United States and State of Texas v. Kimberly-Clark Corporation and Scott Paper Company; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

United States and State of Texas v. Kimberly-Clark Corporation

and Scott Paper Company; Proposed Final Judgment and Competitive Impact

Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. section 16(b)-(h), that a proposed Final

Judgment, Stipulation, and Competitive Impact Statement have been filed

with the United States District Court for the Northern District of

Texas, Dallas Division in United States and State of Texas v. Kimberly-

Clark Corporation and Scott Paper Company, Civil No. 3:95 CV 3055-P, as

to both defendants.

On December 12, 1995, the United States and the State of Texas

filed a Complaint alleging that the proposed merger of Kimberly-Clark

Corporation (``Kimberly-Clark'') and Scott Paper Company (``Scott'')

would violate Section 7 of the Clayton Act, 15 U.S.C. Section 18. The

Complaint further alleges that the merger of Kimberly-Clark and Scott

would lessen competition substantially and tend to create a monopoly in

the sale of consumer facial tissue and baby wipes in the United States.

The proposed Final Judgment, filed the same time as the Complaint,

requires Kimberly-Clark to divest the Scott baby wipes brands, Baby

Fresh and Wash A Bye Baby and

[[Page 66558]]

the Scott facial tissue brand, Scotties, along with certain tangible

and intangible assets.

Public comment is invited within the statutory 60-day comment

period. Such comments and responses thereto will be published in the

Federal Register and filed with the Court. Comments should be directed

to Anthony V. Nanni, Chief, Litigation I Section, Antitrust Division,

United States Department of Justice, 1401 H Street, N.W., Suite 4000,

Washington, D.C. 20530 (telephone: 202/307-6694).

Constance K. Robinson,

Director of Operations.

United States District Court, Northern District of Texas, Dallas

Division

United States of America and State of Texas, Plaintiffs, v.

Kimberly-Clark Corporation and Scott Paper Company, Defendants.

Civil Action No.: 3:95 CV 3055-P. Filed: December 12, 1995.

Stipulation

It is stipulated by and between the undersigned parties, by their

respective attorneys, that:

1. The Court has jurisdiction over the subject matter of this

action and over each of the parties hereto, and venue of this action is

proper in the Northern District of Texas.

2. The parties consent that a Final Judgment in the form hereto

attached may be filed and entered by the Court, upon the motion of any

party or upon the Court's own motion, at any time after compliance with

the requirements of the Antitrust Procedures and Penalties Act (15

U.S.C. Sec. 16(b)-(h)), and without further notice to any party or

other proceedings, provided that either plaintiff has not withdrawn its

consent, which either or both may do at any time before the entry of

the proposed Final Judgment by serving notice thereof on defendants and

by filing that notice with the Court.

3. The parties shall abide by and comply with the provisions of the

proposed Final Judgment pending entry of the Final Judgment, and shall,

from the date of the filing of this Stipulation, comply with all the

terms and provisions of the Final Judgment as though they were in full

force and effect as an order of the Court.

4. In the event either plaintiff withdraws its consent, or if the

proposed Final Judgment is not entered pursuant to this Stipulation,

this Stipulation shall be of no effect whatever and the making of this

Stipulation shall be without prejudice to any party in this or any

other proceeding.

Dated: December 12, 1995.

For Plaintiff United States:

Anne K. Bingaman

Assistant Attorney General, District of Columbia #369900.

Lawrence R. Fullerton,

Deputy Asst. Attorney General, District of Columbia #251264.

Constance K. Robinson,

Director of Operations, District of Columbia #244800.

Charles E. Biggio, Sr. Counsel,

State of New York (no bar no. assigned)

Anthony V. Nanni, Chief,

Litigation I Section State of New York (no bar number assigned).

Anthony E. Harris, Attorney,

State of Illinois #01133713, Antitrust Division, U.S. Department of

Justice, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530, (202)

307-6583.

For Plaintiff State of Texas:

Dan Morales,

Attorney General of Texas

Jorge Vega,

First Assistant Attorney General

Laquita A. Hamilton,

Deputy Attorney General

Thomas P. Perkins, Jr.,

Assistant Attorney General, Chief, Consumer Protection Div.

Mark Tobey,

Assistant Attorney General, Antitrust Section, State of Texas

#22082960, P.O. Box 12548, Austin TX 78711-2548, (512) 463-2185.

For Defendant Kimberly-Clark Corp.:

William O. Fifield, Esquire,

State of Illinois #0080332, Sidley & Austin, One First National Plaza,

Chicago, Illinois 60603, (312) 853-7474

For Defendant Scott Paper Company:

Michael L. Weiner, Esquire,

State of New York (no bar number assigned) Skadden, Arps, Slate,

Meagher & Flom, 919 Third Avenue, New York, New York 10022-3897, (212)

735-2632

Executed on: December 11, 1995.

United States District Court, Northern District of Texas, Dallas

Division

United States of American and State of Texas. Plaintiffs, v.

Kimberly-Clark Corporation and Scott Paper Company, Defendants.

Civil No.: 3:95 CF 3055-P. Filed: December 12, 1995.

Final Judgment

Whereas, plaintiffs, the United States of American and the State of

Texas, having filed their Complaint herein on December 12, 1995, and

plaintiffs and defendants, by their respective attorneys, having

consented to the entry of this Final Judgment without trial or

adjudication of any issue of fact or law herein, and without this Final

Judgment constituting any evidence against or an admission by any party

with respect to any issue of law or fact herein;

And whereas, defendants have agreed to be bound by the provisions

of this Final Judgment pending its approval by the Court;

And whereas, prompt and certain divestiture of certain rights and

assets to assure that competition is not substantially lessened are the

essence of this agreement;

And whereas, plaintiffs require defendants to make certain

divestitures for the purpose of establishing viable competitors in the

sale of baby wipes and facial tissue;

And whereas, defendants have represented to plaintiffs that the

divestitures required below can and will be made and that defendants

will later raise no claims of hardship or difficulty as grounds for

asking the Court to modify any of the divestiture provisions contained

below;

New, therefore, before the taking of any testimony, and without

trial or adjudication of any issue of fact or law herein, and upon

consent of the parties hereto, it is hereby Ordered, Adjudged, and

Decreed as follows:

I. Jurisdiction

This Court has jurisdiction over each of the parties hereto and the

subject matter of this action. The Complaint states a claim upon which

relief may be granted against defendants under Section 7 of the Clayton

Act, as amended (15 U.S.C. 18).

