[Federal Register Volume 60, Number 157 (Tuesday, August 15, 1995)]
[Notices]
[Pages 42164-42168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-20142]
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FEDERAL TRADE COMMISSION
[File No. 931-0121]
Mustad International Group NV and Mustad Connecticut, Inc.;
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
require a Bulle, Switzerland-based company and its Bloomfield,
Connecticut-based subsidiary to divest assets or technology in its
manufacture and sale of roll horseshoe nails.
DATES: Comments must be received on or before October 16, 1995.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT:
Howard Morse, Bureau of Competition, Federal Trade Commission, S-3627,
6th Street & Pennsylvania Ave. NW., Washington, DC 20580. (202) 326-
2949.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 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 acquisitions by Mustad Connecticut, Inc. (``Mustad
Connecticut'') and Mustad International Group NV (``Mustad Group'') of
the horseshoe nail assets of Capewell Manufacturing Company, the assets
of Cooper Horseshoe Nail Co., Ltd., a majority interest in Emcoclavos
S.A., and the horseshoe nail assets of Sterward Engineering Company,
Ltd., and it now appearing that Mustad Connecticut and Mustad Group,
hereinafter sometimes referred to as ``proposed respondents,'' are
willing to enter into an agreement containing an order to divest
certain assets and to cease and desist from making certain
acquisitions, and providing for other relief.
It is hereby agreed by and between proposed respondents, by their
duly authorized officers and attorney, and counsel for the Commission
that:
1. Proposed respondent Mustad Connecticut, a wholly owned
subsidiary of Mustad International Group NV, is a corporation
organized, existing and doing business under and by virtue of the laws
of the State of Connecticut, with its principal place of business at
1395 Blue Hills Avenue, Bloomfield, Connecticut 06002.
2. Proposed respondent Mustad Group is a corporation organized,
existing, and doing business under and by virtue of the laws of the
Netherlands Antilles with its principal place of business at St.
Pierhalsteeg 5, NL-1012 GL Amsterdam.
3. Proposed respondents admit all the jurisdictional facts set
forth in the draft of complaint.
4. Proposed respondents waive:
(a) any further procedural steps;
(b) the requirement that the Commission's decision contain a
statement of findings of fact and conclusions of laws;
(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.
5. This agreement shall not become part of the public record of the
proceedings 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 respondents, 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.
6. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondents that the law has been
violated as alleged in the draft of complaint, or that the facts as
alleged in the draft complaint, other than jurisdictional facts, are
true.
7. 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
proposed respondents, (1) issue its complaint corresponding in form and
substance with the draft of complaint and its decision containing the
following order to divest, license, and cease and desist in disposition
of the proceeding, and (2) make information public with respect
[[Page 42165]]
thereto. When so entered, the order shall have the same force and
effect and may be altered, modified, or set aside in the same manner
and within the same time provided by statute for other orders. The
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 respondents' or to their counsel's addresses as
stated in this agreement shall constitute service. Proposed respondents
waive any right they 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.
8. Proposed respondents have read the proposed complaint and order
contemplated hereby. Proposed respondents understand that once the
order has been issued, they will be required to file one or more
compliance reports showing they have fully complied with the order.
Proposed respondents further understand that they 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. ``Mustad Connecticut'' means Mustad Connecticut, Inc., a wholly
owned subsidiary of Mustad International Group NV, its predecessors,
subsidiaries, divisions, and groups and affiliates controlled by Mustad
Connecticut, their successors and assigns, and their directors,
officers, employees, agents and representatives.
B. ``Mustad Group'' means Mustad International Group NV, its
predecessors, subsidiaries, divisions, and groups and affiliates
controlled by Mustad Group, their successors and assigns, and their
directors, officers, employees, agents and representatives.
C. ``Respondents'' or ``Mustad'' means Mustad Connecticut and
Mustad Group.
D. ``Acquisitions'' means the acquisitions by Mustad of the assets
of Cooper Horseshoe Nail Co., Ltd.; stock of Emcoclavos S.A.; and
assets of Sterward Engineering Company, Ltd.
