[Federal Register Volume 78, Number 250 (Monday, December 30, 2013)]
[Notices]
[Pages 79451-79454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31153]


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FEDERAL TRADE COMMISSION

[File No. 131 0163]


Service Corporation International, and Stewart Enterprises, 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 of 
Agreement Containing Consent Orders to Aid Public Comment describes 
both the allegations in the draft complaint and the terms of the 
consent orders--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before January 22, 2014.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/scistewartconsent online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Service Corporation 
International and Stewart Enterprises, Inc.--Consent Agreement; File 
No. 131 0163'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/scistewartconsent by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, mail or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex 
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Jill Frumin, Bureau of Competition, 
(202-326-2758), 600 Pennsylvania Avenue NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 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 December 23, 2013), 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, DC 20580, either in person or by calling (202) 326-
2222.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before January 22, 
2014. Write ``Service Corporation International and Stewart 
Enterprises, Inc.--Consent Agreement; File No. 131 0163'' on your 
comment. Your comment--including your name and your state--will be 
placed on the public record of this proceeding, including, to the 
extent practicable, on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the 
Commission tries to remove individuals' home contact information from 
comments before placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone'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. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which . . . is privileged or confidential,'' as discussed in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR 
4.10(a)(2). In particular, do not include competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
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    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
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    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/scistewartconsent by following the instructions on the web-based 
form. If this Notice appears at http://

[[Page 79452]]

www.regulations.gov/!home, you also may file a comment through 
that Web site.
    If you file your comment on paper, write ``Service Corporation 
International and Stewart Enterprises, Inc.--Consent Agreement; File 
No. 131 0163'' on your comment and on the envelope, and mail or deliver 
it to the following address: Federal Trade Commission, Office of the 
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW., 
Washington, DC 20580. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that 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 on or before January 22, 2014. You can find more 
information, including routine uses permitted by the Privacy Act, in 
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Orders 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 Stewart Enterprises, Inc. (``Stewart''). 
The purpose of the proposed Consent Agreement is to remedy the 
anticompetitive effects that would otherwise result from SCI's 
acquisition of Stewart. Under the terms of the proposed Consent 
Agreement, SCI and Stewart are required to divest 53 funeral homes in 
29 local funeral services markets and 38 cemeteries in 30 local 
cemetery markets to acquirers who receive the approval of the 
Commission. The proposed Consent Agreement also requires SCI and 
Stewart to divest all related assets and real property necessary to 
ensure that the buyer(s) of the divested facilities will be able to 
quickly and fully replicate the competition that would have been 
eliminated by the merger. Finally, the Commission, SCI, and Stewart 
have agreed to an Order to Hold Separate and Maintain Assets (``Hold 
Separate Order'') that requires SCI and Stewart to maintain and hold 
separate certain 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 (``Public Comment Period''). During this period, 
interested persons can review the proposed Consent Agreement and file 
comments with respect to the competitive effects of the Merger and the 
proposed remedy. At the end of the Public Comment Period, the 
Commission will review and afford appropriate consideration to all 
comments filed. The Commission may then determine whether to modify the 
proposed Consent Agreement, issue the Consent Agreement as final 
without modifications, or withdraw the Consent Agreement in its 
entirety.
    On May 29, 2013, SCI and Stewart executed a definitive merger 
agreement pursuant to which SCI agreed to acquire Stewart in an all-
cash transaction valued at approximately $1.4 billion (the ``Merger''). 
The Commission's complaint alleges that the proposed Merger, if 
consummated, would violate Section 7 of the Clayton Act, as amended, 15 
U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. 45, removing an actual, direct, and substantial 
competitor from 29 funeral services markets, and 30 cemetery services 
markets. The proposed Consent Agreement would remedy the alleged 
violations by requiring divestitures to replace the competition that 
otherwise would be lost in these markets as a result of the Merger.

II. The Parties

    SCI is the largest funeral and cemetery services provider in North 
America. SCI owns and operates more than 1,449 funeral-services 
locations and 374 cemeteries (including 213 combined funeral-services/
cemetery locations), and 100 crematories in 44 states and the District 
of Columbia. SCI's 2012 revenue from all operations totaled 
approximately $2.41 billion.
    Stewart is the second largest funeral and cemetery services 
provider in the United States. Stewart owns and operates 217 funeral 
homes and 141 cemeteries in 24 states and Puerto Rico. For the 12 
months ending October 31, 2013, Stewart's total revenues were 
approximately $524.1 million.

