B.A.T. Industries p.l.c., et al.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[Docket No. 9271]

B.A.T. Industries p.l.c., et al.; Proposed Consent Agreement With

Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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

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, B.A.T Industries and Brown & Williamson

Tobacco Corporation to consummate the proposed acquisition of American

Tobacco Company, but would require them to divest, within twelve

months, six American Tobacco discount cigarette brands. If the required

divestitures are

[[Page 2752]]

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 respondents, for ten

years, to obtain Commission approval before acquiring any interest in a

cigarette manufacturer or any assets used to manufacture or distribute

cigarettes in the United States.

DATES: Comments must be received on or before March 13, 1995.

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

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

FOR FURTHER INFORMATION CONTACT:

Joseph Krauss, FTC/H-324, Washington, DC 20580. (202) 326-2713.

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

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 3.25(f) of

the Commission's rules of practice (16 CFR 3.25(f)), 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 Sec. 4.9(b)(6)(ii) of the Commission's rules of

practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order

The agreement herein, by and between B.A.T Industries p.l.c., Brown

& Williamson Tobacco Corporation, by their duly authorized officers,

hereafter sometimes referred to as respondents, and their attorneys,

and counsel for the Federal Trade Commission, is entered into in

accordance with the Commission's rule governing consent order

procedures. In accordance therewith the parties hereby agree that:

1. Respondent B.A.T Industries p.l.c. (BAT) is a public limited

company incorporated under the laws of England, with its headquarters

and principal place of business located at Windsor House, 50 Victoria

Street, London, England, SW1H 0NL.

2. Respondent Brown & Williamson Tobacco Corporation (B&W) is a

corporation organized, existing and doing business under and by virtue

of the laws of the State of Delaware with its headquarters and

principal place of business located at 1500 Brown & Williamson Tower,

P.O. Box 35090, Louisville, Kentucky, 40232.

3. Respondents have been served with a copy of the complaint issued

by the Federal Trade Commission charging them with violation of section

5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, and

section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and have filed

an answer to said complaint denying said charges.

4. Respondent B&W, and for the purposes only of this agreement and

any proceedings arising out of, or to enforce, this agreement, the

order herein, and the Preservation Agreement attached hereto as

Appendix I, respondent BAT, admit all the jurisdictional facts set

forth in the Commission's complaint in this proceeding.

5. Respondents waive:

a. Any further procedural steps;

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

statement of findings of fact and conclusions of law;

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

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

and

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

6. 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 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

respondents, in which event it will take such action as it may consider

appropriate, or issue and serve its decision containing the Order

herein, in disposition of the proceeding.

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

constitute an admission by respondents that the law has been violated

as alleged in the Commission's complaint, or that the facts as alleged

in the complaint, other than jurisdictional facts, are true.

8. 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 Sec. 3.25(f) of the

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

respondents, (1) issue its decision containing the following order to

divest in disposition of the proceeding, and (2) make information

public with respect thereto. When so entered, the order to divest shall

have the same force and effect and may be altered, modified or set

aside in the same manner and within the same time provided by statute

for other orders. The order shall become final upon service. Delivery

by the U.S. Postal Service of the decision containing the agreed-to-

order to respondent's attorneys, at the addresses as stated in this

agreement, shall constitute service. Respondents waive any right they

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

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

representation, or interpretation not contained in the order or in the

agreement may be used to vary or contradict the terms of the order.

9. Respondents have read the complaint and order contemplated

hereby. Respondents understand that once the order has been issued,

they will be required to file one or more compliance reports showing

that they have fully complied with the order. Respondents further

understand that they may be liable for civil penalties in the amount

provided by law for each violation of the order after it becomes final.

Order

I

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

definitions shall apply:

A. BAT means B.A.T Industries p.l.c., its subsidiaries, divisions,

and groups, including Brown & Williamson Tobacco Corporation, its

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

& Williamson Tobacco Corporation (``B&W''), their successors and

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

representatives.

B. American Brands means American Brands, Inc., its subsidiaries,

divisions, and groups, including The American Tobacco Company

(``ATC''), their successors and assigns, and their directors, officers,

employees, agents, and representatives.

C. Commission means the Federal Trade Commission.

D. Acquisition means the acquisition of ATC from American Brand by

BAT.

