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1
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DECISION & ORDER
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EXTRACTED KEY WORDS
COMMISSION GENERAL MILLS RESPONDENT RALCORP CEREALS CONSENT AGREEMENT TRADE COMMISSION PROVISIONS INTERIM AGREEMENT OFFICERS SUCCESSOR MERGER FEDERAL TRADE COMMISSION BUSINESS CEREAL PRODUCTS PLAN COMPLIANCE ACQUISITION COMPLAINT GMI REORGANIZATION AGREEMENT VIOLATIONS PUBLIC RECORD SUBSIDIARIES REPRESENTATIVES PRIVATE LABEL RIGHTS CHEX TRADEMARK COMPLYING |
9610101
B219558
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
COMMISSIONERS: Robert Pitofsky, Chairman
Mary L. Azcuenaga
Janet D. Steiger
Roscoe B. Starek, III
Christine A. Varney
____________________________________ ))
In the Matter of )) Docket No. C-3742
GENERAL MILLS, INC. )
a corporation. ))
____________________________________)
DECISION AND ORDER
The Federal Trade Commission having initiated an investigation of the acquisition by
General Mills, Inc. ("GMI"), of the branded cereals and snack mix businesses of Ralcorp
Holdings, Inc. ("Ralcorp"), and it now appearing that GMI, hereinafter sometimes referred to as
"respondent," having been furnished with a copy of a draft of Complaint that the Bureau of
Competition presented to the Commission for its consideration and which, if issued by the
Commission, would charge respondent with violations 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; and
Respondent, its attorney, and counsel for the Commission having thereafter executed an
Agreement containing a Consent Order, an admission by respondent of all the jurisdictional facts
set forth in the aforesaid draft of Complaint, a statement that the signing of said Agreement is for
settlement purposes only and does not constitute an admission by respondent that the law has
been violated as alleged in such Complaint, or that the facts as alleged in such complaint, other
than jurisdictional facts, are true and waivers and other provisions as required by the
Commission's Rules; and
The Commission having thereafter considered the matter and having determined that it had
reason to believe that the respondent has violated the said Acts, and that a Complaint should issue
stating its charges in that respect, and having thereupon accepted the executed Consent
Agreement and placed such Agreement on the public record for a period of sixty (60) days, now
in further conformity with the procedure described in § 2.34 of its Rules, the Commission hereby
issues its Complaint, makes the following jurisdictional findings and enters the following Order:
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2
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CONSENT AGREEMENT
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EXTRACTED KEY WORDS
GENERAL MILLS CEREALS FEDERAL TRADE COMMISSION RALCORP ACQUISITION PROPOSED RESPONDENT CONSENT BUSINESS BUSINESSES RALCORP HOLDINGS RTE CEREALS SNACK PRIVATE LABEL PRIVATE LABEL CHEX LAWS CHEX PRODUCTS GMI TRADE COMMISSION ACT PROVISIONS UNITED STATES COMPETITION CHEX TRADEMARK SUCCESSOR PARTY SELL PRIVATE LABEL INTERIM AGREEMENT RALSTON PURINA CEREAL PRODUCER RELEVANT GEOGRAPHIC MARKET JURISDICTIONAL FACTS |
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
______________________________ )
In the matter of ))
GENERAL MILLS, INC., ) File No. 961-0101
a corporation. )
____________________
____________)
AGREEMENT CONTAINING CONSENT ORDER
The Federal Trade Commission ("Commission"), having initiated an investigation of the
acquisition by General Mills, Inc. ("GMI"), of the branded cereals and snack mix businesses of
Ralcorp Holdings, Inc. ("Ralcorp"), and it now appearing that GMI, hereinafter sometimes
referred to as "proposed respondent," is willing to enter into an agreement containing an order to
cease and desist from certain conduct, and providing for other relief:
IT IS HEREBY AGREED by and between proposed respondent, by its duly authorized
officers and attorney, and counsel for the Commission that:
1. Proposed respondent GMI 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 Number One General Mills Boulevard, Minneapolis, MN 55426.
