[Federal Register Volume 62, Number 31 (Friday, February 14, 1997)]
[Notices]
[Pages 7041-7050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-3698]
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DEPARTMENT OF JUSTICE
Antitrust Division
Proposed Final Judgment and Competitive Impact Statement; United
States v. Signature Flight Support Corporation
Notice is hereby given pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. Sec. 16(b)-(h), that a proposed Final
Judgment, Stipulation, and Competitive Impact Statement have been filed
with the United States District Court for the District of Columbia in
United States v. Signature Flight Support Corporation, Civil No. 97-
0248. The proposed Final Judgment is subject to approval by the Court
after the expiration of the statutory 60-day public comment period and
compliance with the Antitrust Procedures and Penalties Act, 15 U.S.C.
Sec. 16(b)-(h).
On February 3, 1997, the United States filed a Complaint seeking to
enjoin a transaction in which Signature Flight Support Corporation
(``Signature'') agreed to acquire International Aviation Palm Beach,
Inc. (``International Aviation''). Signature and International Aviation
are two of three fixed base operators (``FBOs'')
[[Page 7042]]
located at Palm Beach International Airport (``PBI'') in West Palm
Beach, Florida. FBOs provide terminals, fueling, hangars and other
services to general aviation customers, such as businesses and
individuals with private planes. Signature's proposed acquisition of
International Aviation would have created a duopoly at PBI. The
Complaint alleged that the proposed acquisition would substantially
lessen competition in providing FBO services, such as jet fueling and
hangar and ramp rental space, to general aviation customers at PBI in
violation of Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.
The proposed Final Judgment orders Signature to sell certain of its
assets and leaseholds of its FBO business at PBI to a purchaser who has
the capability to compete effectively in the provision of FBO services
to general aviation customers at PBI. The Stipulation also imposes a
hold separate agreement that, in essence, requires the defendant to
ensure that, until the divestiture mandated by the Final Judgment has
been accomplished, Signature's FBO business at PBI will be held
separate and apart from, and operated independently of, any of its
other FBO assets and businesses. A Competitive Impact Statement filed
by the United States describes the Complaint, the proposed Final
Judgment, and remedies available to private litigants.
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. Written comments should be
directed to Roger W. Fones, Chief, Transportation, Energy and
Agriculture Section, Antitrust Division, 325 Seventh Street, N.W.,
Suite 500, Washington, D.C. 20530 (telephone: (202) 307-6351). Copies
of the Complaint, Stipulation, proposed Final Judgment and Competitive
Impact Statement are available for inspection in Room 215 of the U.S.
Department of Justice, Antitrust Division, 325 Seventh Street, N.W.,
Washington, D.C. 20530 (telephone: (202) 514-2481) and at the office of
the Clerk of the United States District Court for the District of
Columbia, 333 Constitution Avenue, N.W., Washington, D.C. 20001.
Copies of any of these materials may be obtained upon request and
payment of a copying fee.
Constance K. Robinson,
Director of Operations, Antitrust Division.
United States District Court, District of Columbia
United States of America, Plaintiff, v. Signature Flight Support
Corporation, Defendant. Civil Action No. 97-0248
Stipulation and Order
It is stipulated by and between the undersigned parties, by their
respective attorneys, as follows:
1. The 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;
2. The parties stipulate that a Final Judgment in the form hereto
attached may be filed and entered by the Court, upon the motion of any
party or upon the 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 plaintiff 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 defendant and by filing that
notice with the Court;
3. Defendant Signature (as defined in paragraph II.A of the
proposed Final Judgment attached hereto) shall abide by and comply with
the provisions of the proposed Final Judgment pending entry of the
Final Judgment, or until expiration of time for all appeals of any
court ruling declining entry of the proposed Final Judgment, and shall,
from the date of the signing of this Stipulation, 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 the Court; provided,
however, that Signature shall not be obligated to comply with Sections
IV through VIII of the proposed Final Judgment unless and until the
closing of any transaction in which Signature directly or indirectly
acquires all or any part of the assets or capital stock of
International Aviation (as defined in paragraph II.B of the proposed
Final Judgment attached hereto);
4. Defendant shall not consummate the transaction before the Court
has signed this Stipulation and Order;
5. In the event plaintiff withdraws its consent, as provided in
paragraph 2 above, or in the event 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 the Court has not otherwise ordered continued compliance
with the terms and provisions of the proposed Final Judgment, then the
parties are released from all further obligations under this
Stipulation, and the making of this Stipulation shall be without
prejudice to any party in this or any other proceeding.
6. The defendant represents that the divestiture ordered in the
proposed Final Judgment can and will be made, and that the defendant
will later raise no claims of hardship or difficulty as grounds for
asking the Court to modify any of the divestiture provisions contained
therein.
Dated: February 5, 1997.
For Plaintiff United States of America:
Joel I. Klein,
Acting Assistant Attorney General.
Constance K. Robinson,
Director of Operations
Charles Biggio,
Senior Counsel.
Roger W. Fones,
Chief.
Donna N. Kooperstein,
Ass't Chief.
Kelly Signs, Michele B. Cano, Robert McGeorge, Michael Harmonis,
Attorneys, U.S. Departmental of Justice, Antitrust Division,
Transportation, Energy and Agriculture Department, 325 Seventh Street,
N.W., Suite 500, Washington, D.C. 20530, (202) 307-6475.
For Defendant Signature Flight Support Corporation:
Bruce Van Allen,
Senior Vice President--Operations.
Paul J. Mokris,
General Counsel.