E. The Reidsville Assets means all real property, fixtures and

equipment at ATC's location at North Scales Street, Reidsville, NC

27320, including but not limited to, the following:

1. All machinery, fixtures, equipment, vehicles, transportation

facilities, furniture, tools and other tangible personal property;

2. Inventory and storage capacity;

3. All rights, titles and interests in and to owned or leased real

property, together with appurtenances, licenses and permits;

Provided however That the Reidsville Assets shall not include:

[[Page 2753]]

98.50/30--(MISTY 100's) (3) Modules; Maker/Protos, Packer/Focke 350

120/32--(MISTY 120's) (2) Modules; Maker/Protos, Packer/Focke 350

120/32--(CARLTON 120's) (1) (Module; Maker/Protos, Packer/Focke 350

Plus supporting equipment dedicated to the above identified brand

styles including, but not limited to, plug makers, wrappers if

separate, case packers, and routine maintenance parts and specific size

parts.

F. ATC Value Brands means the following brands of cigarettes in the

U.S.: Montclair, Riviera, Malibu, Bull Durham, Crowns, and Special

Tens.

G. ATC Full Revenue Brands means the following brands of cigarettes

in the U.S.: Tareyton, Silva Thins and Tall.

H. ATC Brands means the ATC Value Brands together with the ATC Full

Revenue Brands.

I. B&W Brand means the following brand of cigarettes in the U.S.:

Belair.

J. The term Assets means the following tangible and intangible

assets exclusively relating to the manufacture, distribution and sale

of those of the ATC Value Brands, the ATC Full Revenue Brands

(excluding any Reidsville Assets) or the B&W Brand actually being

divested (collectively the ``Brands'') including, to the extent they

exist, but not limited to:

1. The Brand profit and loss statements, Brand contribution

statements, and Brand advertising, promotional and marketing spend

records for each Brand since January 1, 1990;

2. All trademarks, trade dress, trade secrets, technical

information, intellectual property, patents, technology, know-how,

tobacco content formulae, designs, specifications, drawings, processes

and quality control data exclusively related to any of the Brands;

3. A bill of materials for each of the Brands, consisting of full

manufacturing standards and procedures, quality control specifications,

specifications for raw materials and components, including lists of

authorized sources for materials and components;

4. All dedicated molds and equipment currently in use for each of

the Brands;

5. A list of all direct customers who have bought the Brands from

ATC or B&W at any time from January 1, 1990, including names,

addresses, and telephone numbers of the individual customer contacts,

and the unit and dollar amounts of sales, by Brand, to each customer;

6. All current and projected advertising, promotional and marketing

information, materials and programs specifically dedicated to the sale

and distribution of each of the Brands;

7. All inventories of finished goods, packaging and raw materials

uniquely relating to each of the Brands;

8. All names of manufacturers and suppliers under contract with ATC

or B&W who produce for, or supply to, ATC or B&W in connection with the

manufacture or sale of each of the Brands;

9. A copy of all product testing required by any regulatory

authority specific to the Brands from January 1, 1990, including but

not limited to tar and nicotine content testing as required by the FTC

and all regulatory registrations and correspondence; and

10. All price lists for each of the Brand from January 1, 1990.

II

It is further ordered That:

A. BAT and B&W shall divest absolutely and in good faith, within 12

months of the date this order becomes final, the ATC Value Brands

Assets. BAT and B&W shall also divest to the proposed acquirer of the

ATC Value Brands Assets, the Reidsville Assets and the ATC Full Revenue

Brands Assets. BAT and B&W shall also divest:

1. Such additional ancillary assets, formerly of ATC, and effect

such arrangements in respect thereof, as are necessary to assure the

marketability and the viability of the Reidsville Assets for the

manufacture of cigarettes in the United States for sale and consumption

in the United States; and

2. Such additional ancillary physical assets and legal rights,

formerly of ATC, as are exclusive to those ATC Brands being divested

and are necessary to assure the marketability and the viability of

those ATC Brands;

Provided however, if the divestiture of only the ATC Value Brands

Assets is approved by the Commission pursuant to Paragraph II. B., and

the divestiture does not include the Reidsville Assets and/or the ATC

Full Revenue Brands Assets, the obligations of BAT and B&W to divest

under this order shall be satisfied upon the divestiture of the ATC

Value Brands Assets.

B. BAT and B&W shall divest hereunder 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 provided herein is to remedy the lessening of competition

resulting from the proposed acquisition as alleged in the Commission's

complaint and, therefore, if the Reidsville Assets are divested, they

shall be used only for the production of cigarettes in the U.S.

principally for sale and consumption in the U.S.

