[Federal Register Volume 75, Number 65 (Tuesday, April 6, 2010)]
[Notices]
[Pages 17407-17410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7682]


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FEDERAL TRADE COMMISSION

[File No. 101 0013]


Service Corporation International and Keystone North America 
Inc.; Analysis of Agreement Containing Consent Orders to Aid Public 
Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order -- embodied in the consent 
agreement -- that would settle these allegations.

DATES: Comments must be received on or before April 26, 2010.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to ``SCI-
Keystone, File No. 101 0013'' to facilitate the organization of 
comments. Please note that your comment -- including your name and your 
state -- will be placed on the public record of this proceeding, 
including on the publicly accessible FTC website, at (http://www.ftc.gov/os/publiccomments.shtm).
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual's Social Security 
Number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential. . . .,'' as provided in 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which 
confidential treatment is requested must be filed in paper form, must 
be clearly labeled ``Confidential,'' and must comply with FTC Rule 
4.9(c), 16 CFR 4.9(c).\1\
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 
4.9(c).
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    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: (https://public.commentworks.com/ftc/sci/keystonenorthamerica) and following the 
instructions on the web-based form.

[[Page 17408]]

To ensure that the Commission considers an electronic comment, you must 
file it on the web-based form at the weblink: (https://public.commentworks.com/ftc/sci/keystonenorthamerica). If this Notice 
appears at (http://www.regulations.gov/search/index.jsp), you may also 
file an electronic comment through that website. The Commission will 
consider all comments that regulations.gov forwards to it. You may also 
visit the FTC website at (http://www.ftc.gov/) to read the Notice and 
the news release describing it.
    A comment filed in paper form should include the ``SCI-Keystone, 
File No. 101 0013'' reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission, Office of the Secretary, Room H-135 (Annex D), 600 
Pennsylvania Avenue, NW, Washington, DC 20580. The FTC is requesting 
that any comment filed in paper form be sent by courier or overnight 
service, if possible, because U.S. postal mail in the Washington area 
and at the Commission is subject to delay due to heightened security 
precautions.
    The Federal Trade Commission Act (``FTC Act'') and other laws the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding as appropriate. The Commission will 
consider all timely and responsive public comments that it receives, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC website, to the extent practicable, 
at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of 
discretion, the Commission makes every effort to remove home contact 
information for individuals from the public comments it receives before 
placing those comments on the FTC website. More information, including 
routine uses permitted by the Privacy Act, may be found in the FTC's 
privacy policy, at (http://www.ftc.gov/ftc/privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Jeffrey H. Perry (202-326-2331), 
Bureau of Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 
20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 the 
Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that 
the above-captioned consent agreement containing a consent order to 
cease and desist, having been filed with and accepted, subject to final 
approval, by the Commission, has been placed on the public record for a 
period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for March 26, 2010), on the World Wide Web, at (http://www.ftc.gov/os/actions.shtm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. INTRODUCTION

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, subject to final approval, an Agreement Containing 
Consent Orders (``Consent Agreement'') from Service Corporation 
International (``SCI'') and Keystone North America Inc. (``KNA''). The 
purpose of the proposed Consent Agreement is to remedy the 
anticompetitive effects that would otherwise result from SCI's 
acquisition of KNA. Under the terms of the proposed Consent Agreement, 
SCI and KNA are required to divest 22 funeral homes in 16 local funeral 
services markets and four cemeteries in three local cemetery services 
markets to acquirers who receive the approval of the Commission. The 
proposed Consent Agreement also requires SCI and KNA to divest all 
related assets and real property necessary to ensure the buyer(s) of 
the divested facilities will be able to quickly and fully replicate the 
competition that would have been eliminated by the acquisition. 
Finally, the Commission, SCI, and KNA have agreed to an Order to Hold 
Separate and Maintain Assets (``Hold Separate Order'') that requires 
SCI and KNA to maintain and hold separate the facilities to be divested 
pending their final divestiture pursuant to the Consent Agreement.
    The proposed Consent Agreement has been placed on the public record 
for thirty days to solicit comments from interested persons. Comments 
received during this period will become part of the public record. 
After thirty days, the Commission again will review the proposed 
Consent Agreement and comments received, and decide whether it should 
withdraw the Consent Agreement or make it final.
    On October 14, 2009, SCI and KNA executed a definitive support 
agreement pursuant to which SCI agreed to acquire all of the 
outstanding voting securities of KNA. The Commission's complaint 
alleges that the proposed acquisition, if consummated, would violate 
Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec.  18, and 
Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 
Sec.  45, by removing an actual, direct, and substantial competitor 
from 16 funeral services markets, and three cemetery services markets. 
The proposed Consent Agreement would remedy the alleged violations by 
requiring divestitures that will replace the competition that otherwise 
would be lost in these markets as a result of the acquisition.