Freeborn & Peters
By: William C. Holmes,
A Member of the Firm, Suite 3000, 311 South Wacker Driver, Chicago,
Illinois 60606-6677, (312) 360-6000.
So Ordered:
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United States District Judge
Dated:
Final Judgment
Whereas, plaintiff, United States of America (hereinafter ``United
States''), having filed its Complaint herein on February 5, 1997, and
plaintiff and defendant, by their respective attorneys, having
consented to the entry of this Final Judgment without trial or
adjudication of any issue of fact or law herein and without this Final
Judgment constituting any evidence against or an admission by any party
with respect to any issue of law or fact herein:
And whereas, defendant has agreed to be bound by the provisions of
this Final Judgment pending its approval by the Court;
And whereas, prompt and certain divestiture is the essence of this
agreement to assure that competition is not substantially lessened; And
Whereas, plantiff requires defendant to make this divestiture for
the purpose
[[Page 7043]]
of remedying the loss of competition alleged in the complaint;
And whereas, defendant has represented to plaintiff that the
divestiture required below can and will be made and that defendant will
later raise no claims of hardship or difficulty as grounds for asking
the Court to modify any of the divestiture provisions contained below:
Now, therefore, before the taking of any testimony and without
trial or adjudication of any issue of fact or law herein, and upon
consent of the parties thereto, it is hereby
Ordered, Adjudged and Decreed as follows:
I. Jurisdiction
This Court has jurisdiction over the subject matter of this action
and over each of the parties hereto. The Complaint states a claim upon
which relief may be granted against defendant under Section 7 of the
Clayton Act, as amended (15 U.S.C. Sec. 18).
II. Definitions
As used in this Final Judgment:
A. ``Signature'' means Signature Flight Support Corporation, a
Delaware corporation with its headquarters in Orlando, Florida, and
includes its successors and assigns, its parents, subsidiaries,
affiliates, and directors, officers, managers, agents, and employees
acting for or on behalf of any of them.
B. ``International Aviation'' means International Aviation Palm
Beach, Inc., a Florida corporation with its headquarters in West Palm
Beach, Florida, and includes its successors and assigns, its parents,
subsidiaries, affiliates, and directors, officers, managers, agents,
and employees acting for or on behalf of any of them.
C. ``The Assets to be Divested'' means all rights, titles and
interests, including all fee, leasehold and real property rights, in
the following assets, owned or controlled by Signature, that are used
by Signature to provide fuel and other services to general aviation
customers at PBI Airport:
1. The existing Signature terminal and office building (building
#1626), as shown on the attached map.
2. Approximately 71,000 square feet of hangar space, consisting of
the existing Signature hangar buildings #1625, 1627, 1628 and 1629.
3. The existing Signature fuel farm adjacent to Signature hangar
building #1627, consisting of approximately one-half acre, as shown on
the attached map.
4. Approximately 23.5 acres of ramp space adjacent to the foregoing
buildings, as shown on the attached map.
5. Approximately 2.5 acres of parking space, as shown on the
attached map.
6. Existing office furniture, lobby furniture, phone system,
radios, television, towing equipment, golf carts, pickup truck,
refuellers, ground power units and other equipment and supplies
necessary and appropriate to provide a viable FBO at the foregoing
facilities.
7. Contracts (including, but not limited to, customer contracts)
and customer lists.
D. ``PBI Airport'' means Palm Beach International Airport, located
in West Palm Beach, Florida.
E. ``FBO'' means any or all services related to providing fixed
based operator services, including, but not limited to, selling fuel,
leasing hangar, ramp and office space, providing flight support
services, performing maintenance, providing access to terminal
facilities, or arranging for ancillary services such as limousines,
rental cars or hotels.
III. Applicability
A. The provisions of this Final Judgment shall apply to defendant,
its successors and assigns, parents, subsidiaries, affiliates,
directors, officers, managers, agents, and employees, and to all other
persons in active concert or participation with any of them who shall
have received actual notice of this Final Judgment by personal service
or otherwise.
B. Defendant shall require, as a condition of the sale or other
disposition of all or substantially all of the assets of its business,
that the purchaser of such assets agree to be bound by the provisions
of the Final Judgment; provided however, that defendant need not obtain
such an agreement from the acquirer of The Assets to be Divested in the
divestiture contemplated herein.
IV. Divestiture of the Assets To Be Divested
A. Defendant is hereby ordered and directed in accordance with the
terms of this Final Judgment, within one hundred and eighty (180)
calendar days of the filing of this Final Judgment, or within five (5)
business days after notice of entry of this Final Judgment, whichever
is later, to divest The Assets to be Divested to a purchaser acceptable
to the plaintiff, in its sole discretion.
B. Divestiture of Signature's leasehold interest in any of The
Assets to be Divested shall be by transfer of the entire leasehold
interest which shall be for the entire remaining term of such leasehold
including all renewal or option rights.
C. Defendant shall use its best efforts and take all reasonable
steps to accomplish the divestiture as expeditiously as possible. If
defendant has not accomplished the required divestiture within the one
hundred and eight (180) calendar day period specified in section IV.A,
the plaintiff may, in its sole discretion, extend the time period for
two (2) additional periods of time, not to exceed ninety (90) calendar
days in total.
