Sky Chefs, Inc., et al.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 981-0211]

Sky Chefs, Inc., et al.; Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft

complaint that accompanies the consent agreement and the terms of the

consent order--embodied in the consent agreement--that would settle

these allegations.

DATES: Comments must be received on or before September 8, 1998.

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

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

FOR FURTHER INFORMATION CONTACT:

Phillip Broyles, FTC/S-2105, Washington, DC 20580. (202) 326-2805.

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

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the above-captioned consent agreement containing a consent

order to cease and desist, having been filed with and accepted, subject

to final approval, by the Commission, has been placed on the public

record for a period of sixty (60) days. The following Analysis to Aid

Public Comment describes the terms of the consent agreement, and the

allegations in the complaint. An electronic copy of the full text of

the consent agreement package can be obtained from the FTC Home Page

(for June 29, 1998), on the World Wide Web, at ``http://www.ftc.gov/os/

actions97.htm.'' A paper copy can be obtained from the FTC Public

Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, NW,

Washington, DC 20580, either in person or by calling (202) 326-3627.

Public comment is invited. Such comments or views will be considered by

the Commission and will be available for inspection and copying at its

principal office in accordance with Section 4.9(b)(6)(ii) of the

Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

I. Introduction

The Federal Trade Commission (``Commission'') has accepted from Sky

Chef, Inc., and its parents, Onex Corporation and Gerald W. Schwartz

(collectively ``Proposed Respondents'') an Agreement Containing Consent

Order (``Proposed Consent Order''). The Proposed Consent Order remedies

the likely anticompetitive effects in the delivery of catering services

to airlines at McCarran International Airport in Las Vegas, Nevada,

that arise from the proposed acquisition of Ogden Aviation Food

Services, Inc., by Proposed Respondents.

II. Description of the Parties and the Transaction

Sky Chefs, Inc., headquartered in Arlington, Texas, provides

catering services to airlines in the United States and abroad. Its

parent company, Onex Corporation, operates through a number of other

subsidiaries that are involved in chain restaurant food service,

electronics manufacturing, and other businesses. During 1997, Sky Chefs

had total revenues of over $1 billion.

Ogden Corporation, headquartered in New York, is a global company

providing a wide range of services in the aviation, entertainment, and

energy industries. Ogden's wholly-owned indirect subsidiary, Ogden

Aviation Food Services, Inc., and its wholly-owned subsidiary, Ogden

Aviation Food Services (ALC), Inc., operate 11 kitchens serving in-

flight food to more than 85 airlines at a number of locations,

including eight major U.S. airports. Revenues for in-flight catering in

1997 are reported at $164 million.

On March 6, 1998, the parties signed a letter of intent

contemplating that Sky Chefs, Inc., would purchase 100% of the voting

common stock of Ogden Aviation Food Services, Inc., from Ogden

Corporation. On May 7, 1998, the parties signed a stock purchase

agreement that excluded the assets of Ogden's Las Vegas flight kitchen.

On May 22, 1998, Ogden entered into an agreement to sell the Las Vegas

flight kitchen to Dobbs International Services, Inc.

[[Page 36697]]

III. The Proposed Complaint and Consent Order

The Commission has entered into an agreement containing a Proposed

Consent Order with Proposed Respondents in settlement of a proposed

complaint alleging that the acquisition as originally proposed violates

Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, and that

consummation of the acquisition as originally proposed would violate

Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 5 of the

Federal Trade Commission Act. The complaint alleges that the

acquisition will lessen competition in the delivery of catering

services to airlines at McCarran International Airport in Las Vegas,

Nevada.

To remedy the alleged anticompetitive effects of proposed

acquisition, the Proposed Consent Order prohibits Proposed Respondents,

for ten (10) years after the consent order becomes final, from

acquiring any concern that controls Ogden's Las Vegas catering

operations without prior approval from the Commission. It also requires

that, for ten (10) years, Proposed Respondents provide prior notice to

the Commission before acquiring their only in-flight catering

competitor at any airport in the United States.

Proposed Respondents are required to file annual compliance reports

with the Commission for the next ten (10) years, with the first report

due one year after the proposed order becomes final.

IV. Resolution of Antitrust Concerns

The Proposed Consent Order alleviates the alleged antitrust

concerns arising from the acquisition in the delivery of catering

services to airlines at McCarran International Airport in Las Vegas,

Nevada.

In-flight caterers provide meals and beverages for consumption

during aircraft flights. Catering services include the purchasing of

food in accordance with airline specifications, preparation of meals,

stocking of beverage carts, delivery of meals and carts to the

aircraft, loading the galley, unloading of in-coming carts, utensils

and trash, and cleaning and storage of carts and utensils.

Both Sky Chefs and Ogden provide in-flight catering services at

McCarran International Airport in Las Vegas through their flight

kitchens located at or near that airport. McCarran International

Airport is a relevant antitrust geographic market because caterers at

that airport could profitably raise prices by a small but significant

and nontransitory amount without losing enough sales to flight kitchens

in other areas to make such an increase unprofitable. Airlines cannot

economically turn to other areas to obtain their Las Vegas catering

services because of additional costs and quality problems associated

with flying food in from more distant sources.

Sky Chefs and Ogden are the only companies that sell catering

services to airlines at McCarran International Airport. The acquisition

as originally proposed would eliminate Sky Chefs and Ogden as

independent competitors in the provision of in-flight catering services

at McCarran International Airport. The acquisition also would increase

the ability of the combined Sky Chefs/Ogden business unilaterally to

raise prices and reduce the quality of catering services at McCarran

International Airport. New entry would not be timely, likely or

sufficient to defeat an anticompetitive price increase or quality

reduction. An entrant would need to capture a large share of the

catering business at McCarran International Airport in order to reach a

viable scale of operation. Such new entry would entail substantial sunk

costs.

To remedy the potential anticompetitive effects of the transaction

as originally proposed, Proposed Respondents and Ogden amended their

stock purchase agreement to exclude Ogden's in-flight catering assets

serving the Las Vegas airport. Subsequently, Ogden sold its Las Vegas

in-flight catering assets to Dobbs International Services. The Proposed

Consent Order prohibits Proposed Respondents, for ten (10) years, from

acquiring an interest in those assets.

V. Opportunity for Public Comments

The Proposed Consent Order has been placed on the public record for

sixty (60) days for receipt of comments by interested persons. Comments

received during this period will become part of the public record.

After sixty (60) days, the Commission will again review the Proposed

Consent Order and the comments received and will decide whether it

should withdraw from the Proposed Consent Order or make the order

final.

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

Proposed Consent Order to aid the Commission in its determination of

whether to make final the Proposed Consent Order. This analysis does

not constitute an official interpretation of the Proposed Consent

Order, nor is it intended to modify the terms of the Proposed Consent

Order in any way.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 98-17936 Filed 7-6-98; 8:45 am]

BILLING CODE 6750-01-M