Tractor Supply Company and Orscheln Farm and Home LLC; Analysis of Agreement Containing Consent Orders To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 211 0083]

Tractor Supply Company and Orscheln Farm and Home LLC; Analysis of Agreement Containing Consent Orders To Aid Public Comment

AGENCY:

Federal Trade Commission.

ACTION:

Proposed consent agreement; request for comment.

SUMMARY:

The consent agreement in this matter settles alleged violations of federal law prohibiting unfair methods of competition. The attached Analysis of Proposed Consent Orders to Aid Public Comment describes both the allegations in the complaint and the terms of the consent orders—embodied in the consent agreement—that would settle these allegations.

DATES:

Comments must be received on or before November 25, 2022.

ADDRESSES:

Interested parties may file comments online or on paper, by following the instructions in the Request for Comment part of the

SUPPLEMENTARY INFORMATION

section below. Please write: “Tractor Supply Company and Orscheln Farm and Home LLC; File No. 211 0083” on your comment and file your comment online at

https://www.regulations.gov

by following the instructions on the web-based form. If you prefer to file your comment on paper, please mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Laura Krachman (202-326-2895), Bureau of Competition, Federal Trade Commission, 400 7th Street SW, Washington, DC 20024.

SUPPLEMENTARY INFORMATION:

Pursuant to Section 6(f) of the Federal Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule § 2.34, 16 CFR 2.34, notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of 30 days. The following Analysis of Agreement Containing Consent Orders to Aid Public Comment describes the terms of the consent agreement and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC website at this web address:

https://www.ftc.gov/news-events/commission-actions.

You can file a comment online or on paper. For the Commission to consider your comment, we must receive it on or before November 25, 2022. Write “Tractor Supply Company and Orscheln Farm and Home LLC; File No. 211 0083” on your comment. Your comment—including your name and your state—will be placed on the public record of this proceeding, including, to the extent practicable, on the

https://www.regulations.gov

website.

Due to protective actions in response to the COVID-19 pandemic and the agency's heightened security screening, postal mail addressed to the Commission will be delayed. We strongly encourage you to submit your comments online through the

https://www.regulations.gov

website.

If you prefer to file your comment on paper, write “Tractor Supply Company and Orscheln Farm and Home LLC; File No. 211 0083” on your comment and on the envelope, and mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite CC-5610 (Annex D), Washington, DC 20580.

Because your comment will be placed on the publicly accessible website at

https://www.regulations.gov,

you are solely responsible for making sure your comment does not include any sensitive or confidential information. In particular, your comment should not include sensitive personal information, such as your or anyone else's Social Security number; date of birth; driver's license number or other state identification number, or foreign country equivalent; passport number; financial account number; or credit or debit card number. You are also solely responsible for making sure your comment does not include sensitive health information, such as medical records or other individually identifiable health information. In addition, your comment should not include any “trade secret or any commercial or financial information which . . . is privileged or confidential”—as provided by Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule § 4.10(a)(2), 16 CFR 4.10(a)(2)—including competitively sensitive information such as costs, sales statistics, inventories, formulas, patterns, devices, manufacturing processes, or customer names.

Comments containing material for which confidential treatment is requested must be filed in paper form, must be clearly labeled “Confidential,” and must comply with FTC Rule § 4.9(c). In particular, the written request for confidential treatment that accompanies the comment must include the factual and legal basis for the request and must identify the specific portions of the comment to be withheld from the public record.

See

FTC Rule § 4.9(c). Your comment will be kept confidential only if the General Counsel grants your request in accordance with the law and the public interest. Once your comment has been posted on

https://www.regulations.gov

—as legally required by FTC Rule § 4.9(b)—we cannot redact or remove your comment from that website, unless you submit a confidentiality request that meets the

requirements for such treatment under FTC Rule § 4.9(c), and the General Counsel grants that request.

Visit the FTC website at

https://www.ftc.gov

to read this document and the news release describing this matter. The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding, as appropriate. The Commission will consider all timely and responsive public comments it receives on or before November 25, 2022. For information on the Commission's privacy policy, including routine uses permitted by the Privacy Act, see

https://www.ftc.gov/site-information/privacy-policy.

