Broadway-Hale Stores, Inc.

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IN THE MATTER OF BROADWAY-HALE STORES, INC.

CONSENT ORDER , ETC. , IN REGARD TO THE ALLEGED VIOLATION OF SEC, 7 OF THE CLAYTON ACT April 14, 1966 Docket C-1057. Compla,int, April 14, 1966-Decision Consent order requiring a California chain department store, the 16th largest in the Nation, to cease and desist from acquiring without permission of the Federal Trade Commission any department or GMF A (General Merchandise, Apparel, Furniture) store for a period of 5 years, unless the Commission, through an industry\vide proceeding, issues rules or guidelines covering such acquisitions.

COMPLAINT The Federal Trade Commission, having reason to believe that the above-named respondent has violated the provisions of Sec- Complaint 69 F.

tion 7 of the Clayton Act, 15 U. C, , and that a proceeding in respect thereof would be to the interest of the public issues this complaint, stating its charges as follows: I. DEFINITIONS 1. For the purpose of this complaint, the following definitions shall apply:

(a) "Apparel" includes all clothing and related articles and accessories for personal wear and adornment, exclusive of footwear for men, women and children. This definition corresponds to Bureau of Census commodity classifications 140 and 160, combined as used in the 1963 Census of Business.

(b) "Department stores" are retail stores normally employing 25 or more people and engaged in sellng some items in each of the following Jines of merchandise:

(i) Furniture, home furnishings, appliances, radio and TV sets;

(ii) A general line of apparel; and (iii) Household Jinens and dry goods.

An establishment with annual total sales of less than $5 milion is not classified as a "department store" if: (a) sales of anyone of these groups is greater than 80 percent of total sales, or (b) sales of groups(ii) and (iii) combined represent Jess than 20 percent of totai sales. An establishment with annual total sales of $5 million or more is classified as a "department store" even if sales of one of the groups described above is more than 80 percent of total sales, provided that the combined annual sales of the other two groups is $500,000 or more, This definition corresponds to Bureau of Census Industry Classification ::oo 531, as used in the 1963 Census of Business, (c) "General Merchandise, Apparel, Furniture stores " hereinafter referred to as "GMAF stores," include retail establishments in the following categories:

(i) Department stores;

(ii) Other stores primarily engaged in the sale of apparel; Bureau of Census Major Industry Group No. 56; (iii) Limited price variety stores-establishments primarily selling a variety of merchandise at low and popular price ranges , light such as stationery, gift items, accessories, toilet articles hardware, toys, housewares, confectionery; these establishments frequently are known as "5 and 10 stores " although they usu- BROADWAY-HALE STORES, INC, 603 601 Complaint ally sell merchandise outside these price ranges; these stores comprise Bureau of Census Industry Classification No. 533; (iv) Miscelianeous general merchandise stores-retail stores primarily selling household linens and dry goods and/or a combination of apparel, hardware, homewares or home furnishings; stores which meet the criteria for department stores except as to number of employees are included here: these stores comprise Bureau of Census Industry Classification No. 539. (v) Furniture, home furnishings, and equipment stores-retail stores primarily sellng merchandise used in furnishing the home such as furniture, floor coverings, draperies, glass and china ware domestic stoves, refrigerators, and other household electrical and gas appliances, including radio and TV sets; such stores comprise Bureau of Census .Major Industry Group No. 57. G.MAF stores, as defined herein, correspond to all retail store groups under Bureau of Census :VIajor Industry Groups No. 53 , and 57.

II. BROADWAY-HALE 2. Respondent, Broadway-Hale Stores, Inc. , hereinafter referred to as "Broadway-Hale " is a corporation organized and existing under the laws of the State of Delaware, with its principal offce and principal place of business located at 600 South Spring Street, Los Angeles, California, 90014.

3. Broadway-Hale is the sixteenth largest department store company in the United States, and the largest department store company based in the Western United States. Its 27 department stores are among the ieading mercantile establishments in the areas where they are located. Broadway-Hale s annual sales are approximately $220 milion; its total assets are approximately $150 milion; and its accumulated earnings exceed $32 milion, 4. Since the middle 1950' , Broadway-Hale has engaged in a program of acquiring existing department stores: In 1956, Broadway-Hale purchased a store in the Los Altos Shopping Center near Long Beach, California; this store is now operated as the Broadway-Long Beach. " In March 1960, the company acquired Coulter, a Los Angeles area department store; the principal Coulter s property is now operated as the "Broadway-Wilshire store. On January 1, 1961 , Broadway-Hale acquired The Marston Company; the acquisition consisted of a 240 000 square-foot store in downtown San Diego and a store under construction at La Mesa, in suburban San Diego, that now operate under the name Complaint 69 F. T.

