[Federal Register Volume 65, Number 163 (Tuesday, August 22, 2000)]
[Notices]
[Pages 51024-51033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-21289]


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DEPARTMENT OF JUSTICE

Antitrust Division


L'Oreal USA, Inc. et al.; Competitive Impact Statements and 
Proposed Consent Judgments

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Hold Separate Stipulation and Order, and Competitive Impact Statement 
have been filed with the United States District Court for the District 
of Columbia, in United States v. L'Oreal USA, Inc., L'Ordeal S.A., and 
Carson, Inc., Civ. Action No. 1:00CV01848 (Lamberth, J.).
    On July 31, 2000, the United States filed a Complaint alleging that 
the proposed acquisition by L'Oreal USA, Inc. of Carson, Inc. would 
violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, by 
substantially lessening competition in the development, production, and 
sale of adult women's hair relaxer kits through retail channels in the 
United States.
    The proposed Final Judgment, also filed on July 31, 2000, requires 
Defendants to divest two brands, Gentle Treatment and Ultra Sheen, of 
ethnic hair care products, including adult women's hair relaxer kits, 
and certain other tangible and intangible assets.
    Copies of the Complaint, proposed Final Judgment, Hold Separate 
Stipulation and Order, and Competitive Impact Statement are available 
for inspection at the U.S. Department of Justice, Antitrust Division, 
Suite 215 North, 325 7th Street, NW., Washington, DC 20004 (telephone: 
(202) 514-2692), and at the Clerk's office of the U.S. District Court 
for the District of Columbia.
    Public comment is invited within the statutory 60-day comment 
period. Such comments and responses thereto will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to J. Robert Kramer II, Chief, Litigation II Section, Antitrust 
Division, U.S. Department of Justice, 1401 H Street, NW., Suite 3000, 
Washington, DC 20530 (telephone: (202) 307-0924).

Constance K. Robinson,
Director of Operation and Merger Enforcement.

Hold Separate Stipulation and Order

    It Is Hereby Stipulated and Agreed by and between the undersigned 
parties, subject to approval and entry by this Court, that:

I. Definitions

    As used in this Hold Separate Stipulation and Order:
    A. ``Acquirer'' means the entity to whom Defendants or the trustee 
divest the Hair Care Assets or to whom the trustee divests the 
Divestiture Assets.
    ``L'Oreal'' means Defendant L'Oreal S.A., a French corporation 
headquartered in Paris, France, and Defendant L'Oreal USA, Inc., a 
Delaware corporation headquartered in New York, New York, and includes 
all successors and assigns, and all parents, subsidiaries, divisions 
(including Soft Sheen Products, Inc.), groups, affiliates, partnerships 
and joint ventures, and their directors, officers, managers, agents, 
and employees.
    C. ``Carson'' means Defendant Carson, Inc., a Delaware corporation 
with its headquarters in Savannah, Georgia, and includes its successors 
and assigns, and its parents, subsidiaries, divisions, groups, 
affiliates, partnerships and joint ventures, and their directors, 
officers, managers, agents, and employees.
    D. ``Hair Care Assets'' means:

    (1)(a) All tangible assets used primarily in the research, 
development, marketing, servicing or sale of any product that Carson 
sold, sells, or has plans to sell under the Relevant Brand Names, 
including, but not limited to: materials, supplies, and other 
tangible property and all assets used primarily with such products, 
and
    (b) All tangible assets relating to any product that Carson 
sold, sells or has plans to sell under the Relevant Brand Names, 
including, but not limited to, all licenses, permits and 
authorizations issued by any governmental organization; all 
contracts, teaming arrangements, agreements, commitments, 
certifications, and understandings, including supply agreements; all 
customer lists, contracts, accounts, and credit records; all 
agreements with retailers, wholesalers, or any other person 
regarding the sale, promotion, marketing, advertising or placement 
of such products; product inventory, packaging and artwork relating 
to such packaging; molds and silk screens; and all performance 
records and all other records.
    (2) All intangible assets used in the research, development, 
production, marketing, servicing or sale of any product that Carson 
sold, sells, or has plans to sell under the Relevant Brand Names, 
including, but not limited to: all legal rights, including 
intellectual property rights, associated with the products, 
including trademarks, trade names, service names, service marks, 
designs, trade dress, patents, copyrights and all licenses and 
sublicenses to such intellectual property; all legal rights to use 
the names ``Johnson Products Co., Inc.'' and ``JP,'' and any 
derivation thereof; all trade secrets; all technical information, 
computer software and related documentation, and know-how, 
including, but not limited to, recipes and formulas, and information 
relating to plans for, improvements to, or line extensions of, the 
products; all research, packaging, sales, marketing, advertising and 
distribution know-how and documentation, including plan-o-grams, 
marketing and sales data, packaging designs, quality assurance and 
control procedures; all manuals and technical information Carson 
provided to their own employees, customers, suppliers, agents or 
licensees; all specifications for materials, and safety procedures 
for the handling of materials and substances; all research 
information and data concerning historic and current research and 
development efforts, including, but not limited to, designs of 
experiments and the results of successful and unsuccessful designs 
and experiments.

[[Page 51025]]

    (3) With respect to any identifiable and specific trade secrets, 
recipes, formulas or know-how that, prior to the merger, were being 
used in the production or development of products sold under the 
Relevant Brand Names and any product not being divested, the 
Acquirer shall provide to Defendants a non-exclusive, transferable, 
royalty-free right to use any such trade secrets, recipes, formulas 
or know-how in the production or development of any non-divested 
product.

    E. ``Plant Assets'' means all of the following assets: Carson's 
facility and property located at 8522 South Lafayette Avenue, Chicago, 
Illinois, and with respect to such facility, all manufacturing, 
research and development equipment, tooling and fixed assets, personal 
property, real property, titles, interests, leases, input inventory, 
office furniture, materials, supplies, drawings, blueprints, designs, 
design protocols, specifications for parts and devices, and safety 
procedures for the handling of plant equipment and substances, and all 
other tangible property.
    F. ``Divestiture Assets'' means the Hair Care Assets and the Plant 
Assets.
    G. ``Relevant Brand Names'' mean:

    (1) Gentle Treatment;
    (2) Ultra Sheen; and
    (3) Any other name that uses, incorporates, or references either 
the Ultra Sheen or Gentle Treatment name, including, but not limited 
to, Ultra Sheen Supreme, Ultra Sheen Supreme Valu-Pak, Ultra Sheen 
Gro Natural, Ultra Sheen Extra Dry, Ultra Sheen Soft Touch, Ultra 
Sheen Hair Food, Ultra Sheen Anti-Itch, and Ultra Sheen Creme Satin 
Press, but not including the names Precise and Perfect Performance. 
With respect to the Precise name, Perfect Performance name or any 
other brand name or product, Defendants shall not use, incorporate 
or reference the names JP or Johnson Products, Co., Inc. (or any 
derivation thereof), or the names Gentle Treatment or Ultra Sheen.

II. Objectives

    The Final Judgment filed in this civil action is meant to ensure 
prompt divestitures for the purpose of establishing a viable competitor 
in the ethnic hair care industry in order to remedy the effects that 
the United States alleges would otherwise result from L'Oreal's 
acquisition of Carson. The Hold Separate Stipulation and Order ensure, 
prior to such divestitures, that the Hair Care Assets remain 
economically viable as part of an ongoing business that will remain 
independently managed by the Designated Personnel (as defined in 
Section V(I) below) and not influenced by L'Oreal, and that competition 
is maintained during the pendency of the ordered divestitures.

III. Jurisdiction and Venue

    This Court has jurisdiction over the subject matter of this action 
and over each of the parties hereto, and venue of this action is proper 
in the United States District Court for the District of Columbia.

