Source: http://www.justice.gov/atr/cases/f1000/1017.htm
Timestamp: 2014-03-08 12:02:07
Document Index: 167422538

Matched Legal Cases: ['§ 18', '§ 25', '§ 18', '§ 26', '§ 18', '§ 22', '§ 1331', '§ 18']

Complaint : U.S. and The State of Colorado v. Vail Resorts, Inc., Ralston Resorts, Inc. and Ralston Foods, Inc.
Civil Action No. __________________________________
1401 H Street, N.W., Suite 4000	Washington, D.C. 20530	(202) 307-0001	and
THE STATE OF COLORADO by its Attorney General, Gale A. Norton
(303) 866-4500
Plaintiffs,	v. VAIL RESORTS, INC.,	137 Benchmark Road
(970) 476-5601	RALSTON RESORTS, INC. P. O. Box 38, 22010 U. S. Highway 6
(970) 468-2316
and	RALSTON FOODS, INC.
P. O. Box 618	800 Market Street, Suite 2900	St. Louis, Missouri 63101 (314) 877-7300	Defendants.
The United States of America, acting under the direction of the Attorney
General of the United States, and the State of Colorado, by its Attorney General,
bring this civil action to prevent the proposed acquisition by Vail Resorts, Inc. ("Vail
Resorts") of the ski resort businesses of Ralston Resorts, Inc. ("Ralston Resorts").
1.	Vail Resorts and Ralston Resorts are the two largest owner/operators
of ski resorts in Colorado. This transaction would combine several of the largest ski
resorts in this region. This acquisition would increase substantially the
concentration among ski resorts to which several hundred thousand skiers residing
in Colorado's "Front Range"--the major population areas along Interstate 25--can
practicably go for day or overnight ski trips. 2.	During the 1995-96 ski season, Ralston Resorts accounted for over 26
percent and Vail Resorts accounted for about 12 percent of all Front Range skier
days at those resorts typically used by Colorado Front Range skiers. Together they
would have over 38 percent of the Front Range market. This would be
approximately double the Front Range market share of the next competitor. 3.	Vail Resorts and Ralston Resorts, along with other resorts accessible to
Front Range skiers, compete aggressively for Front Range skiers. The resorts
advertise extensively in a variety of local media targeted to the Front Range
population, including newspapers, radio, television, and direct mail. They compete
for the business of Front Range ski clubs and racing teams. They attend a number
of ski shows around the Front Range at which, among other things, they distribute
or sell loyalty cards offering discounts on lift tickets and ancillary products. In
addition to these loyalty cards, these resorts offer discounted lift tickets to Front
Range customers through a number of other channels including sales in local retail
establishments, newspaper coupons, direct mail, and coupon books. 4.	The proposed merger will end this competition between defendants. As a result, this acquisition threatens to raise the price of, or reduce discounts for,
skiing to Front Range Colorado consumers in violation of Section 7 of the Clayton
Act, 15 U.S.C. § 18.
I. JURISDICTION, VENUE AND STANDING
5.	This action is filed under Section 15 of the Clayton Act, 15 U.S.C. § 25, to prevent and restrain the violation by defendants of Section 7 of the Clayton
Act, 15 U.S.C. § 18. The State of Colorado brings this action under Section 16 of the
Clayton Act, 15 U.S.C. § 26, to prevent and restrain the violations by defendants of
Section 7 of the Clayton Act, 15 U.S.C. § 18. 6.	Vail Resorts and Ralston Resorts each operate three ski resorts. They
make sales and purchases of products and advertising in interstate commerce for
these resorts. The operations of the ski resorts affect and are in the flow of
interstate commerce. The Court has subject matter jurisdiction over this action and
over the defendants pursuant to 15 U.S.C. § 22, and 28 U.S.C. §§ 1331 and 1337. II. DEFENDANTS
7.	Vail Resorts, Inc., a Delaware corporation headquartered in Vail,
Colorado, owns Vail Associates, Inc., which owns and operates three Colorado ski
resorts: Vail, Beaver Creek Resort and Arrowhead Mountain. (Arrowhead
Mountain is operated by Vail Resorts in conjunction with Beaver Creek Resort as a
single resort operation; they will be referred to together as "Beaver Creek.") During
the 1995-96 ski season all Vail resorts accounted for approximately 280,000 Front
Range skier days. This is about a 12 percent share of the Front Range market. Overall, Vail Resorts had over 2.2 million skier days and had revenues of over $140
8.	Ralston Resorts, Inc., a Colorado corporation headquartered in
Keystone, Colorado, also owns three Colorado ski resorts: Keystone, Breckenridge
and Arapahoe Basin. Ralston Resorts is a subsidiary of Ralcorp Holdings, Inc., a
Missouri corporation headquartered in St. Louis, Missouri. Ralston Foods, Inc., a
Nevada corporation, is also a subsidiary of Ralcorp Holdings, Inc. It is
headquartered in Saint Louis, Missouri. During the 1995-96 ski season all Ralston
resorts accounted for approximately 600,000 Front Range skier days, or over 26
percent of the Front Range market. Overall, Ralston Resorts had more than 2.6
million skier days and had revenues of more than $135 million.
