[Federal Register Volume 59, Number 143 (Wednesday, July 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18260]


[[Page Unknown]]

[Federal Register: July 27, 1994]


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FEDERAL TRADE COMMISSION
[File No. 941 0075]

 

Revco D.S., Inc.; Proposed Consent Agreement With Analysis to Aid 
Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair acts and practices and unfair methods of competition, this 
consent agreement, accepted subject to final Commission approval, would 
require, among other things, a Ohio-based drugstore chain to divest, 
within one year of the order, to a Commission approved acquirer, all 
assets related to the retail sale of prescription drugs in either the 
respondent's store or in the acquired Hook-SupeRx (HSI) retail store in 
each of three geographic areas, and to complete the divestiture within 
one year. If not complete in that period of time, the order would 
require the respondent to consent to the appointment of a trustee to 
divest the assets. In addition, the proposed consent agreement would 
require the respondent to obtain prior Commission approval, for ten 
years, before acquiring any similar business interest in any of the 
three specified towns.

DATES: Comments must be received on or before September 26, 1994.

ADDRESSES: Comments should be directed to FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., N.W., Washington, DC. 20580.

FOR FURTHER INFORMATION CONTACT:Laura Wilkinson or Ann Malester, FTC/S-
2224, Washington, DC 20580. (202) 226-2830 or 326-2682.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the following consent agreement containing a consent order 
to divest, having been filed with and accepted, subject to final 
approval, by the Commission, has been placed on the public record for a 
period of sixty (60) days. Public comment is invited. Such comments or 
views will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
Section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

    In the matter of Revco D.S., Inc., a corporation. File No. 941-
0075.

Agreement Containing Consent Order

    The Federal Trade Commission (``Commission'') having initiated an 
investigation of the proposed acquisition of all of the voting stock of 
Hook SupeRx, Inc. (``HSI''), by Revco D.S., Inc. (``Revco''), and it is 
now appearing that Revco, hereinafter sometimes referred to as 
``Proposed Respondent,'' is willing to enter into an agreement 
containing an order (``Agreement'') to divest certain assets, and to 
cease and desist from making certain acquisitions, and providing for 
certain other relief:
    It is hereby agreed by and between Proposed Respondent, by its duty 
authorized officers and attorneys, and counsel for the Commission that:
    1. Proposed Respondent Revco is a corporation organized, existing, 
and doing business under and by the virtue of the laws of the State of 
Delaware with its office and principal place of business located at 
1925 Enterprise Parkway, Twinsburg, Ohio 44087.
    2. Proposed Respondent admits all the jurisdictional facts set 
forth in the draft of complaint here attached.
    3. Proposed Respondent waives:
    a. any further procedural steps;
    b. the requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law;
    c. all rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement; 
and
    d. any claim under the Equal Access to Justice Act.
    4. This Agreement shall not become part of the public record of the 
proceeding unless and until it is accepted by the Commission. If this 
Agreement is accepted by the Commission it, together with the draft of 
complaint contemplated thereby, will be placed on the public record for 
a period of sixty (60) days and information in respect thereto publicly 
released. The Commission thereafter may either withdraw its acceptance 
of this agreement and so notify the Proposed Respondent, in which event 
it will take such action as it may consider appropriate, or issue and 
serve its complaint (in such form as the circumstances may require) and 
decision, in disposition of the proceeding.
    5. This Agreement is for settlement purposes only and does not 
constitute an admission by Proposed Respondent that the law has been 
violated as alleged in the draft of complaint here attached, or that 
the facts as alleged in the draft complaint, other than the 
jurisdictional facts, are true.
    6. This Agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Section 2.34 of the 
Commission's Rules, the Commission may, without further notice to the 
Proposed Respondent, (1) issue its complaint corresponding in form and 
substance with the draft of complaint here attached and its decision 
containing the following Order to divest and to cease and desist in 
disposition of the proceeding, and (2) make information public with 
respect thereto. When so entered, the Order shall have the same force 
and effect and may be altered, modified, or set aside in the same 
manner and within the same time provided by statute for other orders. 
The Order shall become final upon service. Delivery by the United 
States Postal Service of the complaint and decision containing the 
agreed-to Order to Proposed Respondent's address as stated in this 
Agreement shall constitute service. Proposed Respondent waives any 
right it may have to any other manner of services. The complaint may be 
used in construing the terms of the Order, and no agreement, 
understanding, representation, or interpretation not contained in the 
Order or the agreement may be used to vary or contradict the terms of 
the Order.
    7. Proposed Respondent has read the proposed Complaint and Order 
contemplated hereby. Proposed Respondent understands that once the 
Order has been issued, it will be required to file one or more 
compliance reports showing that it has fully complied with the Order. 
Proposed Respondent further understands that it may be liable for civil 
penalties in the amount provided by law for each violation of the Order 
after it becomes final.