II. Definitions

As used in this Final Judgment:

A. ``Kimberly-Clark'' means defendant Kimberly-Clark Corporation, a

Delaware corporation with its headquarters in Dallas, Texas, and

includes its successors and assigns, and its subsidiaries, directors,

officers, managers, agents, and employees.

B. ``Scott'' means defendant Scott Paper Company, a Pennsylvania

corporation with its headquarters in Boca Raton, Florida, and includes

its successors and assigns, and its subsidiaries, directors, officers,

managers, agents, and employees.

C. ``Relevant Wet Wipes Assets'' means:

(1) The Dover, Delaware plant of Scott, including all tangible

assets used by Scott in connection with its business of researching,

developing, making, having made, packaging, distributing, or selling

products of the Dover plant, including but not limited to: the

manufacturing plant and associated web making, converting, packaging

and distributing equipment and facilities, inventory, real property,

and any other interests, or tangible assets or

[[Page 66559]]

improvements, associated with the Dover plant;

(2) A twenty-five year, exclusive, royalty-free and assignable

license, perpetually renewable at the licensee's option, to make, have

made, use or sell in the United States any label of any baby wipes

product currently produced at the Dover, Delaware plant, including but

not limited to the Baby Fresh, Wash-a-Bye Baby, Baby Fresh Gentle

Touch, and Kid Fresh labels, and any improvement to or line extension

of those labels; and

(3) All intangible assets, wherever located, that relate in any way

to the tangible assets and labels described above (including but not

limited to: manufacturing, converting, packaging and distribution know-

how); exclusive, assignable rights to all patents, proprietary

technology, supply contracts, and business information solely dedicated

to the tangible assets or the labels described above; rights in real

and personal property; and nonexclusive, assignable rights to all

related patents, proprietary technology and business information used

in connection with, but not solely dedicated to the tangible assets or

the labels described above.

D. ``Relevant Facial Tissue Assets'' means:

(1) A twenty-five year, exclusive, royalty-free and assignable

license, perpetually renewable at the licensee's option, to make, have

made, use or sell in the United States any facial tissue under the

Scotties label, and a covenant that defendants shall not make, have

made, use or sell in the United States any facial tissue under the

Scott or Scotties label;

(2) Any two of the following four tissue mills: the Scott tissue

mill in Marinette, Wisconsin; the Scott tissue mill in Ft. Edward, New

York; the Kimberly-Clark Lakeview tissue mill in Neenah, Wisconsin; and

the Kimberly-Clark Badger-Globe tissue mill in Neenah, Wisconsin;

provided, however, that in the event a purchaser elects to purchase the

Marinette, WI tissue mill of Scott, defendants shall not be required to

divest the DRC tissue machine and associated converting assets, located

in an adjacent facility on the Marinette tissue mill site and not

currently used for making facial tissue, in which case defendants

shall, at the option of the purchaser, enter into an arrangement with

respect to the measures necessary to separate the DRC tissue machine

from the rest of the Marinette tissue mill, including but not limited

to a long-term agreement to provide, on a nondiscriminatory basis,

shared utilities, such as water, electric, steam, and treatment of

waste or effluent;

(3) At the purchaser's option. (a) a commitment by defendants to

enter into up to a three-year agreement to sell to purchaser, at such

rates as to which purchaser and defendants may agree, as much as 25,000

metric tons/year of tissue parent rolls; and (b) a commitment by

defendants to enter into up to a three-year agreement to buy from the

purchaser, at such rates as to which purchaser and defendants may

agree, as much as 25,000 metric tons/year of tissue parent rolls;

(4) All tangible assets used solely in connection with the business

of making, having made, using, converting, packaging, distributing, or

selling any product from any of the tissue mills identified in Section

II(D)(2), including but not limited to: the tissue mill and associated

papermaking, converting, packaging and distribution equipment and

facilities; real property; or tangible assets or improvements,

associated with the tissue mill; and

(5) All intangible assets, not otherwise addressed above, wherever

located, that relate in any way solely to the tangible assets described

above or the Scotties label (including but not limited to: papermaking,

converting, packaging and distributing know-how); exclusive, assignable

rights to all patents, proprietary technology, supply contracts, and

business information and rights in real and personal property solely

dedicated to the tangible assets or the Scotties label; and

nonexclusive, assignable rights to all related patents, proprietary

technology and business information used in connection with, but not

solely dedicated to the tangible assets or the Scotties label.

E. ``Label'' means all legal rights associated with a brand's

trademarks, trade names, copyrights, designs, and trade dress (and any

improvements, extensions or modifications); the brand's trade secrets;

know-how or other proprietary information for making, having made,

using and selling the brand, including, but not limited to, packaging,

sales, marketing and distribution know-how and documentation, such as

customer lists.

III. Applicability

A. The provisions of this Final Judgment apply to the defendants,

their successors and assigns, their subsidiaries, directors, officers,

managers, agents, and employees, and all other persons in active

concert or participation with any of them who shall have received

actual notice of this Final Judgment by personal service or otherwise.

