Proposed Final Judgment and Competitive Impact Statement; United States v. Signature Flight Support Corporation

DEPARTMENT OF JUSTICE

Antitrust Division

Proposed Final Judgment and Competitive Impact Statement; United

States v. Signature Flight Support Corporation

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. Sec. 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 Columbia in

United States v. Signature Flight Support Corporation, Civil No. 97-

0248. 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.

Sec. 16(b)-(h).

On February 3, 1997, the United States filed a Complaint seeking to

enjoin a transaction in which Signature Flight Support Corporation

(``Signature'') agreed to acquire International Aviation Palm Beach,

Inc. (``International Aviation''). Signature and International Aviation

are two of three fixed base operators (``FBOs'')

[[Page 7042]]

located at Palm Beach International Airport (``PBI'') in West Palm

Beach, Florida. FBOs provide terminals, fueling, hangars and other

services to general aviation customers, such as businesses and

individuals with private planes. Signature's proposed acquisition of

International Aviation would have created a duopoly at PBI. The

Complaint alleged that the proposed acquisition would substantially

lessen competition in providing FBO services, such as jet fueling and

hangar and ramp rental space, to general aviation customers at PBI in

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

The proposed Final Judgment orders Signature to sell certain of its

assets and leaseholds of its FBO business at PBI to a purchaser who has

the capability to compete effectively in the provision of FBO services

to general aviation customers at PBI. The Stipulation also imposes a

hold separate agreement that, in essence, requires the defendant to

ensure that, until the divestiture mandated by the Final Judgment has

been accomplished, Signature's FBO business at PBI will be held

separate and apart from, and operated independently of, any of its

other FBO 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 responses thereto, will be published in the

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

directed to Roger W. Fones, Chief, Transportation, Energy and

Agriculture Section, Antitrust Division, 325 Seventh Street, N.W.,

Suite 500, Washington, D.C. 20530 (telephone: (202) 307-6351). 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 Seventh Street, N.W.,

Washington, D.C. 20530 (telephone: (202) 514-2481) and at the office of

the Clerk of the United States District Court for the District of

Columbia, 333 Constitution Avenue, N.W., Washington, D.C. 20001.

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.

United States District Court, District of Columbia

United States of America, Plaintiff, v. Signature Flight Support

Corporation, Defendant. Civil Action No. 97-0248

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 United States District Court for the District of

Columbia;

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 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 defendant and by filing that

notice with the Court;

3. Defendant Signature (as defined in paragraph II.A 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, or until expiration of time for all appeals of any

court ruling declining entry of the proposed Final Judgment, and shall,

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

terms and provisions of the proposed Final Judgment as though the same

were in full force and effect as an order of the Court; provided,

however, that Signature shall not be obligated to comply with Sections

IV through VIII of the proposed Final Judgment unless and until the

closing of any transaction in which Signature directly or indirectly

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

International Aviation (as defined in paragraph II.B of the proposed

Final Judgment attached hereto);

4. Defendant shall not consummate the transaction before the Court

has signed this Stipulation and Order;

5. In the event plaintiff withdraws its consent, as provided in

paragraph 2 above, or in the event the proposed Final Judgment is not

entered pursuant to this Stipulation, the time has expired for all

appeals of any court ruling declining entry of the proposed Final

Judgment, and the Court has not otherwise ordered continued compliance

with the terms and provisions of the proposed Final Judgment, then the

parties are released from all further obligations under this

Stipulation, and the making of this Stipulation shall be without

prejudice to any party in this or any other proceeding.

6. The defendant represents that the divestiture ordered in the

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

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

asking the Court to modify any of the divestiture provisions contained

therein.

Dated: February 5, 1997.

For Plaintiff United States of America:

Joel I. Klein,

Acting Assistant Attorney General.

Constance K. Robinson,

Director of Operations

Charles Biggio,

Senior Counsel.

Roger W. Fones,

Chief.

Donna N. Kooperstein,

Ass't Chief.

Kelly Signs, Michele B. Cano, Robert McGeorge, Michael Harmonis,

Attorneys, U.S. Departmental of Justice, Antitrust Division,

Transportation, Energy and Agriculture Department, 325 Seventh Street,

N.W., Suite 500, Washington, D.C. 20530, (202) 307-6475.

For Defendant Signature Flight Support Corporation:

Bruce Van Allen,

Senior Vice President--Operations.

Paul J. Mokris,

General Counsel.

