[Federal Register Volume 65, Number 76 (Wednesday, April 19, 2000)]
[Notices]
[Pages 21018-21027]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9747]



[[Page 21018]]

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DEPARTMENT OF JUSTICE

Antitrust Division


United States v. The Earthgrains Company, Specialty Foods 
Corporation, and Metz Holdings, Inc.; Proposed Final Judgment and 
Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Hold Separate Stipulation and Order, and Competitive Impact Statement 
have been filed with the United States District Court for the Northern 
District of Illinois, Chicago, IL, in United States v. The Earthgrains 
Company, Specialty Foods Corporation, and Metz Holdings, Inc., Civ. No. 
00 CV 1687 (J. Bucklo).
    On March 20, 2000, the United States filed a Complaint, which 
sought to enjoin Earthgrains from acquiring Metz or from entering into 
or carrying any agreement or understanding the effect of which would be 
to combine the businesses or assets of Earthgrains and Metz. The 
Complaint alleged that Earthgrains's acquisition of Metz would lessen 
competition substantially in the sale of white pan bread though retail 
outlets in violation of section 7 of the Clayton Act, 15 U.S.C. 18, in 
many markets in the Midwest, including Kansas City, MO; Omaha, NE; Des 
Moines, IA; and many smaller communities in Illinois, Iowa, Kansas, 
Missouri, and Nebraska.
    The proposed Final Judgment, also filed on March 20, 2000, requires 
Earthgrains and Metz to divest two popular brands of white pan bread, 
Colonial and Taystee, and such other assets (e.g., Earthgrains's Des 
Moines bakery, bread routes, customer lists, thrift stores, depots, 
warehouses, and trucks) as the government determines is necessary in 
order to create an effective and viable competitor in the sale of white 
pan bread in the geographic areas in which the acquisition would 
adversely affect competition. A Hold Separate Stipulation and Order 
requires the defendants to maintain, prior to divestiture, the 
competitive independence of many of the operations that must be sold 
under the Judgment.
    Public comment is invited within the statutory 60-day comment 
period. Such comments and responses thereto will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to J. Robert Kramer II, Chief, Litigation II Section, Antitrust 
Division, U.S. Department of Justice, 1401 H Street, NW, Suite 3000, 
Washington, D.C. 20530 [telephone: (202) 307-0924].

Constance K. Robinson,
Director of Operations & Merger Enforcement.

[Civil No: 00C 1687]

Judge Bucklo,
Magistrate Judge Nolan.

Hold Separate Stipulation and Order

    It is hereby stipulated and agreed by and between the undersigned 
parties, subject to approval and entry by the Court, that:

I. Definitions

    As used in this Hold Separate Stipulation and Order:
    A. ``Earthgrains'' means defendant The Earthgrains Company, a 
Delaware corporation with its headquarters in St. Louis, Missouri, and 
includes its successors and assigns, and its subsidiaries, divisions, 
groups, affiliates, partnerships, and joint ventures, and their 
directors, officers, managers, agents, and employees.
    B. ``Specialty Foods'' means defendant Specialty Foods Corporation, 
a Delaware corporation with its headquarters in Deerfield, Illinois, 
and includes its successors and assigns, and its subsidiaries 
(including defendant Metz Holdings, Inc. or ``Metz''), divisions, 
groups, affiliates, partnerships and joint ventures, and their 
directors, officers, managers, agents, and employees.
    C. ``Acquirer'' means the entity or entities to whom defendants 
divest the Relevant Baking Assets.
    D. ``Relevant Banking Assets'' means:
    1. A perpetual, royalty-free, freely assignable and transferable, 
and exclusive license to make, have made, use or sell white pan bread 
in the Relevant Territory under each of the Relevant Labels; and
    2. Each of the Additional Baking Assets.
    E. ``Additional Baking Assets'' means:
    1. Earthgrains' Des Moines, IA bakery;
    2. A perpetual, royalty-free, freely assignable and transferable, 
and exclusive license to make, have made, use or sell under each of the 
Relevant Labels any bread, bun or roll other than white pan bread in 
the Relevant Territory;
    3. All trucks and other vehicles, depots and warehouses, and thrift 
stores used by defendants in the sale and distribution of bread, buns 
and rolls under each of the Relevant Labels in the Relevant Territory; 
and
    4. All route books, customer lists, contracts and accounts used by 
defendants in the sale and distribution of bread, buns and rolls under 
each of the Relevant Labels in the Relevant Territory.
    F. ``Label'' means all legal rights associated with a brand's 
trademarks, trade names, copyrights, service names, service marks, 
intellectual property, designs, and trade dress; the brand's trade 
secrets; the brand's technical information and production know-how, 
including, but not limited to, recipes and formulas used to produce 
bread currently sold under the brand, and any improvements to, or line 
extensions thereof; and packaging, marketing and distribution know-how 
and documentation, such as customer lists and route maps, associated 
with the brand.
    G. ``Relevant Labels'' means:
    (1) Earthgrain's Colonial label; and
    (2) Metz's Taystee label (a license to which label may be divested 
to an Acquirer without prior approval of the licensor, Interstate 
Brands West Corporation, see the letter hereto attached as an appendix 
to the proposed Final Judgment, Exhibit A).
    H. ``Relevant Territory'' means:
    (1) Every county in the state of Iowa;
    (2) The following counties in the state of Nebraska: Burt, Butler, 
Cass, Colfax, Cuming, Dodge, Douglas, Gage, Jefferson, Johnson, 
Lancaster, Nemaha, Otoe, Pawnee, Platte, Richardson, Saline, Sarpy, 
Saunders, Stanton, Seward, and Washington;
    (3) The following counties in the state of Kansas: Atchison, Brown, 
Clay, Dickinson, Doniphan, Douglas, Franklin, Geary, Jackson, 
Jefferson, Johnson, Leavenworth, Lyon, Marshall, Miami, Morris, Nemaha, 
Osage, Pottawatomie, Riley, Shawnee, Washington, Waubaunsee, and 
Wyandotte;
    (4) The following counties in the state of Illinois: Carroll, 
Henry, Mercer, Rock Island, and Whiteside; and
    (5) The following counties in the state of Missouri: Andrew, 
Atchison, Buchanan, Caldwell, Carroll, Cass, Clay, Clinton, Daviess, De 
Kalb, Gentry, Grundy, Harrison, Holt, Jackson, Lafayette, Livingston, 
Mercer, Nodaway, Pettis, Platte, Ray, Saline, and Worth.
    I. ``Earthgrain's Des Moines, IA bakery'' means the bakery located 
at 1225-1303 2nd Avenue, Des Moines, IA 50314, and all of Earthgrain's 
rights, titles and interests in any tangible assets (e.g., land, 
buildings, other real property and improvements, fixtures, machinery, 
tooling, fixed assets, personal property, inventory, office furniture, 
material, supplies and equipment) relating thereto, including all fee 
and leasehold and renewal rights in such assets or any

[[Page 21019]]

options to purchase any adjoining property.
    J. ``White Pan Bread'' means white bread baked in a pan, but shall 
not include hamburger and hot dog buns, or variety breads such as 
French bread and Italian bread.

II. Objectives

    The Final Judgment filed in this case is meant to ensure 
defendants' prompt divestitures of the Relevant Baking Assets for the 
purpose of establishing one or more viable competitors in the 
production and sale of white pan bread in the Relevant Territory in 
order to remedy the effects that the United States alleges would 
otherwise result from Earthgrain's acquisition of Metz. This Hold 
Separate Stipulation and Order ensures, prior to such divestitures, 
that the Relevant Baking Assets remain independent, economically 
viable, and ongoing business concerns that will remain independent and 
uninfluenced by Earthgrains, and that competition is maintained during 
the pendency of the ordered divestitures.

III. Jurisdiction and Venue

    The Court has jurisdiction over the subject matter of this action 
and over each of the parties hereto, and venue of this action is proper 
in the United States District for the Northern District of Illinois, 
Eastern Division.

