Southland Corporation

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IN Tile MATIER OF THE SOUTHLAND CORPORATION, ET AL.

CONSENT ORDER, ETC. , IN GARD TO ALLEGED VIOLATIONS OF SEC. 5 Of" THE FEDERAL TRADE COMMISSION ACT AND SEe. 7 OF THE CLAYTON ACT Doket 9127. Complaint, Aprl 1979-DecU, Feb. 1980 This consent order requires, among other things, The Southland Corpration (Southland), a Dallas, Texas dairy procssor, to refrain for seven years from acquiring, without prior Commission approval: 1) any fluid milk proing plant, distribution facility or route within a 150-mile raius of a Southland fluid milk processing plant or distribution facility; 2) any such company or plant located within a 150- to 500-mile radius of a Southland fluid milk processing plant or distribution facility, which prosse more than 26 millon pounds of Class I milk within any of the three years prior to the acquisition; or 3) any fluid milk processing company that processes 300 milion pounds of Class I milk annually.

Appearances For the Commission: James R. Chamber/,in and Robert C. Cheek. For the respondents: Peter K. Bleaktey, Arrld Parr Wash. 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 result in a violation of Section 7 of the Clayton Act, as amended, 15 U. C. 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U. C. 45; and that a proceeding in respect thereof would be in the public interest, hereby issues its complaint, pursuant to Section 5(b) of thc Federal Trade Commission Act, 15 U. C. 45(b), stating its charges as follows: I. DEFINITION 1. For the purpose of this complaint, the term "San Antonio market area" refers to the Office of Management and Budget's Standard Metropolitan Statistical Area for San Antonio, Texas which is composed of the three counties of Bexar, Comal, and Guadalupe. Complaint 95 F.

II. THE SOUTHLAND CORPORATION 2. The Southland Corporation ("Southland") is a corporation organized and existing under the laws of the State of Texas with its principal office at 2828 North Haskell Ave. , Dallas, Texas. 3. Southland is a major operator and franchisor of convenience food stores doing business almost exclusively under the " Eleven brand name. As of December 31, 1977, Southland owned or franchised 357 convenience food stores throughout forty states, tl.e District of Columbia, and Canada.

4. Southland is also one of the nation s largest dairy processors. Since 1960, Southland has acquired approximately twenty-nine other dairy processors and currently sells packaged fluid milk in thirty states and the District of Columbia under twelve strong regional brand names. In 1978 Southland processed over one bilion pounds of packaged fluid milk.

5. In the fiscal year ending December 31, 1977, Southland reported total net sales of $2 536 109 000 of which approximately $344 807 000 were packaged fluid milk products.

III. KNOWLTON , INC.

6. Knowlton, Inc. ("Knowlton ) is a corporation organized and existing under the laws of the State of Texas with its principal office at 1314 Fredericksburg Road, San Antonio, Texas. 7. Knowlton, a family owned firm, is the largest, or one of the largest, independent dairy processors in the San Antonio market area. In 1978, Knowlton s processed approximately 44 857 000 pounds of packaged fluid milk.

8. Knowlton s also owns and operates nine milk and ice cream stores in the San Antonio market area.

9. In 1978 Knowlton s reported $10 988,416 total net sales of which 009 000 were packaged fluid milk products. IV. JURISDICTION 10. At all times relevant herein, Southland and Knowlton s have engaged in commerce, as " commerce" is defined in Section 1 of the Clayton Act, as amended, and their activities, including those challenged herein, are in or affect commerce, as "commerce is defined in Section 4 of the Federal Trade Commission Act, as amended. 337 Complaint V. THE ACQUISITION AGREEMENT 11. On or about January 31, 1979, Southland and Knowlton entered into an agreement whereby Southland would acquire 100% of Knowlton s assets, including the dairy processing plant and the nine milk and ice cream stores, for approximately $3.3 million. The acquisition is scheduled to be consummated on April 30, 1979. VI. TRADE AND COMMERCE 12. The relevant line or relevant lines of commerce are the processing, distribution and sale of packaged fluid milk and the processing and wholesale distribution of packaged fluid milk. 13. A relevant section of the country is the San Antonio market area.

14. The lines of commerce described in Paragraph 12 in the San Antonio market area are highly concentrated. VII. ACTUAL COMPETITION 15. From its Oak Farms plants in Dallas and Houston, Southland ships packaged fluid milk to its distribution center in San Antonio Texas. Southland then sells packaged fluid milk from this distribution center throughout the San Antonio market area. 16. Knowlton s seHs packaged fluid milk in the San Antonio market area from its one plant located in San Antonio. 17. Southland and Knowlton s are presently and have been for many years actual competitors for packaged fluid milk sales in the San Antonio market area.

