaser that receives the other assistants as are reasonably successfully developing the business of prior approval of the Commission no necessary to carry out the Monitor consumer products companies. The later than 180 days from the date that Trustee’s duties and responsibilities. designated CEO of the businesses that this Proposed Order becomes final. The Proposed Consent Order requires
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the Proposed Respondents to bear the By direction of the Commission, of acquired firms, and has some cost and expense of hiring these Chairman Muris recused. experience in the pet industry with its assistants. Hartz Mountain line of pet care Donald S. Clark, products. These factors have led me to C. Other Terms Secretary. conclude that J.W. Childs is very likely Paragraphs V and VII–X of the Statement of Commissioner Sheila F. to restore lost competition and preserve Proposed Consent Order detail certain Anthony choices for dry cat food consumers. I wish to make it clear, however, that general provisions. Paragraph V Yesterday, the Commission accepted I remain skeptical of divestiture plans authorizes the Commission appoint a for public comment a proposed consent that require a purchaser to take brands divestiture trustee in the event Nestle agreement in this case. The evidence alone, then build a competitive developed during the Commission’s fails to divest the assets as required by company from scratch. In addition, I investigation unequivocally the Proposed Consent Order. Paragraph will closely examine divestiture demonstrates that, absent the proposed VII requires Respondents to provide a proposals where the buyer is a financial relief, the acquisition by Nestle of copy of the Proposed Consent Order to company. In most cases, I would prefer Ralston would violate the antitrust laws each of their officers, employees, and to see divested assets go to a company and likely would result in harm to agents with managerial responsibilities with a stronger likelihood of operating consumers of dry cat food. The parties for any obligation under the Proposed the business for the long term. Order. Paragraph VIII requires Proposed have agreed to divest Ralston’s Meow Respondents to provide the Commission Mix and Alley Cat brands to J.W. Childs, Concurring Statement of Commissioner with periodic reports of compliance a private equity investment firm. While Mozelle W. Thompson with the Proposed Consent Order. I have concurred in the Commission’s The Commission today has voted to Paragraph IX provides for notification to decision, I write separately to express accept a Consent Order that remedies the Commission in the event of any my concerns about some aspects of the competitive concerns in the dry cat food changes in the corporate Proposed divestiture proposal. market stemming from Nestle S.A.’’s Respondents. Paragraph X requires The assets to be divested consist of (‘‘Nestle’’) proposed acquisition of Proposed Respondents to grant access to two proven cat food brands and little Ralston Purina Co. (‘‘Ralston’’). any authorized Commission else. Standing alone, these brands do Pursuant to the proposed Consent not constitute a complete, ongoing representative for the purpose of Agreement and Order, Ralston would business. Rather, J.W. Childs will have determining or securing compliance divest its top-selling Meow Mix brand to create a new competitor largely from with the Proposed Consent Order. and its Alley Cat brand to investment whole cloth. In order to turn the Paragraph XI terminates the Proposed firm J.W. Childs Equity Partners II, L.P. divested assets into a viable business Consent Order after ten years from the (‘‘Childs’’), owners of the Hartz entity, J.W. Childs will need to develop, Mountain line of specialty pet care date the Proposed Consent Order among other things, its own research becomes final. products. For me, this decision was and development program, difficult because the continued V. Opportunity for Public Comment manufacturing facilities, distribution competitiveness of these brands is so system, and sales and marketing important to consumers. The Proposed Consent Order has been operations. Such a prospect is daunting As always, the key issue facing the placed on the public record for thirty even when the purchaser is a Commission in its analysis of the (30) days for receipt of comments by participant in the same or a closely proposed remedy is whether or not the interested persons. The Commission has related business—which is why remedy will restore competition that also issued its Complaint in this matter divestitures of stand-alone businesses would be lost as a result of the proposed as well as the Asset Maintenance Order. present the most successful formula for merger. This is at its essence a factual 1 Comments received during this thirty restoring competition. inquiry, involving consideration