2162 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

competent and reliable evidence, which

when appropriate must be competent

and reliable scientific evidence, that

substantiates the claim.

Part II prohibits Abott from

misrepresenting that one serving of any

Ensure product, or any other product

advertised, marketed or sold as a meal

replacement or supplement for healthy

adults, provides vitamins in an amount

comparable to typical vitamin

supplements. It also prohibits Abbott

from misrepresenting the absolute or

comparative amount of any vitamin or

any other nutrient or ingredient

provided by such products. Part II also

requires that any representation covered

by that Part that conveys a nutrient

content claim defined for labeling by

any regulation of the Food and Drug

Administration (‘‘FDA’’) must comply

with the qualifying amount set forth in

that regulation.

Part III provides that representations

that would be specifically permitted in

food labeling, under regulations issued

by the FDA pursuant to the Nutrition

Labeling and Education Act of 1990, are

not prohibited by the order.

The proposed order also requires

Abbott to maintain materials relied

upon to substantiate the claims covered

by the order, to distribute copies of the

order to certain current and future

officers and employees, to notify the

Commission of any changes in corporate

structure that might affect compliance

with the order, and to file one or more

reports detailing compliance with the

order. The order also contains a

provision stating that it will terminate

after twenty (20) years absent the filing

in federal court, by either the United

States or the FTC, of a complaint against

Abbott alleging a violation of the order.

The purpose of this analysis is to

facilitate public comment on the

proposed order, and it is not intended

to constitute an official interpretation of

the agreement and proposed order, or to

modify any of their terms.

Donald S. Clark,

Secretary,

[FR Doc. 97–922 Filed 1–14–97; 8:45 am]

BILLING CODE 6750–01–M

[File No. 961–0101]

General Mills, Inc.; Analysis to Aid

Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

SUMMARY: In settlement of alleged

violations of federal law prohibiting

unfair or deceptive acts or practices and

unfair methods of competition, this

consent agreement, accepted subject to

final Commission approval, would

require, among other things, the

Minneapolis-based producer of readyto-eat cereals to permit New Ralcorp

Holdings, Inc. to transfer to any

successor party, without any

authorization or approval from General

Mills, the right to manufacture and sell

cereals identical to the Chex brand

products. The order also bars General

Mills from delaying production of the

private label Chex rivals. The agreement

settles allegations that General Mills’

acquisition of Ralcorp’s branded cold

cereal business, including the Chex line

of cereals, would boost General Mills’

share of the U.S. ready-to-eat cereals

market to 31 percent and that it would

have restricted the entry of new private

label cereal products to compete with

the General Mills brands. The

Commission had alleged that the

acquisition could have resulted in

higher prices for Chex brand cereals.

DATES: Comments must be received on

or before March 17, 1997.

ADDRESSES: Comments should be

directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W.,

Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:

William J. Baer, Federal Trade

Commission, H–374, 6th St. and Pa.

Ave., N.W., Washington, D.C. 20580.

(202) 326–2932.

George S. Cary, Federal Trade

Commission, H–374, 6th St. and Pa.

Ave., N.W., Washington, D.C. 20580.

(202) 326–3741.

Phillip L. Broyles, Federal Trade

Commission, S–2105, 6th St. and Pa.

Ave., N.W., Washington, D.C. 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 accompanying

complaint. An electronic copy of the

full text of the consent agreement

package can be obtained from the

Commission Actions section of the FTC

Home Page (for December 26, 1996), on

the World Wide Web, at ‘‘http://

www.ftc.gov/os/actions/htm.’’ A paper

copy can be obtained from the FTC

Public Reference Room, Room H–130,

Sixth Street and 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

General Mills, Inc. (‘‘General Mills’’), an

agreement containing a consent order.

The Commission designed the

agreement to remedy any

anticompetitive effects stemming from

General Mills’s acquisition of the

branded ready-to-eat (‘‘RTE’’) cereal

business from Ralcorp Holdings, Inc.

(‘‘Ralcorp’’).

This agreement has been placed on

the public record for sixty (60) days for

reception of comments from interested

persons. Comments received during this

period will become part of the public

record. After sixty (60) days, the

Commission will again review the

agreement and the comments received.

The Commission will then decide

whether it should withdraw from the

agreement or make final the order

contained in the agreement.

The Commission’s Complaint charges

that on or about August 13, 1996,

General Mills agreed to acquire the

branded RTE cereal and snack-mix

businesses owned by Ralcorp. Among

the cereals that General Mills agreed to

acquire are Corn CHEX, Rice CHEX, and

Wheat CHEX. The Commission has

reason to believe that the acquisition

and the agreement to acquire Ralcorp

may have anticompetitive effects and be

in violation of Section 7 of the Clayton

Act and Section 5 of the Federal Trade

Commission Act.

