95-693. B.A.T. Industries p.l.c., et al.; Proposed Consent Agreement With Analysis To Aid Public Comment  

  • [Federal Register Volume 60, Number 7 (Wednesday, January 11, 1995)]
    [Notices]
    [Pages 2751-2756]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-693]
    
    
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    FEDERAL TRADE COMMISSION
    
    [Docket No. 9271]
    
    
    B.A.T. Industries p.l.c., et al.; Proposed Consent Agreement With 
    Analysis To Aid Public Comment
    
    AGENCY: Federal Trade Commission.
    
    ACTION: Proposed Consent Agreement.
    
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    SUMMARY: In settlement of alleged violations of federal law prohibiting 
    unfair acts and practices and unfair methods of competition, this 
    consent agreement, accepted subject to final Commission approval, would 
    permit, among other things, B.A.T Industries and Brown & Williamson 
    Tobacco Corporation to consummate the proposed acquisition of American 
    Tobacco Company, but would require them to divest, within twelve 
    months, six American Tobacco discount cigarette brands. If the required 
    divestitures are
    
    [[Page 2752]]
    
    not completed on time, the consent agreement would permit the 
    Commission to appoint a trustee to complete the transactions. In 
    addition, the consent agreement would require the respondents, for ten 
    years, to obtain Commission approval before acquiring any interest in a 
    cigarette manufacturer or any assets used to manufacture or distribute 
    cigarettes in the United States.
    
    DATES: Comments must be received on or before March 13, 1995.
    
    ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
    Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.
    
    FOR FURTHER INFORMATION CONTACT:
    Joseph Krauss, FTC/H-324, Washington, DC 20580. (202) 326-2713.
    
    SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
    Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 3.25(f) of 
    the Commission's rules of practice (16 CFR 3.25(f)), notice is hereby 
    given that the following consent agreement containing a consent order 
    to cease and desist, having been filed with and accepted, subject to 
    final approval, by the Commission, has been placed on the public record 
    for a period of sixty (60) days. Public comment is invited. Such 
    comments or views will be considered by the Commission and will be 
    available for inspection and copying at its principal office in 
    accordance with Sec. 4.9(b)(6)(ii) of the Commission's rules of 
    practice (16 CFR 4.9(b)(6)(ii)).
    
