[Federal Register Volume 63, Number 129 (Tuesday, July 7, 1998)]
[Notices]
[Pages 36696-36697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17936]


-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 981-0211]


Sky Chefs, Inc., et al.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

-----------------------------------------------------------------------

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 September 8, 1998.

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

FOR FURTHER INFORMATION CONTACT:
Phillip Broyles, FTC/S-2105, Washington, DC 20580. (202) 326-2805.

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 complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for June 29, 1998), 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, NW, 
Washington, DC 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 of Proposed Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted from Sky 
Chef, Inc., and its parents, Onex Corporation and Gerald W. Schwartz 
(collectively ``Proposed Respondents'') an Agreement Containing Consent 
Order (``Proposed Consent Order''). The Proposed Consent Order remedies 
the likely anticompetitive effects in the delivery of catering services 
to airlines at McCarran International Airport in Las Vegas, Nevada, 
that arise from the proposed acquisition of Ogden Aviation Food 
Services, Inc., by Proposed Respondents.

II. Description of the Parties and the Transaction

    Sky Chefs, Inc., headquartered in Arlington, Texas, provides 
catering services to airlines in the United States and abroad. Its 
parent company, Onex Corporation, operates through a number of other 
subsidiaries that are involved in chain restaurant food service, 
electronics manufacturing, and other businesses. During 1997, Sky Chefs 
had total revenues of over $1 billion.
    Ogden Corporation, headquartered in New York, is a global company 
providing a wide range of services in the aviation, entertainment, and 
energy industries. Ogden's wholly-owned indirect subsidiary, Ogden 
Aviation Food Services, Inc., and its wholly-owned subsidiary, Ogden 
Aviation Food Services (ALC), Inc., operate 11 kitchens serving in-
flight food to more than 85 airlines at a number of locations, 
including eight major U.S. airports. Revenues for in-flight catering in 
1997 are reported at $164 million.
    On March 6, 1998, the parties signed a letter of intent 
contemplating that Sky Chefs, Inc., would purchase 100% of the voting 
common stock of Ogden Aviation Food Services, Inc., from Ogden 
Corporation. On May 7, 1998, the parties signed a stock purchase 
agreement that excluded the assets of Ogden's Las Vegas flight kitchen. 
On May 22, 1998, Ogden entered into an agreement to sell the Las Vegas 
flight kitchen to Dobbs International Services, Inc.

[[Page 36697]]

III. The Proposed Complaint and Consent Order

    The Commission has entered into an agreement containing a Proposed 
Consent Order with Proposed Respondents in settlement of a proposed 
complaint alleging that the acquisition as originally proposed violates 
Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, and that 
consummation of the acquisition as originally proposed would violate 
Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 5 of the 
Federal Trade Commission Act. The complaint alleges that the 
acquisition will lessen competition in the delivery of catering 
services to airlines at McCarran International Airport in Las Vegas, 
Nevada.
    To remedy the alleged anticompetitive effects of proposed 
acquisition, the Proposed Consent Order prohibits Proposed Respondents, 
for ten (10) years after the consent order becomes final, from 
acquiring any concern that controls Ogden's Las Vegas catering 
operations without prior approval from the Commission. It also requires 
that, for ten (10) years, Proposed Respondents provide prior notice to 
the Commission before acquiring their only in-flight catering 
competitor at any airport in the United States.
    Proposed Respondents are required to file annual compliance reports 
with the Commission for the next ten (10) years, with the first report 
due one year after the proposed order becomes final.

IV. Resolution of Antitrust Concerns

    The Proposed Consent Order alleviates the alleged antitrust 
concerns arising from the acquisition in the delivery of catering 
services to airlines at McCarran International Airport in Las Vegas, 
Nevada.
    In-flight caterers provide meals and beverages for consumption 
during aircraft flights. Catering services include the purchasing of 
food in accordance with airline specifications, preparation of meals, 
stocking of beverage carts, delivery of meals and carts to the 
aircraft, loading the galley, unloading of in-coming carts, utensils 
and trash, and cleaning and storage of carts and utensils.
    Both Sky Chefs and Ogden provide in-flight catering services at 
McCarran International Airport in Las Vegas through their flight 
kitchens located at or near that airport. McCarran International 
Airport is a relevant antitrust geographic market because caterers at 
that airport could profitably raise prices by a small but significant 
and nontransitory amount without losing enough sales to flight kitchens 
in other areas to make such an increase unprofitable. Airlines cannot 
economically turn to other areas to obtain their Las Vegas catering 
services because of additional costs and quality problems associated 
with flying food in from more distant sources.
    Sky Chefs and Ogden are the only companies that sell catering 
services to airlines at McCarran International Airport. The acquisition 
as originally proposed would eliminate Sky Chefs and Ogden as 
independent competitors in the provision of in-flight catering services 
at McCarran International Airport. The acquisition also would increase 
the ability of the combined Sky Chefs/Ogden business unilaterally to 
raise prices and reduce the quality of catering services at McCarran 
International Airport. New entry would not be timely, likely or 
sufficient to defeat an anticompetitive price increase or quality 
reduction. An entrant would need to capture a large share of the 
catering business at McCarran International Airport in order to reach a 
viable scale of operation. Such new entry would entail substantial sunk 
costs.
    To remedy the potential anticompetitive effects of the transaction 
as originally proposed, Proposed Respondents and Ogden amended their 
stock purchase agreement to exclude Ogden's in-flight catering assets 
serving the Las Vegas airport. Subsequently, Ogden sold its Las Vegas 
in-flight catering assets to Dobbs International Services. The Proposed 
Consent Order prohibits Proposed Respondents, for ten (10) years, from 
acquiring an interest in those assets.

V. Opportunity for Public Comments

    The Proposed Consent Order has been placed on the public record for 
sixty (60) days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After sixty (60) days, the Commission will again review the Proposed 
Consent Order and the comments received and will decide whether it 
should withdraw from the Proposed Consent Order or make the order 
final.
    The purpose of this analysis is to invite public comment on the 
Proposed Consent Order to aid the Commission in its determination of 
whether to make final the Proposed Consent Order. This analysis does 
not constitute an official interpretation of the Proposed Consent 
Order, nor is it intended to modify the terms of the Proposed Consent 
Order in any way.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 98-17936 Filed 7-6-98; 8:45 am]
BILLING CODE 6750-01-M