Freeborn & Peters

By: William C. Holmes,

A Member of the Firm, Suite 3000, 311 South Wacker Driver, Chicago,

Illinois 60606-6677, (312) 360-6000.

So Ordered:

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

United States District Judge

Dated:

Final Judgment

Whereas, plaintiff, United States of America (hereinafter ``United

States''), having filed its Complaint herein on February 5, 1997, and

plaintiff and defendant, 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, defendant has agreed to be bound by the provisions of

this Final Judgment pending its approval by the Court;

And whereas, prompt and certain divestiture is the essence of this

agreement to assure that competition is not substantially lessened; And

Whereas, plantiff requires defendant to make this divestiture for

the purpose

[[Page 7043]]

of remedying the loss of competition alleged in the complaint;

And whereas, defendant has represented to plaintiff that the

divestiture required below can and will be made and that defendant 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 thereto, it is hereby

Ordered, Adjudged and Decreed as follows:

I. Jurisdiction

This Court has jurisdiction over the subject matter of this action

and over each of the parties hereto. The Complaint states a claim upon

which relief may be granted against defendant under Section 7 of the

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

II. Definitions

As used in this Final Judgment:

A. ``Signature'' means Signature Flight Support Corporation, a

Delaware corporation with its headquarters in Orlando, Florida, and

includes its successors and assigns, its parents, subsidiaries,

affiliates, and directors, officers, managers, agents, and employees

acting for or on behalf of any of them.

B. ``International Aviation'' means International Aviation Palm

Beach, Inc., a Florida corporation with its headquarters in West Palm

Beach, Florida, and includes its successors and assigns, its parents,

subsidiaries, affiliates, and directors, officers, managers, agents,

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

C. ``The Assets to be Divested'' means all rights, titles and

interests, including all fee, leasehold and real property rights, in

the following assets, owned or controlled by Signature, that are used

by Signature to provide fuel and other services to general aviation

customers at PBI Airport:

1. The existing Signature terminal and office building (building

#1626), as shown on the attached map.

2. Approximately 71,000 square feet of hangar space, consisting of

the existing Signature hangar buildings #1625, 1627, 1628 and 1629.

3. The existing Signature fuel farm adjacent to Signature hangar

building #1627, consisting of approximately one-half acre, as shown on

the attached map.

4. Approximately 23.5 acres of ramp space adjacent to the foregoing

buildings, as shown on the attached map.

5. Approximately 2.5 acres of parking space, as shown on the

attached map.

6. Existing office furniture, lobby furniture, phone system,

radios, television, towing equipment, golf carts, pickup truck,

refuellers, ground power units and other equipment and supplies

necessary and appropriate to provide a viable FBO at the foregoing

facilities.

7. Contracts (including, but not limited to, customer contracts)

and customer lists.

D. ``PBI Airport'' means Palm Beach International Airport, located

in West Palm Beach, Florida.

E. ``FBO'' means any or all services related to providing fixed

based operator services, including, but not limited to, selling fuel,

leasing hangar, ramp and office space, providing flight support

services, performing maintenance, providing access to terminal

facilities, or arranging for ancillary services such as limousines,

rental cars or hotels.

III. Applicability

A. The provisions of this Final Judgment shall apply to defendant,

its successors and assigns, parents, subsidiaries, affiliates,

directors, officers, managers, agents, and employees, and to 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. Defendant shall require, as a condition of the sale or other

disposition of all or substantially all of the assets of its business,

that the purchaser of such assets agree to be bound by the provisions

of the Final Judgment; provided however, that defendant need not obtain

such an agreement from the acquirer of The Assets to be Divested in the

divestiture contemplated herein.

IV. Divestiture of the Assets To Be Divested

A. Defendant is hereby ordered and directed in accordance with the

terms of this Final Judgment, within one hundred and eighty (180)

calendar days of the filing of this Final Judgment, or within five (5)

business days after notice of entry of this Final Judgment, whichever

is later, to divest The Assets to be Divested to a purchaser acceptable

to the plaintiff, in its sole discretion.

B. Divestiture of Signature's leasehold interest in any of The

Assets to be Divested 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. Defendant shall use its best efforts and take all reasonable

steps to accomplish the divestiture as expeditiously as possible. If

defendant has not accomplished the required divestiture within the one

hundred and eight (180) calendar day period specified in section IV.A,

the plaintiff may, in its sole discretion, extend the time period for

two (2) additional periods of time, not to exceed ninety (90) calendar

days in total.

