[Federal Register Volume 60, Number 115 (Thursday, June 15, 1995)]
[Notices]
[Pages 31470-31477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14693]



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FEDERAL TRADE COMMISSION
[File No. 951 0056]


The Scotts Co.; 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, Scotts, an Ohio-based corporation, to 
divest its Peters Consumer Water Soluble Fertilizer Business and 
related assets to Alljack & Company or another Commission-approved 
buyer by no later than December 31, 1995. If the divestiture is not 
completed on time, the consent agreement would permit the Commission to 
appoint a trustee to complete the transaction. In addition, the consent 
agreement would require the respondent to obtain Commission approval, 
for a period of ten years, before acquiring any consumer water soluble 
fertilizer business in the United States.

DATES: Comments must be received on or before [Insert date 60 days 
after Federal Register publication date].

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

FOR FURTHER INFORMATION CONTACT:
Howard Morse or Robert Cook, FTC/S-3627, Washington, DC 20580, (202) 
326-2949 or 326-2771.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 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 
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

    In the matter of The Scotts Company, a corporation.

    The Federal Trade Commission (``Commission'') having initiated an 
investigation of the proposed acquisition by the Scotts Company 
(``Scotts'') of Stern's Miracle-Gro Products, Inc. (``Miracle-Gro''), 
and it now appearing that Scotts, hereinafter sometimes referred to as 
``proposed respondent,'' is willing to enter into an agreement 
containing an order to divest certain assets and to cease and desist 
from making certain acquisitions, and providing for other relief:
    It is hereby agreed by and between proposed respondent, by its duly 
authorized officers and attorney, and counsel for the Commission that:
    1. Proposed respondent Scotts is a corporation organized, existing 
and doing business under and by virtue of the laws of the State of 
Ohio, with its office and principle place of business located at 14111 
Scottslawn Road, Marysville, Ohio 43041.
    2. Proposed respondent admits all the jurisdictional facts set 
forth in the draft of complaint.
    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, or that the facts as 
alleged in the draft complaint, other than 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 Sec. 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 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 to cease and desist 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 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 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 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. ``Respondent'' or ``Scotts'' means the Scotts Company, its 
directors, officers, employees, agents and representatives, 
predecessors, successors and assigns, its subsidiaries, divisions, 
groups and affiliates controlled by the Scotts Company, and 
[[Page 31471]] the respective directors, officers, employees, agents, 
representatives, successors and assigns of each.
    B. ``Miracle-Gro'' means Stern's Miracle-Gro Products, Inc., its 
predecessors, successors and assigns, its subsidiaries, divisions, 
groups and affiliates controlled by Stern's Miracle-Gro Products, Inc.
    C. ``Alljack'' means Alljack & Company and Celex Corporation, their 
predecessors, successors and assigns, subsidiaries, divisions, groups, 
and affiliates.
    D. ``Commission'' means the Federal Trade Commission.
    E. The term ``Water Soluble Fertilizer'' means fertilizer that is 
sold as a powder, composed principally of nitrogen, phosphorous and 
potash, to be dissolved in water prior to application for use 
principally on houseplants, gardens, shrubs and flowers.
    F. The term ``Consumer Water Soluble Fertilizer'' means Water 
Soluble Fertilizer packaged for sale in containers of less than 20 
pounds.
    G. The term ``Peters Consumer Water Soluble Fertilizer'' means 
Consumer Water Soluble Fertilizer sold under the Peters brand name.
    H. The term ``Peters Consumer Water Soluble Fertilizer Business'' 
means all assets, properties, business and goodwill, tangible and 
intangible, relating to the manufacture or sale of Peters Consumer 
Water Soluble Fertilizer in the United States, including, without 
limitation, the following:
    1. All Peters trademarks;
    2. Inventory;
    3. The right to use the same packaging and trade dress that Peters 
has used for Consumer Water Soluble Fertilizer, provided that the right 
to use the Scotts trademark is limited to the right to sell existing 
inventory;
    4. All customer lists, distribution agreements, vendor lists, 
catalogs, sales promotion literature, advertising materials, research 
materials, technical information, inventions, trade secrets, 
intellectual property, patents, technology, know-how (including, but 
not limited to manufacturing know-how), specifications, designs, 
drawings, processes, quality control data, and formulas;
    5. All rights, titles and interests in and to the contracts entered 
into in the ordinary course of business with customers (together with 
associated bid and performance bonds), suppliers, sales 
representatives, distributors, agents, personal property lessors, 
personal property lessees, licensors, licensees, consignors and 
consignees;
    6. All rights under warranties and guarantees, express or implied;
    7. All books, records, and files; and
    8. All items of prepaid expense.
    The term ``Peters Consumer Water Soluble Fertilizer Business'' does 
not include accounts receivable, the Peters production facilities 
located at Allentown, Pennsylvania, the use of intangible assets 
(including the use of the Peters trademarks on Water Soluble Fertilizer 
in containers of 20 pounds or more) for the production or sale of 
agricultural or commercial products, or the use of the Peters 
trademarks on potting soil, perlite, or vermiculite.
    I. The term ``Peters Business'' means all assets, properties, 
business and goodwill, tangible and intangible, relating to the 
manufacture or sale of all products that Scotts has sold under the 
Peters trademarks during the five (5) years preceding the date on which 
this agreement is accepted by the Commission, including, without 
limitation, the Allentown, Pennsylvania plant where Peters products are 
manufactured and including, without limitation, the following:
    1. The Peters Consumer Water Soluble Fertilizer Business;
    2. All machinery, fixtures, equipment, vehicles, transportation 
facilities, furniture, tools and other tangible personal property;
    3. All customer lists, vendor lists, catalogs, sales promotion 
literature, advertising materials, research materials, technical 
information, management information systems, software, inventions, 
trade secrets, intellectual property, patents, technology, know-how, 
specifications, designs, drawings, processes, quality control data, and 
assets relating to research and development;
    4. Inventory and storage capacity;
    5. All rights, titles and interests in and to owned or leased real 
property, together with appurtenances, licenses and permits;
    6. All rights, titles and interests in and to the contracts entered 
into in the ordinary course of business with customers (together with 
associated bid and performance bonds), suppliers, sales 
representatives, distributors, agents, personal property lessors, 
personal property lessees, licensors, licensees, consignors and 
consignees;
    7. All rights under warranties and guarantees, express or implied;
    8. All books, records, and files; and
    9. All items of prepaid expense.