IV. Compliance With and Entry of Final Judgment

    A. The parties stipulate that a Final Judgment in the form attached 
hereto as Exhibit A may be filed with and entered by this Court, upon 
the motion of any party or upon this Court's own motion, at any time 
after compliance with the requirements of the Antitrust Procedures and 
Penalties Act (15 U.S.C. 16), and without further notice to any party 
or other proceedings, provided that the United States has not withdrawn 
its consent, which it may do at any time before the entry of the 
proposed Final Judgment by serving notice thereof on Defendants and by 
filing that notice with this Court.
    B. Defendants shall abide by and comply with the provisions of the 
proposed Final Judgment, pending the Judgment's entry by this Court, or 
until expiration of time for all appeals of any court ruling declining 
entry of the proposed Final Judgment. Defendants, from the date of the 
signing of this Stipulation by the parties, shall comply with all the 
terms and provisions of the proposed Final Judgment as though the same 
were in full force and effect as an order of this Court.
    C. Defendants shall not consummate the transaction sought to be 
enjoined by the Complaint filed in this action until after this Court 
has signed and entered this Hold Separate Stipulation and Order.
    D. This Stipulation shall apply with equal force and effect to any 
amended proposed Final Judgment agreed upon in writing by the parties 
and submitted to this Court.
    E. In the event that (1) the proposed Final Judgment is not entered 
pursuant to this Stipulation, the time has expired for all appeals of 
any court ruling declining entry of the proposed Final Judgment, and 
this Court has not otherwise ordered continued compliance with the 
terms and provisions of the proposed Final Judgment, or (2) the United 
States has withdrawn its consent, as provided in Section IV(A) above, 
then the parties are released from all further obligations under this 
Stipulation, and the making of this Stipulation shall be without 
evidentiary prejudice to any party in this or any other proceeding.
    F. Defendants represent that the divestitures ordered in the 
proposed Final Judgment can and will be made, and that Defendants will 
later raise no claim of mistake, hardship or difficulty of compliance 
as grounds for asking this Court to modify any of the provisions 
contained therein.

V. Hold Separate Provisions

    Until the divestitures required by the Final Judgment have been 
accomplished:
    A. Defendants shall preserve, maintain, and continue to operate the 
products sold under the Relevant Brand Names as an economically viable 
part of an ongoing competitive business, with management, research, 
development, promotions, marketing, and terms of sale of such products 
held entirely separate, distinct and apart from those of L'Oreal's 
other operations. L'Oreal shall not coordinate its management, 
research, development, promotions, marketing, or terms of sale with any 
products sold under any of the Relevant Brand Names. Within twenty (20) 
calendar days after either the filing of the Complaint or the entry of 
the Hold Separate Stipulation and Order, whichever is earlier, each 
Defendant shall deliver to the United States an affidavit that 
describes in reasonable detail all actions Defendant has taken and all 
steps Defendant has implemented on an ongoing basis to comply with this 
Hold Separate Stipulation and Order.
    B. Defendants shall take all steps necessary to ensure that: (1) 
The products sold under the Relevant Brand Names will be maintained and 
operated as independent, ongoing, economically viable and active 
competitive products in the ethnic hair care industry, including the 
adult women's hair relaxer kit market; (2) management of the Hair Care 
Assets will be conducted by the Designated Personnel and not be 
influenced by L'Oreal (or Carson); and (3) the books, records, 
competitively sensitive sales, marketing, promotion and pricing 
information, and decision-making concerning research, development, 
production, distribution, marketing, promotion or sales of products 
under any of the Relevant Brand Names will be kept separate and apart 
from Defendants' other operations.
    C. Defendants shall use all reasonable efforts to maintain the 
research, development, sales, revenues, marketing, promotion, shelf-
space, advertising, and distribution of the products sold under the 
Relevant Brand Names, and shall maintain at fiscal year 2000 or 
previously approved levels for fiscal year 2001, whichever are higher, 
all research, development, product improvement, promotional, 
advertising,

[[Page 51026]]

sales, distribution, technical assistance, marketing and merchandising 
support for those products. Defendants shall also ensure that all plans 
and efforts to improve current products sold, or to introduce new 
products under, the Relevant Brand Names are continued.
    D. Defendants shall provide sufficient working capital and lines 
and sources of credit to continue to maintain the products sold under 
the Relevant Brand Names as economically viable and competitive, 
ongoing products, consistent with the requirements of Sections V (A) 
and (B) above.
    E. Defendants shall take all steps necessary to ensure that the 
Divestiture Assets are fully maintained in operable condition at no 
less than current capacity and sales, and shall maintain and adhere to 
normal repair, product improvement and upgrade, and maintenance 
schedules for the Divestiture Assets.
    F. Defendants shall not, except as part of a divestiture approved 
by the United States in accordance with the terms of the proposed Final 
Judgment, remove, sell, lease, assign, transfer, pledge or otherwise 
dispose of any of the Divestiture Assets.
    G. Defendants shall maintain, in accordance with sound accounting 
principles, separate, accurate and complete financial ledgers, books 
and records that report on a periodic basis, such as the last business 
day of every month, consistent with past practices, the assets, 
liabilities, expenses, revenues and income of the Divestiture Assets.
    H. Carson's employees with primary responsibility for the research, 
development, marketing, promotion, production, operation, distribution, 
or sale of the products sold under the Relevant Brand Names, shall not 
be terminated, transferred or reassigned to other areas within Carson 
or L'Oreal except for transfer bids initiated by employees pursuant to 
Defendants' regular, established job posting policy. Defendants shall 
provide the United States with ten (10) calendar days notice of such 
transfer. The Designated Personnel shall not be terminated, transferred 
or reassigned prior to a divestiture pursuant to the terms of the Final 
Judgment.
    I. Until such time as the Hair Care Assets are divested pursuant to 
the terms of the Final Judgment, the Hair Care Assets shall be managed 
by Donald N. Riley and Curdedra N. Andrews (collectively ``Designated 
Personnel''). The Designated Personnel shall have complete managerial 
responsibility for the Hair Care Assets, subject to the provisions of 
this Order and the proposed Final Judgment, and will be responsible for 
Defendants' compliance with this Section. In the event that the 
Designated Personnel are unable to perform their duties, Defendants 
shall appoint, subject to the approval of the United States, a 
replacement within ten (10) working days. Should Defendants fail to 
appoint a replacement acceptable to the United States within ten (10) 
working days, the United States shall appoint a replacement. Defendants 
shall take no action that would interfere with the ability of the 
Designated Personnel or any later appointed persons to oversee the Hair 
Care Assets.
    J. Defendants shall take no action that would interfere with the 
ability of any trustee appointed pursuant to the Final Judgment to 
complete the divestitures pursuant to the Final Judgment to an Acquirer 
acceptable to the United States.
    K. This Hold Separate Stipulation and Order shall remain in effect 
until consummation of the divestitures required by the proposed Final 
Judgment or until further order of this Court.

    Dated: 31 July 2000, Washington, D.C.

          Respectfully submitted,

    For Defendant L'Oreal USA Inc.:

John Sullivan, Esq.,
Senior Vice-President & General Counsel, L'Oreal USA, Inc., 575 
Fifth Avenue, New York, N.Y. 10017, Phone: (212) 818-1500.

Peter D. Standish, Esq.,
Partner, Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, 
N.Y. 10153, Phone: 212-310-8000. 

    For Defendant L'Oreal S.A.:

John Sullivan, Esq.,
Senior Vice-President & General Counsel, L'Oreal USA, Inc., 575 
Fifth Avenue, New York, N.Y. 10017, Phone: (212) 818-1500.