2. Proposed respondent admits all the jurisdictional facts set forth in the draft of
complaint here attached.
3. Proposed respondent waives:
a. any further procedural steps;
b. the requirement that the Commission's decision contain a statement of
findings of fact and conclusions of law;
c. all rights to seek judicial review or otherwise to challenge or contest
validity of the order entered pursuant to this agreement; and
d. any claim under the Equal Access to Justice Act.
4. This agreement shall not become part of the public record of the proceeding
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3
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COMPLAINT
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EXTRACTED KEY WORDS
RTE CEREALS RALCORP FEDERAL TRADE COMMISSION ACT BUSINESSES ACQUISITION SALE UNITED STATES PRODUCER PRIVATE LABEL MARKET VIOLATION CLAYTON ACT RESPONDENT GENERAL MILLS SNACK REVENUE COMMERCE RALCORP HOLDINGS CONSUMMATION GROCERY RALSTON PURINA CHEX AGREEMENT POST ACQUISITION ENTRY VIRTUE TIMES RELEVANT POUNDS DOLLAR REVENUES |
9610101
B219558
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
___________________________________
)
In the Matter of )
)
GENERAL MILLS, INC., ) Docket No. C-3742
a corporation. )
)
___________________________________)
COMPLAINT
Pursuant to the provisions of the Federal Trade Commission
Act and the Clayton Act, and by virtue of the authority vested in
it by said Acts, the Federal Trade Commission ("Commission"),
having reason to believe that respondent General Mills, Inc.,
subject to the jurisdiction of the Commission, has agreed to
acquire the branded ready-to-eat cereal and snack mix businesses
from Ralcorp Holdings, Inc., in violation of Section 5 of the
Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and
that the acquisition, if consummated, would violate 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, 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:
I. Respondent General Mills, Inc.
1. Respondent General Mills, Inc. ("General Mills"), is a
corporation organized, existing, and doing business under and by
virtue of the laws of the State of Delaware. General Mills'
headquarters, office and principal place of business is located
at Number One General Mills Boulevard, Minneapolis, Minnesota
55426. In fiscal year 1996, General Mills had sales of
approximately $5.4 billion.
2. Respondent General Mills is, and at all times relevant
herein has been, engaged in the sale of branded ready-to-eat
("RTE") cereals to retail grocery stores, grocery wholesalers,
and others throughout the United States. General Mills's primary
RTE cereals include Cheerios, Total, and Wheaties. General Mills
is the nation's second largest producer of RTE cereals, measured
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4
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STAREK STATEMENT
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EXTRACTED KEY WORDS
GENERAL MILLS COMPETE ACQUISITION AGREEMENT COMMISSION NON-COMPETE BUSINESS RALCORP PRIVATE LABEL ENFORCEMENT MARKET UNITED STATES FOOD CHEX PRODUCTS SALE CONSENT ORDER REASON MAJORITY PARTIES NON-COMPETE PROVISION DURATION CIBA-GEIGY CONSUMERS EVIDENCE SUPPORT FACTS BAR ENFORCEMENT RAISE MARKET POWER |
DISSENTING STATEMENT OF COMMISSIONER ROSCOE B. STAREK, III
In the Matter of
General Mills, Inc.
Docket No. C-3742
I respectfully dissent from the decision of the majority to issue a
consent order against General Mills, Inc. relating to the acquisition
of the branded ready-to-eat ("RTE") cereal and snack food businesses
of Ralcorp Holdings, Inc. ("Ralcorp"). My dissent rests on two
grounds.
As noted in the Commission's complaint, General Mills will not acquire
the private label RTE cereal or snack food businesses of Ralcorp.
Ralcorp instead will form a new entity, New Ralcorp Holdings, Inc.
("New Ralcorp"), to hold the private label cereal and snack food
businesses that General Mills will not acquire. Under the acquisition
agreement, New Ralcorp has the right to manufacture and sell a private
label version of the Chex RTE cereal products, but is restricted from
transferring this right to a third party without permission from
General Mills. The acquisition agreement further provides that New
Ralcorp may not produce private label Chex products for a period of
eighteen months following consummation of the acquisition.
