[Federal Register Volume 75, Number 223 (Friday, November 19, 2010)]
[Notices]
[Pages 70921-70923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29163]


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FEDERAL TRADE COMMISSION

[File No. 101 0061]


Simon Property Group, Inc.; Analysis of Proposed Agreement 
Containing Consent Orders 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 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 December 10, 2010.

ADDRESSES: Interested parties are invited to submit written comments 
electronically or in paper form. Comments should refer to ``Simon 
Property, File No. 101 0061'' to facilitate the organization of 
comments. Please note that your comment--including your name and your 
state--will be placed on the public record of this proceeding, 
including on the publicly accessible FTC Web site, at 
http:[sol][sol]www.ftc.gov[sol]os[sol]publiccomments.shtm.
    Because comments will be made public, they should not include any 
sensitive personal information, such as an individual's Social Security 
Number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. Comments also 
should not include any sensitive health information, such as medical 
records or other individually identifiable health information. In 
addition, comments should not include any ``[t]rade secret or any 
commercial or financial information which is obtained from any person 
and which is privileged or confidential * * *,'' as provided in Section 
6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 4.10(a)(2), 
16 CFR 4.10(a)(2). Comments containing material for which confidential 
treatment is requested must be filed in paper form, must be clearly 
labeled ``Confidential,'' and must comply with FTC Rule 4.9(c), 16 CFR 
4.9(c).\1\
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR 
4.9(c).
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    Because paper mail addressed to the FTC is subject to delay due to 
heightened security screening, please consider submitting your comments 
in electronic form. Comments filed in electronic form should be 
submitted by using the following weblink: https://ftcpublic.commentworks.com/ftc/simonproperty and following the 
instructions on the web-based form. To ensure that the Commission 
considers an electronic comment, you must file it on the web-based form 
at the weblink: https://ftcpublic.commentworks.com/ftc/simonproperty. 
If this Notice appears at 
http:[sol][sol]www.regulations.gov[sol]search[sol]index.jsp, you may 
also file an electronic comment through that Web site. The Commission 
will consider all comments that regulations.gov forwards to it. You may 
also visit the FTC Web site at http:[sol][sol]www.ftc.gov[sol] to read 
the Notice and the news release describing it.
    A comment filed in paper form should include the ``Simon Property, 
File No. 101 0061'' reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission, Office of the Secretary, Room H-135 (Annex D), 600 
Pennsylvania Avenue, NW., Washington, DC 20580. The FTC is requesting 
that any comment filed in paper form be sent by courier or overnight 
service, if possible, because U.S. postal mail in the Washington area 
and at the Commission is subject to delay due to heightened security 
precautions.
    The Federal Trade Commission Act (``FTC Act'') and other laws the 
Commission administers permit the collection of public comments to 
consider and use in this proceeding as appropriate. The Commission will 
consider all timely and responsive public comments that it receives, 
whether filed in paper or electronic form. Comments received will be 
available to the public on the FTC Web site, to the extent practicable, 
at http:[sol][sol]www.ftc.gov[sol]os[sol]publiccomments.shtm. As a 
matter of discretion, the Commission makes every effort to remove home 
contact information for individuals from the public comments it 
receives before placing those comments on the FTC Web site. More 
information, including routine uses permitted by the Privacy Act, may 
be found in the FTC's privacy policy, at 
http:[sol][sol]www.ftc.gov[sol]ftc[sol]privacy.shtm.

FOR FURTHER INFORMATION CONTACT: Joe Lipinsky (206-220-4473), FTC 
Northwest Regional Office, 600 Pennsylvania Avenue, NW., Washington, DC 
20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 the 
Commission 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 thirty (30) 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 November 10, 2010), on the World Wide Web, at 
http:[sol][sol]www.ftc.gov[sol]os[sol]actions.shtm. A paper copy can be 
obtained from the FTC Public Reference Room, Room 130-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580, either in person or by 
calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

[[Page 70922]]

