[Federal Register Volume 60, Number 7 (Wednesday, January 11, 1995)]
[Notices]
[Pages 2751-2756]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-693]


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FEDERAL TRADE COMMISSION

[Docket No. 9271]


B.A.T. Industries p.l.c., et al.; 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 
permit, among other things, B.A.T Industries and Brown & Williamson 
Tobacco Corporation to consummate the proposed acquisition of American 
Tobacco Company, but would require them to divest, within twelve 
months, six American Tobacco discount cigarette brands. If the required 
divestitures are

[[Page 2752]]

not completed on time, the consent agreement would permit the 
Commission to appoint a trustee to complete the transactions. In 
addition, the consent agreement would require the respondents, for ten 
years, to obtain Commission approval before acquiring any interest in a 
cigarette manufacturer or any assets used to manufacture or distribute 
cigarettes in the United States.

DATES: Comments must be received on or before March 13, 1995.

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

FOR FURTHER INFORMATION CONTACT:
Joseph Krauss, FTC/H-324, Washington, DC 20580. (202) 326-2713.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 3.25(f) of 
the Commission's rules of practice (16 CFR 3.25(f)), notice is hereby 
given that the following consent agreement containing a consent order 
to cease and desist, 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 Sec. 4.9(b)(6)(ii) of the Commission's rules of 
practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order

    The agreement herein, by and between B.A.T Industries p.l.c., Brown 
& Williamson Tobacco Corporation, by their duly authorized officers, 
hereafter sometimes referred to as respondents, and their attorneys, 
and counsel for the Federal Trade Commission, is entered into in 
accordance with the Commission's rule governing consent order 
procedures. In accordance therewith the parties hereby agree that:
    1. Respondent B.A.T Industries p.l.c. (BAT) is a public limited 
company incorporated under the laws of England, with its headquarters 
and principal place of business located at Windsor House, 50 Victoria 
Street, London, England, SW1H 0NL.
    2. Respondent Brown & Williamson Tobacco Corporation (B&W) is a 
corporation organized, existing and doing business under and by virtue 
of the laws of the State of Delaware with its headquarters and 
principal place of business located at 1500 Brown & Williamson Tower, 
P.O. Box 35090, Louisville, Kentucky, 40232.
    3. Respondents have been served with a copy of the complaint issued 
by the Federal Trade Commission charging them with violation of section 
5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, and 
section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and have filed 
an answer to said complaint denying said charges.
    4. Respondent B&W, and for the purposes only of this agreement and 
any proceedings arising out of, or to enforce, this agreement, the 
order herein, and the Preservation Agreement attached hereto as 
Appendix I, respondent BAT, admit all the jurisdictional facts set 
forth in the Commission's complaint in this proceeding.
    5. Respondents waive:
    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.
    6. 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 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 
respondents, in which event it will take such action as it may consider 
appropriate, or issue and serve its decision containing the Order 
herein, in disposition of the proceeding.
    7. This agreement is for settlement purposes only and does not 
constitute an admission by respondents that the law has been violated 
as alleged in the Commission's complaint, or that the facts as alleged 
in the complaint, other than jurisdictional facts, are true.
    8. 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 Sec. 3.25(f) of the 
Commission's rules, the Commission may, without further notice to 
respondents, (1) issue its decision containing the following order to 
divest in disposition of the proceeding, and (2) make information 
public with respect thereto. When so entered, the order to divest 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 U.S. Postal Service of the decision containing the agreed-to-
order to respondent's attorneys, at the addresses as stated in this 
agreement, shall constitute service. Respondents waive any right they 
may have to any other manner of service. 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 in the 
agreement may be used to vary or contradict the terms of the order.
    9. Respondents have read the complaint and order contemplated 
hereby. Respondents understand that once the order has been issued, 
they will be required to file one or more compliance reports showing 
that they have fully complied with the order. Respondents further 
understand that they 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. BAT means B.A.T Industries p.l.c., its subsidiaries, divisions, 
and groups, including Brown & Williamson Tobacco Corporation, its 
subsidiaries, divisions, and groups, and affiliates controlled by Brown 
& Williamson Tobacco Corporation (``B&W''), their successors and 
assigns, and their directors, officers, employees, agents, and 
representatives.
    B. American Brands means American Brands, Inc., its subsidiaries, 
divisions, and groups, including The American Tobacco Company 
(``ATC''), their successors and assigns, and their directors, officers, 
employees, agents, and representatives.
    C. Commission means the Federal Trade Commission.
    D. Acquisition means the acquisition of ATC from American Brand by 
BAT.
    E. The Reidsville Assets means all real property, fixtures and 
equipment at ATC's location at North Scales Street, Reidsville, NC 
27320, including but not limited to, the following:
    1. All machinery, fixtures, equipment, vehicles, transportation 
facilities, furniture, tools and other tangible personal property;
    2. Inventory and storage capacity;
    3. All rights, titles and interests in and to owned or leased real 
property, together with appurtenances, licenses and permits;
    Provided however That the Reidsville Assets shall not include:


[[Page 2753]]


98.50/30--(MISTY 100's) (3) Modules; Maker/Protos, Packer/Focke 350
120/32--(MISTY 120's) (2) Modules; Maker/Protos, Packer/Focke 350
120/32--(CARLTON 120's) (1) (Module; Maker/Protos, Packer/Focke 350

Plus supporting equipment dedicated to the above identified brand 
styles including, but not limited to, plug makers, wrappers if 
separate, case packers, and routine maintenance parts and specific size 
parts.
    F. ATC Value Brands means the following brands of cigarettes in the 
U.S.: Montclair, Riviera, Malibu, Bull Durham, Crowns, and Special 
Tens.
    G. ATC Full Revenue Brands means the following brands of cigarettes 
in the U.S.: Tareyton, Silva Thins and Tall.
    H. ATC Brands means the ATC Value Brands together with the ATC Full 
Revenue Brands.
    I. B&W Brand means the following brand of cigarettes in the U.S.: 
Belair.
    J. The term Assets means the following tangible and intangible 
assets exclusively relating to the manufacture, distribution and sale 
of those of the ATC Value Brands, the ATC Full Revenue Brands 
(excluding any Reidsville Assets) or the B&W Brand actually being 
divested (collectively the ``Brands'') including, to the extent they 
exist, but not limited to:
    1. The Brand profit and loss statements, Brand contribution 
statements, and Brand advertising, promotional and marketing spend 
records for each Brand since January 1, 1990;
    2. All trademarks, trade dress, trade secrets, technical 
information, intellectual property, patents, technology, know-how, 
tobacco content formulae, designs, specifications, drawings, processes 
and quality control data exclusively related to any of the Brands;
    3. A bill of materials for each of the Brands, consisting of full 
manufacturing standards and procedures, quality control specifications, 
specifications for raw materials and components, including lists of 
authorized sources for materials and components;
    4. All dedicated molds and equipment currently in use for each of 
the Brands;
    5. A list of all direct customers who have bought the Brands from 
ATC or B&W at any time from January 1, 1990, including names, 
addresses, and telephone numbers of the individual customer contacts, 
and the unit and dollar amounts of sales, by Brand, to each customer;
    6. All current and projected advertising, promotional and marketing 
information, materials and programs specifically dedicated to the sale 
and distribution of each of the Brands;
    7. All inventories of finished goods, packaging and raw materials 
uniquely relating to each of the Brands;
    8. All names of manufacturers and suppliers under contract with ATC 
or B&W who produce for, or supply to, ATC or B&W in connection with the 
manufacture or sale of each of the Brands;
    9. A copy of all product testing required by any regulatory 
authority specific to the Brands from January 1, 1990, including but 
not limited to tar and nicotine content testing as required by the FTC 
and all regulatory registrations and correspondence; and
    10. All price lists for each of the Brand from January 1, 1990.
II
    It is further ordered That:
    A. BAT and B&W shall divest absolutely and in good faith, within 12 
months of the date this order becomes final, the ATC Value Brands 
Assets. BAT and B&W shall also divest to the proposed acquirer of the 
ATC Value Brands Assets, the Reidsville Assets and the ATC Full Revenue 
Brands Assets. BAT and B&W shall also divest:
    1. Such additional ancillary assets, formerly of ATC, and effect 