C. Pending divestiture as provided in this Paragraph II, BAT and

B&W shall:

1. Take such actions as are necessary to maintain the viability and

marketability of the Reidsville Assets by preventing the destruction,

removal, wasting, deterioration, sale, transfer, encumbrance or

impairment of any of the Reidsville Assets except for ordinary wear and

tear, and

2. Take such actions as are necessary to maintain the viability and

marketability of the ATC Brands Assets by preventing the destruction,

sale, transfer, encumbrance or impairment of any of the ATC Brands

Assets.

D. BAT and B&W shall comply with all terms of the Preservation

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

The Preservation Agreement shall continue in effect until the date this

order becomes final.

III

It is further ordered That:

A. If BAT and B&W have not divested, absolutely and in good faith

and with the Commission's prior approval, as provided in Paragraph II.

A., the Commission may appoint a trustee to divest the ATC Value Brands

Assets, the B&W Brand Assets and the Reidsville Assets. Upon

divestiture under this Paragraph III, the Reidsville Assets shall be

used for the production of cigarettes in the U.S. principally for sale

and consumption in the U.S. provided, however, that if the Commission

has not approved or disapproved a proposed divestiture within 120 days

of the date the application for such divestiture has been placed on the

public record, the running of the divestiture prior shall be tolled

until the Commission approves or disapproves the divestiture. In the

event that the Commission or the Attorney General brings an action

pursuant to section 5(l) of the Federal Trade Commission Act, 15 U.S.C.

45(l), or any other statute enforced by the Commission, BAT and B&W

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 section 5(l) of

the Federal Trade Commission Act, or any other statute enforced by the

Commission, for any failure by BAT and B&W to comply with this order.

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

to Paragraph III. A. of the order, BAT and

[[Page 2754]]

B&W 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 BAT and B&W, which consent shall not be unreasonably withheld. The

trustee shall be a person with experience and expertise in acquisitions

and divestitures. If BAT and B&W have not opposed, in writing,

including the reasons for opposing, the selection of any proposed

trustee within ten (10) days after notice by the staff of the

Commission to BAT and B&W of the identity of any proposed trustee, BAT

and B&W 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 Reidsville

Assets, the ATC Value Brands Assets and the B&W Brand Assets.

3. Within twenty (20) days after appointment of the trustee, BAT

and B&W 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

necessary to permit the trustee to effect the divestiture required by

this order.

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

Commission approve 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 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 period only two (2) times.

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

personnel, books, records and facilities related to the Reidsville

Assets, the ATC Value Brands Assets and the B&W Brand Assets or to any

other revelant information, as the trustee may request, and shall take

all reasonable steps to ensure that the confidentiality is maintained

of matters and documents so designated by either of the respondents.

BAT and B&W shall develop such financial or other information as such

trustee may request and shall cooperate with the trustee. BAT and B&W

shall take no action to interfere with or impede the trustee's

accomplishment of the divestitures. Any delays in divestiture caused by

BAT and B&W 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 (which may

include provision for the contract manufacture of cigarettes) that is

submitted to the Commission, subject to BAT's and B&W's absolute and

unconditional obligation to divest at no minimum price. The divestiture

shall be made in the manner and to the acquirer as set out in Paragraph

II B. 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 selected by BAT and B&W from among

those approved by the Commission.

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

cost and expense of BAT and B&W, 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 BAT and B&W,

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 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 the BAT and B&W, 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 Reidsville Assets, the ATC Value Brands Assets

and the B&W Brand Assets.

8. BAT and B&W 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

claims, 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. BAT and B&W shall be responsible for the defense of any

and all claims against the trustee under this subsection and the

trustee shall do and omit nothing which may prejudice such defense.

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 Reidsville Assets, the ATC Value Brands Assets and the B&W

Brand Assets.

12. The trustee shall report in writing to BAT and B&W and the

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

accomplish divestiture.

13. The trustee shall note, in his or her recommendation to the

Commission, whether the proposed acquirer, or any other entity

controlling or commonly controlled by the proposed acquirer, has,

directly or indirectly, in any jurisdiction in the world and at any

time within the last five years, had goods that it manufactured or

supplied seized, impounded or destroyed by any authority pursuant to a

claim of infringement of any intellectual property or other right over

or in respect to those goods.

IV

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

date this order becomes final, BAT and B&W 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 concern, corporate or non-corporate, engaged at the time of such

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

manufacture in the United States of cigarettes for consumption in the

United States, or

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

suitable for use for) the manufacture, distribution, or sale in the

United States of cigarettes.

