Proposed Final Judgment and Competitive Impact Statement; United States of America and the State of Colorado v. Vail Resorts, Inc., Ralston Resorts, Inc., and Ralston Foods, Inc.

DEPARTMENT OF JUSTICE

Antitrust Division

Proposed Final Judgment and Competitive Impact Statement; United

States of America and the State of Colorado v. Vail Resorts, Inc.,

Ralston Resorts, Inc., and Ralston Foods, Inc.

Notice is hereby given pursuant to the Antitrust Procedures and

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

Stipulation, and Competitive Impact Statement have been filed with the

United States District Court for the District of Colorado in United

States and The State of Colorado versus Vail Resorts, Inc., Ralston

Resorts, Inc., and Ralston Foods, Inc., Civ. Action No. 97-B-10. The

proposed Final Judgment is subject to approval by the Court after the

expiration of the statutory 60-day public comment period and compliance

with the Antitrust Procedures and Penalties Act, 15 U.S.C. 16(b)-(h).

On January 3, 1997, the United States and the State of Colorado

filed a Complaint seeking to enjoin a transaction in which Vail

Resorts, Inc. (``Vail'') agreed to acquire Ralston Resorts, Inc.

(``Ralston''). Vail and Ralston are the two largest owner/operators of

ski resorts in Colorado, and this transaction would have combined five

ski resorts in Colorado. The Complaint alleged that the proposed

acquisition would substantially lessen competition in providing skiing

to Front Range Colorado skiers in violation of section 7 of the Clayton

Act, 15 U.S.C. 18.

The proposed Final Judgment orders defendants to sell all of

Ralston's rights, titles, and interests in the Arapahoe Basin resort in

Summit County, Colorado to a purchaser who has the capability to

compete effectively in the provision of skiing to Front Range Colorado

skiers at Arapahoe Basin. The Stipulation also imposes a hold separate

agreement that, in essence, requires the parties to ensure that, until

the divestiture mandated by the Final Judgment has been accomplished,

Ralston's Arapahoe Basin operations will be held separate and apart

from, and operated independently of, Vail's assets and businesses. A

Competitive Impact Statement filed by the United States describes the

Complaint, the proposed Final Judgment, and remedies available to

private litigants.

Public comment is invited within the statutory 60-day comment

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

the Federal Register and filed with the Court. Written comments should

be directed to Craig W. Conrath, Chief, Merger Task Force, Antitrust

Division, 1401 H Street, NW., Suite 4000, Washington, DC. 20530

(telephone: (202) 307-0001). Copies of the Complaint, Stipulation,

proposed Final Judgment and Competitive Impact Statement are available

for inspection in Room 215 of the U.S. Department of Justice, Antitrust

Division, 325 7th Street, NW., Washington, DC 20530 (telephone: (202)

514-2481) and at the office of the Clerk of the United States District

court for the District of Colorado, 1929 Stout Street, Room C-145,

Denver, Colorado 80294.

Copies of any of these materials may be obtained upon request and

payment of a copying fee.

Constance K. Robinson,

Director of Operations, Antitrust Division.

In the United States District Court for the District of Colorado

United States of America and the State of Colorado, Plaintiffs, v.

Vail Resorts, Inc., Ralston Resorts, Inc., and Ralston Foods, Inc.,

Defendants.

Civil Action No. 97-B-10

Stipulation and Order

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

respective attorneys, as follows:

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 District of Colorado;

2. The parties stipulate 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. 16), and without further notice to any party or other

proceedings, provided that plaintiff the United States has not

withdrawn its consent, which it 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. Defendants Vail and Ralston (as defined in paragraphs II (A) &

(B) of the proposed Final Judgment attached hereto) 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 proposed

Final Judgment as through the same were in full force and effect as an

order of the Court; provided, however, that Ralston shall not be

obligated to comply with Section IV(A) of the proposed Final Judgment

unless and until the closing of any transaction in which Vail directly

or indirectly acquires all or any part of the assets or capital stock

of Ralston; and provided, further, that Ralston shall be relieved of

its obligation to comply with Sections IX (A) through (K) of the

proposed Final Judgment in the event that the Stock Purchase Agreement

among Vail Resorts, Inc., Ralston Foods, Inc. and Ralston Resorts,

Inc., dated July 22, 1996 (the ``Stock Purchase Agreement''), is

terminated without consummation of the transaction contemplated therein

or any variant of it; and provided, further, that Ralston Foods, Inc.

shall be relieved of its obligation to comply with Sections IV (A)

through (G) and IX (A) through (K) of the proposed Final Judgment upon

consummation of the transaction contemplated by the Stock Purchase

Agreement.

4. Defendants shall not consummate their transaction before the

Court has signed this Stipulation and Order;

5. Vail shall prepare and deliver affidavits in the forms required

by the provisions of paragraphs A and B of Section VII of the proposed

Final Judgment commencing no later than January 23, 1997 and every

thirty days thereafter pending entry of the Final Judgment;

6. In the event plaintiff United States withdraws its consent, as

provided in paragraph 2 above, 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;

7. The defendants represent that the divestiture ordered in the

proposed Final Judgment can and will be made, and that the defendants

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

asking the Court to modify any of the divestiture provisions contained

therein.

8. All parties agree that this agreement can be signed in multiple

counterparts.

Dated: January 2, 1997.

[[Page 5038]]

For the United States:

Craig W. Conrath,

Chief.

Reid B. Horwitz,

Assistant Chief.

John W. Van Lonkhuyzen,

Anne M. Purcell,*

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

* Counsel of Record.

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

James K. Foster,

Barry L. Creech,

John M. Lynch,

Susan Wittenberg,

Trial Attorneys.

U.S. Department of Justice, Antitrust Division, Merger Task

Force, 1401 H Street NW., Suite 4000, Washington, DC 20530, (202)

307-0001.

For the State of Colorado:

Gale A. Norton,

Attorney General.

Stephen K. ErkenBrack,

Chief Deputy Attorney General.

Richard A. Westfall,

Solicitor General.

Garth C. Lucero,

Deputy Attorney General.

Jan Michael Zavislan, 11636,*

First Assistant Attorney General.

Maria E. Berkenkotter, 16781,*

Assistant Attorney General, Civil Litigation Section, Antitrust Unit.