II

    It is further ordered that:
    A. Scotts shall divest, through sale or exclusive perpetual 
license, absolutely and in good faith, no later than December 31, 1995, 
the Peters Consumer Water Soluble Fertilizer Business as an ongoing 
business and shall also, at the time of such divestiture, divest such 
additional ancillary assets and ancillary businesses and effect such 
arrangements as are necessary to assure the marketability and the 
viability and competitiveness of the Peters Consumer Water Soluble 
Fertilizer Business.
    B. The divestiture shall be made either--
    1. No later than ten (10) days from the date this order becomes 
final, to Alljack, pursuant to the agreements between Scotts and 
Alljack, which are Confidential Appendices II and III, or
    2. 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 of the Peters Consumer Water Soluble 
Fertilizer Business is to ensure that the Peters Consumer Water Soluble 
Fertilizer Business continues to operate as an ongoing business in the 
same business in which it is engaged at the time this Agreement is 
accepted by the Commission and to remedy the lessening of competition 
resulting from the acquisition, as alleged in the Commission's 
complaint.
    C. Pending divestiture of the Peters Consumer Water Soluble 
Fertilizer Business, respondent shall take such actions as are 
necessary to maintain the viability and marketability of the Peters 
Consumer Water Soluble Fertilizer Business, and to prevent the 
destruction, removal, wasting, deterioration, or impairment of any part 
of the Peters Consumer Water Soluble Fertilizer Business.
    D. Unless the acquirer has its own source of supply, the 
devestiture shall include an agreement by Scotts (the ``Supply 
Agreement'') to supply Water Soluble Fertilizer for a period of two (2) 
years from the date of the divestiture required by this Paragraph II. 
The Water Soluble Fertilizer supplied pursuant to the Supply Agreement 
shall, at the option of the acquirer, be of the same chemical 
composition as, and of a quality equal to or greater than, the Water 
Soluble Fertilizer marketed by the Peters Consumer Water Soluble 
Fertilizer Business at the time this agreement is accepted by the 
Commission for comment. The Supply Agreement shall obligate Scotts to 
supply such Water Soluble Fertilizer at a price equal to direct cash 
cost of raw materials, packaging, and labor (based on expenses during 
the previous fiscal year), plus ten (10) percent. The Supply 
[[Page 31472]] Agreement shall obligate Scotts to supply annually, at a 
minimum, at the option of the acquirer, an amount of Water Soluble 
Fertilizer, in containers ready for sale or in bulk, equal to the 
greatest unit amount of Peters Consumer Water Soluble Fertilizer 
produced by or on behalf of the Peters Consumer Water Soluble 
Fertilizer Business during:
    1. The twelve (12) months prior to the divestiture required by this 
Paragraph II, and
    2. Each of the five (5) calendar years preceding the divestiture 
required by this Paragraph II.
    E. The divestiture shall include a non-exclusive perpetual license, 
with no continuing royalty, to manufacture Peters Consumer Water 
Soluble Fertilizer for sale in the United States as it has been 
manufactured at any time during the twelve (12) months preceding the 
date on which this Agreement Containing Consent Order is accepted by 
the Commission for public comment, as well as a royalty-free license 
for all improvements to Peters' Water Soluble Fertilizer technology 
that have been made up to the time of the divestiture required by this 
Paragraph II. Such license shall give the acquirer the right to make 
any improvements to the licensed technology; provided, however, that 
such license need not give the acquirer rights in Scotts intellectual 
property that Scotts has not used in connection with Peters Consumer 
Water Soluble Fertilizer.
    F. Respondent shall not offer Consumer Water Soluble Fertilizer 
(including, but not limited to, Consumer Water Soluble Fertilizer 
bearing the Miracle-Gro trademark) for sale using the Scotts trademark 
for a period of two (2) years following the divestiture required by 
this Paragraph II; provided, however, during that two (2) year period, 
Scott may continue to sell the following products using the Scotts 
trademark:
    1. Scotts Water-Soluble Plant Food Powder, All Purpose Formula (8 
ounce and 16 ounce sizes);
    2. Scotts Water-Soluble Plant Food Powder, Houseplant/Foliage 
Formula (8 ounce and 16 ounce sizes); and
    3. Scotts Water-Soluble Plant Food Powder, African Violet/Flowering 
Formula (8 ounce size).
    G. At the time of the execution of a divestiture agreement between 
Scotts and a proposed acquirer of the Peters Consumer Water Soluble 
Fertilizer Business, Scotts shall provide the acquirer with a complete 
list of all Scotts employees who have spent the majority of their time 
on the development, distribution, marketing, or sale of Peters Consumer 
Water Soluble Fertilizer during the twelve (12) months prior to the 
date on which this agreement is accepted by the Commission. Such list 
shall state each such individual's name, position, address, telephone 
number, and a description of the duties of and work performed by the 
individual in connection with the Peters Consumer Water Soluble 
Fertilizer Business.
    H. Scotts shall provide the individuals identified pursuant to 
Paragraph II.G. of this order with financial incentives to continue in 
their employment positions during the period covered by the Hold 
Separate Agreement, hereto attached, and to accept employment with the 
Commission-approved acquirer, if such employment is offered, at the 
time of the divestiture. Such incentives shall include:
    1. Continuation of all employee benefits offered by Scotts until 
the date of the divestiture; and
    2. A bonus equal to 25 percent of the total annual compensation of 
any employee who agrees to employment with the Commission-approved 
acquirer, payable upon the beginning of such employee's employment by 
the Commission-approved acquirer.
    I. The divestiture agreement may protect Scott's interest in the 
Scotts trademark on inventory acquired by the acquirer of the Peters 
Consumer Water Soluble Fertilizer Business and may provide for the 
continued use by Scotts of the Peters trademarks for agricultural and 
commercial products an consumer soil products.
    J. Respondent shall comply with all terms of the Agreement to Hold 
Separate, attached to this order and made a part hereof as Appendix I. 
The Agreement to Hold Separate shall continue in effect until such time 
as respondent has made the divestiture required by this order.

