[Federal Register Volume 62, Number 140 (Tuesday, July 22, 1997)]
[Notices]
[Pages 39258-39280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19164]


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DEPARTMENT OF JUSTICE

Antitrust Division


Public Comments and Plaintiff's Response

United States of America and the State of Colorado v. Vail Resorts, 
Inc., Ralston Resorts, Inc., and Ralston Foods, Inc.

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that Public Comments and 
Plaintiff's Response have been filed with the United States District 
Court for the District of Colorado in United States and the State of 
Colorado v. Vail Resorts, Inc., Ralston Resorts, Inc., and Ralston 
Foods, Inc., Civ. Action No. 97-B-10.
    On January 3, 1997, the United States and the State of Colorado 
filed a Complaint seeking to enjoin a transaction in which Vail 
Resorts, Inc. (``Vail'') agreed to acquire Ralston Resorts, Inc. 
(``Ralston''). Vail and Ralston are the two largest owner/operators of 
ski resorts in Colorado, and this transaction would have combined five 
ski resorts in Colorado. The Complaint alleged that the proposed 
acquisition would substantially lessen competition in providing skiing 
to Front Range Colorado skiers in violation of Section 7 of the Clayton 
Act, 15 U.S.C. Sec. 18.
    Public comment was invited within the statutory 60-day comment 
period. Such comments, and the responses thereto, are hereby published 
in the Federal Register and filed with the Court. Brochures, newspaper 
clippings and miscellaneous materials appended to the Public Comments 
have not been reprinted here; however they may be inspected with copies 
of the Complaint, Stipulation, proposed Final Judgment, Competitive 
Impact Statement, Public Comments and Plaintiff's Response in Room 215 
of the U.S. Department of Justice, Antitrust Division, 325 7th Street, 
NW., Washington, DC 20530 (telephone (202) 514-2481) and at the office 
of the Clerk of the United States District Court for the District of 
Colorado, 1929 Stout Street, Room C-145, Denver, Colorado 80294.

    Copies of any of these materials may be obtained upon request 
and payment of a copying fee.
Constance K. Robinson,
Director of Operations, Antitrust Division.

United States District Court, District of Colorado, Lewis T. Babcock, 
Judge

[Civil Action No. 97-B-10]

    United States of America and the State of Colorado, Plaintiffs, 
v. Vail Resorts, Inc., Ralston Resorts, Inc. and Ralston Foods, 
Inc., Defendants.

United States' Response to Public Comments

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec. 16(b)-(h) (the ``Tunney Act''), the 
United States responds to the public comments received regarding the 
proposed Final Judgment in this case.

I. Background

    The United States and the State of Colorado filed a civil antitrust 
Complaint on January 3, 1997, alleging that the proposed acquisition of 
Ralston Resorts, Inc. (``Ralston Resorts'') by Vail Resorts, Inc. 
(``Vail Resorts'') would violate Section 7 of the Clayton Act, 15 
U.S.C. Sec. 18. The Complaint alleged that Vail Resorts and Ralston 
Resorts are the two largest owner/operators of ski resorts in Colorado, 
and that the proposed transaction would combine under common ownership 
several of the largest ski resorts in this region. In particular, the 
acquisition would increase substantially the concentration among ski 
resorts to which several hundred thousand skiers residing in Colorado's 
``Front Range''--the major population areas along Interstate 25--can 
practicably go for day or overnight ski trips. As a result, this 
acquisition threatened to raise the price of, or reduce discounts for, 
skiing to Front Range Colorado consumers in violation of Section 7 of 
the Clayton Act, 15 U.S.C. Sec. 18.
    At the same time the Complaint was filed, the United States and the 
State of Colorado also filed a proposed settlement that would permit 
Vail Resorts to complete its acquisition of Ralston Resorts, but 
requires a divestiture that would preserve competition for skiers in 
the Front Range. This settlement consists of a Stipulation and proposed 
final judgment.
    The proposed final judgment orders the parties to sell all of 
Ralston Resorts' rights, titles, and interests in the Arapahoe Basin 
ski area in Summit County, Colorado to a purchaser who has the 
capability to compete effectively in the provision of skiing for Front 
Range Colorado skiers. The parties must complete the divestiture of 
this ski area and related assets within five (5) days after the entry 
of the final judgment, in accordance with the procedures specified in 
the proposed final judgment, unless an extension is granted pursuant to 
the final judgment. The stipulation and proposed final judgment also 
impose a hold separate agreement that requires defendants to ensure 
that, until the divestiture mandated by the final judgment has been 
accomplished, Ralston Resorts' Arapahoe Basin operations will be held 
separate and apart from, and operated independently of, Vail Resorts' 
and Ralston Resorts' other assets and businesses. Defendants must hire, 
subject to the prior approval of the United States, a person to serve 
as chief executive officer or Arapahoe Basin, who shall have complete 
authority to operate Arapahoe Basin in the ordinary course of business 
as a separate and independent business entity.
    A Competitive Impact Statement (``CIS''), explaining the basis for 
the complaint and proposed consent decree in settlement of the suit, 
was filed on January 22, 1997 and subsequently published for comment, 
along with the stipulation and proposed final judgment, in the Federal 
Register on February 3, 1997 (62 FR 5037 through 5046), as required by 
the Tunney Act. Notice was also published in the newspaper, as required 
by the Tunney Act. The CIS explains in detail the provisions of the 
proposed final judgment, the nature and purpose of these proceedings, 
and the proposed acquisition alleged to be illegal.
    The United States, the State of Colorado, Vail Resorts, and Ralston 
Resorts have stipulated that the proposed final judgment may be entered 
after compliance with the Tunney Act. The United States and defendants 
have now, with the exception of publishing the comments and this 
response in the Federal Register, completed the procedures the Tunney 
Act requires before the proposed Final Judgment can be entered.\1\ The 
United States received 14 public comments.
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    \1\ The United States will publish the comments and this 
response promptly in the Federal Register. It will provide the Court 
with a certificate of compliance with the requirements of the Tunney 
Act and file a motion for entry of final judgment once publication 
takes place.
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    The comments, which are collected in the appendix to this 
Response,\2\ came from a variety of sources, such as representatives of 
other ski areas and

[[Page 39259]]

individuals such as skiers, property owners, local business persons, 
local officials, and others.
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    \2\ The comments have been numbered, and a log prepared. See 
Appendix. For ease of reference, the Untied States in this Response 
refers to individual comments by the log number assigned to the 
comment.
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II. Response to Comments

A. Overview

    Most comments are not supportive of the proposed final judgment 
principally for the reason that the commenters do not believe that the 
divestiture of Arapahoe Basin ski area acts as a sufficient check on 
the combined Vail Resorts and Ralston Resorts. Specifically, these 
comments claim that:
    1. The government did not define the market properly in analyzing 
the acquisition;
    2. Data used in analyzing this acquisition are flawed; and
    3. Divestiture of Arapahoe Basin is an inadequate remedy.
    The comments in opposition to the proposed final judgment are 
addressed in the following sections of this response and are arranged 
by the antitrust issues they raise.\3\ For each issue, we discuss 
briefly the standard for merger analysis generally, what the analysis 
was in this case, what the relevant comments were and the response to 
them.
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    \3\ This Response addresses all of the antitrust issues that are 
raised in the comments related to the substance of the Compliant and 
proposed Final Judgment. A number of comments raised issues that are 
not related to standard merger analysis and do not raise issues 
under the Tunney Act. For example, a comment expressed concern about 
the ``Vail mentality'' taking over in Summit County. Whatever the 
validity of such a concern, it is not one to which a Tunney Act 
response can be made--such a ``mentality'' could have been adopted 
by any owner for any ski resort at any time. Only changes that are 
directly and uniquely the result of the merger would be cognizable 
in an antitrust action. Also in this category are complaints about 
the demise of multi-mountain tickets (Ski-the-Summit), which the 
commenters claim occurred before the merger, and comments about the 
atmosphere, premerger prices, or management style of Vail Resorts. 
These views may be valid or not, but they are not antitrust issues 
raised by this merger.
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    As an initial matter, we note that some commenters (e.g. Comments 1 
and 7) questioned the adequacy of the investigation. This investigation 
was conducted like any full-scale merger investigation. The Department 
and the State of Colorado reviewed thousands of documents, not only 
from Vail and Ralston but also from other ski resorts; interviewed 
numerous business people at other Colorado ski resorts; interviewed and 
deposed Vail and Ralson officials; and contacted numerous groups and 
individuals, including substantial numbers of skiers, government 
officials, and others who might have insight into skiing in Colorado. 
In addition, the Department evaluated substantial amounts of sales, 
price, and survey data. The investigation lasted for several months.

B. Downhill Skiing Is the Relevant Product Market for Antitrust 
Purposes

    The Antitrust Division's review of mergers is governed by the 
Clayton and Sherman Acts, judicial precedent, and the Horizontal Merger 
Guidelines issued jointly by the Department and the Federal Trade 
Commission in 1992 (and slightly revised in 1997). The first step is 
defining a relevant product market. In this case the Complaint alleged 
that downhill skiing is the relevant product market. The Department's 
investigation showed that if prices at ski resorts went up a small but 
significant amount after the merger (for example, by five percent 
without inflation or any quality improvements), people would continue 
to ski rather than switch to other recreational activities. Typical 
downhill skiers would not switch to an activity such as ice skating, 
for example, just because the price of a downhill ticket increases by a 
small amount. No commenter disagreed with this relevant product market 
analysis.

C. The Relevant Geographic Market Is for Front Range Day and Weekend 
Skiers

    The relevant standard for defining a relevant geographic market is 
set forth below:

    [I]f a hypothetical monopolist can identify and price 
differently to buyers in certain areas (``targeted buyers'') who 
would not defeat the targeted price increase by substituting to more 
distant sellers in response to a ``small but significant and 
nontransitory'' price increase for the relevant product, * * * then 
a hypothetical monopolist would profitably impose a discriminatory 
price increase. * * * The Agency will consider * * * geographic 
markets consisting of particular locations of buyers for which a 
hypothetical monopolist would profitably and separately impose at 
least a ``small but significant and nontransitory'' increase in 
price.

Horizontal Merger Guidelines Sec. 1.22; see also Brown Shoe v. United 
States, 370 U.S. 294 (1962).
    Ski resorts may compete in several geographic markets at the same 
time. They may compete in local markets for day skiers, larger markets 
for weekend skiers, and quite large markets for extended vacations of 
destination skiers. The Department's investigation revealed that the 
defendants' ski resorts are able to identify different groups of skiers 
that ski at their resorts and to set prices differently for different 
groups. In the Guidelines' terms, these are ``targeted buyers.'' 
``Destination'' skiers, or those that come from outside of Colorado 
(and often outside of the United States), usually travel a significant 
distance to arrive at the ski resort and then ski for extended periods 
of time. Destination skiers usually are attracted to the resort by both 
the skiing itself and the resort's amenities. The defendants market to 
destination skiers by advertising outside of the Front Range area of 
Colorado and emphasizing package pricing which typically includes one 
or more of lift tickets, lodging, and airfare. Advertisements targeted 
at destination skiers also tend to emphasize resort amenities. The 
Complaint did not allege a violation in a market for destination 
skiers.
    Front Range skiers, in contrast, come from the geographic area 
lying just east of the Rocky Mountains and usually take day or 
overnight ski trips in Colorado. Front Range skiers are typically 
interested in the mountain and skiing facilities more than resort 
amenities. The defendants advertise to Front Range skiers in the Front 
Range: For example, through direct mail within certain zip codes and 
through local newspapers and billboards. Front Range advertising 
emphasizes discount prices on lift tickets to Front Range skiers. Front 
Range skiers usually drive to the ski resorts. Front Range skiers are 
more constrained by distance than destination skiers in choosing among 
resorts and are not willing to travel an unlimited distance to ski.
    The defendants' resorts use different pricing strategies depending 
on whether they are selling tickets to destination skiers or to Front 
Range skiers. The resorts sell lift tickets to destination skiers 
through ticket windows, as well as including tickets as part of 
destination package deals. In selling tickets to Front Range skiers, in 
contrast, the defendants' resorts use off-mountain retailers located 
within the Front Range, where tickets are discounted below the ticket 
window price. The ski resorts also offer discount coupons to Front 
Range skiers and frequent skier cards that provide discounts off of the 
window price and sometimes give a free day of skiing after a certain 
number of paid days of skiing. The defendants attempt to limit the 
availability to destination skiers of those promotions targeted at 
Front Range skiers. Because the defendants can identify and use 
different marketing and sales strategies for destination and Front 
Range skiers, the average lift ticket prices that the defendants charge 
to Front Range skiers are different from the prices that they charge to 
destination skiers.
    Because Vail Resorts and Ralston Resorts can offer different prices 
in the different markets for destination and Front Range skiers, each 
market is

[[Page 39260]]

appropriate for antitrust analysis. If Vail Resorts could impose a 
``small but significant and nontransitory'' price increase on Front 
Range skiers after the merger (for example, five percent) without 
causing a sufficient number of Front Range skiers to switch to ski 
resorts in other geographic areas and defeat the price increase, then 
the appropriate geographic market includes these ski resorts.
    It is in the market for Front Range skiing that the Department and 
the State of Colorado alleged likely anticompetitive harm from the 
proposed transaction in this case. Front Range skiers typically drive 
to their ski resort and limit the resorts they use for day trips to 
those which fall within a radius of about two-and-one-half-hour travel 
time from where they live, and a somewhat larger radius for overnight 
trips. The most popular of these resorts are located off Interstate 70 
west of Denver. The Vail and Ralston resorts are located within this 
radius. Front Range skiers would not turn to resorts that fall outside 
of this two-and-one-half-hour radius in sufficient numbers to defeat a 
small but significant, non-transitory price increase imposed by resorts 
within this radius.
    The investigation by the Department and the State of Colorado 
revealed that Vail and Ralston resorts compete directly to provide 
skiing to Front Range Colorado day and overnight skiers. During the 
1995-96 ski season, Vail Resorts accounted for approximately 280,000 
Front Range skiers days. (A ``skier day'' is one day or part of a day 
of skiing for one skier.) This is about a 12 percent share of the Front 
Range market. Overall, Vail's resorts had over 2.2 million skier days 
and had revenues of over $140 million. In this same season Ralston 
Resorts accounted for approximately 600,000 Front Range skiers days, or 
over 26 percent of the Front Range market. Overall, Ralston's resorts 
had more than 2.6 million skier days and had revenues of more than $135 
million.
    The provision of downhill skiing to Front Range residents is 
therefore a relevant market within the meaning of Section 7 of the 
Clayton Act, Vail and Ralston resorts compete directly in this market, 
and as the Complaint alleges, the effect of Vail Resorts' acquisition 
of Ralston Resorts would be to lessen competition substantially in the 
provision of skiing to Front Range skiers.
    Commenters 1 through 4 suggest that one of the relevant regional 
geographic markets for purposes of analyzing this proposed acquisition 
is a local Summit County skier market, and that the Department should 
have alleged harm to local skiers. The United States and the State of 
Colorado conducted a thorough investigation of the proposed merger and 
ultimately filed a complaint that did not allege a violation of the 
Clayton Act for skiers other than Front Range skiers. In evaluating 
these comments, it is important first to note that the merger of the 
Vail and Ralston resorts does not combine any competing ski resorts in 
Summit County; Keystone, Breckenridge and Arapahoe Basin ski resorts 
were already under single ownership before this proposed merger, and 
the Vail resorts are not in Summit County.\4\ Indeed, the divestiture 
relief in the proposed Final Judgment will deconcentrate ownership of 
ski resorts located in Summit County. More important, however, as 
discussed in more detail in Section III, the Tunney Act does not 
contemplate judicial reevaluation of the wisdom of the government's 
determination of which violations to allege in the Complaint. Thus, the 
Court may not look beyond the Complaint ``to evaluate claims that the 
government did not make and to inquire as to why they were not made.'' 
Microsoft, 56 F.3d at 1459 (emphasis in original); see also Associated 
Milk Producers, 534 F.2d at 117-18.\5\ A possible violation in a Summit 
County local skier market is a ``claim the government did not make.''
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    \4\ Thus the merger could affect a possible Summit County market 
only if significant numbers of such skiers use Vail resorts 
frequently enough that they are a significant price constraint on 
Summit County prices, but other out-of-county resorts are not a 
comparable constraint. This possibility was considered in the 
investigation, but not accepted, and the theory was not incorporated 
in the Complaint. It is also worth noting that one commenter 
(Comment 3 at p. 4) confirmed that most local skiers buy season 
passes, which means that these skiers are committed to those resorts 
at which they have bought such passes. For such skiers, competition 
from Vail is not a significant constraint unless substantial numbers 
of Summit County skiers are likely to choose a Vail season pass 
instead of a Ralston season pass, which seems improbable.
    \5\ In the same vein as the comments about a possible Summit 
County market are comments about a ``Multi-Mountain Ticket market'' 
(Comment 3) (although multi-mountain tickets were considered 
carefully in analysis of their use in competition among ski resorts 
in the Front Range skier market); and a ``Colorado market'' (Comment 
3) (although the investigation did consider, and reject, the 
possibility of an anticompetitive effect in the market for 
destination ski vacations). Similarly, concern that Vail may 
dominate a labor market for ski resort employees (Comment 11) is 
beyond the Complaint.
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D. The Proposed Divestiture Solves the Anticompetitive Problem Alleged 
in the Complaint

    The divestiture ordered in the proposed Final Judgment will resolve 
the substantial increase in concentration that is likely to be brought 
about by the proposed merger. In analyzing the proposed final judgment, 
``the court's function is not to determine whether the resulting array 
of rights and liabilities is one that will best serve society, but only 
to confirm that the resulting settlement is within the reaches of the 
public interest.'' United States v. Western Elec. Co., 993 F.2d 1572, 
1576 (D.C. Cir.), cert. denied, 114 S. Ct. 487 (1993) (emphasis added, 
internal quotation and citation omitted). The relief in the proposed 
Final Judgment is sufficient to preserve competition for Front Range 
Colorado skiers.
    The Complaint alleges that the combination of Vail Resorts and 
Ralston Resorts would substantially increase concentration in the Front 
Range skier market, using the Herfindahl-Hirschman Index (``HHI'') \6\ 
as a measure of market concentration. The post-merger HHI, based on 
Front Range skier days derived from surveys of skiers conducted in 
1994, 1995, and 1996, would be approximately 2,228 with a change in the 
HHI of about 643 points. During the 1995-96 skiing season, Vail Resorts 
accounted for about 12 percent and Ralston Resorts over 26 percent of 
Front Range skier days. If the proposed acquisition were consummated 
without divestiture, the combined company would account for over 38 
percent of skier days in the Front Range market. The Complaint also 
alleges that successful entry or expansion in the skiing business is 
extremely unlikely for the reason that entry is difficult, time 
consuming and costly. Entry or expansion is unlikely to prevent any 
harm to competition.
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    \6\ The Herfindahl-Hirschman Index, or ``HHI,'' is a commonly 
accepted measure of market concentration. It is calculated by 
squaring the market share of each firm competing in the market and 
then summing the resulting numbers. For example, for a market 
consisting of four firms with shares of thirty, thirty, twenty, and 
twenty percent, the HHI is 2600 (302 + 302 + 
202 + 202 = 2600). The HHI takes into account 
the relative size and distribution of the firms in a market and 
approaches zero when a market consists of a large number of firms of 
relatively equal size. The HHI increases both as the number of firms 
in the market decreases and as the disparity in size between those 
firms increases. Markets in which the HHI is between 1000 and 1800 
are considered to be moderately concentrated, and those in which the 
HHI is in excess of 1800 points are considered to be concentrated.
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    Information about the Front Range Colorado skiing market permitted 
estimates of the relevant range of likely price increases that could 
result from the proposed merger without the divestiture of Arapahoe 
Basin. If the merger were allowed to take place without any 
divestiture, it was estimated there would be an overall