1525 Sherman Street, 5th Floor, Denver, Colorado 80203, DC Box

No. 20, (303) 866-3613.

For Defendant Vail Resorts, Inc.:

Bruce F. Black,*

Holme, Roberts & Owen, LLP,

1700 Lincoln, Suite 4100,

Denver, CO 80203,

(303) 861-7000.

Robert S., Schlossberg,

Peter E. Halle,

Jonathan M. Rich,

Robert B. Wiggens,

Harry T. Robins,

Anthony E. Bell,

Morgan, Lewis & Bockius LLP,

1800 M Street NW.,

Washington, DC 20036.

(202) 467-7000.

Attorneys for Vail Resorts, Inc.

For Defendants Ralston Resorts, Inc. and Ralston Foods, Inc.:

Paul C. Daw,*

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

*Counsel of Record.

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

Sherman & Howard, LLC, 633 17th Street, Suite 3000, Denver, CO 80202,

(303) 299-8124.

E. Perry Johnson, Rebecca A. Nelson,

Bryan Cave, LLP, One Metropolitan Square, 211 No. Broadway, Suite 3600,

St. Louis, MO 63102, (314) 259-2000

J. Michael Cooper, Daniel C. Schwartz,

Bryan Cave, LLP, 700 13th Street, NW, Washington, DC 20004, (202) 508-

6000.

Attorneys for Ralston Resorts, Inc. and Ralston Foods, Inc.

Dated: January 3, 1997.

So ordered:

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

United States District Judge.

Dated: January 3, 1997.

In the United States District Court for the District of Colorado

United States of America and the State of Colorado, Plaintiffs, v.

Vail Resorts, Inc., Ralston Resorts, Inc. and Ralston Foods, Inc.,

Defendants.

Civil Action No. 97-B-10

Final Judgment

Whereas plaintiffs United States of America (hereinafter ``United

States'') and the State of Colorado, having filed their Complaint

herein on January 3, 1997, 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 the essence of this Final Judgment is prompt and

certain divestiture of assets to assure that competition is not

substantially lessened;

And Whereas plaintiffs require defendants to make certain

divestitures for the purpose of remedying the loss of competition

alleged in the Complaint;

And Whereas defendants have represented to plaintiffs that the

divestiture ordered herein 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;

Now, 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. Ralston means defendants Ralston Resorts, Inc., a Colorado

corporation headquartered in Keystone, Colorado; and Ralston Foods,

Inc., a Nevada corporation headquartered in St. Louis, Missouri, and

includes their successors and assigns, and their parents, subsidiaries,

directors, officers, managers, agents, and employees acting for or on

behalf of any of them.

B. Vail means defendant Vail Resorts, Inc., a Delaware corporation

headquartered in Avon, Colorado, and includes its successors and

assigns, and its parents, subsidiaries, directors, officers, managers,

agents, and employees acting for or on behalf of any of them.

C. Divestiture Assets means all rights, titles and interests,

including all fee and all leasehold, permit and renewal rights, in

Ralston's Arapahoe Basin resort in Summit County, Colorado, including,

but not limited to, all real property (including but not limited to

property owned in fee or used through a lease or special use permit

from the United States Forest Service), deeded development rights to

real property, capital equipment (including but not limited to lifts,

grooming and snowmaking equipment), buildings, fixtures, inventories,

contracts (including but not limited to customer contracts), customer

lists, marketing or consumer surveys relating to Arapahoe Basin,

permits (including but not limited to environmental permits and all

permits from the United States Forest Service), all work in progress on

permits or studies undertaken in order to obtain permits, plans for

design or redesign of ski trails, trucks, snowcats and other vehicles,

water rights sufficient to implement the snowmaking already approved by

the U.S. Forest Service for Arapahoe Basin and the snowmaking outlined

in Arapahoe Basin's pending submission to the U.S. Forest Service, and

all other interests, assets or improvements related to the provision of

skiing services to customers at the Arapahoe Basin resort (collectively

``Arapahoe Basin'').

[[Page 5039]]

D. Skiing services means all services related to providing access

to downhill skiing and snowboarding, including, but not limited to,

providing lifts, skiing lessons, ski patrol, snowmaking, design,

building, and grooming of trails, and ancillary services such as food

service, entertainment, and lodging.

III. Applicability

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

successors and assigns, parents, 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 assets of their ski

operations in Colorado, that the purchaser of such assets agree to be

bound by the provisions of this Final Judgment; provided, however, that

the defendants need not obtain such an agreement from the acquirer of

the Divestiture Assets in the divestiture contemplated herein.

IV. Divestiture

A. Defendants are hereby ordered and directed, in accordance with

the terms of this Final Judgment, within one hundred and fifty (150)

calendar days after the filing of the Stipulation settling this action,

or within five (5) business days after notice of entry of this Final

Judgment, whichever is later, to divest the Divestiture Assets to a

purchaser acceptable to the United States, in its sole discretion,

after consulting with Colorado.

B. Divestiture of defendants' leasehold interests, if any, in the

Divestiture Assets shall be by transfer of the entire leasehold

interest, which shall be for the entire remaining term of such

leasehold, including all renewal or option rights.

C. Defendants agree to use their best efforts to accomplish the

divestiture as expeditiously as possible. The United States, after

consulting with Colorado, in its sole discretion, may extend the time

period for any divestiture for two additional periods of time not to

exceed ninety (90) calendar days in toto.

D. In accomplishing the divestiture ordered by this Final Judgment,

defendants promptly shall make known, by usual and customary means, the

availability of the Divestiture Assets. Defendants shall inform any

person making an inquiry regarding a possible purchase that the sale is

being made pursuant to this Final Judgment and provide such person with

a copy of this Final Judgment. Defendants shall make known to any

person making an inquiry regarding a possible purchase of the

Divestiture Assets that the assets described in Section II (C) are

being offered for sale. Defendants shall also offer to furnish to all

bona fide prospective purchasers, subject to customary confidentiality

assurances, all information regarding the Divestiture Assets

customarily provided in a due diligence process 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.

E. Defendants shall not interfere with any negotiations by any

purchaser to employ any employee of the defendants who works at

Arapahoe Basin, or whose employment substantially relates to the

provision of skiing services at Arapahoe Basin, or whose

responsibilities include the management of or marketing for Arapahoe

Basin.