III

    It is further ordered that:
    A. If Scotts has not divested, absolutely and in good faith and 
with the Commission's prior approval, the Peters Consumer Water Soluble 
Fertilizer Business by December 31, 1995, the Commission may appoint a 
trustee to divest the Peters Consumer Water Soluble Fertilizer 
Business. If the trustee has not divested the Peters Consumer Water 
Soluble Fertilizer Business within six (6) months after the trustee's 
appointment, then the trustee may divest either the Peters Consumer 
Water Soluble Fertilizer Business or the Peters Business. In the event 
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, Scotts 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 the 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 Peters 
Consumer Water Soluble Fertilizer Business or the Peters Business.
    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 of the Peters 
Consumer Water Soluble Fertilizer Business or the Peters Business 
required by this order.
    4. The trustee shall have six (6) months from the date the 
Commission approves the trust agreement described in Paragraph III.B.3. 
to accomplish the divestiture of the Peters Consumer Water Soluble 
Fertilizer Business, which shall be subject to the prior approval of 
the Commission. If no acquirer of the Peters Consumer Water Soluble 
Fertilizer Business is approved by the Commission by the end of the six 
(6) month period (or at the end of any extensions to that period 
pursuant to [[Page 31473]] this Paragraph III.B4.), then the trustee 
shall have twelve (12) additional months to accomplish the divestiture 
of the Peters Consumer Water Soluble Fertilizer Business or the Peters 
Business, which shall be subject to the prior approval of the 
Commission. If, however, at the end of the twelve (12) 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 Peters 
Consumer Water Soluble Fertilizer Business or the Peters Business, or 
to any other relevant information, as the trustee may request. 
Respondent shall develop such financial or other information as such 
trustee may 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 
the respondent shall extend the time for divestiture under this 
Paragraph in an amount equal to the delay, as determined by the 
Commission, or, in the case of 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 the 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 acquiring entity, and if 
the Commission determines to approve more than one such acquiring 
entity, the trustee shall divest to the acquiring entity or entities 
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 
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 (based on sales price) 
contingent on the trustee's divesting the Peters Consumer Water Soluble 
Fertilizer Business or the Peters Business.
    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, including all reasonable fees of counsel and other expenses 
incurred in connection with the preparation for, or defense of any 
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 of the Peters Consumer Water 
Soluble Fertilizer Business or the Peters Business required by this 
order.
    11. The trustee shall have no obligation or authority to operate or 
maintain the Peters Consumer Water Soluble Fertilizer Business or the 
Peters Business.
    12. The trustee shall report in writing to respondent and the 
Commission every sixty (60) days concerning the trustee's efforts to 
accomplish the 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, or other interest in 
any concern, corporate or non-corporate, engaged in at the time of such 
acquisition, or within the two years preceding such acquisition engaged 
in the sale of Consumer Water Soluble Fertilizer in the United States; 
or
    B. Acquire any assets used for or previously used for (and still 
suitable for) the sale of Consumer Water Soluble Fertilizer in the 
United States; provided, however, that prior approval shall not be 
necessary for the acquisition of assets used to manufacture Consumer 
Water Soluble Fertilizer, the acquisition of assets in the ordinary 
course of business, or the acquisition of assets valued at less than 
$100,000 from the same person within any twelve (12) month period.

