Kiwi Brands Inc., et al.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 921 0023]

Kiwi Brands Inc., et al.; Proposed Consent Agreement With

Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

require, among other things, a Pennsylvania-based subsidiary of Sara

Lee Corporation and manufacturer of shoe care products to divest its

Esquire and Griffin brands and related assets to Hickory Industries

within one month after the order becomes final. If the sale to Hickory

Industries is not accomplished within one month, the proposed agreement

would require Kiwi and Sara Lee to divest the assets to another

Commission approved acquirer within twelve months or else the

Commission would be entitled to appoint a trustee to sell the assets to

a Commission approved acquirer in a manner approved by the Commission.

DATES: Comments must be received on or before August 12, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pennsylvania Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

Naomi Licker, FTC/S-2115, Washington, DC 20580. (202) 326-2851.

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 thirty (30) days. Public comment is invited. Such comments or

views will be considered by the Commission and will be available for

inspection and copying at its principal office in accordance with

Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR

4.9(b)(6)(ii).

Agreement Containing Consent Order

The Federal Trade Commission (``the Commission''), having initiated

an investigation of the acquisition by Kiwi Brands Inc. (``Kiwi''), a

wholly-owned subsidiary of Sara Lee Corporation (``Sara Lee''), of

certain assets of Knomark, Inc., at the time of the acquisition a

wholly-owned subsidiary of Papercraft Corporation, and of certain

assets of Reckitt and Colman plc, and it now appearing that Kiwi and

Sara Lee, hereinafter sometimes referred to as proposed Respondents,

are willing to enter into an agreement containing an order to divest

certain assets and providing for other relief:

It is hereby agreed by and between proposed Respondents, by their

duly authorized officers and attorneys, and counsel for the Commission

that:

1. Proposed Respondent Kiwi is a corporation, organized, existing,

and doing business under and by virtue of the laws of the State of

Delaware, with its office and principal place of business located at

447 Old Swede Road, Douglassville, Pennsylvania 19518-1239.

2. Proposed Respondent Sara Lee is a corporation, organized,

existing, and doing business under and by virtue of the laws of the

State of Maryland, with its office and principal place of business

located at 3 First National Plaza, Chicago, Illinois 60602-4260.

3. Proposed Respondents admit all the jurisdictional facts set

forth in the draft of complaint here attached.

4. Proposes Respondents waive:

a. Any further procedural steps;

b. The requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law;

c. All rights to seek judicial review or otherwise to challenge or

contest the validity of the order entered pursuant to this agreement;

and

d. Any claim under the Equal Access to Justice Act.

5. 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 proposed Respondents, 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.

6. This agreement is for settlement purposes only and does not

constitute an admission by proposed Respondents 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 jurisdictional

facts, are true.

7. This agreement contemplates that, if it is accepted by the

Commission, and if 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

proposed Respondents, (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 U.S. Postal

Service of the complaint and decision containing the agreed-to order to

proposed Respondents' addresses as stated in this agreement shall

constitute service. Proposed Respondents waive any right they may have

to any other manner of service. The complaint may be used in construing

the terms of the order, and no agreement, understanding, representation

or interpretation not contained in the order or the agreement may be

used to vary or contradict the terms of the order.

8. Proposed Respondents have read the draft of complaint and order

contemplated hereby. Proposed Respondents understand that once the

order has been issued, they will be required to file one or more

compliance reports showing that they have fully complied with the

order. Proposed Respondents further understand that they may be liable

for civil penalties in the amount provided by law for each violation of

the order after it became final.

Order

I

It is ordered that, as used in this order, the following

definitions shall apply:

A. ``Kiwi'' means Kiwi Brands, Inc., its predecessors,

subsidiaries, divisions, groups and affiliates controlled by Kiwi, and

their respective directors, officers, employees, agents,

representatives, and their respective successors and assigns.

B. ``Sara Lee'' means Sara Lee Corporation, its predecessors,

subsidiaries, divisions, groups and affiliates controlled by Sara Lee,

and their respective directors, officers, employees, agents,

representatives, and their respective successors and assigns.