D. In accomplishing the divestiture ordered by this Final Judgment,
defendant promptly shall make known, by usual and customary means, the
availability for sale of The Assets to be Divested. Defendant shall
notify any person making an inquiry regarding the possible purchase of
The Assets to be Divested that the sale is being made pursuant to this
Final Judgment and provide such person with a copy of the Final
Judgment. Defendant shall make known to any person making an inquiry
regarding a possible purchase of The Assets to be Divested that the
assets described in Section II.C. are being offered for sale. Defendant
shall also offer to furnish to all bona fide prospective purchasers of
The Assets to be Divested, subject to customary confidentiality
assurances, all information regarding The Assets to be Divested
customarily provided in a due diligence process, except information
subject to attorney-client privilege or attorney work product
privilege. Defendant shall make available such information to the
plaintiff at the same time that such information is made available to
any other person. Subject to customary confidentiality assurance,
defendant shall permit prospective purchasers of The Assets to be
Divested to have access to its personnel, to make inspection of The
Assets to be Divested, and to have access to financial, operational,
and other documents and information relating to The Assets to be
Divested, as customarily provided as part of a due diligence process.
E. Unless the United States otherwise consents in writing, the
divestiture pursuant to Section IV.A, or by the trustee appointed
pursuant to Section V of this Final Judgment, shall include all of The
Assets to be Divested and be accomplished by selling or otherwise
conveying The Assets to be Divested to a purchaser in such a way as to
satisfy the United States, in its sole discretion, that The Assets to
be Divested can and will be used by the purchaser as part of a viable,
ongoing business engaged in the provision of FBO services at PBI. The
divestiture, whether pursuant to
[[Page 7044]]
Section IV or Section V of this Final Judgment, shall be made to a
purchaser for whom it is demonstrated to the United States' sole
satisfaction, that: (1) the purchaser has the capability and intent of
competing effectively in the provision of FBO services at PBI; (2) the
purchaser has or soon will have the managerial, operational, and
financial capability to compete effectively in the provision of FBO
services at PBI; and (3) none of the terms of any agreement between the
purchaser and defendant give defendant the ability unreasonably to
raise the purchaser's costs, to lower the purchaser's efficiency, or
otherwise to interfere in the ability of the purchaser to compete
effectively in the provision of FBO service at PBI.
V. Appointment of Trustee
A. In the event that defendant has not divested The Assets to be
Divested within the time specified in Sections IV.A or IV.C of this
Final Judgment, the Court shall appoint, on application of the United
States, a trustee selected by the United States to effect the
divestiture of The Assets to be Divested.
B. After the appointment of a trustee becomes effective, only the
trustee shall have the right to sell The Assets to be Divested. The
trustee shall have the power and authority to accomplish the
divestiture at the best price then obtainable upon a reasonable effort
by the trustee, subject to the provisions of Sections V and VI of this
Final Judgment, and shall have such other powers as the Court shall
deem appropriate. Subject to Section V.C. of this Final Judgment, the
trustee shall have the power and authority to hire at the cost and
expense of defendant any investment bankers, attorneys, or other agents
reasonably necessary in the judgment of the trustee to assist in the
divestiture, and such professionals and agents shall be accountable
solely to the trustee. The trustee shall have the power and authority
to accomplish the divestiture at the earliest possible time to a
purchaser acceptable to the United States, and shall have such other
powers as this Court shall deem appropriate. Defendant shall not object
to a sale by the trustee on any grounds other than the trustee's
malfeasance. Any such objections by defendant must be conveyed in
writing to plaintiffs and the trustee within ten (10) calendar days
after the trustee has provided the notice required under Section VI of
this Final Judgment.
C. The trustee shall serve at the cost and expense of defendant, on
such terms and conditions as the Court may prescribe, 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 the 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 defendant and the trust shall then be
terminated. The compensation of such trustee and of any professionals
and agents retained by the trustee shall be reasonable in light of the
value of The Assets to be Divested 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.
D. Defendant shall use its 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, book,
records, and facilities of defendant, and defendant shall develop
financial or other information relevant to such assets as the trustee
may reasonably request, subject to reasonable protection for trade
secret or other confidential research, development, or commercial
information. Defendant shall take no action to interfere with or to
impede the trustee's accomplishment of the divestiture.
E. After its appointment, the trustee shall file monthly reports
with the parties and the Court setting forth the trustee's efforts to
accomplish the divestiture ordered under this Final Judgment. If the
trustee has not accomplished such divestiture within six (6) months
after its appointment, the trustee thereupon shall file promptly with
the Court a report setting forth (1) the trustee's efforts to
accomplish the required divestiture, (2) the reasons, in the trustee's
judgment, that the required divestiture has not been accomplished, and
(3) the trustee's recommendations; provided, however, that to the
extent such reports contain information that the trustee deems
confidential, such reports shall not be filed in the public docket of
the Court. The trustee shall at the same time furnish such report to
the parties, who shall each have the right to be heard and to make
additional recommendations consistent with the purpose of the trust.
The Court shall enter thereafter such orders as it shall deem
appropriate in order to carry out the purpose of the trust, which may,
if necessary, include extending the trust and the term of the trustee's
appointment by a period requested by the plaintiffs.