9.	Vail Resorts proposes to acquire all of the voting securities of Ralston
Resorts pursuant to the Stock Purchase Agreement among Vail Resorts, Inc.,
Ralston Foods, Inc. and Ralston Resorts, Inc. of July 22, 1996 (the "Stock Purchase
Agreement"). In return, Ralston Foods, Inc. will receive voting securities of Vail
Resorts valued at approximately $145 million. Vail Resorts will also assume or pay
off debt of Ralston Foods amounting to at least $132 million and as much as $165
million under the Stock Purchase Agreement. The total consideration is valued at
approximately $310 million. IV. TRADE AND COMMERCE
10.	The business of ski resorts comprises all services related to providing
access to downhill skiing and snowboarding, including but not limited to providing
lifts, ski patrol, snowmaking, design, building, and grooming of trails, skiing
lessons, and ancillary services such as food service, entertainment and lodging.
11.	Customers of defendants' ski resorts include two types of skiers:
destination skiers and Front Range skiers. Destination skiers come from outside
Colorado. Many come from outside of the United States. These skiers ski for
extended periods of time, typically for a week. Many destination skiers fly to their
ski resort and are usually attracted to the resort by both the mountain and resort
amenities. In contrast, Front Range skiers are day or overnight skiers. As used
here, the term "Front Range" means the geographic area lying just east of the
Rocky Mountains, and including, from north to south, the metropolitan areas of
Fort Collins, Boulder, Denver, Colorado Springs and Pueblo and surrounding
population areas. Most Front Range skiers drive to their ski resort. Front Range
skiers are typically more interested in the mountain and skiing facilities than in the
resort amenities, and are more constrained by distance in choosing among resorts.
12.	The defendants' ski resorts market differently to skiers depending on
whether they are destination or Front Range skiers. These ski resorts advertise
outside the Front Range area of Colorado for destination skiers; for example, in
major metropolitan newspapers and in upscale magazines sold throughout the
United States. In marketing to destination skiers, these resorts emphasize package
pricing, which typically includes one or more of lift tickets, lodging, airfare, and also
emphasize resort amenities as well as mountain features. In contrast, the
defendants' resorts market to the Front Range skier by advertising in the Front
Range, e.g., using direct mail within certain zip codes and local newspapers. Front
Range advertising, in contrast to destination skier advertising, emphasizes discount
prices on lift tickets to the Front Range skier. There is also less emphasis on resort
amenities as opposed to the mountain. 13.	The defendants' ski resorts also use different pricing strategies
depending upon whether they are selling tickets to destination skiers or Front
Range skiers. These resorts sell single-day and multi-day lift tickets through the
resort ticket window to the destination skier. In selling to Front Range skiers,
these ski resorts sell single day lift tickets through off-mountain retailers located
within the Front Range that are discounted below the window lift ticket price. From time to time, these resorts also offer the Front Range skier coupons that
discount off the window ticket price, as well as frequent skier cards that provide
discounts from the window price and may also provide a free day of skiing after a
certain number of paid days of skiing. Promotions are targeted to Front Range
skiers and measures are taken successfully to limit the availability of the
promotions to destination skiers. Consequently, the lift ticket prices defendants
charge to the Front Range skier are different from the prices they charge to the
destination skier.
14.	Downhill skiing differs from all other weekend or one or two day
winter recreational activities, such as cross-country skiing, ice skating, sleigh rides
and tobogganing. A small but significant and nontransitory price increase for
skiing would not cause so many Front Range downhill skiers to substitute other
winter recreational activities for skiing that the price increase would be
unprofitable. 15.	Most Front Range skiers limit the resorts they use for day trips to
those which fall within a radius of about two and one half-hour travel time from
where they live, and a somewhat larger radius for overnight trips. The most
important of these resorts are located off Interstate 70 west of Denver. The Vail
resorts and Ralston resorts fall within this range. 16.	Front Range skiers would not turn to resorts that fall outside of this
range in sufficient numbers to defeat a small but significant, non-transitory price
increase imposed by resorts within this radius. 17.	The provision of skiing to residents of Colorado's Front Range is a
relevant market (i.e., is a line of commerce and is in a section of the country) within
the meaning of Section 7 of the Clayton Act.