According to the Commission’s

Complaint, General Mills is the second

largest producer of RTE cereals and

Ralcorp is the fifth largest producer of

branded RTE cereals. Ralcorp is also the

largest producer of private label RTE

cereals. In 1994, the Ralston Purina

Company created Ralcorp by

distributing shares of Ralcorp to

Ralston’s Purina’s shareholders. General

Mills will not acquire Ralcorp’s private

label RTE cereal business. Ralcorp will

form a new entity, New Ralcorp

Holdings, Inc. (‘‘New Ralcorp’’), which

will continue producing RTE cereals.

The Commission’s investigation of

this matter found potential

anticompetitive problems arising from
Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices 2163

1The noncompete clause described in paragraph

8 of the complaint prohibits Ralcorp from entering

the market with a private label, CHEX-type cereal

product for eighteen months. As indicated in the

Department of Justice and Federal Trade

Commission Horizontal Merger Guidelines (April 2,

1992), a merger is unlikely to create or enhance

market power if entry is ‘‘timely, likely and

sufficient,’’ and entry is deemed ‘‘timely’’ if it can

be achieved within two years. Under this standard,

the noncompete clause is unlikely to create or

enhance market power.

1 General Mills’ share of branded cereals will of

course increase as a result of the transaction, but the

complaint does not allege a relevant market

Continued

this acquisition. The Complaint alleges

that concentration is high in the RTE

cereal market and entry is difficult and

unlikely. Although this transaction does

not reduce the number of established

substantial firms in the RTE cereals

market, it does increase General Mills’

market share by approximately 3

percent and thus increases overall

concentration in the market. Of

particular concern is that the acquisition

agreement restricts New Ralcorp’s

freedom to produce and sell private

label CHEX products as well as its

ability to transfer the rights to

manufacture and sell private label

CHEX products to a third party without

permission from General Mills.

Under the terms of the proposed

order, General Mills must, before

consummating the merger, include in its

agreements with Ralcorp and New

Ralcorp provisions that will permit the

transfer to any successor party of the

right to manufacture and sell private

label CHEX in the United States. These

provisions will permit the successor

party to sell these private label cereals

without further authorization or

approval from General Mills or Ralston

Purina Company. The proposed order

also prohibits General Mills from taking

any action to prevent or delay New

Ralcorp’s sale of private label CHEX

products in the United States. Finally,

the proposed order prohibits General

Mills from enforcing any agreement that

would prevent the transfer to a

successor party of the right to

manufacture and sell private label

CHEX in the United States.

Presently, neither Ralcorp nor any

other person produces private label

CHEX products. The proposed order

will increase the likelihood that

someone will produce and sell private

label CHEX in competition with General

Mills’ branded CHEX products.

To reduce the possibility of

competitive harm before the

Commission’s entry of a final order, the

interim agreement binds General Mills

to the terms of the order, as if it were

final. The interim agreement became

effective on the date General Mills

signed the consent agreement.

The purpose of this analysis is to

invite public comment concerning the

consent order. The Commission does

not intend this analysis to be an official

interpretation of the agreement and

order or to modify their terms in any

way.

Donald S. Clark,

Secretary.

Statement of Commissioner Mary L.

Azcuenaga Concurring in Part and

Dissenting in Part in General Mills,

Inc., File No. 961–0101

The Commission today issues for

public comment a consent order based

on a complaint alleging that the

acquisition by General Mills, Inc., of the

branded ready-to-eat cereal business of

Ralcorp Holdings, Inc., violates Section

7 of the Clayton Act. The order is

narrow, but I would narrow it even

further. In particular, I would delete

Paragraph II(B) of the proposed order,

which requires elimination of a

noncompete clause that would have

prevented Ralcorp for a period of

eighteen months from introducing a

new private label cereal identical or

similar to the CHEX-brand cereals being

sold to General Mills.

Paragraph 14 of the complaint alleges

that the noncompete clause described in

paragraph 8 would have the

anticompetitive effect of ‘‘restricting the

entry of new private label cereal

products into competition with General

Mills.’’ That effect, of course, is

precisely the purpose of this (and every

other) noncompete clause.1 Although

the complaint might be read as alleging

that noncompete clauses are per se

anticompetitive, that interpretation

would be inconsistent with the

Commission’s decision a few days ago

to accept for public comment an order

that in paragraph VI imposed an

affirmative prohibition on competition

for six years between the merged firm

and the acquirer of certain animal

health assets to be divested under the

order. ‘‘Ciba Geigy Limited,’’ (File No.

961–0055, December 17, 1996). The

Ciba Geigy decision recognizes the

efficiency potential of noncompete

clauses, which, among other benefits,

may facilitate an orderly transfer of

ownership and provide a brief transition

period for new owners to establish

themselves in the business.