Broadway-Marston " In June 1962, Broadway-Hale acquired Karrick' , Inc., Phoenix, Arizona; its two department stores are now operated as a division of Broadway-Hale. In February 1963 Broadway-Hale acquired Smith & Lang Co., a department store in Stockton, California, which now operates under the name "Weinstock, Lubin.

5. Broadway-Hale is and for many years has been extensively engaged in the purchase across state lines of goods for resale and in the shipment of goods across state lines. Broadway-Hale is engaged in "commerce" within the meaning of the Clayton Act. !I, EMPORIUM CAPWELL 6. The Emporium Capwell Company, hereinafter referred to as Emporium Capwell " is a corporation organized and existing under the laws of the State of California, with its principal offce and principal place of business located at 835 Market Street, San Francisco, California 94103.

7. Emporium Capweli is the leading department store company in the San Francisco Bay area of N' orthern California. Its ten well-located department stores cover the entire Bay area, and have annual sales of approximately $150 milion. Emporium Capwell' s total assets are about $110 million, and its accumulated earnings are approximately $22 million.

8. Emporium Capwell is and for many years has been extensively engaged in the purchase across state lines of goods for resale and in the shipment of goods across state lines. Emporium Capweli is engaged in "commerce" within the meaning of the Clayton Act.

IV. NATURE OF TRADE AND COMMERCE 9. GMAF stores comprise the second largest group of retailers in the United States, with a sales volume of approximately $55 bilion in 1963; they are exceeded in sales volume only by retail food stores. GMAF store sales represent approximately 23% of all retail sales in the United States.

10. Within the GMAF store group, department stores constitute the largest component, accounting for 37% of total GMAF store sales. Department stores, moreover, are the third most important group of retail stores in the United States, exceeded in sales volume only by food stores and automotive dealers and stores, Their nationai sales volume of approximately $20.5 billion in 1963 represented about 870 of ali retail sales in the country. BROADWAY-HALE STORES, INC 605 601 Complaint Department stores account for approximately 35 % of apparel sales, 43% of women s and children s apparel sales, and 46% of household linen and dry goods sales.

11. Department stores are recognized by the consuming public and in the trade as a distinct line of business: (a) They are particularly favored by the public because they sell a cluster of commodities and services not duplicated by other retailers, They offer the opportunity to satisfy under one roof shopping needs for a wide varieity of merchandise, including apparel, household linens and dry goods, furniture, appliances, and other housewares. This package of products is combined with an array of services such as the extension of credit, delivery of goods, the sending of goods on approval with liberal return privileges, fashion shows, and a number of other services. Moreover frequently they enjoy a favorable image of stability and respectability attributable, at least in part, to their size and importance as retailers in the communities which they service, (b) In the last connection, department stores enjoy an image which derives, at least in part, from the fact that they are the major advertisers in the communities which they serve, usually advertising more than all other GMAF stores combined-as is the case in San Francisco, where the four leading department store advertisers alone account for four-fifths of total department store advertising and approximately as many lines of advertising as all other GMAF stores (including the remaining department stores) combined. As a result of department stores' enormous advertising expenditure, they frequently receive preferred treatment from newspapers in the form of free publicity. (c) Statistics on department store sales and other economic data relating to department stores, institutionally classified as such, are regularly gathered and published by the United States Bureau of Census, the various Federal Reserve Banks, various State agencies, the National Retaij Merchants Association, universities and other trade publications and organizations. 12, Since at least 1954, there has been a substantial degree of concentration in the department store industry. Moreover, between 1954 and 1961 , concentration among department store chains steadily and significantly increased. The following represent the appropriate shares of department store sales commanded by the nation s largest department store chains with eleven or more department stores, during this period: Complaint 69 F. T.

1954 1961 Five largest 38% 41% Ten largest 50% 56% Twenty largest 57% 66% 13. The significant increase in concentration in the department store industry between 1954 and 1961 is largeiy attributable to the expansion of the major chains by mergers and acquisitions. During this period, the twenty largest department store chains have made approximately 60 acquisitions of department store companies throughout the United States, invoiving some 160 stores.

14, The competitive impact of mergers and concentration in the department store industry, and of the growth of national companies, has been felt both in local and national markets and on both the buying and selling sides of the markets in which department stores operate. On the selling, or retail, side of the market, mergers have become a substitute for internal expansion into new markets by existing department store companies, such as Broadway-Hale. The merger movement has thus eliminated potential competition and has tended to remove the threat of entry of department store companies and the restraining influence which the threat of such entry may have upon non-competitive behavior. The replacement of independent local concerns by national department store companies has tended to discipline the market behavior of smaller competitors reluctant to enter into competition with companies many times their size and with many times their financial resources, and has tended to bring about a deterioration of the vigor of competition among those national department store companies which face one another in several markets. On the buying side of the market, suppliers have tended to favor such national companies, because of their power as large buyers, with preferences and advantages over their purchasers, V. VIOLATIONS CHARGED 15, Between September 28, 1956, and May 15, 1964, Broadway-Hale has acquired approximately 24 % of the outstanding common stock of Emporium Capwell.