    For Defendant Carson, Inc.:

Charles Westland, Esq.,
Senior Attorney, Milbank, Tweed, Hadley & McCloy LLP, 1 Chase 
Manhattan Plaza, New York, N.Y. 10005, Phone: 212-530-5000.

    For Plaintiff United States of America:

Anne Purcell,
Assistant Chief, Litigation II Section, U.S. Department of Justice, 
Antitrust Division, 1401 H Street, N.W., Suite 3000, Washington, 
D.C. 20530, Phone: 202-514-5803.

Order

    It Is So Ordered by this Court, this ____ day of ________, 2000.

----------------------------------------------------------------------
United States District Judge

Appendix A

Proposed Final Judgment

    Whereas, Plaintiff, United States of America, filed its Complaint 
on 31 July 2000, Plaintiff and Defendant L'Oreal S.A., Defendant 
L'Oreal USA, Inc. and Defendant Carson, Inc., by their respective 
attorneys, have consented to the entry of this Final Judgment without 
trial or adjudication of any issue of fact or law, and without this 
Final Judgment constituting any evidence against or admission by any 
party regarding any issue of fact or law;
    And Whereas, Defendants agree to be bound by the provisions of this 
Final Judgment pending its approval by this Court;
    And Whereas, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights or assets by the Defendants to 
ensure that competition is not substantially lessened;
    And Whereas, the United States requires Defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And Whereas, Defendants have represented to the United States that 
the divestitures required below can and will be made and that 
Defendants will later raise no claim of hardship or difficulty as 
grounds for asking this Court to modify any of the divestiture 
provisions contained below;
    Now Therefore, before any testimony is taken, without trial or 
adjudication of any issue of fact or law, and upon consent of the 
parties, it is Ordered, Adjudged and Decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states a claim upon which 
relief may be granted against Defendants under Section 7 of the Clayton 
Act, as amended (15 U.S.C. Sec. 18).

II. Definitions

    As used in this Final Judgment:
    A. ``L'Oreal'' means Defendant L'Oreal S.A., a French corporation 
headquartered in Paris, France, and Defendant L'Oreal USA, Inc., a 
Delaware corporation headquartered in New York, New York, and includes 
all successors and assigns, and all parents, subsidiaries, divisions 
(including Soft Sheen Products, Inc.), groups, affiliates, partnerships 
and joint ventures, and their directors, officers, managers, agents, 
and employees.
    B. ``Carson'' means Defendant Carson, Inc., a Delaware corporation 
headquartered in Savannah, Georgia, and includes its successors and 
assigns, and its parents, subsidiaries, divisions, groups, affiliates, 
partnerships and joint ventures, and their directors, officers, 
managers, agents, and employees.

[[Page 51027]]

    C. ``Acquirer'' means the entity to whom Defendants or the trustee 
divest the Hair Care Assets or to whom the trustee divests the 
Divestiture Assets.
    D. ``Hair Care Assets'' mean:

    (1)(a) All tangible assets used primarily in the research, 
development, marketing, servicing or sale of any product that Carson 
sold, sells or has plans to sell under the Relevant Brand Names, 
including, but not limited to: materials, supplies, and other 
tangible property and all assets used primarily with such products; 
and
    (b) All tangible assets relating to any product that Carson 
sold, sells or has plans to sell under the Relevant Brand Names, 
including, but not limited to, all licenses, permits and 
authorizations issued by any governmental organization; all 
contracts, teaming arrangements, agreements, commitments, 
certifications, and understandings, including supply agreements; all 
customer lists, contracts, accounts and credit records; all 
agreements with retailers, wholesalers, or any other person 
regarding the sale, promotion, marketing, advertising or placement 
of such products; product inventory, packaging and artwork relating 
to such packaging; molds and silk screens; and all performance 
records and all other records.
    (2) All intangible assets used in the research, development, 
production, marketing, servicing or sale of any product that Carson 
sold, sells, or has plans to sell under the Relevant Brand Names, 
including, but not limited to: all legal rights, including 
intellectual property rights, associated with the products, 
including trademarks, trade names, service names, service marks, 
designs, trade dress, patents, copyrights and all licenses and 
sublicenses to such intellectual property; all legal rights to use 
the names ``Johnson Products Co., Inc.'' and ``JP.'' and any 
derivation thereof; all trade secrets; all technical information, 
computer software and related documentation, and know-how, 
including, but not limited to: recipes and formulas, and information 
relating to plans for, improvements to, or line extensions of, the 
products; all research, packaging, sales, marketing, advertising and 
distribution know-how and documentation, including plan-o-grams, 
marketing and sales data, packaging designs, quality assurance and 
control procedures; all manuals and technical information Carson 
provided to their own employees, customers, suppliers, agents or 
licensees; all specifications for materials, and safety procedures 
for the handling of materials and substances; all research 
information and data concerning historic and current research and 
development efforts, including, but not limited to: designs of 
experiments and the results of successful and unsuccessful designs 
and experiments.
    (3) With respect to any identifiable and specific trade secrets, 
recipes, formulas or know-how that, prior to the merger, were being 
used in the production or development of products sold under the 
Relevant Brand Names and any product not being divested, the 
Acquirer shall provide to Defendants a non-exclusive, transferable, 
royalty-free right to use any such trade secrets, recipes, formulas 
or know-how in the production or development of any non-divested 
product.

    E. ``Plant Assets'' means all or any of the following assets that 
the United States, in its sole discretion, determines are reasonably 
necessary for an Acquirer to compete effectively and viably in the sale 
of ethnic hair care products, including adult women's hair relaxer 
kits: Carson's facility and property located at 8522 South Lafayette 
Avenue, Chicago, Illinois, and with respect to such facility, all 
manufacturing, research and development equipment, tooling and fixed 
assets, personal property, real property, titles, interests, leases, 
input inventory, office furniture, materials, supplies, drawings, 
blueprints, designs, design protocols, specifications for parts and 
devices, and safety procedures for the handling of plant equipment and 
substances, and other tangible property.
    F. ``Divestiture Assets'' mean the Hair Care Assets and the Plant 
Assets.
    G. ``Plan'' or ``Plans'' means tentative and preliminary proposals, 
recommendations, or considerations, whether or not finalized or 
authorized, as well as those that have been adopted.
    H. ``Relevant Brand Names'' mean:

    (1) Gentle Treatment;
    (2) Ultra Sheen; and
    (3) Any other name that uses, incorporates, or references either 
the Ultra Sheen or Gentle Treatment name, including, but not limited 
to, Ultra Sheen Supreme, Ultra Sheen Supreme Valu-Pak, Ultra Sheen 
Gro Natural, Ultra Sheen Extra Dry, Ultra Sheen Soft Touch, Ultra 
Sheen Hair Food, Ultra Sheen Anti-Itch, and Ultra Sheen Creme Satin 
Press, but not including the names Precise and Perfect Performance. 
With respect to the Precise name, Perfect Performance name or any 
other brand name or product, Defendants shall not use, incorporate 
or reference the names JP or Johnson Products Co., Inc. (or any 
derivation thereof), or the names Gentle Treatment or Ultra Sheen.

III. Applicability

    A. This Final Judgment applies to L'Oreal and Carson, as defined 
above, and all other persons in active concert or participation with 
any of them who receive actual notice of this Final Judgment by 
personal service or otherwise.
    B. Defendants shall require, as a condition of the sale or other 
disposition of all or substantially all of their assets or of lesser 
business units that include the Hair Care Assets (and Plant Assets if 
offered for divestiture under Section V of this Final Judgment), that 
the Acquirer agrees to be bound by the provisions of this Final 
Judgment.

