The Federal Trade Commission today authorized staff to seek a preliminary injunction to block the proposed acquisition of McCall Pattern Company (McCall) by Conso International Corp. (Conso), citing concerns that the transaction would violate federal law by illegally reducing competition in the U.S. market for home sewing patterns. Conso is currently the largest sewing pattern company in the United States, and owns the popular Simplicity brand. Its proposed purchase of McCall is valued at $22 million.
"This 'three-to-two' merger would significantly reduce competition and create a dominant firm in this market," Richard G. Parker, Director of the FTC's Bureau of Competition. "Consumers of home sewing patterns would be the losers if the transaction were to proceed as proposed."
Sewing patterns are typically printed on tissue paper and are laid on fabric and cut to aid in the production of homemade clothing and crafts. There are three leading domestic manufacturers of home sewing patterns: Simplicity, McCall, and Butterick Company Inc. The acquisition as currently structured would reduce the number of significant U.S. sewing pattern designers and producers from three to two, significantly eliminating competition and increasing the likelihood of coordinated anticompetitive behavior, according to the Commission.
According to the FTC's complaint, Conso's purchase of McCall would result in the combined firm controlling more than three-quarters of the U.S. unit sales of domestic home sewing patterns, followed distantly by Butterick, with only 22 percent.
Kwik-Sew Pattern Co. Inc., the next largest domestic manufacturer of home sewing patterns, has never exceeded a share of more than two or three percent of the U.S. market.
The complaint contends that the merger of Conso and McCall would unfairly reduce competition in the U.S. market for the manufacture and distribution of home sewing patterns in violation of Section 7 of the Clayton Act and Section 5 of the FTC Act by eliminating actual and direct competition between the two companies and increasing the likelihood of collusion or other anticompetitive behavior by the firms. Such behavior would allow the combined firm to exercise unilateral market power in this already highly concentrated industry. In addition, according to the Commission, neither the expansion of existing firms or the entry of new firms would likely deter post-acquisition anticompetitive conduct.
The FTC will argue in court for a preliminary injunction on the grounds that the transaction as structured would violate federal antitrust laws. If the court grants the FTC's motion, the Commission will have 20 days within which to determine whether to issue an administrative complaint. The FTC vote to challenge the acquisition was 5-0.
Copies of the complaint are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); 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.
Mitchell J. Katz
Office of Public Affairs
Michael J. Bloom
FTC Northeast Region Office
(FTC File No. 001-0154)