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

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

availability for sale of The Assets to be Divested. Defendant shall

notify any person making an inquiry regarding the possible purchase of

The Assets to be Divested that the sale is being made pursuant to this

Final Judgment and provide such person with a copy of the Final

Judgment. Defendant shall make known to any person making an inquiry

regarding a possible purchase of The Assets to be Divested that the

assets described in Section II.C. are being offered for sale. Defendant

shall also offer to furnish to all bona fide prospective purchasers of

The Assets to be Divested, subject to customary confidentiality

assurances, all information regarding The Assets to be Divested

customarily provided in a due diligence process, except information

subject to attorney-client privilege or attorney work product

privilege. Defendant shall make available such information to the

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

any other person. Subject to customary confidentiality assurance,

defendant shall permit prospective purchasers of The Assets to be

Divested to have access to its personnel, to make inspection of The

Assets to be Divested, and to have access to financial, operational,

and other documents and information relating to The Assets to be

Divested, as customarily provided as part of a due diligence process.

E. 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

Assets to be Divested and be accomplished by selling or otherwise

conveying The Assets to be Divested to a purchaser in such a way as to

satisfy the United States, in its sole discretion, that The Assets to

be Divested can and will be used by the purchaser as part of a viable,

ongoing business engaged in the provision of FBO services at PBI. The

divestiture, whether pursuant to

[[Page 7044]]

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, that: (1) the purchaser has the capability and intent of

competing effectively in the provision of FBO services at PBI; (2) the

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

financial capability to compete effectively in the provision of FBO

services at PBI; and (3) none of the terms of any agreement between the

purchaser and defendant give defendant 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 FBO service at PBI.

V. Appointment of Trustee

A. In the event that defendant has not divested The Assets to be

Divested within the time specified in Sections IV.A or IV.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 Assets to be Divested.

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

trustee shall have the right to sell The Assets to be Divested. 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 defendant 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, and shall have such other

powers as this Court shall deem appropriate. Defendant shall not object

to a sale by the trustee on any grounds other than the trustee's

malfeasance. Any such objections by defendant 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 defendant, 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 defendant 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 Assets to be Divested and based on a fee arrangement

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

the divestiture and the speed with which it is accomplished.

D. Defendant shall use its 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, book,

records, and facilities of defendant, and defendant 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. Defendant 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 Section IV or V of this Final Judgment, defendant or the

trustee, whichever is then responsible for effecting the divestiture,

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

responsible, it shall similarly notify defendant. 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 plaintiff of such notice, plaintiff may

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

or the trustee if applicable additional information concerning the

proposed divestiture and the proposed purchaser. Defendant and the

trustee shall furnish nay additional information requested within

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

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

receipt of the notice or within twenty (20) calendar days after

plaintiff has been provided the additional information requested from

defendant, the proposed purchaser, any third party, and the trustee,

whichever is later, the United States shall provide written notice to

defendant 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 defendant's

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 defendant 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 closing of any

transaction in which signature directly or indirectly acquires all or

any part of the assets or

[[Page 7045]]

capital stock of International Aviation, 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, defendant

shall deliver to plaintiff an affidavit as to the fact and manner of

defendant's compliance with Section 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

Assets to be Divested, 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, defendant shall deliver to plaintiff an affidavit which

describes in detail all actions defendant has taken and all steps

defendant has implemented on an on-going basis to preserve The Assets

to be Divested 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.H of this

Final Judgment with respect to defendant's efforts to preserve The

Assets to be Divested. The affidavit also shall describe, but not be

limited to, defendant's efforts to maintain and operate The Assets to

be Divested as an active competitor, maintain the management, sales,

marketing and pricing of The Assets to be Divested apart from that of

defendant's other businesses that provide FBO services, maintain and

increase sales of defendant's FBO operation at PBI, and maintain The

Assets to be Divested in operable condition, continuing normal

maintenance. Defendant shall deliver to plaintiff an affidavit

describing any changes to the efforts and actions outlined in

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

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

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

preserve and divest The Assets to be Divested.

VIII. Financing

Defendant shall not finance all or nay part of any divestiture made

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

written consent of the United States.