    Agreement Containing Consent Order
    
        The agreement herein, by and between B.A.T Industries p.l.c., Brown 
    & Williamson Tobacco Corporation, by their duly authorized officers, 
    hereafter sometimes referred to as respondents, and their attorneys, 
    and counsel for the Federal Trade Commission, is entered into in 
    accordance with the Commission's rule governing consent order 
    procedures. In accordance therewith the parties hereby agree that:
        1. Respondent B.A.T Industries p.l.c. (BAT) is a public limited 
    company incorporated under the laws of England, with its headquarters 
    and principal place of business located at Windsor House, 50 Victoria 
    Street, London, England, SW1H 0NL.
        2. Respondent Brown & Williamson Tobacco Corporation (B&W) is a 
    corporation organized, existing and doing business under and by virtue 
    of the laws of the State of Delaware with its headquarters and 
    principal place of business located at 1500 Brown & Williamson Tower, 
    P.O. Box 35090, Louisville, Kentucky, 40232.
        3. Respondents have been served with a copy of the complaint issued 
    by the Federal Trade Commission charging them with violation of section 
    5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, and 
    section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and have filed 
    an answer to said complaint denying said charges.
        4. Respondent B&W, and for the purposes only of this agreement and 
    any proceedings arising out of, or to enforce, this agreement, the 
    order herein, and the Preservation Agreement attached hereto as 
    Appendix I, respondent BAT, admit all the jurisdictional facts set 
    forth in the Commission's complaint in this proceeding.
        5. Respondents waive:
        a. Any further procedural steps;
        b. The requirement that the Commission's decision contain a 
    statement of findings of fact and conclusions of law;
        c. All rights to seek judicial review or otherwise to challenge or 
    contest the validity of the order entered pursuant to this agreement; 
    and
        d. Any claim under the Equal Access to Justice Act.
        6. This agreement shall not become part of the public record of the 
    proceeding unless and until it is accepted by the Commission. If this 
    agreement is accepted by the Commission it will be placed on the public 
    record for a period of sixty (60) days and information in respect 
    thereto publicly released. The Commission thereafter may either 
    withdraw its acceptance of this agreement and so notify the 
    respondents, in which event it will take such action as it may consider 
    appropriate, or issue and serve its decision containing the Order 
    herein, in disposition of the proceeding.
        7. This agreement is for settlement purposes only and does not 
    constitute an admission by respondents that the law has been violated 
    as alleged in the Commission's complaint, or that the facts as alleged 
    in the complaint, other than jurisdictional facts, are true.
        8. This agreement contemplates that, if it is accepted by the 
    Commission, and if such acceptance is not subsequently withdrawn by the 
    Commission pursuant to the provisions of Sec. 3.25(f) of the 
    Commission's rules, the Commission may, without further notice to 
    respondents, (1) issue its decision containing the following order to 
    divest in disposition of the proceeding, and (2) make information 
    public with respect thereto. When so entered, the order to divest shall 
    have the same force and effect and may be altered, modified or set 
    aside in the same manner and within the same time provided by statute 
    for other orders. The order shall become final upon service. Delivery 
    by the U.S. Postal Service of the decision containing the agreed-to-
    order to respondent's attorneys, at the addresses as stated in this 
    agreement, shall constitute service. Respondents waive any right they 
    may have to any other manner of service. The complaint may be used in 
    construing the terms of the order, and no agreement, understanding, 
    representation, or interpretation not contained in the order or in the 
    agreement may be used to vary or contradict the terms of the order.
        9. Respondents have read the complaint and order contemplated 
    hereby. Respondents understand that once the order has been issued, 
    they will be required to file one or more compliance reports showing 
    that they have fully complied with the order. Respondents further 
    understand that they may be liable for civil penalties in the amount 
    provided by law for each violation of the order after it becomes final.
    
    Order
    
    I
        It is ordered That, as used in this order, the following 
    definitions shall apply:
        A. BAT means B.A.T Industries p.l.c., its subsidiaries, divisions, 
    and groups, including Brown & Williamson Tobacco Corporation, its 
    subsidiaries, divisions, and groups, and affiliates controlled by Brown 
    & Williamson Tobacco Corporation (``B&W''), their successors and 
    assigns, and their directors, officers, employees, agents, and 
    representatives.
        B. American Brands means American Brands, Inc., its subsidiaries, 
    divisions, and groups, including The American Tobacco Company 
    (``ATC''), their successors and assigns, and their directors, officers, 
    employees, agents, and representatives.
        C. Commission means the Federal Trade Commission.
        D. Acquisition means the acquisition of ATC from American Brand by 
    BAT.
        E. The Reidsville Assets means all real property, fixtures and 
    equipment at ATC's location at North Scales Street, Reidsville, NC 
    27320, including but not limited to, the following:
        1. All machinery, fixtures, equipment, vehicles, transportation 
    facilities, furniture, tools and other tangible personal property;
        2. Inventory and storage capacity;
        3. All rights, titles and interests in and to owned or leased real 
    property, together with appurtenances, licenses and permits;
        Provided however That the Reidsville Assets shall not include:
    
    
    [[Page 2753]]
    
    
    98.50/30--(MISTY 100's) (3) Modules; Maker/Protos, Packer/Focke 350
    120/32--(MISTY 120's) (2) Modules; Maker/Protos, Packer/Focke 350
    120/32--(CARLTON 120's) (1) (Module; Maker/Protos, Packer/Focke 350
    