[[Page 39261]]

average increase in Front Range discounted lift ticket prices on the 
order of 4%. This is an approximate average of about one dollar per 
lift ticket for all Front Range customers (considering actual average 
transaction prices for Front Range skiers, not list (ticket window) 
prices). It was also estimated that there would be higher price 
increases at the merging firms' resorts.
    The divestiture ordered in the proposed Final Judgment is likely to 
resolve the anticompetitive problems raised by the proposed merger. 
Since Ralston Resorts has jointly owned Arapahoe Basin, Keystone, and 
Breckenridge, these three resorts have not been competing against each 
other for customers. Divesting Arapahoe Basin restores such competition 
and, more generally, permits Arapahoe Basin to serve as an independent 
competitor for Front Range skiers. The divestiture of the Arapahoe 
Basin ski area decreases the post-merger HHI for the Colorado Front 
Range skiing market to below 1800 and the defendants' post-merger 
market share in the Front Range to less than 32%. Given the post-
divestiture HHI level, the combined firm's post-divestiture market 
share, and the number and size of independent competing ski resorts 
remaining in the affected markets, the proposed merger with divestiture 
is not likely to have a significant anticompetitive impact through a 
unilateral effect or through a higher probability of coordinated 
behavior.
1. Market Share Calculations Were Accurate
    Commenters 1-8, 11, and 12 all had comments on the market shares 
and the predicted post-merger price increases calculated by the 
Department. Commenter 1 pointed out that some destination skiers 
purchase discount tickets at Front Range locations, which might skew 
calculations of actual Front Range skiers. Commenter 5 commented that 
the ticket systems at the resorts do not accurately record skier days. 
Commenters 2 and 3 suggested that Arapahoe Basin's longer season may 
have caused it to appear to have a higher market share than it actually 
has.
    Front Range skier days were calculated using a variety of documents 
obtained not only from the merging parties, but also from other sources 
involved in the Front Range skiing industry in Colorado. The shares 
were calculated from these documents in several different ways to check 
for accuracy. Adjustments were made to the calculations to account for 
several different factors, including those identified by the 
commenters, such as the purchase by destination skiers of tickets from 
Front Range outlets, and the way in which the length of Arapahoe 
Basin's ski season might affect the significance of the number of skier 
days there. In addition, the availability of data from several 
different sources allowed the Department to verify the accuracy of the 
skier day numbers used to determine market shares. The Department 
considered in its calculations all of the Colorado resorts that are 
used by Front Range skiers. Thus the Department considered the issues 
now raised by the commenters in calculating its market shares, and 
adjusted for those variables.
    Several commenters claimed that Vail Resorts would have anywhere 
from 40% to 61.7% market share (Comments 6, 7, and 9) or contended that 
the HHI figures calculated by the Department were incorrect. One of 
these commenters said that the Arapahoe Basin divestiture does not have 
meaning in the total skier market (Comment 7), and another stated that 
Arapahoe Basin only has 4% of the skier-days in Colorado (Comment 9). 
These commenters all seem to have been looking at statistics other than 
those for Front Range skiers. These comments apparently consider a 
``market'' for all skiing in Colorado--which ignores the important 
distinction between destination and Front Range skiers. In the Front 
Range market, the merged Vail/Ralston Resorts (other than Arapahoe 
Basin) had under a 32% market share; Arapahoe Basin had approximately a 
6-7% market share.\7\
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    \7\ Two commenters (Comments 3 and 11) inquired about the post-
divestiture HHI. Using the same data as in the Complaint, the post-
divestiture HHI would be approximately 1800.
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2. Predictions of Price Increases Were Appropriate
    A number of comments addressed the estimates made by the Department 
and Colorado regarding likely post-merger price increases and 
questioned whether the Department had considered certain issues that 
might affect the integrity of its calculations. Commenter 1 questioned 
the validity of the surveys used by the Department, stating that these 
surveys were not valid because the commenter did not know of any skiers 
who were surveyed and the surveys were probably supplied to the 
Department by the merging companies. As stated above, the Department 
used information from a variety of sources in calculating both market 
shares and predicted price increases. Of course, the estimates made by 
the Department of likely price increases necessarily are just that--
estimates--but they were based on a variety of surveys, including those 
done by Vail and Ralston in the ordinary course of business before the 
merger negotiations as well as those done by others. The Department 
analyzed the data in as many different ways as possible. While 
developing such estimates is inherently an imperfect process, the 
process in this case was based on a standard methodology and prepared 
with the detail and care associated with projects expected to be tested 
in litigation.
    One commenter (Comment 2) suggests that Copper Mountain and 
Arapahoe Basin will simply follow any price increase of Vail. Each 
competitor (in this or any market) sets a price considering whether a 
different price would be more profitable. A higher price, for example, 
may produce more revenue per customer but fewer customers, as some 
customers shift to other ski resorts and some ski less frequently. Each 
competitor must evaluate all these factors including other prices in 
the market. Thus a competitor will not necessarily follow every price 
increase, especially if it believes that it can increase revenues by 
retaining a lower price and capturing skiers that leave another resort 
in response to a price increase. For a general description of the 
methodology used in the Department's price increase estimates, see Carl 
Shapiro, Mergers with Differentiated Products, 10 Antitrust 23 (1996).
    Some commenters (Comments 1, 2, 4, 8, 11, 12, and 13) felt that the 
Department relied too heavily on market share and HHI numbers, and 
opined that the Department used 35% market share as a benchmark market 
share for making a decision regarding the transaction. While the 
Department certainly uses market share numbers and HHIs as one way to 
look at mergers, these are only two among numerous factors considered 
when analyzing this, or any other, merger. As stated above, the 
Department and the State of Colorado performed a complete and thorough 
investigation that lasted several months, and analyzed all aspects of 
the transaction.
3. The Divestiture Relief is Likely to be Sufficient to Constrain 
Average Prices
    Many commenters expressed the concern that the divestiture of 
Arapahoe Basin would not be enough to resolve the likely 
anticompetitive effects of the merger, and stated that if the 
Department and the State of Colorado had concerns about the merger of 
the Vail and Ralston resorts they should have required Vail and Ralston 
to divest a larger resort than Arapahoe Basin,

[[Page 39262]]

such as Breckenridge or Keystone. Commenters stated that there are many 
unique aspects of Arapahoe Basin that they felt would make Arapahoe 
Basin insufficient to constrain any post merger price increase by Vail 
Resorts. Commenters 2, 3, 5, 6, and 7 cited qualities of Arapahoe Basin 
such as its terrain, altitude, ski lifts, extreme weather, and 
remoteness as factors making Arapahoe Basin very different than Vail 
Resorts, Keystone, and Breckenridge. These commenters cited in addition 
other qualitative differences between Arapahoe Basin and other ski 
resorts, such as lodging, dining, and other amenities, as reasons why 
skiers who left Vail Resorts after the merger in response to a price 
increase would not go to Arapahoe Basin. In addition, several of these 
commenters noted that Arapahoe Basin has a high proportion of advanced 
or expert skier slopes and therefore cannot cater to many of the skiers 
that will ski at Vail Resorts after the merger. Some commenters 
(Comments 2, 3, 5, 6, 10, and 11) focused on Arapahoe Basin's size as a 
reason for which Arapahoe would not constrain any post-merger price 
increase by Vail Resorts. These commenters pointed out that Arapahoe 
Basin does not have the capacity to serve the skiers that would leave 
Vail Resorts in response to a price increase.
    As these commenters note, Vail, Breckenridge, and Keystone each is 
bigger than Arapahoe Basin. The relevant question, however, is not 
absolute size but the resort's relative significance in the Front Range 
skier market. While Arapahoe Basin is smaller than the other Ralston 
resorts in acreage and in total skier days, it has a high proportion of 
Front Range skiers. In this market, Breckenridge and Keystone together 
account for about 20% of skier days, Vail Resorts about 12% and 
Arapahoe Basin 6-7%. Arapahoe Basin accounted for approximately one-
quarter of Ralston Resorts' Front Range skier days during the 1995-96 
ski season.\8\
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    \8\ Of course it is true, as one commenter (Comment 6) notes, 
that many Front Range skiers also value the many amenities that are 
important to destination skiers; the relative significance of these 
amenities is greater to the average destination skier than the 
average Front Range skier, however.
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    It is true, as commenters note, that Arapahoe Basin is more 
oriented to the intermediate or advanced skier than are other ski 
areas. Currently, approximately 7-10% of Arapahoe Basin's skiing 
terrain is considered beginner level, compared to 13% of Keystone, 22% 
of Copper Mountain, 22% of Winter Park and 17% of Breckenridge. In 
addition, 50% of Arapahoe Basin's terrain is considered intermediate 
level and 40% is advanced. This terrain does not mean that Arapahoe 
Basin is not attractive to Front Range skiers, however. The very 
characteristics that some commenters say detract from Arapahoe Basin's 
competitiveness actually are appreciated by many Front Range skiers. A 
very substantial portion of Front Range skiers are intermediate or 
advanced skiers. Indeed, with a large percentage of its terrain 
attracting intermediate and advanced skiers. Arapahoe Basin skiing 
compares closely with the bowl and glade skiing experience offered at a 
number of Vail Resorts' mountains. Skier surveys revealed that a 
substantial number of skiers who ski Vail, Breckenridge or Keystone 
also ski Arapahoe Basin, and vice versa. As commenters note, Arapahoe 
Basin is not all things to all skiers. But the Department's 
investigation revealed that a relatively small shift in skier days to 
Arapahoe Basin, when taken together with the shift in skier days to 
other independent resorts, would make any significant price increase by 
the merged firm unprofitable. Therefore, Arapahoe Basin does not have 
to be the ski resort to which every Front Range skier would go after 
leaving Vail Resorts in response to a price increase. The Department 
concluded that Arapahoe Basin is an appropriate divestiture because it 
appears to be sufficiently attractive to enough Front Range skiers who 
also use Vail, Breckenridge and Keystone that it can be a competitive 
alternative in the market. Therefore, once Arapahoe Basin is divested, 
any increase in average discounted prices to Front Range skiers is 
likely to be negligible, according to the same analytical framework 
that produced the estimates of post-merger price increases.
4. The Divested Assets Are Likely To Be Viable
    Several commenters expressed concern that Arapahoe Basin cannot 
survive except as part of a large ski resort company, or at least as 
part of Keystone. A few of these commenters (Comments 1, 2, 5, 10, 13) 
thought that Arapahoe Basin should be left with keystone rather than 
being divested. Commenters 2 and 10 felt that Arapahoe Basin would 
suffer if it did not receive the destination skier business that it 
received through its affiliation with Ralston Resorts. They also noted 
that Arapahoe Basin currently is the beneficiary of certain services 
because it is affiliated with Keystone. Commenter 3 also mentioned that 
Arapahoe Basin would no longer benefit from the advertising efforts of 
Keystone and Breckenridge, which historically included all mountains 
within the multi-mountain group. Commenter 1 felt that Arapahoe Basin 
could not stand alone with 250,000 skiers per year and no town or 
amenities.
    These comments ignore, however, the fact that there are several 
other ski areas of comparable or smaller size, such as Loveland and 
Eldora, which have been able to survive as stand-alone entities. These 
ski areas appeal particularly to Front Range skiers, the group that the 
relief in this case is intended to protect. Furthermore, there are 
other collaborative marketing arrangements that exist, such as ``Gems 
of the Rockies.'' a joint marketing program of a number of Colorado ski 
resorts, including Arapahoe Basin, so Arapahoe Basin need not be cut 
off from all joint marketing activities. In addition, the divestiture 
must be made to a new owner capable of operating a viable ski area 
business, which includes the ability to advertise and market Arapahoe 
Basin.
    One commenter (Comment 6) observed that Arapahoe Basin is not 
likely to be able to expand or to ``reposition'' itself in the market. 
Another commenter (Comment 11) inquired whether the Department assumed 
that certain permits would be granted to allow expansion at Arapahoe 
Basin. While the Department fully investigated such relevant aspects 
when considering Arapahoe Basin as a possible divestiture entity, the 
Department did not assume that any expansion or repositioning would 
take place. The analysis considered current facts.
5. Predictions of Other Anticompetitive Actions by Vail Either Are 
Unfounded or Are Subject to Later Relief
    Commenters 3, 6, and 11 suggest that Vail may engage in 
anticompetitve conduct after the merger. For example, one commenter 
(Comment 6) alleges that Vail Resorts either can engage in predatory 
conduct or can be a price leader that discipline other ski resorts. 
First, in predicting predation, this comment (from a competitor) claims 
that the merger will result in prices that are too low--not too high, 
as alleged in the complaint. Predation is a violation of the antitrust 
laws, albeit one more often alleged than proved; an injured competitor 
is not without remedy for true predation. Second, the allegations of 
possible disciplining conduct in support of price leadership discuss a 
risk that is part of the risk of anticompetitive outcomes considered in 
the investigation. In the judgment of the

[[Page 39263]]

Department, considering the post-divestiture market shares in the 
relevant (Front Range) market, the nature of the industry, the market 
in which a violation was alleged, and the number of competitors in the 
market, this risk did not warrant any additional remedy.
    One commenter (Comment 3) addresses several possible post-merger 
actions by Vail Resorts that it claims could affect competition. 
Included are making package deals with airlines (which does not relate 
to the Front Range market), affecting the placement of competitors' 
radio, television, and print advertisements (which appears to be part 
of the ordinary give-and-take of competition and media scheduling 
practices (in the normal course of business, competitors' 
advertisements are not placed close together)), and contracting with 
retailers for exclusive distribution arrangements for ski tickets 
(which appears to be either part of the ordinary give-and-take of 
competition or, if it truly forecloses retail distribution, may itself 
be an antitrust violation.\9\ In short, these additional concerns do 
not amount to significant criticisms of the proposed Final Judgment and 
the relief it contains.
---------------------------------------------------------------------------

    \9\ One commenter (Comment 3) suggests Vail Resorts' possible 
local transportation service may diminish the likelihood of the 
continuation of a local tax that funds a local bus service running 
to other ski areas. Such a change would have complicated effects, 
and the likelihood of any such change flows primarily from the 
previous Keystone-Breckenridge merger, not from this transaction.
---------------------------------------------------------------------------

    One commenter claims that the government considered, but did not 
discuss, other possible relief in the form of other divestitures 
(Comment 6). The text of that comment itself, however, recognizes that 
any other such option that the government could have considered would 
have involved a full trial on the merits (with relief to be determined 
by the court after trial). A full trial on the merits is the 
alternative explicitly mentioned in Section VI of the Competitive 
Impact Statement filed with this Court. As stated there, the Department 
rejected that option because it was satisfied that the divestiture 
contained in the proposed Final Judgment will preserve competition and 
will there achieve the result that the government would have sought 
through litigation, but without the time, expense, and uncertainty of 
litigation.
    The antitrust issues that commenters have raised were considered by 
the Department and the State of Colorado during the course of a 
thorough and extensive investigation into the proposed merger. 
Ultimately, the Department and Colorado found that any likely 
significant anticompetitive effect resulting from the merger would 
involve Front Range skiers, and the Plaintiff accordingly alleged such 
harm to Front Range skiers in their Complaint in this action. As 
described in detail above in response to the specific concerns voiced 
by commenters, the divestiture of Arapahoe Basin should resolve any 
anticompetitive effect associated with the merger and should restore 
significant competition to the Front Range market in Colorado.

III. The Legal Standard Governing the Court's Public Interest 
Determination

    Once the United States moves for entry of the proposed final 
judgment, the Tunney Act directs the Court to determine whether entry 
of the proposed final judgment ``is in the public interest.'' 15 U.S.C. 
Sec. 16(e). In making that determination, ``the court's function is not 
to determine whether the resulting array of rights and liabilities is 
one that will best serve society, but only to confirm that the 
resulting settlement is within the reaches of the public interest.'' 
United States versus Western Elec. Co., 993 F.2d 1572, 1576 (D.C. Cir.) 
cert. denied, 114 S. Ct. 487 (1993) (emphasis added, internal quotation 
and citation omitted).\10\ The Court should evaluate the relief set 
forth in the proposed Final Judgment and should enter the Judgment if 
it falls within the government's ``rather broad discretion to settle 
with the defendant within the reaches of the public interest.'' United 
States versus Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); 
accord United States versus Associated Milk Producers, 534 F.2d 113, 
117-18 (8th Cir.) cert. denied, 429 U.S. 940 (1976).
---------------------------------------------------------------------------

    \10\ The Western Electric decision concerned a consensual 
modification of an existing antitrust decree. The Court of Appeals 
assumed that the Tunney Act was applicable.
---------------------------------------------------------------------------

    The Court is not ``to make de novo determination of facts and 
issues.'' Western Elec., 993 F.2d at 1577. Rather, ``[t]he balancing of 
competing social and political interests affected by a proposed 
antitrust decree must be left, in the first instance, to the discretion 
of the Attorney General.'' Id. (internal quotation and citation omitted 
throughout). In particular, the Court must defer to the Department's 
assessment of likely competitive consequences, which it may reject 
``only if it has exceptional confidence that adverse antitrust 
consequences will result--perhaps akin to the confidence that would 
justify a court in overturning the predictive judgments of an 
administrative agency.'' Id.\11\
---------------------------------------------------------------------------

    \11\ The Tunney Act does not give a court authority to impose 
different terms on the parties. See, e.g., United States versus 
American Tel. & Tel. Co., 552 F Supp. 131, 153 n.95 (D.D.C. 1982), 
aff'd sub nom. Maryland versus United States, 460 U.S. 1001 (1983) 
(Mem.); accord H.R. Rep. No. 1463, 93d Cong., 2d Sess. 8 (1974). A 
court, of course, can condition entry of a decree on the parties' 
agreement to a different bargain, see, e.g., AT&T, 552 F. Supp. at 
225, but if the parties do not agree to such terms, the court's only 
choices are to enter the decree the parties proposed or to leave the 
parties to litigate.
---------------------------------------------------------------------------

    The Court may not reject a decree simply ``because a third party 
claims it could be better treated.'' Microsoft, 56 F.3d at 1461 n.9. 
The Tunney Act does not empower the Court to reject the remedies in the 
proposed Final Judgment based on the belief that ``other remedies were 
preferable.'' Id. at 1460. As Judge Greene has observed:

    If courts acting under the Tunney Act disapproved proposed 
consent decrees merely because they did not contain the exact relief 
which the court would have imposed after a finding of liability, 
defendants would have no incentive to consent to judgment and this 
element of compromise would be destroyed. The consent decree would 
thus as a practical matter be eliminated as an antitrust enforcement 
tool, despite Congress' directive that it be preserved.

United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 151 
(D.D.C. 1982), aff'd sub nom. Maryland v. United States, 460 U.S. 1001 
(1983) (Mem.).
    Moreover, the entry of a governmental antitrust decree forecloses 
no private party from seeking and obtaining appropriate antitrust 
remedies. Defendants will remain liable for any illegal acts, and any 
private party may challenge such conduct if and when appropriate. The 
issue before the Court in this case is limited to whether entry of this 
particular proposed final judgment, agreed to by the parties as 
settlement of this case, is in the public interest.
    Furthermore, the Tunney Act does not contemplate judicial 
reevaluation of the wisdom of the government's determination of which 
violations to allege in the Complaint. The government's decision not to 
bring a particular case on the facts and law before it at a particular 
time, like any other decision not to prosecute, ``involves a 
complicated balancing of a number of factors which are peculiarly 
within (the government's) expertise.'' Hecklen v. Chaney, 470 U.S. 821, 
831 (1985). Thus, the Court may not look beyond the Complaint ``to 
evaluate claims that the government did not make and to inquire as to 
why they were not made.'' Microsoft, 56 F.3d at 1459 (emphasis in 
original); see also Associated Milk Producers, 534 F.2d at 117-18.

[[Page 39264]]

    Finally, the government has wide discretion within the reaches of 
the public interest to resolve potential litigation. E.g., Western 
Elec. Co., 993 F.2d 1572; AT&T, 552 F. Supp. at 151. The Supreme Court 
has recognized that a government antitrust consent decree is a contract 
between the parties to settle their disputes and differences, United 
States v. ITT Continental Baking Co., 420 U.S. 223, 235-38 (1975); 
United States v. Armour & Co., 402 U.S. 673, 681-82 (1971), and 
``normally embodies a compromise; in exchange for the saving of cost 
and elimination of risk, the parties each give up something they might 
have won had they proceeded with the litigation.'' Armour, 402 U.S. at 
681. This judgment has the virtue of bringing the public certain 
benefits and protection without the uncertainty and expense of 
protracted litigation. Armour, 402 U.S. at 681; Microsoft, 56 F.3d at 
1459.

IV. Conclusion

    After careful consideration of these comments, the United States 
concludes that entry of the proposed final judgment will provide an 
effective and appropriate remedy for the antitrust violation alleged in 
the complaint and is in the public interest. The United States will 
therefore move the Court to enter the proposed final judgment after the 
public comments and this response have been published in the Federal 
Register, as 15 U.S.C. Sec. 16(d) requires.

    Dated: July 10, 1997.

        Respectfully submitted,
Craig W. Conrath,
Chief
Reid B. Horwitz,
Assistant Chief
Susan Wittenberg,
Trial Attorney*
John M. Lynch,
Trial Attorney, U.S. Department of Justice, Antitrust Division, Merger 
Task Force, 1401 H Street, NW, Suite 4000, Washington, DC 20530, (202) 
307-0001.

    *Counsel of Record.

In the United States District Court for the District of Colorado

[Case No. 97-B-10]

United States of America and the State of Colorado Plaintiffs, v. 
Vail Resorts, Inc., Ralston Resorts, Inc., and Ralston foods, Inc. 
Defendants

Certificate of Service

    I hereby certify that on this 10 day of July 1997 a true and 
correct copy of the foregoing United States' Response to Public 
Comments and Appendix was delivered by overnight mail to the following 
persons:
Bruce F. Black,
Holme, Roberts & Owen, LLP, 1700 Lincoln, Suite 4100, Denver, Colorado 
80203
        and
Robert S. Schlossberg, Peter E. Halle,
Morgan, Lewis & Bockius, LLP, 1800 M Street, N.W., Washington, D.C. 
20036.

Counsel for Vail Resorts, Inc.

Jan Michael Zavislan,
First Assistant Attorney General, 1525 Sherman Street, 5th Floor, 
Denver, Colorado 80203.

