Lancaster Colony Corporation

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IN THE MATTER OF LANCASTER COLONY CORPORATION, ET AL.

DISMISSAL ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION AND CLAYTON ACTS Docket 9119. Complaint, Oct. 2.5, 1.978 - Dismissal Order, March 6, 1979 This order dismisses the complaint against two manufacturers of machine-made glassware alleging violations of Section 7 of the Clayton Act, and Section 5 of the Federal Trade Commission Act. The Commission, in dismissing the complaint, held that under the unique circumstances presented in this case further proceedings in the matter are not in the public interest. Appearances For the Commission: Edward T. Colbert and William D. Mitchell For the respondents: Richard Murphy and Fred A. Summer, Dunbar, Kiezel Murphy, Columbus, Ohio, Edward Wolf, J.B. Rather and R. W Davis, White Case, New York City and John W Barnum, White Case, Washington, D. COMPLAINT The Federal Trade Commission, having reason to believe that the above-named respondents, each subject to the jurisdiction of the Commission, have entered into an acquisition agreement which, if consummated, would violate Section 7 of the Clayton Act, as amended, 15 UB. C. , and Section 5 of the Federal Trade Commission Act, as amended, 15 U. c. 45, that said agreement already constitutes a violation of Section 5 of the Federal Trade Commission Act, as amended, and that a proceeding in respect thereof would be in the public interest, hereby issues its complaint, pursuant to Section 11 of the Clayton Act, 15 U.S. c. 21, and Section 5(b) of the Federal Trade Commission Act, 15 U. C. 45(b), stating its charges as follows:

Definition PARAGRAPH 1. For the purpose of this complaint, the following definition shall apply: "Machine-made glassware" means all moderately-priced soda-lime glass beverageware, tableware, food preparation glassware, and novelty and ornamental glassware items produced by machine.

LANCASTER COLONY CORP. ;"l ftu.

318 Complaint Federal Paper Board Company, Inc.

PAR. 2. Federal Paper Board Company, Inc. (Federal Paper) is a corporation organized and existing under the laws of the State of New York, with a principal place of business at 75 Chestnut Ridge Road, Montvale, New Jersey.

PAR. 3. Federal Paper through its unincorporated Federal Glass Company division (Federal Glass) produces machine-made glassware and sells said machine-made glassware throughout the United States.

PAR. 4. In its fiscal year ended December 31, 1977, Federal Paper had net sales of approximately $397 000 000, and net income of approximately $13 800 000; Federal Glass had net sales of approximately $48,000 000 and income before allocation for taxes and corporate overhead of approximately $910 000. PAR. 5. Federal Glass is the third largest manufacturer of machine-made glassware in the United States. PAR. 6. Federal Glass, until 1978, was for many years a member of the American Glassware Association, which is a trade association made up of the major domestic manufacturers of machine-made glassware.

Lancaster Colony Corporation PAR. 7. Lancaster Colony Corporation (Lancaster Colony) is a corporation organized and existing under the laws of the State of Delaware, with a principal place of business at 37 West Broad St. Columbus, Ohio.

PAR. 8. Lancaster Colony, through its subsidiary Indiana Glass Company, an Indiana corporation, produces machine-made glassware, and sells said machine-made glassware throughout the United States. Lancaster Colony also produces machine-made glassware through its subsidiary Lancaster Glass Corporation, an Ohio corporation, and sells said machine-made glassware throughout the United States.

PAR. 9. In its fiscal year ended June 30, 1978, Lancaster Colony had sales of approximately $237 000 000, and net income of approximately $23 300 000. Lancaster Colony had sales of machine-made glassware of approximately $35,500 000.

PAR. 10. Indiana Glass Company is the fourth largest manufacturer of machine-made glassware in the United States. vV1V.11Vll::SION . DECISIONS Complaint 93 F.

PAR. 11. Indiana Glass Company, until 1978, was for many years a member of the .American Glassware Association, which is a trade association made up of the major domestic manufacturers of machine-made glassware.

Jurisdiction PAR. 12. At all times relevant herein Federal Paper and Lancaster Colony have been engaged in the manufacture and sale of machinemade glassware in interstate commerce and are engaged in commerce as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 UB. C. , and each is a corporation whose business is in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U. c. 44. The Acquisition Agreement PAR. 13. On or about April 1978 Federal Paper and Lancaster Colony agreed in principle to the acquisition by Lancaster Colony of all Federal Glass assets of Federal Paper. The proposed purchase agreement provides, inter alia. for the sale of the Federal Glass assets of Federal Paper in exchange for approximately $42 000 000. A letter of intent was executed by Lancaster Colony on August 29 1978.