IV. Compliance with and entry of Final Judgment

    A. The parties stipulate that a Final Judgment in the form attached 
hereto as Exhibit A may be filed with and entered by the Court, upon 
the motion of any party or upon the Court's own motion, at any time 
after compliance with the requirements of the Antitrust Procedures and 
Penalties Act (15 U.S.C. 16), and without further notice to any party 
or other proceedings, provided that the United States has not withdrawn 
its consent, which it may do at any time before the entry of the 
proposed Final Judgment by serving notice thereof on defendants and by 
filing that notice with the Court.
    B. Defendants shall abide by and comply with the provisions of the 
proposed Final Judgment, pending the Judgment's entry by the Court, or 
until expiration of time from all appeals of any Court ruling declining 
entry of the proposed Final Judgment, and shall, from the date of the 
signing of this Stipulation by the parties, comply with all the terms 
and provisions of the proposed Final Judgment as though the same were 
in full force and effect as an order of the Court.
    C. Defendants shall not consummate the transaction sought to be 
enjoined by the Complaint herein before the Court has signed this Hold 
Separate Stipulation and Order.
    D. This Stipulation shall apply with equal force and effect to any 
amended proposed Final Judgment agreed upon in writing by the parties 
and submitted to the Court.
    E. In the event (1) the United States has withdrawn its consent, as 
provided in Section IV(A) above, or (2) the proposed Final Judgment is 
not entered pursuant to this Stipulation, the time has expired for all 
appeals of any Court ruling declining entry of the proposed Final 
Judgment, and the Court has not otherwise ordered continued compliance 
with the terms and provisions of the proposed Final Judgment, then the 
parties are released from all further obligations under this 
Stipulation, and the making of this Stipulation shall be without 
prejudice to any party in this or any other proceeding.
    F. Defendants represents that the divestitures ordered in the 
proposed Final Judgment can and will be made, and that defendants will 
later raise no claim of mistake, hardship or difficulty of compliance 
as grounds for asking the Court to modify any of the provisions 
contained therein.

V. Hold Separate Provisions

    Until the divestitures required by the Final Judgment have been 
accomplished:
    A. Defendants shall preserve, maintain, and continue to operate the 
Relevant Baking Assets as independent competitive businesses, with 
management, sales and operations of such assets held entirely separate, 
distinct and apart from those of Earthgrains's other operations. 
Earthgrains shall not coordinate its production, marketing, or terms of 
sale of any products with those produced by or sold under any of the 
Relevant Baking Assets. Within twenty (20) days after the entry of the 
Hold Separate Stipulation and Order, defendants will inform the United 
States of the steps defendants have taken to comply with this Hold 
Separate Stipulation and Order.
    B. Earthgrains shall take all steps necessary to ensure that (1) 
the Relevant Baking Assets will be maintained and operated as 
independent, ongoing, economically viable and active competitors in the 
production and sale of bread; (2) management of the Relevant Baking 
Assets will not be influenced by Earthgrains (or Metz); and (3) the 
books, records, competitively sensitive sales, marketing and pricing 
information, and decision-making concerning production, distribution or 
sales of products by or under any of the Relevant Baking Assets will be 
kept separate and apart from Earthgrains's other operations. 
Earthgrains influence over the production and sale of products 
utilizing the Relevant Baking Assets shall be limited to that necessary 
to carry out its obligations under this Hold Separate Stipulation and 
Order and the proposed Final Judgment. Earthgrains may, however, 
receive historical aggregate financial information (excluding capacity 
utilization or pricing information relating to the Relevant Baking 
Assets to the extent necessary to allow Earthgrains to prepare 
financial reports, tax returns, and other legally required reports).
    C. Defendants shall use all reasonable efforts to maintain and 
increase the sales and revenues of the products produced by or sold 
under Relevant Baking Assets, and shall maintain at 1999 or previously 
approved levels for 2000, whichever are higher, all promotional, 
advertising, sales, technical assistance, marketing and merchandising 
support for the Relevant Baking Assets and otherwise maintain the 
Relevant Baking Assets as active competitors in the Relevant Territory.
    D. Earthgrains shall take all steps necessary to ensure that its 
Des Moines, IA bakery will be maintained and operated as an 
independent, ongoing, economically viable business concern.
    E. Earthgrains shall provide sufficient working capital and lines 
and sources of credit to continue to maintain the Relevant Baking 
Assets as economically viable and competitive, ongoing businesses, 
consistent with the requirements of Section V (A) and (B).
    F. Earthgrains shall take all steps necessary to ensure that its 
Des Moines, IA bakery is fully maintained in operable condition at no 
less than its current capacity and sales, and shall maintain and adhere 
to normal repair and maintenance schedules for the Relevant Baking 
Assets.
    G. Defendants shall not, except as part of a divestiture approved 
by the United States in accordance with the terms of the proposed Final 
Judgment, remove, sell, lease, assign, transfer, pledge or otherwise 
dispose of any of the Relevant Baking Assets.
    H. Defendants shall maintain, in accordance with sound accounting 
principles, separate, accurate and complete financial ledgers, books 
and records that report on a periodic basis, such as the last business 
day of every month, consistent with past practices, the assets, 
liabilities, expenses, revenues

[[Page 21020]]

and income of products produced, distributed or sold utilizing the 
Relevant Baking Assets.
    I. Except in the ordinary course of business or as otherwise 
consistent with this Hold Separate Stipulation and Order, defendants 
shall not hire, transfer, terminate, or otherwise alter the salary or 
employment agreements for any Earthgrains, Metz, or Specialty Foods 
employee who, on the date of defendants' signing of this Hold Separate 
Stipulation and Order, either: (1) Works in Earthgrains's Des Moines, 
IA bakery or in the production, distribution or sale of bread, buns or 
rolls under a Relevant Baking assets or (2) is a member of management 
referenced in Section V(J) of this Hold Separate Stipulation and Order.
    J. Until such time as the Relevant Baking Assets are divested 
pursuant to the terms of the Final Judgment, the Relevant Baking Assets 
shall be managed by Mr. Paul Johnson, Vice President for Earthgrains's 
Iowa/Nebraska Zone. Mr. Johnson shall have complete managerial 
responsibility for the Relevant Baking Assets, subject to the 
provisions of this Order and the proposed Final Judgment. In the event 
that Mr. Johnson is unable to perform his duties, defendants shall 
appoint, subject to the approval of the United States, a replacement 
within ten (10) working days. Should defendants fail to appoint a 
replacement acceptable to the United States within ten (10) working 
days, the United States shall appoint a replacement.
    K. Defendants shall take no action that would interfere with the 
ability of any trustee appointed pursuant to the Final Judgment to 
complete the divestitures pursuant to the Final Judgment to a Acquirer 
or Acquirers acceptable to the United States.
    L. This Hold Separate Stipulation and Order shall remain in effect 
until consummation of the divestitures required by the proposed Final 
Judgment or until further order of the Court.

    Dated: March 17, 2000.

    For Plaintiff, United States of America:
Anthony E. Harris, 
Esquire, IL Bar #1133713, U.S. Department of Justice, Antitrust 
Division, Litigation II Section, 1401 H Street, NW, Suite 3000, 
Washington, DC 20005, (202) 307-6583.
      Respectfully submitted,

    For Defendant, The Earthgrains Company:
Roxanne E. Henry;
Esquire, DC Bar #351569, Howrey Simon Arnold & White, 1299 Pennsylvania 
Avenue, NW, Washington, DC 20005, (202) 383-6503.
    For Defendants, Specialty Foods Inc. and Metz Holdings, Inc:
Roxanne E. Henry;
Esquire, DC Bar #351569, Howrey Simon Arnold & White, 1299 Pennsylvania 
Avenue, NW, Washington, DC 20005, (202) 383-6503.

Order

    It is so ordered by the Court, this 20th day of March 2000.