III. Funeral and Cemetery Services

    SCI's proposed acquisition of Stewart presents substantial 
antitrust concerns in two relevant product markets: (1) Funeral 
services; and (2) 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. 
Funeral services do not include cremation services because consumers 
generally do not substitute cremation services for burial services 
based upon price. Since many consumers primarily choose their final 
disposition based on their personal or religious views, these consumers 
do not view cremation services as a viable substitute for funeral 
services. Thus, a hypothetical monopolist of funeral services could 
profitably impose a small but significant and non-transitory increase 
in price (``SSNIP'') because most consumers would not switch to 
cremation services. Further, the competitive conditions for cremation 
services are substantially different than for funeral services.
    Cemetery services include all activities relating to the promotion, 
marketing, sale, and provision of property, goods, and services to 
provide for the disposition of human remains in a cemetery, whether by 
burial, entombment in a mausoleum or crypt, disposition in a niche, or 
scattering cremated remains on cemetery grounds.
    In some local markets, certain funeral-service and cemetery-service 
locations cater to specific populations by focusing on the customs and 
rituals associated with one or more religious, ethnic, or cultural 
heritage groups. In such situations, the provision of funeral or 
cemetery services targeted to such populations may constitute distinct 
and relevant product markets. Thus, in Los Angeles, California, for 
example, the provision of funeral services to Catholic consumers 
constitutes a relevant product market in which to analyze the 
competitive effects of the Merger. Likewise, in South Dallas, Texas, 
the provision of cemetery services to the African-American community 
constitutes a relevant product market in which to analyze the 
competitive effects of the Merger.
    The 29 funeral services markets and 30 cemetery services markets at 
issue in this transaction are relatively local in nature. Indeed, data 
analysis and evidence gathered from market participants indicate that 
purchasers of both ``preneed'' and ``atneed'' funeral and cemetery 
services typically choose a local funeral home or cemetery in order to 
make the memorial service, burial, and subsequent visitation more 
convenient.
    The 29 geographic markets in which to analyze the effects of the 
Merger with respect to funeral services are: (1) Mobile, Alabama; (2) 
Auburn, California; (3) East Los Angeles County, California (Catholic); 
(4) Los Angeles (Long Beach), California (Catholic); (5) Los Angeles 
(San Fernando Valley),

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California (Catholic); (6) Palmdale/Lancaster, California; (7) Northern 
San Diego, California; (8) Southern and Eastern San Diego, California; 
(9) Clearwater, Florida; (10) Jacksonville, Florida; (11) Miami-Dade 
County (Homestead), Florida; (12) Miami-Dade County (Miami), Florida; 
(13) Ocala, Florida; (14) Orlando, Florida; (15) Port St. Lucie, 
Florida; (16) Tampa, Florida (Hispanic); (17) Overland Park, Kansas; 
(18) South Kansas City, Kansas/Missouri; (19) New Orleans, Louisiana; 
(20) West Jackson, Mississippi; (21) North Kansas City, Missouri; (22) 
New Bern, North Carolina; (23) Raleigh, North Carolina; (24) Columbia, 
South Carolina; (25) Nashville, Tennessee; (26) Dallas, Texas; (27) 
Southeast Fort Worth, Texas; (28) Arlington-Alexandria, Virginia; and 
(29) Washington, DC/Maryland suburbs (Jewish).
    The 30 geographic markets in which to analyze the effects of the 
Merger with respect to cemetery services are: (1) South San Diego, 
California; (2) Jacksonville, Florida; (3) Miami-Dade County, Florida; 
(4) Ocala, Florida; (5) West Orlando, Florida; (6) Port St. Lucie, 
Florida; (7) Spring Hill/Hudson, Florida; (8) St. Petersburg/Largo, 
Florida; (9) Tampa, Florida; (10) Atlanta (Cobb County), Georgia; (11) 
Atlanta (Fairburn/College Park), Georgia; (12) Atlanta (Henry County), 
Georgia; (13) New Orleans, Louisiana; (14) Annapolis, Maryland; (15) 
Baltimore, Maryland; (16) North Kansas City, Missouri; (17) South 
Kansas City, Kansas/Missouri; (18) High Point, North Carolina; (19) 
Raleigh, North Carolina; (20) Philadelphia, Pennsylvania; (21) 
Greenville, South Carolina; (22) Kingsport, Tennessee; (23) Knoxville, 
Tennessee; (24) Dallas, Texas; (25) South Dallas, Texas (African 
American); (26) Southeast Fort Worth, Texas; (27) Houston, Texas; (28) 
Northwest Richmond, Virginia; (29) South Richmond, Virginia; and (30) 
Kearneysville, West Virginia.
    Each of the relevant funeral and cemetery services markets is 
highly concentrated, and the proposed Merger 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 2010 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 by more than 200 points and results in a post-
acquisition HHI that exceeds 2,500 points. SCI's merger with Stewart 
creates market concentration levels well in excess of these thresholds 
in the local markets listed above.
    The anticompetitive implications of such significant increases are 
reinforced by evidence of intense head-to-head competition that would 
be eliminated by the proposed Merger. This competition between SCI and 
Stewart benefits consumers in the form of lower prices, improved 
products, and better service. Left unremedied, the proposed Merger 
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. In several funeral 
and cemetery services markets, coordinated interaction or tacit 
collusion may be likely due to the transparency of important 
competitive information, high concentration, and relatively small 
number of competitors.
    New entry is unlikely to deter or counteract the anticompetitive 
effects of the proposed Merger. Among other entry barriers, both 
heritage (the consumer's tendency to use the same funeral home or 
cemetery for multiple generations) and reputation pose substantial 
barriers to entrants attempting to establish new funeral-services 
locations. The availability of suitable land and local zoning, health, 
and environmental regulations significantly hinder the ability of firms 
to enter into new cemetery-services locations. As a result, new entry 
sufficient to achieve a significant market impact is unlikely to occur.