Although the appropriate duration of

a noncompete clause may vary

depending on the circumstances of the

industry and the acquisition, using a

noncompete clause for a short period to

smooth a transition may be

procompetitive. I do not find reason to

believe that this short-term noncompete

clause is anticompetitive, and I dissent

from the order requirement to eliminate

it.

Statement of Commissioner Roscoe B.

Starek, III, Dissenting in General Mills,

Inc., File No. 961–0101

I respectfully dissent from the

decision of the majority to accept for

public comment a consent agreement

with General Mills, Inc. relating to the

proposed acquisition of the branded

ready-to-eat (‘‘RAE’’) cereal and snack

food businesses of Ralcorp Holdings,

Inc. (‘‘Ralcorp’’). My dissent rests on

two grounds.

As noted in the Commission’s

proposed complaint, General Mills will

not acquire the private label RTE cereal

or snack food businesses of Ralcorp.

Ralcorp instead will form a new entity,

New Ralcorp Holdings, Inc. (‘‘New

Ralcorp’’), to hold the private label

cereal and snack food businesses that

General Mills will not acquire. Under

the acquisition agreement, New Ralcorp

has the right to manufacture and sell a

private label version of the Chex RTE

cereal products, but is restricted from

transferring this right to a third party

without permission from General Mills.

The acquisition agreement further

provides that New Ralcorp may not

produce private label Chex products for

a period of eighteen months following

consummation of the acquisition.

My first reason for voting against

acceptance of the proposed consent

order is that the Commission lacks

sufficient evidence to support the

unilateral effects theory alleged in the

complaint. Second, it is completely

unnecessary—and in fact creates

inefficiency—to bar enforcement of the

parties’ non-compete agreement.

Whatever minimal competitive risks

this transaction may raise are

adequately addressed by eliminating the

restrictions on Ralcorp’s ability to

transfer manufacturing and sales rights

for private label Chex to a third party.

General Mills’ share of the RTE cereal

market will increase by approximately

three percent as a result of the proposed

acquisition. The number of competitors

in the RTE cereal industry will remain

the same, and General Mills will remain

the second largest RTE cereal producer

in the United States.1 New Ralcorp will
2164 Federal Register / Vol. 62, No. 10 / Wednesday, January 15, 1997 / Notices

consisting of ‘‘branded RTE cereal.’’ Indeed, the

provisions of the proposed order (which affect the

disposition of assets used in the production of

nonbranded cereals) make sense only in the context

of an ‘‘all RTE cereal’’ product market.

2See U.S. Department of Justice and Federal

Trade Commission, Horizontal Merger Guidelines

§ 2.211, 4 Trade Reg. Rep. (CCH) ¶ 13,104, at 20573–

9.

3State of New York v. Kraft General Foods, Inc.,

1995–1 Trade Cas. (CCH) ¶ 70,911, at 74,039, 74,066

(S.D.N.Y. 1995).

4See also Business Elecs. Corp. v. Sharp Elecs.

Corp., 485 U.S. 717, 729 n.3 (‘‘The classic ‘ancillary’

restraint is an agreement by the seller of a business

not to compete within the market.’’).

5See Paragraph VI of the proposed order in CibaGeigy.

6Barring enforcement of the non-compete

agreement might undermine adherence by the

parties to the supply agreement, an element of the

acquisition agreement found acceptable by the

majority.

immediately assume Ralcorp’s position

as the largest private label cereal

producer in the United States.

Moreover, General Mills’ post-merger

share of the RTE cereal market will be

between 25 and 31 percent (depending

on whether share is measured in pounds

or sales dollars), well below levels

suggested by the Horizontal Merger

Guidelines as the minimum threshold at

which the Commission might

reasonably presume market power.2 It is

hard to understand under these simple

facts how the majority determined that

the proposed acquisition will enable

General Mills unilaterally to exercise

market power.

Unable to presume market power, the

Commission instead relies upon a

‘‘close substitutes’’ theory of unilateral

harm, notwithstanding a paucity of

empirical evidence demonstrating that

Ralcorp’s branded Chex products are the

closest substitutes to the branded

cereals of General Mills. Although Chex

products clearly compete with the

branded General Mills RTE cereal

products, consumers have a preference

for variety when they choose RTE

cereals and frequently choose among the

many branded and private label cereals

produced by RTE cereal manufacturers

in the United States. Not surprisingly,

Judge Wood reached this conclusion in

her opinion explaining why she refused

to block the acquisition of the Nabisco

RTE cereal assets by Kraft General

Foods in early 1993.3 In Kraft General

Foods, an empirical analysis of cereal

purchasing patterns suggested—as it

does in the present matter—that

consumers have many attractive

alternatives from which to choose in the

event that one RTE cereal producer tries

to raise prices above competitive levels.