IX. Preservation of Assets

Until the divestiture required by the Final Judgment has been

accomplished:

A. Defendant shall take all steps necessary to ensure that The

Assets to be Divested will be maintained and operated as an ongoing,

economically viable and active competitor in the provision of FBO

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

IX.H of this Final Judgment, the management of The Assets to be

Divested shall be kept separate and apart form the management of

defendant's other FBO operations and will not be influenced by

defendant, and the books, records, and competitively sensitive sales,

marketing and pricing information associated with The Assets to be

Divested will be kept separate and apart from that of defendant's other

businesses that provide FBO services.

B. Defendant shall take all steps necessary to ensure that The

Assets to be Divested are fully maintained in operable condition and

shall maintain and adhere to normal maintenance schedules for The

Assets to be Divested.

C. Defendant shall provide and maintain sufficient sources of

credit to maintain The Assets to be Divested as a viable, ongoing

business.

D. Defendant shall provide and maintain sufficient working capital

to maintain The Assets to be Divested as a viable, ongoing business.

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

the United States, remove, sell, or transfer any of The Assets to be

Divested, other than sales in the ordinary course of business.

F. Unless it has obtained the prior approval of the United States,

defendant shall not terminate or reduce the current employment, salary,

housing, or benefit arrangements for any personnel employed by

defendant who work at, or have managerial responsibility for, The

Assets to be Divested, except in the ordinary course of business.

G. Defendant shall take no action that would jeopardize its ability

to divest The Assets to be Divested as a viable, ongoing business.

H. Defendant shall appoint a person or persons to oversee The

Assets to be Divested, and who will be responsible for defendant's

compliance with Section IX of this Final Judgment.

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 plaintiff, including

consultants and other persons retained by the United States, upon

written request of the Assistant Attorney General in charge of the

Antitrust Division, and on reasonable notice to defendant made to its

principal offices, shall be permitted:

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

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

and documents in the possession or under the control of defendant, who

may have counsel present, relating to enforcement of this Final

Judgment; and

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

restraint or interference from it, to interview its 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 made to defendant's principal offices,

defendant shall submit such written reports, under oath is requested,

with respect to enforcement of this Final Judgment.

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

Section VII or X of this Final Judgment shall be divulged by a

representative of the plaintiff to any person other than a duly

authorized representative of the Executive Branch of the United States,

except in the course of legal proceedings to which the plaintiff is a

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

securing compliance with this Final Judgment, or as otherwise required

by law.

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

defendant to plaintiff, defendant represents and identifies 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 defendant marks 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 defendant prior to divulging such

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

XI. Retention of Jurisdiction

Jurisdiction is retained by this Court for the purpose of enabling

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

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

appropriate for the construction or carrying out of this Final

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

enforcement of compliance herewith, and for the punishment of any

violations hereof.

[[Page 7046]]

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:-----------------------------------------------------------------

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United States District Judge

This page could not be reprinted in the Federal Register,

however, it may be inspected in Suite 215, U.S. Department of

Justice, Legal Procedures Unit, 325 7th St., N.W., Washington, D.C.

at (202) 514-2481 and at the Office of the Clerk of the United

States Court for the District of Columbia.

Competitive Impact Statement

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

Procedures and Penalties Act (``APPA''), 15 U.S.C. Secs. 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

On February 5, 1997, the United States filed a Complaint alleging

that the proposed acquisition of International Aviation Palm Beach,

Inc. (hereinafter ``International Aviation'') by Signature Flight

Support Corporation, (hereinafter ``Signature'') would violate Section

7 of the Clayton Act, 15 U.S.C. Sec. 18. The Complaint alleges that

Signature and International Aviation are two of three providers of

fixed base operator (``FBO'') services for general aviation customers

at Palm Beach International airport (``PBI'') located in West Palm

Beach, Florida, and that this transaction will combine them. Signature

and International Aviation compete head-to-head on price and quality of

services to general aviation customers. This acquisition would

eliminate this competition, reducing the number of competitors from

three to two, creating a FBO duopoly at PBI. As a result, the effect of

the merger would be to give Signature the market power to raise prices

and lower the quality of services to PBI general aviation customers.

The merger would also make coordinated behavior by Signature and Jet

Aviation (the other remaining FBO) easier, resulting in higher prices.

Thus, the proposed acquisition is likely to lessen competition

substantially in the market for FBO services at PBI in violation of

Section 7 of the Clayton Act, as amended, 15 U.S.C. Sec. 18. The prayer

for relief in the Complaint seeks (1) a judgment that the proposed

acquisition would violate Section 7 of the Clayton Act; and (2) a

preliminary and permanent injunction preventing Signature and

International Aviation from consummating the proposed acquisition.