E. ``Capewell'' means substantially all assets of Capewell
Horsenails, Inc., including assets, properties, business and goodwill,
tangible and intangible, used in the manufacture and sale of Rolled
Horseshoe Nails, including the following:
1. Machinery, fixtures, equipment, vehicles, transportation
facilities, furniture, tools and other tangible personal property;
2. Customer lists, vendor lists, catalogs, sales promotion
literature, advertising materials, research materials, technical
information, management information systems, software, inventions,
trade secrets, intellectual property, patents, technology, know-how,
specifications, designs, drawings, processes and quality control data;
3. Inventory of nails produced by Capewell;
4. Rights, titles and interests in and to the contracts entered
into in the ordinary course of business with customers (together with
associated bid and performance bonds), suppliers, sales
representatives, distributors, agents, personal property lessors,
personal property lessees, licensors, licensees, consignors and
consignees;
5. Rights under warranties and guarantees, express or implied;
6. Books, record, files; and
7. Items of prepaid expense.
F. ``Commission'' means the Federal Trade Commission.
G. ``Rolled Horseshoe Nails'' means horseshoe nails that are
produced by the rolling process of drawing the shank of the nail
through a series of dies.
H. ``Functioning Nail Machine'' means a fully functioning and
operational machine that has produced at least 800 pounds per week of
City Head No. 5 Rolled Horseshoe Nails during the preceding year, or
the equivalent production of other types and sizes of nails, including
tooling used in the maintenance or operation of such nail machines, and
capable of producing Rolled Horseshoe Nails in at least the following
sizes: city head 5, city head 6, slim blade 5, regular head 5, and race
nail 3\1/2\.
I. ``Spare Nail Machine'' means a functioning or non-functioning
machine suitable for use in providing spare and replacement parts for
the Functioning Nail Machines.
J. ``Nail Machine'' means a Functioning Nail Machine or Spare Nail
Machine.
K. ``Technology and Know-how'' means all of Mustad's drawings,
blueprints, patents, specifications, tests, and other documentation,
and all information contained therein or available to Mustad personnel
relating to the design, and the production methods, processes and
systems used in the production of Rolled Horseshoe Nails.
II
It is further ordered that:
A. Mustad shall divest, absolutely and in good faith, by May 15,
1996, either (i) Capewell as an ongoing business, or (ii) four (4)
Functioning Nail Machines and one (1) Spare Nail Machine and shall
grant a perpetual non-exclusive license of the Technology and Know-how
to the acquirer.
B. The divestiture and granting of the license shall be made only
to an acquirer that receives the prior approval of the Commission and
only in a manner that receives the prior approval of the Commission.
The purpose of the divestiture and licensing is to create an
independent competitor in the production and sale of Rolled Horseshoe
Nails and to remedy the lessening of competition in the United States
resulting from the Acquisitions as alleged in the Commission's
complaint. Mustad shall divest such other ancillary assets and effect
such other arrangements as are reasonably necessary for the acquirer to
be viable, and competitive.
C. If Mustad divests the Functioning Nail Machines and Spare Nail
Machine, then upon reasonable notice from the acquirer to respondents,
respondents shall provide such assistance to the acquirer as is
reasonably necessary to enable the acquirer to produce Rolled Horseshoe
Nails in substantially the same manner and quality employed or achieved
by the respondent prior to divestiture. Such assistance shall include
reasonable consultation with knowledgeable employees and training for a
period of time sufficient to satisfy the acquirer's management that its
personnel are appropriately trained in the production of rolled
horseshoe nails. Respondents shall convey all know-how necessary to
produce rolled horseshoe nails in substantially the same manner and
quality employed or achieved by respondent prior to divestiture.
However, respondents shall not be required to continue providing such
assistance for more than one (1) year from the date of divestiture.
Respondents shall charge the acquirer its own direct costs for
providing such assistance.
