S.C. Johnson & Son, Inc

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

IN THE MATTER OF S.C. JOHNSON & SON, INC.

MODIFYING ORDER IN REGARD TO ALLEGED VIOLATION OF SEC, 7 OF THE CLAYTON ACT AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3418. Consent Order, Mar. 16, 1993--Modifying Order, Nov. 8, 1993 This order reopens the proceeding and modifies the Commission's consent order issued on March 16, 1993 (116 FTC 184), by removing the requirements that the respondent hold separate and divest the international Renuzit assets to a Commission-approved acquirer. The Commission concluded that the hold separate and divestiture requirements are imposing costs on the respondent and that there do not appear to be any competitive reasons to retain the divestiture requirement.

ORDER REOPENING PROCEEDING AND MODIFYING ORDER On July 8, 1993, S.C. Johnson & Son, Inc. ("Johnson") filed a Request To Reopen and Modify Consent Order ("Request") pursuant to Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. 45(b), and Rule 2.51 of the Commission's Rules of Practice, 16 CFR 2.51. The request was placed on the public record, and the thirty-day comment period expired on August 23, 1993. No comments were received.

In the request, Johnson asks that the Commission reopen and modify the order to eliminate any remaining obligation under paragraph II to divest the Renuzit5 1 9 2 3 7 1267 2160 50 35 96.990990 air5 1 9 2 3 8 1336 2161 184 36 96.741234 freshener5 1 9 2 3 9 1539 2163 165 36 96.601952 business5 1 9 2 3 10 1725 2164 141 36 96.567551 outside5 1 9 2 3 11 1887 2165 58 35 96.958130 thea 1 9 2 4 0 622 2214 1322 45 -1 5 1 9 2 4 1 622 2214 131 35 96.640823 United5 1 9 2 4 2 769 2215 113 36 96.882835 States5 1 9 2 4 3 898 2217 67 34 95.971504 ands 1 9 2 4 4 981 2217 44 34 95.971504 all5 1 9 2 4 5 1042 2218 265 36 96.601067 non-domestic5 1 9 2 4 6 1324 2220 189 36 96.610443 territories5 1 9 2 4 7 1530 2232 40 24 96.841408 or5 1 9 2 4 8 1584 2223 179 34 96.841408 countries5 1 9 2 4 9 1780 2223 34 34 96.897179 in5 1 9 2 4 10 1830 2223 114 36 96.698067 North4 1 9 2 5 0 622 2273 1320 49 -1 5 1 9 2 5 1 622 2273 177 41 94.213974 America,5 1 9 2 5 2 816 2274 99 34 97.011833 north5 1 9 2 5 3 931 2274 41 35 96.956009 of5 1 9 2 5 4 984 2276 67 34 96.768700 ands 1 9 2 5 5 1067 2275 183 47 96.707344 including5 1 9 2 5 6 1266 2277 164 41 96.561852 Panama,5 1 9 2 5 7 1447 2279 57 35 96.543701 thes 1 9 2 5 8 1519 2280 202 35 96.311966 Caribbean5 1 9 2 5 9 1737 2282 68 34 96.646591 ands 1 9 2 5 10 1821 2281 121 36 96.447075 Cuba (“international Renuzit assets"). In the alternative, Johnson requests that the Hold Separate Agreement ("Hold Separate"), dated December 17, 1992, and made a part of the order, be terminated promptly since Johnson has completed the sale of all of the North American Renuzit assets.

S.C. JOHNSON & SON, INC. 1291 1290 Modifying Order The order defines the Renuzit5 1 3 1 1 6 1356 635 144 36 95.862976 Assets as including all of Drackett's right, title and interest in and to both its air freshener products business, including the Renuzit brand, and its furniture care products business, including the Endust and Behold brands.' The order only requires divestiture of the production facilities associated with either air freshener or furniture care products if desired by the acquirer. In defining the Renuzit Assets, the order does not distinguish domestic assets from international assets nor does it exclude the international Renuzit assets from the divestiture and hold separate requirements. The complaint identified the relevant geographic market for continuous and instant action air fresheners products as being the United States. On May 14, 1993, the Commission approved Johnson's divestitures of the Endust and Behold furniture care products business to Sara Lee Corporation ("Sara Lee") and the North American Renuzit air freshener products business to The Dial Corp. ("Dial"). As it lacked international operations, Dial did not acquire the international Renuzit air freshener business from Johnson, and following the divestitures on May 18, 1993, Johnson retained the international Renuzit assets.