V

    It is further ordered that within sixty (60) days after the date 
this order becomes final and every sixty (60) days thereafter until 
respondent has fully complied with the divestiture 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 Paragraphs II and III of this order. 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 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; provided, however, that 
respondent is not obligated to produce copies of documents subject to 
any legally recognized privilege.

VI

    It is further ordered that one (1) year 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 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 Paragraphs II and IV of 
this order.

VII

    It is further ordered that respondent shall notify the Commission 
at least thirty (30) days prior to any proposed [[Page 31474]] 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.
VIII

    It is further ordered that, for the purpose of determining or 
securing compliance with this order, and subject to any legally 
recognized privilege, upon request, respondent shall permit any duly 
authorized representatives 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 
order; and
    B. Upon five (5) days notice to respondent, with respondent's 
counsel present, and without restraint or interference, to interview 
officers, employees, or agents of respondent.

AGREEMENT TO HOLD SEPARATE

    In the matter of The Scotts Company, a corporation.

[File No. 951-0056]

    This Agreement to Hold Separate (``Hold Separate'') is by and 
between the Scotts Company (``Scotts''), a corporation organized, 
existing, and doing business under and by virtue of the laws of 
Ohio, with its office and principal place of business at 14111 
Scottslawn Road, Marysville, Ohio 43041 and the Federal Trade 
Commission (``the 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. (collectively the ``Parties'').

