The Penn Traffic Company; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 951 0009]

The Penn Traffic 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

permit, among other things, the Penn Traffic Company to acquire a

number of Acme supermarkets from American Stores Company, but would

require it to divest, to a Commission approved acquirer or acquirers

within twelve months, one supermarket in each of the three Pennsylvania

areas designated (Towanda, Mount Carmel, and Pittston). If the

divestitures were not completed on time, the consent agreement would

permit the Commission to appoint a trustee to complete the

transactions. In addition, the consent agreement would require the

respondent, for ten years, to obtain Commission approval before

acquiring any interest in any entity that owns or operates a

supermarket in any of the three areas designated.

DATES: Comments must be received on or before April 14, 1995.

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

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

20580.

FOR FURTHER INFORMATION CONTACT:

Ronald Rowe or Marimichael Skubel, FTC/S-2105, Washington, D.C. 20580.

(202) 326-2610 or 326-2611.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 45 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 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)).

Agreement Containing Consent Order

The Federal Trade Commission (``Commission'') having initiated an

investigation of The Penn Traffic Company's (``Penn Traffic'') proposed

acquisition of certain assets of American Stores Company (American),

and it now appearing that Penn Traffic hereinafter sometimes referred

to as ``proposed respondent,'' is willing to enter into an agreement

containing an order to divest certain assets and to cease and desist

from certain acts, and providing for other relief,

It is hereby agreed by and among proposed respondent, by its duly

authorized officers and attorneys, and counsel for the Commission that:

1. Proposed respondent The Penn Traffic Company 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 1200 State Fair Boulevard, Syracuse, New York

13221-4737.

2. Proposed respondent admits all the jurisdictional facts set

forth in the draft of complaint.

3. Proposed respondent waives:

a. any further procedural steps;

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

statement of findings of fact and conclusions of law;

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

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

and

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

4. This agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission it, together with the draft of

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this agreement and so notify the proposed respondent, in which event

it will take such action as it may consider appropriate, or issue and

serve its complaint (in such form as the circumstances may require) and

decision, in disposition of the proceeding.

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

constitute an admission by proposed respondent that the law has been

violated as alleged in the draft of the complaint, or that the facts as

alleged in the draft complaint, other than jurisdictional facts, are

true.

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

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Section 2.34 of the

Commission's Rules, the Commission may, without further notice to the

proposed respondent, (1) issue its complaint corresponding in form and

substance with the draft of complaint 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 time provided by statute

for other orders. The [[Page 8240]] order shall become final upon

service. Delivery by the United States Postal Service of the complaint

and decision containing the agreed-to order to proposed respondent's

address as stated in this Agreement shall constitute service. Proposed

respondent waives any right it may have to any other manner of 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.

7. Proposed respondent has read the proposed complaint and order

contemplated hereby. Proposed respondent understands that once the

order has been issued, it will be required to file verified written

reports showing that it has fully complied with the order. Proposed

respondent further understands that it may be liable for civil

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

after it becomes final.

Order

I

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

definitions shall apply:

A. ``Respondent'' or ``Penn Traffic'' means The Penn Traffic

Company, its predecessors, subsidiaries, divisions, and groups and

affiliates controlled by The Penn Traffic Company, their successors and

assigns, and their directors, officers, employees, agents, and

representatives.

B. ``Assets to be divested'' means the assets described in

Paragraph II. A. of this order.

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

D. ``Supermarket'' means a full-line retail grocery store that

carries a wide variety of food and grocery items in particular product

categories, including bread and dairy products; refrigerated and frozen

food and beverage products; fresh and prepared meats and poultry;

produce, including fresh fruits and vegetables; shelf-stable food and

beverage products, including canned and other types of packaged

products; staple foodstuffs, which may include salt, sugar, flour,

sauces, spices, coffee, and tea; and other grocery products, including

nonfood items such as soaps, detergents, paper goods, other household

products, and health and beauty aids.

II

It is further ordered that:

A. Respondent shall divest, absolutely and in good faith, within

twelve months from the date this order becomes final:

1. The ``Acme'' supermarket located at River and Park Streets,

Borough of Towanda, Pennsylvania;

2. The ``Acme'' supermarket located on Kennedy Boulevard in

Pittston, Pennsylvania; and

3. An ``Acme'' or a Penn Traffic supermarket located in the

Township of Mount Carmel, Pennsylvania.

The assets to be divested shall include the grocery business

operated, and all assets, leases, properties, business and goodwill,

tangible and intangible, utilized in the distribution or sale of

groceries at the locations that are divested.

B. Respondent shall divest the assets to be divested only to an

acquirer or acquirers that receive the prior approval of the Commission

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

Commission. The purpose of the divestiture is to ensure the

continuation of the assets to be divested as ongoing, viable

enterprises engaged in the supermarket business and to remedy the

lessening of competition resulting from the acquisition as alleged in

the Commission's complaint.