Order

I
    It is ordered That, as used in this Order, the following 
definitions shall apply:
    A. ``Revco'' means Revco D.S., Inc., its predecessors, 
subsidiaries, divisions, groups and affiliates controlled by Revco, and 
their respective directors, officers, employees, agents, 
representatives, and their respective successors and assigns.
    B. ``Commission'' means the Federal Trade Commission.
    C. ``Acquisition'' means the acquisition of all the voting stock of 
Hook-SupeRx, Inc. (``HSI`'') by Respondent Revco.
    D. ``Acquirer'' means the party or parties to whom Respondent Revco 
divests the assets herein ordered to be divested.
    E. ``Prescription drugs'' means ethical drugs available at retail 
only by prescription.
    F. ``HSI Pharmacy Business'' means HSI's business of selling 
prescription drugs at any of the retail stores listed in Paragraph 
I.(J). of this Order, but does not include HSI's business of selling 
other products in those retail stores.
    G. ``HSI Pharmacy Assets'' means all assets constituting the HSI 
Pharmacy Business, excluding those assets pertaining to the Hook, 
SupeRx, and Brooks trade names, trade dress, trade marks and service 
marks, and to Revco's proprietary point of sale equipment or its 
PAL system, and including but not limited to:
    1. Leases, at the Acquirer's option;
    2. zoning approvals and registrations, at the Acquirer's option;
    3. books, records, manuals, and operations reports relating to the 
HSI Pharmacy Business, but only if the divestiture is to an Acquirer 
that does not already operate a pharmacy in any location;
    4. inventory instruction, or, at the Acquirer's option, lists of 
stock keeping units (``SKUs''), i.e., all forms, package sizes and 
other units in which prescription drugs are sold and which are used in 
records of sales and inventories;
    5. lists of all prescription drug customers, including but not 
limited to third party insurers, including all files of names, 
addresses, and telephone numbers of the individual customer contacts, 
the unit and dollar amounts of sales, by product, to each customer, and 
store profit and loss statement(s);
    6. all names and addresses of prescription drug manufacturers and 
distributors that supply or have supplied HSI within the six months 
preceding the date this Order becomes final; and
    7. goodwill, tangible and intangible, utilized in the sale of 
prescription drugs.
    H. ``Revco Pharmacy Business'' means Revco's business of selling 
prescription drugs at any of the retail stores listed in Paragraph 
I.(J). of this Order, but does not include Revco's business of selling 
other products in those retail stores.
    I. ``Revco Pharmacy Assets'' means all assets constituting the 
Revco Pharmacy Business, excluding those assets pertaining to the Revco 
trade names, trade dress, trade marks and service marks, and to Revco's 
proprietary point of sale equipment or its PAL system, and 
including but not limited to:
    1. Leases, at the Acquirer's option;
    2. zoning approvals and registrations, at the Acquirer's option;
    3. books, records, manuals, and operations reports, relating to the 
Revco Pharmacy Business, but only if the divestiture is to an Acquirer 
that does not already operate a pharmacy in any location;
    4. inventory instruction, or, at the Acquirer's option, lists of 
SKUs, i.e., all forms, package sizes and other units in which 
prescription drugs are sold and which are used in records of sales and 
inventories;
    5. lists of all prescription drug customers, including but not 
limited to third party insurers, including all files of names, 
addresses, and telephone numbers of the individual customer contacts, 
the unit and dollar amounts of sales, by product, to each customer, and 
store profit and loss statement(s);
    6. all names and addresses of prescription drug manufacturers and 
distributors that supply or have supplied Revco within the six months 
preceding the date this Order becomes final; and
    7. goodwill, tangible and intangible, utilized in the sale of 
prescription drugs.
    J. ``Assets To Be Divested'' means either the HSI Pharmacy Assets 
or the Revco Pharmacy Assets constituting the HSI Pharmacy Business or 
the Revco Pharmacy Business in the following cities or towns:
    1. Covington, Virginia;
    2. Marion, Virginia; and
    3. Radford, Virginia.
    K. ``Competitiveness, viability and marketability'' of the Assets 
To Be Divested mean that Respondent shall continue the operation of the 
Assets To Be Divested in the ordinary course of business without 
material change or alteration that would adversely affect the value or 
goodwill of the Assets To Be Divested.
II
    It is further ordered That:
    A. Respondent shall divest, absolutely and in good faith, within 
twelve (12) months of the date this Order becomes final, the Assets To 
Be Divested.
    B. Respondent shall divest the Assets To Be Divested only to an 
acquirer or acquirers that receive the prior approval of the Commission 
and only in a manner that receives the prior approval of the 
Commission. The purpose of the divestiture of the Assets To Be Divested 
is to ensure the continued use of the Assets To Be Divested as ongoing 
viable pharmacies engaged in the same businesses in which the Assets To 
Be Divested are presently employed and to remedy the lessening of 
competition resulting from the acquisition as alleged in the 
Commission's complaint.
    C. Pending divestiture of the Assets To Be Divested, Respondent 
shall take such actions as are necessary to maintain the 
