[Federal Register Volume 60, Number 29 (Monday, February 13, 1995)]
[Notices]
[Pages 8239-8243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3543]
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FEDERAL TRADE COMMISSION
[File No. 951 0009]
The Penn Traffic Company; Proposed Consent Agreement With
Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
permit, among other things, the Penn Traffic Company to acquire a
number of Acme supermarkets from American Stores Company, but would
require it to divest, to a Commission approved acquirer or acquirers
within twelve months, one supermarket in each of the three Pennsylvania
areas designated (Towanda, Mount Carmel, and Pittston). If the
divestitures were not completed on time, the consent agreement would
permit the Commission to appoint a trustee to complete the
transactions. In addition, the consent agreement would require the
respondent, for ten years, to obtain Commission approval before
acquiring any interest in any entity that owns or operates a
supermarket in any of the three areas designated.
DATES: Comments must be received on or before April 14, 1995.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th Street and Pennsylvania Avenue NW., Washington, D.C.
20580.
FOR FURTHER INFORMATION CONTACT:
Ronald Rowe or Marimichael Skubel, FTC/S-2105, Washington, D.C. 20580.
(202) 326-2610 or 326-2611.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 45 and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the following consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. Public comment is invited. Such
comments or views will be considered by the Commission and will be
available for inspection and copying at its principal office in
accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of
Practice (16 CFR 4.9(b)(6)(ii)).
Agreement Containing Consent Order
The Federal Trade Commission (``Commission'') having initiated an
investigation of The Penn Traffic Company's (``Penn Traffic'') proposed
acquisition of certain assets of American Stores Company (American),
and it now appearing that Penn Traffic hereinafter sometimes referred
to as ``proposed respondent,'' is willing to enter into an agreement
containing an order to divest certain assets and to cease and desist
from certain acts, and providing for other relief,
It is hereby agreed by and among proposed respondent, by its duly
authorized officers and attorneys, and counsel for the Commission that:
1. Proposed respondent The Penn Traffic Company is a corporation
organized, existing, and doing business under and by virtue of the laws
of the State of Delaware, with its office and principal place of
business located at 1200 State Fair Boulevard, Syracuse, New York
13221-4737.
2. Proposed respondent admits all the jurisdictional facts set
forth in the draft of complaint.
3. Proposed respondent waives:
a. any further procedural steps;
b. the requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
c. all rights to seek judicial review or otherwise to challenge or
contest the validity of the order entered pursuant to this agreement;
and
d. any claim under the Equal Access to Justice Act.
4. This agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
agreement is accepted by the Commission it, together with the draft of
complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of this agreement and so notify the proposed respondent, in which event
it will take such action as it may consider appropriate, or issue and
serve its complaint (in such form as the circumstances may require) and
decision, in disposition of the proceeding.
5. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondent that the law has been
violated as alleged in the draft of the complaint, or that the facts as
alleged in the draft complaint, other than jurisdictional facts, are
true.
6. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Section 2.34 of the
Commission's Rules, the Commission may, without further notice to the
proposed respondent, (1) issue its complaint corresponding in form and
substance with the draft of complaint and its decision containing the
following order to divest and to cease and desist in disposition of the
proceeding, and (2) make information public with respect thereto. When
so entered, the order shall have the same force and effect and may be
altered, modified, or set aside in the same time provided by statute
for other orders. The [[Page 8240]] order shall become final upon
service. Delivery by the United States Postal Service of the complaint
and decision containing the agreed-to order to proposed respondent's
address as stated in this Agreement shall constitute service. Proposed
respondent waives any right it may have to any other manner of service.
The complaint may be used in construing the terms of the order, and no
agreement, understanding, representation, or interpretation not
contained in the order or the Agreement may be used to vary or
contradict the terms of the order.
7. Proposed respondent has read the proposed complaint and order
contemplated hereby. Proposed respondent understands that once the
order has been issued, it will be required to file verified written
reports showing that it has fully complied with the order. Proposed
respondent further understands that it may be liable for civil
penalties in the amount provided by law for each violation of the order
after it becomes final.