----------------------------------------------------------------------
United States District Judge

Final Judgment

    Whereas, plaintiff, the United States of America, having filed its 
Compliant in this action on March 20, 2000 and plaintiff and 
defendants, The Earthgrains Company, Specialty Foods Corporation, and 
Metz Holdings, Inc., by their respective attorneys, having consented to 
the entry of this Final Judgment without trial or adjudication of any 
issue of fact or law herein, and without this Final Judgment 
constituting any evidence against or an admission by any party with 
respect to any issue of law or fact herein;
    And whereas, defendants have agreed to be bound by the provisions 
of this Final Judgment pending its approval by the Court;
    And whereas, the essence of this Final Judgment is the prompt and 
certain divestiture by defendants of the Relevant Baking Assets and, if 
necessary, the Additional Relevant Baking Assets to assure that 
competition is not substantially lessened;
    And whereas, the United States requires defendants to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Compliant;

Exhibit A

And whereas, defendants have represented to the United States that 
the divestitures ordered herein can and will be made and that they 
will later raise no claims of hardship, mistake or difficulty as 
grounds for asking the Court to modify any of the injunctive 
provisions contained below;
    Now, therefore, before the taking of any testimony, and without 
trial or adjudication of any issue of fact or law herein, and upon 
consent of the parties hereto, it is hereby ordered, adjudged, and 
decreed as follows:

I. Jurisdiction

    This Court has jurisdiction over each of the parties hereto and 
over the subject matter of this action. The Complaint states a claim 
upon which relief may be granted against defendants under Section 7 of 
the Clayton Act, as amended, 15 U.S.C. 18.

II. Definition

    As used in this Final Judgment:
    A. ``Earthgrains'' means defendant The Earthgrains Company, a 
Delaware corporation with its headquarters in St. Louis, Missouri, and 
includes its successors and assigns, and its subsidiaries, divisions, 
groups, affiliates, partnerships and joint ventures, and their 
directors, officers, managers, agents, and employees.
    B. ``Specialty Foods'' means defendant Specialty Foods Corporation, 
a Delaware corporation with its headquarters in Deerfield, Illinois, 
and includes its successors and assigns, and its subsidiaries 
(including defendant Metz Holdings, Inc. or ``Metz''), divisions, 
groups, affiliates, partnerships and joint ventures, and their 
directors, officers, managers, agents, and employees.
    C. ``Acquirer''means the entity or entities to whom defendants 
divest the Relevant Baking Assets.
    D. ``Relevant Baking Assets'' means:
    1. A perpetual, royalty-free, freely assignable and transferrable, 
and exclusive license to make, have made, use or sell white pan bread 
in the Relevant Territory under each of the Relevant Labels; and
    2. Such Additional Baking assets as the United States, in its sole 
discretion, determines may be reasonably necessary for an Acquirer or 
Acquirers to complete effectively and viably in the sale of white pan 
bread under each of the Relevant Labels in the Relevant Territory.
    E. ``Additional Baking Assets'' means:
    1. Earthgrains's Des Moines, IA bakery;
    2. A perpetual, royalty-free, freely assignable and transferrable, 
and exclusive license to make, have made, use or sell under each of the 
Relevant Labels any bread, buns or rolls other than white pan bread in 
the Relevant Territory.
    3. All trucks and other vehicles, depots and warehouses, and thrift 
stores used by defendants in the sale and distribution of bread, buns 
or rolls under each of the Relevant Labels in the Relevant Territory; 
and
    4. All route books, customer lists, contracts and accounts used in 
defendants' distribution and sale of bread, buns or rolls under each of 
the Relevant Labels in the Relevant Territory.
    F. ``Label`` means all legal rights associated with a brand's 
trademarks, trade names, service names, service

[[Page 21021]]

marks, intellectual property, copyrights, designs, and trade dress; the 
brand's trade secrets; the brand's technical information and production 
know-how, including, but not limited to, recipes and formulas used to 
produce bread currently sold under the brand, and any improvements to, 
or line extensions thereof; and packaging, marketing and distribution 
know-how and documentation, such as customer lists and route maps, 
associated with the brand.
    G. ``Relevant Labels'' means:
    (1) Earthgrains's Colonial label; and
    (2) Metz's Taystee label (a license to which label may be divested 
to an Acquirer without prior approval of the licensor, Interstate 
Brands West Corporation, see the letter attached hereto as Appendix A).
    H. ``Relevant Territory'' means:
    (1) Every county in the state of Iowa;
    (2) The following counties in the state of Nebraska: Burt, Butler, 
Cass, Colfax, Cuming, Dodge, Douglas, Gage, Jefferson, Johnson, 
Lancaster, Nemaha, Otoe, Pawnee, Platte, Richardson, Saline, Sarpy, 
Saunders, Stanton, Seward, and Washington;
    (3) The following counties in the state of Kansas: Atchison, Brown, 
Clay, Dickinson, Doniphan, Douglas, Franklin, Geary, Jackson, 
Jefferson, Johnson, Leavenworth, Lyon, Marshall, Miami, Morris, Nemaha, 
Osage, Pottawatomie, Riley, Shawnee, Washington, Waubaunsee, and 
Wyandotte;
    (4) The following counties in the state of Illinois: Carroll, 
Henry, Mercer, Rock Island, and Whiteside; and
    (5) The following counties in the state of Missouri: Andrew, 
Atchison, Buchanan, Caldwell, Carroll, Cass, Clay, Clinton, Daviess, De 
Kalb, Gentry, Grundy, Harrison, Holt, Jackson, Johnson, Lafayette, 
Livingston, Mercer, Nodaway, Pettis, Platte, Ray, Saline, and Worth.
    I. ``Earthgrains's Des Moines, IA bakery'' means the bakery located 
at 1225-1303 2nd Avenue, Des Moines, IA 50314, and all of Earthgrains's 
rights, titles and interests in any tangible assets (e.g., land, 
buildings, other real property and improvements, fixtures, machinery, 
tooling, fixed assets, personal property, inventory, office furniture, 
material, supplies and equipment) relating thereto, including all fee 
and leasehold and renewal rights in such assets or any options to 
purchase any adjoining property.
    J. ``White Pan Bread'' means white bread baked in a pan but shall 
not include hamburger and hot dog buns, or variety breads such as 
French bread and Italian bread.

III. Applicability

    A. The provisions of this Final Judgment apply to defendants, their 
successors and assigns, subsidiaries, divisions, groups, affiliates, 
partnerships and joint ventures, and their directors, officers, 
managers, agents, and employees, and all other persons in active 
concert or participation with any of them who shall have received 
actual notice of this Final Judgment by personal service or otherwise.
    B. Defendants shall require, as a condition of the sale or other 
disposition of all or substantially all of their assets, or of a lesser 
business unit that includes the Relevant Baking Assets, that the 
acquiring party or parties agree to be bound by the provisions of this 
Final Judgment.