competitiveness, viability and marketability of the Assets To Be 
Divested and to prevent the destruction, removal, wasting, 
deterioration, or impairment of any Assets To Be Divested except for 
ordinary wear and tear.
    D. If a divestiture includes a lease of physical space, and if 
pursuant to that lease Respondent through default of the lease or 
otherwise regains possession of the space, Respondent must notify the 
Commission of such repossession within thirty (30) days and must 
redivest such assets or interest pursuant to Paragraph II of this Order 
within six (6) months of such repossession. If Respondent has not 
redivested such assets or interest pursuant to Paragraph II of this 
Order within six (6) months of such repossession, the provisions of 
Paragraph III shall apply to these assets.
III
    It is further ordered That:
    A. If Respondent has not divested, absolutely and in good faith and 
with the Commission's prior approval, the Assets To Be Divested within 
twelve (12) months of the date this Order becomes final, the Commission 
may appoint a trustee to divest the Assets To Be Divested. In the event 
the Commission or the Attorney General brings an action pursuant to 
Sec. 5(l) of the Federal Trade Commission Act, 15 U.S.C. Sec. 45(l), or 
any other statute enforced by the Commission, Respondent shall consent 
to the appointment of a trustee in such action. Neither the appointment 
of a trustee nor a decision not to appoint a trustee under this 
Paragraph shall preclude the Commission or the Attorney General from 
seeking civil penalties or any other relief available to it, including 
a court-appointed trustee, pursuant to Sec. 5(l) of the Federal Trade 
Commission Act, or any other statute enforced by the Commission, for 
any failure by Respondent to comply with this Order.
    B. If a trustee is appointed by the Commission or a court pursuant 
to Paragraph III.A. of this Order, Respondent shall consent to the 
following terms and conditions regarding the trustee's powers, duties, 
authority, and responsibilities:
    1. The Commission shall select the trustee, subject to the consent 
of Respondent, which consent shall not be unreasonably withheld. The 
trustee shall be a person with experience and expertise in acquisitions 
and divestitures. If Respondent has not opposed, in writing, including 
the reasons for opposing, the selection of any proposed trustee within 
ten (10) days after notice by the staff of the Commission to Respondent 
of the identity of any proposed trustee, Respondent shall be deemed to 
have consented to the selection of the proposed trustee.
    2. Subject to the prior approval of the Commission, the trustee 
shall have the exclusive power and authority to divest the Assets To Be 
Divested.
    3. Within ten (10) days after appointment of the trustee, 
Respondent shall execute a trust agreement that, subject to the prior 
approval of the Commission and, in the case of a court-appointed 
trustee, of the court, transfers to the trustee all rights and powers 
necessary to permit the trustee to effect the divestiture required by 
this Order.
    4. The trustee shall have twelve (12) months from the date the 
Commission approves the trust agreement described in Paragraph III.B.3 
to accomplish the divestiture, which shall be subject to the prior 
approval of the Commission. If, however, at the end of the twelve-month 
period the trustee has submitted a plan of divestiture or believes that 
divestiture can be achieved within a reasonable time, the divestiture 
period may be extended by the Commission, or in the case of a court-
appointed trustee by the court.
    5. The trustee shall have full and complete access to the 
personnel, books, records, and facilities related to the Assets To Be 
Divested, or to any other relevant information, as the trustee may 
reasonably request. Respondent shall develop such financial or other 
information as such trustee may reasonably request and shall cooperate 
with the trustee. Respondent shall take no action to interfere with or 
impede the trustee's accomplishment of the divestiture. Any delays in 
divestiture caused by Respondent shall extend the time for divestiture 
under this Paragraph in an amount equal to the delay, as determined by 
the Commission or, for a court-appointed trustee, by the court.
    6. The trustee shall use his or her best efforts to negotiate the 
most favorable price and terms available in each contract that is 
submitted to the Commission subject to Respondent's absolute and 
unconditional obligation to divest at no minimum price. The divestiture 
shall be made in the manner and to the acquirer or acquirers as set out 
in Paragraph II of this Order. Provided, however, if the trustee 
receives bona fide offers from more than one acquirer, and if the 
Commission determines to approve more than one such acquirer, the 
trustee shall divest to the acquirer or acquirers selected by 
Respondent from among those approved by the Commission.
    7. The trustee shall serve, without bond or other security, at the 
cost and expense of Respondent, on such reasonable and customary terms 
and conditions as the Commission or a court may set. The trustee shall 
have authority to employ, at the cost and expense of Respondent, such 
consultants, accountants, attorneys, investment bankers, business 
brokers, appraisers, and other representatives and assistants as are 
reasonably necessary to carry out the trustee's duties and 
responsibilities. The trustee shall account for all monies derived from 