IV. Divestitures

    A. Defendants are ordered and directed, within ninety (90) calendar 
days after the filing of the Complaint in this matter, or five (5) days 
after notice of the entry of this Final Judgment by this Court, 
whichever is later, to divest the Hair Care Assets in a manner 
consistent with this Final Judgment to an Acquirer acceptable to the 
United States in its sole discretion.
    B. Defendants agree to use their best efforts to divest the Hair 
Care Assets as expeditiously as possible. The United States, in its 
sole discretion, may extend the time period for any such divestiture of 
the Hair Care Assets two additional periods of time, not to exceed 
thirty (30) calendar days each, and shall notify this Court in such 
circumstances.
    C. In accomplishing the divestiture of the Hair Care Assets ordered 
by this Final Judgment, Defendants promptly shall make known, by usual 
and customary means, the availability of such assets. Defendants shall 
inform any person making inquiry regarding a possible purchase of the 
Hair Care Assets that they are being divested pursuant to this Final 
Judgment and provide that person with a copy of this Final Judgment. 
Defendants shall offer to furnish to all prospective Acquirers, subject 
to customary confidentiality assurances, all information and documents 
relating to the Hair Care Assets (and Plant Assets if offered for 
divestiture under Section V of this Final Judgment) customarily 
provided in a due diligence process except such information or 
documents subject to the attorney-client or attorney work-product 
privileges. Defendants shall make available such information to the 
United States at the same time that such information is made available 
to any other person.
    D. Defendants shall provide the Acquirer and the United States 
information relating to the personnel involved in the research, 
production, operation, development, marketing and sale of the Hair Care 
Assets (and Plant Assets if offered for divestiture under Section V of 
this Final Judgment) to enable the Acquirer to make offers of 
employment. Defendants will not interfere with any negotiations by the 
Acquirer to employ any Carson employee whose primary responsibility is 
the research, production, operation, development, marketing or sale of 
the Hair Care Assets (and Plant Assets if offered for divestiture under 
Section V of this Final Judgment).
    E. Defendants shall permit prospective Acquirers of the Hair Care 
Assets (and Plant Assets if offered for

[[Page 51028]]

divestiture under Section V of this Final Judgment) to have reasonable 
access to personnel and to make inspections of the physical facilities 
of the Hair Care Assets (and Plant Assets if offered for divestiture 
under Section V of this Final Judgment); access to any and all 
environmental, zoning, and other permit documents and information; and 
access to any and all financial, sales, marketing, operational, or 
other documents and information customarily provided as part of a due 
diligence process.
    F. Defendants shall warrant that each of the Hair Care Assets and 
those Plant Assets required to be divested under Section V of this 
Final Judgment will be operational on the date of sale.
    G. Defendants shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.
    H. Defendants shall warrant to the Acquirer of the Hair Care Assets 
(and those Plant Assets required to be divested under Section V of this 
Final Judgment) that there are no material defects in the 
environmental, zoning or other permits pertaining to the sale or 
operation of each asset, and that following the sale of the Hair Care 
Assets or Divestiture Assets, Defendants will not undertake, directly 
or indirectly, any challenges to the environmental, zoning, or other 
permits relating to the sale or operation of the Hair Care Assets or 
Divestiture Assets.
    I. Unless the United States otherwise consents in writing, the 
divestiture pursuant to Section IV, or by a trustee appointed pursuant 
to Section V, of this Final Judgment, shall include the entire Hair 
Care Assets (and those Plant Assets required to be divested under 
Section V of this Final Judgment), and shall be accomplished in such a 
way as to satisfy the United States, in its sole discretion, that the 
assets being divested can and will be used by the Acquirer as part of a 
viable, ongoing ethnic hair care products business, including the sale 
of adult women's hair relaxer kits. The divestiture pursuant to Section 
IV, or by a trustee appointed pursuant Section V, of this Final 
Judgment may only be made to an Acquirer, if it is demonstrated to the 
sole satisfaction of the United States that the assets being divested 
will remain viable and the divestiture of such assets will remedy the 
competitive harm alleged in the Complaint. The divestitures, whether 
pursuant to Section IV or Section V of this Final Judgment.

    (1) shall be made to an Acquirer that, in the United States's 
sole judgment, has the intent and capability (including the 
necessary managerial, operational, technical and financial 
capability) of competing effectively in the business of adult 
women's hair relaxer kits; and
    (2) shall be accomplished so as to satisfy the United States, in 
its sole discretion, that none of the terms of any agreement among 
the Acquirer, L'Oreal and Carson give Defendants the ability 
unreasonably to raise the Acquirer's costs, to lower the Acquirer's 
efficiency, or otherwise to interfere in the ability of the Acquirer 
to compete effectively.

V. Appointment of Trustee

    A. If Defendants have not divested the Hair Care Assets within the 
time period specified in Section IV(A) of this Final Judgment, 
Defendants shall promptly notify the United States of that fact in 
writing. Upon application of the United States, this Court shall 
appoint a trustee selected solely by the United States and approved by 
this Court to effect the divestiture of the Hair Care Assets.
    B. After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Hair Care Assets. The trustee 
shall also have the right, upon notice to Defendants and sole approved 
by the United States, to sell the Plant Assets in addition to the Hair 
Care Assets. In the event that the Plant Assets are required to be 
divested to an Acquirer under this Section, the Acquirer shall, at 
L'Oreal's option, offer to L'Oreal a short-term, transitional 
agreement, not to exceed eighteen (18) months in length, pursuant to 
which the Acquirer shall manufacture and deliver to L'Oreal those 
undivested products that Carson had manufactured at the Plant Assets 
prior to Carson's acquisition by L'Oreal and on such terms and 
conditions as are agreeable to the Acquirer and L'Oreal and to the 
United States in its sole discretion. Pursuant to this mutually agreed 
upon agreement, L'Oreal, for the undivested Carson products, shall be 
entitled to final authority over product specifications, an assurance 
that the manufacture will conform to ``cosmetic good manufacturing 
practices'' as that term is understood throughout the industry, and, at 
L'Oreal's expense, on-site quality supervision. In the event that the 
Plant Assets are required to be divested to an Acquirer under this 
Section, Defendants shall, at the Acquirer's option and by sole 
approval of the United States, provide the Acquirer with reasonable 
access to the technical, service, production, or administrative 
employees of the Defendants involved in the operation of the Plant 
Assets.
    C. The trustee shall have the power and authority to accomplish the 
divestiture of the Divestiture Assets to an Acquirer acceptable to the 
United States at such price and on such terms as are then obtainable 
upon reasonable effort by the trustee, subject to the provisions of 
Sections IV, V and VI of this Final Judgment, and shall have such other 
powers as this Court deems appropriate. Subject to Section V(E) of this 
Final Judgment, the trustee may hire at the cost and expense of 
Defendants any investment bankers, attorneys, or other agents, who 
shall be solely accountable to the trustee, reasonably necessary in the 
trustee's judgment to assist in the divestiture.
    D. Defendants shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
Defendants must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VI of this Final Judgment.
    E. The trustee shall serve at the cost and expense of Defendants, 
on such terms and conditions as the Plaintiff approves, and shall 
account for all monies derived from the sale of the assets sold by the 
trustee and all costs and expenses so incurred. After approval by this 
Court of the trustee's accounting, including fees for its services and 
those of any professionals and agents retained by the trustee, all 
remaining money shall be paid to Defendants and the trust shall then be 
terminated. The compensation of the trustee and any professionals and 
agents retained by the trustee shall be reasonable in light of the 
value of the Divestiture Assets and based on a fee arrangement 
providing the trustee with an incentive based on the price and terms of 
the divestiture and the speed with which it is accomplished, but 
timeliness is paramount.
    F. Defendants shall use their best efforts to assist the trustee in 
accomplishing the required divestiture. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of the business to be divested, and Defendants 
shall develop financial and other information relevant to such business 
as the trustee may reasonably request, subject to reasonable protection 
for trade secrets or other confidential research, development, or 
commercial information. Defendants shall take no action to interfere 
with or to impede the trustee's accomplishment of the divestiture.
    G. After its appointment, the trustee shall file monthly reports 
simultaneously with the United States and this Court setting forth the 
trustee's