such arrangements in respect thereof, as are necessary to assure the 
marketability and the viability of the Reidsville Assets for the 
manufacture of cigarettes in the United States for sale and consumption 
in the United States; and
    2. Such additional ancillary physical assets and legal rights, 
formerly of ATC, as are exclusive to those ATC Brands being divested 
and are necessary to assure the marketability and the viability of 
those ATC Brands;
    Provided however, if the divestiture of only the ATC Value Brands 
Assets is approved by the Commission pursuant to Paragraph II. B., and 
the divestiture does not include the Reidsville Assets and/or the ATC 
Full Revenue Brands Assets, the obligations of BAT and B&W to divest 
under this order shall be satisfied upon the divestiture of the ATC 
Value Brands Assets.
    B. BAT and B&W shall divest hereunder only to an acquirer that 
receives the prior approval of the Commission and only in a manner that 
receives the prior approval of the Commission. The purpose of the 
divestiture provided herein is to remedy the lessening of competition 
resulting from the proposed acquisition as alleged in the Commission's 
complaint and, therefore, if the Reidsville Assets are divested, they 
shall be used only for the production of cigarettes in the U.S. 
principally for sale and consumption in the U.S.
    C. Pending divestiture as provided in this Paragraph II, BAT and 
B&W shall:
    1. Take such actions as are necessary to maintain the viability and 
marketability of the Reidsville Assets by preventing the destruction, 
removal, wasting, deterioration, sale, transfer, encumbrance or 
impairment of any of the Reidsville Assets except for ordinary wear and 
tear, and
    2. Take such actions as are necessary to maintain the viability and 
marketability of the ATC Brands Assets by preventing the destruction, 
sale, transfer, encumbrance or impairment of any of the ATC Brands 
Assets.
    D. BAT and B&W shall comply with all terms of the Preservation 
Agreement, attached to this order and made a part hereof as Appendix I. 
The Preservation Agreement shall continue in effect until the date this 
order becomes final.
III
    It is further ordered That:
    A. If BAT and B&W have not divested, absolutely and in good faith 
and with the Commission's prior approval, as provided in Paragraph II. 
A., the Commission may appoint a trustee to divest the ATC Value Brands 
Assets, the B&W Brand Assets and the Reidsville Assets. Upon 
divestiture under this Paragraph III, the Reidsville Assets shall be 
used for the production of cigarettes in the U.S. principally for sale 
and consumption in the U.S. provided, however, that if the Commission 
has not approved or disapproved a proposed divestiture within 120 days 
of the date the application for such divestiture has been placed on the 
public record, the running of the divestiture prior shall be tolled 
until the Commission approves or disapproves the divestiture. In the 
event that the Commission or the Attorney General brings an action 
pursuant to section 5(l) of the Federal Trade Commission Act, 15 U.S.C. 
45(l), or any other statute enforced by the Commission, BAT and B&W 
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 section 5(l) of 
the Federal Trade Commission Act, or any other statute enforced by the 
Commission, for any failure by BAT and B&W to comply with this order.
    B. If a trustee is appointed by the Commission or a court pursuant 
to Paragraph III. A. of the order, BAT and