III
It is further ordered that, pending divestiture of Capewell or the
Functioning Nail Machines and Spare Nail Machine pursuant to Paragraphs
II.A., Mustad shall take such action as is necessary to maintain the
viability and marketability of the Nail Machines to be divested and
shall not cause or permit the destruction, removal,
[[Page 42166]]
wasting, deterioriation or impairment of such Nail Machines, except for
ordinary wear and tear that does not affect the viability and
marketability of the Nail Machines.
IV
It is further order that:
A. If respondents have not completed the divestiture required by
paragraph II.A. by May 15, 1996, the Commission may appoint a trustee
to divest four (4) Functioning Nail Machines, one (1) Spare Nail
Machine, and license the Technology and Know-how. In the event the
Commission or the Attorney General brings an action pursuant to
Sec. 5(1) of the Federal Trade Commission Act, 15 U.S.C. Sec. 45(1), or
any other statute enforced by the Commission, Mustad 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 Section 5(1) of the Federal Trade
Commission Act, or any other statute enforced by the Commission, for
any failure by Mustad to comply with this order.
B. If a trustee is appointed by the Commission or a court pursuant
to Paragraph IV.A. of this order, Mustad shall consent to the following
terms and conditions regarding the trustee's powers, duties,
authorities, and responsibilities:
(1) The Commission shall select the trustee, subject to the consent
of Mustad, which consent shall not be unreasonably withheld. The
trustee shall be a person with experience and expertise in acquisitions
and divestitures. If Mustad has not opposed the selection of a proposed
trustee within fifteen (15) days after notice by the Commission's staff
to Mustad of the identity of the proposed trustee, Mustad 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 the Nail
Machines and grant a license for the Technology and Know-how and to
make any further arrangements that may be reasonably necessary to
maintain the viability and competitiveness of the business.
(3) The trustee shall have twelve (12) months from the date the
Commission approves the trust agreement described in Paragraph IV.B.8
to accomplish the divestiture, 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 the divestiture can be accomplished 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, that the
Commission may extend this period only two (2) times and for a total
period not to exceed two (2) years.
(4) The trustee shall have full and complete access to the
personnel, books, records, and facilities related to the Nail Machines,
or to any other relevant information, as the trustee may reasonably
request. Respondents shall provide such financial or other information
as such trustee may reasonably request and shall cooperate with the
trustee. Mustad shall take no action to interfere with or impede the
trustee's accomplishment of the divestiture and licensing. Any delays
in divestiture caused by Mustad shall extend the time for divestiture
under Paragraph IV.B.3 in an amount equal to the delay, as determined
by the Commission or, for a court-appointed trustee, by the court.
(5) Subject to Mustad's absolute and unconditional obligation to
divest and license at no minimum price, and the purpose of the
divestiture and licensing as stated in Paragraph II of this order, 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. The divestiture shall be made in the manner set out
in Paragraph III of this order, provided, however, if the trustee
receives bona fide offers from more than one acquiring entity, and if
the Commission determines to approve more than one such acquiring
entity, the trustee shall divest to the acquiring entity or entities
selected by Mustad from among those approved by the Commission.
(6) The trustee shall serve, without bond or other security, at the
cost and expense of Mustad, on such reasonable and customary terms and
conditions as the Commission or, in the case of a court-appointed
trustee, the court may set. The trustee shall have authority to employ,
at the cost and expense of Mustad, such consultants, accountants,
attorneys, investment bankers, business brokers, appraisers, and other
representatives and assistants as are reasonably necessary and at
reasonable cost to carry out the trustee's duties and responsibilities.
The trustee shall account for all monies derived from the divestiture
and licensing 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 Mustad and the
trustee's power shall be terminated. The trustee's compensation shall
be based in significant part on a reasonable commission arrangement
contingent on the trustee's divesting the Nail Machines and licensing
the technology and know-how.
(7) Mustad 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
trusteeship, 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, negligence, willful or wanton acts, or bad
faith by the trustee.
(8) Within ten (10) days after appointment of the trustee, and
subject to the prior approval of the Commission and, in the case of a
court-appointed trustee, of the court, Mustad shall execute a trust
agreement that transfers to the trustee all rights and powers necessary
to permit the trustee to effect the divestiture and licensing required
by this order.