Order
I
It is ordered that, as used in this order, the following
definitions shall apply:
A. ``Respondent'' or ``Penn Traffic'' means The Penn Traffic
Company, its predecessors, subsidiaries, divisions, and groups and
affiliates controlled by The Penn Traffic Company, their successors and
assigns, and their directors, officers, employees, agents, and
representatives.
B. ``Assets to be divested'' means the assets described in
Paragraph II. A. of this order.
C. ``Commission'' means the Federal Trade Commission.
D. ``Supermarket'' means a full-line retail grocery store that
carries a wide variety of food and grocery items in particular product
categories, including bread and dairy products; refrigerated and frozen
food and beverage products; fresh and prepared meats and poultry;
produce, including fresh fruits and vegetables; shelf-stable food and
beverage products, including canned and other types of packaged
products; staple foodstuffs, which may include salt, sugar, flour,
sauces, spices, coffee, and tea; and other grocery products, including
nonfood items such as soaps, detergents, paper goods, other household
products, and health and beauty aids.
II
It is further ordered that:
A. Respondent shall divest, absolutely and in good faith, within
twelve months from the date this order becomes final:
1. The ``Acme'' supermarket located at River and Park Streets,
Borough of Towanda, Pennsylvania;
2. The ``Acme'' supermarket located on Kennedy Boulevard in
Pittston, Pennsylvania; and
3. An ``Acme'' or a Penn Traffic supermarket located in the
Township of Mount Carmel, Pennsylvania.
The assets to be divested shall include the grocery business
operated, and all assets, leases, properties, business and goodwill,
tangible and intangible, utilized in the distribution or sale of
groceries at the locations that are divested.
B. Respondent shall divest the assets to be divested only to an
acquirer or acquirers that receive the prior approval of the Commission
and only in a manner that receives the prior approval of the
Commission. The purpose of the divestiture is to ensure the
continuation of the assets to be divested as ongoing, viable
enterprises engaged in the supermarket business and to remedy the
lessening of competition resulting from the acquisition as alleged in
the Commission's complaint.
C. Pending divestiture of such assets to be divested, respondent
shall take such actions as are necessary to maintain the viability and
marketability of such assets to be divested and to prevent the
destruction, removal, wasting, deterioration, or impairment of such
assets to be divested except in the ordinary course of business and
except for ordinary wear and tear.
D. Respondent shall comply with all the terms of the Asset
Maintenance Agreement attached to this Order and made a part hereof as
Appendix I. The Asset Maintenance Agreement shall continue in effect
until such time as respondent has divested all of the assets to be
divested.
III
It is further ordered that:
A. If respondent has not divested, absolutely and in good faith and
with the Commission's prior approval, such assets to be divested within
twelve months from the date this order becomes final, the Commission
may appoint a trustee to divest any of the remaining assets to be
divested. In the event that the Commission or the Attorney General
brings an action pursuant to Sec. 5(l) of the Federal Trade Commission
Act, 15 U.S.C. 45(l), or any other statute enforced by the Commission,
respondent shall consent to the appointment of a trustee in such
action. Neither the appointment of a trustee nor a decision not to
appoint a trustee under this Paragraph shall preclude the Commission or
the Attorney General from seeking civil penalties or any other relief
available to it, including a court-appointed trustee, pursuant to
Sec. 5(l) of the Federal Trade Commission Act, or any other statute
enforced by the Commission, for any failure by the respondent to comply
with this order.
B. If a trustee is appointed by the Commission or a court pursuant
to Paragraph III. A. of this order, respondent shall consent to the
following terms and conditions regarding the trustee's powers, duties,
authority, and responsibilities:
1. The Commission shall select the trustee, subject to the consent
of respondent, which consent shall not be unreasonably withheld. The
trustee shall be a person with experience and expertise in acquisitions
and divestitures. If respondent has not opposed, in writing, including
the reasons for opposing, the selection of any proposed trustee within
ten (10) days after written notice by the staff of the Commission to
respondent of the identity of any proposed trustee, respondent shall be
deemed to have consented to the selection of the proposed trustee.