Analysis of Agreement Containing Consent Orders To Aid Public Comment

I. Introduction

The Federal Trade Commission (“Commission”) has accepted, subject to final approval, an Agreement Containing Consent Orders (“Consent Agreement”) to be put on the public record for comment. The Consent Agreement is with Tractor Supply Company (“Tractor Supply”) and Orscheln Farm and Home LLC (“Orscheln”) (collectively, the “Respondents”). The proposed Decision and Order (“D&O”), included in the Consent Agreement and subject to final Commission approval, is designed to remedy the anticompetitive effects that would result from Tractor Supply's proposed acquisition of Orscheln.

On February 17, 2021, Tractor Supply and Orscheln entered into an agreement whereby Tractor Supply would acquire Orscheln for approximately $320 million (“the Proposed Transaction”). The Commission's Complaint alleges that the Proposed Transaction, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. 45, by removing a direct and substantial farm store competitor in 84 relevant markets. The elimination of this competition would result in significant competitive harm; specifically, absent a remedy, the Proposed Transaction would allow the combined entity to increase prices above competitive levels unilaterally. Similarly, absent a remedy, there is significant risk that the combined entity may decrease quality, selection, and service aspects of its stores below competitive levels in the relevant markets.

The Consent Agreement, which contains the proposed D&O and Order to Maintain Assets, would remedy the alleged violations by requiring divestitures to replace competition that otherwise would be lost in the relevant markets because of the Proposed Transaction. Under the terms of the proposed D&O, Respondents are required to divest 84 stores and related assets in 84 local geographic markets (collectively, the “relevant markets”) in 10 states (Arkansas, Indiana, Iowa, Kansas, Kentucky, Missouri, Nebraska, Ohio, Oklahoma, and Texas) to the Commission-approved buyers, Bomgaars Supply, Inc. (“Bomgaars”) and Buchheit Enterprises, Inc. (“Buchheit”). The Commission and Respondents have agreed to an Order to Maintain Assets that requires Respondents to operate and maintain each divestiture store in the normal course of business through the date the store is ultimately divested to Bomgaars and Buchheit.

The Consent Agreement with the proposed D&O and the Order to Maintain Assets has been placed on the public record for 30 days for receipt of comments from interested persons. Comments received during this period will become part of the public record. After 30 days, the Commission will review the D&O as well as any comments received, and decide whether it should withdraw, modify, or make the D&O final. The Commission is issuing the Order to Maintain Assets when the Consent Agreement is placed on the public record.

II. The Respondents

Respondent Tractor Supply operates over 2,000 farm stores, with stores located in every state except Alaska. Tractor Supply is the largest farm store chain, by store count, in the United States. Respondent Orscheln operates 166 farm stores under the Orscheln Farm & Home banner in Arkansas, Illinois, Indiana, Iowa, Kansas, Kentucky, Missouri, Nebraska, Ohio, Oklahoma, and Texas. Orscheln is the second largest farm store chain, by store count, in the United States.

III. Competition in the Relevant Markets

The Proposed Transaction presents substantial antitrust concerns for the products sold and services provided at brick-and-mortar farm stores. Farm stores offer their customers a broad, in-store assortment of products across multiple product categories to meet their farming, ranching, or other rural lifestyle needs, along with staff knowledgeable about the products. Farm stores sell a wide range of products, including, but not limited to, large animal and pet feed; supplies to care for horses, other livestock, and pets; fencing; equipment and tools used for farm or lawn and garden maintenance; workwear; and home goods. This broad product mix enables customers to purchase products to meet substantially all their farm or rural lifestyle needs and to receive accompanying service from knowledgeable employees at a single store. The brick-and-mortar shopping environment also provides customers with the ability to touch and feel products before buying them, and in-person access to knowledgeable sales staff. The ability to offer consumers this in-person, one-stop shopping experience is a key difference between farm stores and other retailers.