C. ``Respondents'' means Kiwi Brands, Inc. and Sara Lee

Corporation.

D. ``Chemical shoe care products'' means all chemical products used

in the maintenance, cleaning, and protection of shoes, including, but

not limited to, aerosol, liquid, wax, and cream products.

E. ``Sales through the mass market'' means all sales through

grocery stores, drug stores, and mass merchandisers.

F. ``Knomark acquisition'' means the 1987 acquisition in which Sara

Lee acquired the ``Esquire'' brand of chemical shoe care products,

among other assets, from Knomark, Inc., a wholly-owned subsidiary of

Papercraft Corporation.

G. ``Reckitt and Colman acquisition'' means the 1991 acquisition in

which Sara Lee acquired the ``Griffin'' brand of chemical shoe care

products, among other assets, from Reckitt and Colman plc.

H. ``Commission'' means the Federal Trade Commission.

I. ``Griffin and Esquire assets'' means all assets, tangible or

intangible, acquired by Sara Lee in the Knomark acquisition and owned

by Sara Lee as of January 1, 1994, relating to the production or sale

of chemical shoe care products in North and South America, and all

assets, tangible or intangible, acquired by Sara Lee in the Reckitt &

Colman acquisition and owned by Sara Lee as of January 1, 1994,

relating to the production or sale of chemical shoe care products in

North and South America under the ``Griffin'' brand name; provided,

however, that ``Griffin and Esquire assets'' excludes equipment and

formulas used in the production of chemical shoe care products under

the ``Kiwi'' brand. The Griffin and Esquire assets include, but are not

limited to, registered and unregistered trademarks; formulas and other

trade secrets; raw materials, finished goods, packaging materials, and

other inventories (excluding inventories of raw materials and packaging

materials for any products to be manufactured by Kiwi for Hickory

Industries, Inc., after the divestiture); customer lists; and business

and financial records, relating to the ``Griffin'' or ``Esquire''

brands.

II

It is further ordered that Respondents shall divest, absolutely and

in good faith, the Griffin and Esquire assets.

The Griffin and Esquire assets shall be divested either: (1) within

one (1) month of the date this order becomes final, to Hickory

Industries, Inc. (``Hickory''), pursuant to the November 30, 1993,

Asset Purchase Agreement between Kiwi and Hickory, as amended by

Amendment One to November 30, 1993, Asset Purchase Agreement, dated

March 8, 1994, attached hereto as a Confidential Appendix; or (2)

within twelve (12) months of the date the order becomes final, 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 is to assure the continuing use of

the Griffin and Esquire assets in an ongoing, independent, viable

operation engaged in the sale of chemical shoe care products in the

United States, and to remedy the lessening of competition resulting

from the Knomark acquisition and the Reckitt and Colman acquisition as

alleged in the Commission's complaint. Provided, however, that if

Respondents divest pursuant to Paragraph II (1) of this order, in no

event shall Respondents' enforcement of any security interest contained

in the Asset Purchase Agreement referred to in Paragraph II (1) of this

order be construed to not require the Commission's prior approval,

pursuant to Paragraph V of this order, if such approval would otherwise

be required.

III

It is further ordered that:

A. If Respondents have not divested, absolutely and in good faith

and with the Commission's prior approval, the Griffin and Esquire

assets within twelve months of the date this order becomes final, the

Commission may appoint a trustee to divest the Griffin and Esquire

assets. In the event that the Commission or the Attorney General brings

an action pursuant to section 5(l) of the Federal Trade Commission Act,

15 U.S.C. 45(l), or any other statute enforced by the Commission,

Respondents 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 for any failure by Respondents 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, Respondents 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 Respondents, which consent shall not be unreasonably withheld. The

trustee shall be a person with experience and expertise in acquisitions

and divestitures. If Respondents have not opposed, in writing, the

selection of any proposed trustee within ten (10) days after notice by

the staff of the Commission to Respondents of the identity of any

proposed trustee, Respondents 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 Griffin and

Esquire assets.

