UNITED STATES OF AMERICA
In the Matter of
Docket No. C-3894
The Federal Trade Commission ("Commission"), having reason to believe that Provident Companies, Inc., a corporation subject to the jurisdiction of the Commission, has agreed to merge with UNUM Corporation, a corporation subject to the jurisdiction of the Commission, in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 45; and it appearing to the Commission that a proceeding in respect thereof would be in the public interest, hereby issues its Complaint, stating its charges as follows:
1. Respondent Provident Companies, Inc. ("Provident") 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 1 Fountain Square, Chattanooga, Tennessee 37402.
2. Respondent UNUM Corporation ("UNUM") 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 2211 Congress Street, Portland, Maine 04122.
3. For purposes of this proceeding, Respondents are, and at all times relevant herein have been, engaged in commerce as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. § 12, and are corporations whose businesses are in or affecting commerce as "commerce" is defined in Section 4 of the FTC Act, as amended, 15 U.S.C. § 44.
II. THE MERGER
4. Pursuant to an Agreement and Plan of Merger dated November 22, 1998, Provident and UNUM will merge under the name "UNUMProvident Corporation," with a combined stock value of $11.43 billion ("the Merger").
III. THE RELEVANT MARKET
5. For purposes of this Complaint, the relevant line of commerce in which to analyze the effect of the Merger is disability insurance sold to individuals. Disability insurance provides protection against loss of income due to sickness, accident, or injury. Individual disability insurance policies are sold to people who do not have group disability insurance coverage available through their employers or other organizations, or who desire to supplement group disability insurance. Each such individual disability insurance policy is individually underwritten, based on the applicant's medical background, financial portfolio and occupation. Because the individual is the policyholder of his or her own policy, such policies are "portable," i.e., the insured person remains covered so long as he or she pays the premium even if he or she changes employers or occupations.
6. For purposes of this Complaint, a relevant geographic area in which to analyze the effects of the Merger is the United States.
IV. STRUCTURE OF THE MARKET
7. The relevant market set forth in Paragraphs 5 and 6 is highly concentrated, whether measured by Herfindahl-Hirschman Indices ("HHI") or two-firm and four-firm concentration ratios.
V. BARRIERS TO ENTRY AND EXPANSION
8. Timely entry into the relevant market is unlikely to occur at a sufficient scale to deter or counteract the effects of the Merger described in Paragraph 9. Access to credible data on disability claims is required to design and price disability insurance policies for individuals. Thus, an existing provider of individual disability insurance without its own credible base of such data or the ability to access a credible public data base is unlikely to expand successfully. UNUMProvident will possess a substantial percentage of available data, the contribution of which to a publicly available data base will be crucial for industry-wide data to remain credible. However, as a result of the merger, UNUMProvident may have an economic incentive not to supply its data to a publicly-available data base.
VI. EFFECTS OF THE MERGER
9. The effect of the Merger may be substantially to lessen competition in the relevant markets in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended,15 U.S.C. § 45, in the following ways, among others:
VII. VIOLATIONS CHARGED
10. The Merger agreement described in Paragraph 4 constitutes a violation of Section 5 of the FTC Act, as amended, 15 U.S.C. § 45.
11. The Merger described in Paragraph 4, if consummated, would constitute a violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. § 45.
IN WITNESS WHEREOF, the Federal Trade Commission has caused this Complaint to be signed by the Secretary and its official seal to be affixed, at Washington, D.C. this third day of September, 1999.
By the Commission.