Service Corporation International; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 9810353]

Service Corporation International; 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 March 29, 1999.

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

Room 159, 600 Pa. Ave., N.W., Washington, D.C. 20580.

for further information contact: Joseph S. Brownman, FTC/S-2105, 601

Pa. Ave., N.W., Washington, D.C. 20580, (202) 326-2605.

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 January 15, 1999), 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, 600 Pennsylvania Avenue, N.W., Washington,

D.C. 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 To Aid Public Comment on the Provisionally Accepted

Consent Order

The Federal Trade Commission has accepted for public comment from

Service Corporation International (``SCI'') an Agreement Containing

Consent Order (``Consent Agreement''). The proposed Consent Order is

designed to remedy the likely anticompetitive effects arising from the

proposed acquisition by SCI of Equity Corporation International

(``ECI'').

According to the draft of complaint that the Commission intends to

issue, SCI, headquartered in Houston, Texas, is the nation's largest

chain of funeral homes and cemeteries. ECI, in Lufkin, Texas, is the

nation's fourth largest chain. SCI and ECI compete in the sale of

funeral services and cemetery services in various local markets

throughout the United States. Pursuant to an agreement of August 6,

1998, SCI intends to acquire all of the stock of ECI for $578 million.

The draft complaint alleges that the proposed acquisition would

lessen competition in two relevant lines of commerce: (1) the provision

of funeral services in six local geographic markets and (2) the

provision of cemetery services in eight (additional) local geographic

markets. Funeral services include transporting the deceased from the

place of death to the funeral home, embalming and otherwise preparing

the body for burial, providing a casket, holding a viewing or other

ceremony, and transporting the body to the cemetery or crematorium.

Although direct disposal cremation is a less costly alternative to

funeral services, funeral service customers would not switch to

cremation as a substitute in sufficient volume to defeat a price

increase by funeral service providers.

In the market for funeral services, the Commission's draft

complaint alleges that the acquisition would harm competition in the

following geographic markets: (1) Phenix City, Alabama/Columbus,

Georgia; (2) Evansville, Indiana; (3) Jacksonville Beach, Florida; (4)

Roseville, California; (5) Ruskin/Sun City Center, Florida; and (6)

West Pasco County and Tarpon Springs, Florida. In these funeral service

markets, total annual sales are about $36.6 million. Premerger

concentration in these six markets, as measured by the Herfindahl-

Hirschman Index,\1\ ranges from more than 2,200 to 7,450. As a result

of the proposed acquisition, concentration would increase in each

funeral service market by more than 100 points, to levels ranging from

3,270 to 10,000.\2\

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\1\ The Herfindahl-Hirschman Index, or ``HHI,'' is a measurement

of market concentration calculated by summing the squares of the

individual market shares of all participants in the market. Under

Section 1.51 of the Horizontal Merger Guidelines issued April 2,

1992, by the Federal Trade Commission and the Department of Justice,

the Commission considers concentration levels exceeding 1,800 as

``highly concentrated'' and concentration levels between 1,000 and

1,800 as ``moderately concentrated.''

\2\ Under the HHI, a concentration level of 10,000 denotes a

monopoly market in which one firm has 100% of the market. Squaring

100 yields a total of 10,000.

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According to the draft complaint, entry into the provision of

funeral services in each of these six markets is difficult, and would

not be timely, likely or sufficient to prevent anticompetitive effects

from the acquisition.

The draft complaint alleges that a second line of commerce in which

to analyze the competitive effects of the proposed acquisition is the

provision of cemetery services. Cemetery services include the

traditional products and services offered by perpetual care cemeteries.

They include plots, mausoleum spaces, and opening, closing and

maintaining grave sites. The complaint alleges that the acquisition

would harm competition in the following geographic markets: (1) Broward

County (Fort Lauderdale), Florida; (2) Chattanooga, Tennessee, and its

north Georgia suburbs; (3) Citrus County, Florida; (4) Corpus Christi,

Texas; (5) Eugene/Springfield, Oregon, (6) North Richmond, Virginia,

and the northern eastern and western suburbs of Richmond; (7) the South

Bay area of San Diego, California; and (8) Summit County (Akron), Ohio.

In these cemetery service markets, total annual sales are about $47.3

million. Premerger concentration in these eight markets, as measured by

the HHI, ranges from 2,350 to 4,400. As a result of the acquisition,

concentration would increase in each cemetery service market by more

than 100 points, to levels ranging from 3,450 to 10,000.

This line of commerce does not include cemeteries that serve a

distinct group of customers, such as cemeteries limited to veterans and

their families, or small church cemeteries that only serve members of

the church congregation. Such cemeteries are not available to members

of the general public served by the parties, and consumers could not

turn to them to defeat an attempt to raise prices of cemetery services

to the general public. This line of commerce also does not include

direct disposal cremations, even though they are an alternative to

cemetery services. An increase in the price of cemetery services would

not cause a sufficient number of customers to switch from

[[Page 3950]]

cemetery services to direct disposal cremations to make the price

increase unprofitable.

According to the draft complaint, entry into the provision of

cemetery services in each of these eight markets is difficult, and

would not be timely, likely or sufficient to prevent anticompetitive

effects from the acquisition.