II. THE PARTIES

    SCI is the largest funeral and cemetery services provider in North 
America. SCI owns and operates 1,266 funeral homes and 372 cemetery 
locations worldwide, including 1,073 funeral homes in 43 states and the 
District of Columbia, and 357 cemeteries in 31 states. SCI's 2009 
revenue from all operations totaled approximately $2.05 billion.
    KNA is the fifth largest funeral and cemetery services provider in 
North America. KNA owns and operates 199 funeral homes and 15 
cemeteries in the United States and Canada, including 196 funeral homes 
in 31 states, and 15 cemeteries in seven states. KNA's revenue for the 
12 months ending June 30, 2009 totaled approximately $124 million.

III. FUNERAL AND CEMETERY SERVICES

    SCI's proposed acquisition of KNA presents substantial antitrust 
concerns in two relevant product markets: funeral services and cemetery 
services. Funeral services include all activities relating to the 
promotion, marketing, sale, and provision of funeral services and 
goods, including, but not limited to, goods and services used to 
remove, care for, and prepare bodies for burial, cremation or other 
final disposition; and goods and services used to arrange, supervise, 
or conduct funeral ceremonies or final disposition of human remains. 
Cemetery services include all activities relating to the promotion, 
marketing, sale, and provision of property, goods and services to 
provide for the final disposition of human remains in a cemetery, 
whether by burial, entombment in a mausoleum or crypt,

[[Page 17409]]

disposition in a niche, or scattering of cremated remains on the 
cemetery grounds.
    The 16 funeral services markets and three cemetery services markets 
at issue in this transaction are relatively local in nature. Indeed, 
data analysis and evidence gathered from market participants indicate 
that pre-need purchasers of funeral services and cemetery plots, and 
families making at-need purchases, typically choose a local funeral 
home or cemetery to make the memorial service, burial, and subsequent 
visitation more convenient. The 16 funeral services markets are: Yuma, 
Arizona; Monterey, California; Denver, Colorado; Auburndale/Winter 
Haven, Florida; Vidalia, Georgia; Bossier City, Louisiana; Lansing, 
Michigan; East Aurora, New York; Northern Rockland County, New York; 
Charlotte, North Carolina; Greensboro, North Carolina; Columbia, South 
Carolina; West Columbia/Lexington, South Carolina; New Tazewell, 
Tennessee; Lynchburg, Virginia; and Yakima, Washington. The three 
cemetery services markets are: Yuma, Arizona; Macon, Georgia; and 
Columbia, South Carolina.
    Each of the relevant funeral and cemetery services markets is 
highly concentrated, and the proposed acquisition would significantly 
increase market concentration and eliminate substantial, direct 
competition between two significant funeral and cemetery services 
providers. Under the Herfindahl-Hirschman Index (``HHI''), which is the 
standard measure of market concentration under the 1992 Department of 
Justice and Federal Trade Commission Merger Guidelines, an acquisition 
is presumed to create or enhance market power or facilitate its 
exercise if it increases the HHI by more than 100 points and results in 
a post-acquisition HHI that exceeds 1,800 points. SCI's proposed 
acquisition of KNA creates market concentration levels well in excess 
of these thresholds. For funeral services, the post-acquisition HHIs 
range from 3730 to 8632, and HHI levels will increase by 295 to 4130 
points above pre-acquisition levels. The proposed acquisition also will 
result in SCI controlling between 52 percent and 93 percent market 
share in each of the affected funeral services markets. With respect to 
the cemetery services markets, the proposed acquisition will reduce the 
number of cemetery services providers from five to four in the 
Columbia, South Carolina and Macon, Georgia areas, and from three to 
two in Yuma, Arizona.
    The anticompetitive implications of such dramatic increases in 
concentration are buttressed by evidence of intense head-to-head 
competition that would be eliminated by the proposed acquisition. 
Consumers have benefitted from the rivalry between SCI and KNA in the 
form of lower prices, improved products, and better service. Left 
unremedied, the proposed acquisition likely would cause anticompetitive 
harm by enabling SCI to profit by unilaterally raising the prices of 
funeral and cemetery services, as well as reducing its incentive to 
improve quality and provide better service.
    The high levels of concentration also increase the likelihood of 
competitive harm through coordinated interaction. Transparency in the 
pricing of funeral services and consumers' selection of funeral homes 
and cemeteries facilitate the ability of providers to reach and monitor 
terms of coordination, or alternatively promote tacit forms of 
collusion. In several funeral and cemetery services markets, 
coordinated interaction or tacit collusion is likely due to the 
transparency of important competitive information, high concentration, 
and few market participants.
    New entry is unlikely to deter or counteract the anticompetitive 
effects of the proposed acquisition. Among other entry barriers, both 
heritage (the consumer's tendency to use the same funeral services 
provider for multiple generations) and reputation pose substantial 
barriers to entrants attempting to establish new funeral service 
locations, and the availability of suitable land, and local zoning, 
health, and environmental regulations impact significantly the ability 
of firms to enter with new cemetery service locations. As a result, new 
entry sufficient to achieve a significant market impact is unlikely to 
occur in a timely manner.