Trade and Commerce PAR. 14. Relevant lines of commerce are the manufacture and sale of machine-made glassware and submarkets thereof. PAR. 15. A relevant section of the country or geographic market is he entire United States.

PAR. 16. The United States machine-made glassware market is ighly concentrated with the combined market share of the four rgest manufacturers estimated to be approximately 74 percent. PAR. 17. Barriers to entry into the manufacture of machine-made lssware and submarket thereof are substantial. 318 Complaint VII Actual Competition PAR. 18. Federal Paper and Lancaster Colony are and have been for many years actual competitors in the manufacture and sale of machine-made glassware and submarkets thereof, and actual competitors of others engaged in the manufacture and sale of machinemade glassware and submarkets thereof throughout the United States.

VII Effects PAR. 19. The effect of the proposed acquisition may be to substantially lessen competition or to tend to create a monopoly in the relevant market in violation of Section 7 of the Clayton Act. as amended, 15 U. C. 18, or Section 5 of the Federal Trade Commission Act, as amended, 15 U. C. 45, in the following ways, among others: (a) actual competition between Federal Paper and Lancaster Colony in the manufacture and sale of machine-made glassware and submarkets thereof wil be eliminated;

(b) actual competition between competitors generally in the manufacture and sale of machine-made glassware and submarkets thereof may be lessened;

(c) Federal Paper wil be eliminated as an actual substantial independent competitor in the manufacture and sale of machinemade glassware and submarkets thereof;

(d) concentration in tbe manufacture and sale of machine-made glassware and submarkets thereof will be increased and possibilities for eventual deconcentration may be diminished; (e) mergers or acquisitions between other machine-made glassware manufacturers may be encouraged, thus causing a further substantial lessening of competition and tendency toward monopoly in the relevant markets.

Violations Charged PAR. 20. The proposed acquisition by Lancaster Colony of the Federal Glass assets of Federal Paper (if consummated), the proposed Purchase Agreement between Lancaster Colony and Federal Paper (if executed), and the agreement in principle between .22 FEDERAL TRADE COMMISSION DECISIONS Dismissal Order 93 F. Lancaster Colony and Federal Paper, constitute violations of Section 7 of the Clayton Act, as amended, 15 V. C. 18, and are or would be unfair acts, practices or methods of competition in violation of , 15Section 5 of the Federal Trade Commission Act, as amended V.s. C. 45.

ORDER GRANTING COMPLAINT COUNSEL MOTION To WITHDRAW I'ROM ADJUDICATION AND To DISMISS THE COMPLAINT The administrative law judge (ALJ) has certified to the Commission the motion of respondent Federal Paper Board Company, Inc. (Federal) to terminate this proceeding by an order prohibiting the sale of any of the assets of its Federal Glass Division (Division) to respondent Lancaster Colony Corporation (Lancaster). Also certified to the Commission is complaint counsel's motion to withdraw the case from adjudication and to dismiss the complaint. The ALJ recommends that the Commission accept Federal's motion and deny that of complaint counsel.

The Division has been closed since January 31, 1979, when Federal announced the shutdown of its plant, alleging continuing operating losses. However, Federal has refused to provide complaint counsel with financial and other relevant information in support of its failing company" defense. In their papers, complaint counsel note that the withdrawal of the Wheaton Glass Co. and the Eastcllff Corporation from negotiations to purchase the Division have exhausted all feasible alternatives to liquidation of the Division or sale to Lancaster. Complaint counsel recognize the possibility that some other purchaser might exist but suggest that the slight chance of identifying another party which will expeditiously return the plant to normal operation is not worth the gamble of approximately 1500 jobs at stake. Counsel further point out that liquidation of the Division could result in the loss of its customers to the two largest firms in this industry, Anchor Hocking Corporation and the Libbey Division of Owens-Ilinois.

Under these rather unique circumstances, and in the exercise of our discretion, we conclude that further proceedings in this matter are not in the public interest. Accordingly, It is ordered, That the complaint in this matter is hereby dismissed.

323 Interlocutory Order