IV. Divestitures

    A. Defendants are hereby ordered and directed, in accordance with 
the terms of this Final Judgment, within ninety (90) calendar days 
after the filing of the Complaint in this matter, or five (5) days 
after notice of the entry of this Final Judgment by the Court, 
whichever is later, to divest all Relevant Baking Assets as viable, 
ongoing businesses to a Acquirer or Acquirers acceptable to the United 
States, in its sole discretion.
    B. Defendants shall use their best efforts to accomplish the 
divestitures ordered by this Final Judgment as expeditiously and timely 
as possible. The United States, in its sole discretion, may extend the 
time period for any divestiture two additional periods of time, not to 
exceed thirty (30) calendar days each.
    C. In accomplishing the divestitures ordered by this Final 
Judgment, defendants promptly shall make known, by usual and customary 
means, the availability of the Relevant Baking Assets. Defendants shall 
inform any person making an inquiry regarding a possible purchase of 
the Relevant Banking Assets that the sale is being made pursuant to 
this Final Judgment and provide such person with a copy of this Final 
Judgment. Defendants shall also offer a furnish to any prospective 
Acquirer, subject to customary confidentiality assurances, all 
information and documents relating to the Relevant Baking Assets 
customarily provided in a due diligence process except such information 
or documents subject to attorney-client privilege or attorney work-
product privilege. Defendants shall make available such information to 
the United States at the same time that such information is made 
available to any other person.
    D. Defendants shall provide the Acquirer and the United States 
information relating to the personnel involved in the production, 
development, and sale of the divestiture assets to enable the Acquirer 
to make offers of employment. Defendants shall not interfere with any 
negotiations by any Acquirer to employ any Earthgrains (or former 
Specialty Foods or Metz) employee who works at, or whose primary 
responsibility concerns, any bakery business that is part of the 
Relevant Banking Assets.
    E. Defendants shall permit prospective Acquirers of the Relevant 
Baking Assets to have access to personnel and to any and all 
environmental, zoning, and other permit documents and information, and 
to make inspection of the Relevant Baking Assets, and have access to 
any and all financial, operational, business, strategic or other 
documents and information customarily provided as part of a due 
diligence process.
    F. Defendants shall warrant to any Acquirer of Earthgrains's Des 
Moines, IA bakery that the bakery will be fully operational on the date 
of sale.
    G. Defendants shall not take any action, direct or indirect, that 
will impede in any way the operation, sale, or divestiture of the 
Relevant Baking Assets.
    H. Unless the United States otherwise consents in writing, the 
divestitures pursuant to Section IV or by trustee appointed pursuant to 
Section V of this Final Judgment shall include all Relevant Baking 
Assets and be accomplished by selling or otherwise conveying each asset 
to an Acquirer in such a way as to satisfy the United States, in its 
sole discretion, that the Relevant Baking Assets can and will be used 
by the Acquirer as part of a viable, ongoing business or businesses 
engaged in sale of white pan bread in the Relevant Territory. The 
divestitures, whether pursuant to Section IV or Section V of this Final 
Judgment, shall be made to an Acquirer (or Acquirers) for whom it is 
demonstrated to the United States's sole satisfaction that: (1) The 
Acquirer(s) has the capability and intent of competing effectively in 
the sale of white pan bread in each area in the Relevant Territory; (2) 
the Acquirer(s) has the managerial, operational, and financial 
capability to compete effectively in the sale of white pan bread in 
each area of the Relevant Territory; and (3) none of the terms of any 
agreement between an Acquirer and defendants give any defendant the 
ability unreasonably to raise the Acquirer's costs, lower the 
Acquirer's efficiency, or otherwise interfere in the

[[Page 21022]]

ability of the Acquirer to compete effectively in the Relevant 
Territory.

V. Appointment of Trustee

    A. In the event that defendants have not divested the Relevant 
Baking Assets within the time specified in Section IV(A) of this Final 
Judgment, defendants shall notify the United States of that fact in 
writing. Upon application of the United States, the Court shall appoint 
a trustee to be selected by the United States, at its sole discretion, 
to effect the divestiture of the Relevant Baking Assets. Defendants 
shall not object to the selection of the trustee on any grounds other 
than irremediable conflict of interest. Defendants must make any such 
objection within five (5) business days after the United States 
notifies defendants of the trustee's selection.
    B. After the appointment of the trustee becomes effective, only the 
trustee shall have the right to divest the unsold Relevant Baking 
Assets. The trustee shall have the power and authority to accomplish 
any and all divestitures to an Acquirer(s) acceptable to the United 
States at such price and on such terms as are then obtainable upon 
reasonable efforts of the trustee, subject to the provisions of 
Sections IV and VI of this Final Judgment, and shall have such other 
powers as the Court shall deem appropriate. The trustee shall divest 
the unsold Relevant Baking Assets in the manner that is most conducive 
to remedying the loss of competition alleged in the Complaint. Subject 
to Section V(C) of this Final Judgment, the trustee shall have the 
power and authority to hire at the cost and expense of defendants any 
investment bankers, attorneys, or other agents reasonably necessary in 
the judgment of the trustee to assist in the divestitures, and such 
professionals and agents shall be accountable solely to the trustee. 
The trustee shall have the power and authority to accomplish the 
divesitures at the earliest possible time to an Acquier or Acquirers 
acceptable to the United States, and shall have such other powers as 
this Court shall deem appropriate.
    C. The trustee shall serve at the cost and expense of defendants, 
on such terms and conditions as the United States approves, and shall 
account for all monies derived from the sale of each asset sold by the 
trustee and all costs and expenses so incurred. After approval by the 
Court of the trustee's accounting, including fees for its services and 
those of any professionals and agents retained by the trustee, all 
remaining money shall be paid to defendants and the trust shall then be 
terminated. The compensation of such trustee and of any professionals 
and agents retained by the trustee shall be reasonable in light of the 
value of the divested assets and based on a fee arrangement providing 
the trustee with an incentive based on the price and terms of the 
disvestiture and the speed with which it is accomplished.
    D. Defendants shall use their best efforts to assist the trustee in 
accomplishing the required divestitures and shall take no action to 
interfere with or impede the trustee's accomplishment of the 
divestiture of the Relevant Baking Assets. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities for the Relevant Baking Assets, and to 
defendants' overall businesses as is reasonably necessary to effectuate 
the divestiture. Defendants shall provide financial or other 
information relevant to the Relevant Baking Assets customarily provided 
in a due diligence process as the trustee may reasonably request, 
subject to reasonable protection for trade secrets or other 
confidential research, development or commercial information. Subject 
to customary confidentiality assurances, defendants shall permit 
prospective Acquirers of any Relevant Baking Assets to have reasonable 
access to the information provided to the trustee and to management 
personnel for the Relevant Baking Assets, and to make inspection of any 
physical facilities for the Relevant Baking Assets.
    E. After the trustee's appointment, the trustee shall file biweekly 
reports with the parties and the Court setting forth the trustee's 
efforts to accomplish the divestitures ordered under this Final 
Judgment; provided, however, that to the extent such reports contain 
information that the trustee deems confidential, such reports shall not 
be filed in the public docket of the Court. Such reports shall include 
the name, address and telephone number of each person who, during the 
preceding period, made an offer to acquire, expressed an interest in 
acquiring, entered into negotiations to acquire, or was contacted or 
made an inquiry about acquiring, any interest in the Relevant Baking 
Assets, and shall describe in detail each contact with any such person 
during the period. The trustee shall maintain full records of all 
efforts to divest the Relevant Baking Assets.
    F. The United States may object to a proposed divestiture by the 
trustee in the manner prescribed in Section VI of this Final Judgment. 
Defendants shall not object to a divestiture by the trustee on any 
grounds other than the trustee's malfeasance. Any such objections by 
defendants must be conveyed in writing to the United States and the 
trustee within ten (10) calendar days after the trustee has provided 
the notice required under Section VI of this Final Judgment.
    G. If the trustee has not accomplished such divestitures within one 
hundred and twenty (120) days after its appointment, the trustee 
thereupon shall file promptly with the Court a report setting forth (1) 
The trustee's efforts to accomplish the required divestitures, (2) the 
reasons, in the trustee's judgment, why the required divestitures have 
not been accomplished, and (3) the trustee's recommendations for 
completing the required divestiture; provided, however, that to the 
extent such report contains information that the trustee deems 
confidential, it shall not be filed in the public docket of the Court. 
The trustee shall at the same time furnish a copy of such reports to 
the parties, who shall have the right to be heard and to make 
additional recommendations consistent with the purpose of the trust. 
The Court shall thereafter enter such orders as it shall deem 
appropriate in order to carry out the purpose of the Final Judgment, 
which may, if necessary, include extending the trust and the term of 
the trustee's appointment by a period requested by the United States.