Johnson asserts that reopening and modifying the order to eliminate Johnson's obligation to divest the remaining international Renuzit assets will serve the public interest. The international Renuzit assets, which were not included in the divestiture to Dial, consist of certain air freshener patents, trademarks, inventory and technology necessary to market Renuzit air freshner products outside of North America. Johnson does not request a reopening Paragraph I.G. of the order states: Renuzit5 1 5 1 1 8 1229 2262 96 25 83.903870 Assets means all of Drackett's rights, title and interest in and to:

(1) Air freshener products, including, but not limited to the brands and trademarks “Renuzit," Renuzit5 1 5 2 2 2 726 2386 161 30 82.783470 Adjustable, Renuzit Roommate,” Renuzit5 1 5 2 2 6 1326 2382 126 27 78.318298 Freshell, Renuzit5 1 5 2 2 8 1597 2382 129 29 96.726120 Fragrance5 1 5 2 2 9 1744 2381 58 26 72.984650 Jar,”5 1 5 2 2 10 1822 2380 114 23 49.926189 Renuzit Aerosol,"and “Renuzit Fresh'n Dry";

(2) Furniture care products, including, but not limited to, the brands and trademarks Endust and Behold, but excluding the brand and trademark Mr.5 1 5 3 2 9 1326 2500 107 24 74.465652 Muscle”5 1 5 3 2 10 1445 2499 93 24 96.253792 outside5 1 5 3 2 11 1550 2499 37 23 96.253792 thes 1 5 3 2 12 1599 2498 86 24 96.891174 United5 1 5 3 2 13 1696 2498 85 27 96.240425 States;5 1 5 3 2 14 1793 2498 44 23 96.983582 and3 1 5 4 0 0 597 2537 1339 114 -1 4 1 5 4 1 0 670 2537 1265 34 -1 5 1 5 4 1 1 670 2543 36 28 96.693848 (3)5 1 5 4 1 2 726 2543 38 23 95.976379 All5 1 5 4 1 3 776 2542 27 24 93.306145 of5 1 5 4 1 4 812 2542 131 24 33.594223 Drackett's5 1 5 4 1 5 954 2546 74 19 96.550133 assets5 1 5 4 1 6 1039 2542 45 22 96.578804 ands 1 5 4 1 7 1096 2541 109 23 96.541519 business5 1 5 4 1 8 1216 2540 135 23 96.541519 associated5 1 5 4 1 9 1362 2539 56 23 97.018501 with5 1 5 4 1 10 1430 2539 37 23 96.978973 thes 1 5 4 1 11 1477 2539 177 29 96.656807 development,5 1 5 4 1 12 1666 2538 148 30 93.300346 production,5 1 5 4 1 13 1825 2537 110 23 93.140579 distribu-4 1 5 4 2 0 597 2576 1339 34 -1 5 1 5 4 2 1 597 2582 56 24 88.850136 tion,5 1 5 4 2 2 664 2582 45 23 96.851120 ands 1 5 4 2 3 720 2582 49 23 96.967651 sales 1 5 4 2 4 780 2581 36 23 96.967651 for5 1 5 4 2 5 826 2581 75 23 96.990471 resales 1 5 4 2 6 912 2580 28 24 96.979004 of5 1 5 4 2 7 948 2581 34 22 96.979004 air5 1 5 4 2 8 992 2580 120 23 96.908630 freshener5 1 5 4 2 9 1122 2580 111 30 96.677078 products5 1 5 4 2 10 1245 2579 45 23 96.995407 ands 1 5 4 2 11 1302 2578 113 24 96.130257 furniture5 1 5 4 2 12 1426 2584 52 17 96.130257 cares 1 5 4 2 13 1489 2578 112 30 96.841339 products5 1 5 4 2 14 1612 2578 44 21 