[Federal Register Volume 59, Number 143 (Wednesday, July 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18260]
[[Page Unknown]]
[Federal Register: July 27, 1994]
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FEDERAL TRADE COMMISSION
[File No. 941 0075]
Revco D.S., Inc.; 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
require, among other things, a Ohio-based drugstore chain to divest,
within one year of the order, to a Commission approved acquirer, all
assets related to the retail sale of prescription drugs in either the
respondent's store or in the acquired Hook-SupeRx (HSI) retail store in
each of three geographic areas, and to complete the divestiture within
one year. If not complete in that period of time, the order would
require the respondent to consent to the appointment of a trustee to
divest the assets. In addition, the proposed consent agreement would
require the respondent to obtain prior Commission approval, for ten
years, before acquiring any similar business interest in any of the
three specified towns.
DATES: Comments must be received on or before September 26, 1994.
ADDRESSES: Comments should be directed to FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., N.W., Washington, DC. 20580.
FOR FURTHER INFORMATION CONTACT:Laura Wilkinson or Ann Malester, FTC/S-
2224, Washington, DC 20580. (202) 226-2830 or 326-2682.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the following consent agreement containing a consent order
to divest, 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
Section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR
4.9(b)(6)(ii)).
In the matter of Revco D.S., Inc., a corporation. File No. 941-
0075.
Agreement Containing Consent Order
The Federal Trade Commission (``Commission'') having initiated an
investigation of the proposed acquisition of all of the voting stock of
Hook SupeRx, Inc. (``HSI''), by Revco D.S., Inc. (``Revco''), and it is
now appearing that Revco, hereinafter sometimes referred to as
``Proposed Respondent,'' is willing to enter into an agreement
containing an order (``Agreement'') to divest certain assets, and to
cease and desist from making certain acquisitions, and providing for
certain other relief:
It is hereby agreed by and between Proposed Respondent, by its duty
authorized officers and attorneys, and counsel for the Commission that:
1. Proposed Respondent Revco is a corporation organized, existing,
and doing business under and by the virtue of the laws of the State of
Delaware with its office and principal place of business located at
1925 Enterprise Parkway, Twinsburg, Ohio 44087.
2. Proposed Respondent admits all the jurisdictional facts set
forth in the draft of complaint here attached.
3. Proposed Respondent waives:
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.
4. 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, together with the draft of
complaint contemplated thereby, 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 Proposed Respondent, in which event
it will take such action as it may consider appropriate, or issue and
serve its complaint (in such form as the circumstances may require) and
decision, in disposition of the proceeding.
5. This Agreement is for settlement purposes only and does not
constitute an admission by Proposed Respondent that the law has been
violated as alleged in the draft of complaint here attached, or that
the facts as alleged in the draft complaint, other than the
jurisdictional facts, are true.
6. 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 Section 2.34 of the
Commission's Rules, the Commission may, without further notice to the
Proposed Respondent, (1) issue its complaint corresponding in form and
substance with the draft of complaint here attached and its decision
containing the following Order to divest and to cease and desist in
disposition of the proceeding, and (2) make information public with
respect thereto. When so entered, the Order 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 United
States Postal Service of the complaint and decision containing the
agreed-to Order to Proposed Respondent's address as stated in this
Agreement shall constitute service. Proposed Respondent waives any
right it may have to any other manner of services. 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 the agreement may be used to vary or contradict the terms of
the Order.
7. Proposed Respondent has read the proposed Complaint and Order
contemplated hereby. Proposed Respondent understands that once the
Order has been issued, it will be required to file one or more
compliance reports showing that it has fully complied with the Order.
Proposed Respondent further understands that it 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. ``Revco'' means Revco D.S., Inc., its predecessors,
subsidiaries, divisions, groups and affiliates controlled by Revco, and
their respective directors, officers, employees, agents,
representatives, and their respective successors and assigns.
B. ``Commission'' means the Federal Trade Commission.
C. ``Acquisition'' means the acquisition of all the voting stock of
Hook-SupeRx, Inc. (``HSI`'') by Respondent Revco.
D. ``Acquirer'' means the party or parties to whom Respondent Revco
divests the assets herein ordered to be divested.
E. ``Prescription drugs'' means ethical drugs available at retail
only by prescription.
