[Federal Register Volume 62, Number 245 (Monday, December 22, 1997)]
[Notices]
[Pages 66867-66868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33306]
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FEDERAL TRADE COMMISSION
[File No. 971-0081]
Guinness Plc; Grand Metropolitan Plc; Analysis To Aid Public
Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint that accompanies the consent agreement and the terms of the
consent order--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before February 20, 1998.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT:
William Baer, Federal Trade Commission, 6th & Pennsylvania Ave., NW, H-
374, Washington, DC 20580. (202) 326-2932. George S. Cary, Federal
Trade Commission, 6th & Pennsylvania Ave., NW, H-374, Washington, DC
20580. (202) 326-3741.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the above-captioned consent agreement containing a consent
order to cease and desist, having been filed with and accepted, subject
to final approval, by the Commission, has been placed on the public
record for a period of sixty (60) days. The following Analysis to Aid
Public Comment describes the terms of the consent agreement, and the
allegations in the accompanying complaint. An electronic copy of the
full text of the consent agreement package can be obtained from the
Commission Actions section of the FTC Home Page (for December 15,
1997), on the World Wide Web, at ``http://www.ftc.gov/os/
actions97.htm.'' A paper copy can be obtained from the FTC Public
Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W.,
Washington, D.C. 20580, either in person or by calling (202) 326-3627.
Public comment is invited. Such comments or views will be considered by
the Commission and will be available for inspection and copying at its
principal office in accordance with Section 4.9(b)(6)(ii) of the
Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).
Analysis To Aid Public Comment on the Provisionally Accepted
Consent Order
The Federal Trade Commission has accepted for public comment from
Guinness plc (``Guinness'') and Grand Metropolitan plc (``Grand Met'')
an Agreement Containing Consent Order (``Proposed Consent Order''). The
Proposed Consent Order remedies the likely anticompetitive effects
arising from the proposed merger of Guinness and Grand Met in two
relevant product markets. This agreement has been placed on the public
record for sixty (60) days for receipt of comments from interested
persons.
Comments received during this period will become part of the public
record. After sixty (60) days, the Commission will again review the
agreement and the comments received, and will decide whether it should
withdraw from the agreement or make final the consent order in the
agreement.
According to the draft of complaint that the Commission intends to
issue, Guinness and Grand Met are competitors in the sale and
distribution in the United States of premium Scotch and premium gin.
The premium Scotch products of Guinness include Johnnie Walker Red and
Dewar's White Label and the premium Scotch brands of Grand Met include
J&B Rare, J&B Select, and The Famous Grouse. The premium gin brands of
Guinness include Tanqueray gin and the premium gin brands of Grand Met
are Bombay Original and Bombay Sapphire.
The Commission's draft of complaint states that Guinness and Grand
Met entered into an agreement to merge their companies on May 11, 1997.
The size of the transaction, measured in terms of the market
capitalization of both parties, is about $36 billion.
The Commission is concerned that the proposed merger would
eliminate substantial competition between Guinness and Grand Met, and
increase concentration substantially, in the very highly concentrated
premium Scotch and premium gin markets, resulting in higher prices. The
Commission stated it has reason to believe that the proposed merger
would have anticompetitive effects and violate Section 7 of the Clayton
Act and Section 5 of the Federal Trade Commission Act.
In the United States premium Scotch market, Guinness is the largest
competitor with about 68% of all sales and Grand Met is the second
largest competitor, with about 24% of sales. Together, the merged firm
will control approximately 92% of all United States premium Scotch
sales. The proposed merger would increase the Herfindahl-Hirschman
Index (``HHI''), the customary measure of industry concentration, by
over 3000 points and produce a market concentration of over 8000
points. In the United States premium gin market, Guinness is the
largest competitor with about 58% of all sales and Grand Met is the
third largest, and about 15% of sales. Together, the merged firm will
control approximately 73% of all United States premium gin sales. The
proposed merger would increase the HHI by over 1700 points and produce
a market concentration of over 6000 points.
The Proposed Consent Order, if finally issued by the Commission,
would settle all of the charges alleged in the Commission's complaint.
