[Federal Register Volume 78, Number 250 (Monday, December 30, 2013)]
[Notices]
[Pages 79451-79454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31153]
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FEDERAL TRADE COMMISSION
[File No. 131 0163]
Service Corporation International, and Stewart Enterprises, Inc.;
Analysis of Agreement Containing Consent Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis of
Agreement Containing Consent Orders to Aid Public Comment describes
both the allegations in the draft complaint and the terms of the
consent orders--embodied in the consent agreement--that would settle
these allegations.
DATES: Comments must be received on or before January 22, 2014.
ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/scistewartconsent online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Service Corporation
International and Stewart Enterprises, Inc.--Consent Agreement; File
No. 131 0163'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/scistewartconsent by following the
instructions on the web-based form. If you prefer to file your comment
on paper, mail or deliver your comment to the following address:
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Jill Frumin, Bureau of Competition,
(202-326-2758), 600 Pennsylvania Avenue NW., Washington, DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of thirty (30) days. The
following Analysis to Aid Public Comment describes the terms of the
consent agreement, and the allegations in the complaint. An electronic
copy of the full text of the consent agreement package can be obtained
from the FTC Home Page (for December 23, 2013), on the World Wide Web,
at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained
from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue
NW., Washington, DC 20580, either in person or by calling (202) 326-
2222.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before January 22,
2014. Write ``Service Corporation International and Stewart
Enterprises, Inc.--Consent Agreement; File No. 131 0163'' on your
comment. Your comment--including your name and your state--will be
placed on the public record of this proceeding, including, to the
extent practicable, on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the
Commission tries to remove individuals' home contact information from
comments before placing them on the Commission Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which . . . is privileged or confidential,'' as discussed in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/scistewartconsent by following the instructions on the web-based
form. If this Notice appears at http://
[[Page 79452]]
www.regulations.gov/!home, you also may file a comment through
that Web site.
If you file your comment on paper, write ``Service Corporation
International and Stewart Enterprises, Inc.--Consent Agreement; File
No. 131 0163'' on your comment and on the envelope, and mail or deliver
it to the following address: Federal Trade Commission, Office of the
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW.,
Washington, DC 20580. If possible, submit your paper comment to the
Commission by courier or overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before January 22, 2014. You can find more
information, including routine uses permitted by the Privacy Act, in
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted for
public comment, subject to final approval, an Agreement Containing
Consent Orders (``Consent Agreement'') from Service Corporation
International (``SCI'') and Stewart Enterprises, Inc. (``Stewart'').
The purpose of the proposed Consent Agreement is to remedy the
anticompetitive effects that would otherwise result from SCI's
acquisition of Stewart. Under the terms of the proposed Consent
Agreement, SCI and Stewart are required to divest 53 funeral homes in
29 local funeral services markets and 38 cemeteries in 30 local
cemetery markets to acquirers who receive the approval of the
Commission. The proposed Consent Agreement also requires SCI and
Stewart to divest all related assets and real property necessary to
ensure that the buyer(s) of the divested facilities will be able to
quickly and fully replicate the competition that would have been
eliminated by the merger. Finally, the Commission, SCI, and Stewart
have agreed to an Order to Hold Separate and Maintain Assets (``Hold
Separate Order'') that requires SCI and Stewart to maintain and hold
separate certain facilities to be divested pending their final
divestiture pursuant to the Consent Agreement.
The proposed Consent Agreement has been placed on the public record
for thirty days (``Public Comment Period''). During this period,
interested persons can review the proposed Consent Agreement and file
comments with respect to the competitive effects of the Merger and the
proposed remedy. At the end of the Public Comment Period, the
Commission will review and afford appropriate consideration to all
comments filed. The Commission may then determine whether to modify the
proposed Consent Agreement, issue the Consent Agreement as final
without modifications, or withdraw the Consent Agreement in its
entirety.
On May 29, 2013, SCI and Stewart executed a definitive merger
agreement pursuant to which SCI agreed to acquire Stewart in an all-
cash transaction valued at approximately $1.4 billion (the ``Merger'').
The Commission's complaint alleges that the proposed Merger, if
consummated, would violate Section 7 of the Clayton Act, as amended, 15
U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as
amended, 15 U.S.C. 45, removing an actual, direct, and substantial
competitor from 29 funeral services markets, and 30 cemetery services
markets. The proposed Consent Agreement would remedy the alleged
violations by requiring divestitures to replace the competition that
otherwise would be lost in these markets as a result of the Merger.
II. The Parties
SCI is the largest funeral and cemetery services provider in North
America. SCI owns and operates more than 1,449 funeral-services
locations and 374 cemeteries (including 213 combined funeral-services/
cemetery locations), and 100 crematories in 44 states and the District
of Columbia. SCI's 2012 revenue from all operations totaled
approximately $2.41 billion.