[[Page 51029]]

efforts to accomplish the divestiture ordered under this Final 
Judgment. To the extent such reports contain information that the 
trustee deems confidential, such reports shall not be filed in the 
public docket of this Court. Such reports shall include the name, 
address, and telephone number of each person who, during the preceding 
month, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the Divestiture Assets, and 
shall describe in detail each contact with any such person. The trustee 
shall maintain full records of all efforts made to divest the 
Divestiture Assets.
    H. If the trustee has not accomplished such divestiture within six 
(6) months after its appointment, the trustee shall promptly file with 
this Court a report setting forth: (1) The trustee's efforts to 
accomplish the required divestiture, (2) the reasons, in the trustee's 
judgment, why the required divestiture has not been accomplished, and 
(3) the trustee's recommendations. To the extent such reports contain 
information that the trustee deems confidential, such reports shall not 
be filed in the public docket of this Court. The trustee at the same 
time shall furnish such report to the United States. The United States 
and the Defendants shall have the right to make additional 
recommendations consistent with the purpose of the Final Judgment. This 
Court thereafter shall enter such orders as it shall deem appropriate 
to carry out the purpose of the Final Judgment, which may, if 
necessary, include extending the trust and the term of the trustee's 
appointment by a period requested by the United States.

VI. Notice of Proposed Divestiture

    A. Within two (2) business days following execution of a definitive 
divestiture agreement, Defendants or the trustee, whichever is then 
responsible for effecting the divestiture required herein, shall notify 
the United States of any proposed divestiture required by Section IV or 
Section V of this Final Judgment. If the trustee is responsible, it 
shall similarly notify Defendants. The notice shall set forth the 
details of the proposed divestiture and list the name, address, and 
telephone number of each person not previously identified who offered 
or expressed an interest in or desire to acquire any ownership interest 
in the Hair Care Assets or for divestitures under Section V of this 
Final Judgment, the Divestiture Assets, together with full details of 
the same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States may request from Defendants, 
the proposed Acquirer, any other third party, or, if applicable, the 
trustee additional information concerning the proposed divestiture, the 
proposed Acquirer, and any other potential Acquirer. Defendants and the 
trustee shall furnish any additional information requested within 
fifteen (15) calendar days of the receipt of the request, unless the 
parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from Defendants, the 
proposed Acquirer, any third party, and the trustee, whichever is 
later, the United States shall provide written notice to Defendants and 
the trustee, if there is one, stating whether or not it objects to the 
proposed divestiture. If the United States provides written notice that 
it does not object, the divestiture may be consummated, subject only to 
Defendants' limited right to object to the sale under Section V(D) of 
this Final Judgment. Absent written notice that the United States does 
not object to the proposed Acquirer or upon objection by the United 
States, a divestiture proposed under Section IV or Section V of this 
Final Judgment shall not be consummated. Upon objection by Defendants 
under Section V(D), a divestiture proposed under Section V shall not be 
consummated unless approved by this Court.

VII. Financing

    Defendants shall not finance all or any part of any purchase made 
pursuant to Section IV or Section V of this Final Judgment.

VIII. Hold Separate

    Until the divestiture required by this Final Judgment has been 
accomplished, Defendants shall take all steps necessary to comply with 
the Hold Separate Stipulation and Order entered by this Court. 
Defendants shall take no action that would jeopardize the divestiture 
ordered by this Court.

IX. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, and every thirty (30) days thereafter until the 
divestiture has been completed under Section IV or Section V, each 
Defendant shall deliver to the United States an affidavit as to the 
fact and manner of its compliance with Section IV or Section V of this 
Final Judgment. Each such affidavit shall include the name, address, 
and telephone number of each person who, during the preceding thirty 
days, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring, any interest in the Hair Care Assets or 
Divestiture Assets, and shall describe in detail each contact with any 
such person during that period. Each such affidavit shall also include 
a description of the efforts Defendants have taken to solicit buyers 
for the Hair Care Assets or Divestiture Assets, and to provide required 
information to prospective purchasers, including the limitations, if 
any, on such information. Assuming the information set forth in the 
affidavit is true and complete, any objection by the United States to 
information provided by Defendants, including limitation on 
information, shall be made within fourteen (14) calendar days of 
receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, each Defendant shall deliver to the United States an 
affidavit that describes in reasonable detail all actions Defendant has 
taken and all steps Defendant has implemented on an ongoing basis to 
comply with Section VIII of this Final Judgment. Defendants shall 
deliver to the United States an affidavit describing any changes to the 
efforts and actions outlined in Defendants' earlier affidavits filed 
pursuant to this section within fifteen (15) calendar days after the 
change is implemented.
    C. Defendants shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year after such 
divestiture has been completed.

X. Compliance Inspection

    A. For the purposes of determining or securing compliance with this 
Final Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time duly authorized representatives of the United States 
Department of Justice, including consultants and other persons retained 
by the United States, shall, upon written request of a duly authorized 
representative of the Assistant Attorney General in charge of the 
Antitrust Division, and on reasonable notice to Defendants, be 
permitted:

    (1) Access during Defendants' office hours to inspect and copy, 
or at Plaintiff's option require Defendants to provide copies of, 
all books, ledgers, accounts, records and documents in the 
possession, custody or control of Defendants, relating to any 
matters contained in this Final Judgment; and

[[Page 51030]]

    (2) To either interview informally or depose on the record, 
Defendants' officers, employees, or agents, who may have their 
individual counsel present, regarding such matters. The interviews 
or depositions shall be subject to the interviewee's reasonable 
convenience and without restraint or interference by Defendants.

    B. Upon the written request of a duly authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, 
Defendants shall submit written reports, under oath if requested, 
relating to any of the matters contained in the Final Judgment as may 
be requested.
    C. No information or documents obtained by the means provided in 
this Section shall be divulged by the United States to any person other 
than an authorized representative of the executive branch of the United 
States, except in the course of legal proceedings to which the United 
States is a party (including grand jury proceedings), or for the 
purpose of securing compliance with this Final Judgment, or as 
otherwise required by law.
    D. If at the time Defendants, the Acquirer, or any third party 
furnish information or documents to the United States under this Final 
Judgment, including, but not limited to, this Section and Sections IV 
and IX, they represent and identify in writing the material in any such 
information or documents to which a claim of protection may be asserted 
under Rule 26(c)(7) of the Federal Rules of Civil Procedure, and if 
Defendants, the Acquirer, or any third party mark each pertinent page 
of such material, ``Subject to claim of protection under Rule 26(c)(7) 
of the Federal Rules of Civil Procedure,'' then the United States shall 
give Defendants, the Acquirer, or any third party ten (10) calendar 
days notice prior to divulging such material in any legal proceeding 
(other than a grand jury proceeding).

XI. No Reacquisition

    Defendants may not reacquire any part of the assets divested during 
the term of this Final Judgment.

XII. Retention of Jurisdiction

    The Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XIII. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry.

XIV. Public Interest Determination

    Entry of this Final Judgment is in the public interest.

Dated:----------------------------------------------------------------
      Washington, D.C.

    Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.