Other types of brick-and-mortar retailers are not reasonable substitutes for farm stores. Retail stores other than farm stores, including big box general merchandisers, grocery stores, pet stores, and home improvement stores may sell some of the same products as farm stores, but they do not carry the same breadth and variety of rural lifestyle products as farm stores. Such retailers typically lack the breadth of rural lifestyle products that enables farm stores to meet substantially all their customers' rural lifestyle needs in one convenient stop.

Online retailers also are not reasonable substitutes for brick-and-mortar farm stores. Online retailers cannot provide their customers the ability to touch and feel products prior to purchase, nor can they offer in-person access to knowledgeable sales staff to learn about products best suited for their rural lifestyle needs. Additionally, online retailers require time to deliver their products to their customers, while farm stores provide their customers with immediate access to products that meet essential or immediate needs, such as animal feed when a customer runs out or components to fix broken farm equipment. Furthermore, many products sold at farm stores are not conducive to selling online, as they are large and heavy, and therefore impractical or expensive to ship.

The relevant geographic markets in which to analyze the effects of the Proposed Transaction are the areas within a reasonable drive of Orscheln's stores listed in Exhibit A, as these are areas in which Respondents' farm stores compete. When choosing between farm store competitors, a customer is typically choosing between farm stores within a reasonable driving distance of the customer's farm or home. The area within a reasonable drive of a farm store varies depending on a store's location, geography, population density, traffic conditions, and other local

characteristics. While individual markets may be significantly smaller, typically no relevant geographic market is broader than the area within a 60-mile drive of the stores.

The Proposed Transaction would eliminate direct and substantial competition between Respondents Tractor Supply and Orscheln to the detriment of their customers in the relevant markets. Respondents are close competitors and focus on the same types of customers. They compete on price and non-price factors, such as customer service and product selection, resulting in lower prices and other benefits to their customers. With this head-to-head competition removed, the Proposed Transaction would enable the combined entity to increase prices and decrease the quality and selection of products and services at their farm stores in the relevant markets.

Entry into the relevant markets that is timely and sufficient to prevent or counteract the expected anticompetitive effects of the Proposed Transaction is unlikely to occur. Entry barriers include the time and costs associated with conducting necessary market research, selecting an appropriate location for a farm store, obtaining necessary permits and approvals, constructing a new farm store or converting an existing structure to a farm store, and generating sufficient sales to have a meaningful impact on the market. As a result, new entry sufficient to achieve a significant market impact and act as a competitive constraint is unlikely to occur in a timely manner.

IV. The Proposed Order and the Order To Maintain Assets

The proposed D&O and the Order to Maintain Assets effectively remedy the likely anticompetitive effects in the relevant markets. The proposed D&O, which requires the divestiture of Orscheln stores in each of the 84 relevant markets to Commission-approved, upfront buyers, will restore competition that otherwise would be eliminated in these markets because of the Proposed Transaction. The proposed buyers, Buchheit and Bomgaars, appear to be suitable purchasers well-positioned to enter the relevant markets through the divested stores and prevent competitive harm that would otherwise likely result from the Potential Transaction.

The proposed D&O requires Respondents to divest 12 stores, as ongoing businesses, and related assets to Buchheit within 10 days of Respondents consummating the Proposed Transaction. For up to six months afterwards Respondents will provide transitional assistance to Buchheit to ensure that Buchheit can operate the stores similarly to how the stores were operated prior to the Proposed Transaction.

Buchheit appears to be a suitable purchaser for the 12 divestiture stores it intends to acquire. Buchheit is a family-owned company that has operated retail stores since the 1930s. It currently operates eight farm stores in Missouri and Illinois and has over 650 employees. Buchheit also operates a warehousing and shipping service through Buchheit Logistics and a feed and fertilizer manufacturer through Buchheit Agriculture. Buchheit has sufficient financing to fund the acquisition and operate the newly acquired stores. Buchheit also appears to have sufficient distribution and supply capabilities for both the newly acquired stores and its currently operated stores.

The proposed D&O further requires Respondents to divest 72 stores, as ongoing businesses, and related assets to Bomgaars within 10 days of Respondents consummating the Proposed Transaction. For up to 15 months afterwards Respondents will provide transitional assistance to Bomgaars to ensure that Bomgaars can operate the stores similarly to how the stores were operated prior to the Proposed Transaction.

