Sara Lee Corporation has agreed to pay a $3.1 million civil penalty to settle federal charges that it failed to notify the nation's two antitrust enforcement agencies before acquiring the assets of its major competitor in the shoe-care products business. Following a Federal Trade Commission investigation, the government today filed the settlement, which includes the largest civil penalty ever obtained for this type of law violation.
Sara Lee is the parent company of Kiwi Brands, Inc., the leading shoe-care products company in the United States. Sara Lee is based in Chicago, and Kiwi is based in Douglassville, Pennsylvania. In October 1991, Sara Lee acquired Reckitt & Colman plc's shoe-care products business for $25.8 million. Reckitt & Colman, a London, England-based company, sells Melto- nian, Griffin and Magix brands of shoe-care products in the United States. In an action prior to today, the FTC alleged that the acquisition would have created a virtual monopoly in the shoe-care products business.
In today's action, the government alleged that Sara Lee made the acquisition without first notifying the FTC and the Justice Department, as required by the Hart Scott Rodino Act (HSR Act). The HSR Act requires companies contemplating mergers or acqui- sitions that meet certain thresholds to notify the government and then wait a specified period to allow one of the two agencies to analyze whether it believes the transaction might violate federal antitrust laws and raise prices or reduce quality for consumers.
"This case demonstrates that blatant attempts to avoid antitrust review of large mergers will result in a strong government response," said William J. Baer, Director of the FTC's Bureau of Competition. "In this case, Sara Lee deliberately failed to meet HSR filing requirements because it feared the FTC would investigate and challenge its acquisition. Indeed, once the FTC became aware of the acquisition, we investigated and found that it was likely to lead to higher prices for millions of consumers of shoe care products. We required divestitures to resolve our competitive concerns.
"Today's civil penalty settlement of $3.1 million is the largest in the history of the HSR Act. The Act was passed to provide an early warning system to protect consumers from anti- competitive mergers. Where companies intentionally attempt to avoid their obligations under the Act in order to engage in anticompetitive activity, they should expect strong and effective enforcement," Baer said.
The complaint detailing the government's allegations was filed by FTC staff attorneys, serving as Special Attorneys to the U.S. Attorney General. According to the complaint, the trans- actions took place under two separate contracts -- one for Reckitt & Colman's American shoe-care products assets and one for its British assets. It was the acquisition of the American assets that led to the alleged HSR Act violation, because the acquired assets were valued at more than the Act's threshold of $15 million.
Sara Lee did not file the required HSR notification until Aug. 12, 1994, the government alleged, and therefore the company was in violation of the HSR Act filing requirements from the date of the acquisition until the date of filing. The HSR Act provides for a civil penalty of up to $10,000 a day for violations. The settlement announced today, if approved by the federal district court, will resolve the government's case.
The acquisition itself also raised antitrust concerns, the FTC noted. After learning that it had occurred, the FTC investigated and ultimately the Commission required Sara Lee to divest several brands in order to restore competition allegedly reduced by the transaction. (See related FTC news releases, dated June 30, 1994 and Sept. 1, 1994.) The investigation into Sara Lee's HSR Act violations followed that action.
The documents were filed in U.S. District Court for the District of Columbia, on Feb. 6.
NOTE: This consent judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the complaint and settlement, as well as the news releases referenced above, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov
(FTC File No. 921 0023)
(Civil Action No. 1:96CV00196)