B. Defendants shall require, as a condition of the sale or other

disposition of all or substantially all of the Relevant Wet Wipes

Assets and Relevant Facial Tissue Assets, that the purchaser or

purchasers agree to be bound by the provisions of this Final Judgment.

IV. Divestitures

A. Defendants are hereby ordered and directed, within 150 days

after filing of the Final Judgment, to divest to a purchaser the

Relevant Wet Wipes Assets, in accordance with the procedures specified

in this Final Judgment.

Defendants are ordered and directed, within 180 days after filing

of the Final Judgment, to divest to one or more purchasers the Relevant

Facial Tissue Assets, in accordance with the procedures specified in

this Final Judgment.

B. Defendants agree to take all reasonable steps to accomplish the

divestitures as expeditiously and timely as possible. Plaintiffs may,

in their sole discretion, extend the time period for any divestiture

for an additional period of time not to exceed two months.

C. In accomplishing the divestitures ordered by this Final

Judgment, defendants promptly shall make known, by usual and customary

means, the availability of the Relevant Wet Wipes Assets and Relevant

Facial Tissue Assets. Defendants shall provided any person making an

inquiry regarding a possible purchase with a copy of the Final

Judgment. Defendants shall also offer to furnish to all bona fide

prospective purchasers, subject to customary confidentiality

assurances, all reasonably necessary information regarding the Relevant

Wet Wipes Assets and the Relevant Facial Tissue Assets, except such

information subject to attorney-client privilege or attorney work

product privilege. Defendants shall make available such information to

plaintiffs at the same time that such information is made available to

any other person. Defendants shall permit prospective purchasers of the

Relevant Wet Wipes Assets and Relevant Facial Tissue Assets to have

access to personnel and to make such inspection of physical facilities

and any and all financial, operational, or other documents and

information as may be relevant to the divestitures required by this

Final Judgment.

D. Unless plaintiffs otherwise consent in writing, divestitures

under Section IV(A), or by the trustee appointed pursuant to Section V,

shall include the Relevant Wet Wipes Assets and Relevant Facial Tissue

Assets and be

[[Page 66560]]

accomplished in such a way as to satisfy plaintiffs, in their sole

discretion, that the Relevant Wet Wipes Assets and Relevant Facial

Tissue Assets can and will be used by the purchaser or purchasers as

part of viable, ongoing businesses engaged in the selling of baby wipes

and facial tissue at wholesale to retail stores. Each divestiture shall

be made to a purchaser or purchasers for whom it is demonstrated to

plaintiffs' satisfaction that (1) the purchase or purchases are for the

purpose of competing effectively in making and selling branded baby

wipes and/or facial tissue at wholesale to retail stores and other

customers; and (2) the purchaser or purchasers have or soon will have

the managerial, operational, and financial capability to compete

effectively in making and selling branded baby wipes and/or facial

tissue at wholesale to retail stores; and (3) none of the terms of any

agreement between the purchaser or purchasers and defendants give

defendants the ability artificially to raise the purchaser's or

purchasers' costs, lower the purchaser's or purchasers' efficiency, or

otherwise interfere in the ability of the purchaser or purchasers to

compete effectively. Although Sections II(D)(2) and IV(A) require a

sale of any two of four tissue mills, plaintiffs can, in their sole

discretion, approve a divestiture involving a sale of less than two

tissue mills listed in Section II(D), if convinced that such

divestiture is sufficient to satisfy their competitive concerns.

E. Defendants shall exercise any residual right in any label

licensed pursuant to this Final Judgment solely for the purpose of

protecting their lawful intellectual property rights. Defendants shall

not, in any circumstance, exercise any such right to impair or inhibit

in any way a licensee's ability to compete, and they shall not exercise

such right, directly or indirectly, to obtain competitively-sensitive

information pertaining to any licensee.

V. Appointment of Trustee

A. If defendants have not accomplished any divestiture required by

Section IV within the time specified therein, defendants shall notify

plaintiffs of that fact in writing. Within ten (10) calendar days of

their receipt of such written notice, plaintiffs shall provide

defendants with written notice of the names and qualifications of not

more than two (2) nominees for the position of trustee for the required

divestiture. Defendants shall notify plaintiffs within five (5)

calendar days thereafter whether either or both of such nominees are

acceptable. If either or both of such nominees are acceptable to

defendants, plaintiffs shall notify the Court of the person upon whom

the parties have agreed and the Court shall appoint that person as the

trustee. If neither nominee is acceptable to defendants, they shall

furnish to plaintiffs, within ten (10) calendar days after plaintiffs

provide the names of their nominees, written notice of the names and

qualifications of not more than two (2) nominees for the position of

trustee for the required divestiture. If either or both of such

nominees are acceptable to plaintiffs, plaintiffs shall notify the

Court of the person upon whom the parties have agreed and the Court

shall appoint that person as the trustee. If neither nominee is

acceptable to plaintiffs, plaintiffs shall furnish the Court the names

and qualifications of its and defendants' proposed nominees. The Court

may hear the parties as to the nominees' qualifications and shall

appoint one of the nominees as the trustee.

B. If defendants have not accomplished either of the divestitures

required by Section IV of this Final Judgment at the expiration of the

time period specified therein, subject to the selection process

described in Section V(A), the appointment by the Court of the trustee

shall become effective. The trustee shall then take steps to effect the

divestiture(s) specified in Section IV(A).

C. After the trustee's appointment has become effective, only the

trustee shall have the right to sell the Relevant Wet Wipes Assets or

Relevant Facial Tissue Assets. The trustee shall have the power and

authority to accomplish the divestiture(s) to a purchaser acceptable to

plaintiffs at such price and on such terms as are then obtainable upon

the best reasonable effort by the trustee, subject to the provisions of

Section IV of this Final Judgment, and shall have such other powers as

this Court shall deem appropriate. Defendants shall not object to the

sale of the Relevant Wet Wipes Assets or Relevant Facial Tissue Assets

by the trustee on any grounds other than the trustee's malfeasance. Any

such objection by defendants must be conveyed in writing to plaintiffs

and the trustee no later than fifteen (15) calendar days after the

trustee has notified defendants of the proposed licensing and sale in

accordance with Section VI of this Final Judgment.