2. Subject to the prior approval of the Commission, the trustee
shall have the exclusive power and authority to divest any of the
remaining assets to be divested.
3. Within ten (10) days after appointment of the trustee,
respondent shall execute a trust agreement that, subject to the prior
approval of the Commission and, in the case of a court-appointed
trustee, of the court, transfers to the trustee all right and powers
necessary to permit the trustee to effect the divestitures required by
this order.
4. The trustee shall have twelve (12) months from the date the
Commission or court approves the trust agreement described in Paragraph
III.B.3. to accomplish the divestitures, which shall be subject to the
prior approval of the Commission. If, however, at the end of the
twelve-month period, the trustee has submitted a plan of divestiture or
believes that divestiture can be achieved within a reasonable time, the
divestiture period may be extended by the Commission, or, in the case
of a court-appointed trustee, by the court; provided, however, the
Commission may extend this 12-month period only two (2) times.
5. The trustee shall have full and complete access to the
personnel, books, records and facilities related to any of the
remaining assets to be divested or to [[Page 8241]] any other relevant
information, as the trustee may request. Respondent shall develop such
financial or other information as such trustee may reasonably request
and shall cooperate with the trustee. Respondent shall take no action
to interfere with or impede the trustee's accomplishment of the
divestitures. Any delays in divestiture caused by respondent shall
extend the time for divestiture under this Paragraph in an amount equal
to the delay, as determined by the Commission or, for a court-appointed
trustee, by the court.
6. The trustee shall use his or her best efforts to negotiate the
most favorable price and terms available in each contract that is
submitted to the Commission, subject to respondent's absolute and
unconditional obligation to divest at no minimum price. The
divestitures shall be made in the manner and to the acquirer or
acquirers as set out in Paragraph II. of this order; provided, however,
if the trustee receives bona fide offers in any of the areas specified
in this order for a supermarket to be divested from more than one
acquiring entity, and if the Commission determines to approve more than
one acquiring entity, the trustee shall divest to the acquiring entity
or entities selected by respondent from among those approved by the
Commission.
7. The trustee shall serve, without bond or other security, at the
cost and expense of respondent, on such reasonable and customary terms
and conditions as the Commission or a court may set. The trustee shall
have the authority to employ, at the cost and expense of respondent,
such consultants, accountants, attorneys, investment bankers, business
brokers, appraisers, and other representatives and assistants as are
necessary to carry out the trustee's duties and responsibilities. The
trustee shall account for all monies derived from the sale and all
expenses incurred. After approval by the Commission and, in the case of
a court-appointed trustee, by the court, of the account of the trustee,
including fees for his or her services, all remaining monies shall be
paid at the direction of the respondent, and the trustee's power shall
be terminated. The trustee's compensation shall be based at least in
significant part on a commission arrangement contingent on the
trustee's divesting the assets to be divested to satisfy Paragraph II.
8. Respondent shall indemnify the trustee and hold the trustee
harmless against any losses, claims, damages, liabilities, or expenses
arising out of, or in connection with, the performance of the trustee's
duties, including all reasonable fees of counsel and other expenses
incurred in connection with the preparation for, or defense of any
claim, whether or not resulting in any liability, except to the extent
that such liabilities, losses, damages, claims, or expenses result from
misfeasance, gross negligence, willful or wanton acts, or bad faith by
the trustee.
9. If the trustee ceases to act or fails to act diligently, a
substitute trustee shall be appointed in the same manner as provided in
Paragraph III. A. of this order.
10. The Commission or, in the case of a court-appointed trustee,
the court, may on its own initiative or at the request of the trustee
issue such additional orders or directions as may be necessary or
appropriate to accomplish the divestiture required by this order.
11. The trustee shall have no obligation or authority to operate or
maintain the assets to be divested.
12. The trustee shall report in writing to respondent and the
Commission every sixty (60) days concerning the trustee's efforts to
accomplish divestiture.
