Nestle Food Company; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 941 0124]

Nestle Food Company; 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

allow, among other things, Nestle, a California-based manufacturer, to

complete its planned acquisition of Alpo PetFoods, but would require

that it divest the Fort Dodge, Iowa, manufacturing plant within twelve

months. The consent agreement also would require Nestle to obtain prior

Commission approval of the divestiture and if not completed on time,

would permit the Commission to appoint a trustee to complete the

transaction. In addition, the consent agreement would require Nestle,

for ten years, to obtain Commission approval before acquiring stock in

any entity engaged in, or assets used for, manufacturing canned cat

food in the United States.

DATES: Comments must be received on or before April 3, 1995.

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

Room 159, 6th Street and Pennsylvania Avenue, NW., Washington, DC

20580.

FOR FURTHER INFORMATION CONTACT:

Ronald Rowe or Stephen Riddell, FTC/S-2105, Washington, DC 20580. (202)

326-2610 or 326-2721.

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 [[Page 5928]] Rules of Practice (16 CFR 2.34), notice

is hereby given that the following consent agreement containing a

consent order to cease and desist, having been filed with and accepted,

subject to final approval, by the Commission, has been placed on the

public record for a period of sixty (60) days. Public comment is

invited. Such comments or views will be considered by the Commission

and will be available for inspection and copying at its principal

office in accordance with Section 4.9(b)(6)(ii) of the Commission's

Rules of Practice (16 CFR 4.9(b)(6)(ii)).

In the matter of Nestle Food Company, a corporation, File No.

941-0124.

Agreement Containing Consent Order

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

investigation of the proposed acquisition by Nestle Food Company

(``Nestle''), a direct wholly-owned subsidiary of Nestle Holdings,

Inc., a wholly-owned subsidiary of Nestle S.A., of certain assets of

Allen Products Company, Inc., d/b/a ALPO PetFoods, and its subsidiaries

(``Alpo''), a wholly-owned subsidiary of Grand Metropolitan

Incorporated (``Grand Metropolitan''), and it now appearing Nestle,

hereinafter referred to as proposed respondent, and Nestle S.A. are

willing to enter into an Agreement Containing Consent Order

(``Agreement'') to divest certain assets, to cease and desist from

making certain acquisitions, and providing for other relief:

It Is Hereby Agreed By And Between Nestle and Nestle S.A. by their

duly authorized officers and attorneys, and counsel for the Commission

that:

1. Proposed respondent is a corporation organized, existing and

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

Delaware, with its principal executive offices located at 800 North

Brand Boulevard, Glendale, California 91203.

2. Nestle S.A. is a corporation organized, existing and doing

business under and by virtue of the laws of Switzerland, with its

principal executive offices located at Avenue Nestle 55, Ch-1800 Vevey,

Switzerland.

3. Nestle and Nestle S.A. admit all the jurisdictional facts set

forth in the draft of Complaint.

4. Nestle and Nestle S.A. 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 with 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.

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

constitute an admission by Nestle or Nestle S.A. that the law has been

violated as alleged in the draft of Complaint, 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 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

Nestle S.A., (1) issue its Complaint corresponding in form and

substance to the draft of Complaint 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 Nestle's

address as stated in this Agreement shall constitute service. Nestle

waives any right it 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. Nestle and Nestle S.A. have read the proposed Complaint and

Order contemplated hereby. Nestle understands that once the Order has

been issued, it will be required to file one or more compliance reports

showing that they have fully complied with the Order. Nestle and Nestle

S.A. further understand that they may be liable for civil penalties in

the amount provided by law for each violation of the Order after it

becomes final.

Order

I.

As used in this Order, the following definitions shall apply:

A. ``Respondent'' or ``Nestle'' means Nestle Food Company, its

parent Nestle S.A., predecessors, subsidiaries, divisions, and

affiliates and groups controlled by Nestle Food Company, their

directors, officers, employees, agents, and representatives, and their

successors and assigns.