18.	Using a measure of market concentration called the Herfindahl-Hirschman Index ("HHI"), which is defined and explained in Appendix A, a
combination of Vail Resorts and Ralston Resorts would substantially increase
concentration in the market alleged in this complaint.
19.	The post-merger HHI, based on total 1995-96 Front Range skier days,
would be approximately 2,228 with a change in HHI of about 643 points. "Skier
day" means one day or part of a day of skiing. A weekend trip, for instance, is
equivalent to two skier days, assuming the skier skis both days. During the 1995-96 skiing season, Vail Resorts accounted for about 12 percent and Ralston Resorts
over 26 percent of Front Range skier days. If the proposed acquisition were
consummated, the combined company would account for over 38 percent of skier
days in the Front Range market.
20.	Because of such factors as their proximity to the Front Range, the
quality and variety of their terrain, and the number high speed lifts, the Vail and
Ralston resorts are viewed by Front Range skiers as significant alternatives to each
other. Because of the preferences Front Range skiers have for the Vail and Ralston
resorts, a substantial portion of these skiers would continue to ski at these resorts,
even if lift ticket prices at these resorts were increased. 21.	The elimination of the competition between Vail Resorts and Ralston
Resorts resulting from this transaction would reduce competition significantly in
the market for Colorado Front Range skiers. Because the Vail and Ralston resorts
are close competitive alternatives for a substantial number of Front Range skiers,
competition between the resorts limits the ability of each resort to raise prices. This
merger would eliminate the price constraining impact each has on the other. In
particular, the combined Vail and Ralston resorts would be likely to raise prices or
reduce the level of discounts offered to skiers from the Colorado Front Range. In
addition, the transaction would give other ski resorts serving the Front Range the
incentive to raise their lift ticket prices to Front Range skiers following a price
increase at the combined Vail and Ralston resorts. Entry
22.	Successful entry into the skiing business and expansion of existing ski
resorts would be difficult, time consuming, and costly, as well as extremely unlikely. Entry and expansion therefore would not be timely, likely, or sufficient to prevent
any harm to competition.
23.	The effects of the proposed transaction between Vail Resorts and
Ralston Resorts may be to lessen competition substantially and to tend to create a
monopoly in interstate trade and commerce in violation of Section 7 of the Clayton
24.	The transaction would have the following effects, among others:	competition generally in providing skiing to Front Range
Colorado skiers would be lessened substantially;
actual competition between Vail Resorts and Ralston Resorts in
providing skiing to Front Range Colorado skiers would be
discounting to Front Range Colorado skiers by Vail Resorts and
Ralston Resorts would likely be reduced or eliminated; and
prices for skiing to Front Range Colorado skiers would likely increase.
VI. STATUTORY VIOLATIONS
25.	The proposed acquisition will violate Section 7 of the Clayton Act. 15
U.S.C. § 18.
1.	That the defendants' proposed acquisition of the skiing businesses of
Ralston Resorts by Vail Resorts be adjudged to violate Section 7 of the Clayton Act;
2.	That the defendants be permanently enjoined from carrying out the
Stock Purchase Agreement, dated July 22, 1996 or from entering into or carrying
out any agreement, understanding or plan, the effect of which would be to combine
the businesses or assets of Vail Resorts and Ralston Resorts;
3.	That plaintiffs be awarded the costs of this action and plaintiff State of
Colorado its attorneys fees; and
4.	That plaintiffs have such other relief as the Court may deem just and
Dated: January _____, 1997
__________________________________ Joel I. Klein	Acting Assistant Attorney General	Antitrust Division	U. S. Department of Justice	__________________________________ Lawrence R. Fullerton	Deputy Assistant	Attorney General	__________________________________ Charles E. Biggio	Senior Counsel to the
__________________________________ Constance K. Robinson	Director of Operations
__________________________________ Craig W. Conrath	Chief
__________________________________ Reid B. Horwitz	Assistant Chief	__________________________________ John W. Van Lonkhuyzen
Anne M. Purcell*	James K. Foster	Barry L. Creech	John M. Lynch	Susan Wittenberg	Trial Attorneys	/s/ Henry L. Solano
__________________________________ Gale A. Norton
Garth C. Lucero
Jan Michael Zavislan, 11636* First Assistant Attorney General
__________________________________ Maria E. Berkenkotter, 16781*
Litigation Section, Antitrust Unit
* Attorney of Record