IV. THE PROPOSED CONSENT AGREEMENT

    The proposed Consent Agreement remedies completely the 
anticompetitive effects of the acquisition by requiring the divestiture 
of all of the SCI or KNA assets in each relevant geographic market to a 
Commission-approved buyer (or buyers) within 90 days of SCI acquiring 
KNA. Specifically, the proposed Consent Agreement requires the 
divestiture of 22 funeral services facilities and four cemetery 
services facilities, as well as related equipment, customer and supply 
contracts, commercial trade names, and real property in the 19 funeral 
and cemetery services markets at issue in this transaction. See 
Appendix A for a complete list of the divestiture assets. Each funeral 
and cemetery services facility to be divested is a stand-alone 
business, and includes all of the assets necessary for a Commission-
approved buyer to independently and effectively operate each facility.
    The proposed Consent Agreement contains several provisions designed 
to ensure that the divestitures are successful. First, the Commission 
will evaluate the suitability of possible purchasers of the divested 
assets to ensure that the competitive environment that would have 
existed but for the transaction is replicated by the required 
divestitures. If SCI fails to divest the assets within the 90-day time 
period to a Commission-approved buyer, the Consent Agreement permits 
the Commission to appoint a trustee to divest the assets. Second, SCI 
is required to provide transitional services to the Commission-approved 
buyer. These transitional services will facilitate a smooth transition 
of the assets to the acquirer, and ensure continued and uninterrupted 
operation of the assets during the transition. Third, the Consent 
Agreement requires SCI to remove any contractual impediments that may 
deter the current managers of the facilities to be divested from 
accepting offers of employment from any Commission-approved acquirer 
and to obtain all consents necessary to transfer the required assets. 
The Agreement also appoints an Interim Monitor, Shaun Martin, to 
monitor SCI's compliance with the terms of the Agreement. Mr. Martin is 
well-qualified for this role, having extensive experience managing 
businesses on a short-term basis. Finally, to ensure that the 
Commission will have an opportunity to review any attempt by SCI to 
acquire any funeral or cemetery services asset in any of the 19 
geographic markets at issue, the proposed Consent Agreement contains a 
ten-year prior notice provision.
    The Hold Separate Order requires the parties to maintain the 
viability of the divestiture assets as competitive operations until 
each facility is transferred to a Commission-approved buyer. 
Specifically, the parties must maintain the confidentiality of 
sensitive business information, and take all actions required to 
prevent the destruction or wasting of the divestiture assets. After SCI 
acquires KNA, the Hold Separate Order requires that SCI separately hold 
and maintain the KNA divestiture assets and appoints a Hold Separate 
Manager to operate these assets pending their divestiture. SCI is also 
required to separately operate the SCI divestiture assets and the KNA 
assets that SCI acquires in the same geographic market. Finally, the 
Hold Separate Order appoints an Interim Monitor to monitor the 
operation of the separately-

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held KNA assets and the parties' compliance with the terms of the Hold 
Separate Order and the Consent Agreement.
    The sole purpose of this analysis is to facilitate public comment 
on the Consent Agreement. This analysis does not constitute an official 
interpretation of the Consent Agreement or modify its terms in any way.
    By direction of the Commission.

Donald S. Clark,
Secretary.
[FR Doc. 2010-7682 Filed 4-5-10; 11:16 am]
BILLING CODE 6750-01-S