Overall, the empirical evidence does not

support the Commission’s claim, under

either a ‘‘close substitutes’’ or a

dominant firm theory, that General

Mills would be able unilaterally to raise

the prices of its branded RTE cereals

after the acquisition.

Even if I agreed with the majority that

this consent agreement rests upon an

empirically sound theory of competitive

harm, the proposed order would bar

General Mills from enforcing an

arguably procompetitive non-compete

agreement that is properly limited in

scope and duration. Covenants not to

compete are often included in contracts

for the sale of a business, and generally

are enforceable when ancillary to an

enforceable agreement and reasonable in

geographic coverage, scope of activity,

and duration. Lektro-Vend Corp. v.

Vendo Co., 660 F.2d 255, 265 (7th Cir.

1981) (‘‘The recognized benefits of

reasonably enforced non-competition

covenants are now beyond question.’’),

cert. denied, 455 U.S. 921 (1982); United

States v. Addyston Pipe & Steel Co., 85

F. 271, 281–82 (6th Cir. 1898), aff’d as

modified, 175 U.S. 211 (1899).4 Judicial

inquiry into non-compete provisions

generally focuses on whether the

restriction is reasonably necessary to

protect the legitimate business interests

of the party seeking to enforce the

provision. United States v. Empire Gas

Corp., 537 F.2d 296, 307 (8th Cir. 1976),

cert. denied, 429 U.S. 1122 (1977);

Sound Ship Bldg. Corp. v. Bethlehem

Steel Corp., 387 F. Supp. 252, 255

(D.N.J. 1975), aff’d, 533 F.2d 96 (3d

Cir.), cert. denied, 429 U.S. 680 (1976).

The Commission has often recognized

that competitive benefits can flow from

a non-compete clause in the context of

the sale of a business. The

Commission’s recent acceptance for

public comment of a consent agreement

in Ciba-Geigy, Ltd., et al., File No. 961

0055 (consent agreement accepted for

public comment, Dec. 16, 1996), is

illustrative. In Ciba-Geigy, the

Commission imposed an affirmative

obligation on the newly merged entity,

Novartis AG, not to compete in the

United States and Canada for six years

in the sale of animal flea control

products.5 As the Ciba-Geigy order

indicates, the Commission clearly

recognizes that non-compete clauses—

even when long in duration and broad

in scope—can serve legitimate

procompetitive purposes in some

circumstances by allowing an acquiring

entity a brief period to re-deploy the

acquired assets in a manner that

increases competition in the

marketplace. I am therefore puzzled

why the Commission so hastily

condemns a non-compete provision

here that is only eighteen months in

duration, limited to the manufacture

and sale of private label Chex products,

and arguably necessary to protect the

legitimate interests of the contracting

parties.6

Because I find that the facts do not

support the Commission’s theory of

unilateral competitive harm in this

instance, and because in any event I

disagree with the Commission’s

decision to bar enforcement of the noncompete provision contained in the

parties’ acquisition agreement, I have

voted to reject the consent agreement.

[FR Doc. 97–921 Filed 1–14–97; 8:45 am]

BILLING CODE 6750–01–M

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Centers for Disease Control and

Prevention

NIOSH Meeting; The National Institute

for Occupational Safety and Health

(NIOSH) of the Centers for Disease

Control and Prevention (CDC)

Announces the Following Meeting

Name: ‘‘Correlation of Seven Quantitative

Fit Test Methods to an Actual Measurement

of Exposure Using Negative-Pressure Full

Facepiece Respirators,’’ and ‘‘Development

and Correlation of a New Quantitative Fit

Test Method for Health-Care Industry

Respirators’’ study protocol peer review.

Time and Date: 9 a.m.–3 p.m., February 4,

1997.

Place: NIOSH, CDC, Room L–1047A, 1095

Willowdale Road, Morgantown, West

Virginia 26505.

Status: Open to the public, limited only by

the space available. The meeting room

accommodates approximately 20 people.

Purpose: Participants will provide NIOSH

with their individual advice and comments

regarding technical and scientific aspects of

the protocols for two NIOSH studies. The

first study is entitled ‘‘Correlation of Seven

Quantitative Fit Test Methods to an Actual

Measurement of Exposure Using NegativePressure Full Facepiece Respirators.’’ The

second study is entitled ‘‘Development and

Correlation of a New Quantitative Fit Test

Method for Health-Care Industry

Respirators.’’ Peer review panelists will

review the study protocols and provide

individual advice on the conduct of the

studies. Individual viewpoints and

suggestions from industry, labor, academia,

other governmental agencies, and the public

are invited.

Agenda items are subject to change, as

priorities dictate.

Contact Person for Additional Information:

Christopher C. Coffey, M/S 1138, NIOSH,

CDC, 1095 Willowdale Road, Morgantown,

West Virginia 26505, telephone (304) 285–

5958, fax (304) 285–6047.