Paul C. Daw,
Sherman & Howard, LLC, 633 17th Street, Suite 3000, Denver, Colorado 
80202
        and
E. Perry Johnson,
Bryan Cave, LLP, One Metropolitan Square, 211 No. Broadway, Suite 3600, 
St. Louis, Missouri 63102
        and
J. Michael Cooper, Daniel C. Schwartz,
Bryan Cave, LLP, 700 13th Street, N.W., Washington, D.C. 20005.

Counsel for Ralston Resorts, Inc. and Ralston Foods, Inc.

Susan Wittenberg

In the United States District Court for the District of Colorado

Lewis T. Babcock, Judge

[Civil Action No. 97-B-10]

United States of America and the State of Colorado Plaintiff, V. 
Vail Resorts, Inc., Ralston Resorts, Inc. and Ralston Foods, Inc., 
Defendants

Appendix: Public Comments

Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, United States 
Department of Justice, 1401 H Street, N.W., Suite 4000, Washington, 
D.C. 20530

    Dear Sirs: We are writing this letter to you regarding the 
proposed merger between Vail Resorts and Ralston Resorts. We do not 
think the decision that was made, to allow Vail to purchase Keystone 
and Breckenridge, while merely spinning off Arapahoe Basin in the 
name of Competition, is a good one, NOR IS IT IN THE PUBLIC 
INTEREST!
    It's a pretty well-accepted fact that only about four percent of 
people complain or write about issues for which they have a 
legitimate complaint. Since we have talked to many people here about 
this issue, unlike the Department of Justice, let this letter 
represent the feelings of a lot more skiers and residents than just 
the two of us. We know there are business/real estate people here 
who see the merger favorably, but they are concerned ONLY about 
increased dollars for themselves.
    What must be a bigger JOKE than the sixty day appeal period is 
the decision itself! We realize that appealing this decision is 
probably useless, as everything we see and hear about the merger 
points to it being a ``done deal.'' This includes the IPO already 
done this past week by the parent company of Vail; how could they 
even do that before the sixty day appeal period ended, and a 
``final'' decision is made??? Other things that point to a done deal 
are employee pass interchange, KAB pass interchange with additional 
dollars, special buses put on, and insufficient publicity that there 
is a sixty day appeal period before a final decision. The Denver 
Post says Vail now owns Keystone and Breck.
    Nevertheless, we have the time to write, as we are retired. 
Being retired, we are watching our funds closely, and it is a 
foregone conclusion by everyone here we talked to that prices for 
EVERYTHING will be going up substantially with Vail involved in our 
valley. Haven't we learned from Aspen, Vail and Telluride that 
present locals here will be driven from our area. Many people here 
in Summit County have two or three jobs to make ends meet, and it 
will be much worse for them after Vail exerts their influence. It 
doesn't take a genius to know that prices, not only for lift 
tickets, but everything else, will rise steadily once Vail exerts 
their power and money. They will destroy the economy for middle 
level fixed-income and lower income residents/workers. Just look at 
the Vail area NOW!
    This decision is the worst scenario of all possibilities the DOJ 
could have come up with. The best decision would have been as we 
requested in our original letter to the DOJ, a copy of which is 
attached. Barring that as an answer, if only Brechenridge would have 
gone with Vail, it may not have been too bad. Or, if Keystone went 
with Vail, and not Breckenridge, then A-Basin could have stayed with 
Keystone. Or, if you really thought Breckenridge and Keystone should 
go with Vail (which we'll never understand), then you should have 
left A-Basin with the other areas.
    You have sounded the death knell of Arapahoe Basin. There is not 
a local we have talked to yet who thinks it will survive on its own. 
It will not survive in today's economy with the decision you 
allowed. To spin off only A-Basin is absurd! It has approximately 
250,000 skiers in a season, no base area and no town. The other two 
areas have about 1,000,000 skiers each and have a ``town'' and all 
the other amenities for year round activities and recreation. THEY 
CAN STAND ALONE.
    Furthermore, the comparison of A-Basin to Vail and Copper 
because of glade and bowl skiing is completely invalid. For skiing, 
it compares more closely to Loveland. Has anyone involved in making 
this decision ever skied at A-Basin, or anywhere in Summit County? 
Also, on many days Loveland Pass on the Denver side to A-Basin is 
closed for various reasons, mostly avalanche work. Thus, the Front 
Range skiers go some place else. Their numbers will not support the 
area, and it is popular with destination skiers--and many of the 
locals who use it--only because it is part of another package.
    Why such emphasis on Front Range skiers? Your release dated Jan 
3 state. ``Justice Department set conditions that will preserve 
lower prices for hundreds of thousands of

[[Page 39265]]

skiers''. The locals and the destination skiers are going to be 
GREATLY affected by your decision. According to your documents the 
locals aren't even considered. Destination skiers we've talked to 
are already upset that they no longer have Ski-The-Summit ticket 
available to them to provide good rates to all four Summit County 
areas; it's one of the things that brought us here in the first 
place. We have a four-areas STS season pass that's available for 
early-season-buyers, locals or others. but the number is limited. 
We're certain that this wonderful Ski-The-Summit opportunity will be 
gone after this season.
    We feel the surveys that were used as the basis for your Front 
Range skier numbers are not valid. We ski often, and we know of no 
surveys taken, nor do we know of others who ski often that were 
surveyed. Furthermore, we know many destination skiers, including 
family and friends from back East, who always pick up discount 
tickets or ``Colorado Cards'' at FRONT RANGE locations before they 
come up here. I am a retired engineer, and I know that numbers can 
be juggled to obtain desired results. To have used those numbers to 
arrive at a decision this monumental, looking at only a few 
percentage points difference, is ludicrous.
    The numbers were supplied to you by the ski corporations who 
want this merger and will profit greatly from it. This decision will 
not benefit the average citizen. Your people did not contact our 
county commissioners, Summit County's town officials, the Forest 
Service here, the large senior population, or average families to 
question what effects Vail may have in our valley.
    The ski companies are their own worst enemies! They complain 
that skier numbers are flat. But, the companies are constantly 
raising prices, including parking. Families are especially hard-hit 
by these increases. In the last few years, many destination skiers 
are skiing less days in their ski week, like four instead of six, 
and they are finding other things on which to spend their time and 
money. The number one reason why skiers--destination, Front Range 
and locals--are skiing less is the HIGH PRICE OF LIFT TICKETS!
    This decision is NOT IN THE PUBLIC INTEREST. It is in the 
interest of big corporations only. Adam Aron, the CEO at Vail, has 
arrived on the Vail scene only as of July, 1996 after three years as 
president of NCL, where mergers were being effected, too. Before 
that it was UAL. Do you really think he cares about the real people 
here, or is he thinking of his career, his name and his big 
dollars--already guaranteed $250,000 bonus alone?
    As an aide to this decision, maybe the DOJ should be looking at 
better Bankruptcy Laws. Ironically, George Gillett who filed two 
bankruptcies at Vail only four years ago, is not only receiving 
$2,500,000 annual salary from Vail, but has been named prominately 
as a possible buyer for our very own Arapahoe Basin. How many people 
got hurt in those bankruptcies? He and his two sons have already 
bought into about nine other ski areas around the country. Vail may 
even ignore an agreement they had with Gillett not to own a Colorado 
ski resort until 1998! How does this compute? Wheeling and dealing 
as usual!!!
    Please give this merger a closer, second look because of its 
far-reaching ramifications.

        Sincerely,
Joel R. Bitler,
Mern V. Bitler

cc:
    Senator Ben Campbell
    Representative Scott McInnis
    Colorado Attorney General Gail Norton

U.S. Department of Justice, 10th and Constitution Avenues, Room 
3304, Washington, DC 20530

Attn: Ms. Juthymas Harntha

    Dear Ms. Harntha: We are writing to you regarding the possible 
merger whereby Vail would take over most of the Ralcorp ski 
properties of Breckenridge, Keystone and Arapaho Basin in Summit 
County, Colorado. We are adamantly opposed to this merger.
    I, Joel, am a retiree of AT&T, and in 1984, as I'm sure you are 
aware, AT&T was torn apart by the Federal Government in the name of 
competition. We won't debate that case. But, it and the more recent 
case of ski areas in the East set examples for competition. Let's 
not allow this merger so that we may continue to have competition 
here.
    Furthermore, we moved to Summit County because we like the 
``atmosphere'' here. We don't like the Vail area for many reasons, 
including its high costs. We don't want that kind of thinking 
transferred here to Summit County. We won't be able to live here.
    We are retired and don't want to see costs continuing to 
escalate as they have. With Vail involved it can only get worse. The 
only ones to really benefit from this will be ``big money'' people, 
not your average consumer. You can tell how important it is to the 
money people, as no sooner was the plan announced and a famous, and 
no-doubt high-priced lobbyist, was assigned to push for it in 
Washington.
    Please do everything in your power to halt the merger. We were 
dissatisfied, along with many other consumers and workers, when 
Ralcorp was allowed to buy Breckenridge, which then formed quite a 
monopoly here in Summit County. There will be six resorts owned by 
the new group between Eagle and Summit Counties, leaving only Copper 
Mountain to try to survive the ``big guys''.
    Thank you.

        Sincerely,
Joel R. Bitler,
Mern V. Bitler

cc: Representative Scott McInnis

Jeffrey S. Bork,
914 Ruby Road, P.O. Box 23169, Silverthorne, CO 80498-3169

February 18, 1997.

Via Facsimile and First Class Mail

Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of 
Justice, 1401 H Street, N.W., Room 4000, Washington, D.C. 20530

Re: United States and State of Colorado v. Vail Resorts, Inc., 
Ralston Resorts, Inc., and Ralston Foods, Inc., No. 97B-10 (D. Co.)

    Dear Mr. Conrath: I submit this letter to share with you my 
preliminary observations about Vail Resorts' proposed acquisition of 
the ski areas owned by Ralston Resorts. As a full-time resident of 
Summit County, Colorado, I can offer an unique and important 
perspective on this proposed business transaction.
    I am troubled by two of the conclusions in your Division's 
Competitive Impact Statement, 62 Fed. Reg. 5037 (Feb. 3, 
1997)(``CIS''). First, I cannot agree with your unexplained 
conclusion that local skiers like myself would not be adversely 
impacted by the merger. Second, I cannot agree with your conclusion 
that Vail Resorts' acquisition of Breckenridge and Keystone without 
Araphoe Basin would ``resolve the anticompetitive problems raised by 
the proposed transaction.'' CIS at 15. Based on the facts available 
to me, your Division's ``partial'' merger proposal would not resolve 
the problems raised by the proposed transaction. To the contrary, as 
explained below, the ``partial'' merger alternative appears to have 
more flaws than the defendants' original proposal.
    Here is the principal problem I face: your Division did not 
disclose in its CIS the key facts and assumptions it used in 
arriving at its conclusions. Thus, I (or any other member of the 
public, for that matter) have no basis to assess the validity of the 
Department's conclusions.
    I would like to exercise my right under the Antitrust Procedures 
and Penalty Act, 15 U.S.C. Sec. 16(b)-(h), to submit informed 
comments. Both of the transactions now on the table--the original, 
``acquire-all-three-resort'' proposal, or your partial, ``acquire-
only-the-big-two'' alternative--will negatively impact me, my 
family, and my neighbors.
    However, I cannot meaningfully exercise this right unless I have 
access to the material facts and assumptions your Division used in 
its analysis. So I have time to prepare informed comments before the 
close of the current filing deadline. I ask that you submit to me by 
Tuesday, March 4, 1997 the data identified below. I would, of 
course, be willing to execute any reasonable confidentiality 
agreement which you may deem appropriate.
    I have two final requests. First, I would appreciate your 
notifying me immediately if your Division, or any other party, makes 
a filing with the District Court in this matter. Second, please 
identify and explain in your response any statements in this letter 
which you believe are erroneous or irrelevant. The public interest 
obviously is not advanced if anyone makes representations 
inconsistent with known facts.

I. Factual Background

    In July 1996 Vail Resorts, Inc. announced it had reached it had 
reached an agreement to acquire the ski resort business of Ralston 
Resorts, Inc. for approximately $310 million. Vail Resorts is the 
largest owner of ski resorts in Colorado, owning all three resorts 
in Eagle County: Vail, Beaver Creek, and Arrowhead

[[Page 39266]]

Mountain.\1\ Ralston Resorts is the second largest owner of ski 
resorts in Colorado, owning three of the four ski resorts in 
adjacent Summit County: Arapahoe Basin, Breckenridge, and 
Keystone.\2\ A Vail Resort press release has claimed that, with its 
acquisition of the Ralston Resorts ski properties, it will become 
the largest ski resort operator in the world.\3\
---------------------------------------------------------------------------

    \1\ As you know, Arrowhead Mountain is small, and Vail Resorts 
operates Arrowhead as part of Beaver Creek. Consequently, in this 
letter I will refer to Beaver Creek to include both Beaver Creek and 
Arrowhead.
    \2\ Ralston acquired Keystone during the 1970s and Arapahoe 
Basin in 1978. It did not acquire Breckenridge, which had been 
operated independently, until 1994 or 1995. Please identify in your 
response the date Ralston acquired Breckenridge and the name of the 
person or firm which sold Breckenridge to Ralston.
    \3\ Other state that Vail Resorts would ``only'' become the 
second largest operator, with the French Compagnie des Alpes 
retaining the top spot. In your response to this letter, please 
identify how big the merged Vail Resorts would become (with or 
without A-Basin) vis-a-vis other ski resort owner/operators in the 
world.
---------------------------------------------------------------------------

    On January 3, 1997, the State of Colorado and your Department, 
on behalf of the United States, filed a civil antitrust complaint 
against the two resorts alleging that their merger would violate 
Section 7 of the Clayton Act, 15 U.S.C. Sec. 18. The complaint 
alleged that the combination of the two largest ski resort owner/
operators in Colorado would end the current ``aggressive'' 
competition between them and would, as a result, ``increase 
substantially the concentration among ski resorts'' in Colorado. 
Complaint at Paras.  1, 3, and 4. More specifically, the complaint 
alleged:
    This merger would eliminate the price constraining impact each 
has on the other. In particular, the combined Vail and Ralston 
resorts would be likely to raise prices or reduce the level of 
discounts offered to skiers from the Colorado Front Ridge. In 
addition, the transaction would give other ski resorts serving the 
Front Range the incentive to raise their lift ticket prices to Front 
Range skiers following a price increase at the combined Vail and 
Ralston resorts. Id. at para. 21.
    The Complaint asked that this proposed acquisition ``be adjudged 
to violate Section 7 of the Clayton Act'' and that ``the defendants 
be permanently enjoined from carrying out the Stock Purchase 
Agreement . . . or from entering into or carrying out any agreement, 
understanding or plan, the effect of which would be to combine the 
businesses or assets of Vail Resorts and Ralston Resorts.'' Id. at 
11 Paras.  1 and 2.
    Also on January 3, 1997 the plaintiffs moved for entry of a 
stipulation and order in which all the parties agreed to entry of a 
proposed Final Judgment. In the proposed Final Judgment, Vail 
Resorts agrees to divest Arapahoe Basin within 150 days or within 
five business days after notice of entry of the Final Judgment, 
whichever is later. Proposed Final Judgment at 4-5 para. A. In 
return, the plaintiffs agree to drop their antitrust lawsuit and to 
permit Vail Resorts to acquire Breckenridge and Keystone.
    In a press release also issued on January 3, 1997, your 
Department stated that, notwithstanding its acquisition of the large 
Breckenridge and Keystone resorts, Vail Resort's divestiture of 
Arapahoe Basin would ``keep prices lower for skiers'':
    [T]he Justice Department set conditions that will preserve lower 
prices for hundreds of thousands of skiers. * * * Without the 
divestiture, the deal likely would have resulted in higher prices to 
skiers who live in Colorado's Front Range. * * * The proposed 
settlement requires the sale of Ralston's Arapahoe Basin ski resort 
to an entity capable of operating the resort as a long-term, viable 
competitors in the market. The divestiture will prevent Front Range 
skiers from paying higher lift ticket prices.
    Three weeks later, on January 22, 1997, your Department filed 
its Competitive Impact Statement (``CIS'') in compliance with the 
requirements of the Antitrust Procedures and Penalties Act. In this 
CIS, the Department repeated in position that Vail Resorts' 
acquisition of the Ralston Resort ski properties would ``violate 
Section 7 of the Clayton Act.'' CIS at 2. The Department further 
explained that the provision of downhill skiing is a relevant market 
and that customers of the defendants' ski resorts ``include two type 
of skiers; destination skiers and Front Range skiers,'' the later 
defined as skiers residing in ``the geographic area lying just east 
of the Rocky Mountains.'' CIS at 5-6, Complaint at para. 11. 
According to the Department, the proposed acquisition would have no 
impact on ``destination skiers [who] come from outside Colorado,'' 
but would negatively impact ``Front Range skiers [who] are day or 
overnight skiers'' and who drive to resort and ``limit the resorts 
they use for day trips to those which fall within a radius of about 
two-and-one-half hour travel time from where they live.'' \4\ CIS at 
6.
---------------------------------------------------------------------------

    \4\ The definition appears over broad; I know few people who are 
willing to sit in a car five hours in one day to ski that same day. 
Please produce all facts which you considered in developing this 
definition, and identify by name all the resorts which the Division 
believes are viable alternatives for Front Range skiers wanting to 
ski a single day. I can think of only five resorts other than those 
at issue here: Copper Mountain, Eldora, Loveland, Ski Cooper, and 
Winter Park.
---------------------------------------------------------------------------

    Ignored altogether in the complaint, and without explanation in 
the CIS, the Department stated that the merger would have no impact 
on ``the local skier market.'' Id. at 6 n.2.
    In its CIS, the Department repeated its views that the merger of 
Vail Resorts and Ralston Resorts ``would reduce competition 
significantly in the market for Colorado Front Range skiers,'' and 
it identified four separate adverse impacts from such a merger:
    1. Competition generally in providing skiing to Front Range 
skiers would be lessened substantially;
    2. Actual competition between Vail and Ralston in providing 
skiing to Front Range skiers would be eliminated;
    3. Discounting to Front Range skiers by Vail and Ralston would 
likely be reduced; [and]
    4. Prices for skiing to Front Range Colorado skiers would likely 
be increased. CIS at 10.
    The Department further observed that the merger would have 
negative impacts beyond the specific ski resorts at issue: 
``Moreover, once Vail and Ralston resorts charge higher prices, 
other resorts in the market have an incentive to raise their prices 
somewhat in response to less intense price competition for Front 
Range customers.'' \5\ Id. at 13-14.
---------------------------------------------------------------------------

    \5\ The Department has estimated that the merger would likely 
raise lift ticket prices ``on the order of 4%, or about $1 per lift 
ticket.'' CIS at 14. However, it nowhere explains how it computed 
this 4%/$1 figure. A 4% increase in the amount of $1.00 would 
suggest that current ticket prices are $25.00 per day, but daily 
passes at Breckenridge and Keystone are currently $45.00. In your 
response, please include the data you used to compute this ``4%/$1'' 
figure. Also please share the assumptions you used in arriving at 
this estimate (e.g., how you determined the likely impact would be 
4%/$1 as, for example, 8%/$2--or 12%/$3)?
---------------------------------------------------------------------------

    The Department stated, however, that a partial merger--that is, 
Vail Resorts' acquisition of Breckenridge and Keystone, but not 
Arapahoe Basin--``would preserve competition'' and ``resolve the 
anticompetitive problems raised by the proposed transaction'';
    Divesting Arapahoe Basin restores significant competition among 
these mountains and, more generally, permits Arapahoe Basin to serve 
as an independent competitor for skiers throughout the Front Range. 
While Arapahoe Basin is smaller than the other Ralston resorts in 
absolute size, it has a high proportion of Front Range skiers . . . 
and is thus relatively more competitively significant in the Front 
Range skiing market than its overall number of skier days might 
suggest. Id. at 14-15.
    According to the Department, ``[a] relatively small shift in 
skier days to Arapahoe Basin would make any significant price 
increase by the merged firm unprofitable.'' Ibid. The Department 
further stated that, without Arapahoe Basin, the defendants' market 
share of Front Range skiers ``will be less than 32%.'' Id. at 16.