F. Defendants shall permit prospective purchasers of the

Divestiture Assets to have access to personnel and to make such

inspection of the Divestiture Assets, and any and all financial,

operational, or other documents and information customarily provided as

part of a due diligence process.

G. Unless the United States otherwise consents in writing, the

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

pursuant to Section V of this Final Judgment, shall include all of the

Divestiture Assets and be accomplished by selling or otherwise

conveying the Divestiture Assets to a purchaser in such a way as to

satisfy the United States, in its sole discretion, after consulting

with Colorado, that the Divestiture Assets can and will be used by the

purchaser as part of a viable, ongoing business engaged in the

provision of skiing services at Arapahoe Basin. The divestiture,

whether pursuant to Section IV or Section V of this Final Judgment,

shall be made to a purchaser for whom it is demonstrated to the United

States' sole satisfaction, after consulting with Colorado, that: (1)

the purchaser has the capability and intent of competing effectively in

the provision of skiing services at Arapahoe Basin; (2) the purchaser

has or soon will have the managerial, operational, and financial

capability to compete effectively in the provision of skiing services

at Arapahoe Basin; and (3) none of the terms of any agreement between

the purchaser and defendants give defendants the ability unreasonably

to raise the purchaser's costs, to lower the purchaser's efficiency, or

otherwise to interfere in the ability of the purchaser to compete

effectively in the provision of skiing services at Arapahoe Basin.

V. Appointment of Trustee

A. In the event that defendants have not divested the Divestiture

Assets within the time specified in Section IV (A) or (C) of this Final

Judgment, the Court shall appoint, on application of the United States,

a trustee selected by the United States to effect the divestiture of

the Divestiture Assets.

B. After the appointment of a trustee becomes effective, only the

trustee shall have the right to sell the Divestiture Assets. The

trustee shall have the power and authority to accomplish the

divestiture at the best price then obtainable upon a reasonable effort

by the trustee, subject to the provisions of Sections V and VI of this

Final Judgment, and shall have such other powers as the Court shall

deem appropriate. Subject to Section V (C) of this Final Judgment, the

trustee shall have the power and authority to hire at the cost and

expense of defendants any investment bankers, attorneys, or other

agents reasonably necessary in the judgment of the trustee to assist in

the divestiture, and such professionals and agents shall be accountable

solely to the trustee. The trustee shall have the power and authority

to accomplish the divestiture at the earliest possible time to a

purchaser acceptable to the United States, after consulting with

Colorado, and shall have such other powers as this Court shall deem

appropriate. Defendants shall not object to a sale by the trustee on

any grounds other than the trustee's malfeasance. Any such objections

by defendants must be conveyed in writing to plaintiffs and the trustee

within ten (10) calendar days after the trustee has provided the notice

required under Section VI of this Final Judgment.

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

on such terms and conditions as the Court may prescribe, and shall

account for all monies derived from the sale of the assets sold by the

trustee and all costs and expenses so incurred. After approval by the

Court of the trustee's accounting, including fees for its services and

those of any professionals and agents retained by the trustee, all

remaining money shall be paid to Vail and the trust shall then be

terminated. The compensation of such trustee and of any professionals

and agents retained by the trustee shall be reasonable in light of the

value of the Divestiture Assets and based on a fee arrangement

[[Page 5040]]

providing the trustee with an incentive based on the price and terms of

the divestiture and the speed with which it is accomplished.

D. Defendants shall use their best efforts to assist the trustee in

accomplishing the required divestiture. The trustee and any

consultants, accountants, attorneys, and other persons retained by the

trustee shall have full and complete access to the personnel, books,

records, and facilities of defendants, and defendants shall develop

financial or other information relevant to such assets as the trustee

may reasonably request, subject to reasonable protection for trade

secret or other confidential research, development, or commercial

information. Defendants shall take no action to interfere with or to

impede the trustee's accomplishment of the divestiture.

E. After its appointment, the trustee shall file monthly reports

with the parties and the Court setting forth the trustee's efforts to

accomplish the divestiture ordered under this Final Judgment. If the

trustee has not accomplished such divestiture within six (6) months

after its appointment, the trustee thereupon shall file promptly 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, that the required divestiture has not been accomplished, and

(3) the trustee's recommendations; 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. The trustee shall at the same time furnish such report 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 enter thereafter such orders as it shall deem

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

if necessary, include extending the trust and the term of the trustee's

appointment by a period requested by the plaintiffs.

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 a desire to, acquire any

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

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

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

request from defendants, the proposed purchaser, any other third party,

or the trustee if applicable additional information concerning the

proposed divestiture and the proposed purchaser. Defendants and the

trustee shall furnish any additional information requested within

fifteen (15) calendar days of the receipt of the request, unless the

parties shall otherwise agree. Within thirty (30) days after receipt of

the notice or within twenty (20) calendar days after plaintiffs have

been provided the additional information requested from defendants, the

proposed purchaser, any third party, and the trustee, whichever is

later, the United States shall provide written notice to defendants and

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

proposed divestiture. If the United States provides written notice to

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

divestiture may be consummated, subject only to defendants' limited

right to object to the sale under Section V(B) of this Final Judgment.

Absent written notice that the United States does not object to the

proposed purchaser or upon objection by the United States, a

divestiture proposed under Section IV shall not be consummated. Upon

objection by the United States, or by defendants under the proviso in

Section V(B), a divestiture proposed under Section V shall not be

consummated unless approved by the Court.

VII. Affidavits

A. Within twenty (20) calendar days of the filing of this Final

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

divestiture has been completed whether pursuant to Section IV or

Section V of this Final Judgment, Vail shall deliver to plaintiffs an

affidavit as to the fact and manner of defendants' compliance with

Sections IV or 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 Divestiture Assets, and

shall describe in detail each contact with any such person during that

period.

B. Within twenty (20) calendar days of the filing of this Final

Judgment, Vail shall deliver to plaintiffs an affidavit which describes

in detail all actions defendants have taken and all steps defendants

have implemented on an on-going basis to preserve the Divestiture

Assets pursuant to Section IX of this Final Judgment and describes the

functions, duties and actions taken by or undertaken at the supervision

of the individual(s) described at Section IX(F) of this Final Judgment

with respect to defendants' efforts to preserve the Divestiture Assets.