IV
It is furthered ordered that, for a period of ten (10) years from
the date this order becomes final, respondent shall not, without the
prior approval of the Commission, directly or indirectly, through
subsidiaries, partnerships, or otherwise:
A. Acquire any stock, share capital, equity, or other interest in
any supermarket or leasehold interest in any supermarket, including any
facility that has operated as a supermarket within six (6) months of
the date of the proposed acquisition, located in (a) the Towanda,
Pennsylvania area, which includes the Borough of Towanda and the
townships of Wysox, North Towanda, and Monroeton; (b) the Mount Carmel,
Pennsylvania area, which includes the Borough of Mount Carmel and the
Township of Mount Carmel; and (c) the Pittston, Pennsylvania area,
which includes the city of Pittston, the townships of Pittston and
Jenkins, and the boroughs of Dupont, Avoca, Hughestown, Duryea,
Yatesville, and Laflin, Pennsylvania.
B. Acquire any stock, share capital, equity, or other interest in
any entity that owns any interest in or operates any supermarket or
owned any interest in or operated any supermarket within six (6) months
of the date of the proposed acquisition in (a) the Towanda,
Pennsylvania area, which includes the Borough of Towanda and the
townships of Wysox, North Towanda, and Monroeton; (b) the Mount Carmel,
Pennsylvania area, which includes the Borough of Mount Carmel, and the
Township of Mount Carmel; and (c) the Pittston, Pennsylvania area,
which includes the city of Pittston, the townships of Pittston and
Jenkins, and the boroughs of Dupont, Avoca, Hughestown, Duryea,
Yatesville, and Laflin, Pennsylvania.
Provided, however, that these prohibitions shall not apply to the
construction of new facilities or the leasing of facilitates that have
not operated as supermarkets within six months of the date of the offer
to lease.
V
It is further ordered that:
A. Within sixty (60) days after the date this order becomes final
and every sixty (60) days thereafter until respondent has fully
complied with the provisions of Paragraphs II. or III. of this order,
respondent shall submit to the Commission verified written reports
setting forth in detail the manner and form in which it intends to
comply, is complying, and has complied with Paragraphs II. and III. of
this order. Respondent shall include in its compliance reports, among
other things that are required from time to time, a full description of
the efforts being made to comply with Paragraph II. and III. of the
order, including a description of all substantive contacts or
negotiations for the divestiture and the identity of all parties
contacted. Respondent shall include in its compliance reports copies of
all written communications to and from such parties, all internal
memoranda, and all reports and recommendations concerning divestiture.
B. One year (1) from the date this order becomes final, annually
for the next nine (9) years on the anniversary of the date this order
becomes final, and at other times as the Commission may require,
respondent shall file verified written reports with the Commission
setting forth in detail the manner and form in which it has complied
and is complying with this order.
VI
It is further ordered that respondent shall notify the Commission
at least thirty (30) days prior to any proposed change in respondent
such as dissolution, assignment, sale resulting in the emergence of a
successor corporation, or the creation or dissolution of subsidiaries
or any other change in respondent that may affect compliance
obligations arising out of the order. [[Page 8242]]
VII
It is further ordered that, for the purpose of determining or
securing compliance with this order, respondent shall permit any duly
authorized representative of the Commission:
A. Upon reasonable notice to respondent, access, during office
hours and in the presence of counsel, to inspect and copy all books,
ledgers, accounts, correspondence, memoranda and other records and
documents in the possession or under the control of respondent relating
to any matters contained in this order; and
B. Upon reasonable notice to respondent and without restraint or
interference from it, to interview respondent or officers, directors,
or employees of respondent in the presence of counsel.
VIII
It is further ordered that this order shall terminate twenty (20)
years from the date this order becomes final.
Appendix I
Asset Maintenance Agreement
This Asset Maintenance Agreement (``Agreement'') is by and
between The Penn Traffic Company (``Penn Traffic''), a corporation
organized under the laws of the State of Delaware, with its
principal offices located at 1200 State Fair Boulevard, Syracuse,
New York 13221-4737, and the Federal Trade Commission
(``Commission''), an independent agency of the United States
Government, established under the Federal Trade Commission Act of
1914, 15 U.S.C. 41, et seq. (collectively ``the Parties'').