Under the terms of the Proposed Consent Order, Guinness and Grand Met
will be required to divest their Dewar's Scotch, Bombay Original gin,
and Bombay Sapphire gin brands, worldwide, to one or two acquirers
acceptable to the Commission. To insure an uninterrupted supply of
Dewar's Scotch after the brand divestiture, Guinness will be required
to divest additional assets, including Scotch distilling capacity, if
the Commission should determine that these additional assets are
necessary for the acquirer effectively to compete. Also, to insure an
uninterrupted supply of Bombay Original and Bombay Sapphire gins,
Guinness and Grand Met may be required to produce these gins for the
acquirer, in England, should the independent third party that has been
producing Bombay Original and Bombay Sapphire for Grand Met not wish to
continue to do so for the acquirer.
Guinness and Grand Met will be required to complete the required
divestitures within six (6) months from the date of the Commission's
acceptance of the consent order for public comment. In the event
Guinness and Grand Met do not divest Dewar's, Bombay Original, and
Bombay Sapphire to an acquirer or acquirers acceptable to the
Commission in the requisite time, procedures for the appointment of a
trustee to sell the assets have been agreed to and will be triggered.
[[Page 66868]]
Accompanying the Proposed Consent Order is an Asset Maintenance
Agreement. Under its terms, Guinness and Grand Met are required to
preserve and maintain the competitive viability of all of the assets to
be divested in order to insure that the competitive value of these
assets will be maintained after the merger but before the assets are
actually divested.
By accepting the Proposed Consent Order subject to final approval,
the Commission anticipates that the competitive problems alleged in the
compliant will be resolved. The purpose of this analysis is to invite
and facilitate public comment concerning the Proposed Consent Order. It
is not intended to constitute an official interpretation of the
Proposed Consent Order, nor is it intended to modify the terms in any
way.
Donald S. Clark,
Secretary.
Separate Statement of Commissioner Mary L. Azcuenaga Concurring in Part
and Dissenting in Part in Guinness PLC, File No. 971-0081
Today, the Commission accepts for public comment a consent order
settling allegations that the merger of Guinness PLC and Grand
Metropolitan PLC would violate Section 7 of the Clayton Act and Section
5 of the Federal Trade Commission Act. The complaint alleges as
antitrust product markets: (1) ``premium Scotch,'' which is defined as
``blended Scotch whisky that is made and bottled in Scotland, generally
advertised, promoted, and available throughout the United States, and
sold at retail at prices comparable to the prices of the Johnnie Walker
Red, Dewar's White Label, and J&B Rare brands,'' and (2) ``premium
gin,'' which is defined as ``gin that is made and bottled in England,
generally advertised, promoted, and available throughout the United
States, and sold at retail at prices comparable to the prices of
Tanqueray, Bombay Original, and Bombay Sapphire brands.'' I cannot
support the complaint as written.
Although at first glance the markets may sound wacky (to use the
vernacular), the complaint merits our careful attention. For reasons
that are not apparent, the proposed product markets exclude brands not
marketed throughout the United States, if there are any, that compete
head to head with the national brands. By definition, the ``premium
gin'' product market also excludes domestically bottled gin brands, if
any, that are sold at prices comparable to Tanqueray and Bombay. I see
no reason for these seemingly arbitrary exclusions.
More importantly, the price limitations in the product markets do
not seem justifiable. As recognized in Commission precedent,
competition occurs along a continuum of prices as brands compete with
products above and below their prices. In Heublein, Inc., 96 F.T.C. 385
(1980), for example, the Commission dismissed the complaint based on
findings in an ``all wine'' market and the table, dessert and sparkling
wine submarkets. As then Commissioner Pitofsky stated in the Heublein
opinion, although the competitive offerings of the wine industry were
not altogether homogeneous, ``those diverse products nevertheless may
`appropriately be designated as a market' for antitrust analysis,'' 96
F.T.C. at 576 quoting Coca Cola Bottling Co. of New York, Inc., 93
F.T.C. 110 (1979).
Despite my disagreement with the allegations in the complaint, I
find reason to believe that the merger of Guinness PLC and Grand
Metropolitan PLC would violate the law on the basis of a broader market
and that an order to remedy the lessening of competition in the broader
market would be appropriate. The divestiture of the Dewar's Scotch and
Bombay gin brands will have some remedial effect in the broader market,
and for that reason, I have voted to accept the order for public
comment. After the public comment period, I will revisit the question
whether the order is sufficient or whether the Commission should reject
the order and seek additional divestitures in an administrative
proceeding.
[FR Doc. 97-33306 Filed 12-19-97; 8:45 am]
BILLING CODE 6750-01-M