D. The trustee shall serve at the cost and expense of defendants,

shall receive compensation based on a fee arrangement which provides an

incentive based on the price and terms of the divestiture and the speed

with which it is accomplished, and shall serve on such other terms and

conditions as the Court may prescribe; provided however, that the

trustee shall receive no compensation, nor incur any costs or expenses

(other than related to the selection process), prior to the effective

date of his or her appointment. The trustee shall account for all

monies derived. After approval by the Court of the trustee's

accounting, including fees for its services, all remaining monies shall

be paid to defendants and the trust shall then be terminated.

E. Defendants shall take no action to interfere with or impede the

trustee's accomplishment of the divestiture of the Relevant Wet Wipes

Assets or Relevant Facial Tissue Assets and shall use its best efforts

to assist the trustee in accomplishing the required divestiture.

Subject to a customary confidentiality agreement, the trustee shall

have full and complete access to the personnel, books, records, and

facilities related to the Relevant Wet Wipes Assets or the Relevant

Facial Tissue Assets, and defendants shall develop such financial or

other information necessary to the divestiture of the Relevant Wet

Wipes Assets and Relevant Facial Tissue Assets.

F. After its appointment becomes effective, the trustee shall file

monthly reports with the parties and the Court setting forth the

trustee's efforts to accomplish divestiture of the Relevant Wet Wipes

Assets and Relevant Facial Tissue Assets as contemplated under this

Final Judgment; provided however, that to the extent such reports

contain information that the trustee deems confidential, such reports

shall not be filed in the public docket of the Court. Such reports

shall include the name, address, and telephone number of each person

who, during the preceding month, made an offer to acquire, expressed an

interest in acquiring, entered into negotiations to acquire, or was

contacted or made an inquiry about acquiring, any interest in the

Relevant Wet Wipes Assets and Relevant Facial Tissue Assets, and shall

describe in detail each contact with any such person during that

period. The trustee shall maintain full records of all efforts made to

divest these operations.

G. Within six (6) months after its appointment has become

effective, if the trustee has not accomplished the divestiture required

by Section IV of this Final Judgment, the trustee shall promptly file

with the Court a report setting forth (1) the trustee's efforts to

accomplish the required divestiture, (2) the reasons, in the trustee's

judgment, why the required divestiture has not been accomplished, and

(3) the trustee's recommendations; provided however,

[[Page 66561]]

that to the extent such reports contain information that the trustee

deems confidential, such reports shall not be filed in the public

docket of the Court. The trustee shall at the same time furnish such

reports to the parties, who shall each have the right to be heard and

to make additional recommendations consistent with the purpose of the

trust. The Court shall thereafter enter such orders as it shall deem

appropriate in order to carry out the purpose of the trust, which

shall, if necessary, include augmenting the assets to be divested, and

extending the trust and term of the trustee's appointment.

VI. Notification

Within two (2) business days following execution of a definitive

agreement, contingent upon compliance with the terms of this Final

Judgment, to effect, in whole or in part, any proposed divestiture

pursuant to Sections IV or V of this Final Judgment, defendants or the

trustee, whichever is then responsible for effecting the divestiture,

shall notify plaintiffs of the proposed divestiture. If the trustee is

responsible, it shall similarly notify defendants. The notice shall set

forth the details of the proposed transaction and list the name,

address, and telephone number of each person not previously identified

who offered to, or expressed an interest in or desire to, acquire any

ownership interest in the assets that are the subject of the finding

contract, together with full details of same. Within fifteen (15 )

calendar days of receipt by plaintiffs of such notice, plaintiffs may

request additional information concerning the proposed divestiture and

the proposed purchaser. Defendants and the trustee shall furnish any

additional information requested within twenty (20) calendar days of

the receipt of the request, unless the parties shall otherwise agree.

Within thirty (30) calendar days after receipt of the notice or within

twenty (20) calendar days after plaintiffs have been provided the

additional information requested (including any additional information

requested of persons other than defendants or the trustee), whichever

is later, plaintiffs shall proved written notice to defendants and the

trustee, if there is one, stating whether or not it objects to the

proposed divestiture. If plaintiffs provided written notice to

defendants and the trustee that it does not object, then the

divestiture may be consummated, subject only to defendant's limited

right to object to the sale under the provisions in Section V(C).

Absent written notice that the plaintiffs do not object to the proposed

purchaser, a divestiture proposed under Section IV shall not be

consummated. Upon objection by either plaintiff, a divestiture proposed

under Section IV shall not be consummated. Upon objection by either

plaintiff, or by defendants under the proviso in Section V(C), a

divestiture proposed under Section V shall not be consummated unless

approved by the Court.

VII. Affidavits

Within ten (10) calendar days of the filing of this Final Judgment

and every thirty (30) calendar days thereafter until the divestiture

has been completed or authority to effect divestiture passes to the

trustee pursuant to Section V of this Final Judgment, defendants shall

deliver to plaintiffs an affidavit as to the fact and manner of

compliance with Section IV and V of this Final Judgment. Each such

affidavit shall include, inter alia, the name, address, and telephone

number of each person who, at any time after the period covered by the

last such report, made an offer to acquire, expressed an interest in

acquiring, entered into negotiations to acquire, or was contacted or

made an inquiry about acquiring, any interest in the Relevant Wet Wipes

Assets or Relevant Facial Tissue Assets, and shall describe in detail

each contact with any such person during that period. Defendants shall

maintain full records of all efforts made to divest these operations.