II. The Department's Conclusion That Local Skiers Would Not Be 
Adversely Impacted by the Merger Is Unexplained

    The Department has stated that its ``investigation did not 
reveal any likely anticompetitive effect from the proposed merger . 
. . in other relevant markets such as the local skier market,'' CIS 
at 6 n.2. The Department did not explain this conclusion in the CIS. 
Because I believe local Summit County residents would be impacted 
more negatively by the merger than any other category of skier, I 
ask you to produce all the evidence you relied upon in reaching this 
conclusion.
    The residents of Summit County are relatively small in number; I 
estimate the number of full-time residents approximates 18,000. 
However, Summit county residents are very avid skiers (in part 
explaining why they willingly suffer through a long mountain winter, 
with snow from October to June or July). We locals ski often--far 
more often than either destination or Front Range skiers.\6\ While 
locals are perhaps small in number, we generate a considerable 
number

[[Page 39267]]

of skier days and represent a sizable market for skiing in Summit 
and Eagle Counties.
---------------------------------------------------------------------------

    \6\ As but one small example, my 12-year-old son skis each 
weekend day. During his Christmas break, he skied on 16 of 18 
available days.
---------------------------------------------------------------------------

    Local skiers have two basic choices today: we can ski (1) at 
Copper Mountain, or (2) at one of the three Ralston Resorts: 
Breckenridge, Keystone, and Arapahoe Basin. Few locals ski A-Basin 
until the spring; the other three resorts are so much larger and 
offer so much more diverse terrain.\7\ Simply put, A-Basin is simply 
not large enough for most people to ski an entire day.
---------------------------------------------------------------------------

    \7\ This difference in size among the four resorts is reflected 
in their lift ticket prices. A one-day lift ticket honored at any of 
the three Ralston ski areas is $45. A one-day ticket limited to 
Arapahoe Basin is $39.
---------------------------------------------------------------------------

    Because of distance (25+ miles including Vail Pass), locals do 
not ski regularly at the Vail Resorts in adjacent Eagle County, 
perhaps one or two visits per season. Nevertheless, Vail Resorts has 
an enormous, positive impact on Summit county residents. Based on my 
past experience, none of the big three local resorts--Copper, 
Breckenridge, and Keystone--will charge lift ticket prices higher 
than that charged by Vail Resorts.\8\
---------------------------------------------------------------------------

    \8\ Please produce the one-day ticket prices charged by all 
Summit and Eagle County resorts over a period of time (e.g., 5 
years) so I can verify the accuracy of the statement.
---------------------------------------------------------------------------

    At first blush, local skiers would appear to have three choices 
under the partial merger alternative advocated by the Department: we 
could ski (1) at Copper Mountain, (2) at an independently-owned 
Arapahoe Basin, or (3) at Breckenridge or Keystone, both of which 
would be owned by Vail Resorts. The reality is that, before the 
spring, A-Basin is not a meaningful alternative; as explained above, 
it is simply too small to accommodate a full day of robust skiing. 
As a practical matter, then, before the spring when other resorts 
are closing down, local Summit county skiers will continue to have 
the same two alternatives they have today: (1) Copper, or (2) 
Breckenridge/Keystone.
    The difference in this new scenario is that Breckenridge and 
Keystone would now be owned by Vail Resorts, and the competitive 
pricing pressures Vail Resorts had once imposed on the Summit county 
resorts will have vanished. Given its massive size, it is reasonable 
to assume that, if the District Court ultimately approves Vail 
Resort's acquisition of Breckenridge and Keystone, Vail Resorts will 
increase the lift ticket prices at these two resorts to match that 
charged at its ski areas in Eagle County. Indeed, given that Vail 
Resorts (even excluding A-Basin) would be nearly five times larger 
than any other ski resort in Colorado, Vail Resorts could easily 
increase the prices of all of its lift tickets once the consummation 
of the merger becomes final.\9\
---------------------------------------------------------------------------

    \9\ It is for this reason I need all the data you considered and 
assumptions you made in determining the likely impact on pricing 
that would occur if the defendants' original (all three) merger 
proposal were consummated. See note 5 supra.
---------------------------------------------------------------------------

    The competitive alternatives for locals in this situation would 
be to ski instead at either Copper Mountain or Arapahoe Basin--
assuming these two resorts did not increase their prices as well in 
response to a price increase by Vail Resorts. A responsive price 
increase by these two areas would appear likely. For example, Copper 
has been enjoying substantial growth; during the 1995-96 season, it 
enjoyed a total of 967,074 skier days--a 25% increase over the 
previous year (1994-95: 770,973). If I managed Copper Mountain in 
these growth circumstances and my major competitor raised its 
prices, I would find the more attractive business alternative to 
raise Copper's prices as well.\10\ After all, each one dollar 
increase in a lift ticket would generate nearly $1 million for 
Copper.
---------------------------------------------------------------------------

    \10\ Historically, Copper Mountain has set its lift ticket 
prices lower than that charged at the Ralston Resort areas, the 
other ski resorts in Summit County. If Vail Resorts were to increase 
the prices at the former Ralston Resorts, Copper Mountain could 
easily increase its prices as well--and still be somewhat cheaper 
than the competition.
---------------------------------------------------------------------------

    Thus, the most likely outcome of the Department's proposed 
partial merger on local Summit County skiers would be that we would 
(1) pay higher prices at Breckenridge, Copper, and Keystone; or (2) 
ski half days at Arapahoe Basin (assuming it can survive as 
discussed in Part IV below). Consequently, I cannot agree with your 
unexplained conclusion that local skiers would not be negatively 
impacted by either the defendant's proposed complete merger or the 
Department's alternative, the partial merger. At least for locals, 
neither alternative ``will preserve lower prices'' as the Department 
represented in its January 3, 1997 press release.
    It is precisely for this reason that I ask you to produce all 
facts in your possession (whether you considered them or not) which 
relate to the size of the local skier market and the impact of the 
proposed merger on local skiers. In addition, your CIS limits its 
analysis to future pricing behavior to the five resorts that would 
be owned by enlarged Vail Resorts. What analysis have you performed 
about Copper's likely response to a price increase by an enlarged 
Vail Resorts? What analysis have you performed about the likely 
response an independent Arapahoe Basin would make to a price 
increase by an enlarged Vail Resorts? Please produce this data as 
well in your response to this letter.

III. Available Facts Suggest There Is a Substantial Question Whether an 
Independent Arapahoe Basin Would Restrain the Pricing Behavior of a 
Combined Vail Resorts/Breckenridge/Keystone Operations

    According to the Department, while a complete merger would 
violate Section 7 of the Clayton Act, a partial merger--acquisition 
of Breckenridge and Keystone without Arapahoe Basin--would be lawful 
and pro-competitive. In the Department's view, the divestiture of A-
Basin would ``restore significant competition among these mountains 
and, more generally, [would] permit Arapahoe Basin to serve as an 
independent competitor for skiers throughout the Front Range.'' CIS 
at 15. This divestiture, the Department states, ``will prevent Front 
Range skiers from paying higher lift ticket prices'' and ``will 
preserve lower prices for hundreds of thousands of skiers in one of 
America's most popular winter sports areas.'' DoJ News Release at 1 
and 2 (Jan. 3, 1997).
    The Department's assertion that an independent Arapahoe Basin 
will provide ``significant'' competition to a combined Vail Resorts/
Breckenridge/Keystone operations and would, as a result, restrain 
the pricing behavior of this new giant does not appear to be 
credible. Consider the facts when an independent Arapahoe Basin is 
compared with the combined Vail Resorts/Breckenridge/Keystone 
operations:

------------------------------------------------------------------------
                                                          Combined Vail 
                                                             resorts/   
                                             Arapahoe     Breckenridge/ 
                                               Basin         Keystone   
                                                            operations  
------------------------------------------------------------------------
Total Skiable Acres......................         490            9,421  
Acres of Snowmaking......................        None            2,284  
Total Number of Trials...................          61              441  
Longest Run (in miles)...................           1.5              4.5
Total Lifts..............................           5               79  
Total No. of Gondolas/High Speed                                        
 ``Quads''...............................           0               26  
Night Skiing.............................          No              Yes  
Total Uphill Capacity (skiers per hour)..       6,066          121,064  
1995-96 Skier Days.......................     241,435        4,615,358  
------------------------------------------------------------------------


----------------------------------------------------------------------------------------------------------------
                                                A-Basin        Breck       Keystone       Vail      Beaver creek
----------------------------------------------------------------------------------------------------------------
Total Skiable Acres........................         490         2,031          1,749       4,112         1,529  
Acres of Snowmaking........................        None           369            859         347           709  

[[Page 39268]]

                                                                                                                
Total Number of Trials.....................          61           138             91         121            91  
Longest Run (in miles).....................           1.5           3.5            3           4.5           3.5
Total Lifts................................           5            19             20          26            14  
Total No. of Gondolas/High Speek ``Quads''.           0             4              6          12             5  
Total Uphill Capacity (skiers per hour)....       6,066        26,030         26,582      45,213        23,739  
1995-96 Skier Days.........................     241,435     1,357,790      1,057,568  \1\ 2,200,00              
                                                                                               0    ............
----------------------------------------------------------------------------------------------------------------
\1\ Combined.                                                                                                   

    The Department implies that Arapahoe Basin is a ``close 
competitive alternative'' to each of the other four resorts at 
issue. This unexplained conclusion is also difficult to square with 
the facts: \11\
---------------------------------------------------------------------------

    \11\ This conclusion is also difficult to square with the 
Department's position last fall in reviewing another (but much 
smaller) merger in New England. There is stated that `[m]any of the 
other smaller resorts lack the qualitative aspects previously 
identified (number of trails and lifts, variety and difficulty of 
trails, snowmaking, night skiing, and other amenities) to constrain 
a small but significant price increase after the merger'' of larger 
resourts. Plaintiff's Response, U.S. v. American Skiing Co., 61 Fed. 
Reg. 55995, 55998 (Oct. 30, 1996). See also Competitive Impact 
Statement, U.S. v. American Skiing Co., 61 Fed. Reg. 33765, 33771 
(June 28, 1996) (``Smaller ski resorts . . . cannot and after this 
transaction would not constrain prices charged to weekend skiers 
living in eastern New England. Although eastern New England skiers 
occasionally choose to ski at such smaller . . . resorts, skiing at 
such resorts is not a practical . . . alternative for most eastern 
New England skiers most of the time.'').
---------------------------------------------------------------------------

    It is my experience that all three categories of skiers--locals, 
destination, and Front Range--each view Arapahoe Basin as 
fundamentally different than each of the four other ski areas at 
issue:
    1. Local Skiers. Because Arapahoe Basin is so small and more 
different to reach, locals generally ski A-Basin in two of two 
circumstances: (a) when they want to ski for several hours only; or 
(b) in the spring when, because of its location and elevation, A-
Basin has much better conditions than at other resorts (even if they 
are open).\12\
---------------------------------------------------------------------------

    \12\ Some locals ski A=Basin for a third reason: to ``extreme'' 
ski in out-of-bounds areas. Because this activity is not legal, I 
suspect the Department cannot consider it.
---------------------------------------------------------------------------

    2. Destination Skiers. Arapahoe Basin is not an alternative for 
destination skiers because it is completely undeveloped--that is, 
there are no shops; restaurants (other than the single lodge); 
hotels, or condominiums. Besides, even if it had a developed base, 
A-Basin is not large enough and does not have a complete set of 
terrain to attract families and groups of skiers with diverse skiing 
ability.
    3. Front Range Skiers. While I am not personally familiar with 
the practices and preferences of many Front Range Skiers, I suspect 
they ski A-Basin under circumstances similar to local skiers. In 
addition, they may ski A-Basin for half a day, and use their ticket 
to ski Keystone the rest of the day.\13\
---------------------------------------------------------------------------

    \13\ In your response to this letter, please advise whether you 
and your staff (a) are downhill skiers, and (b) have skied at any of 
the Summit/Eagle County resorts (and, if so, which ones). Someone 
unfamiliar with the different ski areas may have a very different 
perspective than one who has actually skied the terrain in question. 
No skier I know of would say that A-Basin is ``comparable'' to the 
other resorts owned by either Ralston Resorts or Vail Resorts.
---------------------------------------------------------------------------

    Thus, if my experience is accurate, it is unlikely that skiers 
preferring to ski at Breckenridge or Keystone would ski instead at 
A-Basin as a result of a price increase by a merged Vail Resorts 
(even assuming A-Basin does not make a responsive price increase as 
well). Indeed, as the Department stated last fall, ``[t]he typical 
downhill skier who goes to [large] resorts for the qualitative 
experience is unlikely to stop skiing or switch to smaller resorts 
with less aties because ticket prices increase by a small amount.'' 
\14\
---------------------------------------------------------------------------

    \14\ Plaintiff's Response, U.S. v. American Skiing Co., 61 Fed. 
Reg. 55995, 55999 (Oct. 30, 1996).
---------------------------------------------------------------------------

    I therefore ask the Department to produce all data in its 
possession (whether or not it was considered) which pertains to the 
question whether Arapahoe Basin is, or is not, a ``close competitive 
alternative'' to each of the other four resorts at issue. I suspect 
your Department has prepared ``elasticity'' studies to show the 
correlation between the prices charged at the other resorts and the 
likelihood that skiers would respond to a price increase by skiing 
instead at A-Basin. Please produce these studies, the underlying 
data, and the source of the underlying data (e.g., whether it was 
produced by the defendants, the industry, or third-party sources).
    The Department's sole explanation for opposing a complete merger 
but approving a partial merger is that with a complete merger the 
new giant would control 38% of all Front Range skiers, while with a 
partial merger this Front Range market share would be split between 
the new giant, with 32%, and Arapahoe Basin, with 6%. It is this 
sharing of the Front Range market that forms of the basis of the 
Department's representation that the divestiture of Arapahoe Basin 
``would preserve competition'' and ``keep prices lower for skiers.'' 
In support, the Department undertook a Herfindahl-Hirschman Index 
(HHI) analysis, but it chose not to disclose the data used in this 
HHI analysis so the public could examine the accuracy of the 
Department's analysis--and, in the process, the legitimacy of the 
Department's conclusions.
    At the outset, the Department never explains in its Complaint or 
its CIS how it arrived at its ``Front Range market share'' data--
that is, the data used both to assess the total size of this market, 
and to allocate market share among different resorts. The accuracy 
of this data is obviously critical: it is this data on which the 
Department uses in its HHI analysis which, in turn, is used to 
explain the Department's willingness to approve the so-called 
partial merger.
    The reason I ask is that your estimates do not correspond, even 
closely, with my own experience. According to your data, Front Range 
skiers constitute less than 13% of total skier days at Vail Resorts 
and less than 20% of total skier days at Breckenridge and 
Keystone.\15\ My experience is that these numbers are understated 
substantially--perhaps as much as 50%.\16\ While I am not very 
familiar with the HHI analysis, I suspect that understating the 
Front Range skier market share would skew the HHI results.
---------------------------------------------------------------------------

    \15\ The Department states that the six resorts owned by Vail 
Resorts and Ralston Resorts ``account for over 38 percent of skiers 
days in the Front Range market.'' CIS at 10. If this were true, then 
the other five resorts which serve Front Range skiers--Copper 
Mountain, Eldora, Loveland, Ski Cooper, and Winter Park--serve the 
remaining 62% of the market. This does not appear to be possible 
given that Eldora, Loveland and Ski Cooper are so small--with each 
being perhaps each smaller than A-Basin.
    \16\ Your production of this data may help explain this apparent 
discrepancy. For example, there are a substantial number of Front 
Range residents who own condominiums in Summit or Eagle Counties and 
who ski most weekends. Perhaps your data erroneously classified 
these skiers as ``destination'' skiers, although they obviously are 
more appropriately classified as Front Range skiers, if not local 
skiers.
---------------------------------------------------------------------------

    However, even assuming the accuracy of the market share data you 
used, the Department's statement that Arapahoe Basin currently 
serves 6% of the Front Range market is misleading, and may be 
misleading in a material way. The CIS does not acknowledge that, 
because of its elevation, A-Basin generally stays open months after 
other ski resorts close (including all other resorts in Summit and 
Eagle Counties).\17\ I suspect a sizable number of A-Basin's total 
number of skier days--virtually all of whom are Front Range or local 
skiers--are generated after other ski resorts have closed. If this 
is the case, Arapahoe Basin may serve less of the Front Range skier 
market during the competitive period than the Department asserts.
---------------------------------------------------------------------------

    \17\ Most ski resorts in Summit and Eagle Counties generally 
close between mid-April and early May, depending upon the conditions 
in a given year. My recollection is that in 1996 A-Basin closed on 
July 4 and that in 1995 it closed on August 10--months after the 
other ski resorts had closed.
---------------------------------------------------------------------------

    I therefore ask the Department to submit skier day data by 
month, so I can ascertain how many of A-Basin's skier days are 
generated in a competitive environment and now many are generated 
when the competition has closed. This data may,

[[Page 39269]]

moreover, impact materially your HHI analysis.
    At the core of the Department's ``partial-merger-is-OK'' 
position is that an independent Arapahoe Basin would provide 
``significant competition'' with the four much larger resorts which 
would be owned by Vail Resorts because, if Vail Resorts increased 
its prices too much, Front Range skiers would instead ski at A-
Basin:
    A relatively small shift in skier days to Arapahoe Basin would 
make any significant price increase by the merged firm unprofitable. 
The calculations of profit-maximizing behavior described above 
suggest that, after the merger, once Arapahoe Basin is divested, any 
increase in average discounted prices to Front Range skiers would be 
negligible. CIS at 15-16.
    The Department does not explain this conclusion, and objective 
facts would suggest otherwise.
    To provide this ``significant competition.'' Arapahoe Basin must 
have the physical capacity to handle a sufficient number of 
additional skiers interested in skiing there rather than at one of 
the Vail Resort areas.\18\ Put another way, the issue is not that A-
Basin currently services 6% (or 4%) of the Front Range skier market; 
rather, the issue is whether A-Basin has the capacity to serve 
additional skiers who decide not to pay the high prices charged at 
the four much larger Vail Resorts.\19\ It does not appear that A-
Basin has such capacity--at least enough to make a difference.\20\
---------------------------------------------------------------------------

    \18\ During a dry season, Arapahoe Basin may provide no 
competition to any resort, because it has no snowmaking 
capabilities.
    \19\ Indeed, because of its major capacity constraints, the new 
owner of A-Basin may decide that the better course is to follow any 
price increases made by the Vail Resorts. The Department does not 
address this likely contingency in any of its papers.
    \20\ See, e.g., Plaintiffs' Response, U.S. v. American Skiing 
Co., 61 Fed. Reg. 55995, 55999 (Oct. 30, 1996) (``[M]any of the 
smaller resorts are unlikely to be able to expand facilities within 
a timely fashion to defeat an anticompetitive price increase. For 
example, to increase the number of lifts and trails or add 
snowmaking or night skiing capability would take these resorts more 
than two years in most cases and/or require a long regulatory 
approval process if their resort is on national forest land.''). To 
my knowledge, A-Basin is located on national forest land.
---------------------------------------------------------------------------

    Arapahoe Basin's best season was in 1986-87, when it enjoyed 
total skier days of 269,399. According to the Department, last 
season A-Basin served approximately 150,000 Front Range skiers. See 
CIS at 4 and 15. Thus, even if A-Basin were able to repeat its best 
season, it would be able to accommodate only 120,000 or so 
additional Front Range skiers--approximately 5% of the total Front 
Range market.\21\ Given that a combined Vail Resorts/Breckenridge/
Keystone operations would average over 4.6 million skier days, and 
that the combined operations would still possess 27% of the Front 
Range market (even assuming A-Basin reaches its capacity by taking 
another 5% of the Front Range market), it is not realistic to think 
that an independent A-Basin will constrain Vail Resorts' pricing 
decisions in any way--much less ``prevent Front Range skiers from 
paying higher lift ticket prices'' as your Division represented in 
its January 3 press release.
---------------------------------------------------------------------------

    \21\ A-Basin's capacity is limited both by its small skiable 
area and its small capacity to take people up the mountain. Given 
the terrain surrounding A-Basin, it is doubtful whether any 
expansion is possible.
---------------------------------------------------------------------------

    In summary, I ask the Department to provide all available facts 
in its possession which relate to how an independent Arapahoe Basin 
can restrain the pricing behavior of a combined Vail Resorts/
Breckenridge/Keystone operations. I also ask the Department to 
explain why, in response to a price increase by Vail Resorts and 
given its significant capacity constraints, A-Basin would not 
increase its prices as well--thereby defeating the very role the 
Department intends A-Basin to play.