    Plus supporting equipment dedicated to the above identified brand 
    styles including, but not limited to, plug makers, wrappers if 
    separate, case packers, and routine maintenance parts and specific size 
    parts.
        F. ATC Value Brands means the following brands of cigarettes in the 
    U.S.: Montclair, Riviera, Malibu, Bull Durham, Crowns, and Special 
    Tens.
        G. ATC Full Revenue Brands means the following brands of cigarettes 
    in the U.S.: Tareyton, Silva Thins and Tall.
        H. ATC Brands means the ATC Value Brands together with the ATC Full 
    Revenue Brands.
        I. B&W Brand means the following brand of cigarettes in the U.S.: 
    Belair.
        J. The term Assets means the following tangible and intangible 
    assets exclusively relating to the manufacture, distribution and sale 
    of those of the ATC Value Brands, the ATC Full Revenue Brands 
    (excluding any Reidsville Assets) or the B&W Brand actually being 
    divested (collectively the ``Brands'') including, to the extent they 
    exist, but not limited to:
        1. The Brand profit and loss statements, Brand contribution 
    statements, and Brand advertising, promotional and marketing spend 
    records for each Brand since January 1, 1990;
        2. All trademarks, trade dress, trade secrets, technical 
    information, intellectual property, patents, technology, know-how, 
    tobacco content formulae, designs, specifications, drawings, processes 
    and quality control data exclusively related to any of the Brands;
        3. A bill of materials for each of the Brands, consisting of full 
    manufacturing standards and procedures, quality control specifications, 
    specifications for raw materials and components, including lists of 
    authorized sources for materials and components;
        4. All dedicated molds and equipment currently in use for each of 
    the Brands;
        5. A list of all direct customers who have bought the Brands from 
    ATC or B&W at any time from January 1, 1990, including names, 
    addresses, and telephone numbers of the individual customer contacts, 
    and the unit and dollar amounts of sales, by Brand, to each customer;
        6. All current and projected advertising, promotional and marketing 
    information, materials and programs specifically dedicated to the sale 
    and distribution of each of the Brands;
        7. All inventories of finished goods, packaging and raw materials 
    uniquely relating to each of the Brands;
        8. All names of manufacturers and suppliers under contract with ATC 
    or B&W who produce for, or supply to, ATC or B&W in connection with the 
    manufacture or sale of each of the Brands;
        9. A copy of all product testing required by any regulatory 
    authority specific to the Brands from January 1, 1990, including but 
    not limited to tar and nicotine content testing as required by the FTC 
    and all regulatory registrations and correspondence; and
        10. All price lists for each of the Brand from January 1, 1990.
    II
        It is further ordered That:
        A. BAT and B&W shall divest absolutely and in good faith, within 12 
    months of the date this order becomes final, the ATC Value Brands 
    Assets. BAT and B&W shall also divest to the proposed acquirer of the 
    ATC Value Brands Assets, the Reidsville Assets and the ATC Full Revenue 
    Brands Assets. BAT and B&W shall also divest:
        1. Such additional ancillary assets, formerly of ATC, and effect 
    such arrangements in respect thereof, as are necessary to assure the 
    marketability and the viability of the Reidsville Assets for the 
    manufacture of cigarettes in the United States for sale and consumption 
    in the United States; and