16. The Emporium Capwell acquisition by Broadway-Hale viewed as a part of its series of acquisitions as alleged in Paragraph 4 herein, and in the context of the trend toward concentration and the merger movement in the department store industry BROADWAY-HALE STORES , INC. 607 601 Decision and Order described in Paragraphs 12 and 13 herein, may substantially lessen competition or tend to create a monopoly in the department store industry and the GMAF store industry in the United States and in the sale and purchase of apparel and other merchandise sold by department stores and GMAF stores throughout the United States or certain sections thereof, in violation of Section 7 of the Clayton Act, as more fully described below in Paragraph 17, 17. The effects of the foregoing violation have been and may be the following, among others:

(a) Competition generally in the retaij sale of apparel and other merchandise distributed by GMAF stores, including department stores, may be substantially lessened; (b) Concentration in the department store industry, the GMAF store industry, and in the sale of apparel and other Jines of merchandise sold by department stores may be increased; (c) Deconcentration in the department store industry, the GMAF store industry, and in the sale of apparel and other lines of merchandise sold by department stores may be prevented; (d) Other acquisitions in the department store industry and the GMAF store industry may be encouraged or stimulated, thus multiplying the competitive impact of the instant acquisition, as hereinbefore described, and the department store industry and the GMAF store industry may thereby be transformed or further transformed from ones comprised of viable, independent, locallyowned businesses into concentrated and nationally-managed industries;

(e) Competition generally in the purchase by department stores and other GMAF stores and the sale by suppliers of apparel and other merchandise distributed by GMAF stores, including department stores, may be substantially lessened; (f) The members of the consuming public may be denied the benefits of free and unrestricted competition in the department store industry and the GMAF store industry, and in the sale and purchase of apparel and other merchandise distributed by GMAF stores, including department stores.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the Order 69 F.

caption hereof, to wit: the acquisition of the stock of The Emporium Capwe1l Company by the respondent Broadway-Hale Stores Inc. ; and the respondent having been furnished thereafter with a copy of a draft of complaint by the Bureau of Restraint of Trade and which draft of complaint, if approved and issued by the Commission, would charge respondent with vioiation of Section 7 of the Clayton Act, as amended; and The respondent and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of a1l 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 the respondent that the law has been violated as alleged in such complaint, and waivers and provisions as required by the Commission s rules; and The Commission, having reason to believe that the respondent has violated Section 7 of the Clayton Act, as amended, and having determined that complaint should issue stating its charges in that respect, hereby issues its complaint, accepts said agreement, makes the following jurisdictional findings and enters the following order:

1. Respondent Broadway-Hale Stores, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its offce and principal place of business located at 600 South Spring Street, Los Angeles, California 90014, 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent. ORDER It is orde?' ed, That, for five (5) years from the effective date of this order, respondent, Broadway-Hale Stores, Inc. , shall cease and desist from acquiring, directly or indirectly, without first notifying the Federal Trade Commission and obtaining its consent any department store or other GMAF store, or any interest in capital stock or other share capital, or any assets constituting a substantial part of a1l of the assets, of any concern engaged in the department store or other GMAF store business, other than The Emporium Capwe1l Company.

ELECTRA SPARK CO. ET AL, 609 601 Syllabus It is further ordered That Section I of this order shall terminate if the Federal Trade Commission, through trade regulation rules or other like nonadjudicative industrywide proceedings, issues rules or guide Jines covering the subject matter of this order. It is further ordered That, in the event the Federal Trade Commisssioll, in any adjudicative or consent order proceeding involving a market extension acquisition of one or more department or other GMAF stores by a company which owns or operates one or more department stores, issues any order which imposes limitations on future such market extension acquisitions less restrictive than the comparable provisions of this order, then the Federal Trade Commission shall, on application of respondent, pursuant to Rule 3.28 of the Commission s Rules of Practice, reopen this proceeding in order to make whatever revisions, if any, are necessary and appropriate to bring the restrictions imposed on respondent herein into conformity with those imposed by such order.

It is further ordered That, within sixty (60) days after the effective date of this order, and every ninety (90) days thereafter Broadway-Hale submit in writing to the Federal Trade Commission a report setting forth in detail the manner and form in which it is complying and intends to comply with the provisions of this order.

Commissioner Elman not concurring.