VI. Notification
Within two (2) business days following execution of a definitive
agreement, contingent upon compliance with the terms of this Final
Judgment, to effect, in whole or in part, any proposed divestiture
pursuant to Section IV or V of this Final Judgment, defendant or the
trustee, whichever is then responsible for effecting the divestiture,
shall notify plaintiff of the proposed divestiture. If the trustee is
responsible, it shall similarly notify defendant. The notice shall set
forth the details of the proposed transaction and list the name,
address, and telephone number of each person not previously identified
who offered to, or expressed an interest in or a desire to, acquire any
ownership interest in the assets that are the subject of the binding
contract, together with full details of same. Within fifteen (15)
calendar days of receipt by plaintiff of such notice, plaintiff may
request from defendant, the proposed purchaser, any other third party,
or the trustee if applicable additional information concerning the
proposed divestiture and the proposed purchaser. Defendant and the
trustee shall furnish nay additional information requested within
fifteen (15) calendar days of the receipt of the request, unless the
parties shall otherwise agree. Within thirty (30) calendar days after
receipt of the notice or within twenty (20) calendar days after
plaintiff has been provided the additional information requested from
defendant, the proposed purchaser, any third party, and the trustee,
whichever is later, the United States shall provide written notice to
defendant and the trustee, if there is one, stating whether or not it
objects to the proposed divestiture. If the United States provides
written notice to defendants and the trustee that it does not object,
then the divestiture may be consummated, subject only to defendant's
limited right to object to the sale under Section V.B of this Final
Judgment. Absent written notice that the United States does not object
to the proposed purchaser or upon objection by the United States, a
divestiture proposed under Section IV shall not be consummated. Upon
objection by the United States, or by defendant under the proviso in
Section V.B, a divestiture proposed under Section V shall not be
consummated unless approved by the Court.
VII. Affidavits
A. Within twenty (20) calendar days of the closing of any
transaction in which signature directly or indirectly acquires all or
any part of the assets or
[[Page 7045]]
capital stock of International Aviation, and every thirty (30) calendar
days thereafter until the divestiture has been completed whether
pursuant to Section IV or Section V of this Final Judgment, defendant
shall deliver to plaintiff an affidavit as to the fact and manner of
defendant's compliance with Section IV or V of this Final Judgment.
Each such affidavit shall include, inter alia, the name, address, and
telephone number of each person who, at any time after the period
covered by the last such report, 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
Assets to be Divested, and shall describe in detail each contact with
any such person during that period.
B. Within twenty (20) calendar days of the filing of this Final
Judgment, defendant shall deliver to plaintiff an affidavit which
describes in detail all actions defendant has taken and all steps
defendant has implemented on an on-going basis to preserve The Assets
to be Divested pursuant to Section IX of this Final Judgment and
describes the functions, duties and actions taken by or undertaken at
the supervision of the individual(s) described at Section IX.H of this
Final Judgment with respect to defendant's efforts to preserve The
Assets to be Divested. The affidavit also shall describe, but not be
limited to, defendant's efforts to maintain and operate The Assets to
be Divested as an active competitor, maintain the management, sales,
marketing and pricing of The Assets to be Divested apart from that of
defendant's other businesses that provide FBO services, maintain and
increase sales of defendant's FBO operation at PBI, and maintain The
Assets to be Divested in operable condition, continuing normal
maintenance. Defendant shall deliver to plaintiff an affidavit
describing any changes to the efforts and actions outlined in
defendant's earlier affidavit(s) filed pursuant to this Section within
fifteen (15) calendar days after the change is implemented.
C. Defendant shall preserve all records of all efforts made to
preserve and divest The Assets to be Divested.
VIII. Financing
Defendant shall not finance all or nay part of any divestiture made
pursuant to Sections IV or V of this Final Judgment without the prior
written consent of the United States.
IX. Preservation of Assets
Until the divestiture required by the Final Judgment has been
accomplished:
A. Defendant shall take all steps necessary to ensure that The
Assets to be Divested will be maintained and operated as an ongoing,
economically viable and active competitor in the provision of FBO
services; and that, except as necessary to comply with Sections IX to
IX.H of this Final Judgment, the management of The Assets to be
Divested shall be kept separate and apart form the management of
defendant's other FBO operations and will not be influenced by
defendant, and the books, records, and competitively sensitive sales,
marketing and pricing information associated with The Assets to be
Divested will be kept separate and apart from that of defendant's other
businesses that provide FBO services.
B. Defendant shall take all steps necessary to ensure that The
Assets to be Divested are fully maintained in operable condition and
shall maintain and adhere to normal maintenance schedules for The
Assets to be Divested.
C. Defendant shall provide and maintain sufficient sources of
credit to maintain The Assets to be Divested as a viable, ongoing
business.
D. Defendant shall provide and maintain sufficient working capital
to maintain The Assets to be Divested as a viable, ongoing business.
E. Defendant shall not, except as part of a divestiture approved by
the United States, remove, sell, or transfer any of The Assets to be
Divested, other than sales in the ordinary course of business.
F. Unless it has obtained the prior approval of the United States,
defendant shall not terminate or reduce the current employment, salary,
housing, or benefit arrangements for any personnel employed by
defendant who work at, or have managerial responsibility for, The
Assets to be Divested, except in the ordinary course of business.
G. Defendant shall take no action that would jeopardize its ability
to divest The Assets to be Divested as a viable, ongoing business.
H. Defendant shall appoint a person or persons to oversee The
Assets to be Divested, and who will be responsible for defendant's
compliance with Section IX of this Final Judgment.
X. Compliance Inspection
Only for the purposes of determining or securing compliance with
the Final Judgment and subject to any legally recognized privilege,
from time to time:
A. Duly authorized representatives of the plaintiff, including
consultants and other persons retained by the United States, upon
written request of the Assistant Attorney General in charge of the
Antitrust Division, and on reasonable notice to defendant made to its
principal offices, shall be permitted:
(1) Access during office hours of defendant to inspect and copy all
books, ledgers, accounts, correspondence, memoranda, and other records
and documents in the possession or under the control of defendant, who
may have counsel present, relating to enforcement of this Final
Judgment; and
(2) Subject to the reasonable convenience of defendant and without
restraint or interference from it, to interview its officers,
employees, and agents, who may have counsel present, regarding any such
matters.