        2. Such additional ancillary physical assets and legal rights, 
    formerly of ATC, as are exclusive to those ATC Brands being divested 
    and are necessary to assure the marketability and the viability of 
    those ATC Brands;
        Provided however, if the divestiture of only the ATC Value Brands 
    Assets is approved by the Commission pursuant to Paragraph II. B., and 
    the divestiture does not include the Reidsville Assets and/or the ATC 
    Full Revenue Brands Assets, the obligations of BAT and B&W to divest 
    under this order shall be satisfied upon the divestiture of the ATC 
    Value Brands Assets.
        B. BAT and B&W shall divest hereunder only to an acquirer that 
    receives the prior approval of the Commission and only in a manner that 
    receives the prior approval of the Commission. The purpose of the 
    divestiture provided herein is to remedy the lessening of competition 
    resulting from the proposed acquisition as alleged in the Commission's 
    complaint and, therefore, if the Reidsville Assets are divested, they 
    shall be used only for the production of cigarettes in the U.S. 
    principally for sale and consumption in the U.S.
        C. Pending divestiture as provided in this Paragraph II, BAT and 
    B&W shall:
        1. Take such actions as are necessary to maintain the viability and 
    marketability of the Reidsville Assets by preventing the destruction, 
    removal, wasting, deterioration, sale, transfer, encumbrance or 
    impairment of any of the Reidsville Assets except for ordinary wear and 
    tear, and
        2. Take such actions as are necessary to maintain the viability and 
    marketability of the ATC Brands Assets by preventing the destruction, 
    sale, transfer, encumbrance or impairment of any of the ATC Brands 
    Assets.
        D. BAT and B&W shall comply with all terms of the Preservation 
    Agreement, attached to this order and made a part hereof as Appendix I. 
    The Preservation Agreement shall continue in effect until the date this 
    order becomes final.
    III
        It is further ordered That:
        A. If BAT and B&W have not divested, absolutely and in good faith 
    and with the Commission's prior approval, as provided in Paragraph II. 
    A., the Commission may appoint a trustee to divest the ATC Value Brands 
    Assets, the B&W Brand Assets and the Reidsville Assets. Upon 
    divestiture under this Paragraph III, the Reidsville Assets shall be 
    used for the production of cigarettes in the U.S. principally for sale 
    and consumption in the U.S. provided, however, that if the Commission 
    has not approved or disapproved a proposed divestiture within 120 days 
    of the date the application for such divestiture has been placed on the 
    public record, the running of the divestiture prior shall be tolled 
    until the Commission approves or disapproves the divestiture. In the 
    event that the Commission or the Attorney General brings an action 
    pursuant to section 5(l) of the Federal Trade Commission Act, 15 U.S.C. 
    45(l), or any other statute enforced by the Commission, BAT and B&W 
    shall consent to the appointment of a trustee in such action. Neither 
    the appointment of a trustee nor a decision not to appoint a trustee 
    under this Paragraph shall preclude the Commission or the Attorney 
    General from seeking civil penalties or any other relief available to 
    it, including a court-appointed trustee, pursuant to section 5(l) of 
    the Federal Trade Commission Act, or any other statute enforced by the 
    Commission, for any failure by BAT and B&W to comply with this order.
        B. If a trustee is appointed by the Commission or a court pursuant 
    to Paragraph III. A. of the order, BAT and
    