The proposed D&O also requires that the Respondents divest Orscheln's distribution center in Moberly, Missouri to Bomgaars. The Orscheln stores that Tractor Supply will be acquiring and keeping currently utilize the Moberly distribution center. The proposed D&O requires Tractor Supply to transition these Orscheln stores out of the Moberly distribution center and to permanently cease reliance on the Moberly distribution center no later than December 31, 2023. Bomgaars will take ownership of the distribution center within ten days thereafter.

Bomgaars appears to be a suitable purchaser for the 72 divesture stores it intends to acquire and for Orscheln's distribution center in Moberly, Missouri. Bomgaars is a family-owned farm store operator with over 70 years of experience running farm stores in the Midwest. Bomgaars has over 100 farm stores located throughout eight midwestern states and approximately 3,000 employees. Bomgaars has sufficient financing to fund the acquisition and operate the newly acquired stores and distribution center. Also, with the addition of the divested distribution center, Bomgaars appears to have sufficient distribution and supply capabilities for both the newly acquired stores and its currently operated stores.

The proposed D&O contains additional provisions designed to ensure the adequacy of the proposed relief. For example, the proposed D&O and the Order to Maintain Assets require Respondents to continue operating and maintaining the divestiture stores in the normal course of business until the date that each store is sold to the buyer. If, at any time before the proposed D&O is made final, the Commission determines that Bomgaars or Buchheit is not an acceptable buyer, Respondents must rescind the divestiture(s) and divest the assets to a different buyer that receives the Commission's prior approval. The proposed D&O imposes other terms, including the obligation to provide Transition Assistance and an obligation to facilitate the buyers interviewing and hiring employees.

Moreover, the proposed D&O sets a strict timeline by which the Respondents must separate the retained Orscheln stores from the Moberly distribution center, requiring separating 12 by April 30, 2023, 40 by July 31, 2023, 60 by October 31, 2023, and the remaining stores by December 31, 2023. Additionally, the proposed D&O includes some newer provisions to ensure its effectiveness, including provisions that appoint a Transition Manager for each buyer, who will be responsible for directing the provision of Transitional Assistance to that buyer, require physical separation of the employees providing assistance to each buyer, and increase the frequency of compliance reporting.

The proposed D&O also requires the appointment of Larry Appel as an independent Monitor to oversee the Respondents' compliance with the requirements of the proposed D&O and the Order to Maintain Assets, and to keep the Commission informed about the status of the transfer of the divested assets. Additionally, the proposed D&O requires the Respondents to receive the Commission's prior approval, for a period of 10 years, to acquire any interest in a farm store that has operated or is operating within a 60-mile radius of a divested store. Finally, the proposed D&O also prohibits the Respondents from entering into or enforcing agreements to restrict a new owner from operating a farm store at any store Respondents may sell in these areas.

The proposed D&O also contains a ten-year prior approval provision relating to the buyers, which prohibits them from selling acquired stores for a period of three years after the proposed

D&O is issued, except to an acquirer that receives the prior approval of the Commission. The initial three-year period is followed by an additional seven-year period during which the buyers are required to receive prior approval from the Commission to sell an acquired store to a buyer that operates one or more farm stores within a 60-mile radius of a divested store the respective buyer acquired.

Exhibit A

State

City

Address

Store No.

Buyer

Arkansas

Jonesboro

1817 E Parker Road, Jonesboro, Arkansas 72404

163

Buchheit.

Paragould

420 Highway 49 North, Paragould, Arkansas 72451

137

Buchheit.

Pocahontas

1966 Highway 62 West, Pocahontas, Arkansas 72455

138

Buchheit.

Springdale

211 N Maestri Road, Springdale, Arkansas 72762

44

Bomgaars.

Indiana

Charlestown

1085

1/2

Market Street, Charlestown, Indiana 47111

112

Bomgaars.

Corydon

1805 Gardner Lane, Corydon, Indiana 47112

111

Bomgaars.

Greenfield

1875 East Main Street, Greenfield, Indiana 46140

107

Bomgaars.

