The Loewen Group Inc. and Loewen Group International, Inc. (Loewen) have agreed to pay a $500,000 civil penalty to settle federal charges that Loewen failed to notify the nation's two antitrust enforcement agencies before it acquired stock in a competitor, Prime Succession, Inc. (Prime). The government alleged that the prior notification was required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR), which is designed to give the government an opportunity to review certain acquisitions and mergers before consummation to determine whether they would violate federal antitrust laws. The Loewen Group Inc., headquartered in Burnaby, British Columbia, Canada, owns and operates funeral homes and cemeteries in the United States through its wholly-owned subsidiary, Loewen Group International, Inc., based in Covington, Kentucky.
The settlement stems from charges filed today by FTC staff attorneys, serving as Special Attorneys to the U.S. Attorney General. The complaint, filed in U.S. District Court for the District of Columbia, alleges that in May and June of 1996, Loewen structured a leveraged buyout of Prime, based in Batesville, Indiana, without observing the notification and waiting requirements of the HSR Act. When a proposed acquisition meets certain criteria, the Act requires persons to notify the FTC and the Department of Justice, and then to observe a waiting period while one of the two agencies reviews the transaction. For example, the notification requirement applies when a voting securities acquisition would bring the value of the purchaser's holdings in a company to more than $15 million.
"Without timely notification of mergers and acquisitions under HSR, we cannot do our job.
Here, Loewen knew the HSR rules and that their acquisition of stock in a key competitor would raise serious antitrust issues. The failure to file in those circumstances is inexcusable and justifies the imposition of civil penalties," said William J. Baer, Director of the FTC's Bureau of Competition.
According to the government's complaint, Loewen acquired $16 million of Prime's voting securities on August 26, 1996, without having filed premerger notification and report forms with the Federal Trade Commission and the Department of Justice.
The complaint alleges that under a May 29, 1996, agreement, Loewen was to contribute $60 million toward the leveraged buyout of Prime -- $10 million for voting securities and $50 million for non-voting securities. The government also alleges that Loewen reviewed the planned leveraged buyout of Prime and concluded that the step involving Loewen's planned acquisition of $10 million of Prime voting securities would not be subject to the notification and waiting period requirements of the HSR Act. On June 14, 1996, Loewen paid a $20 million down payment on its purchase of Prime securities. However, the complaint alleges that before the leveraged buyout of Prime was undertaken, its structure was changed. As a result, on August 26, 1996, Loewen paid a total of $78 million, including $16 million for 24 percent of Prime's voting securities, a price that made the transaction reportable under the HSR Act.
The complaint states that Loewen submitted notification and report forms to the Federal Trade Commission and the Department of Justice to report the acquisition in October, 1996, more than a month after the acquisition was consummated. On November 15, 1996, the FTC issued an HSR "second request" for additional material about the proposed transaction. By acquiring voting securities and non-voting securities of Prime on August 26, 1996, without reporting the transaction, Loewen avoided the risk it might have lost its $20 million down payment, which it might have had to forfeit had the acquisition not taken place before September 20, 1996, because it could have been delayed by an antitrust investigation.
The government's complaint alleges that Loewen was in violation of the HSR Act from August 26, 1996, until May 13, 1997, when the waiting period expired.
The complaint was filed in U.S. District Court for the District of Columbia on March 31, 1998.
NOTE: The Stipulation and proposed Final Judgment are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Such settlements have the force of law when signed by a judge.
Copies of the government's Complaint, Stipulation and proposed Final Judgment are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C.
20580; 202-FTC-HELP (202-382-4357); TDD 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.
(Civil Action No. 980815)
(FTC File No. 9710012)