VI. Notice of Proposed Divestitures

    A. Within two (2) business days following execution of a definitive 
agreement, contingent upon compliance with the terms of this Final 
Judgment, to effect, in whole or in part, any proposed divestiture 
pursuant to Sections IV or V of this Final Judgment, defendants or the 
trustee, whichever is then responsible for effecting the divestiture, 
shall notify the United States of the proposed divestiture. If the 
trustee is responsible, it shall similarly notify defendants. The 
notice shall set forth the details of the proposed transaction and list 
the name, address, and telephone number of each person not previously 
identified who offered to, or expressed an interest in or a desire to, 
acquire any ownership interest in the Relevant Baking Assets that is 
the subject of the definitive agreement, together with full details of 
same.
    B. Within fifteen (15) calendar days of receipt by the United 
States of such notice, the United States, in its sole discretion, may 
request from defendants, the proposed Acquirer(s), any other third 
party, or the trustee additional information concerning the proposed 
divestiture, the proposed Acquirer, or any other potential Acquirer. 
Defendants and the trustee

[[Page 21023]]

shall furnish any additional information requested from them within 
fifteen (15) calendar days of the receipt of the request, unless the 
parties shall otherwise agree.
    C. Within thirty (30) calendar days after receipt of the notice, or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from defendants, the 
proposed Acquirer, any third party, and the trustee, whichever is 
later; the United States shall provide written notice to defendants and 
the trustee, if there is one, stating whether or not it objects to the 
proposed divestiture. If the United States provides written notice to 
defendants (and the trustee, if applicable) that it does not object, 
then the divestiture may be consummated, subject only to defendants' 
limited right to object to the sale under Section V(F) of this Final 
Judgment. Absent written notice that the United States does not object 
to the proposed Acquirer, or upon objection by the United States, a 
divestiture proposed under Section IV or Section V of this Final 
Judgment shall not be consummated. Upon objection by defendants under 
the provision in Section V(F), a divestiture proposed under Section V 
shall not be consummated unless approved by the Court.

VII. Affidavits

    A. Within twenty (20) calendar days of the filing of the Complaint 
in this matter and every twenty (20) calendar days thereafter until the 
divestiture has been completed, whether pursuant to Section IV or 
Section V of this Final Judgment, defendants shall deliver to the 
United States as affidavit as to the fact and manner of compliance with 
Sections IV or V of this Final Judgment. Each such affidavit shall 
include, inter alia, the name, address, and telephone number of each 
person who, at any time after the period covered by the last such 
report, made an offer to acquire, expressed an interest in acquiring, 
entered into negotiations to acquire, or was contacted or made an 
inquiry about acquiring any interest in the Relevant Baking Assets, and 
shall describe in detail each contact with any such person during that 
period. Each such affidavit shall also include a description of the 
efforts that defendants have taken to solicit buyers for any and all 
Relevant Baking Assets and to provide required information to 
prospective Acquirers, including the limitations, if any, on such 
information. Assuming the information set forth in the affidavit is 
true and complete, any objection by the United States to information 
provided by defendants, including limitations on information, shall be 
made within fourteen (14) days of receipt of such affidavit.
    B. Within twenty (20) calendar days of the filing of the Complaint 
in this matter, defendants shall deliver to the United States an 
affidavit which describes in reasonable detail all actions defendants 
have taken and all steps defendants have implemented on an ongoing 
basis to comply with Section VIII of this Final Judgment and the Hold 
Separate Stipulation and Order entered by the Court. The affidavit also 
shall describe, but not be limited to, defendants' efforts to maintain 
and operate each Relevant Baking Asset as a viable active competitor; 
to maintain separate management, staffing, sales, marketing and pricing 
of each asset; and to maintain each asset in operable condition at 
current capacity configurations. Defendants shall deliver to the United 
States an affidavit describing any changes to the efforts and actions 
outlined in defendants' earlier affidavit(s) filed pursuant to this 
Section within fifteen (15) calendar days after any such change has 
been implemented.
    C. For a one-year period following the completion of each 
divestiture, defendants shall preserve all records of any and all 
efforts made to preserve and divest the Relevant Baking Assets.

VIII. Hold Separate Order

    Until the divestitures required by the Final Judgment have been 
accomplished, defendants shall take all steps necessary to comply with 
the Hold Separate Stipulation and Order entered by this Court. 
Defendants shall take no action that would jeopardize the sale of any 
Relevant Baking Asset.

IX. Financing

    Defendants are ordered and directed not to finance all or any part 
of any acquisition by any person made pursuant to Sections IV or V of 
this Final Judgment.

X. Compliance Inspection

    For purposes of determining or securing compliance with the Final 
Judgment, or of determining whether the Final Judgment should be 
modified or vacated, and subject to any legally recognized privilege, 
from time to time:
    A. Duly authorized representatives of the United States Department 
of Justice, upon written request of the Assistant Attorney General in 
charge of the Antitrust Division, and on reasonable notice to 
defendants, shall be permitted:
    1. Access during office hours of defendants to inspect and copy all 
books, ledgers, accounts, correspondence, memoranda, and other records 
and documents in the possession or under the control of defendants, who 
may have counsel present, relating to any matters contained in this 
Final Judgment and the Hold Separate Stipulation and Order; and
    2. Subject to the reasonable convenience of defendants and without 
restraint or interference from them, to interview, either informally or 
on the record, their officers, employees, and agents, who may have 
counsel present, regarding any such matters.
    B. Upon the written request of the Assistant Attorney General in 
charge of the Antitrust Division, defendants shall submit such written 
reports, under oath if requested with respect to any matter contained 
in the Final Judgment and the Hold Separate Stipulation and Order.
    C. No information or documents obtained by the means provided in 
Sections IV, VI or X of this Final Judgment shall be divulged by the 
United States to any person other than an authorized representative of 
the Executive Branch of the United States, except in the course of 
legal proceedings to which the United States is a party (including 
grand jury proceedings), or for the purpose of securing compliance with 
this Final Judgment, or as otherwise required by law.
    D. If at the time information or documents are furnished by 
defendants to the United States, defendants represent and identify in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(7) of the Federal 
Rules of Civil Procedure, and defendants mark each pertinent page of 
such material, ``Subject'' to claim of protection under Rule 26(c)(7) 
of the Federal Rules of Civil Procedure,'' then the United States shall 
give defendants ten (10) calendar days notice prior to divulging such 
material in any legal proceeding (other than a grand jury proceeding).

XI. Retention of Jurisdiction

    Jurisdiction is retained by this Court for the purpose of enabling 
any of the parties to this Final Judgment to apply to this Court at any 
time for such further orders and directions as may be necessary or 
appropriate for the construction or carrying out of this Final 
Judgment, for the modification of any of the provisions hereof, for the 
enforcement of compliance herewith, and for the punishment of any 
violations hereof.

[[Page 21024]]

XII. Termination

    Unless this Court grants an extension, this Final Judgment will 
expire upon the tenth anniversary of the date of its entry.

XIII. Public Interest

    Entry of this Final Judgment is in the public interest.

    Dated ______________, 2000.

Court approval subject to procedures of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec. 16


United States District Judge
Interstate Brands Corporation,
East Armour Blvd., 64111/P.O. Box 419627, Kansas City, MO 64141-5627, 
(816) 502-4000

Legal Department

March 17, 2000.

Mr. David E. Groce,
The Earthgrains Company, 8400 Maryland Avenue, St. Louis, MO 63105.

