| **Analysis to Aid    Public Comment    on the Provisionally Accepted Consent Order**

**Service Corporation International**

**FTC File No. 981 0353**

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)

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 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 cemetery 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;
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- 2. In the Evansville, Indiana, funeral service market, Miller & Miller Colonial        Chapel, 219 East Franklin Street, Evansville, Indiana 47711;
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- 3. In the Jacksonville Beach, Florida, funeral service market, Beaches Funeral Home,        3600 South 3rd Street, Jacksonville Beach, Florida 32250;
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- 4. In the Roseville, California, funeral service market, Cochrane's Chapel of the Roses,        103 Lincoln Street, Roseville, California 95678;
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- 5. In the Ruskin / Sun City Center, Florida, funeral service market, Family Funeral Care        Funeral Home, 1851 Rickenbacker Road, Sun City Center, Florida 33573; 
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- 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; 
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- 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;
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- 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;
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- 9. In the Citrus County, Florida, cemetery service market, Fountains Memorial Park, 4890        South Suncoast Boulevard, Homosassa Springs, Florida 34447; 
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- 10. In the Corpus Christi, Texas, funeral service market, Rose Hill Memorial Park, 2731        Comanche, Corpus Christi, Texas 78408; 
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- 11. In the Eugene/Springfield, Oregon, cemetery service market, Sunset Hills Memorial        Gardens, 4810 South Willamette Street, Eugene, Oregon 97405;
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- 12. In the North Richmond, Virginia, and the northern, eastern, and western suburbs of        Richmond cemetery service market, Forest Lawn Cemetery, 4000 Pilots Lane, Richmond,        Virginia 23222;
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- 13. In the South Bay area of San Diego, California, cemetery service market, LaVista        Memorial Park, 3191 Orange Street, National City, California 91951; and
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- 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. 

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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