B. ``Nestle S.A.'' means Nestle S.A., its predecessors,

subsidiaries, divisions, and affiliates and groups controlled by Nestle

S.A., their directors, officers, employees, agents, and

representatives, and their successors and assigns.

C. ``Alpo'' means Allen Products Company, Inc., its predecessors,

subsidiaries, divisions, and affiliates and groups controlled by Allen

Products Company, Inc., their directors, officers, employees, agents,

and representatives, and their successors and assigns.

D. ``Acquisition'' means the acquisition by Nestle from Alpo of

certain assets of Alpo, as described in an Asset Purchase Agreement

dated September 16, 1994.

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

F. The ``assets to be divested'' or ``Fort Dodge Plant'' means the

following assets used in the manufacture of canned pet food, which

assets are located at 2400 5th Avenue South, Fort Dodge, Iowa 50501:

a. All buildings, machinery, fixtures, equipment, vehicles, storage

facilities, furniture, tools, supplies, spare parts and other tangible

personal property;

b. All rights, title and interest in and to real property, together

with appurtenances, licenses, and permits;

c. All rights under warranties and guarantees for equipment,

express or implied;

d. All on site quality control equipment, including all supplies

and technical information and drawings concerning the equipment; and

e. At the option of the Acquirer, to the extent such can be

assigned to the Acquirer without third party consent, all rights,

title, and interests in and to the contracts entered into in the

ordinary course of business with suppliers, personal property lessors

and [[Page 5929]] licensors, pertaining solely to the operation of the

Fort Dodge Plant.

Provided, however, that excluded from the assets to be divested

are: (i) Meat chunk sizer equipment that is proprietary to Nestle and/

or Nestle S.A., and (ii) all inventory of finished goods, work in

progress, raw materials and supplies used only in the production of

finished goods.

G. ``Fort Dodge Plant Employees'' means all Nestle employees based

at the Fort Dodge Plant location as of the date of divestiture.

H. ``Optional Assets'' means any or all of Alpo's recipes for

private label canned pet food that may be licensed without the consent

of any third party and that were in existence as of September 16, 1994.

II

It Is Further Ordered that:

A. Nestle shall divest, absolutely and in good faith, within twelve

(12) months of the date this order becomes final, the Fort Dodge Plant.

B. Nestle shall divest the Fort Dodge Plant only to an Acquirer

that receives the prior approval of the Commission and only in a manner

that receives the prior approval of the Commission. The purpose of the

divestiture of the Fort Dodge Plant is to ensure the continued use of

the Fort Dodge Plant in the manufacture and production of canned cat

food and to remedy the lessening of competition alleged in the

Commission's complaint.

C. Pending divestiture of the Fort Dodge Plant, Nestle shall take

such actions as are reasonably necessary to maintain the viability and

marketability of the assets to be divested and to prevent the

destruction, removal, wasting, deterioration, or impairment of any

assets that are subject to divestiture pursuant to this Order except

for ordinary wear and tear.

D. Nestle shall comply with all the terms of the Asset Maintenance

Agreement attached to this Order and made a part hereof as Appendix I.

The Asset Maintenance Agreement shall continue in effect until such

time as Nestle has divested all of the assets to be divested.

E. Nestle shall facilitate and not interfere with the Acquirer's

hiring of any Fort Dodge Plant Employees as may desire to undertake

such employment.

III

It Is Further Ordered that:

A. If Nestle has not divested, absolutely and in good faith and

with the Commission's prior approval, the Fort Dodge Plant within

twelve (12) months of the date this Order becomes final, the Commission

may appoint a trustee to divest the assets to be divested. The trustee

shall also have the authority, with the prior approval of the

Commission, to license the Optional Assets on a non-exclusive basis to

the Acquirer for a period not to exceed five (5) years from the date of

the divestiture of the Fort Dodge Plant. In the event 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, Nestle 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 available relief, including a court-appointed trustee,

pursuant to section 5(1) of the Federal Trade Commission Act, or any

other statute enforced by the Commission, for any failure by Nestle or

Nestle S.A. 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, Nestle 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 Nestle, which consent shall not be unreasonably withheld. The

trustee shall be a person with experience and expertise in acquisition

and divestitures of manufacturing facilities. If Nestle has not

opposed, in writing, the selection of any proposed trustee within ten

(10) days after its receipt of notice by the staff of the Commission to

Nestle of the identity of any proposed trustee, Nestle 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 Fort Dodge

Plant and have the authority to grant to the Acquirer a non-exclusive

license of Optional Assets, as described in Paragraph III.A.; for a

period not to exceed five (5) years from the date of the divestiture of

the Fort Dodge Plant, to facilitate the divestiture.