Lawrenceburg

181 South Tanners Creek Drive, Lawrenceburg, Indiana 47025

106

Bomgaars.

North Vernon

2110 N State Highway 3, North Vernon, Indiana 47265

162

Bomgaars.

Richmond

2100 National Road West, Richmond, Indiana 47374

108

Bomgaars.

Scottsburg

1326 North Gardner Street, Scottsburg, Indiana 47170

126

Bomgaars.

Tell City

212 East Highway 66, Tell City, Indiana 47586

134

Bomgaars.

Washington

1 Cherry Tree Plaza, Washington, Indiana 47501

110

Bomgaars.

Winchester

970 East Washington Street, Winchester, Indiana 47394

144

Bomgaars.

Iowa

Fairfield

2107 West Burlington Avenue, Fairfield, Iowa 52556

20

Bomgaars.

Kansas

Ottumwa

1331 Vaughn Drive, Ottumwa, Iowa 52501

99

Bomgaars.

Atchison

605 S 10th Street, Atchison, Kansas 66002

80

Bomgaars.

Basehor

15256 Wolf Creek Parkway, Basehor, Kansas 66007

157

Bomgaars.

Concordia

1620 Lincoln Street, Concordia, Kansas 66901

127

Bomgaars.

Dodge City

1701 North 14th Avenue, Dodge City, Kansas 67801

34

Bomgaars.

El Dorado

2908 W Central Avenue, El Dorado, Kansas 67042

69

Bomgaars.

Garden City

1309 North Taylor Avenue, Garden City, Kansas 67846

55

Bomgaars.

Gardner

18710 South Gardner Road, Gardner, Kansas 66030

172

Bomgaars.

Goddard

20200 West Kellogg Avenue, Goddard, Kansas 67052

161

Bomgaars.

Great Bend

5320 10th Street, Great Bend, Kansas 67530

31

Bomgaars.

Hays

2900 Broadway Avenue, Hays, Kansas 67601

58

Bomgaars.

Hutchinson

1500 East 11th Street, Hutchinson, Kansas 67501

32

Bomgaars.

Iola

1918 North State Street, Iola, Kansas 66749

148

Bomgaars.

Lawrence

1541 E 23rd Street, Lawrence, Kansas 66046

48

Bomgaars.

Louisburg

1160 West Amity Street, Louisburg, Kansas 66053

147

Bomgaars.

Manhattan

427 Hummels Place, Manhattan, Kansas 66502

39

Bomgaars.

McPherson

2204 East Kansas Avenue, McPherson, Kansas 67460

60

Bomgaars.

Newton

321 Windward Drive, Newton, Kansas 67114

43

Bomgaars.

Parsons

211 East Main Street, Parsons, Kansas 67357

21

Bomgaars.

Pratt

1601 1st Street, Pratt, Kansas 67124

33

Bomgaars.

Salina

360 North Ohio Street #57, Salina, Kansas 67401

57

Bomgaars.

Topeka

1133 SW Wanamaker Road, Topeka, Kansas 66604

37

Bomgaars.

Kentucky

Murray

700 A North 12th Street, Murray, Kentucky 42071

93

Buchheit.

Radcliff

135 East Lincoln Trail, Radcliff, Kentucky 40160

154

Bomgaars.

Missouri

Blue Springs

1100 S Hwy 7 Lot 1, Blue Springs, Missouri 64014

174

Buchheit.

Columbia

3300 Paris Road, Columbia, Missouri 65202

9

Buchheit.

Columbia (South)

3910 South Providence Road, Columbia, Missouri 65203

158

Buchheit.

Dexter

1525 West Business Highway 60, Dexter, Missouri 63841

47

Bomgaars.

Fulton

1310 Business 54 South, Fulton, Missouri 65251

11

Buchheit.

Holden

1000 East 10th Street, Holden, Missouri 64040

120

Bomgaars.

Houston

1476 South Sam Houston Blvd., Houston, Missouri 65483

118

Bomgaars.

Missouri

Jane

107 Gordon Hollow Road, Jane, Missouri 64856

160

Bomgaars.

Jefferson City

2304 Missouri Boulevard, Jefferson City, Missouri 65109

41

Buchheit.

