[Federal Register Volume 64, Number 128 (Tuesday, July 6, 1999)]
[Notices]
[Pages 36400-36403]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16943]


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DEPARTMENT OF JUSTICE

Antitrust Division


U.S. v. Signature Flight Support Corporation, et al.; Public 
Comments and Plaintiff's Response

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that the Public Comment and 
Plaintiff's Response have been filed with the United States District 
Court of the District of Columbia in United States v. Signature Flight 
Support Corporation, Civ. Action No. 9900537 (RCL).
    On March 1, 1999, the United States filed a civil antitrust 
Complaint alleging that Signature Flight Support Corporation's 
(``Signature'') proposed acquisition of AMR Combs, Inc., (``Combs'') 
would violate section 7 of the Clayton Act, 15 U.S.C. 18. The Complaint 
alleged that Signature and Combs are fixed based operators (FBOs) 
located at various airports throughout the United States. Signature's 
acquisition of Combs would have eliminated its only FBO competitor at 
Bradley International Airport and at Palm Springs Regional Airport. The 
acquisition would have also significantly reduced the likelihood of 
entry of a third, independent FBO competitor at Denver Centennial 
Airport. As a result, the proposed acquisition would substantially 
lessen competition for FBO services at those airports in violation of 
section 7 of the Clayton Act.
    Public comment was invited within the statutory 60-day comment 
period. The one comment received, and the response thereto, is hereby 
published in the Federal Register  and filed with the Court. Copies of 
these materials may be obtained on request and payment of a copying 
fee.
Constance K. Robinson,
Director of Operations and Merger Enforcement, Antitrust Division.

Plaintiff's Response to Public Comment

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

I. Background

    On March 1, 1999, the United States Department of Justice (``the 
Department'') filed the Complaint in this matter. The Complaint alleges 
that Signature Flight Support Corporation's (``Signature'') proposed 
acquisition of AMR Combs, Inc. (``Combs''), a wholly owned, indirect 
subsidiary of AMR Corporation, would violate section 7 of the Clayton 
Act, 15 U.S.C. Sec. 18. The Complaint alleges that Signature and Combs 
are fixed base operators (FBOs) located primarily at various airports 
throughout the United States. FBOs provide flight support services to 
general aviation customers. By acquiring the Combs FBO facilities, 
Signature would eliminate its sole FBO competitor at Bradley 
International Airport (``BDL'') and at Palm Springs Regional Airport 
(``PSP''). In addition, Signature's proposed acquisition would 
significantly reduce the likelihood of entry by a third, independent 
FBO competitor at Denver Centennial Airport (``APA''). As a result, the 
Complaint alleges, the proposed acquisition would substantially lessen 
competition for FBO services at APA, BDL and PSP in violation of 
section 7 of the Clayton Act. 15 U.S.C. Sec. 18.
    Simultaneously with the filing of the Complaint, the Department 
filed the proposed Final Judgment and Stipulation signed by all the 
parties that allows for entry of the proposed Final Judgment following 
compliance with the Tunney Act. The Department also filed a Competitive 
Impact Statement (``CIS'') on March 15, 1999, that was subsequently 
published in the Federal Register on March 26, 1999. The CIS explains 
in detail the provisions of the proposed Final Judgment, the nature and 
purposes of these proceedings, and the transaction giving rise to the 
alleged violation.
    As the Complaint and the CIS explain, the merger as originally 
proposed was likely to reduce or eliminate competition in three 
specific markets for flight support services--the APA, BDL and PSP 
markets. The proposed Final Judgment is intended to prevent the 
expected lessening of competition the merger would cause in those 
markets.
    As a remedy to competitive harm in the BDL and PSP markets for 
flight support services, the Department and Signature, Combs, and AMR 
agreed to divestiture of one of the FBO businesses at each airport. In 
addition, the parties agreed to remedy the competitive harm in the APA 
market for flight support services by transferring Signature's

[[Page 36401]]

interest in a new FBO facility at APA to another FBO or by divesting 
the existing Combs FBO business to an independent and financially 
viable competitior. These remedies are intended to protect consumers by 
ensuring continued vigorous competition in each market.
    The 60-day comment period for public comments expired on May 25, 
1999. The Department had received only one comment, from Robert A. 
Wilson, President of Wilson Air Center, an FBO located at the Memphis 
International Airport in Memphis, Tennessee.\1\
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    \1\ The comment is attached. The Department plans to public 
promptly the comment and this response in the Federal Register. The 
Department 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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II. Response to the Public Comment

