McCormick & Company, Incorporated; Analysis of the Proposed Consent Orders to Aid Public Comment, 45451-45453 [E8-17868]

Agencies

• FEDERAL TRADE COMMISSION

[Federal Register Volume 73, Number 151 (Tuesday, August 5, 2008)]
[Notices]
[Pages 45451-45453]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-17868]


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FEDERAL TRADE COMMISSION

[File No. 081 0045]


McCormick & Company, Incorporated; Analysis of the Proposed 
Consent Orders to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint and the terms of the consent order -- embodied in the consent 
agreement -- that would settle these allegations.

DATES: Comments must be received on or before August 28, 2008

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``McCormick, File No. 081 0045,'' to 
facilitate the organization of comments. A comment filed in paper form 
should include this reference both in the text and on the envelope, and 
should be mailed or delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania 
Avenue, N.W., Washington, D.C. 20580. Comments containing confidential 
material must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with Commission Rule 4.9(c). 16 CFR 
4.9(c) (2005).\1\ The FTC is requesting that any comment filed in paper 
form be sent by courier or overnight service, if possible, because U.S. 
postal mail in the Washington area and at the Commission is subject to 
delay due to heightened security precautions. Comments that do not 
contain any nonpublic information may instead be filed in electronic 
form by following the instructions on the web-based form at (https://
secure.commentworks.com/ftc-McCormick). To ensure that the Commission 
considers an electronic comment, you must file it on that web-based 
form.
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    \1\ The comment must be accompanied by an explicit request for 
confidential treatment, including the factual and legal basis for 
the request, and must identify the specific portions of the comment 
to be withheld from the public record. The request will be granted 
or denied by the Commission's General Counsel, consistent with 
applicable law and the public interest. See Commission Rule 4.9(c), 
16 CFR 4.9(c).
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    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments, whether filed 
in paper or electronic form, will be considered by the Commission, and 
will be available to the public on the FTC website, to the extent 
practicable, at www.ftc.gov. As a matter of discretion, the FTC makes 
every effort to remove home contact information for individuals from 
the public comments it receives before placing those comments on the 
FTC website. More information, including routine uses permitted by the 
Privacy Act, may be found in the FTC's privacy policy, at (https://
www.ftc.gov/ftc/privacy.shtm).

FOR FURTHER INFORMATION CONTACT: Jill M. Frumin, FTC Bureau of 
Competition, 600 Pennsylvania Avenue, NW, Washington, D.C. 20580, (202) 
326-2758.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec.  2.34 of 
the Commission Rules of Practice, 16 CFR 2.34, notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for July 30, 2008), on the World Wide Web, at (https://www.ftc.gov/os/
2008/07/index.htm). A paper copy can be obtained from the FTC Public 
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. All comments should be filed as 
prescribed in the ADDRESSES section above, and must be received on or 
before the date specified in the DATES section.

[[Page 45452]]

Analysis of Agreement Containing Consent Order to Aid Public Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted subject 
to final approval, an Agreement Containing Consent Orders (``Consent 
Agreement'') from McCormick & Company, Incorporated (``McCormick'' or 
``Respondent''), which is designed to remedy the anticompetitive 
effects that would otherwise result from McCormick's proposed 
acquisition of Unilever's Lawry's and Adolph's brands of seasoned salt 
products. Under the terms of the proposed Consent Agreement, McCormick 
is required to divest its entire Season-All business to an up-front 
buyer, Morton International, Inc (``Morton'' or ``Purchaser'').
    The proposed Consent Agreement has been placed on the public record 
for thirty (30) days to solicit comments from interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
proposed Consent Agreement and will decide whether it should withdraw 
from the proposed Consent Agreement, modify it, or make final the 
Decision and Order (``Order'').
    Pursuant to an Asset Purchase Agreement dated November 13, 2007 
(the ``Acquisition Agreement''), McCormick proposes to acquire the 
Lawry's and Adolph's brands of marinades, spice, and seasoning products 
(``Lawry's'') from Unilever N.V., a Netherlands corporation, for 
approximately $605 million in cash. The Commission's complaint alleges 
that the Proposed Acquisition, if consummated, would violate Section 7 
of the Clayton Act, as amended, 15 U.S.C. Sec.  18, and Section 5 of 
the Federal Trade Commission Act, as amended, 15 U.S.C. Sec.  45, by 
lessening competition in the market for branded seasoned salt in the 
United States.

II. Description of the Parties

    McCormick is a corporation organized, existing, and doing business 
under and by virtue of the laws of the state of Maryland. The company 
manufactures, markets, and sells spices, seasonings, and flavors to 
grocery retailers and the food industry. In 2006, McCormick's sales 
were approximately $2.7 billion.
    Unilever N.V., a Netherlands corporation, is an international 
manufacturer of leading brands in the food, home care, and personal 
care industry, including Lawry's and Adolph's. In 2006, Lawry's and 
Adolph's brands combined sales were approximately $153 million.