Kirksville

2302 South Baltimore Street, Kirksville, Missouri 63501

153

Buchheit.

Marshfield

1331 Spur Drive, Marshfield, Missouri 65706

135

Bomgaars.

Monroe City

1110 Hwy. 24-36 East Unit #50, Monroe City, Missouri 63456

151

Bomgaars.

Poplar Bluff

2235 N Westwood Blvd., Poplar Bluff, Missouri 63901

84

Bomgaars.

Republic

1055 U.S. Highway 60 East Republic, Missouri 65738

117

Bomgaars.

Sedalia

2424 South Limit Sedalia, Missouri 65301

1

Bomgaars.

St. Joseph

137 North Belt Highway, St. Joseph, Missouri 64504

53

Bomgaars.

Sullivan

124 East South Service Road, Sullivan, Missouri 63080

38

Bomgaars.

Troy

1 Lincoln Center, Highway 47, Troy, Missouri 63379

45

Bomgaars.

Warsaw

1551 Commercial Street, Warsaw, Missouri 65355

125

Bomgaars.

Washington

860 Washington Corners, Washington, Missouri 63090

12

Bomgaars.

Waynesville

110 C W Parker Lane, Waynesville, Missouri 65583

24

Bomgaars.

Beatrice

2415 North 6th Street, Beatrice, Nebraska 68310

95

Buchheit.

Nebraska

Gothenburg

716 4th Street, Gothenburg, Nebraska 69138

101

Bomgaars.

Grand Island

515 South Webb Road, Grand Island, Nebraska 68803

115

Bomgaars.

Hastings

1315 West J Street, Hastings, Nebraska 68901

42

Bomgaars.

Kearney

910 Third Avenue, Kearney, Nebraska 68845

25

Bomgaars.

Lexington

1701 Plumcreek Parkway, Lexington, Nebraska 68850

100

Bomgaars.

Lincoln

5640 Cornhusker Highway, Lincoln, Nebraska 68507

63

Bomgaars.

McCook

1602 North Highway 83, McCook, Nebraska 69001

70

Bomgaars.

Nebraska City

2412 South 11th Street, Nebraska City, Nebraska 68410

67

Bomgaars.

North Platte

2501 East 4th Street, North Platte, Nebraska 69101

102

Buchheit.

York

518 S Lincoln Avenue, York, Nebraska 68467

27

Bomgaars.

Ohio

Mount Orab

206 Sterling Run Blvd., Mount Orab, Ohio 45154

173

Bomgaars.

Oklahoma

Ada

724 Arlington Center, Ada, Oklahoma 74820

22

Bomgaars.

Ardmore

1925 N Rockford Road, Ardmore, Oklahoma 73401

86

Bomgaars.

Duncan

4800 N Highway 81, Duncan, Oklahoma 73533

85

Bomgaars.

Durant

2424 West Main Street, Durant, Oklahoma 74701

83

Bomgaars.

Muskogee

6 East Shawnee Road, Muskogee, Oklahoma 74403

56

Bomgaars.

Nowata

329 South Ash Street, Nowata, Oklahoma 74048

156

Bomgaars.

Okmulgee

2000 South Wood Drive, Okmulgee, Oklahoma 74447

23

Bomgaars.

Pryor

715 North Mill Street, Pryor, Oklahoma 74361

54

Bomgaars.

Texas

Decatur

1200 W U.S. Business Hwy. 380, Decatur, Texas 76234

178

Bomgaars.

Sherman

2725 Hwy. 75 North, Sherman, Texas 75090

175

Bomgaars.

Waco

2701 S Jack Kultgen Expressway, Waco, Texas 76706

177

Bomgaars.

Weatherford

102 College Park Drive, Weatherford, Texas 76086

176

Bomgaars.

The purpose of this analysis is to facilitate public comment on the Consent Agreement. It is not intended to constitute an official interpretation of the Consent Agreement or to modify its terms in any way.

By direction of the Commission.

April J. Tabor,

Secretary.

[FR Doc. 2022-23245 Filed 10-25-22; 8:45 am]

BILLING CODE 6750-01-P