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    B&W shall consent to the following terms and conditions regarding the 
    trustee's powers, duties, authority, and responsibilities:
        1. The Commission shall select the trustee, subject to the consent 
    of BAT and B&W, which consent shall not be unreasonably withheld. The 
    trustee shall be a person with experience and expertise in acquisitions 
    and divestitures. If BAT and B&W have not opposed, in writing, 
    including the reasons for opposing, the selection of any proposed 
    trustee within ten (10) days after notice by the staff of the 
    Commission to BAT and B&W of the identity of any proposed trustee, BAT 
    and B&W shall be deemed to have consented to the selection of the 
    proposed trustee.
        2. Subject to the prior approval of the Commission, the trustee 
    shall have the exclusive power and authority to divest the Reidsville 
    Assets, the ATC Value Brands Assets and the B&W Brand Assets.
        3. Within twenty (20) days after appointment of the trustee, BAT 
    and B&W shall execute a trust agreement that, subject to the prior 
    approval of the Commission and, in the case of a court-appointed 
    trustee, of the court, transfers to the trustee all rights and powers 
    necessary to permit the trustee to effect the divestiture required by 
    this order.
        4. The trustee shall have twelve (12) months from the date the 
    Commission approve the trust agreement described in Paragraph III B. 3. 
    to accomplish the divestiture, which shall be subject to the prior 
    approval of the Commission. If, however, at the end of the twelve-month 
    period, the trustee has submitted a plan of divestiture or believes 
    that divestiture can be achieved within a reasonable time, the 
    divestiture period may be extended by the Commission, or, in the case 
    of a court-appointed trustee, by the court; provided, however, the 
    Commission may extend this period only two (2) times.
        5. The trustee shall have full and complete access to the 
    personnel, books, records and facilities related to the Reidsville 
    Assets, the ATC Value Brands Assets and the B&W Brand Assets or to any 
    other revelant information, as the trustee may request, and shall take 
    all reasonable steps to ensure that the confidentiality is maintained 
    of matters and documents so designated by either of the respondents. 
    BAT and B&W shall develop such financial or other information as such 
    trustee may request and shall cooperate with the trustee. BAT and B&W 
    shall take no action to interfere with or impede the trustee's 
    accomplishment of the divestitures. Any delays in divestiture caused by 
    BAT and B&W shall extend the time for divestiture under this Paragraph 
    in an amount equal to the delay, as determined by the Commission or, 
    for a court-appointed trustee, by the court.
        6. The trustee shall use his or her best efforts to negotiate the 
    most favorable price and terms available in each contract (which may 
    include provision for the contract manufacture of cigarettes) that is 
    submitted to the Commission, subject to BAT's and B&W's absolute and 
    unconditional obligation to divest at no minimum price. The divestiture 
    shall be made in the manner and to the acquirer as set out in Paragraph 
    II B. of this order; provided, however, if the trustee receives bona 
    fide offers from more than one acquiring entity, and if the Commission 
    determines to approve more than one such acquiring entity, the trustee 
    shall divest to the acquiring entity selected by BAT and B&W from among 
    those approved by the Commission.
        7. The trustee shall serve, without bond or other security, at the 
    cost and expense of BAT and B&W, on such reasonable and customary terms 
    and conditions as the Commission or a court may set. The trustee shall 
    have the authority to employ, at the cost and expense of BAT and B&W, 
    such consultants, accountants, attorneys, investment bankers, business 
    brokers, appraisers, and other representatives and assistants as are 
    necessary to carry out the trustee's duties and responsibilities. The 
    trustee shall account for all monies derived from the divestiture and 
    all expenses incurred. After approval by the Commission and, in the 
    case of a court-appointed trustee, by the court, of the account of the 
    trustee, including fees for his or her services, all remaining monies 
    shall be paid at the direction of the BAT and B&W, and the trustee's 
    power shall be terminated. The trustee's compensation shall be based at 
    least in significant part on a commission arrangement contingent on the 
    trustee's divesting the Reidsville Assets, the ATC Value Brands Assets 
    and the B&W Brand Assets.
        8. BAT and B&W shall indemnify the trustee and hold the trustee 
    harmless against any losses, claims, damages liabilities, or expenses 
    arising out of, or in connection with, the performance of the trustee's 
    duties, including all reasonable fees of counsel and other expenses 
    incurred in connection with the preparation for, or defense of any 
    claims, whether or not resulting in any liability, except to the extent 
    that such liabilities, losses, damages, claims, or expenses result from 
    misfeasance, gross negligence, willful or wanton acts, or bad faith by 
    the trustee. BAT and B&W shall be responsible for the defense of any 
    and all claims against the trustee under this subsection and the 
    trustee shall do and omit nothing which may prejudice such defense.
        9. If the trustee ceases to act or fails to act diligently, a 
    substitute trustee shall be appointed in the same manner as provided in 
    Paragraph III A. of this order.
        10. The Commission or, in the case of a court-appointed trustee, 
    the court, may on its own initiative or at the request of the trustee 
    issue such additional orders or directions as may be necessary or 
    appropriate to accomplish the divestiture required by this order.
        11. The trustee shall have no obligation or authority to operate or 
    maintain the Reidsville Assets, the ATC Value Brands Assets and the B&W 
    Brand Assets.
        12. The trustee shall report in writing to BAT and B&W and the 
    Commission every sixty (60) days concerning the trustee's efforts to 
    accomplish divestiture.
        13. The trustee shall note, in his or her recommendation to the 
    Commission, whether the proposed acquirer, or any other entity 
    controlling or commonly controlled by the proposed acquirer, has, 
    directly or indirectly, in any jurisdiction in the world and at any 
    time within the last five years, had goods that it manufactured or 
    supplied seized, impounded or destroyed by any authority pursuant to a 
    claim of infringement of any intellectual property or other right over 
    or in respect to those goods.
    IV
        It is further ordered That, for a period of ten (10) years from the 
    date this order becomes final, BAT and B&W shall not, without the prior 
    approval of the Commission, directly or indirectly, through 
    subsidiaries, partnerships, or otherwise:
        A. Acquire any stock, share capital, equity, or other interest in 
    any concern, corporate or non-corporate, engaged at the time of such 
    acquisition, or within the two years preceding such acquisition, in the 
    manufacture in the United States of cigarettes for consumption in the 
    United States, or
        B. Acquire any assets used for or previously used for (and still 
    suitable for use for) the manufacture, distribution, or sale in the 
    United States of cigarettes.
        Provided, however, that this Paragraph IV shall not apply to
    
