[Federal Register Volume 61, Number 196 (Tuesday, October 8, 1996)]
[Notices]
[Pages 52796-52797]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-25738]


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FEDERAL TRADE COMMISSION

[File No. 961-0067]


Castle Harlan Partners, II, L.P.; 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 or deceptive acts or practices and unfair methods of 
competition, this consent agreement, accepted subject to final 
Commission approval, would require, among other things, modification of 
the planned combination of two of the four major competitors in the 
class rings market. The settlement resolves allegations that the 
proposed purchase of the class ring businesses of both Town & Country 
Corporation and CJC Holdings, Inc. by Class Rings, Inc., which is owned 
by Castle Harlan, could have raised prices to the more than 1.6 million 
high school and college students who purchase commemorative class rings 
in this country every year, by giving one firm nearly 45 percent of all 
class rings sold and more than 90 percent of class rings sold in retail 
stores. Under the settlement, the merger no longer includes Town & 
Country's Gold Lance, Inc. class ring business, which will continue as 
an independent competitor.

DATES: Comments must be received on or before December 9, 1996.

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

FOR FURTHER INFORMATION CONTACT:
William J. Baer, Federal Trade Commission, H-374, 6th and Pennsylvania 
Ave, NW., Washington, DC 20580. (202) 326-2932.
    George Cary, Federal Trade Commission, H-374, 6th and Pennsylvania 
Ave, NW., Washington, DC 20580. (202) 326-3741.
    Howard Morse, Federal Trade Commission, S-3627, 6th and 
Pennsylvania Ave, NW., Washington, DC 20580. (202) 326-2949.
    Joseph G. Krauss, Federal Trade Commission, S-3627, 6th and 
Pennsylvania Ave, NW., 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 Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the above-captioned 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. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the accompanying complaint. An electronic copy of the 
full text of the consent agreement package can be obtained from the FTC 
Home page, on the World Wide Web, at ``http://www.ftc.gov/os/actions/
htm.'' A paper copy can be obtained from the FTC Public Reference Room, 
Room H-130, Sixth Street and Pennsylvania Avenue, N.W., Washington, 
D.C. 20580. Public comment is invited. Such comments or views will be 
considered by the Commission and will be available for inspection and 
copying at its principal office in accordance with Section 
4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Analysis To Aid Public Comment on the Provisionally Accepted Consent 
Order

    The Federal Trade Commission (``the Commission'') has accepted for 
public comment an agreement containing a consent order with Class 
Rings, Inc., Castle Harlan Partners II, L.P. (``Castle Harlan''), and 
the Town & Country Corporation (``Town & Country''). This agreement has 
been placed on the public record for sixty days for reception of 
comments from interested persons.
    Comments received during this period will become part of the public 
record. After sixty days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
with draw from the agreement or make final the agreement's order.
    The Commission's investigation of this matter concerns the proposed 
acquisition by Class Rings, Inc., a wholly owned subsidiary of Castle 
Harlan, of certain assets of Town & Country and CJC Holdings, 
Incorporated (``CJC''). The Commission's proposed complaint alleges 
that Town & Country and CJC are two of four major manufacturers of 
class rings in the United States.
    The agreement containing consent order would, if finally accepted 
by the Commission, settle charges that the acquisitions may 
substantially lessen competition in the manufacture and sale of class 
rings in the United States. The Commission has reason to believe that 
the acquisitions and agreements violate Section 5 of the Federal Trade 
Commission Act and the acquisitions would have anticompetitive effects 
and would violate Section 7 of the Clayton Act and Section 5 of the 
Federal Trade Commission Act if consummated, unless an effective remedy 
eliminates such anticompetitive effects.
    The Commission's Complaint alleges that class rings are a uniquely 
American phenomenon and that class ring purchasers would not switch to 
other products even if prices for class rings increased significantly. 
The top four manufacturers of class rings--Jostens, Inc., CJC, Town & 
Country, and Herff Jones, Inc.--account for over 95% of all class rings 
sold. Moreover, CJC and Town & Country combined account for over 90% of 
class rings sold in retail jewelry stores and mass merchandisers. The 
Complaint further alleges that new entry into class rings or expansion 
by the fringe class ring manufacturers would not be timely or likely to 
deter or offset reductions in competition resulting from the proposed 
acquisitions. The Commission's Complaint alleges that the proposed 
acquisitions would lessen competition by eliminating competition 
between CJC and Town & Country, and would lead to higher prices.
    The proposed order accepted for public comment contains provisions 
that would prohibit Class Rings, Inc., and Castle Harlan from Acquiring 
Gold Lance, Inc. (``Gold Lance''), a subsidiary of Town & Country. The 
purpose of this provision is to ensure the continuation of Gold Lance 
as an independent competitor in the manufacture and sale of class rings 
and to remedy the lessening of competition as alleged in the 
Commission's Complaint. In effect, this order is equivalent to an 
injunction preventing the acquisition of Gold Lance by Class Rings, 
Inc., and Castle Harlan, and keeps Gold Lance in the hands of Town & 
Country, a company well positioned to compete in the marketplace.
    Moreover, the proposed order prohibits Class Rings, Inc., and 
Castle Harlan, for a period of ten years, from purchasing any interest 
in Town & Country or any assets from Town &