The proposed Consent Order, if issued by the Commission, would

remedy all of the Commission's competitive concerns about the proposed

acquisition. Under the terms of the proposed Consent Order, SCI must

divest one or more funeral homes in each of the funeral services

markets and one or more cemeteries in each of the services markets, as

follows:

1. In the Phenix City, Alabama/Columbus, Georgia, funeral service

market, (a) Vance Memorial Chapel, 3738 Highway 431 North, Phenix City,

Alabama 36867; and (b) Vance Memorial Chapel, 2919 Hamilton Road,

Columbus, Georgia 31904;

2. In the Evansville, Indiana, funeral service market, Miller &

Miller Colonial Chapel, 219 East Franklin Street, Evansville, Indiana

47711;

3. In the Jacksonville Beach, Florida, funeral service market,

Beaches Funeral Home, 3600 South 3rd Street, Jacksonville Beach,

Florida 32250;

4. In the Roseville, California, funeral service market, Cochrane's

Chapel of the Roses, 103 Lincoln Street, Roseville, California 95678;

5. In the Ruskin/Sun City Center, Florida, funeral service market,

Family Funeral Care Funeral Home, 1851 Rickenbacker Road, Sun City

Center, Florida 33573;

6. In the West Pasco County, Florida, and Tarpon Springs, Florida,

funeral service market, Michels & Lundquist Funeral Home, 130 State

Road 54, New Port Richey, Florida 34652;

7. In the Broward County, Florida, cemetery service market, (a)

Evergreen Cemetery, 1300 S.E. 10th Avenue, Fort Lauderdale, Florida

33316; (b) Lauderdale Memorial Park, 2001 S.W. 4th Avenue, Fort

Lauderdale, Florida 33315; and (c) Sunset Memorial Gardens, 3201 19th

Street, Fort Lauderdale, Florida 33311,

8. In the Chattanooga, Tennessee, and the neighboring north Georgia

suburbs of Chattanooga cemetery service market, (a) Lakewood Memory

Gardens East Cemetery, 4621 Shallowford Road, Chattanooga, Tennessee

37411; (b) Lakewood Memory Gardens West Cemetery, 3509 Cummings Road,

Chattanooga, Tennessee 37419; and (c) Lakewood Memory Gardens South

Cemetery, 627 Greens Lake Road, Rossville, Georgia 30741;

9. In the Citrus County, Florida, cemetery service market,

Fountains Memorial Park, 4890 South Suncoast Boulevard, Homosassa

Springs, Florida 34447;

10. In the Corpus Christi, Texas, funeral service market, Rose Hill

Memorial Park, 2731 Comanche, Corpus Christi, Texas 78408;

11. In the Eugene/Springfield, Oregon, cemetery service market,

Sunset Hills Memorial Gardens, 4810 South Willamette Street, Eugene,

Oregon 97405;

12. In the North Richmond, Virginia, and the northern, eastern, and

western suburbs of Richmond cemetery service market, Forest Lawn

Cemetery, 4000 Pilots Land, Richmond, Virginia 23222;

13. In the South Bay area of San Diego, California, cemetery

service market, LaVista Memorial Park, 3191 Orange Street, National

City, California 91951; and

14. In the Summit County, Ohio, cemetery service market, Greenlawn

Memorial Park, 2580 Romig Road, Akron, Ohio 44320.

SCI must complete the required divestitures to Carriage within

seven days from the date the Consent Order becomes final, or 120 days

from the date of the signing of the Agreement Containing Consent Order,

whichever is earlier. In the event SCI does not divest the assets to an

acquirer or acquirers acceptable to the Commission in the required

time, the Consent Order establishes procedures for the appointment of a

trustee to sell the assets. Also, for a period of ten years, SCI must

give prior notice to the Commission of any proposed acquisition of a

funeral home or cemetery, as applicable, in each of the 14 local

markets. The Consent Order also requires SCI to deliver a copy of the

required notice to the office of the attorney general in each state

where any to-be-acquired assets are found.

An Asset Maintenance Agreement accompanies the proposed Consent

Order. Under its terms, SCI must preserve and maintain the assets that

it must divest. The procedures enumerated in the Asset Maintenance

Agreement will ensure the continued competitive viability of these

assets after they are divested.

The proposed Consent Order also requires SCI to provide the

Commission a report of compliance with the terms of the order within

thirty days following the date on which the order becomes final, every

thirty days thereafter until the divestitures are completed, and

annually for a period of ten years.

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

sixty days for receipt of comments by interested persons. Comments

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

After sixty days, the Commission will again review the agreement and

the comments received and will decide whether it should withdraw from

the agreement or make the proposed Consent Order final.

By accepting the proposed Consent Order subject to final approval,

the Commission anticipates that the competitive problems alleged in the

complaint will be resolved. The purpose of this analysis is to invite

and facilitate public comment concerning the proposed Consent Order in

order to aid the Commission in its determination of whether to make the

proposed Consent Order final. It is not intended to constitute an

official interpretation of the proposed Consent Order, nor is it

intended to modify the terms in any way.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 99-1655 Filed 1-25-99; 8:45 am]

BILLING CODE 6750-01-M