3. Within ten (10) days after appointment of the trustee, Nestle

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 reasonably

necessary to permit the trustee to effect the divestiture required by

this Order, and, if appropriate, the license of Optional Assets.

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 the divestiture can be accomplished within a reasonable

time, the divestiture period may be extended by the Commission, or by

the court in the case of a court-appointed trustee; provided, however,

the Commission may only extend the divestiture period two (2) times.

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

personnel, books, records (to the extent not prohibited by law) and

facilities related to the Fort Dodge Plant, the Optional Assets, or to

any other relevant information, as the trustee may request. Nestle

shall develop such financial or other information as such trustee may

request and shall cooperate with any request of the trustee. Nestle and

Nestle S.A. shall take no action to interfere with or impede the

trustee's accomplishment of the divestiture of the Fort Dodge Plant or

the license of the Optional Assets. Any delays in divestiture caused by

Nestle or Nestle S.A. shall extend the time for divestiture under this

Paragraph in an amount equal to the delay, as determined by the

Commission or by the court for a court-appointed trustee.

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 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 respondent from among those approved by the Commission.

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

cost and expense of Nestle, 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 Nestle, such

consultants, accountants, attorneys, investment bankers, business

brokers, appraisers, and other representatives and assistants as are

necessary, and at reasonable fees, to carry out the trustee's

[[Page 5930]] 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 Nestle, 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 divesting the Fort

Dodge Plant.

8. Nestle 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, claims, or expenses result from misfeasance, 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 Fort Dodge Plant.

12. The trustee shall report in writing to Nestle and to the

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

accomplish the divestiture.

IV

It Is Further Ordered that, within sixty (60) days after the date

this order becomes final and every sixty (60) days thereafter until

Nestle has fully complied with the provisions of Paragraph II or III of

this order, Nestle 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, or has complied with those provisions. Nestle

shall include in its compliance reports, among other things that are

required from time to time, a full description of all 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 identities of all parties contacted. Nestle 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 the divestiture.

V

It Is Further Ordered that, for a period of ten (10) years from the

date this Order becomes final, Nestle and Nestle S.A. shall not,

without the prior approval of the Commission, directly or indirectly,

through subsidiaries, partnerships, or otherwise:

1. acquire any stock, share capital, equity or other interest in

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

producing canned cat food in the United States; or

2. acquire any assets which are located in the United States and

which are used, or previously used (and still suitable for use) in the

manufacture or production of canned cat food from any other

manufacturer or producer of canned cat food in the United States.

Provided, however, that this Paragraph V. shall not apply to the

acquisition of products or services in the ordinary course of business.

It is Further Ordered that, one year from the date this Order

becomes final, annually for nine (9) years on the anniversary of the

date this Order becomes final, and at other times as the Commission may

require, Nestle shall file with the Commission a verified written

report setting forth in detail the manner and form in which it has

complied and is complying with Paragraph V. this Order.

VII

It Is Further Ordered that, for the purpose of determining or

securing compliance with this Order and subject to any legally

recognized privilege or restriction, Nestle and Nestle S.A. shall

permit any duly authorized representatives of the Commission:

A. Access, during office hours and in the presence of counsel, to

inspect and designate for copying all books, ledgers, accounts,

correspondence, memoranda and other records and documents in the

possession or under the control of Nestle relating to any matters

contained in this Order; and

B. Upon five (5) days' notice to Nestle or Nestle S.A., and without

restraint or interference from them, to interview their officers or

employees, who may have counsel present, regarding such matters.