    Wilson opposes the Department's decision to permit Signature's 
acquisition of Combs subject to the divestiture of FBO facilities or 
interests in FBO facilities at APA, BDL and PSP. Wilson claims that the 
Department should have challenged the acquisition in another market 
that consists of the Memphis International Airport. The Wilson comment 
indicates that the Memphis International Airport market has only two 
FBO competitors: Combs and Wilson Air Center. According to Wilson, 
shortly before the announcement of the transaction between Signature 
and Combs, Combs had negotiated various agreements with the Memphis and 
Shelby County Airport Authority that he believes place Wilson Air 
Center at a competitive disadvantage. In Wilson's view, Signature's 
purchase of Combs is objectionable because it perpetuates what he 
considers to be anticompetitive agreements at the Memphis International 
Airport.
    The Clayton and Sherman Acts, judicial precedent, and the 
Horizontal Merger Guidelines \2\ govern the Department's review of 
mergers. The first step in the review is defining relevant product and 
geographic markets where the merging firms are actual or potential 
competitors. Once the relevant markets are identified, the analysis 
turns to the competitive implications of the proposed transaction's 
elimination of one of the firms. Signature and Combs did not compete 
with one another at the Memphis International Airport, and there was no 
indication that Signature planned to become an independent competitor 
at the airport. Since there was no actual or potential competition and 
thus, no substantial lessening of competition, that market would not 
be--and, in fact, was not--one that merited review. Instead, the 
Department identified three geographic markets were Signature and Combs 
were actual or potential competitors, and determined that, as a result 
of the acquisition, competition in those markets would be substantially 
lessened. Accordingly, the Department brought its case on the basis of 
those three markets, and obtained as relief divestitures designed to 
ensure continued competition in each market. In sum, the Wilson comment 
does not raise competition issues caused by the proposed acquisition.
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    \2\ Federal Trade Commission and United States Department of 
Justice, Horizontal Merger Guidelines (1992, rev. 1997).
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III. The Legal Standard Governing the Court's Public Interest 
Determination

    Once the Department 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 v. Western Elec. Co., 993 F.2d 1572, 1576 (D.C. Cir. 
1993) (citation omitted). \3\ The Court should evaluate the relief set 
forth in the proposed Final Judgment and should enter the proposed 
Final Judgment if it falls within the government's ``rather broad 
discretion to settle with defendant within the reaches of the public 
interest.'' United States v. Microsoft Corp., 56 F.3d 1448, 1461 (D.C. 
Cir. 1995); accord United States v. Associated Milk Producers, 534 F.2d 
113, 117-18 (8th Cir. 1976).
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    \3\ The Western Electric decision concerned a consensual 
modification of an existing antitrust decree. The Court of Appeals 
assumed that the Tunney Act was applicable.
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    Because Wilson argues for a different case than the one that the 
Department brought, and does not address the relief ordered by the 
proposed Final Judgment, the comment raises no issues relevant to this 
Tunney Act proceeding. The Tunney Act does not contemplate a judicial 
reevaluation of the government's determination of which violations to 
allege in the Complaint. The government's decision not to bring a 
particular case based 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.'' Heckler 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; see also 
Associated Mild Producers, 534 F.2d at 117-18.
    Similarly, the government has wide discretion within the reaches of 
the public interest to resolve potential litigation. See, e.g., Western 
Elect., 993 F.2d at 1577; United States v. American Tel. & Tel. Co., 
552 F. Supp. 131, 151-52 (D.D.C. 1982). 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 proposed Final Judgment has the virtue of bringing the public 
certain benefits and protection without the uncertainty and expense of 
protracted litigation. Id.; Microsoft, 56 F.3d at 1459.
    Finally, the entry of a governmental antitrust decree forecloses no 
private party from seeking and obtaining appropriate antitrust 
remedies. Thus, defendants will remain liable for any illegal acts, and 
any private party may challenge such conduct if and when appropriate. 
If the commenting party has a basis for suing the defendants, it may do 
so. The legal precedent discussed above holds that the scope of a 
Tunney Act proceeding 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.