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    transactions entered into in the ordinary course of business.
    V
        It is further ordered That:
        A. Within sixty (60) days after the date this order becomes final 
    and every sixty (60) days thereafter until BAT and B&W have fully 
    complied with the provisions of Paragraphs II and III of this order, 
    BAT and B&W shall submit to the Commission a verified written report 
    setting forth in detail the manner and form in which they intend to 
    comply, are complying, and have complied with Paragraphs II and III of 
    this order. BAT and B&W shall include in their compliance reports, 
    among other things that are required from time to time, a full 
    description of the efforts being made to comply with Paragraphs II and 
    III of the order, including a description of all substantive contacts 
    or negotiations for the divestiture and the identity of all parties 
    contacted. BAT and B&W shall include in their compliance reports copies 
    of all written communications to and from such parties, all internal 
    memoranda, and all reports and recommendations concerning divestiture.
        B. One year (1) from the date this order becomes final, annually 
    for the next nine (9) years on the anniversary of the date this order 
    becomes final, and at other times as the Commission may require, BAT 
    and B&W shall file a verified written report with the Commission 
    setting forth in detail the manner and form in which they have complied 
    and are complying with Paragraph IV of this order.
    VI
        It is further ordered That BAT and B&W shall notify the Commission 
    at least thirty (30) days prior to any proposed change in the 
    corporations, such as dissolution, assignment, sale resulting in the 
    emergence of a successor corporation, or the creation or dissolution of 
    subsidiaries or any other change in the corporations, that in each case 
    may affect compliance obligations arising out of the order.
    VII
        It is further ordered That, for the purpose of determining or 
    securing compliance with this order, subject to any legally recognized 
    privilege, BAT and B&W shall permit any duly authorized representative 
    of the Commission:
        A. Upon written notice to counsel, access, during office hours and 
    in the presence of counsel, to inspect and copy all books, ledgers, 
    accounts, correspondence, memoranda and other records and documents in 
    the possession or under the control of BAT and B&W relating to any 
    matters contained in this order; and
        B. Upon five days' written notice to counsel and without restraint 
    or interference from BAT and B&W, to interview officers, directors, or 
    employees of BAT and B&W, who may have counsel present.
    