VIII

It Is Further Ordered that, Nestle and Nestle S.A. shall notify the

Commission at least thirty (30) days prior to any proposed change in

Nestle or Nestle S.A. such as dissolution, assignment, sale resulting

in the emergence of a successor corporation, or the creation or

dissolution of domestic subsidiaries or any other change that may

affect compliance obligations arising out of this Order.

Appendix I--United States of America Before The Federal Trade

Commission

In the matter of Nestle Food Company, a corporation, File No.

941-0124.

Asset Maintenance Agreement

This Asset Maintenance Agreement (``Agreement'') is by and between

Nestle Food Company (``Nestle''), a corporation organized, existing and

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

Delaware, with its principal executive offices located at 800 North

Brand Boulevard, Glendale, California 91203, and the Federal Trade

Commission (``Commission''), an independent agency of the United States

Government, established under the Federal Trade Commission Act of 1914,

15 U.S.C. Sec. 41, et seq. (collectively, the ``Parties'').

Premises

Whereas, on September 16, 1994, Nestle entered into an Agreement to

acquire certain assets (hereinafter ``Acquisition'') from Allen

Products Company, Inc., d/b/a ALPO PetFoods and its subsidiaries

(``Alpo''); and

Whereas, the Commission is now investigating the Acquisition to

determine whether it would violate any of the statutes enforced by the

Commission; and

Whereas, if the Commission accepts the Agreement Containing Consent

Order (``Consent Order''), the Commission must place it on the public

record for a period of at least sixty (60) days and may subsequently

withdraw such acceptance pursuant to the provisions of Section 2.34 of

the Commission's Rules; and

Whereas, the Commission is concerned that if an understanding is

not reached preserving the Fort Dodge Plant, as defined in Paragraph

I.F. of the Consent Order, and the Optional Assets, as defined in

Paragraph I.H. of the Consent Order, during the period prior to the

Commission's issuance of its Decision and Order (after the 60-day

comment period), divestiture resulting from any proceeding challenging

the legality of the Acquisition might not be [[Page 5931]] possible, or

might be a less than effective remedy; and

Whereas, the Commission is concerned that if the Acquisition is

consummated, it will be necessary to preserve the Commission's ability

to require the divestiture of the Fort Dodge Plant and, if appropriate,

the license of the Optional Assets and to preserve the Commission's

right to seek to have the Fort Dodge Plant continue as a viable

concern; and

Whereas, the purpose of this Agreement is to:

A. Preserve the Fort Dodge Plant as a viable, ongoing concern

engaged in canned cat food manufacture in which it is presently engaged

until divestiture is achieved; and

B. Maintain and make certain improvements to the Fort Dodge Plant

to ensure it can be effectively divested as a viable independent

facility engaged in the manufacture and production of canned cat food;

and

C. Preserve the Optional Assets pending the divestiture of the Fort

Dodge Plant or, if required under the Consent Order, the license of the

Optional Assets; and

D. Preserve a remedy for any anticompetitive effects of the

Acquisition; and

Whereas, Nestle's entering into this Agreement shall in no way be

construed as an admission by Nestle that the Acquisition is illegal or

anticompetitive; and

Whereas, Nestle understands that no act or transaction contemplated

by this Agreement shall be deemed immune or exempt from the provisions

of the antitrust laws or the Federal Trade Commission Act by reason of

anything contained in this Agreement.

Now, Therefore, upon the understanding that the Commission has not

yet determined whether the Acquisition will be challenged, and in

consideration of the Commission's agreement that, at the time it

accepts the Consent Order for public comment it will grant early

termination of the Hart-Scott-Rodino waiting period, and unless the

Commission determines to reject the Consent Order, it will not seek

further relief from Nestle with respect to the Acquisition (except that

the Commission may exercise any and all rights to enforce this

Agreement and the Consent Order to which it is annexed and made a part

thereof, and in the event that the divestiture required in Paragraph II

of the Consent Order is not accomplished, to appoint a trustee to seek

divestiture of the Fort Dodge Plant and, if required, the license of

the Optional Assets), the Parties agree as follows:

1. Nestle agrees to execute and be bound by the Consent Order.

Nestle and the Commission further agree that each term defined in the

Consent Order shall have the same meaning in this Agreement.