IV. Conclusion

    After careful consideration of the comment, the Department 
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 Department will move 
the Court to enter the proposed Final Judgment after the public comment 
and this Response have been published in the Federal Register, as 15 
U.S.C. Sec. 16(d) requires.

    Dated this 21st day of June, 1999.


[[Page 36402]]


    Respectfully submitted.
Nina B. Hale,
Salvatore Mass,
U.S. Department of Justice, Antitrust Division, 325 7th Street, NW, 
Suite 500, Washington, D.C. 20530, (202) 307-6351.

Certificate of Service

    I, Marian Honus, hereby certify that, on June 21, 1999, I caused 
the foregoing document to be served on defendants Signature Flight 
Support Corporation, AMR Combs, Inc., and AMR Corporation by having a 
copy mailed, first-class, postage prepaid, to:
William Norfolk, Esq.,
Sullivan & Cromwell, 125 Broad Street, New York, NY 1004.

Eugene A. Burrus, Esq.,
AMR Corporation, P.O. Box 619616, MD 5675, Dallas Fort Worth Airport, 
TX 75261.

Marian Honus
May 21, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Department of 
Justice, Antitrust Division, 325 Seventh St., NW, Suite 500, 
Washington, DC 20530

RE: Comments of Wilson Air Center, LLC in Response to Federal 
Register Notice Regarding Proposed Final Judgment and Competitive 
Impact Statement: United States of America v. Signature Flight 
Support Corporation, et al., Federal Register 58 (March 26, 1999)

    Dear Mr. Fones: Wilson Air Center, LLC (``Wilson Air'') is an 
independently owned Fixed Base Operation (``FBO'') and is the only 
FBO other than AMR Combs, Inc. (``AMR'') located at the Memphis 
International Airport, Memphis, Tennessee (the ``Memphis Airport''). 
Wilson Air comments on the proposed acquisition insofar as it will 
impact FBO competition at the Memphis Airport as follows:
    Wilson Air is opposed to the acquisition of AMR by Signature 
Flight Support Corporation (``Signature'') because it will 
perpetuate agreements between AMR and the Memphis and Shelby County 
Airport Authority (the ``Authority'') which will give Signature an 
illegal competitive advantage for FBO customers at the Memphis 
Airport. The timing and substance of the recently executed anti-
competitive agreements suggests that they were negotiated in 
anticipation of the instant sale to improperly increase the value of 
AMR's Memphis operation. If the proposed sale is implemented at the 
Memphis Airport such that Signature assumes the anti-competitive 
agreements that are in place, FBO competition at the Memphis Airport 
will be stifled and Wilson Air will be irreparably harmed.

The Anti-Competitive Agreements

    The new lease between the Airport Authority and AMR was executed 
in late July or early August of 1998 but was made effective as of 
June 1, 1998 (the ``Lease''). A copy of the AMR Lease is at EXHIBIT 
A. In the Lease, AMR procured terms which make it impossible for 
Wilson Air to fairly compete for customers. The Lease also directly 
violates the Federal Grant Assurances \1\ which, as a contractual 
obligation for the receipt of Federal funding, mandate fair and 
equitable treatment of FBOs so that competition can be preserved at 
airports supported with Federal funds.
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    \1\ The Grant Assurances set out fully at Section 47107 of 49 
United State Code under the heading Economic Nondiscrimination 
provide that ``(e)ach fixed-base operator shall be subject to the 
same rates, fees, rentals, and other charges as are uniformly 
applicable to all other fixed-base operators making the same or 
similar use of such airport * * '' Id. At Para. 22(c). Paragraph 23 
of the Grant Assurances, entitled Exclusive Rights, goes on to state 
that an airport authority sponsor''* * * will permit no exclusive 
right for the use of the airport by any person providing * * * 
aeronautical services to the public.'' The Memphis Airport between 
1994 and 2008 has and is scheduled to receive $119,380,000 in 
federal grant funds from the Federal Aviation Administration. As 
such, Memphis Airport is a federally assisted airport operation and 
must comply with the Federal Grant Assurances which are incorporated 
into the Authority's grant funding contracts with the FAA
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Disparate Lease Rates