    Appendix I
    
    Preservation Agreement
    
        This Preservation Agreement is by and between B.A.T. Industries 
    p.l.c., a public limited company incorporated under the laws of 
    England, with its headquarters and principal place of business located 
    at Windsor House, 50 Victoria Street, London, England, SW1H 0NL 
    (``BAT''), Brown & Williamson Tobacco Corporation, a corporation 
    incorporated under the laws of the State of Delaware with its 
    headquarters and principal place of business located at 1500 Brown & 
    Williamson Tower, PO Box 35090, Louisville, Kentucky (``B&W''), and the 
    Federal Trade Commission, an independent agency of the United States 
    Government, established under the Federal Trade Commission Act of 1914, 
    15 U.S.C. 41, et seq.
    
    Premises for Agreement
    
        Whereas, BAT pursuant to an agreement dated April 26, 1994, agreed 
    to purchase substantially all of the outstanding stock of the American 
    Tobacco Company (``ATC''), a whole owned subsidiary of American Brands, 
    Inc.; and
        Whereas, the Commission has reason to believe that the agreement 
    would violate section 5 of the Federal Trade Commission Act, and that, 
    if consummated, would violate section 7 of the Clayton Act and section 
    5 of the Federal Trade Commission Act, statutes enforced by the 
    Commission, and the Commission has issued its administrative complaint 
    challenging the agreement; and
        Whereas, if the parties accept the attached Agreement Containing 
    Consent Order (``Consent Agreement''), the Commission is required to 
    place it on the public record for a period of sixty (60) days for 
    public comment and may subsequently withdraw such acceptance pursuant 
    to the provisions of Sec. 3.25(f) of the Commission's rules; and
        Whereas, the Commission is concerned that if an agreement is not 
    reached preserving the status quo ante of the Reidsville Assets and the 
    ATC Brands Assets during the period prior to final acceptance of the 
    Order by the Commission (after the 60-day comment period), any 
    divestiture resulting from any proceeding challenging the legality of 
    the acquisition might not be possible, or might produce a less than 
    effective remedy; and
        Whereas, the Commission is concerned that if the acquisition is 
    consummated, it will be necessary to preserve the continued viability 
    and marketability of the Reidsville Assets and the ATC Brands Assets, 
    as defined in the Consent Agreement; and
        Whereas, the purpose of this Preservation Agreement and of the 
    Consent Agreement is to preserve the Reidsville Assets and the ATC 
    Brands Assets until the date this Order becomes final, in order to 
    remedy any anticompetitive effects of the acquisition; and
        Whereas, BAT's and B&W's entering into this Preservation Agreement 
    shall in no way be construed as an admission by BAT and B&W that the 
    acquisition is anticompetitive or illegal; and
        Whereas, BAT and B&W understand that no act or transaction 
    contemplated by this Preservation Agreement shall be deemed immune or 
    exempt from the provisions of the antitrust laws, or the Federal Trade 
    Commission Act by reason of anything contained in this Preservation 
    Agreement;
        Now, therefore, in consideration of the Commission's agreement 
    that, unless the Commission determines to reject the Consent Agreement, 
    it will not seek further relief from the parties with respect to the 
    acquisition, except that the Commission may exercise any and all rights 
    to enforce this Preservation Agreement, and the Consent Agreement to 
    which this Preservation Agreement, is annexed and made a part thereof, 
    and the final order in this proceeding, and, in the event the required 
    divestiture is not accomplished, to appoint a trustee to seek the 
    divestiture of the Reidsville Assets, the ATC Value Brands Assets and 
    the B&W Brand Assets as provided in the Consent Agreement, the parties 
    agree as follows:
    
    Terms of Agreement
    
        1. BAT and B&W agree to execute, and upon its issuance, to be bound 
    by the attached Consent Agreement.
        2. BAT will be free to close the acquisition with American Brands 
    immediately after the Commission's approval of the Consent Agreement 
    for placement on the public record for comment.
        3. BAT and B&W agree that from the date this Preservation Agreement 
    is signed by BAT and B&W until the earliest of the dates listed in 
    subparagraphs 3.a and 3.b they will
    
    [[Page 2756]]
    
    comply with the provisions of this Preservation Agreement:
        a. Three business days after the Commission withdraws its 
    acceptance of the Consent Agreement pursuant to the provisions of 
    Sec. 3.25(f) of the Commission's rules; or
        b. The day the order becomes final.
        4. From the time BAT and B&W sign this Preservation Agreement until 
    the date the order becomes final, BAT and B&W shall:
        a. Take such actions as are necessary to maintain the viability and 
    marketability of the Reidsville Assets by preventing the destruction, 
    removal, wasting, deterioration, sale, transfer, encumbrance or 
    impairment of any of the Reidsville Assets except for ordinary wear and 
    tear, and
        b. Take such actions as are necessary to maintain the viability and 
    marketability of the ATC Brands Assets by preventing the destruction, 
    sale, transfer, encumbrance or impairment of any of the ATC Brands 
    Assets.
        5. BAT and B&W also waive all rights to contest the validity of 
    this agreement.
        6. For the purpose of determining or securing compliance with this 
    agreement, subject to any legally recognized privilege, and upon 
    written request with reasonable notice to counsel for BAT or B&W, BAT 
    or B&W shall permit any duly authorized representative or 
    representatives of the Commission:
        a. Access during the office hours of BAT or B&W, in the presence of 
    counsel, to inspect and copy all books, ledgers, accounts, 
    correspondence, memoranda and other records and documents in the 
    possession or under the control of BAT or B&W relating to compliance 
    with this agreement; and
        b. Upon five (5) days' notice to BAT or B&W and without restraint 
    or interference from them, to interview officers or employees of BAT or 
    B&W, who may have counsel present, regarding any such matters.
        7. This agreement shall not be binding on the Commission until 
    approved by the Commission.
    