(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 IV.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 and licensing required by
this order.
(11) The trustee shall have no obligation or authority to operate
or maintain the Nail Machines.
(12) The trustee shall report in writing to Mustad and to the
Commission every sixty (60) days concerning the trustee's efforts to
accomplish the divestiture and licensing.
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 Mustad has fully complied
with the provisions of Paragraph II or IV of this order, Mustad shall
submit to the Commission a verified written report setting forth in
detail the manner and form in which it intends to comply, is complying,
and has complied with those provisions.
[[Page 42167]]
Mustad 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 Paragraphs II and IV of the order, including a
description of all substantive contacts or negotiations for the
divestiture and licensing and the identity of all parties contacted.
Mustad also 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 from the year that this order becomes final, annually
for the next nine (9) years on the anniversary of the date on which
this order becomes final, and at such other times as the Commission may
require, Mustad shall file with the Commission a verified written
report setting forth in detail the manner and form in which it has
complied and is complying with Paragraph VI of this order.
It is further ordered that, for a period of ten (10) years from the
date this order becomes final, respondent shall not, without providing
advance written notification to the Commission, directly or indirectly,
through subsidiaries, partnerships, or otherwise:
A. Acquire any stock, share capital, equity or other interest in
any concern, corporate or non-corporate, presently engaged in, within
the two years preceding such acquisition engaged in, or in the process
of attempting to engage in producing or selling horseshoe nails in the
United States; or
B. Acquire any assets used for, or previously used for (and still
suitable for use for) the production of horseshoe nails from any
concern, corporate or non-corporate, presently engaged in, within the
past two years engaged in, or in the process of attempting to engage in
producing or selling horseshoe nails in the United States.
Said notification shall be given on the Notification and Report
Form set forth in the Appendix to Part 803 of Title 16 of the Code of
Federal Regulations as amended (hereinafter referred to as ``the
Notification''). Respondent shall provide to the Commission at least
thirty days prior to acquiring any such interest (hereinafter referred
to as the ``first waiting period''), both the Notification and
supplemental information either in respondent's possession or
reasonably available to respondent. Such supplemental information shall
include a copy of the proposed acquisition agreement; the names of the
principal representatives of respondent and of the firm respondent
desires to acquire who negotiated the acquisition agreement; and any
management or strategic plans discussing the proposed acquisition. If,
within the first waiting period, representatives of the Commission make
a written request for additional information, respondent shall not
consummate the acquisition until twenty days after submitting such
additional information. Early termination of the waiting periods in
this paragraph may be requested and, where appropriate, granted in the
same manner as is applicable under the requirements and provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C.
Sec. 18a.
VII
It is further ordered that, for the purposes of determining or
securing compliance with this order, and subject to any legally
recognized privilege, upon written request, Mustad reasonably shall
permit any duly authorized representatives of the Commission:
A. 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 Mustad relating to any matters contained in this order;
and
B. Upon five (5) days notice to Mustad, and without restraint or
interference from Mustad, to interview officers or employees of Mustad,
who may have counsel present, regarding such matters.
VIII
It is further ordered that Mustad shall notify the Commission at
least thirty (30) days prior to any proposed change in Mustad, such as
dissolution, assignment, or sale resulting in the emergence of a
successor, the creation or dissolution of subsidiaries, or any other
change that may affect compliance obligations arising out of this
order.
Analysis of Proposed Consent Order to Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, and Agreement Containing Consent Order
(``Agreement'') from Mustad International Group NV (``Mustad''), a
Netherlands Antilles firm, and Mustad Connecticut, Inc., a Connecticut
company.
The proposed Order has been placed on the public record for sixty
(60) days for reception of comments by interested persons. Comments
received during this period will become part of the public record.
After sixty (60) days, the Commission will again review the Agreement
and the comments received and will decide whether it should withdraw
from the Agreement or make final the Agreement's proposed Order.