Premises

    Whereas, on January 26, 1995, Scotts entered into an Agreement 
and Plan of Merger with Stern's Miracle-Gro Products, Inc. 
(``Miracle-Gro'') to acquire all of the voting securities of 
Miracle-Gro in exchange for voting securities of Scotts (hereinafter 
the ``Acquisition'');I21Whereas, Scotts is a leading producer and 
marketer of consumer lawn care products, including consumer water 
soluble fertilizer under the Peters brand name;
    Whereas, Miracle-Gro, with its principal office and place of 
business located at 800 Port Washington Blvd., Port Washington, New 
York 11050 is the leading marketer of water soluble fertilizer in 
the United States;
    Whereas, the Commission is now investigating the Acquisition to 
determine whether it would violate any of the statutes enforced by 
the Commission;
    Whereas, if the Commission accepts the Agreement Containing 
Consent Order (``Consent Order''), the Commission must place it on 
the public record for a period of at least sixty (60) days and may 
subsequently withdraw such acceptance pursuant to the provisions of 
Section 2.34 of the Commission's Rules;
    Whereas, the Commission is concerned that if an understanding is 
not reached, preserving the status quo ante of the Peters Consumer 
Water Soluble Fertilizer Business (as defined in Paragraph I of the 
Consent Order) and Miracle-Gro during the period prior to the final 
acceptance of the Consent Order by the Commission (after the 60-day 
public comment period), divestiture resulting from any proceeding 
challenging the legality of the Acquisition might not be possible, 
or might be less than an effective remedy;
    Whereas, the Commission is concerned that if the Acquisition is 
consummated, it will be necessary to preserve the Commission's 
ability to require the divestiture of the Peters Consumer Water 
Soluble Fertilizer Business, the Peters Business, or Miracle-Gro and 
the Commission's right to have the Peters Consumer Water Soluble 
Fertilizer Business, the Peters Business, and Miracle-Gro continue 
as viable competitors;
    Whereas, the Commission is concerned that the exchange of 
competitively sensitive information between persons operating and 
managing Miracle-Gro, the Peters Business, and the Peters Consumer 
Water Soluble Fertilizer Business may lessen the competitive 
viability of any divestiture if the Commission accepts the proposed 
Consent Order and makes it final;
    Whereas, the purposes of the Hold Separate and the Consent Order 
are:
    1. To preserve the Peters Consumer Water Soluble Fertilizer 
Business, the Peters Business, and Miracle-Gro as viable, 
independent businesses pending the Commission's final approval of 
the Consent Order and the divestiture of a viable and ongoing 
enterprise,
    2. To remedy any anticompetitive effects of the Acquisition,
    3. To preserve the Peters Consumer Water Soluble Fertilizer 
Business, the Peters Business, and Miracle-Gro as ongoing and 
competitive entities engaged in the same business in which they are 
presently employed until the Commission gives final approval to the 
Consent Order and the divestiture is achieved, and
    4. To protect the competitive viability of Miracle-Gro, the 
Peters Business, and the Peters Consumer Water Soluble Fertilizer 
Business by preventing the exchange of competitively sensitive 
information among persons managing or operating those businesses;
    Whereas, Scotts' entering into this Hold Separate shall in no 
way be construed as an admission by Scotts that the Acquisition is 
illegal;
    Whereas, Scotts understands that no act or transaction 
contemplated by this Hold Separate 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 Hold 
Separate:
    Now, Therefore, the parties agree, upon the understanding that 
the Commission has not yet determined whether the acquisition will 
be challenged, and in consideration of the Commission's agreement 
that it will not seek further relief from Scotts with respect to the 
Acquisition if the Consent Order is made final, except that the 
Commission may exercise any and all rights to enforce this Hold 
Separate, the Consent Order to which it is annexed and made a part 
thereof and the Order, once it becomes final, and in the event that 
the required divestiture is not accomplished, to appoint a trustee 
to seek divestiture of the Peters Consumer Water Soluble Fertilizer 
Business or the Peters Business pursuant to the Consent Order, as 
follows:
    1. Scotts agrees to execute and be bound by the Consent Order.
    2. To ensure the complete independence and viability of the 
Peters Consumer Water Soluble Fertilizer Business, the Peters 
Business, and Miracle-Gro and to assure that no competitive 
information is exchanged between Miracle-Gro and either the Peters 
Consumer Water Soluble Fertilizer Business or the Peters Business, 
Scotts shall hold Miracle-Gro separate and apart as it is presently 
constituted, from the date this Hold Separate is accepted until the 
earlier of the completion of the divestiture obligations required by 
the Consent Order or three (3) days after the Commission withdraws 
its acceptance of the Consent Order pursuant to Sec. 2.34 of the 
Commission's rules, on the following terms and conditions:
    a. Except as required by law, and except to the extent that 
necessary information is exchanged in defending investigations or 
litigation, obtaining legal advice, or complying with this Hold 
Separate or the Consent Order, Scotts (including, but not limited 
to, any officer, director, employee, or agent of Scotts) shall not 
receive or have access to, or the use of, any material confidential 
information of Miracle-Gro or the activities of the board of 
directors of Miracle-Gro (the ``Miracle-Gro Board'') not in the 
public domain that relates to Water Soluble Fertilizer, nor shall 
Miracle-Gro (including, but not limited to, any officer, director, 
employee or agent of Miracle-Gro) receive or have access to, or the 
use of, any material confidential information of Scotts or the 
activities of the board of directors of Scotts (the ``Scotts 
Board'') not in the public domain that relates to Water Soluble 
Fertilizer; provided, however, after the Consent Order is made 
final, Scotts and Miracle-Gro may exchange information concerning 
Water Soluble Fertilizer sold outside the United States. Scotts may 
receive on a regular basis from Miracle-Gro aggregate financial and 
other information necessary to allow Scotts to file financial 