VIII. Financing

With prior written consent of the plaintiffs, defendants may

finance all or any part of any purchase made pursuant to Sections IV or

V of this Final Judgment.

IX. Preservation of Assets

Until the divestitures required by the Final Judgment have been

accomplished:

A. Defendants shall take all steps necessary to ensure that the

Relevant Wet Wipes Assets will be maintained as an independent,

ongoing, economically viable and active competitor in the sale of baby

wipes in the United States, with proprietary technology, management

operations, books, records and competitively-sensitive sales, marketing

and pricing information and decision-making kept separate and apart

from, and not influenced by, that of Kimberly-Clark's Huggies baby

wipes business.

B. Defendants shall operate the Relevant Facial Tissue Assets to

ensure a distinct and economically viable product line, which actively

competes in the sale of facial tissue in the United States, with

competitively-sensitive sales, marketing and pricing information and

decision-making kept separate and apart from, and not influenced by,

that of Kimberly-Clark's Kleenex facial tissue business.

C. Defendants shall use all reasonable efforts to maintain and

increase sales of baby wipes under any label required to be divested

pursuant to Sections II(C) and IV(A) and facial tissue under the

Scotties label, and they shall maintain at 1995 or previously approved

levels, whichever is higher, promotional, advertising, marketing and

merchandising support for baby wipes under labels in the Relevant Wet

Wipes Assets and facial tissue under the Scotties label.

D. Defendants shall take all steps necessary to ensure that the

Relevant Wet Wipes Assets and Relevant Facial Tissue Assets are fully

maintained inoperable condition at their current capacity

configurations, and shall maintain and adhere to normal repair and

maintenance schedules for such assets.

E. Defendants shall not, except as part of a divestiture approved

by plaintiffs, sell any Relevant Wet Wipes Assets or Relevant Facial

Tissue Assets, other than in the ordinary course of business.

F. Defendants shall take no action that would jeopardize the sale

or license of the Relevant Wet Wipes Assets or the Relevant Facial

Tissue Assets. Within 21 days after filing of the Final Judgment,

defendants shall discontinue making and selling facial tissue under the

Scott label and make and sell facial tissue under the Scotties label;

provided, however, that defendants may sell inventory of facial tissue

produced under the Scott Label until such inventory is depleted.

X. Compliance Inspection

Only for the purposes of determining or securing compliance with

the Final Judgment and subject to any legally recognized privilege from

time to time.

A. Duly authorized representatives of the United States Department

of Justice, upon written request of the Attorney General or of the

Assistant Attorney General in charge of the Antitrust Division, or of

the Attorney General of the State of Texas, and on reasonable notice to

defendants made to their principal offices, shall be permitted:

(1) Access during office hours of defendants to inspect and copy

all books, ledgers, accounts, correspondence, memoranda, and other

records and documents in the possession or under the control of

defendants, who may have counsel present, relating to enforcement of

this Final Judgment; and

(2) Subject to the reasonable convenience of defendants and without

[[Page 66562]]

restraint or interference from them, to interview officers, employees,

and agents of defendants, who may have counsel present, regarding any

such matters.

B. Upon the written request of the Attorney General or of the

Assistant Attorney General in charge of the Antitrust Division, or of

the Attorney General of the State of Texas, made to defendants'

principal offices, defendants shall submit such written reports, under

oath if requested, with respect to enforcement of this Final Judgment.

C. No information or documents obtained by the means provided in

this Section X shall be divulged by a representative of either

plaintiff to any person other than a duly authorized representative of

the Executive Branch of the United States or of the State of Texas,

except in the course of legal proceedings to which the United States is

a party (including grand jury proceedings), or for the purpose of

securing compliance with this Final Judgment, or as otherwise required

by law.

D. If at the time information or documents are furnished by

defendants to plaintiffs, defendants represent and identify in writing

the material in any such information or documents to which a claim of

protection may be asserted under Rule 26(c)(7) of the Federal Rules of

Civil Procedure, and defendants mark each pertinent page of such

material, ``Subject to claim of protection under Rule 26(c)(7) of the

Federal Rules of Civil Procedure,'' then ten (10) calendar days notice

shall be given by plaintiff to defendants prior to divulging such

material in any legal proceeding (other than a grand jury proceeding).

XI. Retention of Jurisdiction

Jurisdiction is retained by this Court for the purpose of enabling

any of the parties to this Final Judgment to apply to this Court at any

time for such further orders and directions as may be necessary or

appropriate for the construction or carrying out of this Final

Judgment, for the modification of any of the provisions hereof, for the

enforcement of compliance herewith, and for the punishment of any

violations hereof.

XII. Termination

Unless this Court grants an extension, this Final Judgment will

expire on the tenth anniversary of the date of its entry.

XIII. Public Interest

Entry of this Final Judgment is in the public interest.

Dated: ---------------------------------------------------------------

----------------------------------------------------------------------

United States District Judge

United States District Court, Northern District of Texas, Dallas

Division

United States of America and State of Texas, Plaintiffs, v.

Kimberly-Clark Corporation and Scott Paper Company, Defendants.

Civil No. 3:95 CV 3055-P. Filed December 12, 1995.

Competitive Impact Statement

The United States, pursuant to Section 2(b) of the Antitrust

Procedures and Penalties Act (``APPA''), 15 U.S.C. Sec. 16(b)-(h),

files this Competitive Impact Statement relating to the proposed Final

Judgment submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

The United States and the State of Texas filed a civil antitrust

Complaint on December 12, 1995, which alleges that Kimberly-Clark

Corporation's proposed acquisition of Scott Paper Company (``Scott'')

would violate Section 7 of the Clayton Act, 15 U.S.C. Sec. 18.

Kimberly-Clark and Scott are the nation's first and third leading

sellers of facial tissue, and its leading sellers of baby wipes.

