21018 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Notices

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

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Notices 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

21020 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Notices

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.

lllllllllllllllllllll

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

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Notices 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

21022 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Notices

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

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Notices 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.

21024 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Notices

1The Complaitn was filed on march 20, 2000.

2The 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.

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 lllllll, 2000.

Court approval subject to procedures of the

Antitrust Procedures and Penalties Act, 15

U.S.C. § 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 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 trademark

to any third party approved by DOJ

under the proposed consent decree. Any

final decision concerning whether the

sublicensing of the TAYSTEE

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, § 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.

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. 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

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Notices 21025

3The Herfindahl-Hirschman Index (‘‘HHI’’) is a

widely-used measure of market concentration.

Following the acquisition, the approximate postmerger 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.

4As 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, § 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.,

§ II(D)(1).

5These assets are defined in the Final Judgment

as the ‘‘Additional Baking Assets.’’ See Final

Judgment, § II(E).

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.

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

21026 Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Notices

6These areas, listed in the ‘‘Relevant Territory’’

definition of the Final Judgment, § II(H), include a

number of cities and counties in Illinois, Iowa,

Kansas, Missouri and Nebraska.

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.

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

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / Notices 21027

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. § 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.

8United 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).

9United 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).

settlement through the consent decree

process.’’ 7 Rather,

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 circumstances.

United States v. Mid-America

Dairymen, Inc., 1977–1 Trade Cas.

(CCH) ¶ 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

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

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

DEPARTMENT OF JUSTICE

Antitrust Division

Joint Motion To Modify Final Judgment

and United States’ Memorandum in

Support of Motion To Modify; United

States v. Baroid Corp., et al.

Notice is hereby given that the United

States and Diamond Products

International (‘‘DPI’’) have filed a joint

motion to modify the final judgment

filed in a civil antitrust case, United

States v. Baroid Corpation., et al. Civil

Action No. 93–2621, in the United

States District Court for the District of

Columbia. The Department has

consented to modification of the

Judgment but has reserved the right to

withdraw its consent if it determines

that, based upon comments filed or

other information received, consent to

the modification is not in the public

interest.

This case was filed on December 23,

1993, and alleged that the merger of

Dresser Industries, Inc. (‘‘Dresser’’) and

Baroid Corporation (‘‘Baroid’’) might

substantially lessen competition in the

United States in the manufacture and

sale of two oil field service products,

diamond drill bits and drilling fluids, in

violation of section 7 of the Clayton Act.

The Final Judgment was entered on

April 12, 1994.