IV. There Appears to be a Substantial Question Whether an Independent, 
Stand-Alone Arapahoe Basin Can Succeed as a Long Term Competitor to a 
Combined Vail Resorts/Breckenridge/Keystone Operations

    There is a second, critically important component to the 
Department's theory that a partial merger ``resolves the 
anticompetitive problems'' raised by a complete merger--namely, that 
an independent Arapahoe Basin can be ``economically viable.'' CIS at 
15. Even if, as the Department apparently believes, A-Basin can 
provide meaningful competition upon its divestiture. A-Basin can 
play this important price-constraining role only if it can survive 
over the ``long-term.'' DoJ Press Release at 2 (Jan. 3, 1997). If A-
Basin cannot survive, consumers would be penalized twice under the 
Department's partial merger plan; (1) they will pay higher prices, 
and (2) they will lose the opportunity to ski at A-Basin 
altogether--in which case they will likely pay even higher prices at 
the remaining resorts.
    There is a substantial question whether Arapahoe Basin can 
survive, much less provide ``significant'' competition, as ski 
resort on its own, especially when it must compete with a giant like 
the combined Vail Resorts/Breckenridge/Keystone operations. First, 
there is no recent history in which to evaluate the viability of 
Arapahoe Basin as an independent operation; Ralston Resorts acquired 
A-Basin almost 20 years ago to complement its Keystone operations. 
Consequently, anyone's representations about A-Basin's long term 
viability as an independent resort is, at best, speculation.
    Second, the trend of the ski industry in recent years has been 
towards larger and larger consolidations, as evidenced by the merger 
proposed in this proceeding.\22\ According to a recent news article, 
the number of ski resorts in this country has dropped by 63% over 
the last 20 years (from 1,400 to 519).\23\
---------------------------------------------------------------------------

    \22\ This consolidation trend is also demonstrated by the 
December 1996 announcement that the fourth Summit County resort, 
Copper Mountain, would be acquired by Intrawest and by the merger 
last year of American Skiing Company and S-K-I Limited, which own 
many large resorts in New England.
    \23\ See Penny Parker, Vail Resorts, Inc. Sports New Power 
Thanks to Merger, The Denver Post On-line (Feb. 2, 1977). Indeed, 
numerous small resorts in Colorado, including Berthoud Pass which 
once served one-third of all skier days in Colorado, have closed 
because of their inability to compete with larger resorts.
---------------------------------------------------------------------------

    Presumably, there are economic forces in the ski industry 
compelling this consolidation activity.\24\ Divesting such a small 
resort as Arapahoe Basin to operate independently and to compete 
against so much larger rivals bucks this trend.
---------------------------------------------------------------------------

    \24\ Most industry observers believe the driving forces behind 
both consolidation and attrition are the need to gain access to 
capital to maintain state-of-the-art facilities, the need to retain 
professional management, and the inability of numerous resorts to 
keep pace with the competition with respect to one or both of these 
market forces. The trend among leading resorts is toward investing 
in improving technology and infrastructure so as to deliver a more 
consistent, high quality product.
---------------------------------------------------------------------------

    Third, Arapahoe Basin has not enjoyed the growth experienced by 
most other ski resorts in the Summit/Eagle County area.\25\ During 
last ski season (1995-96), Arapahoe Basin had a total of 241,435 
skier days--an 8% decrease over the previous, 1994-95 season 
(262.240). Indeed, A-Basin's skier day total last season was less 
than that 10 years ago (1985-86: 267,200) or even 14 years ago 
(1981-82: 254,618). Without growth, A-Basin may not generate the 
revenues it needs to make improvements (e.g., install snowmaking 
equipment, newer lifts, electronic ticketing, and the like).
---------------------------------------------------------------------------

    \25\ Nationally, growth in the ski industry over the last decade 
has been stagnant. Colorado resorts, and the resorts in Summit/Eagle 
Counties in particular (with the exception of A-Basin) have 
generally fared better.
---------------------------------------------------------------------------

    Four, as an independent, self-contained resort, it should be 
anticipated that Arapahoe Basin will lose much, if not all, of its 
destination skier business--approximately 35% of its current 
business.\26\ The Department nowhere explains how A-Basin can 
survive with the likely loss of this business.
---------------------------------------------------------------------------

    \26\ This 35% is based on the fact that A-Basin had a total of 
241,435 skier days during the 1995-96 season and that, according to 
the Department, 150,000 of those skiers were Front Range skier 
days--leaving 90,000 days involving skiers other than Front Range 
skiers. See CIS at 4 and 15. Some of these 90,000 skier days were 
generated by local skiers, so the 35% estimate may be overstated.
---------------------------------------------------------------------------

    As noted, Arapahoe Basin does not have any base facilities to 
accommodate any destination skiers. In the past, A-Basin has been 
able to survive because it has been owned by Keystone, a major 
destination resort located five or so miles away, and Ralston 
Resorts has always operated the two resorts as one (e.g., one life 
ticket honored at both resorts.). Ralston facilitated destination 
skiing at A-Basin by offering a free shuttle bus so destination 
skiers staying at Keystone could ski part of a day at A-Basin and by 
including A-Basin ``Ski the Legend'' advertising in its general 
advertising. Keystone, because of its large size, presumably offers 
A-Basin many other operating cost efficiencies such as joint 
purchasing.
    This Keystone/A-Basin connection (e.g., one ticket, free 
shuttle, extensive advertising) undoubtedly will be severed if Vail 
Resorts is allowed to acquire Keystone, but not A-Basin. To a layman 
like me, A-Basin must be

[[Page 39270]]

concerned about the potential loss of up to one-third of its skier 
customer base.
    I therefore ask you to produce data identifying all the services 
Keystone has provided to Arapahoe Basin before announcement of the 
acquisition, and to explain how the severing of the Keystone 
connection will impact A-Basin's future, including the likely loss 
of destination skiers.
    Arapahoe Basin, currently celebrating its 50th anniversary, is a 
national treasure, and it is important that nothing be done to 
undermine its long-term viability. In my judgment, A-Basin is such a 
marginal player in the ski resort market that, given its beauty and 
unparalleled conditions for spring skiing, the Department should 
permit A-Basin to continue to be owned by the operator of Keystone--
even if Vail Resorts eventually acquires Keystone. Put another way, 
from the perspective of the public interest, it would be preferable 
to approve the defendants' original, complete merger plan than to 
implement the Department's partial merger alternative. If the choice 
is paying higher prices or losing altogether the opportunity to ski 
at A-Basin, I would prefer to pay higher prices. I believe the vast 
majority of my fellow skiers would agree. Besides, if the partial 
merger is consummated, we will likely pay higher prices anyways.

V. Conclusion

    For the foregoing reasons, I ask you to reconsider your 
unexplained conclusion that local skiers would not be negatively 
impacted by the merger. In addition, based on the data available to 
me, I believe that the State of Colorado and the Department should 
withdraw their support of the proposed Final Judgment and advise the 
defendants that they intends to to prosecute the complaint if the 
defendants decide to proceed with their merger. As discussed above, 
it would appear that the Department's partial merger alternative 
would not resolve the anticompetitive problems with the proposed 
acquisition.
    I freely admit my current position may be based on incomplete 
facts, and it is precisely for this reason that I have identified 
the facts I need to submit informed comments. However, so I can 
meaningfully exercise my statutory right to submit comments. I ask 
that you produce the data requested by Tuesday, March 4, 1997.

    Yours truly,
Jeffrey S. Bork,
P.O. Box 23169, Silverthorne, CO 80498-3169, 970-468-0103.

Lewis, Rice & Fingersh

Attorneys at Law

500 N. Broadway, Suite 2000, St. Louis, Missouri 63102-2147

March 13, 1997.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, United States 
Department of Justice, 1401 H Street N.W., Suite 4000, Washington, 
DC 20530

Re: Proposed Merger of Vail Resorts, Inc. and Ralston Resorts, Inc.

    Gentlemen: Please be advised that this firm represents Copper 
Mountain, Inc. (``Copper Mountain''). This letter is in response to 
your Stipulation and proposed Final Judgment filed in the United 
States District Court for the District of Colorado in the case of 
United States of America and the State of Colorado v. Vail Resorts, 
Inc., Ralston Resorts, Inc. and Ralston Foods, Inc., Civil Action 
No. 97-B-10 (the ``proposed Final Judgment'') and the Competitive 
Impact Statement filed in connection therewith (the ``CIS''). This 
letter sets forth Copper Mountain's opposition to Vail Resorts, 
Inc.'s (``Vail'') acquisition of the ski resorts in Summit County, 
Colorado owned by Ralston Resorts, Inc. (``Ralston''). Vail and 
Ralston are the two largest owner/operators of ski resorts in 
Colorado and the proposed acquisition would combine several of the 
largest ski resorts in that region. CIS page 2. Copper Mountain 
believes that the proposed acquisition, even if consummated in the 
manner contemplated in the proposed Final Judgment, will create and 
enhance market power in Vail and will greatly facilitate Vail's 
unilateral exercise of such market power. Copper Mountain 
respectfully disagrees with your conclusions that the proposed 
divestiture of Arapahoe Basin (``A-Basin'') will preserve 
competition and resolve the anticompetitive problems raised by the 
proposed transaction. We respectively request that the Department of 
Justice (the ``Department'') reconsider its position regarding the 
Vail/Ralston merger based on the following information.

I. Statement of Interest

    Copper Mountain owns and operates the Copper Mountain ski resort 
located at Copper Mountain, Colorado off of Interstate Highway 70 at 
the intersection of State Highway 91 (``Copper''). The Vail resorts 
(i.e., Vail, Beaver Creek and Arrowhead) are located to Copper's 
west and the Ralston resorts (i.e., Keystone, Breckenridge and A-
Basin) are located to Copper's east.

II. Statement of Position

    Copper Mountain believes that the effect of the proposed 
acquisition will, if consummated, substantially lessen competition, 
create a monopoly and increase substantially the concentration among 
ski resorts to which Eagle County, Summit County and Front Range (as 
defined on page 2 of the CIS) residents practicably will go for day 
ski trips and to which skiers will go for destination skiing in 
Colorado. Copper Mountain believes that the proposed acquisition, if 
consummated, will create and enhance market power in Vail and 
greatly facilitate Vail's unilateral exercise of such market power. 
This acquisition threatens to raise the price of, or reduce 
discounts for, day skiing and destination skiing to consumers and is 
likely to result in other adverse competitive effects, all in 
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18. Copper 
Mountain does not believe the Department's proposed remedy of 
requiring the divestiture of A-Basin will rectify these adverse 
competitive effects.

III. Inadequate Remedy

    The Department's Complaint, the proposed Final Judgment and the 
CIS all acknowledge and allege that the proposed acquisition would 
substantially increase concentration in the market, reduce 
competition in the market, and eliminate the price constraining 
impact Vail and Ralston currently have on each other. The economic 
models referred to in the CIS predict that such factors will result 
in higher prices and/or a reduction in the discounts offered to 
skiers in the relevant market. Copper Mountain does not believe the 
Department's proposed remedy of requiring the divestiture of A-Basin 
will rectify these adverse competitive effects to any meaningful 
degree. First, Copper Mountain believes the Department has 
substantially misstated the market share of A-Basin with respect to 
Front Range skiers. A substantial portion of the skier days at A-
Basin occurs after the other Summit County and Eagle County ski 
resorts have closed. All of A-Basin's ``post-season'' skier days are 
part of a market in which the surrounding resorts do not compete and 
should be excluded in computing Front Range market share. Using such 
seasonally adjusted information, A-Basin's share of the Front Range 
market has to be less than currently calculated by the Department, 
and conversely, Vail's and Ralston's other resorts must have a 
greater market share. The logical conclusion from these facts is 
that a post-merger divestiture of A-Basin will have less of an 
impact on the Front Range market than that apparently presumed by 
the Department in the proposed Final Judgment and the CIS.
    Second, several factors indicate that A-Basin's market presence 
after the proposed divestiture will be significantly less than that 
indicated by A-Basin's historical operating performance. After the 
divestiture A-Basin will lose the substantial benefit of being part 
of a Multi-Mountain Ticket (see below). A-Basin's historical 
operating performance has been enhanced by its pairing for many 
years with Keystone and more recently with Breckenridge. There is no 
question that skiers perceive a Multi-Mountain Ticket as a better 
value and we anticipate an appreciable drop-off in A-Basin's total 
ridership once it is severed from the remainder of the Ralston 
family. Also, A-Basin will no longer benefit from the huge 
advertising efforts of Keystone and Breckenridge (and now Vail) 
which historically have included all mountains within the multi-
mountain group.
    Moreover, prior to the current ski season, many of the skier 
days at A-Basin have been snowboarders who were prohibited from 
snowboarding at Keystone. Historically Keystone has been a skiers-
only mountain and snowboarders holding Ralston's Multi-Mountain 
Tickets would utilize the close-by A-Basin facilities. Keystone's 
ban on boarders has been lifted effective with the 1996-1997 ski 
season. Since Vail's announcement of the proposed acquisition we 
believe many of the snowboarders who formerly boarded at A-Basin 
have migrated to Keystone. Copper Mountain understands that skier 
days at Keystone are up from last year while skier days at A-Basin 
are down from last year, and believes this is largely attributable 
to the change in Keystone's policy on snowboarders. Accordingly, the 
lost snowboarder days and anticipated loss of multi-mountain skier 
days should be factored

[[Page 39271]]

in when computing A-Basin's estimated Front Range market share after 
the proposed divestiture. Again, A-Basin's share of the Front Range 
market after the proposed divestiture must be signifcantly less than 
that calculated by merely extrapolating A-Basin's historical 
operating data.
    Third, A-Basin has fewer lifts, trails, skiable area and other 
amenities than the other Eagle/Summit County resorts. These 
qualitative differences are so great that it is unlikely that those 
skiers who ski at the other Vail mountains after the divestiture 
would accept A-Basin as an alternative if Vail significantly raises 
prices. The Department specifically recognized in the recent United 
States v. American Skiing Company case that if there are significant 
qualitative differences between the resorts, price competition by 
the lesser resort will not be effective to constrain price increases 
by a dominant firm having resorts with more and better facilities. 
Neither the proposed Final Judgment nor the CIS discuss the 
overwhelming qualitative differences between A-Basin and the other 
Vail and Ralston mountains. A reader of the proposed Final Judgment 
and the CIS who is not familiar with these facilities could well 
assume that A-Basin's facilities and amenities are fungible with 
those of the other Vail and Ralston resorts. In fact, A-Basin has 
more in common with the lesser Front Range resorts which the 
proposed Final Judgment indicates are disdained by most skiers of 
the Vail and Ralston resorts. Please explain how A-Basin falls out 
of the general rule so forcefully put forward in the United States 
v. American Skiing Company case that such qualitatively 
disadvantaged competitors are unable to constrain price increases by 
their stronger competitors.
    We find it interesting that neither the proposed Final Judgment 
nor the CIS quantify the ``post-divestiture'' HHI or the resulting 
change in HHI. We believe that both numbers (especially after making 
the appropriate seasonal and historical adjustments referred to in 
this section) will remain well in excess of the benchmarks which 
presumptively raise antitrust concerns under the Department's 1992 
Horizontal Merger Guidelines. Please provide such calculations so 
that all parties will be better able to assess the anticipated 
effect of an A-Basin divestiture.

IV. Market Definition, Measurement and Concentration

A. Product Market Definition; Multi-Mountain Tickets

    Copper Mountain agrees with the Department's definition of the 
business of skiing as set forth at pages 5 and 6 of the CIS and 
agrees that one of the relevant products for both Vail and Ralston 
in the instant case is downhill skiing. However, Copper Mountain 
believes that the Department has failed to consider another relevant 
product. In Colorado, several ski resorts offer a multi-mountain 
multi-day ski life ticket (a ``Multi-Mountain Ticket''). A Multi-
Mountain Ticket allows a skier to ski on several mountains over a 
period of several days instead of just skiing at one location, 
thereby offering the purchaser of the ticket a greater variety of 
skiing opportunities. The price of the Multi-Mountain Ticket is 
usually cheaper than an equal number of one day lift tickets for the 
mountains the subject of such Multi-Mountain Ticket. A Multi-
Mountain Ticket is perceived as a better value by a skier, and 
several such Multi-Mountain Tickets are offered in Colorado (e.g., 
Ski-The-Summit (discussed below), a multiple mountain ticket offered 
by Vail (Vail Mountain and Beaver Creek prior to the proposed 
acquisition and, as recently announced, Breckenridge and Keystone 
also), Ski The Gems (consisting of Silver Creek, Loveland, Ski 
Sunlight, Monarch, Powderhorn, Ski Cooper, Arapahoe Basin and 
Eldora), Aspen (Aspen Mountain, Aspen Highlands, Buttermilk and 
Snowmass) and Ski 3 (A-Basin, Breckenridge and Keystone prior to 
this proposed acquisition)). The firms offering a Multi-Mountain 
Ticket can price discriminate with respect to that ticket because it 
is a different product. Since both Vail and Ralston offer Multi-
Mountain Tickets, Multi-Mountain Tickets are also a relevant 
product.

B. Geographic Market Definition

    Both Vail and Ralston sell downhill skiing, including Multi-
Mountain Tickets, to day skiers and destination skiers at each of 
their ski resorts. These skiers originate from many different 
geographic locations. The Department apparently has determined that 
the only relevant market which would experience anticompetitive 
effects from the proposed acquisition is the Front Range day and 
weekend skier market. Copper Mountain respectfully disagrees and 
believes that there are additional relevant geographic markets which 
will suffer anticompetitive effects from the proposed acquisition.

1. Local Skier Markets

    Vail provides skiing to Eagle County, Colorado skiers at all 
three of its resorts and Ralston provides skiing to Summit County, 
Colorado skiers at all three of its resorts. Copper Mountain 
believes that these skiers are a significant element of Vail's and 
Ralston's ski resort income. Eagle County residents (which number 
approximately 25,000) generally turn to the Vail resorts for day 
skiing trips and Summit County residents (who number approximately 
18,000) generally turn to the ski resorts located in Summit County 
(which are Copper, Breckenridge, A-Basin and Keystone) for day 
skiing trips since these are the resorts that are within a 
reasonable and economic traveling distance for these skiers. Local 
skiers generally purchase season passes to a local ski resort. This 
creates a ``lock-in'' effect and, once purchased, a local skier has 
little incentive to ski someplace else. Further, if the Eagle County 
local skiers did decide to ski elsewhere, the logical choice would 
be Summit County, which means they would be required to drive over 
Vail Pass (elevation 10,660 feet) twice, which can be treacherous 
during winter storms. If the Summit County local skier decided to 
ski outside of Summit County, assuming he headed east, he would be 
required to drive over Loveland Pass (elevation 11,990 feet) or 
through the Eisenhower Tunnel (elevation 11,160 feet) twice, both of 
which can be treacherous during winter storms. A trip in the other 
direction to Vail would be further and would require a drive over 
Vail Pass. Finally, local residents ski their local resorts due to 
the convenient access. A skier wanting to ski during his lunch hour, 
or work in the morning and ski in the afternoon (or vice versa), 
will ski locally and not at a more distant ski resort. As such, ski 
resorts located outside Eagle County and Summit County cannot (and 
would not after the proposed Vail/Ralston acquisition is 
consummated) constrain a significant non-transitory price increase 
charged to day skiers living in those Counties. It is of importance 
however that Vail currently influences the rates charged by the 
Summit County ski resorts. Summit County resorts generally set their 
prices beneath those charged by Vail. This constraint will be 
removed by consummation of the Vail/Ralston merger with respect to 
three of the four ski resorts in Summit County.
    Eagle County and Summit County skiers can be identified easily 
by the ski resorts that are reasonable alternatives for these day 
skiers. Ski resorts can charge these skiers prices that differ from 
prices charged to out-of-county skiers or to destination skiers 
generally by increasing the cost of a season pass or reducing the 
discount offered on a season pass. This is done by, among other 
things, advertising in the Vail Trail, a local newspaper circulated 
in Eagle County or in the Summit Daily News and the Summit County 
Journal, local newspapers circulated in Summit County or by direct 
mailings to P.O. boxes in Eagle and Summit Counties and mailings to 
past season ticket holders. A single firm controlling all of the ski 
resorts in Eagle County and Summit County would be able to raise 
prices a small but significant amount to the local skiers without 
losing so much business as to make the price increase unprofitable.
    Of further concern is transportation between these two Counties. 
In 1995, Vail began operating a bus from Breckenridge to Vail 
Mountain. Vail has announced its intentions to expand this bus 
service and thereby increase the interaction between the two 
counties. If Eagle County skiers do travel to other counties for 
skiing, the logical locations of choice are the ski resorts in 
Summit County, and vice versa. Nearby resorts outside of Eagle and 
Summit Counties are: Eldora, Loveland Basin, Silver Creek, Ski 
Cooper and Winter Park. Four of these five alternative resorts 
outside of the Eagle/Summit County area (i.e., Eldora, Loveland 
Basin, Silver Creek and Ski Cooper) generally have fewer lifts, 
trails, skiable area and amenities than the Eagle/Summit County 
resorts and are not of the same qualitative choice. Winter Park is 
comparable in size and amenities to the Eagle/Summit County resorts, 
but it is further away. Gasoline costs to any of the other five 
alternative ski resorts, on a round trip basis, would exceed a 
significant 5% increase by Vail to the one day lift ticket price. 
Finally, none of these five resorts are as convenient to local 
skiers as those in Eagle and Summit Counties for the reason set 
forth above. As such, ski resorts located outside Eagle/Summit 
County would not after the proposed Vail/Ralston acquisition is 
consummated constrain a

[[Page 39272]]

significant price increase charged to local skiers living in Eagle 
County or Summit County, Colorado.