[[Page 52797]]

Country used for the design, manufacture, or sale of class rings 
without the prior approval of the Commission. The proposed order also 
prohibits Town & Country, for a period of ten years, from purchasing 
any interest in Castle Harlan or Class Rings, Inc., or any assets from 
Castle Harlan or Class Rings, Inc., used for the design, manufacture, 
or sale of class rings without the prior approval of the Commission. 
Town & Country, however, may purchase assets from Class Rings, Inc., or 
Castle Harlan totaling not more than $2 million in any twelve month 
period. The purpose of these provisions is to ensure that Class Rings, 
Inc. and Town & Country remain independent from each other, thereby 
fostering a competitive environment for the sale of class rings.
    The proposed order also prohibits Castle Harlan and Class Rings, 
Inc., for a period of one year from the date this proposed order 
becomes final, from employing or seeking to employ any person who is or 
was employed at any time during calendar year 1996 by Gold Lance or 
Town & Country in the design, manufacture or sale of class rings. The 
purpose of this provision to ensure that Town & Country, through Gold 
Lance, remains a viable competitor in the manufacture and sale of class 
rings.
    An interim agreement was also entered into by the parties and the 
Commission that requires Class Rings, Inc., Castle Harlan, and Town & 
Country to be bound by the terms of the proposed order, as if it were 
final, from the date that Class Rings, Inc. and Castle Harlan signed 
the proposed order.
    The purpose of this analysis is to invite public comment concerning 
the proposed order. This analysis is not intended to constitute an 
official interpretation of the agreement and order or to modify their 
terms in any way.
Donald S. Clark,
Secretary.

Statement of Commissioner Mary L. Azcuenaga Concurring in Part and 
Dissenting in Part

In Class Rings, Inc., File No. 961-0067
    Today the Commission accepts for public comments a consent 
agreement resolving allegations that the proposed acquisitions by Class 
Rings, Inc., a newly created subsidiary of Castle Harlan Partners II, 
L.P., of certain assets of Town & Country Corp. (two subsidiaries, Gold 
Lance, Inc., and L.G. Balfour, Inc.) and CJC Holdings, Inc., would be 
unlawful. The proposed order prohibits the acquisition of Gold Lance.
    I concur, except with respect to the prior approval provisions in 
Paragraphs III and IV of the proposed order, which are inconsistent 
with the ``Statement of Federal Trade Commission Policy Concerning 
Prior Approval and Prior Notice Provisions'' (``Prior Approval Policy 
Statement'' or ``Statement''). In its Statement, the Commission 
announced that it would ``rely on'' the Hart-Scott-Rodino premerger 
notification requirements in lieu of imposing prior approval or prior 
notice provisions in its orders. Although the Commission reserved its 
power to use prior approval or notice ``in certain limited 
circumstances,'' it cited only a single situation in which a prior 
approval clause might be appropriate, that is, ``where there is a 
credible risk that a company'' might attempt the same merger.
    The complaint does not allege any facts showing a ``credible risk'' 
that the parties might attempt to acquire Gold Lance a second time. Nor 
am I aware of any reason to think that the parties have a concealed 
plan or intention to circumvent the order by doing so. Of course, as 
evidenced by their premerger notification report filed pursuant to the 
requirements of the Hart-Scott-Rodino Act, the parties wanted to 
acquire Gold Lance, but every merger case involves parties who want to 
combine firms or assets.
    As I understand it, the primary reason for assuming that the 
parties will try again is that they seemed so much to want to 
consummate this transaction. The intensity of the parties' interest in 
a proposed transaction as perceived by the Commission (even assuming 
that we can distinguish between the vigor of their legal representation 
and the intensity of their own feelings) has no established predictive 
value of the likelihood that parties will again attempt a transaction 
now known to be viewed unfavorably by the FTC. In addition, the 
intensity of their feelings as perceived by the Commission is unlikely 
to result in an evenhanded selection of exceptions to our prior 
approval policy.
    It also has been suggested that one reason for imposing a prior 
approval requirement is that the Commission is prohibiting the 
acquisition of Gold Lance, rather than allowing it subject to a 
divestiture requirement, under which the Commission supervises the 
divestiture. In fact, however, the choice of remedy is not predictive 
of the likelihood of recurrence. Once a divestiture has been 
accomplished, the Commission has no greater ability to deter a 
particular transaction than it will here.
    I am most sympathetic to the concern that if the parties attempted 
to repeat the transaction in the future, the Commission might be faced 
with a significant duplicative expenditure of resources. That is one of 
the reasons I dissented from the Commission's Prior Approval Policy 
Statement. Dissenting Statement of Commissioner Mary L. Azcuyenaga on 
Decision to Abandon Prior Approval Requirements in Merger Orders, 4 CCH 
Trade Reg. Rep. para. 13,241 at 20,992 (1995). But given that we have 
the policy, it seems to me incumbent on the Commission either to live 
by it or to change it.\1\
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    \1\ See Dissenting Statement of Commissioner Mary L. Azcuenaga 
in The Vons Companies, Inc., Docket No. C-3391 (May 24, 1996).

[FR Doc. 96-25738 Filed 10-7-96; 8:45 am]
BILLING CODE 6750-01-M