C. Pending divestiture of such assets to be divested, respondent

shall take such actions as are necessary to maintain the viability and

marketability of such assets to be divested and to prevent the

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

assets to be divested except in the ordinary course of business and

except for ordinary wear and tear.

D. Respondent 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 respondent has divested all of the assets to be

divested.

III

It is further ordered that:

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

with the Commission's prior approval, such assets to be divested within

twelve months from the date this order becomes final, the Commission

may appoint a trustee to divest any of the remaining assets to be

divested. In the event that the Commission or the Attorney General

brings an action pursuant to Sec. 5(l) of the Federal Trade Commission

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

respondent shall consent to the appointment of a trustee in such

action. Neither the appointment of a trustee nor a decision not to

appoint a trustee under this Paragraph shall preclude the Commission or

the Attorney General from seeking civil penalties or any other relief

available to it, including a court-appointed trustee, pursuant to

Sec. 5(l) of the Federal Trade Commission Act, or any other statute

enforced by the Commission, for any failure by the respondent to comply

with this order.

B. If a trustee is appointed by the Commission or a court pursuant

to Paragraph III. A. of this order, respondent shall consent to the

following terms and conditions regarding the trustee's powers, duties,

authority, and responsibilities:

1. The Commission shall select the trustee, subject to the consent

of respondent, which consent shall not be unreasonably withheld. The

trustee shall be a person with experience and expertise in acquisitions

and divestitures. If respondent has not opposed, in writing, including

the reasons for opposing, the selection of any proposed trustee within

ten (10) days after written notice by the staff of the Commission to

respondent of the identity of any proposed trustee, respondent shall be

deemed to have consented to the selection of the proposed trustee.

2. Subject to the prior approval of the Commission, the trustee

shall have the exclusive power and authority to divest any of the

remaining assets to be divested.

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

respondent shall execute a trust agreement that, subject to the prior

approval of the Commission and, in the case of a court-appointed

trustee, of the court, transfers to the trustee all right and powers

necessary to permit the trustee to effect the divestitures required by

this order.

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

Commission or court approves the trust agreement described in Paragraph

III.B.3. to accomplish the divestitures, 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; provided, however, the

Commission may extend this 12-month period only two (2) times.

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

personnel, books, records and facilities related to any of the

remaining assets to be divested or to [[Page 8241]] any other relevant

information, as the trustee may request. Respondent shall develop such

financial or other information as such trustee may reasonably request

and shall cooperate with the trustee. Respondent shall take no action

to interfere with or impede the trustee's accomplishment of the

divestitures. Any delays in divestiture caused by respondent shall

extend the time for divestiture under this Paragraph in an amount equal

to the delay, as determined by the Commission or, for a court-appointed

trustee, by the court.

6. The trustee shall use his or her best efforts to negotiate the

most favorable price and terms available in each contract that is

submitted to the Commission, subject to respondent's absolute and

unconditional obligation to divest at no minimum price. The

divestitures 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 in any of the areas specified

in this order for a supermarket to be divested from more than one

acquiring entity, and if the Commission determines to approve more than

one 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 respondent, 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 respondent,

such consultants, accountants, attorneys, investment bankers, business

brokers, appraisers, and other representatives and assistants as are

necessary to carry out the trustee's duties and responsibilities. The

trustee shall account for all monies derived from the sale 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 the respondent, and the trustee's power shall

be terminated. The trustee's compensation shall be based at least in

significant part on a commission arrangement contingent on the

trustee's divesting the assets to be divested to satisfy Paragraph II.

8. Respondent shall indemnify the trustee and hold the trustee

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

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

duties, 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.

9. If the trustee ceases to act or fails to act diligently, a

substitute trustee shall be appointed in the same manner as provided in

Paragraph III. A. of this order.

10. The Commission or, in the case of a court-appointed trustee,

the court, may on its own initiative or at the request of the trustee

issue such additional orders or directions as may be necessary or

appropriate to accomplish the divestiture required by this order.

11. The trustee shall have no obligation or authority to operate or

maintain the assets to be divested.

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

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

accomplish divestiture.

IV

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

the date this order becomes final, respondent shall not, without the

prior approval of the Commission, directly or indirectly, through

subsidiaries, partnerships, or otherwise:

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

any supermarket or leasehold interest in any supermarket, including any

facility that has operated as a supermarket within six (6) months of

the date of the proposed acquisition, located in (a) the Towanda,

Pennsylvania area, which includes the Borough of Towanda and the

townships of Wysox, North Towanda, and Monroeton; (b) the Mount Carmel,

Pennsylvania area, which includes the Borough of Mount Carmel and the

Township of Mount Carmel; and (c) the Pittston, Pennsylvania area,

which includes the city of Pittston, the townships of Pittston and

Jenkins, and the boroughs of Dupont, Avoca, Hughestown, Duryea,

Yatesville, and Laflin, Pennsylvania.