2. The State of Colorado

    Both Vail and Ralston provide skiing to day skiers and 
destination skiers (both residents and non-residents of Colorado) at 
all of their resorts, as do most ski resorts in Colorado. The ski 
resorts in Colorado specifically market Colorado as a skiing market, 
not only to residents of Colorado but also to skiers around the 
country and the world. The majority of the ski resort owners in 
Colorado are members of Ski Country. Ski Country publishes, among 
other things, a Consumer Ski Guide. According to this Ski Guide, Ski 
Country ``functions as the information source for the Colorado ski 
industry and serves as the voice for Colorado Skiing with many 
entities, including the travel trade, legislators, government 
officials, regulatory agencies, the media and skiers.''
    Others also consider Colorado to be a separate market, even 
Vail. Adam Aron, Vail's new chairman and chief executive officer, 
has been quoted as saying: ``It's time to increase the number of 
people coming to Colorado to ski. . . .'' \1\ Mr. Aron was also 
quoted that one of his goals was to ``[g]o right to work in 
promoting Colorado skiing to see if the market can be expanded.'' 
\2\ Finally, he stated: ``If Colorado wants to remain a strong 
player, its resorts need to come together to keep the spotlight on 
the state as a destination.'' \3\ Vail spokesperson Pat Peoples was 
quoted as saying: ``[T]his would make an incredible merger and keep 
Colorado in the forefront of world-class skiing. . . . Marketing 
will be directed toward the sport and Colorado and to the individual 
resorts.'' \4\ Ralston also identifies Colorado as a distinct 
market: ``Jim Felton, communications director for Ralston resorts, 
said the merger `helps us to fortify Colorado's stance as the gold 
standard in skiing.' '' \5\
---------------------------------------------------------------------------

    \1\ Vail `will grow and grow', Michele Conklin, Rocky Mountain 
News, July 24, 1996, p. 4B.
    \2\ Skiing behemoth formed, Penny Parker, The Denver Post, July 
24, 1996 p. 8C.
    \3\ Aron Takes Reins at Vail Resorts; Firm Merges With Ralcorp, 
Felicity Long, Travel Weekly, August 15, 1996, p. 15.
    \4\ Vail Resorts buys into 3 local ski areas, Marc Angelo, 
Summit Daily News, Volume VII, Number 339, July 24, 1996, p. 1.
    \5\ Vail to buy three Summit resorts, Madaeleine Osberger, 
Snowmass Sun, July 24, 19996, p. 1.
---------------------------------------------------------------------------

    Skiers ski in Colorado because of the abundance and quality of 
the snow, the variety of skiing conditions and the amenities offered 
at the destination resorts. In addition, Colorado is easily 
accessible from most places in the country. Colorado day skiers 
generally have no other place to go. Destination skiers generally 
fly to Colorado to ski and spend an average of seven nights on their 
ski trip. A price increase for lift tickets of five percent would 
not be sufficient to cause destination skiers to choose another 
state in which to ski.
    Please provide more information to justify your conclusion that 
no relevant market other than the Front Range day and weekend skier 
market will be competitively disadvantaged by the proposed 
acquisition.

C. Calculating Market Share

    In the downhill skiing business, market share has historically 
been determined on the basis of skier days (i.e., one person 
visiting a ski area for all or part of one paid day or night for the 
purpose of skiing). As such, skier days generally are the 
appropriate measure of market share for downhill skiing and Multi-
Mountain Tickets. However, although total skier day information for 
Colorado resorts is readily available through Ski Country, 
definitive information breaking down skier days for Colorado resorts 
for the various relevant markets is not, to our knowledge, publicly 
available. As such, we have made some assumptions as to the local 
markets and the Multi-Mountain Ticket markets shares.
    Vail currently owns all of the ski resorts in Eagle County. As 
stated above, local residents generally only ski in their own 
county. If that is true, then Vail's market share of Eagle County 
resident day skiers is close to 100%. As to the Multi-Mountain 
Ticket market in Eagle County, since Vail offers the only Multi-
Mountain Ticket in Eagle County, its market share of Multi-Mountain 
Ticket users in Eagle County must also be 100%.
    There are only four ski resorts in Summit County. Ralston 
currently owns three of the ski resorts and Copper Mountain owns the 
fourth. Since there is more than one firm participating in this 
relevant market, market share should be determined by skier days. 
Again, we do not have definitive information regarding skier days at 
the Ralston resorts (other than total skier days). However, we 
believe Ralston's market share of Summit County local day skiers is 
approximately 75%. Ralston's records should substantiate this. There 
are only two Multi-Mountain Tickets offered in Summit County, i.e., 
the Multi-Mountain Ticket offered by Ralston and the Multi-Mountain 
Ticket offered by Ski-The-Summit (see the discussion below). Since 
Ski-The-Summit has effectively been eliminated with respect to local 
skiers, Ralston has 100% of the Multi-Mountain Ticket market in 
Summit County.
    The relevant indicator of market share for the entire Colorado 
market is total skier days (i.e. day skiers and destination skiers). 
The calculation of market share for all Colorado resorts for the 
1995/1996 season is as follows:

------------------------------------------------------------------------
                                                                Market  
                           Resort                               share   
                                                              (percent) 
------------------------------------------------------------------------
Ralston resorts............................................        23.39
Vail resorts...............................................        19.56
Copper.....................................................         8.49
Silver Creek...............................................         0.80
Winter Park................................................         8.89
Eldora.....................................................         1.50
Loveland Basin.............................................         2.68
Ski Cooper.................................................         0.58
Aspen......................................................        11.78
Crested Butte..............................................         4.45
Monarch....................................................         1.19
Purgatory..................................................         2.70
Steamboat..................................................         8.93
Cuchara Valley.............................................         0.17
Howelson Hill..............................................         0.16
Powderhorn.................................................         0.46
Ski Sunlight...............................................         0.80
Telluride..................................................         2.38
Wolf Creek.................................................         1.09
------------------------------------------------------------------------
    Total..................................................       100.00
------------------------------------------------------------------------

    Vail, Ralston, Ski The Gems and Aspen are the only firms 
effectively offering Multi-Mountain Tickets in Colorado. We do not 
know the number of skier days attributable to Multi-Mountain Tickets 
at these locations. However, based upon total 1995/1996 skier days, 
Vail, Ralston, Ski The Gems and Aspen would have the following 
Multi-Mountain Ticket market shares pre-merger:

------------------------------------------------------------------------
                                                             Percentage 
                    Firm                       Skier days     (percent) 
------------------------------------------------------------------------
Vail........................................     2,228,419         30.10
Ralston.....................................     2,665,307         36.01
Ski The Gems................................     1,166,461         15.76
Aspen.......................................     1,342,109         18.13
                                             ---------------------------
    Total...................................     7,402,296        100.00
------------------------------------------------------------------------

The Department should be able to obtain the actual information from 
Vail, Ralston and the other resorts.\6\
---------------------------------------------------------------------------

    \6\ It is interesting to note that the Ski The Gems ticket is a 
season pass at each of its participating resorts as opposed to a 
multi-day ticket. Generally the multi-day ticket is practical only 
at the same mountain or at mountains in close proximity to each 
other. Looking strictly at true multi-day tickets (as opposed to a 
season pass), the top three firms in Colorado (based on skier days) 
offer the Multi-Mountain Ticket.
---------------------------------------------------------------------------

D. Proposed Acquisition (HHI Analysis)

    In the local markets and the Colorado market, it appears that 
Vail's post-merger market share will result in an HHI factor 
substantially in excess of 1800. In addition, it appears that Vail's 
increase in the HHI after the merger will be in excess of 3000 
points in the case of the Eagle/Summit County market, 4000 points in 
the case of the Eagle/Summit County Multi-Mountain Ticket market, 
900 points in the case of the Colorado market and 2000 points in the 
case of the Colorado Multi-Mountain Ticket market. These HHI numbers 
and increases in concentration are substantially in excess of what 
the Department considers acceptable.

V. Potential Adverse Competitive Effects of the Proposed Acquisition

    Market share and concentration as well as the HHI factor provide 
only the starting point for analyzing the competitive impact of a 
merger. Other factors to review are: the firm's ability to 
unilaterally increase prices; the ability of other firms to enter 
the market; the efficiencies achieved through the merger; and 
whether one or more of the firms are failing or their assets will be 
leaving the market. A merger may diminish competition because the 
merging firms may find it profitable to alter their behavior 
unilaterally following the acquisition by elevating price. Based on 
the prior acts of Ralston after its acquisition of the Breckenridge 
ski resort (as described

[[Page 39273]]

below), and some of the announced intentions of Vail if the proposed 
acquisition is consummated, we believe that Vail will take these 
unilateral acts. The Department has stated in the CIS that its 
``unilateral effects'' economic models predict significant post-
acquisition price increases at the Vail and Ralston resorts. In 
addition to these effects on price, we believe the proposed 
acquisition will have numerous other deleterious effects on 
competition.

A. Multi-Mountain Tickets; Ski-The-Summit

    In May 1984, Keystone organized the Ski-The-Summit (``STS'') 
program for Summit County. STS allowed skiers to visit any of the 
four participating areas (A-Basin, Breckenridge, Copper and 
Keystone) for a package price pursuant to a Multi-Mountain Ticket. 
Summit County restaurants, hotels and condos were also advertised 
together. The idea behind STS was that skiers would find a ticket 
usable at four mountains more favorable than a ticket usable at only 
one mountain. From the mid 1980's until after the Breckenridge 
merger, STS sold season passes and Multi-Mountain Tickets, as well 
as selling cards (the ``STS Club Card'') which allowed discounts off 
of various purchases at participating ski resorts, lodges and 
merchants in Summit County. STS marketed Summit County to Front 
Range and out-of-state skiers.
    After Ralston acquired Breckenridge in 1993, the Ralston 
effectively excluded Copper from a Multi-Mountain Ticket. Ralston 
set its price for its season pass to the Ralston resorts below the 
season pass price of STS, thereby drawing the multiple-mountain 
season pass holder away from STS.\7\ Prior to the 1993 Breckenridge/
Keystone acquisition, STS offered a four or six day Multi-Mountain 
Ticket. After the 1993 Breckenridge/Keystone acquisition, Ralston 
refused to allow any STS Multi-Mountain Ticket for a period shorter 
than ten days, while at the same time Ralston marketed its own 
Multi-Mountain Tickets from 2 to 14 days. These actions have 
effectively eliminated STS as a viable competitor, the result of 
which is to exclude Copper Mountain from Multi-Mountain Tickets. The 
only area in which STS still has remaining viability is in the 
international arena.
---------------------------------------------------------------------------

    \7\ STS still sells some season passes (approximately 2,000 for 
the 1995/1996 season, with less than 1,500 expected for the 1996/
1997 season).
---------------------------------------------------------------------------

    STS used to offer the STS Club Card for $30 per skier per 
season. STS used the revenues from the sales of the card for STS 
marketing. As noted above, the STS Club Card allowed skiers 
discounted ski tickets and discounts for food and lodging in Summit 
County. After the Breckenridge merger, Ralston created its own ``Ski 
3'' cards, and distributed over 100,000 of the Ski 3 cards free of 
charge to local and Front Range skiers via mass mailings. The Ski 3 
card could only be used at the Ralston resorts. This undercut the 
STS Club Card, STS Club Card sales went to zero and the STS Club 
Card was discontinued, eliminating an important source of revenue to 
market STS.
    Ralston's actions have effectively precluded Copper Mountain's 
access to a Multi-Mountain Ticket other than in the international 
market. A Multi-Mountain Ticket is perceived by the skier as a 
better value. Vail's tentative plans call for creating a Multi-
Mountain Ticket for all five resorts if the acquisition is 
consummated. Copper will be excluded from this ticket also, thereby 
eliminating a choice to skiers in the Multi-Mountain Ticket market. 
Furthermore, these past actions predict that A-Basin will be 
excluded from the Vail Multi-Mountain Ticket after the proposed 
divestiture.

B. Lift Ticket Marketing

    Copper Mountain and Ralston sell their lift tickets both on-site 
and through off-site merchants. Copper Mountain sets its on-site 
price, but Copper Mountain's off-site vendors are allowed to set 
their own lift ticket prices. Copper Mountain establishes the amount 
per off-site ticket which must be passed back to Copper Mountain by 
the off-site vendor, but the off-site vendor is free to establish 
whatever retail price it desires. We believe, however, that Ralston 
may exercise significant resale price maintenance with respect to 
its off-site lift tickets. Several vendors have expressed to Copper 
Mountain dissatisfaction with Ralston's setting of prices, but the 
vendors felt they had no choice but to go along with Ralston's 
requirements because of Ralston's huge market presence.
    Ralston also may have entered into contracts with off-site 
merchants which preclude the merchants from selling other lift 
tickets, including Copper Mountain's lift tickets and Ralston may 
have used its market power to discourage the selling of Copper 
tickets by vendors. The means used by Ralston to achieve these ends 
we believe are several. First, Ralston may have entered into 
exclusive contracts with retailers which provide that the retailer 
can only sell tickets to the Ralston resorts. Second, Ralston may 
set favorable commissions, or discounts for the retailer's purchases 
from Ralston, which are available only if the retailer agrees to 
sell Ralston tickets exclusively. Finally, Ralston may provide 
incentives, such as additional tickets, season tickets, lodging 
packages, free transportation, joint advertising promotion, public 
relations or other forms of consideration, if the retailer sells 
more Ralston tickets than Copper tickets, or has a sliding scale of 
consideration based on their selling a high, or increasing 
percentage of, Ralston tickets. These methods would effectively 
reduce competition by preventing the off-site sale of other ski 
resort lift tickets or by providing a greater incentive to sell only 
Ralston resort tickets. Because of these practices, Copper Mountain 
has been able to find only a few retailers in Breckenridge who will 
sell Copper Mountain's tickets, and none in Keystone. Copper is 
concerned that Vail may exclude Copper Mountain from selling its 
tickets in all of the Vail resorts and Ralston resorts, and will 
continue the anticompetitive attempts with Front Range vendors if 
the proposed acquisition is allowed to proceed.

C. The ``Summit Stage'' Local Bus Issue

    STS used to expand a large portion of its budget to pay for 
buses running between the four ski areas in Summit County. Several 
years ago, Summit County passed a one-half per cent sales tax to pay 
for public buses (the Summit Stage) that drive to all four ski areas 
and intermediate towns and carry passengers without charge. After 
the merger between Keystone/A-Basin and Breckenridge in 1993, 
Ralston started operating buses that drive only between the Ralston 
resorts. Summit County residents are now suggesting a repeal of the 
tax,

D. Other Concerns

    One of the more important benefits which a ski resort can offer 
its employees is a season multi-mountain pass. With the demise of 
STS, Copper Mountain can no longer offer this benefit, potentially 
resulting in a loss of a substantial number of employees. This 
problem will become even more acute if Vail offers a five-mountain 
lift ticket. Vail is expected to have a $20,000,000 advertising 
budget. Cooper Mountain is concerned that Vail could dictate the 
placement of print advertisements and time slots for radio and 
television. Finally, Copper Mountain is concerned that Vail can make 
package deals with the airlines which other ski resorts cannot match 
or will not be given the opportunity to match. Further, Copper 
Mountain currently has an agreement with United Airlines whereby 
United provides discount airline tickets to Copper Mountain in 
exchange for Copper Mountain meeting a set quota for tickets sold to 
Copper customers. Copper Mountain is concerned that Vail will cause 
United to increase the quota or increase the penalty for falling 
short of the quota. In effect, Vail would be raising a rival's 
costs.

VI. Conclusions

    Vail has and will continue to have a virtual monopoly on ski 
resorts in Eagle County, Colorado. In addition, Ralston currently 
has (and Vail will have if the proposed acquisition is consummated) 
a substantial portion of the market in Summit County, Colorado. As 
to the Eagle/Summit County market. Vail will own six (or five if the 
A-Basin divestiture is completed) of the seven ski resorts in that 
two-county market. Finally, the proposed merger will decrease the 
number of participating firms in the Colorado market and will 
decrease the number of participating firms in the Multi-Mountain 
Ticket markets as follows: which could leave Copper without a 
transportation system. The Summit Stage is very important to 
transport both guests and employees to Copper, and its elimination 
or replacement with a system that did not serve Copper would harm 
both guests and employees. Vail's tentative plans call for creating 
bus service among all five resorts. Copper Mountain believes this 
will bring further pressure to eliminate the tax that supports the 
Summit Stage, thereby eliminating an important source of 
transportation in Summit County. In addition, Copper Mountain is 
concerned that it would be precluded from such bus service, meaning 
that skiers using such service would not have readily available 
access to skiing at Copper or other resorts if they so chose.

[[Page 39274]]



------------------------------------------------------------------------
                         Market                            From     To  
------------------------------------------------------------------------
Eagle/Summit County.....................................       2       1
All Front Range Resorts.................................       3       2
Colorado................................................       4       3
------------------------------------------------------------------------

    In summary, Copper Mountain agrees with the Department as to the 
likely anticompetitive effect of the merger on the Front Range 
skiers. There will be significant nontransitory price increases and 
past behavior in this market indicates that numerous other 
anticompetitive effects in the Front Range market will follow. 
However, Copper Mountain also believes there will be an anti-
competitive effect on local skiers as well as Colorado skiers in 
general, and in the Multi-Mountain Ticket market as well. Finally, 
Copper Mountain respectfully disagrees with the Department's 
conclusion that a post-acquisition divestiture of A-Basin will do 
anything to ameliorate the deleterious effects of the Vail/Ralston 
combination. A-Basin is too small and too ill-equipped to constrain 
price increases by its monopolistic neighbor and otherwise is 
unlikely to be an effective competitor. Nothing short of prohibiting 
the merger or at least requiring the divestiture of either 
Breckenridge or Keystone will adequately lessen the anti-competitive 
effects which otherwise will ensue.

        Sincerely,
Douglas D. Hommert

January 18, 1997.
Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of 
Justice, 1401 H St., N.W., Room 4000, Washington, D.C. 20530.

    Dear Mr. Conrath, I am extremely disappointed to hear of your 
preliminary approval of Vail Associates quest to buy Breckenridge 
and Keystone ski areas. I am a native Coloradan and Denverite. I 
have been skiing here for 30 years. I share the opinion of many that 
this is a monopolistic move by Vail Associates. The figures 
published in the paper indicate Vail Associates will have ``between 
32% and 34% of the front range ski market''. The article in the 
January 4, 1997 Rocky Mountain News goes on to say that 35% market 
share is a benchmark used in federal law to determine when a company 
can raise prices unilaterally.
    I would like you to consider my argument from a local skiers 
point of view. Consider that these acquisitions are along the I-70 
corridor. A front range skier considers the winter road conditions 
as we decide where to ski. We travel I-70 past Idaho Springs 
(approximately 45 minutes from Denver) to the major fork where US 6 
and US 40 split. Hundreds of millions of federal and state dollars 
have been spent to improve I-70, including the building of the 
Eisenhower Tunnel. Little if any money (beyond maintenance) has been 
used to make the road over Berthoud Pass any easier in tough winter 
conditions. Obviously it is a much more difficult trip to go skiing.
    The majority of the money has been spent on roads in the I-70 
corridor. Therefore, that is the easiest route to take skiing. 
Vail's acquisition of Keystone and Breckenridge gives them dominance 
in the heart of Colorado's prime ski market. They have continued to 
raise prices and it is difficult for my family or four to ski more 
than once per month at best. Arrowhead, under Vail's management, has 
gone from an affordable family resort to a prohibitively expensive 
place to ski.
    I ask you to consider my argument and reconsider this decision. 
It's not healthy for one organization who is known for catering to 
out of state wealthy people to suddenly have reign over two more 
strategic ski areas so near to the Denver market. As a last request, 
ask them to keep Arapahoe Basin but divest of Keystone or 
Breckenridge. That would leave a larger resort like Keystone or 
Breckenridge independent. If Vail Associates is effective in their 
marketing as they always have been, what happens when their market 
share of 32% to 34% grows to 35% to 40%? Will they have the ability 
to raise prices unilaterally? Will you have any control at that 
point?
    Please rethink this issue. It's not good for Colorado's ski 
industry. I'll look forward to your reply.

      Sincerely,
Greg Horstman,
5892 E. Geddes PL., Englewood, Colorado 80112.