[[Page 2754]]

B&W 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 BAT and B&W, which consent shall not be unreasonably withheld. The 
trustee shall be a person with experience and expertise in acquisitions 
and divestitures. If BAT and B&W have 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 BAT and B&W of the identity of any proposed trustee, BAT 
and B&W 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 Reidsville 
Assets, the ATC Value Brands Assets and the B&W Brand Assets.
    3. Within twenty (20) days after appointment of the trustee, BAT 
and B&W 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 approve 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; provided, however, the 
Commission may extend this period only two (2) times.
    5. The trustee shall have full and complete access to the 
personnel, books, records and facilities related to the Reidsville 
Assets, the ATC Value Brands Assets and the B&W Brand Assets or to any 
other revelant information, as the trustee may request, and shall take 
all reasonable steps to ensure that the confidentiality is maintained 
of matters and documents so designated by either of the respondents. 
BAT and B&W shall develop such financial or other information as such 
trustee may request and shall cooperate with the trustee. BAT and B&W 
shall take no action to interfere with or impede the trustee's 
accomplishment of the divestitures. Any delays in divestiture caused by 
BAT and B&W 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 (which may 
include provision for the contract manufacture of cigarettes) that is 
submitted to the Commission, subject to BAT's and B&W's absolute and 
unconditional obligation to divest at no minimum price. The divestiture 
shall be made in the manner and to the acquirer as set out in Paragraph 
II B. of this order; provided, however, if the trustee receives bona 
fide offers from more than one acquiring entity, and if the Commission 
determines to approve more than one such acquiring entity, the trustee 
shall divest to the acquiring entity selected by BAT and B&W from among 
those approved by the Commission.
    7. The trustee shall serve, without bond or other security, at the 
cost and expense of BAT and B&W, on such reasonable and customary terms 
and conditions as the Commission or a court may set. The trustee shall 
have the authority to employ, at the cost and expense of BAT and B&W, 
such consultants, accountants, attorneys, investment bankers, business 
brokers, appraisers, and other representatives and assistants as are 
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 the BAT and B&W, 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 Reidsville Assets, the ATC Value Brands Assets 
and the B&W Brand Assets.
    8. BAT and B&W 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, including all reasonable fees of counsel and other expenses 
incurred in connection with the preparation for, or defense of any 
claims, 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. BAT and B&W shall be responsible for the defense of any 
and all claims against the trustee under this subsection and the 
trustee shall do and omit nothing which may prejudice such defense.
    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 Reidsville Assets, the ATC Value Brands Assets and the B&W 
Brand Assets.
    12. The trustee shall report in writing to BAT and B&W and the 
Commission every sixty (60) days concerning the trustee's efforts to 
accomplish divestiture.
    13. The trustee shall note, in his or her recommendation to the 
Commission, whether the proposed acquirer, or any other entity 
controlling or commonly controlled by the proposed acquirer, has, 
directly or indirectly, in any jurisdiction in the world and at any 
time within the last five years, had goods that it manufactured or 
supplied seized, impounded or destroyed by any authority pursuant to a 
claim of infringement of any intellectual property or other right over 
or in respect to those goods.
IV
    It is further ordered That, for a period of ten (10) years from the 
date this order becomes final, BAT and B&W shall not, without the prior 
approval of the Commission, directly or indirectly, through 
subsidiaries, partnerships, or otherwise:
    A. Acquire any stock, share capital, equity, or other interest in 
any concern, corporate or non-corporate, engaged at the time of such 
acquisition, or within the two years preceding such acquisition, in the 
manufacture in the United States of cigarettes for consumption in the 
United States, or
    B. Acquire any assets used for or previously used for (and still 
suitable for use for) the manufacture, distribution, or sale in the 
United States of cigarettes.
    Provided, however, that this Paragraph IV shall not apply to

[[Page 2755]]

transactions entered into in the ordinary course of business.
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 BAT and B&W have fully 
complied with the provisions of Paragraphs II and III of this order, 
BAT and B&W shall submit to the Commission a verified written report 
setting forth in detail the manner and form in which they intend to 
comply, are complying, and have complied with Paragraphs II and III of 
this order. BAT and B&W shall include in their 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. BAT and B&W shall include in their compliance reports copies 
of all written communications to and from such parties, all internal 
memoranda, and all reports and recommendations concerning divestiture.
    B. One year (1) from the date this order becomes final, annually 
for the next nine (9) years on the anniversary of the date this order 
becomes final, and at other times as the Commission may require, BAT 
and B&W shall file a verified written report with the Commission 
setting forth in detail the manner and form in which they have complied 
and are complying with Paragraph IV of this order.
VI
    It is further ordered That BAT and B&W shall notify the Commission 
at least thirty (30) days prior to any proposed change in the 
corporations, 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 corporations, that in each case 
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, subject to any legally recognized 
privilege, BAT and B&W shall permit any duly authorized representative 
of the Commission:
    A. Upon written notice to counsel, 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 BAT and B&W relating to any 
matters contained in this order; and
    B. Upon five days' written notice to counsel and without restraint 
or interference from BAT and B&W, to interview officers, directors, or 
employees of BAT and B&W, who may have counsel present.