III. Branded Seasoned Salt

    The relevant product market in which to assess the competitive 
effects of the proposed Acquisition is the manufacture and sale of 
branded seasoned salt products. Branded seasoned salt products include 
several different types of spices, including seasoned salt, garlic 
salt, and reduced sodium varieties. The evidence indicates that 
consumers, if faced with a five to ten percent increase in the price of 
branded seasoned salt, would not switch to other spice blends or 
seasoning products.
    The relevant geographic market in which to assess the impact of the 
Proposed Acquisition is the United States. Brand equity plays a 
critical role in determining the competitive strength of a seasoned 
salt product. Consistent with Commission findings in previous branded 
consumables cases, the need for distribution, infrastructure, and a 
U.S. sales force creates significant impediments to the ability of 
foreign firms to successfully and competitively sell branded seasoned 
salt into the United States.
    The United States market for branded seasoned salt is highly 
concentrated. Today, this approximately $100 million market consists of 
two significant branded products: Lawry's line of seasoned salt 
products and McCormick's Season-All products. The Proposed Acquisition 
would significantly increase market concentration and eliminate 
substantial competition between the only two significant suppliers of 
branded seasoned salt products in the United States. As a result of the 
acquisition, McCormick would account for nearly 80% of the sales of 
branded seasoned salt products in the United States.
    Consumers have benefitted from the competition between McCormick 
and Lawry's on pricing, discounts, promotional trade spending, and 
product innovation. Thus, unremedied, the proposed acquisition likely 
would cause significant anticompetitive harm by enabling McCormick to 
profit by unilaterally raising the prices of one or both products above 
pre-merger levels, as well as reducing its incentives to innovate and 
develop new products.

IV. Entry

    Entry into this market would require the investment of high sunk 
costs to, among other things, develop products, establish a brand name, 
and provide promotional funding and advertising to support the 
product(s), which would be difficult to justify given the market 
structure and sales opportunities in the affected markets. Even if a 
new entrant were willing to take on such investments, it would also 
face the difficult task of convincing retailers to carry its products. 
As a result, new entry into any of these markets sufficient to achieve 
a significant market impact within two years is unlikely.

V. The Terms of the Agreement Containing Consent Orders

    The proposed Consent Agreement will remedy the Proposed 
Acquisition's anticompetitive effects in the relevant market. The 
Consent Agreement preserves competition in the branded seasoned salt 
market by requiring McCormick to divest its Season-All (seasoned salt 
spice blends) business to an up-front buyer, Morton. The Season-All 
assets include: Season-All seasoned salt, Garlic Season-All seasoned 
salt, Pepper Season-All seasoned salt, Spicy Season-All seasoned salt, 
25% Less Sodium Season-All seasoned salt, and Season-All coating mix.
    The Commission is satisfied that Morton is a well-qualified 
acquirer of the Season-All business. Morton supplies an extensive 
variety of salt products to the food service industry. These products 
currently include table salt, kosher salt, French fry salt, as well as 
disposable shakers, portion packets, water softening salts, and ice 
control salts. Morton has the resources, technical skills, and 
experience to ensure the continued success of the Season-All business.
    The proposed Consent Agreement requires that the divestitures occur 
no later than ten (10) business days after the acquisition is 
consummated. However, if McCormick divests the Season-All business to 
Morton during the public comment period, and if, at the time the 
Commission decides to make the order final, the Commission notifies 
Respondent that Purchaser is not an acceptable acquirer or that the 
asset purchase agreement with Purchaser is not an acceptable manner of 
divestiture, then Respondent must immediately rescind the transaction 
in question and divest those assets to another buyer within three (3) 
months of the date the order becomes final. At that time, Respondent 
must divest those assets only to an acquirer that receives the prior 
approval of the Commission and only in a manner that receives the prior 
approval of the Commission.
    The proposed Consent Agreement also enables the Commission to 
appoint a trustee to divest any assets identified in the order that 
Respondent has not divested to satisfy the requirements of

[[Page 45453]]

the order. In addition, the order enables the Commission to seek civil 
penalties against Respondent for non-compliance with the order.
    The proposed Consent Agreement further requires McCormick to 
maintain the viability of the assets identified for divestiture. Among 
other requirements related to maintaining operations of the assets, the 
proposed Consent Agreement requires McCormick to: (1) maintain the 
viability, competitiveness, and marketability of the assets to be 
divested; (2) not cause the wasting or deterioration of the assets to 
be divested; (3) not sell, transfer, encumber, or otherwise impair the 
assets' marketability or viability; (4) maintain the assets consistent 
with past practices; (5) use best efforts to preserve the assets' 
existing relationships with suppliers, customers, and employees; and 
(6) keep and maintain the assets at inventory levels consistent with 
past practices.
    The proposed Consent Agreement prohibits McCormick, for ten (10) 
years, from acquiring, without providing the Commission with prior 
notice, any other seasoned salt product, or any interest in any other 
spice blends business. The provisions regarding prior notice are 
consistent with prior Orders. The proposed Consent Agreement does not 
restrict McCormick from expanding its line of spices.
    McCormick is required to file compliance reports with the 
Commission, the first of which is due within thirty (30) days of the 
date on which Respondent signed the proposed Consent Agreement, and 
every thirty (30) days thereafter until the divestitures are completed, 
and annually for ten (10) years.
    The purpose of this analysis is to facilitate public comment on the 
proposed Consent Agreement, and it is not intended to constitute an 
official interpretation of the proposed Decision and Order and the 
Order to Maintain Assets, or to modify their terms in any way.
    By direction of the Commission.

Donald S. Clark,
Secretary of the Commission.
[FR Doc. E8-17868 Filed 8-4-08: 8:45 am]
[BILLING CODE 6750-01-S]