    The terms of the Lease which violate the Federal Grant 
Assurances create the anti-competitive environment which the Grant 
Assurances sought to prevent. The Lease includes disparate pricing 
terms.\2\ At Paragraph 4 and in its Exhibit C, the Lease in 1998 
granted to AMR property at rates far below the then existing market 
and far below rates which had been set for Wilson Air more than four 
(4) years earlier. More precisely, effective June 30, 1998, the 
Lease requires AMR to pay between $.0759 per square foot for 
``unimproved land'' and $.0949 per square foot for ``improved 
land.'' In the lease, AMR's base lease rental schedule increases 
incrementally through 2010. Even so, rates for ``unimproved land'' 
remain well below the rates paid by Wilson Air until after June 30, 
1005. The rates charged to AMR are shown on Exhibit C to the Lease 
(EXHIBIT A). Moreover, it appears that AMR is paying nothing for the 
13,500 square feet occupied by the General Aviation Building. In 
stark contrast Wilson Air, in a lease of more unimproved land 
negotiated in 1994 which extends through 2005, must pay $.12 per 
square foot. Wilson Air at that higher rate was required to build 
its entire facility from the ground up. A copy of Wilson Air's lease 
is at EXHIBIT B.
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    \2\ The Authority has asserted that the Lease is merely an 
extension of AMR's 1979 Lease and an accommodation for giving up 
other land. The many substantial discrepancies between the Lease and 
AMR's 1979 lease show that it is indeed a new document and not an 
extension of the old lease. Other documents exchanged between AMR 
and the Authority further rebut this claim.
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    The disparate rates included in the Lease make it impossible for 
Wilson Air profitably to offer its current and prospective FBO 
tenants lease rates which are competitive with the lease rates 
offered by AMR. AMR has already used the disparate lease rates to 
procure for itself customers. As shown in Paragraph 8a of the 
sublease at EXHIBIT C, AMR as of July 17, 1998, subleased to 
Richard's Aviation, Inc. at the rate of $.0759 per square foot--four 
and one-half cents less than the Authority had leased unimproved 
land to Wilson Air. The inability of Wilson Air to enter match such 
a rate is obvious. And, as Paragraph IIB of the Notice states 
``(t)he largest source of revenues for an FBO is its fuel sales'' 
and (g)eneral aviation customers generally buy fuel from the same 
FBO from which they obtain those other services (hangar rental, 
office space rental, etc.)''. Thus, the reduced lease rates given to 
AMR preclude Wilson Air from competing for hangar tenants and for 
fuel customers. This Lease term restrains trade and commerce at the 
Memphis Airport as it relates to the two FBOs and appears to violate 
both Section 7 of the Clayton Act and Section 1 of the Sherman Act.

Disparity in Land Under Lease

    Wilson Air currently has approximately 16 acres of land under 
lease. Through the Lease, AMR has increased the acreage held by it 
and has obtained an option for even more land.\3\ At this same time, 
Wilson Air has repeatedly requested from the Authority and has been 
denied additional land on which to expand its operations. AMR's 
Lease grants AMR an option on three separate parcels totaling 13.53 
acres (identified in the Lease as N, O and P). In the new Lease, as 
amended, the Authority grants AMR an option to these parcels for 
$.02 to $.03 per square foot. In addition, 15.45 more acres of new 
land were added to the new AMR lease.
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    \3\ AMR had approximately 20 acres under its 1979 lease of the 
south complex. A copy of that lease is at EXHIBIT D.
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    These terms of the Lease are anti-competitive in that they give 
AMR approximately 3 times Wilson Air's acreage with which it can 
entice customers away from Wilson Air at rates well below what 
Wilson Air must pay the Airport Authority without worrying about 
running out of space to grow. Since AMR has more land than it can 
use, it can grant a sublease like the one at EXHIBIT C ``at cost'' 
knowing that it will get the customer's business for fuel.\4\
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    \4\ Paragraph 37 of the sublease at EXHIBIT C tied that sublease 
to a ``fuel agreement.'' Wilson Air, despite request, has never seen 
that ``fuel agreement.'' After voicing its concerns, Wilson Air was 
advised that Paragraph 37 of the Lease was amended to prohibit 
exclusive fueling agreement being entered into by AMR and its 
subtenants and customers.
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    Additionally, the location of the land covered by the Lease also 
precludes Wilson Air access to valuable military fueling contracts. 
Due to space limitation, Wilson Air cannot bid on and receive 
military fueling contracts because Wilson Air does not have the 
available land to handle the type and size of military aircraft for 
fueling purposes. As with the rental rates, these lease terms appear 
to violate Section 7 of the Clayton Act and Section 1 of the Sherman 
Act.
    From the documents produced to Wilson Act, it appears that AMR 
has been responsible for the maintenance and repair of the General 
Aviation Building (``GAB'') for more than 15 years, but has 
evidently failed