F. ``HSI Pharmacy Business'' means HSI's business of selling
prescription drugs at any of the retail stores listed in Paragraph
I.(J). of this Order, but does not include HSI's business of selling
other products in those retail stores.
G. ``HSI Pharmacy Assets'' means all assets constituting the HSI
Pharmacy Business, excluding those assets pertaining to the Hook,
SupeRx, and Brooks trade names, trade dress, trade marks and service
marks, and to Revco's proprietary point of sale equipment or its
PAL system, and including but not limited to:
1. Leases, at the Acquirer's option;
2. zoning approvals and registrations, at the Acquirer's option;
3. books, records, manuals, and operations reports relating to the
HSI Pharmacy Business, but only if the divestiture is to an Acquirer
that does not already operate a pharmacy in any location;
4. inventory instruction, or, at the Acquirer's option, lists of
stock keeping units (``SKUs''), i.e., all forms, package sizes and
other units in which prescription drugs are sold and which are used in
records of sales and inventories;
5. lists of all prescription drug customers, including but not
limited to third party insurers, including all files of names,
addresses, and telephone numbers of the individual customer contacts,
the unit and dollar amounts of sales, by product, to each customer, and
store profit and loss statement(s);
6. all names and addresses of prescription drug manufacturers and
distributors that supply or have supplied HSI within the six months
preceding the date this Order becomes final; and
7. goodwill, tangible and intangible, utilized in the sale of
prescription drugs.
H. ``Revco Pharmacy Business'' means Revco's business of selling
prescription drugs at any of the retail stores listed in Paragraph
I.(J). of this Order, but does not include Revco's business of selling
other products in those retail stores.
I. ``Revco Pharmacy Assets'' means all assets constituting the
Revco Pharmacy Business, excluding those assets pertaining to the Revco
trade names, trade dress, trade marks and service marks, and to Revco's
proprietary point of sale equipment or its PAL system, and
including but not limited to:
1. Leases, at the Acquirer's option;
2. zoning approvals and registrations, at the Acquirer's option;
3. books, records, manuals, and operations reports, relating to the
Revco Pharmacy Business, but only if the divestiture is to an Acquirer
that does not already operate a pharmacy in any location;
4. inventory instruction, or, at the Acquirer's option, lists of
SKUs, i.e., all forms, package sizes and other units in which
prescription drugs are sold and which are used in records of sales and
inventories;
5. lists of all prescription drug customers, including but not
limited to third party insurers, including all files of names,
addresses, and telephone numbers of the individual customer contacts,
the unit and dollar amounts of sales, by product, to each customer, and
store profit and loss statement(s);
6. all names and addresses of prescription drug manufacturers and
distributors that supply or have supplied Revco within the six months
preceding the date this Order becomes final; and
7. goodwill, tangible and intangible, utilized in the sale of
prescription drugs.
J. ``Assets To Be Divested'' means either the HSI Pharmacy Assets
or the Revco Pharmacy Assets constituting the HSI Pharmacy Business or
the Revco Pharmacy Business in the following cities or towns:
1. Covington, Virginia;
2. Marion, Virginia; and
3. Radford, Virginia.
K. ``Competitiveness, viability and marketability'' of the Assets
To Be Divested mean that Respondent shall continue the operation of the
Assets To Be Divested in the ordinary course of business without
material change or alteration that would adversely affect the value or
goodwill of the Assets To Be Divested.
II
It is further ordered That:
A. Respondent shall divest, absolutely and in good faith, within
twelve (12) months of the date this Order becomes final, the Assets To
Be Divested.
B. Respondent shall divest the Assets To Be Divested only to an
acquirer or acquirers that receive the prior approval of the Commission
and only in a manner that receives the prior approval of the
Commission. The purpose of the divestiture of the Assets To Be Divested
is to ensure the continued use of the Assets To Be Divested as ongoing
viable pharmacies engaged in the same businesses in which the Assets To
Be Divested are presently employed and to remedy the lessening of
competition resulting from the acquisition as alleged in the
Commission's complaint.
C. Pending divestiture of the Assets To Be Divested, Respondent
shall take such actions as are necessary to maintain the
competitiveness, viability and marketability of the Assets To Be
Divested and to prevent the destruction, removal, wasting,
deterioration, or impairment of any Assets To Be Divested except for
ordinary wear and tear.