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

filed a proposed settlement that would permit Signature to complete its

acquisition of International Aviation, but requires a divestiture that

would preserve competition for general aviation customers at PBI. This

settlement consists of a Stipulation and Order, and a proposed Final

Judgment.

The proposed Final Judgment orders Signature to sell certain FBO

assets (hereinafter ``The Assets to be Divested'') to a purchaser who

has the capability to compete effectively in the provision of FBO

services to general aviation customers at PBI. The Assets to be

Divested include Signature's terminal building, four hangars, a fuel

farm, and adjacent ramp and parking space. Signature must complete the

divestiture of these FBO assets before the later of one hundred and

eighty (180) calendar days after the consummation of the proposed

acquisition of International Aviation of five (5) days after entry of

the Final Judgment, in accordance with the procedures specified in the

proposed Final Judgment. If Signature should fail to accomplish the

divestiture, a trustee appointed by the Court would be empowered to

divest these assets.

The Stipulation and Order and the proposed Final Judgment also

impose a hold separate agreement that requires defendant to ensure

that, until the divestiture mandated by the Final Judgment has been

accomplished, The Assets to be Divested will be held separate and apart

from, and operated independently of, Signature's other FBO assets and

businesses.

The United States and Signature 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. Events Giving Rise to the Alleged Violation

A. The Parties and the Proposed Transaction

On March 22, 1996, Signature, International Aviation, International

Aviation Teterboro Inc. and IAS Holdings, Inc. (the parent of

International Aviation and International Aviation Teterboro, Inc.)

entered into an agreement under which Signature would seek to acquire

the assets of the three companies for approximately $18 million.

Signature is a wholly owned subsidiary of BBA Group PLC, a British

holding company. Signature is a Delaware corporation with its principal

place of business in Orlando, Florida. Signature operates a nationwide

network of 34 FBOs throughout the United States, including one at PBI.

Signature's total revenues for fiscal year 1995 were $233 million.

International Aviation operates an FBO at PBI airport in West Palm

Beach, Florida, International Aviation is a subsidiary of IAS Holdings,

Inc., which, in conjunction with its subsidiary International Aviation

Teterboro, Inc., also operates FBO facilities at Westchester County

(NY) airport, and Teterboro (NJ) airport.

B. The FBO Services Market

FBOs are facilities located at commercial airports that provide

flight support services, including aircraft fueling, ramp and hangar

rentals, office space rentals, and other services to general aviation

customers. General aviation customers include charter, private and

corporate aircraft operators, as distinguished from scheduled

commercial airlines. Last year, general aviation customers purchased

around $1 billion of jet fuel from FBOs nationwide.

FBO services include sales of jet aviation (``Jet A'') fuel and

aviation gasoline (``avgas''), and ramp, hangar and office space

rental. FBOs do not charge separately for many services offered to

general aviation customers, such as use of customer and pilot lounges,

baggage handling, and flight planning support; rather, they recover the

costs for these services in the price that they charge for fuel. There

are some services for which FBOs do charge separately, such as hangar

rental, office space rental, ramp parking fees, catering, cleaning the

aircraft, arranging ground transportation and maintenance on the

aircraft. General aviation customers generally buy fuel from the same

FBO from which they obtain other services.

The largest source of revenue for an FBO is its fuel revenues. FBOs

sell Jet A fuel for jet aircraft, turboprops and helicopters, and avgas

for smaller, piston driven planes. In 1995, Jet A fuel sales at PBI

were approximately $15 million; avgas sales were less than $1 million.

Revenues for hangar rentals and parking fees at PBI in 1995 were

approximately $1 million.

[[Page 7047]]

The Complaint alleges that the provision of FBO services to general

aviation customers at PBI is a relevant market (i.e., a line of

commerce and a section of the country) under Section 7 of the Clayton

Act. General aviation customers cannot obtain fuel, hangar, ramp and

other services offered at PBI, except through an FBO authorized to sell

such products and services by the local airport authority. Thus,

general aviation customers have no alternatives to FBOs for these

products and services when they land at PBI.

FBOs at other airports would not provide economically practical

alternatives for general aviation customers who currently use PBI.

Although there are a number of smaller airports in the region, they are

not economically viable substitutes for PBI general aviation customers.