----------------------------------------------------------------------
United States District Judge

Competitive Impact Statement

    The United States, pursuant to Section 2(b) of the Antitrust 
Procedures and Penalties Act, (``APPA'') 15 U.S.C. 16(b)-(h), files 
this Competitive Impact Statement relating to the Proposed Final 
Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    On July 31, 2000, the United States filed a Complaint alleging that 
the acquisition of Carson, Inc. (``Carson'') by L'Oreal USA, Inc. 
(``L'Oreal'') would substantially lessen competition in violation of 
Section 7 of the Clayton Act, as amended, 15 U.S.C. 18. The Complaint 
alleges that Carson and L'Oreal are, respectively, the Nation's largest 
and third largest suppliers of adult women's hair relaxer kits sold in 
the United States. The proposed acquisition by Carson by L'Oreal will 
result in L'Oreal's controlling three of the top five selling brands 
and approximately 50 percent of adult women's hair relaxer kits sold 
through retail channels in the United States. As alleged in the 
Complaint, the elimination of Carson as a significant competitor 
substantially increases the likelihood that L'Oreal will raise prices 
of adult women's hair relaxer kits post-acquisition, thereby harming 
consumers. Accordingly, the prayer for relief in the Complaint seeks 
among other things: (1) A judgment that the proposed acquisition would 
violate Section 7 of the Clayton Act; and (2) permanent injunctive 
relief that would prevent Defendants from carrying out the acquisition 
or otherwise combining their businesses or assets.
    At the same time the Complaint was filed, the United States also 
filed a proposed settlement that would permit L'Oreal S.A. to complete 
their acquisition of Carson provided that certain assets are divested 
to preserve competition. The settlement consists of a Proposed Final 
Judgment and a Hold Separate Stipulation and Order.
    The Proposed Final Judgment orders Defendants to divest the Gentle 
Treatment and Ultra Sheen brands and associated 
assets to an acquirer approved by the United States. Defendants must 
complete these divestitures within ninety (90) calendar days after the 
filing of the Complaint, or five days after the notice of the entry of 
the Final Judgment, whichever is later. If Defendants do not complete 
the divestitures within the prescribed time, then, under the terms of 
the proposed Final Judgment, this Court will appoint a trustee to sell 
the brands and associated assets. In the event a trustee is appointed, 
the Proposed Judgment provides that the trustee shall have the right, 
upon approval by the United States, to divest Carson's manufacturing 
facility in Chicago, Illinois.
    The Hold Separate Stipulation and Order, which this Court entered 
on July 31, 2000, and the Proposed Final Judgment require Defendants to 
maintain the products sold under the Gentle Treatment and 
Ultra Sheen brands as an economically viable part of an 
ongoing competitive business, with competitively sensitive business 
information and decision-making relating to the products sold under the 
two brands kept separate from L'Oreal's other businesses. Defendants 
have designated two Carson employees to monitor and ensure their 
compliance with these requirements.
    The United States and Defendants have stipulated that the Proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the Proposed Final Judgment would terminate this action, except that 
this Court would retain jurisdiction to construe, modify or enforce the 
provisions of the Proposed Final Judgment and to punish violations 
thereof.

II. Description of the Events Giving Rise to the Alleged Violation 
of the Antitrust Laws

A. The Defendants

1. L'Oreal S.A. and L'Oreal USA, Inc.
    L'Oreal S.A., a French corporation based in Paris, France, is the 
world's largest hair care and cosmetics company, with operations in 
over 150 countries and over 42,000 employees. Last year, L'Oreal S.A. 
reported over $10 billion in worldwide annual sales and $11 billion in 
total assets. Among L'Oreal S.A.'s wholly owned subsidiaries is L'Oreal 
USA, Inc. (``L'Oreal''), a Delaware corporation headquartered in New 
York, New York. Both L'Oreal S.A. and L'Oreal manufacture and market 
such well

[[Page 51031]]

known brands as L'Oreal, Lancome, 
Maybelline, Laboratiries Garnier, Redken 5th Ave 
NYC, Ralph Lauren Fragrances, Giorgio Armani 
Parfums, Biotherm and Helena Rubinstein. 
Soft Sheen Products, Inc. (``Soft Sheen''), based in Chicago, Illinois, 
is a wholly owned subsidiary of L'Oreal. L'Oreal acquired Soft Sheen in 
1998. Soft Sheen makes and sells ethnic hair care products, which are 
products primarily formulated for, and marketed to, African-American 
consumers. These products include hair relaxer kits, hair color kits, 
hair dressings, shampoos and conditioners. Soft Sheen's brands include 
Optimum Care, the top-selling retail brand of adult women's 
hair relaxer kits in the United States. It also sells retail adult 
women's hair relaxer kits under the Alternatives and Frizz 
Free brands.
2. Carson, Inc.
    Carson is a Delaware corporation headquartered in Savannah, 
Georgia. Founded in 1901, Carson is a global leader in products 
specifically formulated to address the physiological characteristics of 
hair of consumers of African descent. Carson makes and sells a complete 
line of ethnic hair care products, including hair relaxers, shampoos, 
conditioners, hair oils, hair colors, and shaving cremes. It is the 
Nation's leading manufacturer of adult women's hair relaxer kits, which 
are sold through retail channels under the brands Dark & 
Lovely, Gentle Treatment, and Ultra 
Sheen. Carson reported worldwide sales for 1999 of 
approximately $169 million.

B. The Proposed Acquisition

    On or about February 25, 2000, L'Oreal entered into an agreement 
with Carson to purchase for $5.20 per share the common stock of Carson. 
The value of the cash tender offer is approximately $79 million. This 
proposed combination, which would substantially lessen competition in 
the sale of adult women's hair relaxer kits in the United States, 
precipitated the United States's antitrust suit.