VIII. EFFECTS: VIOLATIONS CHARGED 18. The effects of thc proposed acquisition may be substantially to lessen competition or tend to create a monopoly in the relevant markets, in violation of Section 7 of the Clayton Act, as amended, 15 C. 18, and the acquisition agreement is an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U. C. 45, in the following ways, among others: (a) actual competition between Southland and Knowlton s for packaged fluid milk sales in the San Antonio market area wi1 be eliminated;

(b) already high levels of concentration will increase; (c) Knowlton, the largest, or one of the largest, independent dairies Decision and Order 95 F. in the market and a known price competitor will be elirrnated from competition; and (d) additional acquisitions and mergers between dairy processors may be fostered, causing a further substantial lessening of competition and increasing concentration.

19. The acquisition, if consummated, would for the reasons set forth herein, constitute a violation of Section 7 of the Clayton Act, as amended, 15 U. C. 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U . C. 45.

20. By entering into the agreement which would give rise to the violation described in Paragraph 18, herein, Southland and Knowlton have violated Section 5 of the Federal Trade Commission Act, as amended 15 U. C. 45.

Commissioner Pitofsky did not participate. DECISION AND ORDER The Commission having heretofore issued its complaint charging the respondents named in the caption hereof with violation of Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act, as amended, and the respondents having been served with a copy of that complaint, together with a notice of contemplated relief; and The respondents, their attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order an admission by the respondents of all the jurisdictional facts set forth in the complaint, a statement that the signing of said agreement is for settement purposes only and does not constitute an admission by respondents that the law bas been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Secretary of the Commission having thereafter withdrawn this matter from adjudication in accordance with Section 3.25(c) of its Rules; and The Commission having considered the matter and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, and having duly considered the comment filed tbereafter by an interested person pursuant to Section 3.25 of its Rules, now in further conformity with the procedure prescribed in Section 3.25(f) of its Rules, the Commission hereby makes the following jurisdictional findings and enters the following order:

1. Respondent The Southland Corporation is a corporation organized, existing and doing business under and by virtue of the laws of 337 Decision and Order the State of Texas with its office and principal place of business located at 2828 N. Haskell Ave., Dallas, Texas. Respondent Knowlton, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of Texas with its office and principal place of business located at 1314 Fredericksburg Road, San Antonio, Texas. Since on or about June 15 1979, an of Knowlton s assets have been owned by Southland. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER DEFINI110NS For purposes of this order the following definitions shan apply: (a) "Class I Milk" means packaged fluid whole milk, partiany skim milk (approximately 2% butterfat or less), skim milk, buttermilk cultured fluid milk products (except yogurt), flavored milk, and flavored milk drinks.

(b) "Southland" refers to The Southland Corporation, its subsidiaries, divisions, affiliates, successors and assigns. It ,is O"rdwred That Southland shan refrain, for a period of seven (7) years from the date of service upon it of this order, from acquiring, directly or indirectly, without prior approval of the Federal Trade Commission: (i) Any fluid milk processing plant, distribution facility or route (except those serving fluid milk processed by Southland exclusively) within a 150-mile radius of a Southland fluid milk processing plant or distribution facility; (ii) Any fluid milk processing company plant located within a radius of between 150 and 500 miles of a Southland fluid milk processing plant or distribution facility which in any of the three years prior to the acquisition processed more than 26 minion pounds of Class I milk; or (iii) Any fluid milk processing company that processes 300 minion pounds of Class I milk annuany; provided, however that if the Federal Trade Commission at any time during the seven (7) year period of this order should modify its Criteria for Assessing Future Mergers, as set forth in the Commission Enforcement Policy With Respect to Mergers in the Dairy Industry, the Commission will modify this order to conform to the modified Criteria.

Decision and Order 95 F. II.

It is further ordered That Southland shall within thirty (30) days after service upon it of this order file with the Commission a report setting forth in detail the location of its existing fluid milk processing plants, distribution facilities and routes (including those operated by Knowlton s). Thereafter annually for seven years, Southland shall file with the Commission a written report setting forth in detail the manner and form in which it has complied with this order and shall include in such report a current list of Southland's fluid milk processing plants, distribution facilities and routes. III.

It is further ordered That Southland shall notify the Commission at least thirty (30) days prior to any proposed corporate change such as dissolution, assignment or sale, resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change which may affect compliance obligations arising out of this order.

Commissioner Pitofsky did not participate. FORD MOTOR CO., ET AL.

Modifying Order