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'' or ``FTC'') has 
accepted, subject to final approval, an Agreement Containing Consent 
Orders (``Consent Agreement'') from Simon Property Group, Inc. 
(``Simon'') that will remedy the anticompetitive effects likely to 
result from Simon's acquisition of Prime Outlets Acquisition Company, 
LLC (``Prime''). Under the terms of the proposed Consent Agreement, 
Simon is required, among other things, to divest either Prime Outlets-
Jeffersonville or Simon's Cincinnati Premium Outlets, both located in 
Southwest Ohio. Additionally, the proposed Consent Agreement prohibits 
Simon from enforcing any radius restriction with respect to any lease 
with any tenant in either of the following geographic areas: the 
Chicago, IL, metropolitan area or Orlando, FL. Finally, from the time 
when the Order becomes final through January 1, 2015, all tenants in 
Prime Outlets Orlando, Prime Outlets Orlando Marketplace, and Orlando 
Premium Outlets may unilaterally opt to extend any existing lease under 
its existing terms, without penalty, until January 1, 2015.
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
proposed Consent Agreement, and will decide whether to withdraw from 
the proposed Consent Agreement, modify it, or make it final.
    On December 8, 2009, Simon and Prime entered into an acquisition 
agreement under which Simon would acquire the entire Prime portfolio of 
outlet centers, consisting of 22 properties. The total value of the 
transaction was approximately $2.3 billion. On June 28, 2010, the 
parties amended the agreement to remove Prime's St. Augustine, FL, 
outlet center and its development projects at Livermore, CA, and Grand 
Prairie, TX, from the schedule of properties to be acquired by Simon. 
The acquisition was consummated on August 30, 2010. The Commission's 
complaint alleges that Simon's acquisition violates Section 7 of the 
Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal 
Trade Commission Act, as amended, 15 U.S.C. 45, by eliminating an 
actual, direct, and substantial competitor from certain local markets 
in the United States.

II. Description of the Parties

    Simon, a publicly traded real estate investment trust, is based in 
Indianapolis, Indiana. Simon is engaged in the business of developing 
and managing real estate. In particular, Simon develops and operates 
outlet centers under the Premium Outlets and Mills brands. Simon also 
develops and operates other real estate platforms.
    Prime is a privately held subsidiary, jointly owned by entities 
controlled by David Lichtenstein and the Lightstone Group, a real 
estate investment company. Headquartered in Baltimore, MD, Prime is a 
developer and operator of outlet centers under the Prime Outlets brand.