Provided, however, that this Paragraph IV shall not apply to

[[Page 2755]]

transactions entered into in the ordinary course of business.

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 BAT and B&W have fully

complied with the provisions of Paragraphs II and III of this order,

BAT and B&W shall submit to the Commission a verified written report

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

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

this order. BAT and B&W shall include in their compliance reports,

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

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

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

or negotiations for the divestiture and the identity of all parties

contacted. BAT and B&W shall include in their compliance reports copies

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

memoranda, and all reports and recommendations concerning divestiture.

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, BAT

and B&W shall file a verified written report with the Commission

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

and are complying with Paragraph IV of this order.

VI

It is further ordered That BAT and B&W shall notify the Commission

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

corporations, 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 the corporations, that in each case

may affect compliance obligations arising out of the order.

VII

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

securing compliance with this order, subject to any legally recognized

privilege, BAT and B&W shall permit any duly authorized representative

of the Commission:

A. Upon written notice to counsel, 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 BAT and B&W relating to any

matters contained in this order; and

B. Upon five days' written notice to counsel and without restraint

or interference from BAT and B&W, to interview officers, directors, or

employees of BAT and B&W, who may have counsel present.

Appendix I

Preservation Agreement

This Preservation Agreement is by and between B.A.T. Industries

p.l.c., a public limited company incorporated under the laws of

England, with its headquarters and principal place of business located

at Windsor House, 50 Victoria Street, London, England, SW1H 0NL

(``BAT''), Brown & Williamson Tobacco Corporation, a corporation

incorporated under the laws of the State of Delaware with its

headquarters and principal place of business located at 1500 Brown &

Williamson Tower, PO Box 35090, Louisville, Kentucky (``B&W''), and the

Federal Trade 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.

Premises for Agreement

Whereas, BAT pursuant to an agreement dated April 26, 1994, agreed

to purchase substantially all of the outstanding stock of the American

Tobacco Company (``ATC''), a whole owned subsidiary of American Brands,

Inc.; and

Whereas, the Commission has reason to believe that the agreement

would violate section 5 of the Federal Trade Commission Act, and that,

if consummated, would violate section 7 of the Clayton Act and section

5 of the Federal Trade Commission Act, statutes enforced by the

Commission, and the Commission has issued its administrative complaint

challenging the agreement; and

Whereas, if the parties accept the attached Agreement Containing

Consent Order (``Consent Agreement''), 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. 3.25(f) 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 Reidsville Assets and the

ATC Brands Assets during the period prior to final acceptance of the

Order by the Commission (after the 60-day comment period), any

divestiture resulting from any 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 if the acquisition is

consummated, it will be necessary to preserve the continued viability

and marketability of the Reidsville Assets and the ATC Brands Assets,

as defined in the Consent Agreement; and

Whereas, the purpose of this Preservation Agreement and of the

Consent Agreement is to preserve the Reidsville Assets and the ATC

Brands Assets until the date this Order becomes final, in order to

remedy any anticompetitive effects of the acquisition; and

Whereas, BAT's and B&W's entering into this Preservation Agreement

shall in no way be construed as an admission by BAT and B&W that the

acquisition is anticompetitive or illegal; and

Whereas, BAT and B&W understand that no act or transaction

contemplated by this Preservation 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 Preservation

Agreement;

Now, therefore, in consideration of the Commission's agreement

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

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 Preservation Agreement, and the Consent Agreement to

which this Preservation Agreement, is annexed and made a part thereof,

and the final order in this proceeding, and, in the event the required

divestiture is not accomplished, to appoint a trustee to seek the

divestiture of the Reidsville Assets, the ATC Value Brands Assets and

the B&W Brand Assets as provided in the Consent Agreement, the parties

agree as follows:

Terms of Agreement

1. BAT and B&W agree to execute, and upon its issuance, to be bound

by the attached Consent Agreement.

2. BAT will be free to close the acquisition with American Brands

immediately after the Commission's approval of the Consent Agreement

for placement on the public record for comment.

3. BAT and B&W agree that from the date this Preservation Agreement

is signed by BAT and B&W until the earliest of the dates listed in

subparagraphs 3.a and 3.b they will

[[Page 2756]]

comply with the provisions of this Preservation Agreement:

a. Three business days after the Commission withdraws its

acceptance of the Consent Agreement pursuant to the provisions of

Sec. 3.25(f) of the Commission's rules; or

b. The day the order becomes final.