The Complaint alleges that the combination of these rivals would

substantially lessen competition in production and distribution, and

raise prices to consumers in retail sale, of facial tissue and baby

wipes in the United States. The prayer for relief seeks: (1) A judgment

that the proposed acquisition would violate Section 7 of the Clayton

Act; and (2) a permanent injunction preventing Kimberly-Clark from

acquiring control of Scott's facial tissue and baby wipes businesses or

otherwise combining them with its own business in the United States.

At the time the suit was filed, the United States and State of

Texas also filed a proposed settlement that would permit Kimberly-Clark

to complete its acquisition of Scott's other assets, but require

divestitures of baby wipes and facial tissue assets in a way that will

preserve competition in the markets. This settlement consists of a

Stipulation and a proposed Final Judgment.

The proposed Final Judgment orders defendants to divest to one or

more purchasers Scott's Scotties facial tissue label, any two

or four United States tissue mills currently operated by Kimberly-Clark

or Scott, all of Scott's baby wipes labels, and Scott's wet wipes plant

used to produce baby wipes and other products. Certain tangible and

intangible assets that relate to these assets and labels must also be

divested. Defendants must complete the divestiture of the Scott facial

tissue business within 180 days, and the divestiture of the wet wipes

business within 150 days, after December 12, 1995, in accordance with

the procedures specified in the proposed Final Judgment.

The Stipulation and Final Judgment require Kimberly-Clark to ensure

that, until the divestitures mandated by the Final Judgment have been

accomplished, Scott's facial tissue and baby wipes businesses and

associated assets will be held separate from, and operated

independently of, other, competing Kimberly-Clark facial tissue and

baby wipes businesses. Kimberly-Clark must preserve and maintain these

assets as saleable and economically viable, ongoing concerns, with

competitively-sensitive business information and decision-making

divorced from that of competing Kimberly-Clark businesses.

The United States, the State of Texas, Kimberly-Clark, and Scott

have also stipulated that the proposed Final Judgment may be entered

after compliance with the APPA. Entry of the proposed Final Judgment

would terminate this action, except that the Court would retain

jurisdiction to construe, modify, or enforce the provisions of the

proposed Final Judgment and to punish violations thereof.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction

Kimberly-Clark, based in Dallas, Texas, is a leading producer of

consumer paper products, including disposable diapers, feminine care

products, facial tissue and baby wipes. In 1994, Kimberly-Clark

reported total sales of $7.3 billion. Kimberly-Clark makes

Kleenex facial tissue and Huggies brand baby wipes.

Scott, based in Boca Raton, Florida, is also a leading producer of

consumer paper products, including bath tissue, facial tissue and baby

wipes. In 1994, Scott reported total sales of $3.5 billion. Among its

other brands, Scott makes and sells Scotties facial tissue

(recently renamed Scott and Baby Fresh and Wash A

Bye Baby baby wipes.

On July 16, 1995, Kimberly-Clark agreed to acquire Scott for cash

and stock in a transaction that would create a firm with global sales

of about $12 billion. This transaction, which would combine leading

competitors in two major markets, precipitated the governments' suit.

[[Page 66563]]

B. The Transaction's Effects in the Facial Tissue Industry

Facial tissue is a soft, thin, pliable and absorbent sheet of

paper, typically folded and packed in a box. It is primarily used to

catch a sneeze, blow a nose, or remove make-up. There are no good

substitutes for facial tissue.

For all practical purposes, the retail facial tissue market is

dominated by three major firms--Kimberly-Clark, Scott and Procter &

Gamble--which together account for nearly 90 percent of sales of facial

tissue, a $1.34 billion dollar market. Kimberly-Clark's popular

Kleenex is by far the leading brand of facial tissue sold,

commanding 48.5 percent of all sales.

Scott's Scotties facial tissue, a value brand offering

consumers more product for the money, has a 7 percent share of sales,

but significantly greater presence and consumer acceptance in the

Northeast, where the brand was first introduced. Procter & Gamble, the

only other significant firm, makes Puffs, which has about a

30 percent market share.\1\

\1\ The approximate post-merger Herfindahl-Hirschman Index

(``HHI'') for the facial tissue market, based on 1994 dollar sales,

would be 4031, with an increase in the HHI as a result of the merger

of 705 points.

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Scott's market share, however, understates its competitive

significance. As a value brand, Scotties has, in the past,

imposed a significant constraint on Kimberly-Clark's prices for facial

tissue. Kimberly-Clark's Kleenex likewise has been a

significant constraint on prices of Scotties facial tissue.

The Complaint alleges that Kimberly-Clark's acquisition of Scott

would remove these constraints, and provide Kimberly-Clark both the

power and the incentive to increase unilaterally and profitably the

price of either, or both, brands of facial tissue. Kimberly-Clark's

acquisition of Scott would also increase the likelihood of cooperative

increases in the price of consumer facial tissue, since the merger

would leave Kimberly-Clark with a single significant rival, Procter &

Gamble's Puffs, in the facial tissue market.

Because entry into the facial tissue market is difficult, requiring

a significant investment in plant equipment and brand building,

successful new entry or repositioning after the merger is unlikely to

restore the competition lost through Kimberly-Clark's removal of Scott

from the marketplace.

C. The Transaction's Effect in the Baby Wipes Industry

Baby wipes are soft, moist and absorbent sheets of paper substrate,

about the size of a wash cloth, that are packaged in a plastic tub or

canister. Consumer use baby wipes to clean babies, especially during a

diaper change. Stronger, softer and more convenient or sanitary than

any alternative product, baby wipes are a popular staple of families

with babies, and are bought by 95 percent of such households. There are

no good substitutes for baby wipes.