[[Page 36403]]

to meet those obligations. Rather than force AMR to comply with its 
maintenance and repair obligations, however, the Lease grants AMR 
rent incentives and abatements on the GAB property. Those Lease 
terms are far more favorable to AMR than the rent terms offered to 
Wilson Air for another building on the Memphis Airport even though 
the two buildings will be subject to the same type of FBO usage. 
Wilson Air has asked the Authority to lease to it a building known 
as the Northwest AirLink building (the ``NWA''). The Authority 
ordered a 1995 appraisal which compared the NWA to more expensive 
off-airport commercial buildings and indicated an adjusted appraisal 
rental rate of $5.50 per square foot.
    Instead of offering any incentives like those given to AMR, the 
Authority has demanded a $6.50 per square foot rental rate from 
Wilson Air. The NWA previously has not been used for general 
aviation tenants, but if Wilson Air rented the building, it would be 
used for general aviation tenants and general aviation related 
services. Again by contrast, the Authority in the Lease has abated 
rent through 2010 on the GAB to AMR while simultaneously demanding 
that Wilson Air pay $6.50 per square foot for use of the NWA 
property.\5\ Both buildings require the expenditure of substantial 
funds for improvements and will experience the same or similar uses.
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    \5\ A 1997 airport appraisal of the GAB indicated a minimum $.75 
per square foot rental on the building prior to renovation.
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    This unequal treatment as to office square precludes Wilson Air 
from effectively competing for tenants which would require use of 
such facilities.
    In addition to the Lease, AMR and the Authority negotiated two 
separate ``letter agreements'' which granted AMR month-to-month 
leases on 3.21 acres and 6.09 acres of improved (closed) runway and 
taxilane property respectively. The December 16, 1997 letter 
agreement and the July 27, 1998, letter agreement are at EXHIBITS E 
and F. The Authority has now acknowledged that while Wilson Air was 
being told that no additional land was available to Wilson Air, the 
Authority was giving AMR the free use of this valuable acreage. 
Thus, the Authority allowed AMR to use land at no cost, while 
denying land to Wilson Air and requiring it to pay full rent for all 
land used.\6\
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    \6\ Apparently, AMR is still using the old AMR north complex, an 
additional approximate 12 acre site at a different location on the 
airport, to service tenants, even though Wilson Air Center has been 
advised that this site has been designated for use for FedEx 
Corporation expansion.
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    A portion of this land now lies within one of the option parcels 
granted to AMR and as recently as May 11, 1999, AMR (already 
operating at the Memphis Airport under the ``Signature'' name) has 
used the land without paving rental fees. This is another indicia of 
the manner in which Wilson Air has been hurt by the anti-competitive 
agreements between the Authority and AMR. These anti-competitive 
agreements will persist unless Signature is precluded from assuring 
these agreements at the Memphis Airport.
    Wilson Air submits that permitting Signature to move forward 
with the acquisition of AMR's rights at the Memphis Airport will 
violate the Competitive Impact Statement and the spirit of the 
Proposed Final Judgment in the subject suit. Wilson Air further 
asserts that the Authority's pending assignment of the AMR lease 
terms to Signature as required by the AMR Lease will perpetuate the 
anti-competitive environment between FBO's at the Memphis Airport.
    Accordingly, Wilson Air requests that the Department of Justice 
consider the above in determining whether to support the entry of 
the Final Judgment in the above-cited suit. Alternatively, Wilson 
Air requests that Department of Justice expand its investigation 
into the anti-competitive aspects of the sale of AMR to Signature 
Flight Support Corporation to include consideration of the AMR Lease 
at the Memphis Airport.

        Very truly yours,

Wilson Air Center, LLC

Robert A. Wilson,
President.
RAW/kaw
Enclosures

    Exhibits A, B, C, D, & E can be obtained from the Document 
Office, U.S. Department of Justice, 325 7th Street, N.W., Room 215, 
Washington, D.C. 20530, or (202) 514-2481.

[FR Doc. 99-16943 Filed 7-2-99; 8:45 am]
BILLING CODE 4410-11-M