General aviation customers use PBI because of its location, convenience

and facilities. General aviation customers have chosen PBI because of

its proximity to their ultimate destination (whether their residence,

business or other place); using a different airport would significantly

increase their driving time. PBI has facilities that other airports

lack: longer runways, precision instrument landing capability, a 24-

hour landing tower, and a U.S. Customs facility. Because of these and

other factors, there are not enough general aviation customers who have

selected PBI as their airport who would switch to other airports to

prevent anticompetitive price increases for fuel and other services at

PBI resulting from this acquisition.

In addition, post-acquisition price increases at PBI for fuel would

not be prevented by efforts of general aviation customers to decrease

fuel purchases at PBI by increasing fuel purchases at airports outside

the region. Carrying more fuel than is necessary to reach the next

destination is referred to in the industry as ``tankering.'' Most

pilots tanker to some extent in response to fuel prices; that is, they

buy more fuel at their origin if it is significantly cheaper so they

can buy less at their destination (or vice versa). Tankering, however,

would prevent a post-merger fuel price increase only if it would

increase significantly after the merger, resulting in significant lost

fuel sales at PBI. For a number reasons, PBI general aviation customers

are not likely to change their current tankering practices enough to

prevent a post-merger fuel price increase at PBI. First, tankering is

not possible on all flights, particularly on those that are near the

aircraft's maximum range. Second, some pilots are unwilling to carry

around excess fuel due to safety concerns. Third, tankering itself is

costly: fuel is heavy and the extra weight requires that more fuel be

burned, and there is additional wear and tear on the engine and landing

gear. These added costs mean that only large fuel price differences can

induce tankering.

Available data confirmed that tankering is unlikely to prevent a

post-merger fuel price increase at PBI. Using information on average

prices and quantities of jet fuel sold at PBI, we estimated the

elasticity of demand for Jet A fuel at PBI. The demand for Jet A fuel

at PBI is inelastic. The elasticity was estimated to be about .7, which

indicates that tankering, and all other forms of substitution, would

not lead to a fuel sales decrease at PBI sufficient to deter a price

increase.

C. Competition Between Signature and International Aviation

Signature and International Aviation are direct competitors in the

provision of FBO services to general aviation customers at PBI. All

three FBOs at PBI compete over price and service packages.

General aviation customers have benefited from competition between

Signature and International Aviation at PBI, receiving lower prices and

improved FBO services. The elimination of this competition would reduce

competition significantly in the market for FBO services to general

aviation customers at PBI. Because Signature and International

Aviation's facilities are close competitive alternatives for a

substantial number of general aviation customers at PBI, competition

between these FBOs limits the ability of each FBO to raise prices. This

merger would eliminate the price constraining impact each has on the

other.

In addition, as a result of Signature's acquisition of

International Aviation, a duopoly would be created at PBI, making it

easier for the two remaining firms to coordinate with one another and

raise prices and lower the quality of FBO services to general aviation

customers at PBI.

New entry is not likely to check Signature's ability to raise

prices or reduce service as a result of the acquisition. The airport

has set aside land for an additional FBO. Although that site is

currently in use as the airport's antennae farm, the antennae farm

could, at a cost, be relocated. There are additional sunk costs of

entering, including costs associated with construction of ramp,

terminal, hangar and fueling facilities. In this case, all of this

necessary preparation could be completed within a reasonable period of

time; that is, there are no insurmountable obstacles to timely entry.

That new entry could occur within a reasonable period of time, however,

is a necessary but not sufficient condition for new entry to prevent

the anticompetitive effects of the merger.

The ultimate issue is whether a firm would enter the market on a

scale sufficient to cause prices to fall to pre-merger levels. The

answer depends not only on whether entry on that scale is possible, but

whether it would be profitable in the post-acquisition environment.

Here, after taking into account the sunk costs required for entry on

the airport, the likely margins an entrant would earn over time at pre-

merger prices, and the discount or ``hurdle'' rates typically used in

the FBO industry to make similar investment decisions, it appears that

entry at PBI would be profitable only if the entrant could build a

significantly smaller facility but still achieve a market share similar

to that of the three current competitors, all without significantly

underpricing its PBI rivals. Because an entrant is not likely to be

able to lure customers away from incumbents without offering

significant discounts or providing a better facility, post-merger entry

is unlikely to occur at PBI.