reports, tax returns, personnel reports, and reports with the 
Securities and Exchange Commission. Any such information that is 
obtained pursuant to this subparagraph shall be used only for the 
purpose set forth in this subparagraph. (``Material confidential 
information,'' as used herein, means competitively sensitive or 
proprietary information not independently known to Scotts from 
sources other than Miracle-Gro or the Miracle-Gro Board and includes 
but is not limited to customer lists, price lists, prices, marketing 
methods, advertising plans, [[Page 31475]] patents, technologies, 
processes, or other trade secrets.)
    b. Except as expressly provided in this Hold Separate, all 
manufacturing, sales, licensing, and other business relationships 
relating to Water Soluble Fertilizer between Scotts and Miracle-Gro 
shall be conducted at arm's length and on commercial terms available 
to other persons. Furthermore, Scotts and Miracle-Gro may not 
integrate or coordinate the marketing of the products of Scotts and 
Miracle-Gro.
    c. Scotts shall circulate a notice of this Hold Separate and 
Consent Order, in the form attached hereto as Attachment A, to the 
management employees (including, but not limited to, officers) of 
Scotts and Miracle-Gro (including, but not limited to, members of 
the board of directors of Scotts (the ``Scotts Board'') and members 
of board of directors of Miracle-Gro (the ``Miracle-Gro Board''), as 
well as to any employees or agents of Scotts or Miracle-Gro who 
participate directly or indirectly in managing or operating any 
business affected by this Hold Separate or the Consent Order. Scotts 
shall also appropriately display a notice of this Hold Separate and 
Consent Order in the form attached hereto as Attachment A.
    d. Scotts shall report in writing to the Commission every sixty 
(60) days concerning Scott's efforts to accomplish the purposes of 
this Hold Separate.
    e. Scotts shall maintain the marketability, viability, and 
competitiveness of the Peters Consumer Water Soluble Fertilizer 
Business and the Peters Business, and shall not cause or permit the 
destruction, removal, wasting, deterioration, or impairment of any 
assets or business it may have to divest except in the ordinary 
course of business and except for ordinary wear and tear, and Scotts 
shall not sell, transfer, encumber (other than in the normal course 
of business), or otherwise impair the marketability, viability or 
competitiveness of the Peters Consumer Water Soluble Fertilizer 
Business or the Peters Business.
    f. Scotts shall continue to provide to the Peters Business and 
the Peters Consumer Water Soluble Fertilizer Business such support 
services as it provided during the twelve (12) months and the 
calendar year prior to the acceptance of the Consent Order by the 
Commission. The Peters Business and the Peters Consumer Water 
Soluble Fertilizer Business shall be staffed with sufficient 
employees to maintain the viability and competitiveness of the 
Peters Business and the Peters Consumer Water Soluble Fertilizer 
Business, which employees shall be the employees of the Peters 
Business or Peters Consumer Water Soluble Fertilizer Business that 
have managed and operated the Peters Business and the Peters 
Consumer Water Soluble Fertilizer Business during the twelve (12) 
months prior to the Commission's acceptance of Consent Order by the 
Commission and may also be hired from sources other than the Peters 
Business or the Peters Consumer Water Soluble Fertilizer Business. 
The compensation of the management employees of the Peters Business 
and the Peters Consumer Water Soluble Fertilizer Business shall be 
based in significant part on the sales of the Peters Business or the 
Peters Consumer Water Soluble Fertilizer Business, as applicable. 
Scotts shall facilitate the efforts of the Peters Business and the 
Peters Consumer Water Soluble Fertilizer Business to promote Peters 
products (including, but not limited to Peters Consumer Water 
Soluble Fertilizer products) to retailers, both at trade shows and 
otherwise, pending the divestiture required by the Consent Order. 
Scotts' obligation to facilitate those efforts shall include, 
without limitation, permitting the Peters Business and the Peters 
Consumer Water Soluble Fertilizer Business to participate either 
with Scotts or independently in all industry trade shows. Scotts 
shall provide the Peters Business and the Peters Consumer Water 
Soluble Fertilizer Business with any funds to accomplish the 
foregoing.
    g. Scotts shall cause the Peters Consumer Water Soluble 
Fertilizer Business to expend in 1995 at an annual rate at least 
equal to the funds expended for 1993 or 1994 (whichever is greater) 
for advertising and promotion of Peters Consumer Water Soluble 
Fertilizer during 1995 and shall cause the Peters Consumer Water 
Soluble Fertilizer Business to increase such spending as reasonably 
necessary in light of competitive conditions. If the Peters Consumer 
Water Soluble Fertilizer Business is not divested by December 31, 
1995, then Scotts shall thereafter cause the Peters Consumer Water 
Soluble Fertilizer Business to expend for advertising and promotion 
of Peters Consumer Water Soluble Fertilizer at an annual rate of no 
less than 200 percent of the amount expended for 1995 for that 
purpose until such time as divestiture has been accomplished.
    h. The Peters Business shall be staffed with sufficient 
employees to maintain the viability and competitiveness of the 
Peters Business, which employees shall be the employees of the 
Peters Business that have managed and operated the Peters Business 
during the twelve (12) months prior to the Commission's acceptance 
of Agreement by the Commission and may also be hired from sources 
other than the Peters Business. Each Peters Business management 
employee shall execute a confidentiality agreement prohibiting the 
disclosure of any confidential information of the Peters Business.
    3. Scotts agrees that it will comply with the provisions of this 
Paragraph 3 of this Hold Separate, in addition to the terms and 
conditions in Paragraph 2, from the date this Hold Separate is 
accepted until the earlier of the Commission's final approval of the 
Consent Order or three (3) days after the Commission withdraws its 
acceptance of the Consent Order pursuant to Section 2.34 of the 
Commission's Rules:
    a. All earnings and profits of Miracle-Gro shall be retained 
separately by Miracle-Gro. Miracle-Gro shall be held separate and 