2. Nestle agrees that from the date this Agreement is accepted

until the earlier of the dates listed in subparagraphs 2.a. and 2.b.,

it will comply with the provisions of Paragraph 3. of this Agreement:

a. Three (3) business days after the Commission withdraws its

acceptance of the Consent Order pursuant to the provisions of Section

2.34 of the Commission's rules; or

b. The time that the divestiture required by the Consent Order is

completed.

3. Nestle shall maintain and preserve the viability and

marketability of the Fort Dodge Plant and the Optional Assets on the

following terms and conditions:

a. Nestle shall continue to provide the Fort Dodge Plant with such

support services as provided by Nestle prior to the Acquisition.

b. Nestle shall take all necessary steps to ensure that the Fort

Dodge Plant is staffed with sufficient employees to maintain the

viability and marketability of the Fort Dodge Plant.

c. Nestle shall take all necessary steps to maintain the production

capability of the Fort Dodge Plant in a condition at least equal to

that existing as of the date of this Agreement (``Current Condition'').

Nestle shall continue to make all expenditures necessary to maintain

the Fort Dodge Plant in its Current Condition. Nestle shall maintain

the Fort Dodge Plant in accordance with Nestle usual standards of plant

maintenance.

d. Nestle shall complete all capital improvements in the Fort Dodge

Plant that were initiated prior to the date of this Agreement.

e. Nestle shall take all necessary steps to ensure that the Fort

Dodge Plant is furnished with all the equipment, machine parts and

other assets necessary to produce canned pet food in can sizes in the

range of: (1) Five (5) to six (6) ounces; and (ii) thirteen (13) to

fourteen (14) ounces; and that such equipment, machine parts and other

assets are in good working order.

f. Nestle shall refrain from, directly or indirectly, selling,

disposing of, or causing to be transferred any assets or property of

the Fort Dodge Plant, except that Nestle may sell or otherwise dispose

of manufactured products in the ordinary course of business, and may

replace and sell or dispose of assets or property in the course of

fulfilling its maintenance and capital improvements obligations set

forth above, and may sell the assets or property of the Fort Dodge

Plant pursuant to Paragraph II of the Consent Order.

g. Nestle shall refrain from mortgaging or pledging the assets of

the Fort Dodge Plant or the Optional Assets pursuant to any loan

transaction.

h. Nestle shall maintain hazard insurance on the Fort Dodge Plant

in the same manner as prior to this Agreement to provide for the

facility's replacement.

i. Nestle shall maintain separate cost books and records for the

Fort Dodge Plant, and, upon request, shall make some available to the

Commission. All such books, records and statements shall be kept in a

manner consistent with Nestle standard accounting practices. Nestle

shall provide the Commission with copies of all agreements entered into

by Nestle with third parties relating to any of the Optional Assets.

4. Should the Federal Trade Commission seek in any proceeding to

compel Nestle to divest itself of the Fort Dodge Plant or to license

any Optional Assets, or to seek any other injunctive or equitable

relief, Nestle shall not raise any objection based on the expiration of

the applicable waiting period under the Hart-Scott-Rodino Antitrust

Improvements Act of 1976 or the fact that the Commission has permitted

the Acquisition. Nestle also waives all rights to contest the validity

of this Agreement.

5. For the purpose of determining or securing compliance with this

Agreement, subject to any legally recognized privilege, and upon

written request with reasonable notice to Nestle made to its principal

office, Nestle shall permit any duly authorized representative or

representatives of the Commission:

a. Access during the office hours of Nestle 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 Nestle relating to compliance with

this Agreement;

b. Upon five (5) days' notice to Nestle and without restraint or

interference from it, to interview officers or employees of Nestle, who

may have counsel present, regarding any such matters.