The affidavit also shall describe, but not be limited to, defendants'

efforts to maintain and operate Arapahoe Basin as an active competitor,

maintain the management, sales, marketing and pricing of Arapahoe Basin

apart from that of defendants' other businesses that provide skiing

services, maintain and increase sales of skiing services at Arapahoe

Basin, maintain the Divestiture Assets in operable condition,

continuing normal maintenance. Vail shall deliver to plaintiffs and

affidavit describing any changes to the efforts and actions outlined in

defendants' earlier affidavit(s) filed pursuant to this Section within

fifteen (15) calendar days after the change is implemented.

C. Defendants shall preserve all records of all efforts made to

preserve and divest the Divestiture Assets.

VIII. Financing

Defendants shall not finance all or any part of any divestiture

made pursuant to Sections IV or V of this Final Judgment without the

prior written consent of the United States, after consulting with

Colorado.

IX. Preservation of Assets

Until the divestiture required by the Final Judgment has been

accomplished:

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

Divestiture Assets will be maintained and operated as an ongoing,

economically viable and active competitor in the provision of skiing

services; and that, except as necessary to comply with Sections IX(B)

to IX(H) of this Final Judgment, the management of Arapahoe Basin shall

be kept separate and apart from the management of defendants' other ski

resorts and will not be influenced by defendants, and the books,

records, and competitively sensitive sales, marketing and pricing

information associated with Arapahoe Basin will be kept separate

[[Page 5041]]

and apart from that of defendants' other businesses that provide skiing

services.

B. Defendants shall use all reasonable efforts to maintain and

increase sales of skiing services at Arapahoe Basin, and defendants

shall maintain at 1996 or previously approved levels, whichever are

higher, promotional, advertising, sales, marketing, skier

transportation, reservation and merchandising support for skiing

services sold at Arapahoe Basin. Defendants' sales and marketing

employees responsible for sales of skiing services at Arapahoe Basin

shall not be transferred or reassigned to other ski resorts owned by

defendant.

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

Divestiture Assets are fully maintained in operable condition and shall

maintain and adhere to normal maintenance schedules for the Divestiture

Assets.

D. Defendants shall provide and maintain sufficient lines of

sources of credit to maintain the Divestiture Assets as viable, ongoing

businesses.

E. Defendants shall provide and maintain sufficient working capital

to maintain the Divestiture Assets as viable ongoing businesses.

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

by the United States, after consulting with Colorado, remove, sell, or

transfer any of the Divestiture Assets, other than sales in the

ordinary course of business.

G. Unless they have obtained the prior approval of the United

States, after consulting with Colorado, defendants shall not terminate

or reduce the current employment, salary, housing, or benefit

arrangements for any personnel employed by defendants who work at, or

have managerial responsibility for, Arapahoe Basin, except in the

ordinary course of business.

H. Defendants shall continue all efforts in progress to obtain

permits for Arapahoe Basin, including, but not limited to, efforts to

obtain permits relating to water rights or access or snowmaking.

I. Defendants shall take no action that would jeopardize their

ability to divest the Divestiture Assets as viable, ongoing businesses.

J. Defendants shall appoint a person or persons to oversee the

Divestiture Assets, and who will be responsible for defendant's

compliance with Section IX of this Final Judgment.

K. (a) Within five (5) days after the closing pursuant to the Stock

Purchase Agreement amongst defendants, defendants shall hire, subject

to the prior approval of the United States after consulting with

Colorado, a person with the requisite experience and ability to serve

as chief executive officer of Arapahoe Basin (the ``A-Basin CEO''). The

A-Basin CEO shall have complete authority to manage and operate

Arapahoe Basin in the ordinary course of business as a separate and

independent business entity, including mountain operations, guest

services, food and beverage operations, marketing, sales, lift ticket

operations and pricing; provided, however, that the A-Basin CEO may

continue A-Basin's participation in Ralcorp's previously announced

marketing (e.g., Ski-3), skier transportation and reservations

programs; and provided, further that, consistent with their obligations

under Sections IX(B) to IX(H) of this Final Judgment, defendants shall

provide the A-Basin CEO with whatever resources the A-Basin CEO

requests. The A-Basin CEO may help facilitate the timely sale of the

Divestiture Assets (e.g., by assisting in the due diligence process).

In no circumstances shall defendants provide to, or receive from, the

A-Basin CEO competitively sensitive marketing, sales and pricing

information relating to their respective ski operations, and, further,

except as is necessary for defendants to comply with Sections IX(B) to

IX(H) of this Final Judgment or to effect the divestiture contemplated

by Section IV(A), defendants shall not communicate with, or attempt to

influence the business decisions of, the A-Basin CEO. The A-Basin CEO

shall report directly in writing to the plaintiffs on the operation of

A-Basin every thirty (30) days from the date he or she is hired until

the divestiture required by this Final Judgment is completed.

(b) The appointment of the A-Basin CEO by defendants is for the

purpose of facilitating defendants' compliance with Section IX(A) of

this Final Judgment, and does not relieve defendants of whatever

additional measures they may be required to take to comply fully with

Section IX(A) of this Final Judgment. Furthermore, the appointment of

the A-Basin CEO shall not be construed to relieve defendants of their

obligations under Sections IX(B) to IX(J), VII and X of this Final

Judgment.

(c) The A-Basin CEO's compensation shall not depend on A-Basin's

revenues, profits, or profit margins, but may depend on a measure of

output (e.g., skier days).

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 plaintiffs, including

consultants and other persons retained by the United States or the

State of Colorado , upon written request of the Assistant Attorney

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

Colorado, 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

restraint or interference from them, to interview their officers,

employees, and agents, who may have counsel present, regarding any such

matters.

B. Upon the written request of the Assistant Attorney General in

charge of the Antitrust Division or the Attorney General of Colorado

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

Section X of this Final Judgment shall be divulged by a representative

of the plaintiffs to any person other than a duly authorized

representative of the Executive Branch of the United States or of the

State of Colorado, except in the course of legal proceedings to which

the plaintiffs are 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

[[Page 5042]]

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

In the United States District Court for the District of Colorado

United States of America and The State of Colorado, Plaintiffs, v.