C. The Hair Relaxer Industry and the Competitive Effects of the 
Acquisition

1. The Relevant Market Is Adult Women's Hair Relaxer Kits Sold Through 
Retail Channels in the United States
    The Complaint alleges that the development, production and sale of 
adult women's hair relaxer kits through retail outlets is a relevant 
product market under Section 7 of the Clayton Act. Hair relaxers are 
chemicals used primarily by African-American women to straighten their 
naturally curly hair prior to styling. Unless an African-American women 
with naturally curly hair relaxes her hair, any hair style she adopts, 
aside from a totally natural look, will be short-lived. By relaxing her 
hair, an African-American woman has more styling options. Between 65 
and 80 percent of adult African-American women routinely relax their 
hair, spending in excess of $200 million annually on hair relaxers and 
associated products.
    Adult women's hair relaxer kits are marketed specifically to 
African-American women for home use. Each relaxer kit typically 
contains everything needed to relax hair, including: (i) A complete set 
of instructions; (ii) gloves; (iii) two bottles of chemicals (the 
activator and relaxer base) that, when mixed, form the chemical that 
relaxes the hair (invariably the active chemical in relaxer kits is 
``no-lye'' calcium hydroxide); (iv) a bottle of a neutralizing shampoo 
to deactivate the relaxer: (v) conditioners to repair split ends and 
make the hair appear thicker or fuller; and in some kits, (vi) a gel to 
protect against scalp injury.
    There are no good substitutes for adult women's hair relaxer kits. 
The unique qualities and characteristics of these hair relaxer kits 
distinguish them from products such as hot combs and professional hair 
relaxers sold in bulk to beauticians. Because of the unique qualities 
and characteristics of adult women's hair relaxer kits, a small but 
significant increase in the price of women's hair relaxer kits would 
not cause a sufficient number of purchasers to switch to other products 
so as to make such a price increase unprofitable. Thus, the Complaint 
alleges that a relevant product market in which to assess the 
competitive effects of this acquisition is the development, production 
and sale of adult women's hair relaxer kits through retail outlets.
    The Complaint further alleges that the United States constitutes a 
relevant geographic market within the meaning of Section 7 of the 
Clayton Act. L'Oreal's and Carson's adult women's hair relaxer kits are 
manufactured in, and sold and compete throughout, the United States. 
Virtually no adult women's hair relaxer kits are imported into the 
United States. A small but significant increase in the price of adult 
women's hair relaxer kits would not cause a sufficient number of 
purchasers to switch to hair relaxer kits manufactured outside the 
United States to make the price increase unprofitable.
2. Anticompetitive Consequences of the Acquisition
    The Complaint alleges that L'Oreal's acquisition of Carson will 
likely have the following anticompetitive effects: (i) Competition 
generally in the development, production and sale of adult women's hair 
relaxer kits would be substantially lessened; (ii) the actual and 
potential competition between L'Oreal and Carson would be eliminated; 
and (iii) prices for adult women's hair relaxer kits would likely 
increase. Specifically, the Complaint alleges that Carson and L'Oreal 
are respectively the nation's largest and third largest suppliers of 
adult women's hair relaxer kits, and together own three of the top five 
selling brands. L'Oreal's Optimum Care, 
Alternatives, and Frizz Free brands and Carson's 
Dark & Lovely, Gentle Treatment, and Ultra 
Sheen brands of adult women's hair relaxer kits operate as 
significant competitive constraints on each firm's prices for its 
brands. If L'Oreal is permitted to acquire Carson, the substantial 
competition between the two companies would be eliminated, and L'Oreal 
would have the power to profitably increase prices unilaterally for one 
or more of its brands of retail adult women's hair relaxer kits to the 
detriment of consumers.
    This acquisition would increase concentration significantly. The 
market for adult women's hair relaxer kits is highly concentrated under 
a standard measure of market concentration employed by economists, 
called the Herfindahl-Hirschman Index (``HHI''). In this highly 
concentrated market, with a HHI of approximately 2,100 L'Oreal has a 
share of about 17 percent and Carson has a share of about 33.5 percent 
of total dollar sales of adult women's hair relaxer kits through retail 
channels. After acquiring Carson, L'Oreal would dominate the market 
with approximately a 50.5 percent share, making it nearly twice the 
size of its next largest competitor. Following the acquisition, the HHI 
would increase by over 1100 points from approximately 2100 to over 
3200, well in excess of levels that raise significant antitrust 
concerns.
    The Complaint alleges that entry is unlikely to be timely, likely 
or sufficient to restore the competition lost through this transaction. 
Barriers to entering this market include: (1) The substantial time and 
expense required to build a brand reputation to overcome existing 
consumer preferences; (ii) the substantial sunk costs for promotional 
and advertising activity to secure the distribution and placement of a 
new

[[Page 51032]]

entrant's kit in retail outlets; (iii) the inability of a new entrant 
to recoup quickly its substantial and largely sunk costs \1\ in 
promoting its brand; and (iv) the difficulty of securing shelf-space in 
retail outlets. Most hair relaxer kits introduced in recent years have 
been unable to gain significant sales within several years after 
entering. This is due in part to the degree of consumer loyalty and 
brand recognition for long-established, well-regarded brands such as 
Carson's Dark & Lovely, Gentle Treatment and Ultra 
Sheen and L'Oreal's Optimum Care. To succeed, an 
entrant must gain consumer confidence and trust, as hair relaxers 
contain powerful chemicals that may pose significant health risks, such 
as burning one's scalp and hair. Developing a reputation for quality, 
reliability, and performance of one's hair relaxer kit generally takes 
many years of effort. In short, new entry into the development, 
production and sale of adult women's hair relaxer kits through retail 
channels in the United States is time-consuming, expensive and 
difficult, and thus is unlikely to deter Defendants from exercising 
market power in the reasonable foreseeable future.
---------------------------------------------------------------------------

    \1\ The term ``sunk costs'' as used in this context includes the 
costs of acquiring tangible and intangible assets that cannot be 
recovered through the redeployment of these assets outside the 
relevant market--in other words, costs uniquely incurred to enter 
the adult women's hair relaxer kits market, and which cannot be 
recovered when a firm leaves the market or enters another market.
---------------------------------------------------------------------------

III. Explanation of the Proposed Final Judgment

    The Proposed Final Judgment requires significant divestitures that 
will preserve competition in the sale of adult women's hair relaxer 
kits through retail channels in the United States. Within ninety (90) 
calendar days after July 31, 2000, the date the Complaint was filed, or 
five days after notice of entry of the Final Judgment, whichever is 
later, Defendants must divest the Gentle Treatment and Ultra 
Sheen brands and associated assets (including the ``Johnson 
Products Co., Inc.'' and ``JP'' names) to an acquirer that, in the 
United States's sole judgment, has the intent and capability (including 
the necessary managerial, operational, technical and financial 
capability) of competing effectively in the business of adult women's 
hair relaxer kits. \2\ This relief has been tailored to ensure that the 
ordered divestitures restore competition that would have been 
eliminated as a result of the acquisition, and prevent L'Oreal from 
exercising market power in the adult women's hair relaxer kit market 
after the acquisition.
---------------------------------------------------------------------------

    \2\ The assets to be divested are defined and described in the 
Proposed Final Judgment as the ``Hair Care Assets.'' See Section 
II(D) of the proposed Final Judgment. These assets also include 
other products (in addition to hair relaxer kits) sold under the 
Gentle Treatment and Ultra Sheen brands, but 
exclude the Precise and Perfect Performance 
brands. See Section II(H) of the Proposed Final Judgment. The 
divestiture of other ethnic hair care products sold under the Gentle 
Treatment and Ultra Sheen brands will enhance 
the acquirer's ability to compete post-divestiture.
---------------------------------------------------------------------------

    Defendants must use their best efforts to divest these assets as 
expeditiously as possible. The Proposed Final Judgment provides that 
the assets must be divested in such a way as to satisfy the United 
States, in its sole discretion, that the acquirer can and will use the 
assets as part of a viable, ongoing business engaged in the sale of 
adult women's hair relaxer kit through retail channels in the United 
States. Until the ordered divestitures take place, Defendants must 
cooperate with any prospective purchasers.
    If Defendants do not accomplish the ordered divestitures within the 
prescribed time period, then Section V of the Proposed Final Judgment 
provides that this Court will appoint a trustee, selected by the United 
States, to complete the divestitures. Section V of the Proposed Final 
Judgment also empowers the trustee to sell, if necessary, certain 
additional production assets to effect the divestitures. These 
additional assets entail all the assets at Carson's Chicago, Illinois 
facility that the United States determines are reasonable necessary for 
an acquirer to compete effectively and viably in the ethnic hair care 
industry.
    If a trustee is appointed, the Proposed Final Judgment provides 
that Defendants must cooperate fully with the trustee and pay all of 
the trustee's costs and expenses. The trustee's compensation will be 
structured to provide an incentive for the trustee based on the price 
and terms of the divestiture and the speed with which it is 
accomplished. After the trustee's appointment becomes effective, the 
trustee will file monthly reports with the United States and this Court 
setting forth the trustee's efforts to accomplish the required 
divestiture. If at the end of six months after that appointment, the 
divestiture has not been accomplished, then the trustee, the United 
States, and Defendants will make recommendations to this Court, which 
shall enter such orders as appropriate to carry out the purpose of the 
Final Judgment.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal district court to recover 
three times the damages the person has suffered, as well as the costs 
of bringing a lawsuit and reasonable attorneys' fees. Entry of the 
Proposed Final Judgment will neither impair nor assist the bringing of 
any private antitrust damage action. Under the provisions of Section 
5(a) of the Clayton Act, 15 U.S.C. 16(a), the Proposed Final Judgment 
has no effect as prima facie evidence in any subsequent private lawsuit 
that may be brought against Defendants.