Appendix I

Preservation Agreement

    This Preservation Agreement is by and between B.A.T. Industries 
p.l.c., a public limited company incorporated under the laws of 
England, with its headquarters and principal place of business located 
at Windsor House, 50 Victoria Street, London, England, SW1H 0NL 
(``BAT''), Brown & Williamson Tobacco Corporation, a corporation 
incorporated under the laws of the State of Delaware with its 
headquarters and principal place of business located at 1500 Brown & 
Williamson Tower, PO Box 35090, Louisville, Kentucky (``B&W''), and the 
Federal Trade Commission, an independent agency of the United States 
Government, established under the Federal Trade Commission Act of 1914, 
15 U.S.C. 41, et seq.

Premises for Agreement

    Whereas, BAT pursuant to an agreement dated April 26, 1994, agreed 
to purchase substantially all of the outstanding stock of the American 
Tobacco Company (``ATC''), a whole owned subsidiary of American Brands, 
Inc.; and
    Whereas, the Commission has reason to believe that the agreement 
would violate section 5 of the Federal Trade Commission Act, and that, 
if consummated, would violate section 7 of the Clayton Act and section 
5 of the Federal Trade Commission Act, statutes enforced by the 
Commission, and the Commission has issued its administrative complaint 
challenging the agreement; and
    Whereas, if the parties accept the attached Agreement Containing 
Consent Order (``Consent Agreement''), the Commission is required to 
place it on the public record for a period of sixty (60) days for 
public comment and may subsequently withdraw such acceptance pursuant 
to the provisions of Sec. 3.25(f) of the Commission's rules; and
    Whereas, the Commission is concerned that if an agreement is not 
reached preserving the status quo ante of the Reidsville Assets and the 
ATC Brands Assets during the period prior to final acceptance of the 
Order by the Commission (after the 60-day comment period), any 
divestiture resulting from any proceeding challenging the legality of 
the acquisition might not be possible, or might produce a less than 
effective remedy; and
    Whereas, the Commission is concerned that if the acquisition is 
consummated, it will be necessary to preserve the continued viability 
and marketability of the Reidsville Assets and the ATC Brands Assets, 
as defined in the Consent Agreement; and
    Whereas, the purpose of this Preservation Agreement and of the 
Consent Agreement is to preserve the Reidsville Assets and the ATC 
Brands Assets until the date this Order becomes final, in order to 
remedy any anticompetitive effects of the acquisition; and
    Whereas, BAT's and B&W's entering into this Preservation Agreement 
shall in no way be construed as an admission by BAT and B&W that the 
acquisition is anticompetitive or illegal; and
    Whereas, BAT and B&W understand that no act or transaction 
contemplated by this Preservation Agreement shall be deemed immune or 
exempt from the provisions of the antitrust laws, or the Federal Trade 
Commission Act by reason of anything contained in this Preservation 
Agreement;
    Now, therefore, in consideration of the Commission's agreement 
that, unless the Commission determines to reject the Consent Agreement, 
it will not seek further relief from the parties with respect to the 
acquisition, except that the Commission may exercise any and all rights 
to enforce this Preservation Agreement, and the Consent Agreement to 
which this Preservation Agreement, is annexed and made a part thereof, 
and the final order in this proceeding, and, in the event the required 
divestiture is not accomplished, to appoint a trustee to seek the 
divestiture of the Reidsville Assets, the ATC Value Brands Assets and 
the B&W Brand Assets as provided in the Consent Agreement, the parties 
agree as follows:

Terms of Agreement

    1. BAT and B&W agree to execute, and upon its issuance, to be bound 
by the attached Consent Agreement.
    2. BAT will be free to close the acquisition with American Brands 
immediately after the Commission's approval of the Consent Agreement 
for placement on the public record for comment.
    3. BAT and B&W agree that from the date this Preservation Agreement 
is signed by BAT and B&W until the earliest of the dates listed in 
subparagraphs 3.a and 3.b they will