4. From the time BAT and B&W sign this Preservation Agreement until

the date the order becomes final, BAT and B&W shall:

a. Take such actions as are necessary to maintain the viability and

marketability of the Reidsville Assets by preventing the destruction,

removal, wasting, deterioration, sale, transfer, encumbrance or

impairment of any of the Reidsville Assets except for ordinary wear and

tear, and

b. Take such actions as are necessary to maintain the viability and

marketability of the ATC Brands Assets by preventing the destruction,

sale, transfer, encumbrance or impairment of any of the ATC Brands

Assets.

5. BAT and B&W also waive 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 counsel for BAT or B&W, BAT

or B&W shall permit any duly authorized representative or

representatives of the Commission:

a. Access during the office hours of BAT or B&W, 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 BAT or B&W relating to compliance

with this agreement; and

b. Upon five (5) days' notice to BAT or B&W and without restraint

or interference from them, to interview officers or employees of BAT or

B&W, who may have counsel present, regarding any such matters.

7. This agreement shall not be binding on the Commission until

approved by the Commission.

Analysis of Proposed Consent Order To Aid Public Comment

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

subject to final approval, an agreement containing a proposed consent

order from B.A.T Industries p.l.c. (``BAT'') and Brown & Williamson

Tobacco Corporation (``B&W''). The proposed consent order has been

placed on the public record for sixty (60) days for reception of

comments by interested persons. comments received during this period

will become part of the public record. After sixty (60) days, the

Commission will again review the agreement and the comments received

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

final the agreement's proposed order.

The Commission's investigation of this matter concerns the

acquisition of The American Tobacco Company (``ATC''), a wholly-owned

subsidiary of American Brands, Inc. by BAT. B&W, BAT's wholly-owned

subsidiary, and ATC are the third and fifth largest manufacturers of

cigarettes, respectively, in the United States. In its administrative

complaint, the Commission alleges, among other things, that the United

States cigarette market is highly concentrated and would become

substantially more concentrated as a result of the acquisition. The

Commission also alleges that it has reason to believe that the

acquisition would have anticompetitive effects and would violate

section 7 of the Clayton Act and section 5 of the Federal Trade

Commission Act. The agreement containing consent order would, if

finally accepted by the Commission, settle charges that the acquisition

may substantially lessen competition in the manufacture and sale of

cigarettes in the United States.

The order, accepted for public comment, contains provisions

requiring BAT and B&W to divest certain brands of cigarettes and

cigarette manufacturing facilities. The order requires BAT and B&W to

divest, within twelve (12) months, six discount cigarette brands,

formerly owned by ATC, including Montclair, Riviera, Malibu, Bull

Durham, Crowns and Special Tens. The order also requires BAT and B&W to

divest to the purchaser of the discount brands, three former ATC full

revenue brands, Tareyton, Silva Thins and Tall, and the former-ATC

cigarette manufacturing facility located at Reidsville, North Carolina.

Under the terms of the divestiture, BAT and B&W may satisfy the

divestiture requirements without divesting the full revenue brands and/

or the Reidsville facility, if the Commission approves the divestiture

of only the discount brands as satisfying the remedial concerns of the

order. The purpose of the divestiture is to remedy the lessening of

competition resulting from the acquisition as alleged in the

Commission's complaint and, therefore, if the Reidsville facility is

divested, it is to be used only for the production of cigarettes in the

United States principally for sale and consumption in the United

States.

Under the terms of the order, if BAT and B&W fail to complete the

divestiture within the required period, the Commission may appoint a

trustee to divest the six discount cigarette brands, the Reidsville

facility and Belair, a B&W full revenue cigarette.

Any proposed divestiture pursuant to the order must be approved by

the Commission after the divestiture proposal has been placed on the

public record for reception of comments from interested persons. The

Preservation Agreement executed as part of the agreement containing the

consent order requires BAT and B&W, until the order becomes final, to

take actions as are necessary to maintain the viability and

marketability of the former ATC brands of cigarettes and the Reidsville

facility.

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

the order prohibits BAT and B&W from acquiring, without prior

Commission approval, stock or assets of, or interests in, any company

engaged in the manufacture and sale of cigarettes in the United States.

The purpose of this analysis is to facilitate public comment on the

proposed order, and it is not intended to constitute an official

interpretation of the agreement and proposed order or to modify in any

way their terms.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 95-693 Filed 1-10-95; 8:45 am]

BILLING CODE 6750-01-M