apart and shall be operated independently of Scotts except to the 
extent that Scotts must exercise direction and control over Miracle-
Gro to assure compliance with this Agreement or the Consent Order. 
Except as expressly provided in this Hold Separate, all 
manufacturing, sales, licensing, and other business relationships 
between Scotts and Miracle-Gro shall be conducted at arm's length 
and on commercial terms available to other persons.
    b. Except as required by law, and except to the extent that 
necessary information is exchanged in defending investigations or 
litigation, obtaining legal advice, or complying with this Hold 
Separate or the Consent Order, Scotts (including, but not limited 
to, any officer, director, employee, or agent of Scotts) shall not 
receive or have access to, or the use of, any material confidential 
information of Miracle-Gro or the activities of the Miracle-Gro 
Board not in the public domain, nor shall Miracle-Gro (including, 
but not limited to, any officer, director, employee or agent of 
Miracle-Gro) receive or have access to, or the use of, any material 
confidential information about the Peters Consumer Water Soluble 
Fertilizer Business or the Peters Business not in the public domain. 
Scotts may receive on a regular basis from Miracle-Gro aggregate 
financial and other information necessary to allow Scotts to file 
financial reports, tax returns, personnel reports, and reports with 
the Securities and Exchange Commission. Any such information that is 
obtained pursuant to this subparagraph shall be used only for the 
purpose set forth in this subparagraph.
    c. Scotts shall not change the composition of the Miracle-Gro 
Board and, except as expressly provided in this Hold Separate, 
Scotts shall not change the composition of the management of 
Miracle-Gro (except that the Miracle-Gro Board shall have the power 
to remove management employees for cause) and members of the 
Miracle-Gro Board shall not serve as officers, directors, employees, 
or agents of Scotts. Scotts shall not exercise direction or control 
over, or influence directly or indirectly, Miracle-Gro or the 
Miracle-Gro Board; provided, however, Scotts may exercise only such 
direction and control as is necessary to assure compliance with this 
Hold Separate, the order and with all applicable laws. Meetings of 
the Scotts Board and meetings of the Miracle-Gro Board shall be 
audio recorded and the recording retained for two (2) years after 
the termination of the Hold Separate. Notwithstanding, in order to 
maintain Miracle-Gro's value, Scotts may direct the management of 
Miracle-Gro with regard to the following matters: investment 
decisions relating to Miracle-Gro's cash, decisions relating to the 
handling of claims and litigation, proposed acquisitions and 
divestitures outside of the ordinary course of business, and changes 
in Miracle-Gro's corporate structure.
    d. The Chairman of the Miracle-Gro Board shall have the power to 
remove members of the Miracle-Gro Board for cause and to require 
Scotts to appoint replacement members to the Miracle-Gro Board who 
are not officers, directors, employees, or agents of Scotts. If the 
Chairman of the Miracle-Gro Board ceases to act or fails to act 
diligently, a substitute chairman shall be appointed from among the 
members of the Miracle-Gro Board.
    e. If necessary, Scotts shall provide Miracle-Gro with 
sufficient working capital to maintain the same level of sales as 
during the twelve (12) months preceding the date of the Hold 
Separate. [[Page 31476]] 
    f. All material transactions of Miracle-Gro, out of the ordinary 
course of business and not precluded by this Hold Separate, shall be 
subject to a majority vote of the Miracle-Gro Board. The Miracle-Gro 
Board shall serve at the cost and expense of Scotts. Scotts shall 
indemnify the Miracle-Gro Board against any losses or claims of any 
kind that might arise out of its involvement under this Hold 
Separate, except to the extent that such losses or claims result 
from misfeasance, gross negligence, willful or wanton acts, or bad 
faith by the Miracle-Gro Board directors.
    g. Scotts shall take all reasonable steps, consistent with the 
other provisions of this Hold Separate, to maintain the 
marketability, viability, and competitiveness of Miracle-Gro, and 
not to cause or permit the destruction, removal, wasting, 
deterioration, or impairment of any assets or business it may have 
to divest except in the ordinary course of business and except for 
ordinary wear and tear, and Scotts shall not sell, transfer, 
encumber (other than in the normal course of business), or otherwise 
impair the marketability, viability or competitiveness of Miracle-
Gro.
    4. Should the Federal Trade Commission seek in any proceeding to 
compel Scotts to divest itself of the Peters Consumer Water Soluble 
Fertilizer Business, the Peters Business, Miracle-Gro, or any 
additional assets, or to seek any other equitable relief, Scotts 
shall not raise any objection based on the expiration of the 
applicable Hart-Scott-Rodino Antitrust Improvement Act waiting 
period or the fact that the Commission has permitted the 
Acquisition. Scotts also shall waive all rights to contest the 
validity of this Hold Separate.
    5. For the purpose of determining or securing compliance with 
this Hold Separate, subject to any legally recognized privilege, and 
upon written request with reasonable notice to Scotts made to its 
General Counsel, Scotts, the Peters Consumer Water Soluble 
Fertilizer Business, the Peters Business, and Miracle-Gro shall 
permit any duly authorized representative or representatives of the 
Commission:
    a. Access during the office hours of Scotts, the Peters Consumer 
Water Soluble Fertilizer Business, the Peters Business, or Miracle-
Gro 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 Scotts, the 
Peters Consumer Water Soluble Fertilizer Business, the Peters 
Business, or Miracle-Gro relating to compliance with this Hold 
Separate;
    b. Upon five (5) days notice to Scotts, the Peters Consumer 
Water Soluble Fertilizer Business, the Peters Business, or Miracle-
Gro and without restraint or interference from it, to interview 
officers or employees of Scotts, the Peters Consumer Water Soluble 
Fertilizer Business, the Peters Business, or Miracle-Gro, which 
officers or employees may have counsel present, regarding any such 
matters.
    6. This Hold Separate shall not be binding until approved by the 
Commission.