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

any entity that owns any interest in or operates any supermarket or

owned any interest in or operated any supermarket within six (6) months

of the date of the proposed acquisition in (a) the Towanda,

Pennsylvania area, which includes the Borough of Towanda and the

townships of Wysox, North Towanda, and Monroeton; (b) the Mount Carmel,

Pennsylvania area, which includes the Borough of Mount Carmel, and the

Township of Mount Carmel; and (c) the Pittston, Pennsylvania area,

which includes the city of Pittston, the townships of Pittston and

Jenkins, and the boroughs of Dupont, Avoca, Hughestown, Duryea,

Yatesville, and Laflin, Pennsylvania.

Provided, however, that these prohibitions shall not apply to the

construction of new facilities or the leasing of facilitates that have

not operated as supermarkets within six months of the date of the offer

to lease.

V

It is further ordered that:

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

and every sixty (60) days thereafter until respondent has fully

complied with the provisions of Paragraphs II. or III. of this order,

respondent shall submit to the Commission verified written reports

setting forth in detail the manner and form in which it intends to

comply, is complying, and has complied with Paragraphs II. and III. of

this order. Respondent shall include in its compliance reports, among

other things that are required from time to time, a full description of

the efforts being made to comply with Paragraph II. and III. of the

order, including a description of all substantive contacts or

negotiations for the divestiture and the identity of all parties

contacted. Respondent shall include in its compliance reports copies of

all written communications to and from such parties, all internal

memoranda, and all reports and recommendations concerning divestiture.

B. One year (1) 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 other times as the Commission may require,

respondent shall file verified written reports with the Commission

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

and is complying with this order.

VI

It is further ordered that respondent shall notify the Commission

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

such as dissolution, assignment, sale resulting in the emergence of a

successor corporation, or the creation or dissolution of subsidiaries

or any other change in respondent that may affect compliance

obligations arising out of the order. [[Page 8242]]

VII

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

securing compliance with this order, respondent shall permit any duly

authorized representative of the Commission:

A. Upon reasonable notice to respondent, access, during office

hours and in the presence of counsel, to inspect and copy all books,

ledgers, accounts, correspondence, memoranda and other records and

documents in the possession or under the control of respondent relating

to any matters contained in this order; and

B. Upon reasonable notice to respondent and without restraint or

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

or employees of respondent in the presence of counsel.

VIII

It is further ordered that this order shall terminate twenty (20)

years from the date this order becomes final.

Appendix I

Asset Maintenance Agreement

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

between The Penn Traffic Company (``Penn Traffic''), a corporation

organized under the laws of the State of Delaware, with its

principal offices located at 1200 State Fair Boulevard, Syracuse,

New York 13221-4737, 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. 41, et seq. (collectively ``the Parties'').

Premises

Whereas, Penn Traffic, pursuant to an agreement dated September

30, 1994, agreed to purchase certain assets of American Stores

Company (hereinafter ``Acquisition''); and

Whereas, the Commission is now investigating the Acquisition to

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

Commission; and

Whereas, if the Commission accepts the attached Agreement

Containing Consent Order, the Commission is required to place it on

the public record for a period of sixty (60) days for public comment

and may subsequently withdraw such acceptance pursuant to the

provisions of Sec. 2.34 of the Commission's Rules; and

Whereas, the Commission is concerned that if an agreement is not

reached preserving the status quo ante of the assets to be divested

as described in II. A. of the attached Agreement Containing Consent

Order (``Assets'') during the period prior to their divestiture,

when those Assets will be in the hands of Penn Traffic, that any

divestiture resulting from any administrative proceeding challenging

the legality of the Acquisition might not be possible, or might

produce a less than effective remedy; and

Whereas, the Commission is concerned that prior to divestiture

to the acquirer, it may be necessary to preserve the continued

viability and competitiveness of the Assets; and

Whereas, the purpose of this Agreement and of the Consent Order

is to preserve the Assets pending the divestiture to the acquirer

approved by the Federal Trade Commission under the terms of the

Order, in order to remedy any anticompetitive effects of the

Acquisition; and

Whereas, Penn Traffic entering into this Agreement shall in no

way be construed as an admission by Penn Traffic that the

Acquisition is illegal; and

Whereas, Penn Traffic 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, in consideration of the Commission's agreement

that, unless the Commission determines to reject the Consent Order,

it will not seek further relief from the parties with respect to the

Acquisition, except that the Commission may exercise any and all

rights to enforce this Agreement and the Consent Order annexed

hereto and made a part thereof, and, in the event the required

divestiture is not accomplished, to appoint a trustee to seek

divestiture of the Assets, the Parties agree as follows:

Terms of Agreement

1. Penn Traffic agrees to execute, and upon its issuance to be

bound by, the attached Consent Order. The Parties further agree that

each term defined in the attached Consent Order shall have the same

meaning in this Agreement.