V. Procedures Available for Modification of the Proposed Final 
Judgment

    The parties have stipulated that the Proposed Final Judgment may be 
entered by this Court after compliance with the provisions of the APPA, 
provided that the United States has not withdrawn its consent. The APPA 
conditions entry of the decree upon this Court's determination that the 
Proposed Final Judgment is in the public interest.
    The APPA provides a period of at least sixty (60) days preceding 
the effective date of the Proposed Final Judgment within which any 
person may submit to the United States written comments regarding the 
proposed Final Judgment. Any person who wishes to comment should do so 
within sixty (60) days of the date of publication of this Competitive 
Impact Statement in the Federal Register. The United States will 
evaluate and respond to the comments. All comments will be given due 
consideration by the Department of Justice, which remains free to 
withdraw its consent to the Proposed Final Judgment at any time prior 
to entry. The comments and the response of the United States will be 
filed with this Court and published in the Federal Register. Written 
comments should be submitted to: J. Robert Kramer II, Chief, Litigation 
II Section, Antitrust Division, United States Department of Justice, 
1401 H Street, NW., Suite 3000, Washington, DC 20530.
    The Proposed Final Judgment provides that this Court retains 
jurisdiction over this action, and the parties may apply to this Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered, as an alternative to the proposed 
Final Judgment, a full trial on the merits against Defendants. The 
United States is

[[Page 51033]]

satisfied, however, that the divestiture of the Gentle 
Treatment and Ultra Sheen brands, associated 
assets, and other relief contained in the Proposed Final Judgment will 
establish, preserve and ensure a viable competitor in the relevant 
market identified by the United States. Thus, the United States is 
convinced that the Proposed Final Judgment, once implemented by the 
Court, will prevent L'Oreal's acquisition of Carson from having adverse 
competitive effects.

VII. Standard of Review Under the APPA for Proposed Final Judgment

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty (60) day 
comment period, after which the court shall determine whether entry of 
the Proposed Final Judgment is ``in the public interest.'' In making 
that determination, the court may consider--

    (1) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration or relief sought, anticipated effects of 
alternative remedies actually considered, and any other 
considerations bearing upon the adequacy of such judgment;
    (2) The impact of entry of such judgment upon the public 
generally and individuals alleging specific injury from the 
violations set forth in the complaint including consideration of the 
public benefit, if any, to be derived from a determination of the 
issues at trial.

15 U.S.C. 16(e) (emphasis added). As the Court of Appeals for the 
District of Columbia has held, the APPA permits a court to consider, 
among other things, the relationship between the remedy secured and the 
specific allegations set forth in the government's complaint, whether 
the decree is sufficiently clear, whether enforcement mechanisms are 
sufficient, and whether the decree may positively harm third parties. 
See United States v. Microsoft Corp., 56 F.3d 1448, 1458-62 (D.C. Cir. 
1995).
    In conducting this inquiry, ``the Court is nowhere compelled to go 
to trial or to engage in extended proceedings which might have the 
effect of vitiating the benefits of prompt and less costly settlement 
through the consent decree process.'' \3\ Rather,

absent a showing of corrupt failure of the government to discharge 
its duty, the Court, in making its public interest finding, should * 
* * carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order 
to determine whether those explanations are reasonable under the 
circumstances.\4\
    Accordingly, with respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in an unrestricted evaluation of 
what relief would best serve the public.'' United States v. BNS. Inc., 
858 F.2d 456, 462 (9th Cir. 1988), quoting United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083 
(1981); see also Microsoft, 56 F.3d at 1458. Precedent requires that
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    \3\ 119 Cong. Rec. 24,598 (1973). See United States v. Gillette 
Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest'' 
determination can be made properly on the basis of the Competitive 
Impact Statement and Response to Comments filed pursuant to the 
APPA. Although the APPA authorizes the use of additional procedures, 
15 U.S.C. Sec. 16(f), those procedures are discretionary. A court 
need not invoke any of them unless it believes that the comments 
have raised significant issues and that further proceedings would 
aid the court in resolving those issues. See H.R. Rep. No. 93-1463, 
93rd Cong. 2d Sess. 8-9 (1974), reprinted in 1974 U.S.C.C.A.N. 6535, 
6538.
    \4\ United States v. Mid-America Dairymen, Inc., 1977-1 Trade 
Cas. (CCH) para. 61,508, at 71,980 (W.D. Mo. 1977); see also United 
States  v. Loew's Inc., 783 F. Supp. 211, 214 (S.D.N.Y. 1992); 
United States  v. Columbia Artists Mgmt., Inc., 662 F. Supp. 865, 
870 (S.D.N.Y. 1987).

the balancing of competing social and political interests affected 
by a proposed antitrust consent decree must be left, in the first 
instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to 
the decree. The court is required to determine not whether a 
particular decree is the one that will best serve society, but 
whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
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effectiveness of antitrust enforcement by consent decree.\5\

    The proposed Final Judgment, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of free competition in the future. Court approval of a final 
judgment requires a standard more flexible and less strict than the 
standard required for a finding of liability. A ``proposed decree must 
be approved even if it falls short of the remedy the court would impose 
on its own, as long as it falls within the range of acceptability or is 
`within the reaches of public interest.' '' \6\
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    \5\ United States  v. Bechtel Corp., 648 F.2d at 666 (citations 
omitted) (emphasis added); see United States  v. BNS, Inc.,  858 
F.2d at 463; United States  v. National Broadcasting Co.,  449 F. 
Supp. 1127, 1143 (C.D. Cal. 1978); United States v. Gillette Co.,  
406 F. Supp. at 716. See also United States v. American Cyanamid 
Co.,  719 F.2d 558, 565 (2d Cir. 1983), cert. denied, 465 U.S. 1101 
(1984).
    \6\ United States v. American Tel. & Tel. Co, 552 F. Supp. 131, 
151 (D.D.C. 1982) (quoting Gillette, 406 F. Supp. at 716), aff'd sub 
nom. Maryland v. United States, 460 U.S. 1001 (1983); United States 
v. Alcan Aluminum, Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985); 
United States v. Carrols Dev. Corp., 454 F. Supp. 1215, 1222 
(N.D.N.Y. 1978).
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    Moreover, the court's role under the APPA is limited to reviewing 
the remedy in relationship to the violations that the United States has 
alleged in its complaint, and does not authorize the court to 
``construct [its] own hypothetical case and then evaluate the decree 
against that case.'' Microsoft, 56 F.3d at 1459. Since the ``court's 
authority to review the decree depends entirely on the government's 
exercising its prosecutorial discretion by bringing a case in the first 
place,'' it follows that the court ``is only authorized to review the 
decree itself,'' and not to ``effectively redraft the complaint'' to 
inquire into other matters that the United States might have but did 
not pursue. Id.

VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

    Dated: August 8, 2000. Washington, D.C.

          Respectfully submitted,

Maurice E. Stucke,
U.S. Department of Justice, Antitrust Division, Litigation II 
Section, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530, 
202-305-1489.

Certificate of Service

    I hereby certify that I served a copy of the foregoing Competitive 
Impact Statement via First Class United States Mail, this 8th day of 
August, 2000, on:

Peter D Standish, Esquire,
Weil, Gotshal & Manges, LLP, 767 Fifth Avenue, New York, NY 10153-
0119, Counsel for Defendants L'Oreal USA, Inc. and L'Oreal S.A.

Charles Westland, Esquire,
Milbank, Tweed, Hadley & McCloy, LLP, One Chase Manhattan Plaza, New 
York, NY 10005, Counsel for Defendant Carson, Inc.

Damian G. Didden,
Trial Attorney, U.S. Department of Justice, Antitrust Division, 1401 
H Street, N.W., Suite 3000, Washington, D.C. 20530, (202) 307-0935.

[FR Doc. 00-21289 Filed 8-21-00; 8:45 am]
BILLING CODE 4410-11-M