96.889786 ands 1 5 4 2 15 1667 2584 25 15 96.433777 as5 1 5 4 2 16 1703 2576 90 23 96.433777 furthers 1 5 4 2 17 1801 2576 135 23 96.928551 delineated4 1 5 4 3 0 598 2617 1003 34 -1 5 1 5 4 3 1 598 2621 21 23 96.985428 in5 1 5 4 3 2 631 2622 37 22 96.396988 thes 1 5 4 3 3 679 2621 187 30 96.396988 subparagraphs5 1 5 4 3 4 877 2620 28 24 97.014114 of5 1 5 4 3 5 913 2620 120 24 96.975716 Schedules 1 5 4 3 6 1043 2621 28 24 96.649757 A,5 1 5 4 3 7 1083 2620 107 22 96.668465 attached5 1 5 4 3 8 1202 2620 81 22 96.746796 hereto5 1 5 4 3 9 1294 2619 45 22 96.694199 ands 1 5 4 3 10 1351 2618 68 23 96.749130 made5 1 5 4 3 11 1423 2613 11 42 96.749130 a5 1 5 4 3 12 1453 2623 49 24 96.661224 parts 1 5 4 3 13 1513 2617 88 23 96.436348 hereof.3 1 5 5 0 0 596 2655 1339 74 -1 4 1 5 5 1 0 670 2655 1265 30 -1 5 1 5 5 1 1 670 2661 49 22 96.531342 Parts 1 5 5 1 2 730 2660 13 23 96.531342 25 1 5 5 1 3 754 2659 28 24 96.914589 of5 1 5 5 1 4 790 2660 117 23 96.640419 Schedules 1 5 5 1 5 912 2651 14 40 96.958977 A5 1 5 5 1 6 950 2659 48 23 96.974045 lists5 1 5 5 1 7 1009 2663 73 19 96.743416 assets5 1 5 5 1 8 1095 2659 46 22 96.961601 that5 1 5 5 1 9 1152 2659 106 22 96.844574 Johnson5 1 5 5 1 10 1270 2658 59 22 96.741005 needs 1 5 5 1 11 1342 2662 39 18 96.902145 not5 1 5 5 1 12 1392 2657 77 22 96.875870 divests 1 5 5 1 13 1480 2656 19 23 96.895264 if5 1 5 5 1 14 1507 2656 39 22 96.908157 thes 1 5 5 1 15 1556 2656 107 29 96.955269 acquirers 1 5 5 1 16 1672 2656 59 22 96.987175 does5 1 5 5 1 17 1743 2659 39 18 96.887260 not5 1 5 5 1 18 1793 2655 59 22 96.886276 needs 1 5 5 1 19 1864 2655 71 22 95.461449 them.4 1 5 5 2 0 596 2698 339 31 -1 5 1 5 5 2 1 596 2699 43 23 96.438744 Sees 1 5 5 2 2 649 2700 76 26 96.940140 order,5 1 5 5 2 3 736 2699 129 30 96.632271 paragraphs 1 5 5 2 4 876 2698 59 24 24.000336 IIA. Modifying Order Hl6F.T.C.

and modification on the basis of a change of fact or law. Johnson claims that the requested order modification will have no impact on competition in the U.S. market for continuous and instant action air freshener products as defined in the complaint. Furthermore, Johnson argues that the remedial purposes of the order have been fully satisfied by the divestiture of the domestic Renuzit air freshener business to Dial.

After reviewing respondent's Request, the Commission has concluded that the public interest warrants reopening and modifying the language of Schedule A, Part 2 of the order to relieve Johnson of any further obligation to divest the international Renuzit assets.’ With the elimination of any remaining divestiture obligations, the Hold Separate will terminate by its terms. Accordingly, there is no need to modify the Hold Separate itself.