    Dear David: I understand that The Earthgrains Company has agreed to 
acquire Metz Baking Company (``Metz''), and that both firms have agreed 
to resolve certain competitive concerns raised by the U.S. Department 
of Justice (``DOJ'') in connection with this merger by entering into a 
consent decree. I have been advised that the consent decree would 
require Earthgrains and Metz to divest, to a purchaser approved by DOJ, 
Metz's license rights under the TAYSTEE<Register> trademark for certain 
geographic areas in the Midwest. Interstate Brands West Corporation, 
will, upon the request of Metz and in accordance with the provisions of 
the License Agreement dated July 27, 1987, between American Bakeries 
Licensing Co. (our predecessor in interest) and Heileman Baking Company 
(Metz's predecessor in interest) (except for provisions of Articles 
5(G) and 9 requiring prior written approval of sublicensees), consent 
to a transfer and sublicense of the TAYSTEE<Register> trademark to any 
third party approved by DOJ under the proposed consent decree. Any 
final decision concerning whether the sublicensing of the 
TAYSTEE<Register> trademark to such third party satisfies the 
conditions of the consent decree shall be in the sole discretion of the 
United States.

      Sincerely,
Kim B. Murphy,
Sr. Staff Attorney.

Appendix A

Competitive Impact Statement

    The United States, pursuant to Section 2(b) of the Antitrust 
Procedure and Penalties Act (``APPA''), 15 U.S.C. 16(b)-(h), files this 
Competitive Impact Statement relating to the proposed Final Judgment 
submitted for entry in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    On March 20, 2000, the United States field a civil antitrust suit 
the alleges that an acquisition by The Earthgrains Company 
(``Earthgrains'') of Metz Holdings, Inc. (``Metz'') would violate 
Section 7 of the Clayton Act, 15 U.S.C. 18. The complaint alleges that 
in many markets in the Midwest, Earthgrains and Metz are two of only a 
few significant competitors in the production and sale of white pan 
bread, and that their combination would substantially lessen 
competition in these already highly concentrated markets, including 
Kansas City, Missouri,; Omaha, Nebraska; Des Moines, Iowa; and many 
smaller communities in Illinois, Iowa, Kansas, Missouri, and Nebraska. 
According to the Complaint, the loss of competition would likely result 
in retailers and consumers paying higher prices for white pan bread in 
these areas. The prayer for relief in the Complaint seeks: (1) A 
judgment that the proposed acquisition would violate Section 7 of the 
Clayton Act; and (2) a permanent injunction that would prevent 
Earthgrains from acquiring control of Metz or otherwise combining 
Metz's assets with its own business.
    At the same time the Complaint was filed, the United States also 
filed a proposed settlement that would permit Earthgrains to complete 
its acquisition of Metz, yet preserve competition in the markets in 
which the transaction would otherwise raise significant competitive 
concerns. The settlement consists of a proposed Final Judgment and a 
Hold Separate Stipulation and Order. In essence, the Hold Separate 
Stipulation and Order would require Earthgrains to maintain certain 
bread brands, and associated production and distribution assets, as 
economically viable, ongoing concerns, operated independently of 
Earthgrains' other businesses until the divestitures mandated by the 
Final Judgment have been accomplished.
    The proposed Final Judgment orders defendants to divest to one or 
more acquirers the Colonial and Taystee labels of white pan bread for 
use in each of the affected markets, including all of the cities and 
counties identified in the proposed Final Judgment. See Final Judgment, 
Sec. II (H). Because an acquirer may require other assets in order to 
compete effectively and viably in the sale of white pan bread in the 
affected areas, under the Final Judgment the United States may, in its 
sole discretion, require the divestiture of additional assets, 
including (a) Earthgrains' Des Moines, IA bakery; (b) a license to 
produce buns, rolls and any other bread under the Colonial and Taystee 
labels; (c) Earthgrains' and Metz's bread routes, trucks, and customer 
lists; and (d) other ancillary assets currently used by Eathgrains and 
Metz in the production, distribution and sale of white pan bread under 
the Colonial or Taystee labels. Defendants must complete these 
divestitures within 90 days after filing of the Complaint,\1\ or five 
days after entry of the Final Judgment, whichever is later. If they do 
not complete the divestitures within the prescribed time, the Court may 
appoint a trustee to see the assets.
---------------------------------------------------------------------------

    \1\ The Complaitn was filed on march 20, 2000.
---------------------------------------------------------------------------

    The United States and defendants have stipulated that the proposed 
Final Judgment may be entered after compliance with the APPA. Entry of 
the proposed Final Judgment would terminate this action, except that 
the Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. Description of the Events Giving Rise to the Alleged Violation

A. The Defendants and the Proposed Transaction
    1. Earthgrains. Earthgrains, based in St. Louis, Missouri, is the 
nation's second largest wholesale commercial baker. It operates a total 
of 43 commercial bakeries throughout the United States, though its 
bread production and sales are concentrated primarily in the South and 
Midwest. In 1999, Earthgrains reported sales of $1.93 billion.\2\
---------------------------------------------------------------------------

    \2\ The Complaint inaccurately alleges that Earthgrains operates 
28 commercial bakeries and reported sales of $1.6 billion in 1999. 
It, in fact, operated 43 commercial bakeries and reported $1.93 
million in annual sales.
---------------------------------------------------------------------------

    2. Specialty Foods and Metz. Specialty Foods Corporation is a 
privately held concern that owns several baking operations, including 
Metz. Metz, based in Deerfield, Illinois, is one of the largest 
regional wholesale commercial bakers. It produces and sells white pan 
bread throughout the Midwest, primarily in Colorado, Illinois, Iowa, 
Kansas, Michigan, Minnesota, Missouri, Nebraska, Utah, and Wisconsin. 
In 1999, Metz's total revenue exceeded $600 million.
    3. The proposed transaction. On November 15, 1999, Earthgrains 
agreed to acquire Metz from Specialty Foods for about $625 million. 
This proposed

[[Page 21025]]

transaction, which would combine Earhtgrains and Metz and substantially 
lessen competition in the sale of white pan bread in many areas of the 
Midwest, precipitated the government's antitrust suit.
B. The Bread Industry and the Competitive Effects of the Transaction
    1. White pan bread. White pan bread describes the ubiquitous, 
white, sliced, soft loaf known to most consumers as ``plain old white 
bread.'' An American household staple, typically used for sandwiches, 
white pan bread is sold in the commercial bread aisle of every grocery 
store, as well as many other retail stores. White pan bread differs 
significantly from other types of bread, such as variety bread (e.g., 
wheat, rye or French) and freshly baked in-store breads, in taste, 
texture, uses, perceived nutritional value, keeping qualities, and 
appeal to various groups of consumers. Families with young children, 
for instance, strongly prefer to purchase white pan bread because 
children prefer this bread.
    Because of its unique appeal and distinguishing attributes, a small 
but significant increase in the price of white pan bread by all 
producers would not cause a significant number of current purchasers to 
substitute any other type of breads, or for that matter, any other 
product. The sale of white pan bread to consumers through retailers is, 
therefore, a relevant product market in which to assess the competitive 
effects of the acquisition.
    White pan bread is mass produced on high-speed production lines by 
wholesale commercial bakers, who package and sell it to retailers under 
either their own brand or a private label (i.e., a brand controlled by 
a grocery chain or buying cooperative). Though physically similar to 
private label brand, branded white pan bread is perceived by consumers 
as higher quality bread; consequently, consumers often pay a premium of 
twice as much or more for branded white pan bread.
    The Complaint alleges that the provision of white pan bread through 
retail outlets takes place in highly localized geographic markets. The 
high transportation costs, short shelf life, and extensive bakery 
control over the sale of their branded white bread products all make it 
very expensive and difficult for retail stores and consumers to 
purchase white pan bread from bakers that are not local market 
incumbents.
    2. Competition between Earthgrains and Metz in the sale of white 
pan bread. Earthgrains and Metz compete directly in producing, 
promoting, and selling both private label and branded white pan bread 
to grocery retailers, who in turn sell it to consumers. In the relevant 
areas alleged in the Complaint, Earthgrains sells two brands of white 
pan bread, either IronKids and Colonial or IronKids and Rainbo, and 
Metz sells two brands of white pan bread, either Pillsbury and Old Home 
or Pillsbury and Taystee.
    Earthgrains and Metz recognize the keen rivalry between their bread 
products in the relevant geographic markets. To avoid losing sales to 
the other, each has engaged in extensive promotional and couponing 
campaigns that reduce the prices charged for their branded white pan 
breads to the benefit of retailers and consumers. Each also competed 
against the other in pricing and in improving the quality and services 
offered in connection with both branded and private label white pan 
bread. Through these activities, Earthgrains and Metz have each 
operated as a significant competitive constraint on the other's prices 
for branded and private label white pan bread.
    3. Anticompetitive consequences of the acquisition. The Complaint 
alleges that Earthgrains's acquisition of Metz would remove the 
competitive constraint each has had on the other, and create (or 
facilitate Earthgrains's exercise of) market power (i.e., the ability 
to increase prices to consumers) in a number of relevant geographic 
markets throughout the Midwest, including Kansas City, Missouri; Omaha, 
Nebraska; and Des Moines, Iowa metropolitan areas; and in many smaller 
communities in Illinois, Iowa, Kansas, Missouri and Nebraska.
    Specifically, the Complaint alleges that in each of the markets, 
Earthgrains and Metz are two of only a few significant competitors. The 
acquisition would increase concentration significantly in these already 
highly concentrated, difficult-to-enter markets.\3\ Post-acquisition, 
Earthgrains would dominate each market, accounting for at least 58 
percent of all sales of white pan bread in the Omaha market, at least 
52 percent in the Kansas City market, about 56 percent in the Des 
Moines market, and likely half or more of all sales of white pan bread 
in many smaller communities in Iowa, western Illinois, northeastern 
Kansas, northwestern Missouri, and eastern Nebraska. Moreover, after 
the merger, Earthgrains and only one or two other competitors would 
control more than 90 percent of annual sales revenues of white pan 
bread in these areas.
---------------------------------------------------------------------------