1101 Market Street, 29th Fl., Philadelphia, PA 19107.

March 14, 1997.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, United States 
Department of Justice, 1401 H Street N.W., Suite 4000, Washington, 
D.C. 20530

Re: Vail Resorts, Inc., C.I.S., Civ. Action No. 97-B-10
    Dear Mr. Conrath: This is a comment on the above-captioned 
Competitive Impact Statement as filed by the Department of Justice 
(``DOJ'') in U.S. and Colorado v. Vail Resorts, Inc. et al.
    Having just returned from my annual ski trip to the Front Range, 
I must advise you that a major topic of conversation out there was 
how the DOJ got sucked into accepting that the sale of A-Basin (the 
Front Range name for Arapahoe Basin) could save us from the 
inevitable lift ticket increases which will surely come about with 
Vail's acquisition of Keystone and Breckenridge.
    The CIS for this transaction, and the lack of factual detail 
therein is fascinating. I'll wager that not one of the attorneys or 
economists representing the Government in this matter has ever 
ridden the Pavliacini lift! Therefore, some ``real skier'' (and 
antitrust lawyer) facts:
    1. A-Basin is a bowl. It is high, stark, open and tough. It 
tends to magnify adverse weather conditions, notably wind, cold and 
flat-light white-outs. A large number of those who ski The Basin do 
so to ski non lift-serviced terrain. This is very different skiing 
from the standard groomed and semi-groomed runs which constitute the 
bulk of skier business at Keystone, Breckenridge and Copper 
Mountain. In addition, A-Basin is a much smaller resort than the 
others.
    2. Because of the items set forth in 1. above, A-Basin has 
traditionally been a cheaper place to ski than the other Summit 
County resorts. Even after Ralston bought it, an A-Basin only ticket 
(not usable at Keystone) was cheaper than the Keystone/A-Basin 
combined ticket.
    3. No one goes to A-Basin to ski because the weather is bad at 
Keystone. It is, however, common for skiers to go to Keystone, buy a 
ticket, take the little shuttle from Keystone up to The Basin, and 
check out the conditions frequently by taking the bottom chair up to 
the bottom of the bowl which allows a skier to check out the bowl 
conditions without having to actually ski the bowl. The significance 
of this pattern is that such a skier's ticket would be recorded at 
the bottom of A-Basin as an A-Basin skier, although the skier almost 
immediately leaves the hill and returns to Keystone. Note that the 
CIS statistics are skier-days, not skier-runs. Having bought tickets 
and ridden ski lifts in this area since before electronic scanning 
existed, I do not believe that either Keystone or A-Basin has 
sufficiently sophisticated systems to draw the kinds of 
differentiations which would really indicate the degree to which A-
Basin is a meaningful skiiing alternative to Keystone.
    4. Breckenridge and Keystone do in fact compete with Copper and 
Vail in the minds and planning of Front Range skiers. Copper 
Mountain has for a number of years been cheaper than the others, but 
that may change given Copper Mountain's new ownership. Vail has for 
many years placed large quantities of Vail/Beaver Creek deep 
discount coupons and lift tickets in the Dillon/Silverthorne/Frisco/
Breckenridge areas serviced by Breckenridge, Keystone/A-Basin and 
Copper. However, even with the deep discounting, Vail/Beaver Creek 
lift tickets are much more expensive than the Summit County 
alternatives. A half-day ticket purchased at Beaver Creek on March 7 
was $44. On the same day, a half-day ticket at the other resorts 
would have cost as follows: Breckenridge or Keystone/A-Basin, $36; 
Copper, $33. (Due to high winds at no time during the course of a 
week could we ski at A-Basin alone).
    5. The only resort with which A-Basin alone (without Keystone) 
might be considered competitive by local Front Range skiers is 
Loveland Basin (which is on the other side of the continental divide 
(and the Eisenhower Tunnel) from A-Basin).
    In conclusion, I offer another wager: allow this transaction to 
proceed and within 2-3 seasons lift ticket prices at Keystone and 
breckenridge will have gone up and prices at Vail/Beaver Creek will 
not have gone down. In addition, those of us who love A-Basin are 
seriously concerned that being contaposed to the big resorts it will 
not survive. It is readily understandable that Vail is delighted to 
not have to carry the burden of this small and peculiar operation. 
However, if the Department of Justice wants to allow this 
transaction to occur, please do not orphan A-Basin--make Vail buy it 
and keep it.
      Very truly yours,

[[Page 39275]]

Jones, Day, Reavis & Pogue

Metropolitan Square, 1450 G Street, N.W., Washington, DC 20005-2088

April 4, 1997.

Via Hand Delivery

Craig W. Conrath,
Esquire, Antitrust Division, U.S. Department of Justice, 1401 H 
Street, NW Ste. 4000, Washington, DC 20530.

Re: United States v. Vail Resorts, Inc.

    Dear Craig: I have enclosed for filing the Tunney Act comments 
of the City and County of Denver and the Winter Park Recreational 
Association. Please acknowledge your receipt of these materials by 
signing and dating one original of this letter and returning it with 
our messenger.
    Needless to say, we would be happy to answer any questions you 
might have.
      Sincerely,
Charles A. James

    Received by the Antitrust Division:

----------------------------------------------------------------------
(Name)

----------------------------------------------------------------------
(Date)

United States v. Vail Resorts, Inc.

[Civil Action No. 97-B-10]

United States District Court for the District of Colorado

    Comments of the city and county of Denver and the Winter Park 
Recreational Association in opposition to the proposed final 
judgment.
    Submitted to the Antitrust Division of the U.S. Department of 
Justice pursuant to 15 U.S.C. 16(b)-(h).
    April 4, 1997, Washington, D.C.

    The City and County of Denver (``Denver''), together with the 
Winter Park Recreational Association (``Winter Park''). hereby comment 
in opposition to the proposed final judgment resolving United States v. 
Vail Resorts, Inc., Civil Action No. 97-B-10, (D.Col.). We fully agree 
that Vail's acquisition of Ralston Resorts threatens substantial harm 
to competition in the Front Range ski market. The proposed relief, 
however, falls well short of what would be required to eliminate that 
threat and restore competition.
    This matter involves the combination of the two premier ski resort 
operators serving Colorado Front Range skiers. The transactions places 
under single ownership the three top ski resorts in North America and 
four of the top six resorts serving the Front Range skier. Following 
the transaction, Vail will own properties that accounted for 61.7 
percent of total 1995-96 visits to ski areas serving Front Range 
skiers, as measured by Colorado Ski Country USA data. Five of the 
remaining eleven Front Range resorts each reported 305,000 or fewer 
1995-96 visits, an amount that represented less than twenty percent of 
the 1995-96 visits to Vail's largest single resort alone. After an 
extensive investigation, the U.S. Department of Justice found that the 
merger would allow Vail, single-handedly, to raise prices above 
competitive levels.
    The proposed consent decree calls for the divestiture of Arapahoe 
Basin, a small, remote ski area that is little more than a few ski 
trails and a parking lot. It has none of the amenities that 
characterize the year-round, full service resorts that have been 
combined under the Vail/Ralston transaction, and has virtually no 
potential to expand into a major resort property. Because of its 
location, altitude and ski conditions, Arapahoe Basin has a limited 
following, even among advanced Front Range skiers. The divestiture of 
this small ``niche'' ski area cannot be expected to check the enormous 
economic power that will be gained through the Vail/Ralston merger. 
Accordingly, we urge the Antitrust Division to reconsider its decision 
to accept this paltry divestiture or, failing that, we urge the Court 
to reject the proposed decree.

The Commentors

    Denver is the local governing authority for the 153 square mile 
land area encompassing the City and County of Denver and is responsible 
for a population of approximately 484,000. The City Attorney is the 
chief local attorney responsible for civil matters affecting Denver 
residents.
    Denver is vitally interested in the competitive health of the 
Colorado ski industry. By virtue of its Rocky Mountain location and 
climate, winter sports, especially skiing, are a major engine of 
economic activity and development for the Denver area. Skiing generates 
tourist trade, as well as tax revenues associated with lodging, travel, 
dining, entertainment, equipment purchases and other ski-related 
expenditures. Winter Park estimates that the ski industry is worth 
about $2.5 billion to the Colorado economy. Perhaps even more 
importantly, skiing is a vital component of the recreational life of 
the community. The availability of winter sports is a major factor in 
drawing residents and industry to the Denver area.
    Having closely evaluated the Vail/Ralston transaction, Denver 
believes that the combination will harm resident skiers. Among other 
things, Denver concurs in the Antitrust Division's conclusion that Vail 
will have the ability to raise prices charged to Front Range skiers.
    Winter Park is a not-for-profit corporation formed in 1950 by 
Denver to operate, maintain and develop the Winter Park Recreational 
Area for the benefit of the people of the City and County of Denver and 
the general public. By virtue of its charter, the Winter Park resort 
operates to advance the public interest by providing an enjoyable 
winter sports experience at reasonable prices, providing unique 
programs for special populations, such as young skiers and the 
disabled, and subsidizing non-ski recreational activities throughout 
the community. The Winter Park Board of Trustees believes that its 
corporate charter is furthered by the preservation of a fully 
competitive ski industry in the Colorado Front Range area.
    Like Denver, Winter Park is concerned about the market power 
created by the Vail/Ralston transaction. It believes that, having 
acquired the Ralston resorts, Vail will have the ability to discipline 
other ski areas so as to discourage aggressive price and service 
competition. Further, Winter Park believes that Vail will be well 
positioned to pursue predatory strategies directed at other ski areas 
and resorts toward the ends of eliminating competitors and perhaps 
softening potential acquisition targets.

The Front Range Ski Market

    The complaint supporting the proposed final judgment defines the 
relevant market as the provision of skiing services to residents of the 
Front Range. The Front Range is defined as the geographic area just 
east of the Rocky Mountains, including, from north to south, the 
metropolitan areas from Fort Collins to Pueblo. The complaint goes on 
to allege that most Front Range skiers limit their day trips to resorts 
within two and one-half hours travel time, and somewhat longer for 
overnight trips. For all practical purposes, this definition excludes 
thirteen of the twenty-four Colorado ski areas, including the major 
resorts at Aspen and Steamboat Springs. The remaining market 
participants are: Arapahoe Basin, Beaver Creek/Arrowhead, Breckenridge, 
Copper Mountain, Eldora, Keystone, Loveland, Silver Creek, Ski Cooper, 
Vail and Winter Park. Five of them--Arapahoe Basin, Breckenridge, 
Beaver Creek/Arrowhead, Keystone and Vail--are now owned by Vail.
    Although there are eleven ski areas that serve the Front Range 
Skier, the market has been dominated by the Vail and Ralston resorts, 
which are now a single competitive entity. Since consummation of the 
merger, Vail controls three of the four resorts that attracted 1 
million or more 1995-96 skier visits. Indeed, according to the 
prospectus accompanying Vail's most

[[Page 39276]]

recent stock offering, Vail, Breckenridge and Keystone, in that order, 
are the three most popular ski resorts in North America. Together the 
four Vail resorts, excluding Arapahoe Basin, accounted for just under 
62 percent of total skier visits to resorts serving the Front Range. 
According to the complaint in this matter, they accounted for over 38 
percent of skier days in the Front Range market.
    Among the remaining Front Range resorts, only Winter Park had one 
million or more skier visits in the 1995-96 season. Three resorts--
Copper Mountain, Beaver Creek/Arrowhead and Loveland--had skier visits 
between 970,000 and 300,000. The remaining four competitors--Arapahoe 
Basin, Eldora, Silver Creek and Ski Cooper--each had 250,000 or fewer 
1995-96 skier visits, with Silver Creek and Ski Cooper each having less 
than 100,000.
    The four Vail resorts dominate the Colorado ski market for a 
variety of reasons. Each is a modern winter sports complex, offering a 
variety of ski terrains and non-ski recreational facilities. Each is 
located within a well-developed resort community, featuring lodging, 
dining and entertainment. According to the White Book of U.S. Ski 
Areas, the Vail Resort, for example, offers a full-service school with 
1100 instructors, has 20,000 beds for lodging on the resort and in the 
immediate community, offers nine restaurants on the mountain itself and 
over 100 in the surrounding community and has over 250 shops and 
services in the area. Even Beaver Creek/Arrowhead, Vail's smallest 
property, offers a full-service ski school with 400 instructors, 4700 
beds for lodging and six on-mountain restaurants.
    By way of contrast, the smaller areas, such as Arapahoe Basin and 
Eldora, offer no lodging and few other amenities. Indeed, the White 
Book directs Arapahoe Basin skiers to the Keystone Resort for lodging, 
dining and entertainment.

The Antitrust Division's Competitive Analysis

    The competitive impact statement accompanying the proposed final 
judgment states that the Antitrust Division's opposition to the Vail/
Ralston merger is premised upon the ``unilateral effects'' model. 
Competitive Impact Statement at 12. This model, as articulated in the 
1992 DOJ/FTC Horizontal Merger Guidelines, posits that a merger may 
enable the surviving firm to raise prices where ``a significant share 
of sales in the relevant market are accounted for by consumers who 
regard the products of the merging firms as their first and second 
choices and that repositioning of the non-parties' product lines to 
replace the localized competition lost through the merger (is) 
unlikely.'' Merger Guidelines at 23.
    The Antitrust Division described the application of the unilateral 
effects model to this case as follows:

(B)efore a merger, if two resorts are significant competitors to 
each other and one of these resorts increases its prices, a 
significant portion of this resort's customers would be ``lost'' to 
the other resort. After a merger between these two resorts, however, 
some customers who switch away from the resort that raises its price 
would no longer be lost, but rather would be ``recaptured'' at the 
newly-acquired resort. Price increases that would have been 
unprofitable to either firm alone, therefore, would become 
profitable to the merger entity.

Competitive Impact Statement at 12. Based upon its analysis of costs 
and demand in the market, the Antitrust Division estimated the adverse 
price effect of the merger to be an increase of roughly four percent or 
about $1 per lift ticket. Competitive Impact Statement at 14.
    The conclusion that the Vail resorts would be able to increase 
prices following the merger necessarily means that the six non-party 
ski areas (excluding Arapahoe Basin) do not provide a sufficient 
constraint upon the combined Vail and Ralston resorts to discipline 
pricing in the Front Range market. That conclusion also means that the 
Antitrust Division has concluded that none of the non-party resorts 
could ``reposition'' their service offerings so as to enhance localized 
competition between their resorts and those of Vail. An effective 
remedy, therefore, requires the creation of a new competitive entity 
attractive enough to Vail patrons to capture sales to consumers 
switching away from the Vail resorts in response to a price increase.

Inadequacy of the Proposed Final Judgment

    By the very terms of the Antitrust Division's competitive effects 
analysis, the divestiture of Arapahoe Basin would serve to constrain 
price increases at the Vail resort only to the extent that Arapahoe 
Basin is a close competitive substitute for each of the Vail 
properties. Otherwise, the run-off resulting from a Vail price increase 
at one of its resorts would be recaptured by another Vail resort. It 
would be virtually impossible to find anyone acquainted with the 
various ski areas serving Front Range skiers who would even suggest 
that Arapahoe Basin is a close substitute for any of the Vail 
properties.
    Arapahoe Basin has the highest altitude base among the ski areas 
serving the Front Range. This, together with the fact that much of it 
is situated above the timberline, means that is suffers extreme weather 
conditions, including frequent ``white-outs,'' more intense winds and 
much colder temperatures than other Front Range properties. 
Additionally, unlike most of the other resorts serving Front Range 
skiers, Arapahoe Basin is not located on the Interstate 70 corridor. 
Indeed, the most direct route to and from Arapahoe Basin requires 
traversing one of the highest and most frequently closed highway passes 
in the United States.
    As a winter sports experience, Arapahoe Basin bears not even the 
slightest resemblance to the Vail resorts. First and foremost, Arapahoe 
Basin is not a resort at all. It is more properly characterized as a 
pure ski area. Unlike the Vail resorts, which boast full-service ski 
schools, cross country skiing, curling, ice skating, indoor tennis, 
sledding and snowcat riding, among other activities, Arapahoe Basin has 
ski lifts and trails, a snack bar and a parking lot. Unlike the Vail 
resorts, which feature a balanced skiing experience to accommodate 
skiers of varying skill levels, 90 percent of Arapahoe Basin's trails 
are listed as intermediate or advanced.
    Moreover, contrary to the suggestion in the competitive impact 
statement that Front Range skiers are less interested in amenities than 
destination skiers, the social aspects of a ski trip often are just as 
important to the Front Range skier as they are to those who travel from 
more distant locations. Front Range skiers are as diverse as 
destination skiers. They are not just ski fanatics willing to drive two 
and one-half hours simply to take a few runs down the mountain and 
return home. Thus, it would be preposterous to suggest that Front Range 
skiers, even those travelling on a day-trip basis, have no interest 
whatsoever in non-ski winter sports activities, dining, entertainment 
and shopping.
    The Vail resorts and Arapahoe Basin simply are at opposite ends of 
the spectrum of ski experiences available to Front Range skiers. Front 
Range skiers who are inclined toward the Vail resorts obviously are 
attracted by the full package of services and amenities they offer. It 
taxes the imagination to believe that Front Range skiers would find a 
``no-frills'' ski area like Arapahoe Basin to be the next best thing to 
a visit to any one of the Vail properties.
    Nor can it be believed that Arapahoe Basin, if placed under new 
ownership, can be transformed into a more significant competitive rival 
to the Vail

[[Page 39277]]

resorts than it is at present. As an initial matter, all of the lands 
at and around Arapahoe Basin are owned by the federal government, 
meaning that government permission would be required for any major 
development effort. Moreover, by virtue of its remote location, 
altitude and terrain, Arapahoe Basin is a highly unlikely site for 
major development. These conditions not only increase construction 
costs by several orders of magnitude, but also call into question 
whether any meaningful development effort would have any prospect of 
success. Finally, even if the governmental approval, engineering, 
construction and financial obstacles could be overcome, it would take 
decades to develop sufficient lodging, dining establishments, 
entertainment venues, and shopping facilities necessary to even 
approach the type of resort communities available at the Vail resorts. 
In the terminology of the Merger Guidelines, Arapahoe Basin cannot be 
``repositioned'' to become a close competitive substitute for any of 
the Vail properties.
    Arapahoe Basin has functioned as a specialized satellite operation 
of the Keystone resort, catering to a small cadre of hardcore, advanced 
skiers who appreciate its unique ski conditions and no-frills 
character. Indeed, in the 1996-97 edition of Colorado Ski Country USA 
Travel Agent Guide, Arapahoe Basin is advertised as a part of the 
Keystone resort; it is not listed as having any independent existence. 
Travel Agent Guide at 52-3. Given this history, it is unclear that 
Arapahoe Basin can even survive on its own, much less offer the type of 
competition necessary to check the economic power of the Vail resorts.
    For all of the foregoing reasons, a strategic price increase by one 
of the Vail resorts would not cause any significant shift of patronage 
to Arapahoe Basin. By the Antitrust Division's own theory, the switch 
likely would be to one of the more similar resorts within the Vail 
resorts family. The proposed divestiture of Arapahoe Basin, therefore, 
fails miserably as a means of preventing an exercise of market power by 
Vail. Short of seeking to untangle the now-consummated merger, the only 
remedy that would stand any chance of constraining Vail's market power 
would be the divestiture of one of its more substantial resorts--i.e., 
one that has scale, ski characteristics and amenities comparable to the 
resorts Vail will continue to operate.

Other Competitive Issues

    In challenging the proposed merger solely under the unilateral 
effects model, the Antitrust division either rejected or ignored other 
possible adverse consequences of this transaction. It is worth noting 
that the transaction, which increases the Herfindahl-Hirschman index by 
643 points to over 2200, is presumptively anticompetitive under the 
Merger Guidelines, without regard to any unilateral effects scenario. 
Denver and Winter Park believe that the proposed merger has created a 
market force in the Vail resorts that can wield power in a variety of 
anticompetitive ways, ranging from discouraging aggressive price 
competition by smaller rivals to outright predatory conduct.
    Through this merger, Vail has brought under common ownership four 
of the premier ski resorts available to Front Range skiers. They are 
geographically dispersed along the Interstate 70 corridor in varying 
proximity to the other ski areas. Vail has complete freedom to price 
each resort separately or to bundle resorts together in special 
promotional packages. Under these circumstances, Vail has both the 
incentive and the ability to target particular competitors with 
disciplinary or predatory conduct.
    For example, as the market share leader, Vail has the most to lose 
from any softening of prices in the market. Should any other ski area 
seek to increase its share through special promotions or other 
competitive initiatives, Vail has the economic power to respond with 
pricing counter-measures that would render the other resort's pricing 
initiative useless. Given the prospect of a Vail pricing response, the 
other ski area would recognize that a decrease in price would neither 
increase revenues nor increase market share. In this way, Vail has the 
ability to stabilize market pricing. While the other ski areas might 
benefit in the short term from this price stability, it simultaneously 
locks them into a subordinate economic position, since any attempt to 
grow their business relative to Vail can be crushed. Alternatively, 
Vail has the ability and incentive to target smaller ski areas with 
predatory prices, at least to the point where they might become 
acquisition targets.
    These potential adverse effects are the direct result of combining 
so many of the premier Front Range resorts under the Vail banner. The 
transaction gives Vail enough distinct resorts to pursue selective 
strategies directed at individual competitors and the ability to 
subsidize such strategies at one property with supracompetitive profits 
earned at another. The divestiture of the Arapahoe Basin ski area does 
nothing to address these potential competitive effects. Once again, 
Arapahoe Basin is far too remote, small and specialized to provide any 
meaningful constraint on Vail's market power.

Alternatives to the Final Judgment

    The competitive impact statement asserts that the only alternative 
the Antitrust Division considered to the proposed final judgment is a 
full trial on the merits of the complaint. Competitive Impact Statement 
at 19. These commentors, however, find it hard to believe that the 
Antitrust Division did not at least consider requiring the divestiture 
of one of Vail's more prominent resorts. Given the process the 
Antitrust Division says it went through to analyze the effects of the 
merger--a close examination of localized competition between each 
possible pairing of resorts--it would be surprising indeed that no 
similar analysis was performed with respect to the remedy or, if such 
an analysis were performed, that it would lead so definitely to the 
conclusion that Arapahoe Basin is the ideal divestiture candidate.
    Very clearly, the Antitrust Division considered, and perhaps 
sought, other possible divestitures, but were rebuffed by the parties. 
Vail likely would not give up one of its premier resorts without a 
fight, but probably commenced the Hart-Scott-Rodino process willing to 
divest Arapahoe Basin if challenged on the merger. It is equally clear 
that any sane businessperson would readily give up a tiny resort like 
Arapahoe Basin in exchange for the opportunity to own the top three 
resorts in the market and four of the top six.
    Although we can see why this is a more than satisfactory settlement 
from Vail's perspective, we fail to see how it protects the public 
interest. If the adverse effects the Antitrust Division alleges in the 
complaint are real ones, and we most certainly believe they are, then 
they merit an effective remedy. Here the proposed remedy is completely 
hollow. Having asserted that the merger likely would cause 
anticompetitive effects if the parties were not willing to offer 
meaningful divestiture in settlement, the Antitrust Division should 
have been willing to obtain meaningful relief through litigation.