D. If a divestiture includes a lease of physical space, and if
pursuant to that lease Respondent through default of the lease or
otherwise regains possession of the space, Respondent must notify the
Commission of such repossession within thirty (30) days and must
redivest such assets or interest pursuant to Paragraph II of this Order
within six (6) months of such repossession. If Respondent has not
redivested such assets or interest pursuant to Paragraph II of this
Order within six (6) months of such repossession, the provisions of
Paragraph III shall apply to these assets.
III
It is further ordered That:
A. If Respondent has not divested, absolutely and in good faith and
with the Commission's prior approval, the Assets To Be Divested within
twelve (12) months of the date this Order becomes final, the Commission
may appoint a trustee to divest the Assets To Be Divested. In the event
the Commission or the Attorney General brings an action pursuant to
Sec. 5(l) of the Federal Trade Commission Act, 15 U.S.C. Sec. 45(l), or
any other statute enforced by the Commission, Respondent 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 Sec. 5(l) of the Federal Trade
Commission Act, or any other statute enforced by the Commission, for
any failure by Respondent to comply with this Order.
B. If a trustee is appointed by the Commission or a court pursuant
to Paragraph III.A. of this Order, Respondent 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 Respondent, which consent shall not be unreasonably withheld. The
trustee shall be a person with experience and expertise in acquisitions
and divestitures. If Respondent has 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 Respondent
of the identity of any proposed trustee, Respondent 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 Assets To Be
Divested.
3. Within ten (10) days after appointment of the trustee,
Respondent 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 approves 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.
5. The trustee shall have full and complete access to the
personnel, books, records, and facilities related to the Assets To Be
Divested, or to any other relevant information, as the trustee may
reasonably request. Respondent shall develop such financial or other
information as such trustee may reasonably request and shall cooperate
with the trustee. Respondent shall take no action to interfere with or
impede the trustee's accomplishment of the divestiture. Any delays in
divestiture caused by Respondent 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 that is
submitted to the Commission subject to Respondent's absolute and
unconditional obligation to divest at no minimum price. The divestiture
shall be made in the manner and to the acquirer or acquirers as set out
in Paragraph II of this Order. Provided, however, if the trustee
receives bona fide offers from more than one acquirer, and if the
Commission determines to approve more than one such acquirer, the
trustee shall divest to the acquirer or acquirers selected by
Respondent from among those approved by the Commission.
7. The trustee shall serve, without bond or other security, at the
cost and expense of Respondent, on such reasonable and customary terms
and conditions as the Commission or a court may set. The trustee shall
have authority to employ, at the cost and expense of Respondent, such
consultants, accountants, attorneys, investment bankers, business
brokers, appraisers, and other representatives and assistants as are
reasonably 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 Respondent 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 Assets To Be Divested.
8. Respondent 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, and Respondent shall either defend against such claims or pay
the trustee's expenses, including all reasonable fees of counsel and
other expenses incurred in connection with the preparation for, or
defense of any such claim, 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.
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 Assets To Be Divested.
12. The trustee shall report in writing to Respondent and to the
Commission every sixty (60) days concerning the trustee's efforts to
accomplish divestiture.
IV
It is further ordered That, for a period of ten (10) years from the
date this Order becomes final, Respondent shall not, without the prior
approval of the Commission, directly or indirectly, through
subsidiaries, partnerships, or otherwise: (A) Acquire any stock, share
capital, equity, leasehold or other interest in any concern, corporate
or non-corporate, presently engaged in, or within the six months
preceding such acquisition engaged in, the business of selling
prescription drugs at retail stores located in any of the cities or
towns listed in Paragraph I. (J). of this Order; or (B) Acquire any
assets used for, or previously used for (and still suitable for use
for), the business of selling prescription drugs at retail stores
located in any of the cities or towns listed in Paragraph I.(J). of
this Order from any concern, corporate or non-corporate, presently
engaged in or within the six months preceding such acquisition engaged
in, the business of selling prescription drugs at retail stores located
in any of the cities or towns listed in Paragraph I.(J). of this Order.
Provided, however, that these prohibitions shall not relate to the
construction of new facilities.