B. Upon the written request of the Assistant Attorney General in
charge of the Antitrust Division made to defendant's principal offices,
defendant shall submit such written reports, under oath is requested,
with respect to enforcement of this Final Judgment.
C. No information or documents obtained by the means provided in
Section VII or X of this Final Judgment shall be divulged by a
representative of the plaintiff to any person other than a duly
authorized representative of the Executive Branch of the United States,
except in the course of legal proceedings to which the plaintiff 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 information or documents are furnished by
defendant to plaintiff, defendant represents and identifies 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 defendant marks each pertinent page of such
material, ``Subject to claim of protection under Rule 26(c)(7) of the
Federal Rules of Civil Procedure,'' then ten (10) calendar days notice
shall be given by plaintiff to defendant prior to divulging such
material in any legal proceeding (other than a grand jury proceeding).
XI. Retention of Jurisdiction
Jurisdiction is retained by this Court for the purpose of enabling
any of the parties to this Final Judgment to apply to this Court at any
time for such further orders and directions as may be necessary or
appropriate for the construction or carrying out of this Final
Judgment, for the modification of any of the provisions hereof, for the
enforcement of compliance herewith, and for the punishment of any
violations hereof.
[[Page 7046]]
XII. Termination
Unless this Court grants an extension, this Final Judgment will
expire on the tenth anniversary of the date of its entry.
XIII. Public Interest
Entry of this Final Judgment is in the public interest.
Dated:-----------------------------------------------------------------
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United States District Judge
This page could not be reprinted in the Federal Register,
however, it may be inspected in Suite 215, U.S. Department of
Justice, Legal Procedures Unit, 325 7th St., N.W., Washington, D.C.
at (202) 514-2481 and at the Office of the Clerk of the United
States Court for the District of Columbia.
Competitive Impact Statement
The United States, pursuant to Section 2(b) of the Antitrust
Procedures and Penalties Act (``APPA''), 15 U.S.C. Secs. 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 February 5, 1997, the United States filed a Complaint alleging
that the proposed acquisition of International Aviation Palm Beach,
Inc. (hereinafter ``International Aviation'') by Signature Flight
Support Corporation, (hereinafter ``Signature'') would violate Section
7 of the Clayton Act, 15 U.S.C. Sec. 18. The Complaint alleges that
Signature and International Aviation are two of three providers of
fixed base operator (``FBO'') services for general aviation customers
at Palm Beach International airport (``PBI'') located in West Palm
Beach, Florida, and that this transaction will combine them. Signature
and International Aviation compete head-to-head on price and quality of
services to general aviation customers. This acquisition would
eliminate this competition, reducing the number of competitors from
three to two, creating a FBO duopoly at PBI. As a result, the effect of
the merger would be to give Signature the market power to raise prices
and lower the quality of services to PBI general aviation customers.
The merger would also make coordinated behavior by Signature and Jet
Aviation (the other remaining FBO) easier, resulting in higher prices.
Thus, the proposed acquisition is likely to lessen competition
substantially in the market for FBO services at PBI in violation of
Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec. 18. The prayer
for relief in the Complaint seeks (1) a judgment that the proposed
acquisition would violate Section 7 of the Clayton Act; and (2) a
preliminary and permanent injunction preventing Signature and
International Aviation from consummating the proposed acquisition.
At the same time the Complaint was filed, the United States also
filed a proposed settlement that would permit Signature to complete its
acquisition of International Aviation, but requires a divestiture that
would preserve competition for general aviation customers at PBI. This
settlement consists of a Stipulation and Order, and a proposed Final
Judgment.
The proposed Final Judgment orders Signature to sell certain FBO
assets (hereinafter ``The Assets to be Divested'') to a purchaser who
has the capability to compete effectively in the provision of FBO
services to general aviation customers at PBI. The Assets to be
Divested include Signature's terminal building, four hangars, a fuel
farm, and adjacent ramp and parking space. Signature must complete the
divestiture of these FBO assets before the later of one hundred and
eighty (180) calendar days after the consummation of the proposed
acquisition of International Aviation of five (5) days after entry of
the Final Judgment, in accordance with the procedures specified in the
proposed Final Judgment. If Signature should fail to accomplish the
divestiture, a trustee appointed by the Court would be empowered to
divest these assets.
The Stipulation and Order and the proposed Final Judgment also
impose a hold separate agreement that requires defendant to ensure
that, until the divestiture mandated by the Final Judgment has been
accomplished, The Assets to be Divested will be held separate and apart
from, and operated independently of, Signature's other FBO assets and
businesses.
The United States and Signature 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
the Court would retain jurisdiction to construe, modify, or enforce the
provisions of the proposed Final Judgment and to punish violations
thereof.
II. Events Giving Rise to the Alleged Violation
A. The Parties and the Proposed Transaction
On March 22, 1996, Signature, International Aviation, International
Aviation Teterboro Inc. and IAS Holdings, Inc. (the parent of
International Aviation and International Aviation Teterboro, Inc.)
entered into an agreement under which Signature would seek to acquire
the assets of the three companies for approximately $18 million.
Signature is a wholly owned subsidiary of BBA Group PLC, a British
holding company. Signature is a Delaware corporation with its principal
place of business in Orlando, Florida. Signature operates a nationwide
network of 34 FBOs throughout the United States, including one at PBI.
Signature's total revenues for fiscal year 1995 were $233 million.