[[Page 2756]]

comply with the provisions of this Preservation Agreement:
    a. Three business days after the Commission withdraws its 
acceptance of the Consent Agreement pursuant to the provisions of 
Sec. 3.25(f) of the Commission's rules; or
    b. The day the order becomes final.
    4. From the time BAT and B&W sign this Preservation Agreement until 
the date the order becomes final, BAT and B&W shall:
    a. Take such actions as are necessary to maintain the viability and 
marketability of the Reidsville Assets by preventing the destruction, 
removal, wasting, deterioration, sale, transfer, encumbrance or 
impairment of any of the Reidsville Assets except for ordinary wear and 
tear, and
    b. Take such actions as are necessary to maintain the viability and 
marketability of the ATC Brands Assets by preventing the destruction, 
sale, transfer, encumbrance or impairment of any of the ATC Brands 
Assets.
    5. BAT and B&W also waive all rights to contest the validity of 
this agreement.
    6. For the purpose of determining or securing compliance with this 
agreement, subject to any legally recognized privilege, and upon 
written request with reasonable notice to counsel for BAT or B&W, BAT 
or B&W shall permit any duly authorized representative or 
representatives of the Commission:
    a. Access during the office hours of BAT or B&W, 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 BAT or B&W relating to compliance 
with this agreement; and
    b. Upon five (5) days' notice to BAT or B&W and without restraint 
or interference from them, to interview officers or employees of BAT or 
B&W, who may have counsel present, regarding any such matters.
    7. This agreement shall not be binding on the Commission until 
approved by the Commission.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``the Commission'') has accepted, 
subject to final approval, an agreement containing a proposed consent 
order from B.A.T Industries p.l.c. (``BAT'') and Brown & Williamson 
Tobacco Corporation (``B&W''). 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.
    The Commission's investigation of this matter concerns the 
acquisition of The American Tobacco Company (``ATC''), a wholly-owned 
subsidiary of American Brands, Inc. by BAT. B&W, BAT's wholly-owned 
subsidiary, and ATC are the third and fifth largest manufacturers of 
cigarettes, respectively, in the United States. In its administrative 
complaint, the Commission alleges, among other things, that the United 
States cigarette market is highly concentrated and would become 
substantially more concentrated as a result of the acquisition. The 
Commission also alleges that it has reason to believe that the 
acquisition would have anticompetitive effects and would violate 
section 7 of the Clayton Act and section 5 of the Federal Trade 
Commission Act. The agreement containing consent order would, if 
finally accepted by the Commission, settle charges that the acquisition 
may substantially lessen competition in the manufacture and sale of 
cigarettes in the United States.
    The order, accepted for public comment, contains provisions 
requiring BAT and B&W to divest certain brands of cigarettes and 
cigarette manufacturing facilities. The order requires BAT and B&W to 
divest, within twelve (12) months, six discount cigarette brands, 
formerly owned by ATC, including Montclair, Riviera, Malibu, Bull 
Durham, Crowns and Special Tens. The order also requires BAT and B&W to 
divest to the purchaser of the discount brands, three former ATC full 
revenue brands, Tareyton, Silva Thins and Tall, and the former-ATC 
cigarette manufacturing facility located at Reidsville, North Carolina. 
Under the terms of the divestiture, BAT and B&W may satisfy the 
divestiture requirements without divesting the full revenue brands and/
or the Reidsville facility, if the Commission approves the divestiture 
of only the discount brands as satisfying the remedial concerns of the 
order. The purpose of the divestiture is to remedy the lessening of 
competition resulting from the acquisition as alleged in the 
Commission's complaint and, therefore, if the Reidsville facility is 
divested, it is to be used only for the production of cigarettes in the 
United States principally for sale and consumption in the United 
States.
    Under the terms of the order, if BAT and B&W fail to complete the 
divestiture within the required period, the Commission may appoint a 
trustee to divest the six discount cigarette brands, the Reidsville 
facility and Belair, a B&W full revenue cigarette.
    Any proposed divestiture pursuant to the order must be approved by 
the Commission after the divestiture proposal has been placed on the 
public record for reception of comments from interested persons. The 
Preservation Agreement executed as part of the agreement containing the 
consent order requires BAT and B&W, until the order becomes final, to 
take actions as are necessary to maintain the viability and 
marketability of the former ATC brands of cigarettes and the Reidsville 
facility.
    For a period of ten years from the date the order becomes final, 
the order prohibits BAT and B&W from acquiring, without prior 
Commission approval, stock or assets of, or interests in, any company 
engaged in the manufacture and sale of cigarettes in the United States.
    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.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 95-693 Filed 1-10-95; 8:45 am]
BILLING CODE 6750-01-M