3. The trustee shall have twelve (12) months from the date the

Commission approves the trust agreement described in Paragraph III B.

8. 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.

4. The trustee shall have full and complete access to the

personnel, books, records and facilities related to the Griffin and

Esquire assets, or to any other relevant information, as the trustee

may reasonably request. Respondents shall develop such financial or

other information as such trustee may reasonably request and shall

cooperate with the trustee. Respondents shall take no action to

interfere with or impede the trustee's accomplishment of the

divestiture. Any delays in divestiture caused by Respondents 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.

5. 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 acquiring entity, and if

the Commission determines to approve more than one such acquiring

entity, the trustee shall divest to the acquiring entity or entities

selected by Respondents from among those approved by the Commission.

6. The trustee shall serve, without bond or other security, at the

cost and expense of Respondents, on such reasonable and customary terms

and conditions as the Commission or a court may set. The trustee shall

have the authority to employ, at the cost and expense of Respondents,

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 Respondents, 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 Griffin and Esquire assets.

7. Respondents shall indemnify the trustee and hold the trustee

harmless against any losses, claims, damages, liabilities, or expenses

arising out of, or in connection with, the performance of the trustee's

duties, including all reasonable fees of counsel and other expenses

incurred in connection with the preparation for, or defense of any

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.

8. Within ten (10) days after appointment of the trustee, and

subject to the prior approval of the Commission and, in the case of a

court-appointed trustee, of the court, Respondents shall execute a

trust agreement that transfers to the trustee all rights and powers

necessary to permit the trustee to effect the divestiture required by

this order.

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 report in writing to Respondents and the

Commission every sixty (60) days concerning the trustee's efforts to

accomplish divestiture.

IV

It is further ordered that pending divestiture of the Griffin and

Esquire assets, Respondents shall maintain the viability and

marketability of the Griffin and Esquire assets and shall not cause or

permit the destruction, removal, wasting, deterioration or impairment

of the Griffin and Esquire assets.

V

It is further ordered that, for a period of ten (10) years from the

date this order becomes final, Respondents shall not, directly or

indirectly, through subsidiaries, partnerships, or otherwise, without

the prior approval of the Commission:

A. Acquire any stock, share capital, equity or other interest in

any concern, corporate or non-corporate, presently engaged in or within

the two years preceding such acquisition engaged in the manufacture of

chemical shoe care products in the United States, or the distribution

or sale of chemical shoe care products through the mass market in the

United States; provided, however, that an acquisition will be exempt

from the requirements of this paragraph if it is solely for the purpose

of investment and Respondents will hold no more than one percent of the

shares of any class of security traded on a national securities

exchange or authorized to be quoted in an interdealer quotation system

of a national securities association registered with the United States

Securities and Exchange Commission; or

B. Acquire any assets used for, or previously used for (and still

suitable for use for) the manufacture of chemical shoe care products in

the United States, or the distribution or sale of chemical shoe care

products through the mass market in the United States (including, but

not limited to, brand or trade names), except in the ordinary course of

business, from any concern, corporate or non-corporate, presently

engaged in, or within the two years preceding such acquisition engaged

in the manufacture of chemical shoe care products in the United States,

or the distribution or sale of chemical shoe care products through the

mass market in the United States; provided, however, that an

acquisition of assets will be exempt from the requirements of this

paragraph if the purchase price of the assets-to-be-acquired is less

than $100,000, and the purchase price of all assets used for, or

previously used for (and still suitable for use for) the manufacture of

chemical shoe care products in the United States, or the distribution

or sale of chemical shoe care products through the mass market in the

United States that Respondents have acquired from the same person (as

that term is defined in the premerger notification rules, 16 CFR

801.1(a)(1)) in the twelve-month period preceding the proposed

acquisition, when aggregated with the purchase price of the to-be-

acquired assets, does not exceed $100,000.