    \3\ The Herfindahl-Hirschman Index (``HHI'') is a widely-used 
measure of market concentration. Following the acquisition, the 
approximate post-merger HHIs, calculated from 1999 dollar sales, 
would be about 3800 with a change of 875 points for the Omaha area; 
3400 with a change of 1378 points for the Kansas City area; and 3500 
with a change of 1530 points for the Des Moines area. Under the 
Merger Guidelines, an acquisition that increases the HHI by 50 
points or more in a market in which the post-merger HHI will exceed 
1800 points may raise serious competitive concerns.
---------------------------------------------------------------------------

    The Complaint alleges that Earthgrains's acquisition of Metz in 
each of these markets would cause a substantial reduction in 
competition either from an increased likelihood of coordinated pricing 
that would result from the elimination of a significant competitor, 
Metz, or from the likelihood that Earthgrains will acquire the power to 
unilaterally increase prices to consumers for branded white pan bread 
after the merger. In both instances, the merger is likely to lead to 
higher prices to consumers who purchase white pan bread through retail 
outlets in the relevant areas.
    The Complaint alleges that entry by other wholesale commercial 
bakers into the sale of white pan bread in any of the adversely 
affected geographic markets is time-consuming, expensive and difficult, 
and hence, unlikely to soon counteract these anticompetitive effects.

III. Explanation of the Proposed Final Judgment

    The proposed Final Judgment would preserve competition in the sale 
of white pan bread in each of the relevant geographic markets. Within 
90 days after March 20th, the date the Complaint was filed, or five 
days after entry of the Final Judgment, whichever is later, defendants 
must divest two of their popular white pan bread brands, the Colonial 
and Taystee labels, \4\ and such other production and distribution 
assets that the United States determines may be necessary to create an 
economically viable competitor in the sale of white pan bread in each 
geographic market.\5\ It may well be that the sale to an

[[Page 21026]]

existing wholesale baker of exclusive rights to make and sell white pan 
bread under either the Colonial and Taystee labels is all that is 
required to accomplish this goal. Depending on the acquirer's 
requirements, however, effective divestiture may require the sale other 
assets such as Earthgrain's Des Moines, IA bakery, which currently 
services the relevant areas; a license to sell buns, rolls, or other 
bread under the Colonial and Taystee labels; and the bread routes, 
trucks, thrift stores, depots, warehouses, customers contracts and 
lists used by Earthgrains and Metz in production, distribution, and 
sale of white pan bread under the Colonial and Taystee labels. 
Defendants must use their best efforts to accomplish the divestitures 
as expeditiously as possible. The proposed Final Judgment provides that 
the assets must be divested in such a way as to satisfy the United 
States, in its sole discretion, that the assets can and will be used by 
the acquirer as part of a viable, ongoing business or businesses 
engaged in the sale of white pan bread in the geographic areas covered 
by the Final Judgment.\6\
    If defendants do not accomplish the ordered divestitures within the 
prescribed time period, the proposed Final Judgment provides that the 
Court will appoint a trustee to complete the divestitures. If a trustee 
is appointed, the proposed Final Judgment provides that defendants must 
pay all costs and expenses of the trustee. The trustee's commission 
will be structured so as to provide an incentive for the trustee based 
on the price obtained and the speed with which divestiture is 
accomplished. After his or her appointment becomes effective, the 
trustee will file periodic, biweekly reports with the parties and the 
Court, setting forth the trustee's efforts to accomplish the required 
divestiture. At the end of six months, if the divestiture has not been 
accomplished, then the trustee and the parties will make 
recommendations to the Court, which shall enter such orders as 
appropriate.
    The relief in the Final Judgment has been tailored to ensure that 
the ordered divestitures maintain competition that would have been 
eliminated as a result of the merger and prevent the exercise of market 
power after the merger in each of the various markets alleged in the 
Complaint.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
16(a), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against defendant.
---------------------------------------------------------------------------

    \4\ As defined in the Final Judgment, a ``label'' ``means all 
legal rights associated with a brand's trademarks, trade names, 
service names, service marks, intellectual property, copyrights, 
designs, and trade dress; the brand's trade secrets; the brand's 
technical information and production known-how, including, but not 
limited to, recipes and formulas used to produce bread currently 
sold under the brand, and any improvements to, or line extensions 
thereof; and packaging, marketing and distribution know-how and 
documentation, such as customer lists and route maps, associated 
with the brand.'' Final Judgment, Sec. II(F). Divesting a label 
would require defendants to grant, at a minimum, ``[a] perpetual, 
royal-free, freely assignable and transferrable, and executive 
license to make, have made, use or sell white pan bread in the 
Relevant Territory under each of the Relevant Labels.'' Id., 
Sec. II(D)(1).
    \5\ These assets are defined in the Final Judgment as the 
``Additional Baking Assets.'' See Final Judgment, Sec. II(E).
    \6\ These areas, listed in the ``Relevant Territory'' definition 
of the Final Judgment, Sec. II(H), include a number of cities and 
counties in Illinois, Iowa, Kansas, Missouri and Nebraska.
---------------------------------------------------------------------------

V. Procedures Available for Modification of the Proposed Final Judgment

    The parties have stipulated that the proposed Final Judgment may be 
entered by the Court after compliance with the provisions of the APPA, 
provided that the United States has not withdrawn its consent. The APPA 
conditions entry of the decree upon the Court's determination that the 
proposed Final Judgment is in the public interest.
    The APPA provides a period of at least 60 days preceding the 
effective date of the proposed Final Judgment within which any person 
may submit to the United States written comments regarding the proposed 
Final judgment. Any person who wishes to comments should do so within 
sixty (60) days of the date of publication of this Competitive Impact 
Statement in the Federal Register. The United States will evaluate and 
respond to the comments. All comments will be given due consideration 
by the Department of Justice, which remains free to withdraw its 
consent to the proposed Judgment at any time prior to entry. The 
comments and the response of the United States will be filed with the 
Court and published in the Federal Register. Written comments should be 
submitted to: J. Robert Kramer II, Chief, Litigation II Section, 
Antitrust Division, United States Department of Justice, 1401 H Street, 
NW, Suite 3000, Washington, DC 20530.
    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to The Proposed Final Judgment,

    The United States considered, as an alternative to the proposed 
Final Judgment a full trial on the merits against defendants 
Earthgrains, Specialty Foods and Metz. The United States could have 
continued the litigation to seek preliminary and permanent injunctions 
against Earthgrains's acquisition of Metz. The United States is 
satisfied, however, that defendants' divestiture of the assets 
described in the proposed Final Judgment will establish, preserve and 
ensure a viable competitor in each of the relevant markets identified 
by the United States. To this end, the United States is convinced that 
the proposed relief, once implemented by the Court, will prevent 
Earthgrains's acquisition of Metz from having adverse competitive 
effects.