2. Unless the Commission brings an action to seek to enjoin the

proposed acquisition pursuant to Section 13(b) of the Federal Trade

Commission Act, 15 U.S.C. Sec. 53(b), and obtains a temporary

restraining order or preliminary injunction blocking the proposed

acquisition, Penn Traffic will be free to close the Acquisition

after 11:59 p.m., January 17, 1995.

3. Penn Traffic agrees that from the date this Agreement is

accepted until the earliest of the dates listed in subparagraphs

3.a-3.b it will comply with the provisions of this Agreement:

a. Three 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. On the day the divestiture set out in the Consent Order has

been completed.

4. From the time Penn Traffic acquires the Assets until the

divestiture set out in the Consent Order has been completed, Penn

Traffic shall maintain the viability, competitiveness and

marketability of the Assets, and shall not cause the wasting or

deterioration of the Assets, nor shall it sell, transfer, encumber

or otherwise impair their marketability or viability.

5. Should the Commission seek in any proceeding to compel Penn

Traffic to divest itself of the Assets or to seek any other

injunctive or equitable relief, Penn Traffic shall not raise any

objection based upon the expiration of the applicable Hart-Scott-

Rodino Antitrust Improvements Act waiting period or the fact that

the Commission has not sought to enjoin the Acquisition. Penn

Traffic also waives all rights to contest the validity of this

Agreement.

6. 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 Penn Traffic to its

principal offices, Penn Traffic shall permit any duly authorized

representative or representatives of the Commission:

a. Access during the office hours of Penn Traffic, 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 Penn Traffic relating to

compliance with this Agreement; and

Upon five (5) days' notice to Penn Traffic and without restraint

or interference from them, to interview officers or employees of

Penn Traffic, who may have counsel present, regarding any such

matters.

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

Commission.

Analysis To Aid Public Comment on the Provisionally Accepted Consent

Order

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

public comment from The Penn Traffic Company (``Penn Traffic'') an

agreement containing consent order to divest certain assets. The

agreement is designed to remedy any anticompetitive effect stemming

from Penn Traffic's acquisition of a number of Acme supermarkets from

American Stores Company.

The agreement has been placed on the public record for sixty 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

30, 1994, Penn Traffic agreed to acquire certain assets of Acme

Markets, Inc., wholly-owned subsidiary of American Stores Company, for

$94 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, Penn Traffic and Acme are direct

competitors for the retail sale of food and grocery items in the market

areas of (1) the Towanda, Pennsylvania area, which includes the Borough

of [[Page 8243]] Towanda and the townships of Wysox, North Towanda, and

Monroeton; (2) the Mount Carmel, Pennsylvania area, which includes the

Borough of Mount Carmel and the Township of Mount Carmel; and (3) the

Pittston, Pennsylvania area, which includes the city of Pittston, the

townships of Pittston and Jenkins, and the boroughs of Dupont, Avoca,

Hughestown, Duryea, Yatesville, and Laflin, Pennsylvania. According to

the draft complaint, these markets are highly concentrated and entry is

difficult or unlikely. Penn Traffic's acquisition of Acme may reduce

competition in these markets by eliminating the direct competition

between Penn Traffic and Acme, by increasing the likelihood that Penn

Traffic will become a dominant firm, and by increasing the likelihood

of collusive behavior among the few remaining competitors.

The agreement containing consent order attempts to remedy the

Commission's competitive concerns about the acquisition. Under the

terms of the proposed order, Penn Traffic must divest three

supermarkets within twelve-months, to a purchaser approved by the

Commission. The three stores to be divested include the ``Acme''

supermarket located in Towanda, Pennsylvania, the ``Acme'' supermarket

located in Pittston, Pennsylvania, and either the ``Acme'' or the Penn

Traffic store located in Mount Carmel, Pennsylvania.

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

the order also prohibits Penn Traffic from acquiring, without prior

Commission approval, stock, or any other interest in any supermarket,

or entity that owns or operates a supermarket, located in the areas of

Towanda, Pittston, or Mount Carmel, Pennsylvania. This prohibition will

not apply to the construction of new facilities or the leasing of

facilities not operated as supermarkets within six months of the offer

to lease.

The purpose of this analysis is to invite public comment concerning

the consent order and any other aspect of this matter. 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. 95-3543 Filed 2-10-95; 8:45 am]

BILLING CODE 6750-01-M