6. In the event the Commission has not finally issued the Consent

Order within one hundred twenty (120) days of its publication in the

Federal Register, Nestle may, at its option, terminate this Agreement

by delivering written notice of termination to the

[[Page 5932]] Commission, which termination shall be effective ten (10)

days after the Commission's receipt of such notice, and this Agreement

shall thereafter be of no further force and effect. If this Agreement

is so terminated, the Commission may take such action as it deems

appropriate, including, but not limited to, an action pursuant to

Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. 53(b).

Termination of this Agreement shall in no way operate to terminate the

Consent Order that Nestle has entered into in this matter.

7. This Agreement shall not be binding until approved by the

Commission.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted for public comment from

Nestle Food Company (``Nestle''), an agreement containing a consent

order to divest certain assets. The agreement is designed to remedy any

anticompetitive effect stemming from Nestle's acquisition of most of

the assets of Allen Products Company, Inc., d/b/a ALPO PetFoods, and

its subsidiaries (``Alpo''), a wholly-owned subsidiary of Grand

Metropolitan Incorporated (``Grand Metropolitan). Nestle is an indirect

subsidiary of and controlled by Nestle S.A.

The agreement has been placed on the public record for 60 days for

reception of comments from interested persons. Comments received during

this period will become part of the public record. After 60 days, the

Commission will again review the agreement and comments received, and

will decide whether it should withdraw from the agreement or make final

the order contained in the agreement.

The Commission's draft complaint charges that on or about September

16, 1994, Nestle and its parent Nestle S.A. agreed to acquire certain

assets of Alpo, a wholly-owned subsidiary of Grand Metropolitan, for

$510 million. The Commission has reason to believe that the

acquisition, as well as the agreement to enter into the acquisition,

may have anticompetitive effects and be in violation of Section 7 of

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

According to the draft complaint, Nestle and Alpo are direct

competitors in the United States market for the manufacture and

production of canned cat food. According to the draft complaint, the

market is highly concentrated and entry is difficult or unlikely.

Nestle acquisition of Alpo may reduce competition in the United States

canned cat food market by eliminating the direct competition between

Nestle and Alpo, by increasing the likelihood that Nestle will become a

dominant firm, and by increasing the likelihood of collusive behavior

among the few remaining significant competitors. Consequently, the

acquisition may lead to higher prices for purchasers of canned cat

food.

The agreement containing consent order attempts to remedy the

Commission's competitive concerns about the acquisition. Under the

terms of the proposed order, Nestle must divest its canned cat food

manufacturing facility located in Fort Dodge, Iowa, within twelve

months, to a purchaser approved by the Commission. The assets to be

divested included: (1) All rights to the real property, buildings,

machinery, fixtures, equipment, furniture, tools, supplies and spare

parts; (2) all warranties and technical information concerning the

equipment; and (3) at the option of the purchaser, all supply contracts

that Nestle has the absolute right to assign. A separate asset

maintenance agreement requires the respondent to maintain the assets

that are to be divested in a marketable and viable condition pending

divestiture.

If Nestle fails to complete the divestiture within the twelve

months, the Commission may appoint a trustee to divest the facility. In

addition, at the option of the purchaser, the trustee is empowered to

grant the purchaser a non-exclusive license to use any and all of

Alpo's wholly-owned private label formulations for the manufacture of

canned cat food. The license may extend up to five years.

For ten years, the agreement containing consent order also requires

Nestle to obtain Commission approval before acquiring either stock in

another company engaged in, or assets used in, the manufacture or

production of canned cat food in the United States.

By accepting the consent order subject to final approval, the

Commission anticipates that the competitive problems alleged in the

complaint will be resolved. The purpose of this analysis is to invite

and facilitate public comment concerning the consent order. It is not

intended to constitute an official interpretation of the agreement and

proposed order or in any way to modify their terms.

Donald S. Clark,

Secretary.

[FR Doc. 95-2307 Filed 1-30-95; 8:45 am]

BILLING CODE 6750-01-M