Stewart is the second largest funeral and cemetery services
provider in the United States. Stewart owns and operates 217 funeral
homes and 141 cemeteries in 24 states and Puerto Rico. For the 12
months ending October 31, 2013, Stewart's total revenues were
approximately $524.1 million.
III. Funeral and Cemetery Services
SCI's proposed acquisition of Stewart presents substantial
antitrust concerns in two relevant product markets: (1) Funeral
services; and (2) cemetery services. Funeral services include all
activities relating to the promotion, marketing, sale, and provision of
funeral services and goods, including, but not limited to, goods and
services used to remove, care for, and prepare bodies for burial.
Funeral services do not include cremation services because consumers
generally do not substitute cremation services for burial services
based upon price. Since many consumers primarily choose their final
disposition based on their personal or religious views, these consumers
do not view cremation services as a viable substitute for funeral
services. Thus, a hypothetical monopolist of funeral services could
profitably impose a small but significant and non-transitory increase
in price (``SSNIP'') because most consumers would not switch to
cremation services. Further, the competitive conditions for cremation
services are substantially different than for funeral services.
Cemetery services include all activities relating to the promotion,
marketing, sale, and provision of property, goods, and services to
provide for the disposition of human remains in a cemetery, whether by
burial, entombment in a mausoleum or crypt, disposition in a niche, or
scattering cremated remains on cemetery grounds.
In some local markets, certain funeral-service and cemetery-service
locations cater to specific populations by focusing on the customs and
rituals associated with one or more religious, ethnic, or cultural
heritage groups. In such situations, the provision of funeral or
cemetery services targeted to such populations may constitute distinct
and relevant product markets. Thus, in Los Angeles, California, for
example, the provision of funeral services to Catholic consumers
constitutes a relevant product market in which to analyze the
competitive effects of the Merger. Likewise, in South Dallas, Texas,
the provision of cemetery services to the African-American community
constitutes a relevant product market in which to analyze the
competitive effects of the Merger.
The 29 funeral services markets and 30 cemetery services markets at
issue in this transaction are relatively local in nature. Indeed, data
analysis and evidence gathered from market participants indicate that
purchasers of both ``preneed'' and ``atneed'' funeral and cemetery
services typically choose a local funeral home or cemetery in order to
make the memorial service, burial, and subsequent visitation more
convenient.
The 29 geographic markets in which to analyze the effects of the
Merger with respect to funeral services are: (1) Mobile, Alabama; (2)
Auburn, California; (3) East Los Angeles County, California (Catholic);
(4) Los Angeles (Long Beach), California (Catholic); (5) Los Angeles
(San Fernando Valley),
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California (Catholic); (6) Palmdale/Lancaster, California; (7) Northern
San Diego, California; (8) Southern and Eastern San Diego, California;
(9) Clearwater, Florida; (10) Jacksonville, Florida; (11) Miami-Dade
County (Homestead), Florida; (12) Miami-Dade County (Miami), Florida;
(13) Ocala, Florida; (14) Orlando, Florida; (15) Port St. Lucie,
Florida; (16) Tampa, Florida (Hispanic); (17) Overland Park, Kansas;
(18) South Kansas City, Kansas/Missouri; (19) New Orleans, Louisiana;
(20) West Jackson, Mississippi; (21) North Kansas City, Missouri; (22)
New Bern, North Carolina; (23) Raleigh, North Carolina; (24) Columbia,
South Carolina; (25) Nashville, Tennessee; (26) Dallas, Texas; (27)
Southeast Fort Worth, Texas; (28) Arlington-Alexandria, Virginia; and
(29) Washington, DC/Maryland suburbs (Jewish).
The 30 geographic markets in which to analyze the effects of the
Merger with respect to cemetery services are: (1) South San Diego,
California; (2) Jacksonville, Florida; (3) Miami-Dade County, Florida;
(4) Ocala, Florida; (5) West Orlando, Florida; (6) Port St. Lucie,
Florida; (7) Spring Hill/Hudson, Florida; (8) St. Petersburg/Largo,
Florida; (9) Tampa, Florida; (10) Atlanta (Cobb County), Georgia; (11)
Atlanta (Fairburn/College Park), Georgia; (12) Atlanta (Henry County),
Georgia; (13) New Orleans, Louisiana; (14) Annapolis, Maryland; (15)
Baltimore, Maryland; (16) North Kansas City, Missouri; (17) South
Kansas City, Kansas/Missouri; (18) High Point, North Carolina; (19)
Raleigh, North Carolina; (20) Philadelphia, Pennsylvania; (21)
Greenville, South Carolina; (22) Kingsport, Tennessee; (23) Knoxville,
Tennessee; (24) Dallas, Texas; (25) South Dallas, Texas (African
American); (26) Southeast Fort Worth, Texas; (27) Houston, Texas; (28)
Northwest Richmond, Virginia; (29) South Richmond, Virginia; and (30)
Kearneysville, West Virginia.