Mustad has consummated a series of acquisitions, beginning in July
1985 through January 1993. The proposed complaint alleges that the
effect of the acquisitions was to substantially lessen competition and
to give Mustad a virtual monopoly in the market for rolled horseshoe
nails, which allowed Mustad to raise prices by as much as 50-75% on the
most popular, large volume sizes of horseshoe nails in the United
States.
The complaint alleges that Mustad acquired Capewell Manufacturing
Company (``Capewell''), Cooper Horseshoe Nail Co., Ltd. (``Cooper''),
and Emcoclavos S.A. (``Emcoclavos'') and acquired a horseshoe nail
machine from Sterward Engineering Company, Ltd. (``Sterward''). Cooper
and Emcoclavos were direct competitors of Mustad and Sterward was a
potential competitor to Mustad. The complaint also alleges that Mustad
entered into non-compete agreements with Cooper and Sterward for a
period of at least twenty years. The complaint also alleges that Mustad
destroyed saleable rolled horseshoe nail machines in order to prevent
potential competitors from producing horseshoe nails.
The proposed complaint alleges that the Mustad's acquisitions of
Cooper, Emcoclavos and Sterward violated Section 7 of the Clayton Act,
as amended, 15 U.S.C. Sec. 18, and Section of the Federal Trade
Commission Act, as amended, 15 U.S.C. Sec. 45; that the Sterward non-
compete agreement violates Section 5 of the Federal Trade Commission
Act, as amended, 15 U.S.C. Sec. 45; and that Mustad, in making its
acquisitions of Capewell, Cooper, and Emcoclavos, in destroying
machinery, and in entering the non-compete agreements, attempted to
monopolize and did monopolize the market for rolled horseshoe nails in
violation of Section 5 of the Federal Trade Commission Act, as amended,
15 U.S.C. Sec. 45.
The complaint alleges that rolled horseshoe nails are a relevant
line of commerce that differ from other types of nails used by farriers
(the people who shoe horses). Rolled horseshoe nails are not reasonably
interchangeable with forged nails.
The complaint alleges that Mustad gained a virtual monopoly, nearly
a 90% share of sales of rolled horseshoe nails in the world, as a
result of its acquisitions of Cooper, Emcoclavos, and
[[Page 42168]]
Sterward. Prior to each acquisition, the rolled horseshoe nail market
was highly concentrated and concentration increased substantially
following each acquisition. The complaint alleges that entry into the
production and sale of rolled horseshoe nails would be difficult and
time consuming--taking well in excess of two years, entailing
significant sunk costs, and requiring technical expertise.
The proposed Order would remedy the alleged violations by replacing
the lost competition that has resulted from the acquisitions. The
proposed Order would require Mustad to divest either (1) Capewell as an
ongoing business, or (2) four fully functioning horseshoe nail
machines, one spare nail machine, and grant a perpetual non-exclusive
license to technology and know-how. In order to ensure that the
acquirer of machinery would be able to quickly begin production at the
same level of quality as exists currently, Mustad would be required to
provide training and technical assistance to the acquirer for up to one
year.
The proposed Order provides that Mustad shall divest Capewell or
the machinery no later than May 15, 1996. If Mustad does not complete
the required divestiture during the allotted time period, then a
trustee may be appointed to divest the machinery within twelve months.
The time period for the trustee to complete the divestiture may be
extended twice.
The proposed Order requires Mustad to submit a report of compliance
with the proposed Order's divestiture requirements within sixty (60)
days following the date the proposed Order becomes final, and every
sixty (60) days thereafter until Mustad has completed the divestiture.
Finally, the proposed Order prohibits Mustad from acquiring any
interest in any other company engaged in, or attempting to engage in,
the production or sale of horseshoe nails without giving prior notice
to the Commission and observing certain waiting periods for a period of
ten years.
The purpose of this analysis is to facilitate public comment on the
proposed Order. This analysis is not intended to constitute an official
interpretation of the Agreement or the proposed Order or in any way to
modify the terms of the Agreement or the proposed Order.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 95-20142 Filed 8-14-95; 8:45 am]
BILLING CODE 6750-01-M