Kimberly-Clark and Scott are the nation's two largest and most

significant manufacturers of baby wipes. Scott's Baby Fresh

and Wash A Bye Baby baby wipes account for about 31 percent

of all baby wipes sold, while Kimberly-Clark's Huggies baby

wipes command nearly 25 percent of all sales. They are each other's

primary competitor and most significant constraint on prices for baby

wipes. Kimberly-Clark and Scott aggressively compete in pricing,

promotion, and product innovation.

Following its acquisition of Scott, Kimberly-Clark would control

nearly 60 percent of all baby wipes sold,\2\ and leave it seven times

larger than its next largest competitor in a market with $500 million

in annual sales. By eliminating Scott, the Complaint alleges, Kimberly-

Clark would acquire market power that would enable it unilaterally to

increase prices to consumers of either, or both, Huggies,

Baby Fresh and Wash A Bye Baby wipes. New market

entry is difficult, time-consuming and unlikely, and hence cannot be

expected to constrain the unlawful effects of Kimberly-Clark's

acquisition of Scott.

\2\ The approximate post-merger HHI for the relevant market

based on 1994 dollar sales would be over 3137, with a change in the

HHI concentration index resulting from the merger of 1501 points.

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D. Harm to Competition as a Consequence of the Acquisition

The Complaint alleges that the transaction would have the following

effects, among others: competition generally in the facial tissue and

baby wipes markets will be substantially lessened; actual and potential

competition between Kimberly-Clark and Scott in the market for facial

tissue and baby wipes will be eliminated in the United States; prices

for facial tissue and baby wipes in the United States are likely to

increase; and product innovation in facial tissue and baby wipes in the

United States will suffer.

III. Explanation of the Proposed Final Judgment

The proposed Final Judgment would preserve competition in

production and retail sale of branded baby wipes and facial tissue in

the United States. Within 150 days after filing the proposed Final

Judgment, defendants must divest Scott's wet wipes plant in Dover,

Delaware; grant a 25-five year, royalty-free, exclusive and assignable,

perpetually renewable license for the baby wipes labels produced at

that plant; and divest other associated assets--sell, in essence, the

entire Scott baby wipes business and brands. Within 180 days after

filing the proposed Final Judgment, defendants must similarly divest

Scott's Scotties brand facial tissue business, grant a 25-

year, royalty-free, exclusive and assignable, perpetually renewable

license for the Scotties facial tissue label, and divest any

two of four tissue mills specified in the Final Judgment and associated

assets. These businesses must be sold to a purchaser or purchasers who

demonstrate to the sole satisfaction of the United States and the State

of Texas that they will be an economically viable and effective

competitor, capable of maintaining or surpassing Scott's market

performance in the sale of branded baby wipes and consumer facial

tissue in the United States.

Until the ordered divestitures take place, defendants must take all

reasonable steps necessary to accomplish the divestitures, and

cooperate with any prospective purchaser. If defendants do not

accomplish the ordered divestitures within the specified 150 and 180

day time periods, the Final Judgment provides for procedures by which

the Court shall appoint a trustee to complete the divestitures.

Defendants must cooperate fully with the trustee.

If a trustee is appointed, the proposed Final Judgment provides

that Kimberly-Clark will pay all costs and expenses of the trustee. The

trustee's compensation will be structured so as to provide an incentive

for the trustee to obtain the highest price for the assets to be

divested, and to accomplish the divestiture as quickly as possible.

After the effective date of his or her appointment, the trustee shall

serve under such other conditions as the Court may prescribe. After his

or her appointment becomes effective, the trustee will file monthly

reports with the parties and the Court, setting forth the trustee's

efforts to accomplish divestiture. At the end of six months, if the

divestiture has not been accomplished, the trustee shall promptly file

with the Court a report setting forth the trustee's efforts to

accomplish the divestiture, explaining why the divestiture has not been

accomplished, and making recommendations. The trustee's report will be

furnished to the parties and shall

[[Page 66564]]

be filed in the public docket, except to the extent the report contains

information the trustee deems confidential. The parties will each have

the right to make additional recommendations to the Court. The Court

shall enter such orders as it deems appropriate to carry out the

purpose of the trust.

IV. Remedies Available to Potential Private Litigants

Section 4 of the Clayton Act (15 U.S.C. Sec. 15) provides that any

person who has been injured as a result of conduct prohibited by the

antitrust laws may bring suit in federal court to recover three times

the damages the person has suffered, as well as costs and reasonable

attorneys' fees. Entry of the proposed Final Judgment will neither

impair nor assist the bringing of any private antitrust damage action.

Under the provisions of Section 5(a) of the Clayton Act (15 U.S.C.

Sec. 16(a)), the proposed Final Judgment has no prima facie effect in

any subsequent private lawsuit that may be brought against defendants.

The proposed Final Judgment provides that nothing therein contained

shall be construed to provide any rights to any third party.

V. Procedures Available for Modification of the Proposed Final Judgment

The United States and the defendants have stipulated that the

proposed Final Judgment may be entered by the Court after compliance

with the provisions of the APPA, provided that the United States has

not withdrawn its consent. The APPA conditions entry upon the Court's

determination that the proposed Final Judgment is in the public

interest.

The APPA provides a period of at least sixty (60) days preceding

the effective date of the proposed Final Judgment within which any

person may submit to the United States written comments regarding the

proposed Final Judgment. Any person who wishes to comment should do so

within sixty (60) days of the date of publication of this Competitive

Impact Statement in the Federal Register. The United States will

evaluate and respond to the comments. All comments will be given due

consideration by the Department of Justice, which remains free to

withdraw its consent to the proposed Final Judgment at any time prior

to entry. The comments and the response of the United States will be

filed with the Court and published in the Federal Register.

Written comments should be submitted to: Anthony V. Nanni, Chief,

Litigation I Section, Antitrust Division, United States Department of

Justice, 1401 H Street, N.W., Suite 4000, Washington, D.C. 20530.