International Aviation operates an FBO at PBI airport in West Palm
Beach, Florida, International Aviation is a subsidiary of IAS Holdings,
Inc., which, in conjunction with its subsidiary International Aviation
Teterboro, Inc., also operates FBO facilities at Westchester County
(NY) airport, and Teterboro (NJ) airport.
B. The FBO Services Market
FBOs are facilities located at commercial airports that provide
flight support services, including aircraft fueling, ramp and hangar
rentals, office space rentals, and other services to general aviation
customers. General aviation customers include charter, private and
corporate aircraft operators, as distinguished from scheduled
commercial airlines. Last year, general aviation customers purchased
around $1 billion of jet fuel from FBOs nationwide.
FBO services include sales of jet aviation (``Jet A'') fuel and
aviation gasoline (``avgas''), and ramp, hangar and office space
rental. FBOs do not charge separately for many services offered to
general aviation customers, such as use of customer and pilot lounges,
baggage handling, and flight planning support; rather, they recover the
costs for these services in the price that they charge for fuel. There
are some services for which FBOs do charge separately, such as hangar
rental, office space rental, ramp parking fees, catering, cleaning the
aircraft, arranging ground transportation and maintenance on the
aircraft. General aviation customers generally buy fuel from the same
FBO from which they obtain other services.
The largest source of revenue for an FBO is its fuel revenues. FBOs
sell Jet A fuel for jet aircraft, turboprops and helicopters, and avgas
for smaller, piston driven planes. In 1995, Jet A fuel sales at PBI
were approximately $15 million; avgas sales were less than $1 million.
Revenues for hangar rentals and parking fees at PBI in 1995 were
approximately $1 million.
[[Page 7047]]
The Complaint alleges that the provision of FBO services to general
aviation customers at PBI is a relevant market (i.e., a line of
commerce and a section of the country) under Section 7 of the Clayton
Act. General aviation customers cannot obtain fuel, hangar, ramp and
other services offered at PBI, except through an FBO authorized to sell
such products and services by the local airport authority. Thus,
general aviation customers have no alternatives to FBOs for these
products and services when they land at PBI.
FBOs at other airports would not provide economically practical
alternatives for general aviation customers who currently use PBI.
Although there are a number of smaller airports in the region, they are
not economically viable substitutes for PBI general aviation customers.
General aviation customers use PBI because of its location, convenience
and facilities. General aviation customers have chosen PBI because of
its proximity to their ultimate destination (whether their residence,
business or other place); using a different airport would significantly
increase their driving time. PBI has facilities that other airports
lack: longer runways, precision instrument landing capability, a 24-
hour landing tower, and a U.S. Customs facility. Because of these and
other factors, there are not enough general aviation customers who have
selected PBI as their airport who would switch to other airports to
prevent anticompetitive price increases for fuel and other services at
PBI resulting from this acquisition.
In addition, post-acquisition price increases at PBI for fuel would
not be prevented by efforts of general aviation customers to decrease
fuel purchases at PBI by increasing fuel purchases at airports outside
the region. Carrying more fuel than is necessary to reach the next
destination is referred to in the industry as ``tankering.'' Most
pilots tanker to some extent in response to fuel prices; that is, they
buy more fuel at their origin if it is significantly cheaper so they
can buy less at their destination (or vice versa). Tankering, however,
would prevent a post-merger fuel price increase only if it would
increase significantly after the merger, resulting in significant lost
fuel sales at PBI. For a number reasons, PBI general aviation customers
are not likely to change their current tankering practices enough to
prevent a post-merger fuel price increase at PBI. First, tankering is
not possible on all flights, particularly on those that are near the
aircraft's maximum range. Second, some pilots are unwilling to carry
around excess fuel due to safety concerns. Third, tankering itself is
costly: fuel is heavy and the extra weight requires that more fuel be
burned, and there is additional wear and tear on the engine and landing
gear. These added costs mean that only large fuel price differences can
induce tankering.
Available data confirmed that tankering is unlikely to prevent a
post-merger fuel price increase at PBI. Using information on average
prices and quantities of jet fuel sold at PBI, we estimated the
elasticity of demand for Jet A fuel at PBI. The demand for Jet A fuel
at PBI is inelastic. The elasticity was estimated to be about .7, which
indicates that tankering, and all other forms of substitution, would
not lead to a fuel sales decrease at PBI sufficient to deter a price
increase.
C. Competition Between Signature and International Aviation
Signature and International Aviation are direct competitors in the
provision of FBO services to general aviation customers at PBI. All
three FBOs at PBI compete over price and service packages.
General aviation customers have benefited from competition between
Signature and International Aviation at PBI, receiving lower prices and
improved FBO services. The elimination of this competition would reduce
competition significantly in the market for FBO services to general
aviation customers at PBI. Because Signature and International
Aviation's facilities are close competitive alternatives for a
substantial number of general aviation customers at PBI, competition
between these FBOs limits the ability of each FBO to raise prices. This
merger would eliminate the price constraining impact each has on the
other.
In addition, as a result of Signature's acquisition of
International Aviation, a duopoly would be created at PBI, making it
easier for the two remaining firms to coordinate with one another and
raise prices and lower the quality of FBO services to general aviation
customers at PBI.
New entry is not likely to check Signature's ability to raise
prices or reduce service as a result of the acquisition. The airport
has set aside land for an additional FBO. Although that site is
currently in use as the airport's antennae farm, the antennae farm
could, at a cost, be relocated. There are additional sunk costs of
entering, including costs associated with construction of ramp,
terminal, hangar and fueling facilities. In this case, all of this
necessary preparation could be completed within a reasonable period of
time; that is, there are no insurmountable obstacles to timely entry.
