| **Statement of Commissioner Sheila F.    Anthony**

**Nestle S.A. / Ralston Purina Co.Docket No. C - 4028**

The Commission has now issued a final order in this case to    resolve complaint allegations that the acquisition would lessen competition in the U.S.    dry cat food market. To avert this harm to consumers of dry cat food, the parties agreed    to divest Ralston's Meow Mix and Alley Cat brands to J.W. Childs, a private equity    investment firm. While I concurred in the Commission's decision to accept this settlement,    I write separately to express my concerns about some aspects of the divestiture.

The assets to be divested consist of two proven cat food    brands and little else. Standing alone, these brands do not constitute a complete, ongoing    business. Rather, J.W. Childs will have to create a new competitor largely from whole    cloth. In order to turn the divested assets into a viable business entity, J.W. Childs    will need to develop, among other things, its own research and development program,    manufacturing facilities, distribution system, and sales and marketing operations. Such a    prospect is daunting even when the purchaser is a participant in the same or a closely    related business - which is why divestitures of stand-alone businesses present the most    successful formula for restoring competition.(1)

The risk to consumers is further heightened where, as here,    the proposed purchaser is a financial buyer. When compared to dedicated industry    participants, investment firms may have quite different incentives and goals in operating    a business. For example, a financial buyer's business plan often involves selling the    acquired business within a relatively short period of time.

In the end, I am convinced that this is a rather unique    situation and that consumers will be adequately protected by the relief set forth in the    Commission's order. Manufacturing and distribution in this industry segment is routinely    and economically contracted out through "co-packing" arrangements. Moreover,    this particular financial buyer, J.W. Childs, is financially strong, has a proven track    record of good management and growth of acquired firms, and has some experience in the pet    industry with its Hartz Mountain line of pet care products. These factors led me to    conclude that J.W. Childs is very likely to restore lost competition and preserve choices    for dry cat food consumers.

I wish to make it clear, however, that I remain skeptical of    divestiture plans that require a purchaser to take brands alone, then build a competitive    company from scratch. In addition, I will closely examine divestiture proposals where the    buyer is a financial company. In most cases, I would prefer to see divested assets go to a    company with a stronger likelihood of operating the business for the long term.

**Endnote:**

1. See, e.g., Federal Trade    Commission Bureau of Competition Staff, A Study of the Commission's Divestiture Process    (1999).UBLIC "-//IETF//DTD HTML//EN"> |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|