The proposed Final Judgment provides that the Court retains

jurisdiction over this action, and the parties may apply to the Court

for any order necessary or appropriate for the modification,

interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

The United States considered, as an alternative to the proposed

Final Judgment, a full trial on the merits of its Complaint against

defendants Kimberly-Clark and Scott. The United States is satisfied,

however, that the divestiture of the assets and other relief contained

in the proposed Final Judgment will preserve viable competition in the

production and sale of facial tissue and baby wipes that would

otherwise be adversely affected by the acquisition. Thus, the proposed

Final Judgment would achieve the relief the governments would have

obtained through litigation, but avoids the time, expense and

uncertainty of a full trial on the merits of the governments'

Complaint.

VII. Standard of Review Under the APPA for Proposed Final Judgment

The APPA requires that proposed consent judgments in antitrust

cases brought by the United States be subject to a sixty-day comment

period, after which the court shall determine whether entry of the

proposed Final Judgment ``is in the public interest.'' In making that

determination, the court may consider--

(1) the competitive impact of such judgment, including

termination of alleged violations, provisions for enforcement and

modification, duration or relief sought, anticipated effects of

alternative remedies actually considered, and any other

considerations bearing upon the adequacy of such judgment;

(2) the impact of entry of such judgment upon the public

generally and individuals alleging specific injury from the

violations set forth in the complaint including consideration of the

public benefit, if any, to be derived from a determination of the

issues at trial.

15 U.S.C. 16(e) (emphasis added). As the DC Circuit recently held, this

statute permits a court to consider, among other things, the

relationship between the remedy secured and the specific allegations

set forth in the government's complaint, whether the decree is

sufficiently clear, whether enforcement mechanisms are sufficient, and

whether the decree may positively harm third parties. See United States

v. Microsoft, 1995-1 Trade Cas. (CCH) para.71,027, at ____ (Slip op.

26) (DC Cir. June 16, 1995).

In conducting this inquiry, ``the Court is nowhere compelled to go

to trial or to engage in extended proceedings which might have the

effect of vitiating the benefits of prompt and less costly settlement

through the consent decree process.'' \3\ Rather,

\3\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette

Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest''

determination can be made properly on the basis of the Competitive

Impact Statement and Response to Comments filed pursuant to the

APPA. Although the APPA authorizes the use of additional procedures,

15 U.S.C. Sec. 16(f), those procedures are discretionary. A court

need not invoke any of them unless if believes that the comments

have raised significant issues and that further proceedings would

aid the court in resolving those issues. See H.R. Rep. 93-1463, 93rd

Cong. 2d Sess. 8-9, reprinted in (1974) U.S. Code Cong. & Ad. News

6535, 6538.

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absent a showing of corrupt failure of the government to discharge

its duty, the Court, in making its public interest finding, should *

* * carefully consider the explanations of the government in the

competitive impact statement and its responses to comments in order

to determine whether those explanations are reasonable under the

circumstances.

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. para.

61,508, at 71,980 (W.D. Mo. 1977).

Accordingly, with respect to the adequacy of the relief secured by

the decree, a court may not ``engage in an unrestricted evaluation of

what relief would best serve the public.'' United States v. BNS, Inc.,

858 F.2d 456, 462 (9th Cir. 1988) quoting United States v. Bechtel

Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083

(1981); see also Microsoft, 1995-1 Trade Cas. at ____ (Slip. op. 22).

Precedent requires that

the balancing of competing social and political interests affected

by a proposed antitrust consent decree must be left, in the first

instance, to the discretion of the Attorney General. The court's

role in protecting the public interest is one of insuring that the

government has not breached its duty to the public in consenting to

the decree. The court is required to determine not whether a

particular decree is the one that will best serve society, but

whether the settlement is ``within the reaches of the public

interest.'' More elaborate requirements might undermine the

effectiveness of antitrust enforcement by consent decree.\4\

\4\ United States v. Bechtel, 648 F.2d at 666 (citations

omitted) (emphasis added); see United States v. BNS, Inc., 858 F.2d

at 463; United States v. National Broadcasting Co., 449 F. Supp.

1127, 1143 (C.D. Cal. 1978); United States v. Gillette Co., 406 F.

Supp. at 716. See also Microsoft, 1995-1 Trade Cas. at ____ (Slip

op. 23) (whether ``the remedies [obtained in the decree are] so

inconsonant with the allegations charged as to fall outside of the

`reaches of the public interest.' '') (citations omitted).

[[Page 66565]]

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The proposed Final Judgment, therefore, should not be reviewed

under a standard of whether it is certain to eliminate every

anticompetitive effect of a particular practice or whether it mandates

certainty of free competition in the future. Court approval of a final

judgment requires a standard more flexible and less strict than the

standard required for a finding of liability. ``[A] proposed decree

must be approved even if it falls short of the remedy the court would

impose on its own, as long as it falls within the range of

acceptability or is `within the reaches of public interest.' (citations

omitted).'' \5\

\5\ United States v. American Tel. and Tel Co., 552 F. Supp.

131, 150 (D.D.C. 1982), aff'd sub nom. Maryland v. United States,

460 U.S. 1001 (1983) quoting United States v. Gillette Co., supra,

406 F. Supp. at 716; United States v. Alcan Aluminum, Ltd., 605 F.

Supp. 619, 622 (W.D. Ky 1985).

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VIII. Determinative Documents

There are no determinative materials or documents within the

meaning of the APPA that were considered by the United States in

formulating the proposed Final Judgment.

Dated: December 12, 1995.

Respectfully submitted,

Anthony E. Harris,

Attorney, State of Illinois # 01133713, Antitrust Division, U.S.

Department of Justice, 1401 H. Street NW., suite 4000, Washington, DC

20530, (202) 307-6583.

[FR Doc. 95-31054 Filed 12-21-95; 8:45 am]

BILLING CODE 4410-01-M