That new entry could occur within a reasonable period of time, however,
is a necessary but not sufficient condition for new entry to prevent
the anticompetitive effects of the merger.
The ultimate issue is whether a firm would enter the market on a
scale sufficient to cause prices to fall to pre-merger levels. The
answer depends not only on whether entry on that scale is possible, but
whether it would be profitable in the post-acquisition environment.
Here, after taking into account the sunk costs required for entry on
the airport, the likely margins an entrant would earn over time at pre-
merger prices, and the discount or ``hurdle'' rates typically used in
the FBO industry to make similar investment decisions, it appears that
entry at PBI would be profitable only if the entrant could build a
significantly smaller facility but still achieve a market share similar
to that of the three current competitors, all without significantly
underpricing its PBI rivals. Because an entrant is not likely to be
able to lure customers away from incumbents without offering
significant discounts or providing a better facility, post-merger entry
is unlikely to occur at PBI.
D. Anticompetitive Consequences of the Acquisition
The Complaint alleges that the combination of Signature and
International Aviation would substantially increase concentration in
the market for the provision of FBO services at PBI, using the
Herfindahl-Hirschman Index (``HHI'') \1\ as a measure of market
concentration. The post-merger HHI, based on Jet A gallons sold in 1995
at PBI, would be approximately 5450 with a change in HHI of about 2000
points. For that year, International Aviation sold approximately 40% of
the throughput at PBI, and Signature accounted for approximately 25% of
sales. If the proposed acquisition were consummated, the combined
company
[[Page 7048]]
would account for 65% of the jet fuel sales at PBI.
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\1\ The Herfindahl-Hirschman Index, or ``HHI,'' is a commonly
accepted measure of market concentration. It is calculated by
squaring the market share of each firm competing in the market and
then summing the resulting numbers. For example, for a market
consisting of four firms with shares of thirty, thirty, twenty, and
twenty percent, the HHI is 2600 (30\2\+30\2\+20\2\+20\2\=2600). The
HHI takes into account the relative size and distribution of the
firms in a market and approaches zero when a market consists of a
large number of firms of relatively equal size. The HHI increases
both as the number of firms in the market decreases and as the
disparity in size between those firms increases. Markets in which
the HHI is between 1000 and 1800 are considered to be moderately
concentrated, and those in which the HHI is in excess of 1800 points
are considered to be concentrated.
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The Complaint further alleges that the acquisition of International
Aviation by Signature would substantially lessen competition. The
transaction would have the following effects, among others:
1. actual competition between Signature and International Aviation
in the market for FBO services at PBI will be eliminated;
2. competition generally in the market for FBO services at PBI is
likely to be substantially lessened;
3. prices for fuel sold to general aviation customers at PBI are
likely to increase.
Several sources of data were examined in this case to determine the
likely effect of reducing the number of FBOs at PBI from three to two.
Using estimates of the PBI Jet A fuel demand elasticity and other
information, a standard economic model of competition among sellers of
differentiated products predicted an overall average increase in the
price of Jet A fuel at PBI on the order of four percent in the event
that the merger were allowed to occur without a divestiture. Also, an
analysis of margins earned by Signature at its many different airports
suggested that reducing the number of competitors from three to two
tends to increase average price by about five percent.
III. Explanation of the Proposed Final Judgment
The United States brought this action because the effect of the
acquisition of International Aviation by Signature may be substantially
to lessen competition, in violation of Section 7 of the Clayton Act, in
the market for FBO services to general aviation customers at PBI. The
risk to competition posed by this acquisition, however, would be
eliminated if certain assets and leases currently held by Signature to
operate its PBI FBO business were sold and assigned to a purchaser that
could operate them as an active, independent and financially viable
competitor. To this end, the provisions of the proposed Final Judgment
are designed to accomplish the sale and assignment of certain assets
and leaseholds to such a purchaser and thereby prevent the
anticompetitive effects of the proposed acquisition.
Section IV of the proposed Final Judgment requires defendant
Signature, within one hundred and eighty (180) calendar days after
acquiring International Aviation, to divest the bulk of its FBO
business, as set out in Section II.C (hereinafter ``The Assets to be
Divested'') of the proposed Final Judgment. Unless the United States
otherwise consents in writing, Signature is required to divest its
interests in its terminal building, four hangars, its fuel farm, and
ramp and parking space adjacent to these facilities. In addition,
Signature shall divest such equipment and supplies as is necessary and
appropriate to operate a viable FBO at PBI. Finally, Signature shall
transfer its contracts, including customer contracts, and customer
lists, for providing FBO services at PBI.
Divestiture of the assets and leaseholds will cure the potential
anticompetitive consequences of Signature's acquisition of
International Aviation. The Assets to be Divested include all the ramp,
hangar, terminal, parking, and fuel farm assets that have been used by
Signature in providing FBO services at PBI. Together with the
equipment, supplies and customer contracts and lists, these assets will
give a qualified purchaser the means to establish itself as a
competitive alternative to Signature and Jet Aviation. Thus, as a
result of the divestiture required by the proposed Final Judgment,
general aviation consumers at PBI will continue to have a choice among
three competitive FBOs.
Under the proposed Final Judgment, Signature must take all
reasonable steps necessary to accomplish quickly the divestiture of The
Assets to be Divested, and shall cooperate with bona fide prospective
purchasers by supplying all information relevant to the proposed sale.