Vail Resorts, Inc., Ralston Resorts, Inc., and Ralston Foods, Inc.,

Defendants.

Civil Action No. 97-B-10

Competitive Impact Statement

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

Procedures and Penalties Act (``APPA''), 15 U.S.C. 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 Colorado filed a civil antitrust

Complaint on January 3, 1997, alleging that the proposed acquisition by

Vail Resorts, Inc. (``Vail'') of the ski resort businesses of Ralston

Resorts, Inc. (``Ralston'') would violate Section 7 of the Clayton Act,

15 U.S.C. Sec. 18. The Complaint alleges that Vail and Ralston are the

two largest owner/operators of ski resorts in Colorado, and that this

transaction would combine several of the largest ski resorts in this

region. In particular, this acquisition would increase substantially

the concentration among ski resorts to which several hundred thousand

skiers residing in the ``Front Range'' of Colorado--the geographic area

lying just east of the Rocky Mountains, and including the metropolitan

areas of Fort Collins, Boulder, Denver, Colorado Springs, and Pueblo

and surrounding population areas--can practicably go for day or

overnight ski trips. As a result, the acquisition would threaten to

raise the price of, or reduce discounts for, weekend and day skiing to

consumers living in these areas. The acquisition would thus violate

Section 7 of the Clayton Act. The prayer for relief in the Complaint

seeks: (1) A judgment that the proposed acquisition would violate

Section 7 of he Clayton Act, 15 U.S.C. 18; and (2) a permanent

injunction preventing Vail and Ralston from carrying out the Stock

Purchase Agreement, dated July 22, 1996, or from entering into or

carrying out any agreement, understanding or plan, the effect of which

would be to combine the businesses or assets of Vail and Ralston.

At the same time the Complaint was filed, the United States and the

State of Colorado also filed a proposed settlement that would permit

Vail to complete its acquisition of Ralston's ski resorts, but requires

a divestiture that would preserve competition for skiers in the Front

Range. This settlement consists of a Stipulation and a proposed Final

Judgment.

The proposed Final Judgment orders the parties to sell all of

Ralston's rights, titles, and interests in the Arapahoe Basin resort in

Summit County, Colorado to a purchaser who has the capability to

compete effectively in the provision of skiing for Front Range Colorado

skiers at Arapahoe Basin. The parties must complete the divestiture of

these ski resorts and related assets before the later of one-hundred-

and-fifty (150) calendar days after the filing of the Stipulation

settling this action or five (5) business days after the entry of Final

Judgment, in accordance with the procedures specified in the proposed

Final Judgment. The stipulation and proposed Final Judgment also impose

a hold separate agreement that requires defendants to ensure that,

until the divestiture mandated by the Final Judgment has been

accomplished, Ralston's Arapahoe Basin operations will be held separate

and apart from, and operated independently of, Vail's and Ralston's

other assets and businesses. Defendants must hire, subject to the prior

approval of the United States, a person to serve as chief executive

officer of Arapahoe Basin, who shall have complete authority to operate

Arapahoe Basin in the ordinary course of business as a separate and

independent business entity.

The United States, the State of Colorado, Vail, and Ralston have

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 Parties and the Proposed Transaction

Vail Resorts, Inc. (``Vail''), a Delaware corporation headquartered

in Vail, Colorado, owns Vail Associates, Inc., which owns and operates

two Colorado ski resorts: Vail and Beaver Creek Resorts. (Beaver Creek

Resort includes the formerly independent Arrowhead Mountain.) During

the 1995-96 ski season, Vail's resorts accounted for approximately

280,000 Front Range skier days. A ``skier day'' is one day or part of a

day of skiing for one skier. This is about a 12 percent share of the

Front Range market. Overall, Vail's resorts had over 2.2 million skier

days and had revenues of over $140 million.

Ralston Resorts, Inc. (``Ralston''), a Colorado corporation

headquartered in Keystone, Colorado, owns three Colorado ski resorts:

Keystone, Breckenridge, and Arapahoe Basin. Ralston is a subsidiary of

Ralcorp Holdings, Inc., a Missouri corporation headquartered in St.

Louis, Missouri. Ralston Foods, Inc., a Nevada corporation, is also a

subsidiary of Ralcorp Holdings, Inc., and is headquartered in St.

Louis, Missouri. During the 1995-96 ski season, Ralston accounted for

approximately 600,000 Front Range skier days, or over 26 percent of the

Front Range market. Overall, Ralston's resorts had more than 2.6

million skier days and had revenues of more than $135 million.

Pursuant to a Stock Purchase Agreement among Vail Resorts, Inc.,

Ralston Foods, Inc., and Ralston Resorts Inc. dated July 22, 1996, Vail

proposes to acquire all of the voting securities of Ralston, in return

for which Ralston Foods, Inc. will receive voting securities of Vail

valued at approximately $145 million. Vail will also assume or pay off

debt of Ralston Foods amounting to at least $132 million and as much as

$165 million under the Stock Purchase Agreement. The total

consideration is valued at approximately $310 million. This proposed

transaction combining the two largest owner/operators of ski resorts in

Colorado precipitated the plaintiffs' antitrust suit.

B. The Skiing Market

The Complaint alleges that the provision of downhill skiing to

residents of Colorado's Front Range constitutes a relevant market for

antitrust purposes--that is, in the language of the Clayton Act, it is

a ``line of commerce'' and is in a ``section of the country.'' The

Complaint further alleges that the effect of Vail's acquisition

[[Page 5043]]

would be to lessen competition substantially in the provision of

skiiing to Front Range skiers.

The business of skiing comprises all services related to providing

access to downhill skiing and snowboarding, including, but not limited

to, providing lifts, ski patrol, snowmaking, design, building, and

grooming of trails, skiing lessons, and ancillary services such as food

service, entertainment, and lodging. Downhill skiing differs from other

winter recreational activities, such as cross-country skiing, ice

skating, snow-mobiling, sleigh riding, tobogganing, ice fishing, and

taking cruises or vacationing in places with hot climates.\1\ A small

but significant and nontransitory increase in prices for skiing would

not cause a significant number of downhill skiers to substitute other

recreational activities for skiing.