D. Anticompetitive Consequences of the Acquisition

The Complaint alleges that the combination of Signature and

International Aviation would substantially increase concentration in

the market for the provision of FBO services at PBI, using the

Herfindahl-Hirschman Index (``HHI'') \1\ as a measure of market

concentration. The post-merger HHI, based on Jet A gallons sold in 1995

at PBI, would be approximately 5450 with a change in HHI of about 2000

points. For that year, International Aviation sold approximately 40% of

the throughput at PBI, and Signature accounted for approximately 25% of

sales. If the proposed acquisition were consummated, the combined

company

[[Page 7048]]

would account for 65% of the jet fuel sales at PBI.

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\1\ 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.

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The Complaint further alleges that the acquisition of International

Aviation by Signature would substantially lessen competition. The

transaction would have the following effects, among others:

1. actual competition between Signature and International Aviation

in the market for FBO services at PBI will be eliminated;

2. competition generally in the market for FBO services at PBI is

likely to be substantially lessened;

3. prices for fuel sold to general aviation customers at PBI are

likely to increase.

Several sources of data were examined in this case to determine the

likely effect of reducing the number of FBOs at PBI from three to two.

Using estimates of the PBI Jet A fuel demand elasticity and other

information, a standard economic model of competition among sellers of

differentiated products predicted an overall average increase in the

price of Jet A fuel at PBI on the order of four percent in the event

that the merger were allowed to occur without a divestiture. Also, an

analysis of margins earned by Signature at its many different airports

suggested that reducing the number of competitors from three to two

tends to increase average price by about five percent.

III. Explanation of the Proposed Final Judgment

The United States brought this action because the effect of the

acquisition of International Aviation by Signature may be substantially

to lessen competition, in violation of Section 7 of the Clayton Act, in

the market for FBO services to general aviation customers at PBI. The

risk to competition posed by this acquisition, however, would be

eliminated if certain assets and leases currently held by Signature to

operate its PBI FBO business were sold and assigned to a purchaser that

could operate them as an active, independent and financially viable

competitor. To this end, the provisions of the proposed Final Judgment

are designed to accomplish the sale and assignment of certain assets

and leaseholds to such a purchaser and thereby prevent the

anticompetitive effects of the proposed acquisition.

Section IV of the proposed Final Judgment requires defendant

Signature, within one hundred and eighty (180) calendar days after

acquiring International Aviation, to divest the bulk of its FBO

business, as set out in Section II.C (hereinafter ``The Assets to be

Divested'') of the proposed Final Judgment. Unless the United States

otherwise consents in writing, Signature is required to divest its

interests in its terminal building, four hangars, its fuel farm, and

ramp and parking space adjacent to these facilities. In addition,

Signature shall divest such equipment and supplies as is necessary and

appropriate to operate a viable FBO at PBI. Finally, Signature shall

transfer its contracts, including customer contracts, and customer

lists, for providing FBO services at PBI.

Divestiture of the assets and leaseholds will cure the potential

anticompetitive consequences of Signature's acquisition of

International Aviation. The Assets to be Divested include all the ramp,

hangar, terminal, parking, and fuel farm assets that have been used by

Signature in providing FBO services at PBI. Together with the

equipment, supplies and customer contracts and lists, these assets will

give a qualified purchaser the means to establish itself as a

competitive alternative to Signature and Jet Aviation. Thus, as a

result of the divestiture required by the proposed Final Judgment,

general aviation consumers at PBI will continue to have a choice among

three competitive FBOs.

Under the proposed Final Judgment, Signature must take all

reasonable steps necessary to accomplish quickly the divestiture of The

Assets to be Divested, and shall cooperate with bona fide prospective

purchasers by supplying all information relevant to the proposed sale.

Should Signature fail to complete its divestiture within one hundred

and eighty (180) calendar days, the Court will appoint, pursuant to

Section V, a trustee to accomplish the divestiture. The United States

will have the discretion to delay the appointment of the trustee for up

to an additional three months should it appear that the assets can be

sold in the extended time period.

Following the trustee's appointment, only the trustee will have the

right to sell the diversiture assets, and defendant Signature will be

required to pay for all of the trustee's sale-related expenses. 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.

Section VI of the proposed Final Judgment would assure the United

States an opportunity to review any proposed sale, whether by Signature

or by the trustee, before it occurs. Under this provision, the United

States is entitled to receive complete information regarding any

proposed sale or any prospective purchaser prior to consummation. Upon

objection by the United States to a sale of the divestiture assets by

the defendant Signature, a proposed divestiture may not be completed.