the divestiture and all expenses incurred. After approval by the 
Commission and, in the case of a court-appointed trustee, by the court, 
of the account of the trustee, including fees for his or her services, 
all remaining monies shall be paid at the direction of Respondent and 
the trustee's power shall be terminated. The trustee's compensation 
shall be based at least in significant part on a commission arrangement 
contingent on the trustee's divesting the Assets To Be Divested.
    8. Respondent shall indemnify the trustee and hold the trustee 
harmless against any losses, claims, damages, liabilities, or expenses 
arising out of, or in connection with, the performance of the trustee's 
duties, and Respondent shall either defend against such claims or pay 
the trustee's expenses, including all reasonable fees of counsel and 
other expenses incurred in connection with the preparation for, or 
defense of any such claim, whether or not resulting in any liability, 
except to the extent that such liabilities, losses, damages, claims, or 
expenses result from misfeasance, gross negligence, willful or wanton 
acts, or bad faith by the trustee.
    9. If the trustee ceases to act or fails to act diligently, a 
substitute trustee shall be appointed in the same manner as provided in 
Paragraph III.A. of this Order.
    10. The Commission or, in the case of a court-appointed trustee, 
the court, may on its own initiative or at the request of the trustee 
issue such additional orders or directions as may be necessary or 
appropriate to accomplish the divestiture required by this Order.
    11. The trustee shall have no obligation or authority to operate or 
maintain the Assets To Be Divested.
    12. The trustee shall report in writing to Respondent and to the 
Commission every sixty (60) days concerning the trustee's efforts to 
accomplish divestiture.
IV
    It is further ordered That, for a period of ten (10) years from the 
date this Order becomes final, Respondent shall not, without the prior 
approval of the Commission, directly or indirectly, through 
subsidiaries, partnerships, or otherwise: (A) Acquire any stock, share 
capital, equity, leasehold or other interest in any concern, corporate 
or non-corporate, presently engaged in, or within the six months 
preceding such acquisition engaged in, the business of selling 
prescription drugs at retail stores located in any of the cities or 
towns listed in Paragraph I. (J). of this Order; or (B) Acquire any 
assets used for, or previously used for (and still suitable for use 
for), the business of selling prescription drugs at retail stores 
located in any of the cities or towns listed in Paragraph I.(J). of 
this Order from any concern, corporate or non-corporate, presently 
engaged in or within the six months preceding such acquisition engaged 
in, the business of selling prescription drugs at retail stores located 
in any of the cities or towns listed in Paragraph I.(J). of this Order. 
Provided, however, that these prohibitions shall not relate to the 
construction of new facilities.
V
    It is further ordered That:
    A. Within sixty (60) days after the date this Order becomes final 
and every sixty (60) days thereafter until Respondent has fully 
complied with the provisions of Paragraphs II. and III. of this Order, 
Respondent shall submit to the Commission a verified written report 
setting forth in detail the manner and form in which it intends to 
comply, is complying, and has complied with those provisions. 
Respondent shall include in its compliance reports, among other things 
that are required from time to time, a full description of the efforts 
being made to comply with Paragraphs II and III of the Order, including 
a description of all substantive contacts or negotiations for the 
divestiture and the identity of all parties contacted. Respondent also 
shall include in its compliance reports copies of all written 
communications to and from such parties, all internal memoranda, and 
all reports and recommendations concerning divestiture.
    B. One (1) year from the date this Order becomes final, annually 
thereafter for the next nine (9) years on the anniversary of the date 
this Order became final, and at such other times as the Commission may 
require, Respondent shall file a verified written report with the 
Commission setting forth in detail the manner and form in which it has 
complied and is complying with Paragraph IV. of this Order.
VI
    It is further ordered That Respondent shall notify the Commission 
at least thirty (30) days prior to any proposed change in the corporate 
respondent such as dissolution, assignment, sale resulting in the 
emergence of a successor corporation, or the creation or dissolution of 
subsidiaries or any other change in the corporation that may affect 
compliance obligations arising out of the Order.
VII
    It is further ordered That, for the purpose of determining or 
securing compliance with this Order, Respondent shall permit any duly 
authorized representative of the Commission:
    A. Access, during office hours and in the presence of counsel, to 
inspect and copy all books, ledgers, accounts, correspondence, 
memoranda and other records and documents in the possession or under 
the control of Respondent relating to any matters contained in this 
consent order; and
    B. Upon five (5) days notice to Respondent, and without restraint 
or interference from it, to interview officers, directors, or employees 
of Respondent, who may have counsel present, regarding such matters.

Analysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted 
provisionally an agreement containing a proposed Consent Order from 
Revco D.S., Inc. (``Revco'') under which Revco would divest pharmacy 
assets in three (3) geographic locations where it faces limited 
competition. Revco operates the Revco chain of drug stores.
    The proposed Consent Order has been placed on the public record for 
sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
Order.
    On March 31, 1994 Revco and Hook-SupeRx, Inc. (``HSI'') executed an 
Agreement and Plan or Merger providing for the acquisition by Revco of 
all of the voting securities of HSI. The proposed complaint alleges 
that the proposed acquisition, if consummated, would constitute a 
violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. 
Sec. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. Sec. 45, 
in the market for the sale of prescription drugs in retail stores in 
the following towns: Covington, Virginia; Marion, Virginia; and 
Radford, Virginia (hereinafter ``relevant geographic area''). The 
proposed Consent Order would remedy the alleged violation by 
maintaining the current number of competitors in the relevant 
geographic areas where Revco and HSI are direct competitors and where 
they face limited competition.
    The proposed Consent Order provides that within one (1) year of the 
Order becoming final, Revco shall divest all assets related to the 
retail sale of prescription drugs in Revco or HSI retail stores in the 
relevant geographic areas. The divestiture of the Revco or HSI pharmacy 
business in the relevant geographic areas shall be made only to an 
acquirer or acquirers that receive prior approval of the Commission and 
only in a manner that receives the prior approval of the Commission. 
The assets shall be divested to an eligible acquirer or acquirers that 
will operate a pharmacy business in the relevant geographic areas. 
Eligible acquirers in each relevant geographic area include, but are 
not limited to: owners of retail stores that currently do not operate a 
pharmacy in that relevant geographic area; persons previously employed 
by Revco or HSI; or persons who will open a new retail store. In the 
event that Revco has not divested the Revco or HSI pharmacy assets in 
the relevant areas in one (1) year, the proposed Consent Order provides 
that Revco shall consent to the appointment by the Commission of a 
trustee to divest the pharmacy assets.
    Under the provisions of the Consent Order, Revco is also required 
to provide to the Commission a report of its compliance with the 
divestiture provisions of the Order within sixty (60) days following 
the date this Order becomes final, and every sixty (60) days thereafter 
until Revco has completely divested its interest in assets related to 
the retail sale of prescription drugs in the relevant geographic areas. 
The proposed Order will also prohibit Revco, for a period of ten (10) 
years, from acquiring, without Federal Trade Commission approval, any 
stock in any concern engaged in the business of selling prescription 
drugs at retail in the relevant geographic areas or any assets used for 
the business of selling prescription drugs at retail in the relevant 
geographic areas.
    One year from the date the Order becomes final and annually 
thereafter for nine (9) years, Revco will be required to provide to the 
Commission a report of its compliance with the Consent Order. The 
Consent Order also requires Revco to notify the Commission at least 
thirty (30) day prior to any change in the structure of Revco resulting 
in the emergence of a successor.
    The purpose of this analysis is to facilitate public comment on the 
proposed Order, and it is not intended to constitute an official 
interpretation of the agreement and proposed Order or to modify in any 
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 94-18260 Filed 7-26-94; 8:45 am]
BILLING CODE 6750-01-M