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

\1\ Skiing is a discretionary recreational activity, but this

does not, in itself, affect the antitrust analysis of whether skiing

constitutes a product market. The antitrust laws protect and respect

consumers' choices for discretionary products as well as for

nondiscretionary products.

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

Customers of defendants' ski resorts include two types of skiers:

destination skiers and Front Range skiers.\2\ Destination skiers come

from outside Colorado, many from outside of the United States. These

skiers ski for extended periods of time, typically for a week. Many

destination skiers fly to their ski resort and are usually attracted to

the resort by both the mountain (e.g., terrain, trails, lifts, and

grooming) and resort amenities (e.g., lodging and night life). In

contrast, Front Range skiers are day or overnight skiers. Most Front

Range skiers drive to their ski resort and limit the resorts they use

for day trips to those which fall within a radius of about two-and-one-

half-hour travel time from where they live, and a somewhat larger

radius for overnight trips. Front Range skiers are typically more

interested in the mountain and skiing facilities than in the resort

amenities.

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

\2\ The Complaint does not allege a violation of the Clayton Act

for destination skiers or for types of skiers other than Front Range

skiers. The Division's investigation did not reveal any likely

anticompetitive effect from the proposed merger in the destination

skier market or in other relevant markets such as the local skier

market.

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

The defendants market their ski resorts differently to skiers

depending on whether they are destination or Front Range skiers. They

advertise their ski resorts outside the Front Range area of Colorado

for destination skiers, for example, in major metropolitan newspapers

and in magazines sold throughout the United States. In marketing to

destination skiers, the resorts emphasize package pricing, which

typically includes one or more of lift tickets, lodging, airfare, and

also emphasize resort amenities as well as mountain features. In

contrast, the defendants market their resorts to Front Range skiers by

advertising in the Front Range, e.g., using direct mail within certain

zip codes, billboards, and local newspapers. Front Range advertising,

in contrast to destination skier advertising, emphasizes discount

prices on lift tickets to the Front Range skier. There is also less

emphasis on resort amenities as opposed to qualities of the mountains

themselves.

The defendants' ski resorts use different pricing strategies

depending on whether they are selling tickets to destination skiers or

Front Range skiers. These resorts sell single-day and multi-day lift

tickets through the resort ticket window primarily to the destination

skier. In selling to Front Range skiers, these ski resorts sell single-

day lift tickets through off-mountain retailers located within the

Front Range that are discounted below the window lift ticket price.

These resorts also offer the Front Range skier coupons that discount

off the window ticket price, as well as frequent skier cards that

provide discounts from the window price and may also provide a free day

of skiing after a Front Range skier has paid for a certain number of

lift tickets. Promotions are targeted to Front Range skiers, and

measures are taken successfully to limit the access of destination

skiers to such promotions. Consequently, the lift ticket prices

defendants charge to Front Range skiers are different from the prices

they charge to destination skiers.

C. Competition Between Vail and Ralston

Vail and Ralston compete directly to provide skiing to Front Range

Colorado day and overnight skiers.

As noted above, Front Range skiers typically drive to their ski

resort and limit the resorts they use for day trips to those which fall

within a radius of about two-and-one-half-hour travel time from where

they live, and a somewhat larger radius for overnight trips. The most

popular of these resorts are located off Interstate 70 west of Denver.

The Vail and Ralston resorts are located within this radius. Front

Range skiers would not turn to resorts that fall outside of this two-

and-one-half-hour radius in sufficient numbers to defeat a small

significant, non-transitory price increase imposed by resorts within

this radius.

Resorts located farther away cannot, and after this transaction

would not, constrain prices charged to skiers living in the Front

Range. Although Front Range skiers occasionally choose to ski at more

distant resorts, skiing at such resorts is not a practical or economic

alternative for most Front Range skiers most of the time.

Ski resorts in Colorado that are within the distance which a Front

Range resident will practically travel for a day or a weekend skiing

trip can charge different prices to these skiers than they charge to

customers coming from other parts of the country or the world.

Thus, the provision of downhill skiing to Front Range residents is

a relevant market within the meaning of Section 7 of the Clayton Act

(i.e., is a ``line of commerce'' and is in a ``section of the

country''), and Vail and Ralston compete directly in this market.

D. Anticompetitive Consequences of the Acquisition

The Complaint alleges that the combination of Vail and Ralston

would substantially increase concentration in the Front Range skier

market, using the Herfindahl-Hirschman Index (``HHI'')\3\ as a measure

of market concentration. The post-merger HHI, based on Front Range

skier days derived from surveys of skiers conducted in 1994, 1995, and

1996, would be approximately 2,228 with a change in HHI of about 643

points. During the 1995-96 skiing season, Vail's resorts accounted for

about 12 percent and Ralston's resorts over 26 percent of Front Range

skier days. If the proposed acquisition were consummated, the combined

company would account for over 38 percent of skier days in the Front

Range market.

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

\3\ The Herfindahl-Hirschman Index, or ``HHI,'' is a commonly

accepted measure of market concentration. It is calculated by

squaring the market share of each firm competing in the market and

then summing the resulting numbers. For example, for a market

consisting of four firms with shares of thirty, thirty, twenty, and

twenty percent, the HHI is 2600 (30\2\+30\2\+20\2\+20\2\=2600). The

HHI takes into account the relative size and distribution of the

firms in a market and approaches zero when a market consists of a

large number of firms of relatively equal size. The HHI increases

both as the number of firms in the market decreases and as the

disparity in size between those firms increases. Markets in which

the HHI is between 1000 and 1800 are considered to be moderately

concentrated, and those in which the HHI is in excess of 1800 points

are considered to be concentrated.

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

The Complaint further alleges that the acquisition of Ralston by

Vail would substantially lessen competition. The transaction would have

the following effects, among others:

1. Competition generally in providing skiing to Front Range skiers

would be lessened substantially;

2. Actual competition between Vail and Ralston in providing skiing

to Front Range skiers would be eliminated;

[[Page 5044]]

3. Discounting to Front Range skiers by Vail and Ralston would

likely be reduced;

4. Prices for skiing to Front Range Colorado skiers would likely be

increased.