VI

It is further ordered that, for a period of ten (10) years from the

date this order becomes final, unless Respondents are required to seek

prior approval from the Commission pursuant to Paragraph V, Respondents

shall not, without providing advance written notification to the

Commission, directly or indirectly, through subsidiaries, partnerships,

or otherwise:

A. Acquire any stock, share capital, equity or other interest in

any concern, corporate or non-corporate, presently engaged in, or

within the two years preceding such acquisition engaged in the

manufacture, distribution, or sale of chemical shoe care products in

the United States; provided, however, that an acquisition will be

exempt from the requirements of this paragraph if it is solely for the

purpose of investment and Respondents will hold no more than one

percent of the shares of any class of security traded on a national

securities exchange or authorized to be quoted in an interdealer

quotation system of a national securities association registered with

the United States Securities and Exchange Commission; or

B. Acquire any assets used or previously used (and still suitable

for use) in the manufacture, distribution, or sale of chemical shoe

care products, except in the ordinary course of business, from any

concern, corporate or non-corporate, presently engaged in, or within

the two years preceding such acquisition engaged in the manufacture,

distribution, or sale of chemical shoe care products in the United

States.

Said notification shall be given on the Notification and Report

Form set forth in the Appendix to Part 803 of Title 16 of the Code of

Federal Regulations as amended (hereinafter referred to as ``the

Notification''). Respondents shall provide to the Commission at least

thirty days prior to acquiring any such interest (hereinafter referred

to as the ``first waiting period''), both the Notification and

supplemental information either in Respondents' possession or

reasonably available to Respondents. Such supplemental information

shall include a copy of the proposed acquisition agreement; the names

of the principal representatives of each Respondent and of the firm

Respondents desire to acquire who negotiated the acquisition agreement;

and any management or strategic plans discussing the proposed

acquisition. If, within the first waiting period, representatives of

the Commission make a written request for additional information,

Respondents shall not consummate the acquisition until twenty days

after submitting such additional information. Early termination of the

waiting periods in this paragraph may be requested and, where

appropriate, granted in the same manner as is applicable under the

requirements and provisions of the Hart-Scott-Rodino Antitrust

Improvements Act of 1976, 15 U.S.C. 18a.

VII

It is further ordered that:

A. Within sixty (60) days after the date this order becomes final

and every sixty (60) days thereafter until Respondents have fully

complied with the provisions of Paragraph II or III of this order,

Respondents shall submit to the Commission a verified written report

setting forth in detail the manner and form in which they intend to

comply, are complying, and have complied with Paragraphs II and III of

this order. Respondents shall include in their compliance reports,

among other things that are required from time to time, a full

description of the efforts being made to comply with Paragraphs II and

III of the order, including a description of all substantive contacts

or negotiations for the divestiture and the identity of all parties

contacted. Respondents shall include in their compliance reports copies

of all written communications to and from such parties, all internal

memoranda, and all reports and recommendations concerning divestiture.

Provided, however, that if, prior to the date the first report required

by this paragraph is due, Respondents have consummated the acquisition

described in Paragraph II (1) of this order, Respondents shall, in lieu

of the report or reports and documentary attachments required by this

Paragraph, submit to the Commission, within thirty (30) days of

consummation of the acquisition, a verified statement that Respondents

have complied with Paragraph II of this order, including the date of

consummation.

B. One (1) year from the date this order becomes final, annually

for the next nine (9) years on the anniversary of the date this order

becomes final, and at such other times as the Commission may require,

Respondents shall file a verified written report with the Commission

setting forth in detail the manner and form in which they have complied

and are complying with Paragraphs V and VI of this order.

VIII

It is further orderded that each of the Respondents shall notify

the Commission at least thirty days prior to any proposed change in

such Respondent, such as dissolution, assignment or sale resulting in

the emergency of a successor corporation, the creation or dissolution

of subsidiaries or any other change in such Respondent that may affect

compliance obligations arising out of this order.

IX

It is further ordered that, for the purpose of determining or

securing compliance with this order, and subject to any legally

recognized privilege, upon written request, each of the Respondents

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 such Respondent relating to any matters contained in

this order; and

B. Upon five (5) days notice to such Respondent and without

restraint or interference from it, to interview officers, directors, or

employees of such Respondent, who may have counsel present, regarding

such matters.