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 Respondent has fully
complied with the provisions of Paragraphs II. and III. of this Order,
Respondent shall submit to the Commission a verified written report
setting forth in detail the manner and form in which it intends to
comply, is complying, and has complied with those provisions.
Respondent shall include in its 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. Respondent also
shall include in its compliance reports copies of all written
communications to and from such parties, all internal memoranda, and
all reports and recommendations concerning divestiture.
B. One (1) year from the date this Order becomes final, annually
thereafter for the next nine (9) years on the anniversary of the date
this Order became final, and at such other times as the Commission may
require, Respondent shall file a verified written report with the
Commission setting forth in detail the manner and form in which it has
complied and is complying with Paragraph IV. of this Order.
VI
It is further ordered That Respondent shall notify the Commission
at least thirty (30) days prior to any proposed change in the corporate
respondent 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 corporation that 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, Respondent shall permit any duly
authorized representative of the Commission:
A. 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 Respondent relating to any matters contained in this
consent order; and
B. Upon five (5) days notice to Respondent, and without restraint
or interference from it, to interview officers, directors, or employees
of Respondent, who may have counsel present, regarding such matters.
Analysis of Proposed Consent Order to Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted
provisionally an agreement containing a proposed Consent Order from
Revco D.S., Inc. (``Revco'') under which Revco would divest pharmacy
assets in three (3) geographic locations where it faces limited
competition. Revco operates the Revco chain of drug stores.
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.
On March 31, 1994 Revco and Hook-SupeRx, Inc. (``HSI'') executed an
Agreement and Plan or Merger providing for the acquisition by Revco of
all of the voting securities of HSI. The proposed complaint alleges
that the proposed acquisition, if consummated, would constitute a
violation of Section 7 of the Clayton Act, as amended, 15 U.S.C.
Sec. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. Sec. 45,
in the market for the sale of prescription drugs in retail stores in
the following towns: Covington, Virginia; Marion, Virginia; and
Radford, Virginia (hereinafter ``relevant geographic area''). The
proposed Consent Order would remedy the alleged violation by
maintaining the current number of competitors in the relevant
geographic areas where Revco and HSI are direct competitors and where
they face limited competition.
The proposed Consent Order provides that within one (1) year of the
Order becoming final, Revco shall divest all assets related to the
retail sale of prescription drugs in Revco or HSI retail stores in the
relevant geographic areas. The divestiture of the Revco or HSI pharmacy
business in the relevant geographic areas shall be made only to an
acquirer or acquirers that receive prior approval of the Commission and
only in a manner that receives the prior approval of the Commission.
The assets shall be divested to an eligible acquirer or acquirers that
will operate a pharmacy business in the relevant geographic areas.
Eligible acquirers in each relevant geographic area include, but are
not limited to: owners of retail stores that currently do not operate a
pharmacy in that relevant geographic area; persons previously employed
by Revco or HSI; or persons who will open a new retail store. In the
event that Revco has not divested the Revco or HSI pharmacy assets in
the relevant areas in one (1) year, the proposed Consent Order provides
that Revco shall consent to the appointment by the Commission of a
trustee to divest the pharmacy assets.
Under the provisions of the Consent Order, Revco is also required
to provide to the Commission a report of its compliance with the
divestiture provisions of the Order within sixty (60) days following
the date this Order becomes final, and every sixty (60) days thereafter
until Revco has completely divested its interest in assets related to
the retail sale of prescription drugs in the relevant geographic areas.
The proposed Order will also prohibit Revco, for a period of ten (10)
years, from acquiring, without Federal Trade Commission approval, any
stock in any concern engaged in the business of selling prescription
drugs at retail in the relevant geographic areas or any assets used for
the business of selling prescription drugs at retail in the relevant
geographic areas.
One year from the date the Order becomes final and annually
thereafter for nine (9) years, Revco will be required to provide to the
Commission a report of its compliance with the Consent Order. The
Consent Order also requires Revco to notify the Commission at least
thirty (30) day prior to any change in the structure of Revco resulting
in the emergence of a successor.
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.
Donald S. Clark,
Secretary.
[FR Doc. 94-18260 Filed 7-26-94; 8:45 am]
BILLING CODE 6750-01-M
