Promodes, S.A

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF PROMODES, S.A., ET AL.

Docket 9228. Show Cause Order, May 12, 1993 ORDER TO SHOW CAUSE On May 17, 1990, the Federal Trade Commission issued an order against Promodes, S.A. and Red Food Stores, Inc. (collectively, “respondents”) in Docket No. 9228. Paragraph II of the order, among other things, requires respondents to divest six specific supermarkets in the Chattanooga, Tennessee Metropolitan Statistical Area, by March 1, 1991, to an acquirer or acquirers that receives the prior approval of the Commission. Paragraph II of the order also requires respondents to maintain the viability and marketability of the supermarkets pending divestiture. Paragraph II of the order provides for the appointment of a trustee to divest the supermarkets in the event respondents have not accomplished the divestitures mandated by paragraph II of the order in a timely manner.

Respondents did not divest the supermarkets by March 1, 1991, as required by paragraph IJ of the order. On January 6, 1992, the Commission appointed Neill A. Thompson, III, as trustee pursuant to paragraph III of the order. Since his appointment, Mr. Thompson has divested one supermarket pursuant to the order and has filed an application for Commission approval to divest another. By letter dated May 12, 1993, the Commission extended the trustee’s time to divest certain of the supermarkets covered by the order, but did not extend the time to divest the supermarkets described in paragraphs I(A)(1) (“the Lee Highway store”) and II(A)(2) (‘the Fort Oglethorpe store”’) of the order.

The trustee made all reasonable efforts to obtain offers for the Lee Highway and Fort Oglethorpe stores. Despite these efforts, he was unable to divest the supermarkets. It now appears to the Commission that it is extremely unlikely that the Lee Highway and PROMODES, S.A., ET AL. 333 332 Interlocutory Order Fort Oglethorpe stores can be divested within a reasonable time. Certain structural problems with the building housing the Lee Highway store make it unattractive to potential acquirers. These problems arose subsequent to the order and are beyond the control of the respondents to correct. Although the trustee’s compliance reports indicate that at one time there was some interest in purchasing this store, that interest has dissolved in large part due to the structural problems of the building that arose subsequent to the order.

Also subsequent to the order, new supermarkets have opened in the immediate vicinity of the Fort Oglethorpe store, resulting in a substantial decrease in its sales and creating considerable doubt about its future viability as a supermarket. In addition, no potential acquirer has shown a specific interest in this supermarket. The order does not expressly provide for the termination of the respondents’ obligation under paragraph II to divest in the event that the trustee appointed pursuant to paragraph III is not able to divest all the supermarkets. Accordingly, respondents continue to be obligated to divest the supermarkets and to maintain the supermarkets pending divestiture. However, the record in this case establishes that it is extremely unlikely that the required divestiture of the Lee Highway and Fort Oglethorpe stores can be accomplished within a reasonable time, notwithstanding the trustee’s good faith efforts to divest the stores. The costs to respondents of further divestiture efforts therefore are an inequitable and unbargained-for element of the consent order.' In view of the foregoing, the Commission has determined in its discretion that it is in the public interest to reopen the proceeding in Docket No. 9228 and modify the order in this case by setting aside paragraphs II(A)(1) and II(A)(2).

} We distinguish the costs imposed on a respondent by continued attempts to comply with an order requirement made ineffectual by subsequent events from the kinds of costs ordinarily imposed by an order. For example, certain definable and predictable costs are always associated with a respondent’s compliance obligations under a consent order. These costs are accepted by the respondent as part of the settlement of the case.

Interlocutory Order 116 F.T.C.

Accordingly, the Commission hereby issues this Order to Show Cause why the proceeding in Docket No. 9228 should not be reopened to modify the order as described above. In accordance with Section 3.72 of the Commission’s Rules of Practice and Procedure, 16 CFR 3.72, respondents have thirty (30) days from the date of service of this order to file an answer to this Order to Show Cause or be deemed to have accepted the action proposed herein.

KKR ASSOCIATES, L.P., ET AL. 335 335 Modifying Order