My first reason for voting against issuing the consent order is that
the Commission lacks sufficient evidence to support the unilateral
effects theory alleged in the complaint. Second, it is completely
unnecessary -- and in fact creates inefficiency -- to bar enforcement
of the parties' non-compete agreement. Whatever minimal competitive
risks this transaction may raise are adequately addressed by
eliminating the restrictions on Ralcorp's ability to transfer
manufacturing and sales rights for private label Chex to a third
party.
General Mills' share of the RTE cereal market will increase by
approximately three percent as a result of the acquisition. The number
of competitors in the RTE cereal industry will remain the same, and
General Mills will remain the second largest RTE cereal producer in
the United States. New Ralcorp will immediately assume Ralcorp's
position as the largest private label cereal producer in the United
States. Moreover, General Mills' post-merger share of the RTE cereal
market will be between 25 and 31 percent (depending on whether share
is measured in pounds or sales dollars), well below levels suggested
by the Horizontal Merger Guidelines as the minimum threshold at which
the Commission might reasonably presume market power. It is hard to
understand under these simple facts how the majority determined that
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5
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AZCUENAGA STATEMENT
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EXTRACTED KEY WORDS
CEREALS GENERAL MILLS COMPLAINT PARAGRAPH COMMISSION RALCORP PRIVATE LABEL ENTRY MARKET POWER DISSENTING DOCKET ALLEGING ACQUISITION BUSINESS CEREAL PRODUCTS COMPETITION CIBA GEIGY TRANSITION MERGER INDUSTRY SMOOTH REASON SHORT-TERM NONCOMPETE CLAUSE ORDER REQUIREMENT ENTERING CHEX-TYPE CEREAL PRODUCT JUSTICE FEDERAL TRADE COMMISSION HORIZONTAL MERGER GUIDELINES |
STATEMENT OF COMMISSIONER MARY L. AZCUENAGA
CONCURRING IN PART AND DISSENTING IN PART
in General Mills, Inc.,
Docket No. C-3742
The Commission today issues a consent order based on a complaint
alleging that the acquisition by General Mills, Inc., of the branded
ready-to-eat cereal business of Ralcorp Holdings, Inc., violates
Section 7 of the Clayton Act. The order is narrow, but I would narrow
it even further. In particular, I would delete Paragraph II(B) of the
proposed order, which requires elimination of a noncompete clause that
would have prevented Ralcorp for a period of eighteen months from
introducing a new private label cereal identical or similar to the
CHEX-brand cereals being sold to General Mills.
Paragraph 14 of the complaint alleges that the noncompete clause
described in paragraph 8 would have the anticompetitive effect of
"restricting the entry of new private label cereal products into
competition with General Mills." That effect, however, is precisely
the purpose of this (and every other) noncompete clause. Although the
complaint might be read as alleging that noncompete clauses are per se
anticompetitive, that interpretation would be inconsistent with the
Commission's recent decision in another case to issue an order that
imposed an affirmative prohibition on competition for six years
between the merged firm and the acquirer of certain assets to be
divested under the order. See Ciba Geigy Limited, (Docket No. C-3725,
March 24, 1997). The Ciba Geigy decision recognizes the efficiency
potential of noncompete clauses, which, among other benefits, can
facilitate an orderly transfer of ownership and provide a brief
transition period for new owners to establish themselves in the
business.
Although the appropriate duration of a noncompete clause may vary
depending on the circumstances of the industry and the acquisition,
using a noncompete clause for a short period to smooth a transition
may be procompetitive. I do not find reason to believe that this
short-term noncompete clause is anticompetitive, and I dissent from
the order requirement to eliminate it.
___________________________________
The noncompete clause described in paragraph 8 of the complaint
prohibits Ralcorp from entering the market with a private label,
CHEX-type cereal product for eighteen months. As indicated in the
Department of Justice and Federal Trade Commission Horizontal Merger
Guidelines (April 2, 1992), a merger is unlikely to create or enhance
market power if entry is "timely, likely and sufficient," and entry is
deemed "timely" if it can be achieved within two years. Under this
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