    Analysis of Proposed Consent Order To Aid Public Comment
    
        The Federal Trade Commission (``the Commission'') has accepted, 
    subject to final approval, an agreement containing a proposed consent 
    order from B.A.T Industries p.l.c. (``BAT'') and Brown & Williamson 
    Tobacco Corporation (``B&W''). The proposed consent order has been 
    placed on the public record for sixty (60) days for reception of 
    comments by interested persons. comments received during this period 
    will become part of the public record. After sixty (60) days, the 
    Commission will again review the agreement and the comments received 
    and will decide whether it should withdraw from the agreement or make 
    final the agreement's proposed order.
        The Commission's investigation of this matter concerns the 
    acquisition of The American Tobacco Company (``ATC''), a wholly-owned 
    subsidiary of American Brands, Inc. by BAT. B&W, BAT's wholly-owned 
    subsidiary, and ATC are the third and fifth largest manufacturers of 
    cigarettes, respectively, in the United States. In its administrative 
    complaint, the Commission alleges, among other things, that the United 
    States cigarette market is highly concentrated and would become 
    substantially more concentrated as a result of the acquisition. The 
    Commission also alleges that it has reason to believe that the 
    acquisition would have anticompetitive effects and would violate 
    section 7 of the Clayton Act and section 5 of the Federal Trade 
    Commission Act. The agreement containing consent order would, if 
    finally accepted by the Commission, settle charges that the acquisition 
    may substantially lessen competition in the manufacture and sale of 
    cigarettes in the United States.
        The order, accepted for public comment, contains provisions 
    requiring BAT and B&W to divest certain brands of cigarettes and 
    cigarette manufacturing facilities. The order requires BAT and B&W to 
    divest, within twelve (12) months, six discount cigarette brands, 
    formerly owned by ATC, including Montclair, Riviera, Malibu, Bull 
    Durham, Crowns and Special Tens. The order also requires BAT and B&W to 
    divest to the purchaser of the discount brands, three former ATC full 
    revenue brands, Tareyton, Silva Thins and Tall, and the former-ATC 
    cigarette manufacturing facility located at Reidsville, North Carolina. 
    Under the terms of the divestiture, BAT and B&W may satisfy the 
    divestiture requirements without divesting the full revenue brands and/
    or the Reidsville facility, if the Commission approves the divestiture 
    of only the discount brands as satisfying the remedial concerns of the 
    order. The purpose of the divestiture is to remedy the lessening of 
    competition resulting from the acquisition as alleged in the 
    Commission's complaint and, therefore, if the Reidsville facility is 
    divested, it is to be used only for the production of cigarettes in the 
    United States principally for sale and consumption in the United 
    States.
        Under the terms of the order, if BAT and B&W fail to complete the 
    divestiture within the required period, the Commission may appoint a 
    trustee to divest the six discount cigarette brands, the Reidsville 
    facility and Belair, a B&W full revenue cigarette.
        Any proposed divestiture pursuant to the order must be approved by 
    the Commission after the divestiture proposal has been placed on the 
    public record for reception of comments from interested persons. The 
    Preservation Agreement executed as part of the agreement containing the 
    consent order requires BAT and B&W, until the order becomes final, to 
    take actions as are necessary to maintain the viability and 
    marketability of the former ATC brands of cigarettes and the Reidsville 
    facility.
        For a period of ten years from the date the order becomes final, 
    the order prohibits BAT and B&W from acquiring, without prior 
    Commission approval, stock or assets of, or interests in, any company 
    engaged in the manufacture and sale of cigarettes in the United States.
        The purpose of this analysis is to facilitate public comment on the 
    proposed order, and it is not intended to constitute an official 
    interpretation of the agreement and proposed order or to modify in any 
    way their terms.
    Benjamin I. Berman,
    Acting Secretary.
    [FR Doc. 95-693 Filed 1-10-95; 8:45 am]
    BILLING CODE 6750-01-M
    
    
    

Document Information

Published:
01/11/1995
Department:
Federal Trade Commission
Entry Type:
Notice
Action:
Proposed Consent Agreement.
Document Number:
95-693
Dates:
Comments must be received on or before March 13, 1995.
Pages:
2751-2756 (6 pages)
Docket Numbers:
Docket No. 9271
PDF File:
95-693.pdf