The Complaint also alleges that successful entry or expansion in

the skiing business would be difficult, time consuming, and costly, as

well as extremely unlikely. Entry or expansion therefore would not be

timely, likely, or sufficent to prevent any harm to competition.

Prices charged to Front Range skiers are constrained by competition

among ski resorts for these skiers' business. That is, each ski resort

is limited in raising its price by the fact that when a resort raises

its price, it can lose revenues because customers switch to other ski

resorts. Thus, a resort's prices are constrained by other resorts'

prices. Similarly, if prices increase, some customers would ski less

frequently. This, too, constrains the prices a resort may charge.

Acting in light of these facts, a ski resort (like any business)

attempts to set a price that will earn it the most profit. It does not

want to charge a price so high that it loses too many customers, nor

does it want to charge a price so low that it misses the opportunity

for the revenue that a higher price would bring. For each resort, the

price that will maximize profit balances these two conflicting goals--

either a higher or a lower prices would be profitable. Businesses often

cannot easily determine the profit-maximizing price, and may do so

through trial and error. But the effort to find the profit-maximizing

price--that is, the price that neither drives away too many customers

because it is too high nor misses revenue opportunities because it is

too low--is reflected in the day to day business decisions of ski

resorts, as well as countless other businesses.

Economists have developed an analytical framework to explain how a

merger can allow a firm to charge higher prices after acquiring a

competitor, even if firms do not coordinate their behavior (such as by

explicitly colluding with one another). Associated with this framework

are standard tools that allow us to predict specific price effects.

This framework has been called a unilateral effects'' mode. It is

particularly useful in markets that have differentiated products, that

is, where products of different firms are not identical \4\ Each ski

resort, for example, has characteristics, such as terrain and

amenities, that different consumers value differently. This unilateral

effects model is an additional tool to examine the accepted, common-

sense notion that a merger is more likely to have a harmful effect if

the merging firms are close competitors.

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

\4\See, e.g., Carl Shapiro, Mergers with Differentiated

Products, 10 Antitrust 23 (1996).

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

Before a merger, increases in price by two independent resorts are

deterred by the loss of customers that would result from a price

increase. If resorts are put under common ownership by a merger,

however, they no longer constrain each other's prices in the same way.

A merger can make a price increase profitable. In particular, before a

merge, if two resorts are significant competitors to each other and one

of these resorts increases its prices, a significant proportion of this

resort's customers would be ``lost'' to the other resort. After merger

between these two resorts, however, some customers who switch away from

the resort that raises its price would no longer be lost, but rather

would be ``recaptured'' at the newly-acquired resort. Price increases

that would have been unprofitable to either firm alone, therefore,

would become profitable to the merged entity.

As a result of this recapture phenomenon, a merged firm, acting

independently to earn the most profits it can, will choose higher

prices than its two component firms did before the merger, if those

firms were significant competitors to each other before the merger. The

loss of competition that arises as a result of this effect is what is

meant by a ``unilateral'' anticompetitive effect, that is, an effect

that does not depend on the firms in the market acting

interdependently. This unilateral effect will be larger as the

recapture rate (which is sometimes called the ``diversion ratio,'' see

infra noted 4) is larger, as the margin earned on recaptured customers

is higher, and as the customers who leave the merging firms in response

to a price increase are fewer (in technical terms, the lower the ``own

price elasticity'').

The Vail and Ralston resorts are close competitive alternatives for

a number of Front Range skiers. Some of the customers who would switch

away from Vail's resorts if Vail raised its price would instead go to

Ralston resorts, and some customers who currently ski at Ralston's

resorts would switch to Vail if Ralston raised its price. After the

merger, Vail-Ralston would no longer lose revenues from these customers

if it raised its price, because it would recapture the revenues from

customers who would switch between Vail and Ralston in response to a

price increase. The profit-maximizing price for the post-merger Vail-

Ralston therefore would be higher than that for either firm before the

merger. Moreover, once Vail and Ralston resorts charge higher prices,

other resorts in the market have an incentive to raise their prices

somewhat in response to less intense price competition for Front Range

customers.

Economics allows us to estimate the likely unilateral effect of a

merger if we have information on the elasticities, margins and

recapture ratios. In this case, information about the Front Range

Colorado skiing market permitted estimates of the relevant range of

likely price increases. Existing surveys of Front Range skiers were

used to estimate how many customers are likely to switch between Vail

and Ralston resorts in response to a price change (the recapture

ratios). Margin information was derived from accounting and marketing

documents obtained from the parties. A range of likely elasticities was

derived from a number of sources, including surveys, existing

literature about the market, and market data on past price changes. In

conjunction with other information about costs and demand in the

market, this information permitted estimates of how much the profit-

maximizing price for various resorts would increase as a result of the

merger. It was estimated that, if the merger were allowed to take place

without any divestiture, there would be an overall average increase in

Front Range discounted lift ticket prices on the order of 4%, or about

$1 per lift ticket on average to all Front Range customers, with higher

price increases at the merging firms' resorts.

III. Explanation of the Proposed Final Judgment

The proposed Final Judgment would preserve competition for Front

Range skiers in the operation of ski resorts in Colorado. Within one-

hundred-and-fifty (150) calendar days after filing the proposed Final

Judgment, defendants must sell all of Ralston's rights, titles, and

interests in the Arapahoe Basin resort in Summit County, Colorado. The

assets and interests will be sold to a purchaser who demonstrates to

the sole satisfaction of the United States (which will consult with

Colorado) that it will be an economically viable and effective

competitor.

The divestiture ordered in the proposed Final Judgment resolves the

anticompetitive problems raised by the proposed transaction. Since

Ralston has jointly owned Arapahoe Basin, Keystone, and Breckenridge,

these three resorts have not been competing against each other for

customers. Divesting Arapahoe Basin restores significant competition

among these mountains

[[Page 5045]]

and, more generally, permits Arapahoe Basin to serve as an independent

competitor for skiers throughout the Front Range. While Arapahoe Basin

is smaller than the other Ralston resorts in absolute size, it has a

high proportion of Front Range skiers (roughly one-quarter of Ralston's

Front Range skier days last year were at Arapahoe Basin) and is thus

relatively more competitively significant in the Front Range skiing

market than its overall number of skier days might suggest.