of a day comment period will become part of The risk to consumers is further multitude of factors, including the heightened where, as here, the proposed the public record. After thirty days, the extent of the prospective buyer’s purchaser is a financial buyer. When Commission will again review the industry know-how, its financial compared to dedicated industry Proposed Consent Order and the viability, its future marketing plans, and participants, investment firms may have comments received and will decide its capacity to research, develop, and quite different incentives and goals in whether it should withdraw from the make innovations to the relevant operating a business. For example, a Proposed Consent Order or make final products. the agreement’s Proposed Consent financial buyer’s business plan often Our analysis here was made all the Order. involves selling the acquired business more difficult in that we were presented within a relatively short period of time. By accepting the Proposed Consent with a buyer that does not have a record In the end, I am convinced that this Order subject to final approval, the of experience in the market in question, is a rather unique situation and that Commission anticipates that the therefore, historical indicia of market consumers will be adequately protected competitive problems alleged in the competitiveness were not available for by the proposed relief. Manufacturing complaint will be resolved. The purpose the Commission’s review. As such, the and distribution in this industry of this analysis is to invite public Commission undertook an segment is routinely and economically comment on the Proposed Consent extraordinarily rigorous analysis of contracted out through ‘‘co-packing’’ Agreement, to aid the Commission in its Childs and its ability to be competitive arrangements. Moreover, this particular determination of whether it should with the assets in question. Ultimately, financial buyer, J.W. Childs, is make final the Proposed Order my primary reservation was not about financially strong, has a proven track contained in the agreement. This Childs’ ability to be competitive in the record of good management and growth analysis is not intended to constitute an dry cat food marketplace, but rather that official interpretation of the Proposed 1 See, e.g., Federal Trade Commission Bureau of Childs, as a financial buyer, might in the Order, nor is it intended to modify the Competition Staff, A Study of the Commission’s near term re-sell the assets in question terms of the Proposed Order in any way. Divestiture Process (1999). to a buyer who will operate the business
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poorly or not at all, thus defeating the because it might resell the divested regulatory requirements. The Advisory purpose of the Commission’s Order. assets in the near future. It is possible Committee will advise and make These concerns are addressed in that this close scrutiny would go for recommendations for changes that Section VI of the proposed Order, which naught if J.W. Childs were promptly to would be beneficial in four broad areas: provides that Childs’ will not sell the resell the assets to a less qualified buyer. health care delivery, health systems acquired assets within five years of the On the other hand, this risk is always operations, biomedical and health date of the Order without prior approval present—even had the assets remained research, and the development of of the Commission. While generally I in Ralston’s hands. I think that our pharmaceuticals and other products. am cautious about including lengthy approval of J.W. Childs as the buyer All meetings and hearings of the oversight provisions in such orders, it is means that we have determined that, in Committee are open to the general appropriate in this case because these spite of any possible resale plans, the public. During each meeting, invited provisions ensure that in the event of a company will develop and employ the witnesses will address how regulations resale by Childs, the Commission will assets as vigorously as Ralston would affect health-related issues. Meeting be able to assure that the prospective have done. Once we have made this agendas will also allow time for public buyer is committed to enhancing the determination, I question the need for comment. Additional information on assets in question, thus maintaining the imposing a prior approval requirement each meeting’s agenda and list of integrity of the Commission’s Order. on J.W. Childs that we would not have participating witnesses will be posted on the Committee’s Web site prior to the Concurring Statement of Commissioner imposed on a buyer that was less likely meetings (http:// Orson Swindle to resell the assets. I also think that the prior approval www.regreform.hhs.gov). The Commission has accepted for requirement may require that the DATES: The