[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