III. The Complaint

    The Commission's complaint alleges that Simon's acquisition of 
Prime may substantially lessen competition in the provision of retail 
space at outlet centers in the Southwest Ohio; Chicago, IL; and 
Orlando, FL, areas in violation of Section 7 of the Clayton Act, as 
amended, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission 
Act, as amended, 15 U.S.C. 45.
    The complaint alleges that the relevant product market in which to 
analyze the effects of the acquisition is retail space at outlet 
centers. Outlet centers are shopping centers featuring outlet stores, 
which sell discounted brand name merchandise. By clustering together, 
outlet tenants derive strong benefits from the network effect of 
creating a shopping destination, which is strengthened by the presence 
of tenants with desirable brands.
    The complaint also alleges that the relevant geographic markets are 
local in nature. Competition between owners and developers of outlet 
centers occurs in local areas where more than one outlet center exists. 
In local overlap areas, tenants are able to use competition between 
landlords to get more favorable price and non-price terms in leases. 
The three geographic areas of concern outlined in the complaint are: 
(1) Southwest Ohio; (2) the Chicago, IL, metropolitan area; and (3) 
Orlando, FL.
    In Southwest Ohio, Simon owns one outlet center, Cincinnati Premium 
Outlets in Monroe, OH, and Prime owns one, Prime Outlets-Jeffersonville 
in Jeffersonville, OH. These are the only outlet centers serving 
Southwest Ohio. Absent the proposed divestiture of one of these outlet 
centers, Simon's acquisition of Prime would give Simon a monopoly in 
the retail space in outlet centers market in Southwest Ohio, increasing 
the risk that Simon would unilaterally raise rents or reduce non-price 
benefits provided to tenants.
    In the Chicago metropolitan area, the acquisition of Prime's 
Huntley, IL, and Pleasant Prairie, WI, outlet centers would give Simon 
ownership of all five outlet centers currently serving the Chicago 
metropolitan area market. However, there are two other outlet centers 
planned for this market: Craig Realty Group's planned outlet center in 
Country Club Hills, IL; and AWE Talisman's planned outlet center in 
Rosemont, IL. Absent the proposed relief in the Chicago metropolitan 
area, Simon may be able to prevent or limit this planned entry. Many of 
the tenants at the current Chicago area outlet centers have radius 
restrictions in their leases. This prevents or makes it very expensive 
for these outlet tenants to open additional stores within the Chicago, 
IL metropolitan area, which has the effect of preventing potential 
entry because the new developers cannot sign many of the tenants that 
are subject to radius restrictions.
    In Orlando, the acquisition of Prime's outlet centers would give 
Simon ownership of three of the six outlet centers serving the Orlando 
area. However, Simon is acquiring the two closest competitors for many 
tenants. Absent the proposed relief in Orlando, Simon's acquisition of 
Prime would increase the risk that Simon would unilaterally raise 
prices or otherwise reduce tenant benefits due to lost competition.
    Based on the above facts, the complaint alleges that Simon's 
acquisition of Prime could eliminate actual, direct, and substantial 
competition between Simon and Prime in the relevant markets, and 
increase Simon's ability to unilaterally exercise market power in 
Southwest Ohio; Chicago; and Orlando.
    As stated in the complaint, entry would not be timely, likely, or 
sufficient to deter or counteract the anticompetitive effects of this 
acquisition. It takes more than two years to develop an outlet center, 
or to reposition another type of shopping center into an outlet center. 
In addition, entry is not likely because the relevant markets affected 
by this transaction are protected by radius restrictions, which prevent 
or make it very expensive for outlet tenants to open additional stores 
within a certain proscribed radius of an existing outlet center. This 
has the effect of preventing potential entry because new developers 
cannot sign tenants already bound by radius restrictions.

[[Page 70923]]

IV. The Terms of the Proposed Consent Agreement

    The proposed Consent Agreement will remedy the likely competitive 
effects resulting from Simon's acquisition of Prime's outlet centers in 
each of the relevant markets discussed above. Pursuant to the proposed 
Consent Agreement, Simon will divest one outlet center in Southwest 
Ohio. This will remedy the competitive harm in that market by ensuring 
that Simon will not have a monopoly. The proposed Consent Agreement 
also requires Simon to waive enforcement of radius restrictions in the 
Chicago metropolitan area, which will eliminate a significant entry 
barrier that otherwise would likely preclude entry in Chicago. Finally, 
in Orlando, the proposed Consent Agreement requires Simon to waive 
enforcement of radius restrictions, which will make new entry 
substantially easier. Additionally, the proposed Consent Agreement 
requires Simon to provide tenants at all three outlet centers it will 
own in Orlando with the unilateral right to extend existing leases 
under existing lease terms up to January 1, 2015, with no penalty.
    Finally, the proposed Consent Agreement requires Simon to maintain 
the Southwest Ohio outlet centers at full economic viability, 
marketability, and competitiveness until the divestiture of one of the 
outlet centers to a Commission-approved acquirer is complete.

V. Opportunity for Public Comment

    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days for receipt of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will review the comments 
received, and decide whether to withdraw from the proposed Consent 
Agreement, modify it, or make it final. By accepting the proposed 
Consent Agreement 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 inform and invite public 
comment on the proposed Consent Agreement, including the proposed 
divestiture, and to aid the Commission in its determination of whether 
to make the proposed Consent Agreement final. This analysis is not 
intended to constitute an official interpretation of the proposed 
Consent Agreement, nor to modify the terms of the proposed Consent 
Agreement in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2010-29163 Filed 11-18-10; 8:45 am]
BILLING CODE 6750-01-P