VII. Standard of Review Under the APPA for Proposed Final Judgment

    The APPA requires the proposed consent judgments in antitrust cases 
brought by the United States be subject to a sixty-day comment period, 
after which the court shall determine whether entry of the proposed 
Final Judgment ``is in the public interest.'' In making that 
determination, the court may consider--
    (1) The competitive impact of such judgment, including termination 
of alleged violations, provisions for enforcement and modification, 
duration or relief sought, anticipated effects of alternative remedies 
actually considered, and any other considerations bearing upon the 
adequacy of such judgment;
    (2) The impact of entry of such judgment upon the public generally 
and individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if any, 
to be derived from a determination of the issues at trial.

15 U.S.C. 16(e) (emphasis added). As the Court of Appeals for the 
District of Columbia Circuit has held, the APPA permits a court to 
consider, among other things, the relationship between the remedy 
secured and the specific allegations set forth in the government's 
complaint, whether the decree is sufficiently clear, whether 
enforcement mechanisms are sufficient, and whether the decree may 
positively harm third parties. See United States v. Microsoft Corp., 56 
F.3d 1448, 1458-62 (D.C. Cir. 1995).
    In conducting this inquiry, ``the Court is nowhere compelled to go 
to trial or to engage in extended proceedings which might have the 
effect of vitiating the benefits of prompt and less costly

[[Page 21027]]

settlement through the consent decree process.'' \7\ Rather,
---------------------------------------------------------------------------

    \7\ 119 Cong. Rec. 24598 (1973). See United States v. Gillette 
Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public interest'' 
determination can be made properly on the basis of the Competitive 
Impact Statement and Response to Comments filed pursuant to the 
APPA. Although the APPA authorizes the use of additional procedures, 
15 U.S.C. Sec. 16(f), those procedures are discretionary. A court 
need not invoke any of them unless it believes that the comments 
have raised significant issues and that further proceedings would 
aid the court in resolving those issues. See H.R. 93-1463, 93rd 
Cong. 2d Sess. 8-9, reprinted in (1974) U.S.C.C. A.N. 6535, 6538.

absent a showing of corrupt failure of the government to discharge its 
duty, the Court, in making its public interest finding, should * * * 
carefully consider the explanations of the government in the 
competitive impact statement and its responses to comments in order to 
determine whether those explanations are reasonable under the 
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circumstances.

United States v. Mid-America Dairymen, Inc., 1977-1 Trade Cas. (CCH) 
para. 61,508, at 71,980 (W.D.Mo. 1977).
    Accordingly, with respect to the adequacy of the relief secured by 
the decree, a court may not ``engage in an unrestricted evaluation of 
what relief would best serve the public'' United States v. BNS, Inc., 
858 F.2d 456, 462 (9th Cir. 1988), quoting United States v. Bechtel 
Corp., 648 F.2d 660, 666 (9th Cir.), cert. denied, 454 U.S. 1083 
(1981); see also Microsoft, 56 F.3d 1448 (D.C. Cir. 1995). Precedent 
requires that the balancing of competing social and political interests 
affected by a proposed antitrust consent decree must be left, in the 
first instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to the 
decree. The court is required to determine not whether a particular 
decree is the one that will best serve society, but whether the 
settlement is ``within the reaches of the public interest.'' More 
elaborate requirements might undermine the effectiveness of antitrust 
enforcement by consent decree.\8\
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    \8\ United States v. Bechtel Corp., 648 F.2d at 666 (citations 
omitted) (emphasis added); see United States v. BNS, Inc., 858 F.2d 
at 463; United States v. National Broadcasting Co., 449 F. Supp. 
1127, 1143 (C.D. Cal. 1978); United States v. Gillette Co., 406 F. 
Supp. at 716. See also United States v. American Cyanamid Co., 719 
F.2d 558, 565 (2d Cir. 1983), cert. denied, 465 U.S. 1101 (1984).
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    The proposed Final Judgment, therefore, should not be reviewed 
under a standard of whether it is certain to eliminate every 
anticompetitive effect of a particular practice or whether it mandates 
certainty of free competition in the future. Court approval of a final 
judgment requires a standard more flexible and less strict than the 
standard required for a finding of liability. ``[A] proposed decree 
must be approved even if it falls short of the remedy the court would 
impose on its own, as long as it falls within the range of 
acceptability or is `within the reaches of public interest' (citations 
omitted).'' \9\
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    \9\ United States v. American Tel. and Tel. Co., 552 F. Supp. 
131, 150 (D.D.C. 1982), aff'd sub nom. Maryland v. United States, 
460 U.S. 1001 (1983) quoting United States v. Gillette Co., supra, 
406 F. Supp. at 716; United States v. Alcan Aluminum, Ltd., 605 F. 
Supp. 619, 622 (W.D. Ky. 1985).
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    Moreover, the court's role under the Tunney Act is limited to 
reviewing the remedy in relationship to the violations that the United 
States has alleged in its complaint, and does not authorize the Court 
to ``construct [its] own hypothetical case and then evaluate the decree 
against that case,'' Microsoft, 56 F.3d at 1459. Since ``[t]he court's 
authority to review the decree depends entirely on the government's 
exercising its prosecutorial discretion by bringing a case in the first 
place,'' it follows that the court ``is only authorized to review the 
decree itself,'' and not to ``effectively redraft the complaint'' to 
inquire into other matters that the United States might have but did 
not pursue. Id.

VIII. Determinative Documents

    There is a single determinative document within the meaning of the 
APPA that was considered by the United States in formulating the 
proposed Final Judgment. That document, a letter dated March 17, 2000 
from Kim Murphy, an attorney at Interstate Brands Corporation 
(``IBC''), to David Groce, General Counsel of Earthgrains, is attached 
to the Final Judgment as Appendix A. (A copy of this letter is 
reproduced in the attached Appendix). Although defendants proposed 
licensing the Taystee label as a step toward alleviating the 
competitive harm, Metz's license rights to that label were subject to 
the approval of the original licensee, IBC. Defendants subsequently 
secured assurances from IBC that it would permit the Taystee label to 
be licensed to an acquirer acceptable to the United States under the 
terms of the Final Judgment. Divestiture of the Taystee label became 
acceptable to the United States only after it had received that written 
assurance.

    Dated: April 7, 2000.

    Respectfully submitted,
Anthony E. Harris, Illinois Bar #1133713.
U.S. Department of Justice, 1401 H Street, NW, Suite 3000, Washington, 
DC 20530, (202) 307-6583.

Certificate of Service

    I hereby certify that on April 7, 2000, I caused a copy of the 
foregoing Competitive Impact Statement to be served by causing the 
pleading to be mailed first-class, postage prepaid, to a duly 
authorized legal representative of each of the defendants, as follows:

The Earthgrains Company

Roxann E. Henry, Esquire, Howrey Simon Arnold & White, 1299 
Pennsylvania Avenue, NW, Washington, DC 20004

Specialty Foods Corporation and Metz Holdings, Inc.

David E. Schreibman, Esquire, Vice President, Secretary and General 
Counsel, Specialty Foods Corporation, 520 Lake Cook Road, Deerfield, IL 
60015.
Anthony E. Harris, (IL Bar #1133713).
[FR Doc. 00-9747 Filed 4-18-00; 8:45 am]
BILLING CODE 4410-11-M