Conclusion

    There is absolutely no sense in which the divestiture of Arapahoe 
Basin can be expected to remedy the severe economic harm likely to be 
caused by the Vail/Ralston merger. Accordingly, we urge the Antitrust 
Division to insist upon

[[Page 39278]]

more meaningful relief in the form of more extensive divestiture. The 
divestiture of either Breckenridge or the Keystone/Arapahoe Basin 
combination would provide more appropriate relief.

    Dated: April 4, 1997.

      Respectfully Submitted,
Daniel E. Muse,
City Attorney, Denver, Colorado.

Gerald F. Groswold,
President, Winter Park Recreational Association.

532 Oakwood Drive, Castle Rock, CO 80104

15 January 1997.
U.S. Department of Justice,
1401 H St. N.W., Room 4000, Washington, DC 20515.

    Attn: Mr. Craig W. Conrath, Merger Task Force Antitrust 
Division.

Re: Vail's acquisition of Breckenridge, Keystone, and A-Basin

    Dear Mr. Conrath: I offer this in opposition to the above 
acquisition. Justice Department approval has been granted so this 
effort will be nothing but an expression of frustration and 
incredulity. Why does Justice think this is good for Colorado 
skiing? Such an acquisition (merger is a euphemism) places Vail in 
control of 40% (not 35% as you say) of the Colorado ski market. Your 
denial of A-Basin from the acquisition has no meaning in total skier 
market. A-Basin is absolutely a great ski area but for expert 
skiers--a small group by comparison. Breckenridge or Keystone has to 
remain a competitor of Vail to keep any sense of fairness for the 
skiing public. Otherwise, Vail will control the most accessible and 
significant skiing in Colorado. That is plainly enough reason to 
deny such concentration of market. How can anyone see Colorado 
skiing being better served with this acquisition than without it?
    The acquisition by Vail eliminates the need to compete with 
Summit County ski areas. It is that simple and it is Vail's true 
purpose. Vail's incentive is to maximize profit, not to improve the 
skiing experience. Vail has the highest ticket prices of all these 
areas. There is no way Vail will not equalize prices among a combine 
they control. Vail is buying what they could not otherwise get thru 
competition. After skiing here 25 years I can say few mid-westerners 
(I recently moved from Illinois) ski Vail for more than a day or 
two. Vail is congested, overdeveloped, elitist, very expensive and 
one goes away feeling taken. Most people I talk to in this area feel 
the same thing will happen to Breckenridge and Keystone.
    Skiers prefer skiing to bigger and grander resorts or more 
extravagant hotels. Where base areas build out, as Vail has, further 
growth is thru acquisition and/or market consolidation. It will not 
benefit less affluent skiers to allow Vail to exploit a market 
segment they cannot otherwise attract. Instead of Justice rewarding 
Vail for poor business decisions, you should encourage them to 
address skier concerns and attract more skiers. Skiers have not 
disappeared. The population is bigger today than yesterday. If ski 
areas gave attention to providing reasonable access, accommodations, 
parking and ticket prices, a huge market exists.
    Some say skiing is recreation and unimportant in a bigger 
picture of important business activity. That argument is specious 
and ignores significant contribution to the economy. So isn't this 
grab by Vail just another step towards the insidious and relentless 
pressure to control by elimination of competition? There are few 
business consolidations that improve the product with consequent 
lower user prices? The incentive to do that is absent! Consolidation 
is for the benefit of the surviving company. Like other business, 
ski areas should take the consequences for bad business decisions. 
Overdevelopment rather than improving access to their product is the 
problem.
    I have seen the cost of lift tickets increase from $6.00 in mid-
1970 to $48/$50 to date in Breckenridge and Vail. That calculates as 
32% per year. In comparison with other business, ski area prices are 
way ahead of inflation. While that increase is huge the market has 
expanded till recent years. I will continue to pay for the pleasure 
but I worry for younger skiers. The point is, few new ski areas are 
likely to open to the public, because skiing growth has been made 
flat. Cost has something to do with flat growth but other factors 
enter the equation as well. Further public land availability is 
improbable. Yet, most, if not all, ski areas are on public land and 
enjoy the benefits of low rent and good profitability. Ski areas do 
not have to provide the capital for land ownership. The government 
provides it to them at a bargain from the taxes of skier and non-
skier alike. Should consolidation of these ski areas, on public 
land, be approved in what is already a limited market with limited 
entry for new ski areas?
    Governments already subsidize in the form of low rent, highways 
and maintenance, snow removal, tax abatements, utilities and other 
subsidies that do not come to mind. It is apparent to the most 
uninformed that healthy competition is what is needed to keep this 
industry vying for skier business. What is wrong with competition 
among the ski areas? It serves both skier and ski area well? Vail 
has opted for the top income bracket skier and has exploited their 
base operation to such an extent they can attract only the most 
affluent skiers. Now with Justices blessing they buy their 
competition. You cannot tell me this will be an improvement for 
Breckenridge, Keystone or the skiing public.
    As said above, public comment will not halt the Vail acquisition 
because the Justice Department has rolled over to mega mergers and 
mega business. They now bless mega ski corporations. It is sad to 
see the demise of Breckenridge and Keystone because of the resultant 
loss to skiers. Skiers are served best as competition now exists. 
Each area vigorously competes for the skier and although ticket 
prices have soared year after year each area offers special prices 
that help to stabilize costs. Justice now says this will continue if 
Vail owns it all. How gullible do you think the public is? You allow 
this because skiing is small concern to big government but most of 
all because you are lazy. It is easier to accept this as an 
unimportant merger than to do your job of preserving balance in the 
marketplace. Vail is buying out their competition pure and simple 
and it is sad for the loss to skiers.

      Disappointed in Denver,

Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of 
Justice, 1401 H St., N.W., Room 4000, Washington, D.C. 20530.

    Dear Sir: I am writing to protest the proposed Vail Associates 
buyout of Breckenridge and Keystone ski resorts. I understand the 
standard for determining an antitrust violation is control of 35% of 
the market. In this case, the Denver Front Range skier is the market 
considered. It may be true that by selling off Arapahoe Basin, that 
percentage falls below the magic percentage, but an important aspect 
is being ignored.
    If one makes the more realistic evaluation comparing the big 
resorts as a group (toss in Winter Park and Cooper as biggies), the 
market controlled by Vail Associates would be a much higher 
percentage. It is not realistic to include Arapahoe Basin, Eldora, 
Loveland, and Ski Cooper in the same market. They are fun little 
areas, but these niche areas are already much cheaper than the 
biggies and do not have a major effect on pricing. Vail Associates 
has been advertising their good intentions in supporting the local 
skier. It looks good in print. Then one should take a look at what 
happened to Arrowhead lift prices once VA purchased them. Prices 
went up . . . way up. Image what happens when Vail introduces the 
All VA ticket for Beaver Creek, Breckenridge, Vail, and Keystone. 
Ski Keystone for the price of a Vail ticket!
    I do believe Breckenridge and Vail Associates make a good fit--
I'm not anti-everything. I just believe the entire package cannot 
help but increase lift prices. Please prevent it.

      Regards,
David LeBlang.

James E. Leibold, MD,

3458 S. Columbine Cr., Englewood, CO 80110.

Jan. 14, 1997.
Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of 
Justice, 1401 H St., N.W., Room 4000, Washington, D.C. 20530.

    Dear Mr. Conrath: When word of Vail's plan to buy Breckenridge, 
Keystone and Arapahoe Basin Ski Areas appeared in the press, we 
wrote to your department protesting this plan. As senior citizen 
skiers we are very concerned about lift ticket prices as their cost 
continually increase whereas our income is fixed. Vail does not 
offer skiers over age 60 the same discounts as Breckenridge and 
Keystone presently do. Therefore, we are fearful of losing these 
discounts if Vail owns these resorts also. We simply have not been 
able to afford to ski at Vail the past few years.
    To think that asking Vail to divest Arapahoe Basin will prevent 
a monopoly in

[[Page 39279]]

Summit County is ludicrous. Arapahoe is a small ski area with only 
4% of the skier days in central Colorado. If you truly wanted to 
avoid monopoly issues, divestiture of either Keystone or 
Breckenridge would have been far more effective.
    Vail's clout in marketing will surely have a severe adverse 
impact on Central Colorado ski areas not under Vail's mantle and 
this is bound to eventually cause a rise in lift ticket prices. 
Surely, this is not in the public interest. We again urge you to 
disapprove the buyout plans as now proposed. Thank you for your 
consideration of this matter.

      Your truly,
James E. Leibold,
Angela M. Leibold.

James W. Margolis

1250 Golden Circle, #509, Golden, CO 80401

January 6, 1997.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of 
Justice, 1401 H St., N.W., Room 4000, Washington, D.C. 20530.

    Dear Mr. Conrath: As an economist and regular skiier in Summit 
County for nearly 20 years now, I have followed the news about 
Vail's purchase very carefully.
    Based on the limited coverage in the Denver newspapers, I must 
say that I am dumbfounded that the ``regulators'' determined the 
proposed merger would have anti-competitive effects and that the 
solution would be to sell A-Basin. Although I certainly believe that 
the merger would be anti-competitive (by whatever definition), the 
proposed solution to sell off A-Basin makes no sense. A-Basin is 
simply too small to make a difference. If you are not going to force 
Vail to sell Keystone or Breck, you are better off doing nothing.
    The public interest is best served by keeping Keystone and A-
Basin together and treating them as a single unit for analyses 
purposes. Without Keystone, A-Basin has no lodging or transportation 
link. Also, even hard core skiiers have been known to go to Keystone 
on white-out days when it is very difficult to ski at A-Basin due to 
flat light. Keystone and A-Basin are wonderful complements to each 
other. It is unfortunate that in your efforts to quantify ``market 
share and competition'' you have simply ignored common sense.
    Is there any report that your office could mail to me? I would 
be interested in reading the details of your assumptions and 
analyses.
    If you have any questions about the trade-off between 
quantitative analyses and common sense, please feel free to contact 
me.

      Thank you,
James W. Margolis

Summit County

Joe Sands, District 3, County Commissioner

January 8, 1997.
Mr. Craig Conrath,
Chief, Merger Task Force, U.S. Department of Justice, Anti-Trust 
Division, City Center Building #4000, 1401 H Street, N.W., 
Washington, D.C. 20005.

    Dear Mr. Conrath: Speaking as a commissioner, not for the Summit 
County Board of Commissioners, this letter is a further 
interrogatory and follow-up to my September 30, 1996, letter of 
concern about the proposed Vail Resorts-Ralcorp merger. I have 
compliments to your team mixed with puzzlement about issues 
unanswered. I am having to write this before the Competitive Impact 
Statement is released, but based on my conversations with the 
Taskforce, I would be surprised if that document answers these 
questions.
    First the compliments. My staff and myself are pleasantly 
surprised at the availability and responsiveness of your task force 
members to whom we have inquired. We haven't always agreed with 
their answers, but that is not due to any obfuscation on your team's 
part.
    Most importantly, from a community need, ski culture diversity, 
and front range experienced skier need, the divestiture of Arapahoe 
Basin is great. I hope that order in your decision does not assume 
some very hotly debated proposed additions to the A-Basin permit 
(controversial alpine slide, and major new water works for 
snowmaking). You need to clarify this. If I am reading correctly 
that the trustee is paid a commission on this sale, that becomes an 
immense issue.
    Almost as important, is if your order means Andy Daly and Vail 
Resorts can start to manage the former Ralcorp remaining properties, 
then I'm all for that. The outgoing Ralcorp leadership caused many 
societal controversies; their own employees, guests, and the local 
community is ready to give a parade for any new management.
    Unfortuntely, there is also puzzlement. I haven't found anyone 
who thinks A-Basin has enough unused skier day capacity to be a 
market competition leveling effect as the stipulation and order 
indicate. If the five million skier day Apollo consortium does 
anything negative to its customers, at most the 100,000 new skier 
day absorption at A-Basin, is not a significant competitive 
alternative. Plus a lot of Vail/Apollo's skier days are closely tied 
to real estate purchases and lodging geography. Both of which make 
the remote A-Basin less of an alternative. I also predict the H.H.I. 
formula you used could create a new round of jokes at an economics 
convention (make them forget the C.P.I. controversy). Divesting the 
non-compatible A-Basin so as to sneak your H.H.I. to 1781 and just 
below the 1800 points of a concentrated market appears hollow. 
Taking this into consideration, I would hope you would see that A-
Basin does truly offer competition to the other mountains in the 
merger. Therefore the stipulation offered with A-Basin's divestiture 
does nothing to guarantee competition.
    Probably my biggest personal puzzlement is your team's 
efficiency assumptions. Many items they see as savings passed on to 
the customer, I see as expanding the corporate profit margin, not 
going to the customer, because the competition's ability to be an 
alternative is inconsequential. I've seen nothing in these documents 
that addresses my September 30th, 1996, concerns on:
     controlling airplane seats, transportation access, 
etc.;
     ad/promoting control;
     lodging reservation favoritism;
     labor market, control of salaries;
     societal impacts (healthcare, donations, infrastructure 
support);
     and their past practices of ``shutting out others'' in 
a lot of these areas.
    Even if I were to allow the Department of Justice's assumption 
that the efficiency will benefit the customer, I would have to 
challenge the assumption that this necessarily will be maintained 
long term or sustain competition from A-Basin or the other ski 
resorts. The efficiency will give the merged mountains the power to 
undercut prices to the point of eliminating your so called 
competition.
    The good news of this proposed settlement, is I had challenged 
Vail/Apollo in a Labor Day thesis of community concerns to answer 
some of this. Maybe without the excuse they have used your process 
for, they will finally address these matters. But my conclusion 
today is doubtful. All of this is about the profit to be gained when 
Vail goes public in I.P.O. I hope the judge who decides this sees 
that.
    My closing thought is an objection to a far-fetched insulting 
statement (enclosed) quoted to Colorado's First Assistant Attorney 
General. I'd accept an apology if offered. For the second most 
politically motivated state office to present this thought, * * * 
while ignoring the powerful 17th Street law firm and political 
handler who were hired ``to facilitate'' this matter, is the 
ultimate in hypocrisy. Possibly this last sentence is incorrect, the 
judge ruling should also question if the ultimate hypocrisy is the 
campaign contributions from Leon Black, Apollo parties, Vail, 
Ralcorp, etc., to all interested political groups since this has 
started.
    I would hope the Department of Justice would have a change of 
heart/position and consider more action before the United States 
consent to entry of the Final Judgment.

    Sincerely,
Joe Sands,
County Commissioner.

Enclosure

6299 E. Caley Dr., Englewood, CO 80111

Feb. 11, 1997.
Mr. Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of 
Justice, 1401 H St. NW., Room 4000, Washington, DC 20530.

    Dear Sir: I am writing to protest the proposed Vail Associates 
buyout of Breckenridge and Keystone ski resorts. I understand the 
standard for determining an antitrust violation is control of 35% of 
the market. In this case, the Denver Front Range skier is the market 
considered. It may be true that by selling off Arapahoe Basin, that 
percentage falls below the magic percentage, but an important aspect 
is being ignored.
    If one makes the more realistic evaluation comparing the ``big'' 
resorts as a group (toss in Winter Park and Copper as biggies), the 
market controlled by Vail Associates would be a much higher 
percentage. It is not realistic to include Arapahoe Basin, Eldora,

[[Page 39280]]

Loveland, and Ski Cooper in the same market. They are fun little 
areas, but these niche areas are already much cheaper than the 
biggies and do not have a major effect on pricing.
    Vail Associates has been advertising their good intentions in 
supporting the local skier. It looks good in print. Then one should 
take a look at what happened at Arrowhead lift prices once VA 
purchased them. Prices went up * * * way up. Imagine what happens 
when Vail introduces the All VA ticket for Beaver Creek, 
Breckenridge, Vail, and Keystone. Ski Keystone for the price of a 
Vail ticket!
    I do believe Breckenridge and Vail Associates makes a good fit--
I'm not anti everything. I just believe the entire package cannot 
help but increase lift prices. Please prevent it.

    Regards,
Dick Thompson,
Front Range skier.

Thomas J. Tomazin, P.C.

Attorney at Law, 5655 South Yosemite, Suite 200, Englewood, 
Colorado 80111

January 17, 1997.
Craig W. Conrath,
Chief, Merger Task Force, Antitrust Division, U.S. Department of 
Justice, 1401 H Street, N.W., Room 4000, Washington, D.C. 20530.

Re: Vail/Ralcorp Merger

    Dear Mr. Conrath: I am a life-long resident of the State of 
Colorado. While I was born in the rural part of Colorado, I have 
lived in the Denver metropolitan area for the past thirty-one years. 
Both myself and my five children have enjoyed skiing in Colorado 
since 1969.
    I am writing regarding the proposed merger between Vail and 
Ralcorp. I have skied at all of the ski areas that are involved. 
Overall, I am in favor of the merger and do not believe that there 
is any risk of a monopoly being created by permitting the merger. To 
the contrary, all of the Colorado ski areas cater tremendously to 
the Colorado skier. All of the ski areas are well-aware that their 
customer base and profit are to a large extent dependent upon the 
Colorado skier rather than the out-of-state skier.
    My only objection to the merger as proposed is that Vail and 
Ralcorp must divest Arapahoe Basin. From comments I have read in the 
newspaper, it is conceded that the requirement for the divestiture 
of Arapahoe Basin makes no sense. Rather, the reasons assigned in 
the newspaper was that it was a negotiated settlement. One account I 
read indicated that by taking out the annual number of Arapahoe 
Basin skiers, approximately 258,000, it would reduce the percentage 
share of Vail/Ralcorp from approximately thirty-eight percent to 
approximately thirty-four percent.
    Regardless of the rationalizations, reasons or negotiations, as 
a practical matter, the requirement that Arapahoe Basin be divested 
spells a death knell for Arapahoe Basin. Any proposed purchaser will 
essentially be unable to maintain the area in the manner in which 
Ralcorp has done to date nor will the purchaser be able to compete 
effectively. Arapahoe Basin will surely deteriorate and, I am 
fearful, cease to exist.
    In an era where Keystone, Breckenridge and Vail continue to grow 
and become more technologically advanced, it was always refreshing 
to have Arapahoe Basin as a throwback to an era long since past.
    I would strongly request that reconsideration be given in this 
matter and that as part of the merger, Vail and Ralcorp not be 
required to divest Arapahoe Basin.
    Should you have any questions, please do not hesitate to contact 
me. Thank you in advance for your cooperation and assistance in this 
regard.

    Very truly yours,
Thomas J. Tomazin, P.C.

Town of Montezumza

P.O. Box 1476 Dillon, Colo. 80435

Hon. Lewis T. Rebcock,
District Judge, United States District Court for the District of 
Colorado, 1961 Stout Street, Denver, Colo. 80202.

Re: U.S. v. Vail Resorts, 97B-10

    Dear Judge Babcock, The Town of Montezumz opposes Vail's 
acquisition of the Ralston Resorts ski areas of Breckenridge, 
Keystone, and Arapahoe Basin. We apologize for not submitting our 
comments earlier, but likemost people in Summit County we believe 
the merger was a done deal and had closed without the opportunity 
for public comment. Our apparent misconception was corrected by a 
recent article in our local newspaper, The Summit Daily, indicating 
that the City of Denver had recently opposed the merger.
    Montezuma is an incorporated Town (1862) 6 miles from the 
Keystone ski area at 10,400's in the center of 5 major Forest 
Service trailheads and by their 1996 count 15,000 persons pass 
through here annually. One concern is the increased vehicle traffic 
that will impact the Town with the obvious growth expected from the 
merger. The additional recreational users in the area can only harm 
the delicate surrounding forest. This 100 year old growth is very 
susceptible to fire. The only road to Montezuma and these trailheads 
off Hwy 6 is narrow and winding causing additional concern of the 
increased traffic.
    Hwy 6 is the main artery for trucks carrying hazardous material 
crosscountry East and West. They must, at the bottom of Loveland 
Pass, drive through the already congested skier traffic. This 
situation with the additional development can only create further 
dangers to the public safety.
    We are a working class population proud of the modest homes we 
live in, but fearful the rising taxes the merger will create could 
prohibit local ownership as has happened in other communities. We 
realize we are only a very small voice in this vast expansion but we 
are the voice of people and ask you to consider the far reaching 
effects this ``monopoly will have on our communities, the work 
force, the skiers, and the State of Colorado. Adam Arron of Vail 
Resorts has acknowledged the present problems and has said new 
problems could be on the horizon if the company's plans for 
increased growth are realized.
    Thank you for your time and consideration.

      Sincerely,
Town Trustee,
Town of Montezuma.

[FR Doc. 97-19164 Filed 7-21-97; 8:45 am]
BILLING CODE 4410-11-M