Analysis to Aid Public Comment on the Provisionally Accepted Consent

Order

The Federal Trade Commission (``the Commission'') has accepted, for

public comment, from Kiwi Brands Inc. (``Kiwi'') and Sara Lee

Corporation (``Sara Lee'') an agreement containing consent order. This

agreement has been placed on the public record for thirty days for

reception of comments from interested persons.

Comments received during this period will become part of the public

record. After thirty 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 order.

The Commission's investigation of this matter concerns Sara Lee's

and Kiwi's 1987 acquisition of the ``Esquire'' brand of chemical shoe

care products and related assets from Knomark, Inc., then a subsidiary

of Papercraft Corporation, and Sara Lee's and Kiwi's 1991 acquisition

of the ``Griffin'' brand of chemical shoe care products and related

assets from Reckitt & Colman.

The agreement containing consent order would, if finally accepted

by the Commission, settle charges alleged in the Commission's complaint

that the acquisitions substantially lessened competition in the sale in

the United States of chemical shoe care products used in the

maintenance, cleaning, and protection of shoes, through grocery stores,

drug stores, and mass merchandisers, sometimes referred to as the mass

market channel, and that Sara Lee undertook the acquisitions with the

intention and effect of restraining, lessening, or eliminating

competition, or acquiring or maintaining market power in the same

market. The Commission's complaint further alleges that the

acquisitions had and will have anticompetitive effects and that, in

making the acquisitions, Sara Lee and Kiwi violated Section 7 of the

Clayton Act and Section 5 of the Federal Trade Commission Act.

The order accepted for public comment contains provisions that

would require that Sara Lee and Kiwi divest the ``Esquire'' and

``Griffin'' brand names and related assets to Hickory Industries, Inc.,

within one month of the date the order becomes final. If the

transaction with Hickory Industries, Inc., is not consummated within

one month of the date the order becomes final, then the order would

require Sara Lee and Kiwi to divest the Esquire and Griffin assets to

an acquirer that receives the prior approval of the Commission and in a

manner approved by the Commission within twelve months of the date the

order becomes final. The purpose of the divestiture is to assure the

continuing use of the Esquire and Griffin assets in an ongoing,

independent, viable operation engaged in the sale of chemical shoe care

products in the United States, and to remedy the lessening of

competition resulting from each of the acquisitions.

If Sara Lee and Kiwi do not divest the Esquire and Griffin assets

within the time periods described above, the Commission would be

entitled to appoint a trustee to effect the divestiture of the Esquire

and Griffin assets to an acquirer or acquirers approved by the

Commission and in a manner approved by the Commission.

For a period of ten years from the date the order becomes final,

the order would also prohibit Kiwi and Sara Lee from acquiring, without

prior Commission approval, stock in or assets of an entity engaged in

the manufacture of chemical shoe care products in the United States, or

the distribution or sale of chemical shoe care products through the

mass market in the United States. Acquisitions, for investment purposes

only, of less than 1 percent of the outstanding stock of a publicly-

traded company would be exempt from the prior approval provision.

Acquisitions of certain assets valued at less than $100,000 would also

be exempt from the prior approval provision.

For acquisitions of stock in or assets of an entity engaged in the

manufacture, distribution, or sale of chemical shoe care products in

the United States by Sara Lee or Kiwi for which prior approval would

not otherwise be required by the order, the order would require that

Sara Lee and Kiwi give notice to the Commission before consummating the

acquisition. Acquisitions, for investment purposes only, of less than 1

percent of the outstanding stock of a publicly-traded company would be

exempt from the prior notice provision, in addition to being exempt

from the prior approval provision.

The purpose of this analysis is to invite public comment concerning

the consent order and any other aspect of the acquisition. This

analysis is not intended to constitute an official interpretation of

the agreement and order or to modify its terms in any way.

Donald S. Clark,

Secretary.

[FR Doc. 94-16950 Filed 7-12-94; 8:45 am]

BILLING CODE 6750-01-M