Each of the relevant funeral and cemetery services markets is
highly concentrated, and the proposed Merger would significantly
increase market concentration and eliminate substantial direct
competition between two significant funeral and cemetery services
providers. Under the Herfindahl-Hirschman Index (``HHI''), which is the
standard measure of market concentration under the 2010 Department of
Justice and Federal Trade Commission Merger Guidelines, an acquisition
is presumed to create or enhance market power or facilitate its
exercise if it increases by more than 200 points and results in a post-
acquisition HHI that exceeds 2,500 points. SCI's merger with Stewart
creates market concentration levels well in excess of these thresholds
in the local markets listed above.
The anticompetitive implications of such significant increases are
reinforced by evidence of intense head-to-head competition that would
be eliminated by the proposed Merger. This competition between SCI and
Stewart benefits consumers in the form of lower prices, improved
products, and better service. Left unremedied, the proposed Merger
likely would cause anticompetitive harm by enabling SCI to profit by
unilaterally raising the prices of funeral and cemetery services, as
well as reducing its incentive to improve quality and provide better
service.
The high levels of concentration also increase the likelihood of
competitive harm through coordinated interaction. In several funeral
and cemetery services markets, coordinated interaction or tacit
collusion may be likely due to the transparency of important
competitive information, high concentration, and relatively small
number of competitors.
New entry is unlikely to deter or counteract the anticompetitive
effects of the proposed Merger. Among other entry barriers, both
heritage (the consumer's tendency to use the same funeral home or
cemetery for multiple generations) and reputation pose substantial
barriers to entrants attempting to establish new funeral-services
locations. The availability of suitable land and local zoning, health,
and environmental regulations significantly hinder the ability of firms
to enter into new cemetery-services locations. As a result, new entry
sufficient to achieve a significant market impact is unlikely to occur.
IV. The Proposed Consent Agreement
The proposed Consent Agreement remedies completely the
anticompetitive effects of the Merger by requiring the divestiture of
SCI or Stewart funeral homes, cemeteries, and related assets in each
relevant geographic market to a Commission-approved buyer (or buyers)
within 180 days of SCI acquiring Stewart. Specifically, the proposed
Consent Agreement requires the divestiture of 53 funeral-services
facilities and 38 cemeteries, as well as related equipment, customer
and supplier contracts, commercial trade names, and real property in
the funeral and cemetery services markets at issue in this transaction.
The assets to be divested include all of the associated assets and real
property necessary for a Commission-approved buyer to independently and
effectively operate each facility. See Appendix A to the proposed
Decision and Order for a complete list of the divestiture assets.
The proposed Consent Agreement contains several provisions designed
to ensure that the divestitures are successful. First, the Commission
will evaluate the suitability of the proposed purchasers of the
divested assets to ensure that the competitive environment that would
have existed but for the transaction is replicated by the required
divestitures. If SCI fails to divest the assets within the 180 day time
period to a Commission-approved buyer, the Consent Agreement permits
the Commission to appoint a divestiture trustee to divest the assets.
Second, SCI is required to provide transitional services to the
Commission-approved acquirer. These transitional services will
facilitate a smooth transition of the assets to the acquirer, and
ensure continued and uninterrupted operation of the assets during the
transition. Third, the Consent Agreement requires SCI to remove any
contractual impediments that may deter the current employees of the
divested facilities from accepting offers of employment from any
Commission-approved acquirer and to obtain all consents necessary to
transfer the required assets. The Agreement also appoints a Hold
Separate Trustee to monitor SCI's compliance with the terms of the
Agreement. Finally, the Commission will have an opportunity to review
any attempt by SCI to acquire any funeral or cemetery services asset in
any of the geographic markets at issue, as well as certain markets
where any future acquisition by SCI would likely cause substantial
competitive harm. This prior notice provision has a term of ten years.
The Hold Separate Order requires the parties to maintain the
viability of the divestiture assets as competitive operations until
each facility is transferred to a Commission-approved acquirer. After
SCI acquires Stewart, the Hold Separate Order requires that SCI
segregate the 91 locations to be divested separate and apart from SCI's
own death services business, and maintain these assets as independent
competitive enterprises pending divestiture. To facilitate this
process, the Hold Separate Order allows Paul A. Houston, the proposed
Hold Separate Trustee, to appoint one or more Hold Separate Managers to
assist with the management the daily operations of the held separate
businesses in an effort to ensure competition in the relevant
geographic markets. Additionally, the Hold Separate Order obligates SCI
to provide sufficient working capital to the held
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separate businesses and to provide continued support services as needed
in the interim. Overall, the Hold Separate Order and the Consent
Agreement are designed to safeguard competition in the provision of
death care services in these markets immediately post-acquisition.
The sole purpose of this analysis is to facilitate public comment
on the Consent Agreement. This analysis does not constitute an official
interpretation of the Consent Agreement or modify its terms in any way.
By direction of the Commission.
Janice Podoll Frankle,
Acting Secretary.
[FR Doc. 2013-31153 Filed 12-27-13; 8:45 am]
BILLING CODE 6750-01-P