Furthermore, with a large percentage of its terrain attracting advanced

intermediate and expert skiers, Arapahoe Basin competes directly with

the bowl and glade skiing experience offered at a number of Vail's

mountains. A relatively small shift in skier days to Arapahoe Basin

would make any significant price increase by the merged firm

unprofitable. The calculations of profit-maximizing behavior described

above suggest that, after the merger, once Arapahoe Basin is divested,

any increase in average discounted prices to Front Range skiers would

be negligible.

With this divestiture, the post-merger HHI for the Colorado Front

Range skiing market will be below 1800 and the defendants' post-merger

market share in the Front Range will be less than 32%. Given the post-

divestiture HHI level, the combined firm's post-divestiture market

share, and the number and size of independent competing ski resorts

remaining in the affected markets, the proposed transaction is not

likely to lead to a significant anticompetitive effect--provided that

Arapahoe Basin is divested.

Until the ordered divestiture takes place, defendants must take all

reasonable steps necessary to accomplish the divestiture, and cooperate

with any prospective purchaser. If defendants do not accomplish the

ordered divestiture within the specified one-hundred-and-fifty (150)

calendar day time period, which may be extended by the United States

for two additional periods of time not to exceed (90) calendar days in

toto, the proposed Final Judgment provides for procedures by which the

Court shall appoint a trustee to complete the divestiture. In that

case, defendants must cooperate fully with the trustee.

If a trustee is appointed, the proposed Final Judgment provides

that defendants 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 the divestiture. At the end of six (6) months, if

the divestiture has not been accomplished, the trustee shall file

promptly with the Court a report that sets forth: (1) The trustee's

efforts to accomplish the divestiture, (2) the reasons, in the

trustee's judgment, why the divestiture has not been accomplished, and

(3) the trustee's recommendations. The trustee's report will be

furnished to the parties and shall be filed in the public docket,

except to the extent the report contains information the trustee deems

confidential. The parties each will 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.

The Stipulation and proposed Final Judgment also impose a hold

separate agreement that requires defendants to ensure that, until the

divestiture mandated by the Final Judgment has been accomplished,

Ralston's Arapahoe Basin operations will be held separate and apart

from, and operated independently of, defendants' other assets and

businesses. Defendants must hire, subject to the prior approval of the

United States, a person to serve as chief executive officer of Arapahoe

Basin, who shall have complete authority to operate Arapahoe Basin in

the ordinary course of business as a separate and independent business

entity.

IV. Remedies Available to Potential Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. 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

attorney's 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.

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

substantial private lawsuit that may be brought against Vail or

Ralston.

V. Procedures Available for Modification of the Proposed Final Judgment

The United States, the State of Colorado, and the defendants have

stipulated that the proposed Final Judgment may be entered by the Court

after compliance with the provisions of APPA, provided that the United

States has now 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 proceeding

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, after consultation with the State of Colorado, will

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: Craig W. Conrath, Chief,

Merger Task Force, Antitrust Division, United States Department of

Justice, 1402 H Street, NW., Suite 4000, Washington, DC 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

Vail or Ralston. The United States is satisfied, however, that the

divestiture of the assets and other relief contained in the proposed

Final Judgment will preserve competition in the operation of ski

resorts that otherwise would be affected adversely by the acquisition.

Thus, the proposed Final Judgment would achieve the relief the

government would have obtained through litigation, but avoids the time,

expense, and uncertainty of a full trial on the merits of the

government's 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

[[Page 5046]]

to a sixty (60) day comment period, after which the could shall

determine whether entry of the proposed Final Judgment ``is in the

public interest.'' In making that determination, the coust 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 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 United States Court of

Appeals for the D.C. Circuit has held, this statute permits a court to

consider, among other things, the relationship between the remedy

secured and the specific alleviations 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, 56 F.3d

1448, 1461-62 (D.C. Cir. 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.'' \5\ Rather,

\5\ 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 it 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.

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

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-American 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, 56 F.3d at 1460-62. 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.\6\

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

\6\ 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, 56 F.3d at 1461 (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).

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

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).'' \7\

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

\7\ 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).

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

VIII. Determinative Documents

There are no determinative materials or documents within the

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

formulating the proposed Final Judgment.

Dated: January 21, 1997.

Respectfully submitted,

Craig W. Conrath,

Chief.

Reid B. Horwitz,

Assistant Chief.

John W. Van Lonkhuyzen,

Anne M. Purcell,*

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

* Counsel of Record.

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

James K. Foster,

Barry L. Creech,

John M. Lynch,

Susan Wittenberg,

Trial Attorneys.

U.S. Department of Justice, Antitrust Division, Merger Task

Force, 1401 H Street, NW, Suite 4000, Washington, DC 20530, (202)

307-0001.

In the United States District Court for the District of Colorado

United States of America and the State of Colorado, Plaintiffs, v.

Vail Resorts, Inc., Ralston Resorts, Inc., and Ralston Foods, Inc.

Defendants.

Case No. 97-B-10

Certificate of Service

I hereby certify that on this 21st day of January, 1997 a true and

correct copy of the foregoing Competitive Impact Statement was

delivered by overnight mail to the following persons:

Bruce F. Black,

Holme, Roberts & Owen, LLP, 1700 Lincoln, Suite 4100, Denver, Colorado

80203

and

Robert S. Schlossberg,

Peter E. Halle,

Morgan, Lewis & Bockius, LLP, 1800 M Street, N.W., Washington, D.C.

20036

Counsel for Vail Resorts, Inc.

Jan Michael Zavislan,

First Assistant Attorney General, 1525 Sherman Street, 5th Floor,

Denver, Colorado 80203,

Counsel for State of Colorado

Paul C. Daw,

Sherman & Howard, LLC, 633 17th Street, Suite 3000, Denver, Colorado

80202

and

E. Perry Johnson,

Bryan Cave, LLP, One Metropolitan Square, 211 No. Broadway, Suite 3600,

St. Louis, Missouri 63102

and

J. Michael Cooper,

Daniel C. Schwartz,

Bryan Cave, LLP, 700 13th Street, N.W., Washington, D.C. 20005

Counsel for Ralston Resorts, Inc. and Ralston Foods, Inc.

[FR Doc. 97-2522 Filed 1-31-97; 8:45 am]

BILLING CODE 4410-11-M