Attachment A--Notice of Divestiture and Requirement for Confidentiality

    The Scotts Company (``Scotts'') has entered into an Agreement 
Containing Consent Order (``Consent Order'') and an Agreement to 
Hold Separate with the Federal Trade Commission (``Commission'') 
relating to the divestiture of the Peters Consumer Water Soluble 
Fertilizer Business or the Peters Business. Until after the 
Commission's order becomes final and the Peters Consumer Water 
Soluble Fertilizer Business or the Peters Business is divested, 
Stern's Miracle-Gro Products, Inc. (``Miracle-Gro'') must be managed 
and maintained as a separate, ongoing business, independent of all 
other Scotts businesses. All competitive information relating to 
Miracle-Gro must be retained and maintained on a confidential basis 
by the persons involved in Miracle-Gro, and such persons are 
prohibited from providing, discussing, exchanging, circulating, or 
otherwise furnishing any such information to or with any other 
person whose employment involves any other Scotts business, 
including the Peters Consumer Water Soluble Fertilizer Business or 
the Peters Business.
    Any violation of the Agreement Containing Consent Order or the 
Agreement to Hold Separate, incorporated by reference as part of the 
Agreement to Hold Separate, incorporated by reference as part of the 
Agreement Containing Consent Order, may subject Scotts to civil 
penalties and other relief as provided by law.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted, subject 
to final approval, an Agreement Containing Consent Order 
(``Agreement'') from the Scotts Company (``Scotts'').
    The proposed 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.
    Scotts has proposed to acquire the outstanding voting securities of 
Stern's Miracle-Gro Products, Inc. (``Miracle-Gro'') in exchange for 
voting securities of Scotts. Scotts and Miracle-Gro value the 
transaction at approximately $200 million. The proposed complaint 
alleges that the merger, if consummated, would violate section 7 of 
Clayton Act, as amended, 15 U.S.C. 18, and section 5 of the Federal 
Trade Commission Act, as amended, 15 U.S.C. 45.
    The complaint alleges that Scotts and Miracle-Gro compete in the 
market for water soluble fertilizer for United States consumer use. 
Scotts sells consumer water soluble fertilizer under the Peters brand 
name, while Miracle-Gro sells consumer water soluble fertilizer under 
the Miracle-Gro brand name. The proposed complaint alleges that the 
merger would significantly increase concentration in an already highly 
concentrated market, combining a firm with a 70 percent market share 
and a firm with a six to seven percent market share. The proposed 
complaint also alleges that timely entry on a competitively meaningful 
scale would require a significant sunk investment in advertising. Entry 
is likely to require a significant amount of time because of the 
seasonal nature of the consumer lawn and garden industry and consumer 
reluctance to try new fertilizer brands. The proposed complaint 
concludes that the merger would increase the likelihood of unilateral 
anticompetitive behavior by the merged firm, because Miracle-Gro 
consumer water soluble fertilizer is the closest substitute for Peters 
consumer water soluble fertilizer. In addition, the complaint alleges 
that the merger would increase the likelihood of coordinated 
interaction among marketers of consumer water soluble fertilizer.
    The proposed Order would remedy the alleged violation by replacing 
the lost competition that would result from the merger of Scotts and 
Miracle-Gro. The proposed Order would require Scotts to divest the 
Peters consumer water soluble fertilizer business, including the 
exclusive right to sell products to consumers under the Peters brand 
name. The divestiture is to be made either (1) to Alljack & Co. or (2) 
to an acquirer approved by the Commission. In order to ensure that the 
acquirer would be able to step quickly into Scotts' shoes in marketing 
Peters water soluble fertilizer, the proposed Order requires Scotts to 
divest its inventory and to enter into an interim year supply agreement 
with the acquirer. After the expiration of the supply agreement, the 
acquirer will be able to either manufacture or to have a supplier 
manufacture water soluble fertilizer identical to the water soluble 
fertilizer supplied by Scotts under the supply agreement. The proposed 
Order prohibits Scotts from putting the Scotts brand name on water 
soluble fertilizer for consumer use for a period of two (2) years to 
prevent activity that might undermine the Peters brand for a reasonable 
transition period after the divestiture.
    A Hold Separate Agreement signed by Scotts provides that Miracle-
Gro will be operated independently of Scotts, pending the Commission's 
final approval of the proposed Order. The Hold Separate Agreement also 
requires Scotts to maintain the viability of the Peters consumer water 
soluble fertilizer business and limits the exchange of certain 
information pending divestiture. [[Page 31477]] 
    The proposed Order provides that Scotts shall divest the Peters 
consumer water soluble fertilizer business no later than December 31, 
1995. If Scotts does not divest the Peters consumer water soluble 
fertilizer business during the allotted time period, then a trustee may 
be appointed to divest the business. If the trustee does not divest the 
business within six (6) months, then the trustee may divest the entire 
Peter business (consisting of all consumer and professional 
horticultural products sold under the Peters brand name, as well as the 
assets needed to manufacture and sell those products) within a twelve 
(12) month period. The proposed Order requires Scotts to submit a 
report of compliance with the proposed Order's divestiture requirements 
within sixty (60) days following the date the proposed Order becomes 
final, and every sixty (60) days thereafter until Scotts has completed 
the divestiture.
    Finally, the proposed Order prohibits Scotts from acquiring any 
interest in any other company engaged in the sale of water soluble 
fertilizer for consumer use, without prior approval from the 
Commission, for a period of ten (10) years.
    The purpose of this analysis is to facilitate public comment on the 
proposed Order. This analysis is not intended to constitute an official 
interpretation of the Agreement or the proposed Order or in any way to 
modify the terms of the Agreement or the proposed Order.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 95-14693 Filed 6-14-95; 8:45 am]
BILLING CODE 6750-01-M