first meeting of the public comment a consent agreement to Commission make a difficult Secretary’s Advisory Committee on resolve complaint allegations that the determination. For example, assume Regulatory Reform will be held on effect of Nestle S.A.’’s (‘‘Nestle’’) that J.W. Childs seeks prior approval to Monday, January 7, 2002, from 9 a.m. to acquisition of Ralston Purina Co. resell the assets four years after the 5:30 p.m. and on Tuesday, January 8, (‘‘Ralston’’) may be to substantially Nestle/Ralston merger has been 2002, from 8 a.m. to 1 p.m. lessen competition in the market for the consummated. The Commission ADDRESSES: The Secretary’s Advisory sale of dry cat food in the United States. presumably will have to determine To remedy these competitive concerns, Committee on Regulatory Reform will whether the prospective buyer of the meet on Monday, January 7, in the Ross the merging parties have entered into a resold assets will compete as effectively consent agreement under which Ralston Auditorium at Providence Hospital, as Ralston would have competed in the would divest its Meow Mix and Alley 1150 Varnum Street NE., Washington, absence of the Nestle/Ralston merger. Cat brands to J.W. Childs Equity DC 20017. On Tuesday, January 8, the Given the passage of four years since the Partners II, L.P. (‘‘J.W. Childs’’), an Committee will meet in Room 800 of the merger and the dynamic nature of investment firm that owns the Hartz line Hubert H. Humphrey Building, 200 markets, it may be difficult for the of pet care products. Because the Independence Avenue SW., Commission to make this determination divestiture to J.W. Childs is likely to Washington, DC 20201. with a high degree of confidence. FOR FURTHER INFORMATION CONTACT: replace the competition in the market I welcome public comments on the for dry cat food that otherwise would Christy Schmidt, Executive Coordinator, prior approval provision included in have been lost due to the Nestle/Ralston Secretary’s Advisory Committee on Paragraph VI of the Proposed Consent merger, I have voted to accept the Regulatory Reform, Office of the Order, including any suggestions for consent agreement for public comment. Assistant Secretary for Planning and One provision in the proposed distinguishing between situations where Evaluation, 200 Independence Avenue, consent agreement is unusual and may the additional relief may be justified SW., Room 801, Washington, DC 20201, raise concerns, however. Paragraph VI and those where it is not. (202) 401–5182. of the Proposed Consent Order requires [FR Doc. 01–31339 Filed 12–19–01; 8:45 am] SUPPLEMENTARY INFORMATION: J.W. Childs, for a period of five years, BILLING CODE 6750–01–P Providence Hospital and the Hubert H. to obtain Commission approval before Humphrey Building are in compliance selling all or substantially all of the with the Americans with Disabilities assets acquired in the divestiture. The DEPARTMENT OF HEALTH AND Act. Anyone planning to attend the Analysis to Aid Public Comment HUMAN SERVICES meeting who requires special disability- explains that the Commission does not related arrangements such as sign- routinely impose such prior approval Office of the Assistant Secretary for language interpretation should provide requirements, but it is appropriate to do Planning and Evaluation notice of their need by Friday, so ‘‘where the proposed acquirer’s December 31, 2001. Please make any Secretary’s Advisory Committee on current plans indicate that there is a request to Michael Starkweather ‘‘ Regulatory Reform; Notice of Meeting high probability that the assets will be phone: 301–628–3141; fax: 301–628– resold, possibly within 2–5 years.’’ The ACTION: Notice of meeting. 3101; email: [email protected]. purpose of the prior approval On June 8, 2001, HHS Secretary requirement is to make certain that SUMMARY: Notice is hereby given of a Thompson announced a Department- whoever buys the resold assets from meeting by the Department of Health wide initiative to reduce regulatory J.W. Childs would be a sufficient and Human Services (HHS) Secretary’s burdens in health care, to improve competitor to remedy the lessening of Advisory Committee on Regulatory patient care, and to respond to the competition from the Nestle/Ralston Reform. As governed by the Federal concerns of health care providers and transaction alleged in the complaint. Advisory Committee Act in accordance industry, State and local Governments, See Paragraph VI.F. of the Proposed with section 10(a)(2), the Secretary’s and individual Americans who are Consent Order. Advisory Committee on Regulatory affected by HHS rules. As part of this I agree that J.W. Childs warranted a Reform is seeking guidance for the initiative, the Department is establishing hard look as a prospective buyer Department’s efforts to streamline the Secretary’s Advisory Committee on
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