IV. The Proposed Consent Agreement

    The proposed Consent Agreement remedies completely the 
anticompetitive effects of the Merger by requiring the divestiture of 
SCI or Stewart funeral homes, cemeteries, and related assets in each 
relevant geographic market to a Commission-approved buyer (or buyers) 
within 180 days of SCI acquiring Stewart. Specifically, the proposed 
Consent Agreement requires the divestiture of 53 funeral-services 
facilities and 38 cemeteries, as well as related equipment, customer 
and supplier contracts, commercial trade names, and real property in 
the funeral and cemetery services markets at issue in this transaction. 
The assets to be divested include all of the associated assets and real 
property necessary for a Commission-approved buyer to independently and 
effectively operate each facility. See Appendix A to the proposed 
Decision and Order for a complete list of the divestiture assets.
    The proposed Consent Agreement contains several provisions designed 
to ensure that the divestitures are successful. First, the Commission 
will evaluate the suitability of the proposed 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 180 day time 
period to a Commission-approved buyer, the Consent Agreement permits 
the Commission to appoint a divestiture trustee to divest the assets. 
Second, SCI is required to provide transitional services to the 
Commission-approved acquirer. 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 employees of the 
divested facilities 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 a Hold 
Separate Trustee to monitor SCI's compliance with the terms of the 
Agreement. Finally, the Commission will have an opportunity to review 
any attempt by SCI to acquire any funeral or cemetery services asset in 
any of the geographic markets at issue, as well as certain markets 
where any future acquisition by SCI would likely cause substantial 
competitive harm. This prior notice provision has a term of ten years.
    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 acquirer. After 
SCI acquires Stewart, the Hold Separate Order requires that SCI 
segregate the 91 locations to be divested separate and apart from SCI's 
own death services business, and maintain these assets as independent 
competitive enterprises pending divestiture. To facilitate this 
process, the Hold Separate Order allows Paul A. Houston, the proposed 
Hold Separate Trustee, to appoint one or more Hold Separate Managers to 
assist with the management the daily operations of the held separate 
businesses in an effort to ensure competition in the relevant 
geographic markets. Additionally, the Hold Separate Order obligates SCI 
to provide sufficient working capital to the held

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separate businesses and to provide continued support services as needed 
in the interim. Overall, the Hold Separate Order and the Consent 
Agreement are designed to safeguard competition in the provision of 
death care services in these markets immediately post-acquisition.
    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.
Janice Podoll Frankle,
Acting Secretary.
[FR Doc. 2013-31153 Filed 12-27-13; 8:45 am]
BILLING CODE 6750-01-P