Premises
Whereas, Penn Traffic, pursuant to an agreement dated September
30, 1994, agreed to purchase certain assets of American Stores
Company (hereinafter ``Acquisition''); and
Whereas, the Commission is now investigating the Acquisition to
determine if it would violate any of the statutes enforced by the
Commission; and
Whereas, if the Commission accepts the attached Agreement
Containing Consent Order, the Commission is required to place it on
the public record for a period of sixty (60) days for public comment
and may subsequently withdraw such acceptance pursuant to the
provisions of Sec. 2.34 of the Commission's Rules; and
Whereas, the Commission is concerned that if an agreement is not
reached preserving the status quo ante of the assets to be divested
as described in II. A. of the attached Agreement Containing Consent
Order (``Assets'') during the period prior to their divestiture,
when those Assets will be in the hands of Penn Traffic, that any
divestiture resulting from any administrative proceeding challenging
the legality of the Acquisition might not be possible, or might
produce a less than effective remedy; and
Whereas, the Commission is concerned that prior to divestiture
to the acquirer, it may be necessary to preserve the continued
viability and competitiveness of the Assets; and
Whereas, the purpose of this Agreement and of the Consent Order
is to preserve the Assets pending the divestiture to the acquirer
approved by the Federal Trade Commission under the terms of the
Order, in order to remedy any anticompetitive effects of the
Acquisition; and
Whereas, Penn Traffic entering into this Agreement shall in no
way be construed as an admission by Penn Traffic that the
Acquisition is illegal; and
Whereas, Penn Traffic understands that no act or transaction
contemplated by this Agreement shall be deemed immune or exempt from
the provisions of the antitrust laws, or the Federal Trade
Commission Act by reason of anything contained in this Agreement;
Now, Therefore, in consideration of the Commission's agreement
that, unless the Commission determines to reject the Consent Order,
it will not seek further relief from the parties with respect to the
Acquisition, except that the Commission may exercise any and all
rights to enforce this Agreement and the Consent Order annexed
hereto and made a part thereof, and, in the event the required
divestiture is not accomplished, to appoint a trustee to seek
divestiture of the Assets, the Parties agree as follows:
Terms of Agreement
1. Penn Traffic agrees to execute, and upon its issuance to be
bound by, the attached Consent Order. The Parties further agree that
each term defined in the attached Consent Order shall have the same
meaning in this Agreement.
2. Unless the Commission brings an action to seek to enjoin the
proposed acquisition pursuant to Section 13(b) of the Federal Trade
Commission Act, 15 U.S.C. Sec. 53(b), and obtains a temporary
restraining order or preliminary injunction blocking the proposed
acquisition, Penn Traffic will be free to close the Acquisition
after 11:59 p.m., January 17, 1995.
3. Penn Traffic agrees that from the date this Agreement is
accepted until the earliest of the dates listed in subparagraphs
3.a-3.b it will comply with the provisions of this Agreement:
a. Three business days after the Commission withdraws its
acceptance of the Consent Order pursuant to the provisions of
Section 2.34 of the Commission's Rules; or
b. On the day the divestiture set out in the Consent Order has
been completed.
4. From the time Penn Traffic acquires the Assets until the
divestiture set out in the Consent Order has been completed, Penn
Traffic shall maintain the viability, competitiveness and
marketability of the Assets, and shall not cause the wasting or
deterioration of the Assets, nor shall it sell, transfer, encumber
or otherwise impair their marketability or viability.
5. Should the Commission seek in any proceeding to compel Penn
Traffic to divest itself of the Assets or to seek any other
injunctive or equitable relief, Penn Traffic shall not raise any
objection based upon the expiration of the applicable Hart-Scott-
Rodino Antitrust Improvements Act waiting period or the fact that
the Commission has not sought to enjoin the Acquisition. Penn
Traffic also waives all rights to contest the validity of this
Agreement.