Should the United States object to a sale of the divested assets by the

trustee, that sale shall not be consummated unless approved by the

Court.

Pursuant to Section V.E, should the trustee not accomplish the

divestiture within six months of appointment, the trustee and the

parties will make recommendation to the Court, which shall enter such

orders as it deems appropriate to carry out the purpose of the trust,

which may include extending the trust of the term of the trustee's

appointment.

Under Section IX of the proposed Final Judgment, defendant

Signature must take certain steps to ensure that, until the required

divestiture has been completed, the divestiture assets will be

maintained as a separate, ongoing, viable business and kept distinct

from Signature's other FBO operations. Until such divestiture,

Signature must also continue to maintain and operate the divestiture

assets as a viable, independent competitor at PBI, using all reasonable

efforts to maintain and increase sales of FBO services to general

aviation customers. Signature must maintain the business, so that it

continues to be stable, including maintaining all records, loans, and

personnel necessary for its operation.

Section X requires the defendant to make available, upon request,

the business records and the personnel of its business. This provision

allows the United States to inspect its facilities and ensure that the

defendant is complying with the requirements of the proposed Final

Judgment. Section XII of the proposed Final Judgment provides that it

will expire on the tenth anniversary of its entry by the Court.

IV. Remedies Available to Potential Private Litigants

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

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

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

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

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.

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

any subsequent private

[[Page 7049]]

lawsuit that may be brought against the defendant.

V. Procedure for Commenting on the Proposed Final Judgment

The United States and defendant have stipulated that the proposed

Final Judgment may be entered by the Court after compliance with the

provisions of the APPA, provided that the United States has not

withdrawn its consent. The APPA conditions entry upon the Court's

determination that the proposed Final Judgment is in the public

interest.

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

the effective date of the proposed Final Judgment within which any

person may submit to the United States written comments regarding the

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

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

Impact Statement in the Federal Register. The United States will

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

consideration by the Department of Justice, which remains free to

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

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

filed with the Court and published in the Federal Register.

Written comments should be submitted to: Roger W. Fones, Chief,

Transportation, Energy & Agriculture Section, Antitrust Division, 325

Seventh Street, N.W., Suite 500, Washington, D.C. 20530.

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

Signature. The United States is satisfied, however, that the

divestiture of the assets and other relief contained in the proposed

Final Judgment will preserve viable competition in the provision of FBO

services to general aviation customers at PBI that otherwise would be

affected adversely by the acquisition. Thus, the compliance with the

proposed Final Judgment and the completion of the sale required by the

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 to a sixty (60) day

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

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

that determination, the court may consider--

(1) the competitive impact of such judgment, including

termination of alleged violations, provisions for enforcement and

modification, duration or relief sought, anticipated effects of

alternative remedies actually considered, and any other

considerations bearing upon the adequacy of such judgment;

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

generally and individuals alleging specific injury from the

violations set forth in the complaint including consideration of the

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

issues at trial.

15 U.S.C. Sec. 16(e). 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 allegations set forth in the government's complaint, whether

the decree is sufficiently clear, whether enforcement mechanisms are

sufficient, and whether the decree may positively harm third parties.

See United States v. Microsoft, 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.'' \2\ Rather,

\2\ 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.

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Absent a showing of corrupt failure of the government to

discharge its duty, the Court, in making its public interest

finding, should * * * carefully consider the explanations of the

government in the competitive impact statement and its responses to

comments in order to determine whether those explanations are

reasonable under the circumstances.

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

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

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

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

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

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

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

(1981); see also Microsoft, 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.\3\

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\3\ 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).'' \4\

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\4\ United States v. American Tel. and Tel. Co., 552 F. Supp.

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

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

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

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

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VIII. Determinative Materials and Documents

There are no materials or documents that the United States

considered to be determinative in formulating this proposed Final

Judgment. Accordingly, none are being filed with this Competitive

Impact Statement.

Dated: February 5, 1997.

[[Page 7050]]

Respectfully submitted,

Kelly Signs, Michele B. Cano, Robert McGeorge, Michael Harmonis,

Trial Attorneys, U.S. Department of Justice, Antitrust Division,

Transportation, Energy and Agriculture Section, Suite 500, 325 Seventh

Street, N.W., Washington, D.C. 20530, (202) 307-6351.

[FR Doc. 97-3698 Filed 2-13-97; 8:45 am]

BILLING CODE 4410-11-M