Should Signature fail to complete its divestiture within one hundred
and eighty (180) calendar days, the Court will appoint, pursuant to
Section V, a trustee to accomplish the divestiture. The United States
will have the discretion to delay the appointment of the trustee for up
to an additional three months should it appear that the assets can be
sold in the extended time period.
Following the trustee's appointment, only the trustee will have the
right to sell the diversiture assets, and defendant Signature will be
required to pay for all of the trustee's sale-related expenses. The
trustee's compensation will be structured so as to provide an incentive
for the trustee to obtain the highest price for the assets to be
divested, and to accomplish the divestiture as quickly as possible.
Section VI of the proposed Final Judgment would assure the United
States an opportunity to review any proposed sale, whether by Signature
or by the trustee, before it occurs. Under this provision, the United
States is entitled to receive complete information regarding any
proposed sale or any prospective purchaser prior to consummation. Upon
objection by the United States to a sale of the divestiture assets by
the defendant Signature, a proposed divestiture may not be completed.
Should the United States object to a sale of the divested assets by the
trustee, that sale shall not be consummated unless approved by the
Court.
Pursuant to Section V.E, should the trustee not accomplish the
divestiture within six months of appointment, the trustee and the
parties will make recommendation to the Court, which shall enter such
orders as it deems appropriate to carry out the purpose of the trust,
which may include extending the trust of the term of the trustee's
appointment.
Under Section IX of the proposed Final Judgment, defendant
Signature must take certain steps to ensure that, until the required
divestiture has been completed, the divestiture assets will be
maintained as a separate, ongoing, viable business and kept distinct
from Signature's other FBO operations. Until such divestiture,
Signature must also continue to maintain and operate the divestiture
assets as a viable, independent competitor at PBI, using all reasonable
efforts to maintain and increase sales of FBO services to general
aviation customers. Signature must maintain the business, so that it
continues to be stable, including maintaining all records, loans, and
personnel necessary for its operation.
Section X requires the defendant to make available, upon request,
the business records and the personnel of its business. This provision
allows the United States to inspect its facilities and ensure that the
defendant is complying with the requirements of the proposed Final
Judgment. Section XII of the proposed Final Judgment provides that it
will expire on the tenth anniversary of its entry by the Court.
IV. Remedies Available to Potential Private Litigants
Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any
person who has been injured as a result of conduct prohibited by the
antitrust laws may bring suit in federal court to recover three times
the damages the person has suffered, as well as costs and reasonable
attorney's 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.
Sec. 16(a), the proposed Final Judgment has no prima facie effect in
any subsequent private
[[Page 7049]]
lawsuit that may be brought against the defendant.
V. Procedure for Commenting on the Proposed Final Judgment
The United States and defendant have stipulated that the proposed
Final Judgment may be entered by the Court after compliance with the
provisions of the APPA, provided that the United States has not
withdrawn its consent. The APPA conditions entry upon the 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 the Court and published in the Federal Register.
Written comments should be submitted to: Roger W. Fones, Chief,
Transportation, Energy & Agriculture Section, Antitrust Division, 325
Seventh Street, N.W., Suite 500, Washington, D.C. 20530.
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 of its Complaint against
Signature. The United States is satisfied, however, that the
divestiture of the assets and other relief contained in the proposed
Final Judgment will preserve viable competition in the provision of FBO
services to general aviation customers at PBI that otherwise would be
affected adversely by the acquisition. Thus, the compliance with the
proposed Final Judgment and the completion of the sale required by the
Judgment would achieve the relief the government would have obtained
through litigation, but avoids the time, expense, and uncertainty of a
full trial on the merits of the government's Complaint.
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. Sec. 16(e). As the United States Court of Appeals for the
D.C. Circuit has held, this statute 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, 56 F.3d 1448, 1461-62 (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.'' \2\ Rather,
\2\ 119 Cong. Rec. 24598 (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. 93-1463, 93rd
Cong. 2d Sess. 8-9, reprinted in (1974) U.S. Code Cong. & Ad. News
6535, 6538.
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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.
United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. para.
61,508, at 71,980 (W.D. Mo. 1977).
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 1460-62. Precedent requires that
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
effectiveness of antitrust enforcement by consent decree.\3\
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\3\ United States v. Bechtel, 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 Microsoft, 56 F.3d at 1461 (whether ``the
remedies [obtained in the decree are] so inconsonant with the
allegations charged as to fall outside of the `reaches of the public
interest.' '') (citations omitted).
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.' (citations
omitted).'' \4\
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\4\ United States v. American Tel. and Tel. Co., 552 F. Supp.
131, 150 (D.D.C. 1982), aff'd sub nom, Maryland v. United States,
460 U.S. 1001 (1983), quoting United States v. Gillette Co., supra,
406 F. Supp. at 716; United States v. Alcan Aluminum, Ltd., 605 F.
Supp. 619, 622 (W.D. Ky. 1985).
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VIII. Determinative Materials and Documents
There are no materials or documents that the United States
considered to be determinative in formulating this proposed Final
Judgment. Accordingly, none are being filed with this Competitive
Impact Statement.
Dated: February 5, 1997.
[[Page 7050]]
Respectfully submitted,
Kelly Signs, Michele B. Cano, Robert McGeorge, Michael Harmonis,
Trial Attorneys, U.S. Department of Justice, Antitrust Division,
Transportation, Energy and Agriculture Section, Suite 500, 325 Seventh
Street, N.W., Washington, D.C. 20530, (202) 307-6351.
[FR Doc. 97-3698 Filed 2-13-97; 8:45 am]
BILLING CODE 4410-11-M