6. For the purpose of determining or securing compliance with
this Agreement, subject to any legally recognized privilege, and
upon written request with reasonable notice to Penn Traffic to its
principal offices, Penn Traffic shall permit any duly authorized
representative or representatives of the Commission:
a. Access during the office hours of Penn Traffic, in the
presence of counsel, to inspect and copy all books, ledgers,
accounts, correspondence, memoranda and other records and documents
in the possession or under the control of Penn Traffic relating to
compliance with this Agreement; and
Upon five (5) days' notice to Penn Traffic and without restraint
or interference from them, to interview officers or employees of
Penn Traffic, who may have counsel present, regarding any such
matters.
7. This agreement shall not be binding until approved by the
Commission.
Analysis To Aid Public Comment on the Provisionally Accepted Consent
Order
The Federal Trade Commission (``the Commission'') has accepted for
public comment from The Penn Traffic Company (``Penn Traffic'') an
agreement containing consent order to divest certain assets. The
agreement is designed to remedy any anticompetitive effect stemming
from Penn Traffic's acquisition of a number of Acme supermarkets from
American Stores Company.
The agreement has been placed on the public record for sixty days
for reception of comments from interested persons. Comments received
during this period will become part of the public record. After 60
days, the Commission will again review the agreement and comments
received and will decide whether it should withdraw from the agreement
or make final the order contained in the agreement.
The Commission's draft complaint charges that on or about September
30, 1994, Penn Traffic agreed to acquire certain assets of Acme
Markets, Inc., wholly-owned subsidiary of American Stores Company, for
$94 million. The Commission has reason to believe that the acquisition,
as well as the agreement to enter into the acquisition, may have
anticompetitive effects and be in violation of Section 7 of the Clayton
Act and Section 5 of the Federal Trade Commission Act.
According to the draft complaint, Penn Traffic and Acme are direct
competitors for the retail sale of food and grocery items in the market
areas of (1) the Towanda, Pennsylvania area, which includes the Borough
of [[Page 8243]] Towanda and the townships of Wysox, North Towanda, and
Monroeton; (2) the Mount Carmel, Pennsylvania area, which includes the
Borough of Mount Carmel and the Township of Mount Carmel; and (3) the
Pittston, Pennsylvania area, which includes the city of Pittston, the
townships of Pittston and Jenkins, and the boroughs of Dupont, Avoca,
Hughestown, Duryea, Yatesville, and Laflin, Pennsylvania. According to
the draft complaint, these markets are highly concentrated and entry is
difficult or unlikely. Penn Traffic's acquisition of Acme may reduce
competition in these markets by eliminating the direct competition
between Penn Traffic and Acme, by increasing the likelihood that Penn
Traffic will become a dominant firm, and by increasing the likelihood
of collusive behavior among the few remaining competitors.
The agreement containing consent order attempts to remedy the
Commission's competitive concerns about the acquisition. Under the
terms of the proposed order, Penn Traffic must divest three
supermarkets within twelve-months, to a purchaser approved by the
Commission. The three stores to be divested include the ``Acme''
supermarket located in Towanda, Pennsylvania, the ``Acme'' supermarket
located in Pittston, Pennsylvania, and either the ``Acme'' or the Penn
Traffic store located in Mount Carmel, Pennsylvania.
For a period of ten years from the date the order becomes final,
the order also prohibits Penn Traffic from acquiring, without prior
Commission approval, stock, or any other interest in any supermarket,
or entity that owns or operates a supermarket, located in the areas of
Towanda, Pittston, or Mount Carmel, Pennsylvania. This prohibition will
not apply to the construction of new facilities or the leasing of
facilities not operated as supermarkets within six months of the offer
to lease.
The purpose of this analysis is to invite public comment concerning
the consent order and any other aspect of this matter. This analysis is
not intended to constitute an official interpretation of the agreement
and order or to modify its terms in any way.
Donald S. Clark,
Secretary.
[FR Doc. 95-3543 Filed 2-10-95; 8:45 am]
BILLING CODE 6750-01-M