Reopening and Modifying a Commission Order Section 5(b) of the Federal Trade Commission Act, 15 U.S.C. 45(b), provides that the Commission shall reopen an order to consider whether it should be modified if the respondent makes5 1 5 1 3 11 1934 1735 20 23 95.759827 a4 1 5 1 4 0 632 1779 1320 48 -1 5 1 5 1 4 1 632 1779 222 45 96.900528 satisfactory5 1 5 1 4 2 870 1779 162 45 96.631958 showings 1 5 1 4 3 1047 1780 71 34 96.719460 that5 1 5 1 4 4 1131 1780 161 45 96.771866 changed5 1 5 1 4 5 1306 1780 202 35 96.233070 conditions5 1 5 1 4 6 1523 1781 43 34 96.771446 of5 1 5 1 4 7 1576 1782 67 33 97.009300 laws 1 5 1 4 8 1657 1792 40 24 96.999809 or5 1 5 1 4 9 1710 1781 89 35 91.078102 fact require such modification. A satisfactory showing sufficient to require such reopening is made when a request shows that the changes eliminate the need for the order or make continued application of it inequitable or harmful to competition. Louisiana-Pacific Corp., Docket No. C-2956, Letter to John C. Hart (June 5, 1986), at 4.° 2 In the Request, Johnson also proposes to acquire from Dial the existing Renuzit technology and related information reasonably necessary for Johnson to operate the international Renuzit business. The proposed acquisition covers “existing manufacturing specifications, process specifications, manufacturing formulas, toxicology data and reports, safety and other regulatory data, and any machinery specifications for equipment used to manufacture Renuzit air freshener products." Request, at 4. Johnson's proposal qualifies as an acquisition of any5 1 7 1 6 11 1429 2385 75 18 96.340179 assets5 1 7 1 6 12 1516 2380 59 23 96.902344 used5 1 7 1 6 13 1587 2387 26 16 96.555283 or5 1 7 1 6 14 1623 2380 138 30 96.689957 previously5 1 7 1 6 15 1774 2381 58 23 92.951256 used5 1 7 1 6 16 1845 2400 4 3 62.867897 .5 1 7 1 6 17 1862 2400 3 4 62.867897 .5 1 7 1 6 18 1879 2400 4 3 68.945572 .5 1 7 1 6 19 1897 2380 22 24 96.689758 in5 1 7 1 6 20 1932 2381 38 23 96.864624 thea 1 7 1 7 0 629 2417 1340 32 -1 5 1 7 1 7 1 629 2417 162 23 96.791878 manufactures 1 7 1 7 2 805 2424 26 16 97.004837 or5 1 7 1 7 3 845 2418 141 30 96.676529 productions 1 7 1 7 4 1000 2418 29 23 96.406189 of5 1 7 1 7 5 1041 2418 34 23 96.420265 air5 1 7 1 7 6 1088 2418 122 24 96.636307 freshener5 1 7 1 7 7 1224 2418 132 31 73.207001 products. Order, VI(3). Therefore, prior Commission approval is required by the Order for this proposed acquisition. Because the international assets have no competitive significance in the domestic air freshener market and the proposed acquisition will not affect U.S. competition, the Commission is giving its approval to this acquisition by separate letter. 3 Cf. United States v. Louisiana-Pacific Corp., 967 F.2d 1372, 1376-77 (9th Cir. 1992), where the court noted that [a]5 1 8 1 2 5 919 2635 108 24 96.632065 decisions 1 8 1 2 6 1041 2641 23 18 96.999649 to5 1 8 1 2 7 1076 2644 87 22 96.857147 reopens 1 8 1 2 8 1177 2637 58 22 96.356682 does5 1 8 1 2 9 1249 2642 39 17 96.977417 not5 1 8 1 2 10 1301 2637 144 29 96.910942 necessarily5 1 8 1 2 11 1459 2637 70 23 96.913437 entails 1 8 1 2 12 1543 2644 12 16 96.492996 a5 1 8 1 2 13 1567 2637 108 23 96.492996 decisions 1 8 1 2 14 1690 2643 22 17 85.200874 to5 1 8 1 2 15 1736 2637 92 30 85.200874 modify5 1 8 1 2 16 1842 2638 37 22 97.016617 thes 1 8 1 2 17 1891 2638 76 23 96.853386 order.4 1 8 1 3 0 627 2675 1340 31 -1 5 1 8 1 3 1 627 2675 139 29 96.729271 Reopening5 1 8 1 3 2 778 2682 53 23 96.140038 may5 1 8 1 3 3 841 2682 73 16 96.162216 occurs 1 8 1 3 4 924 2682 59 16 96.317482 even5 1 8 1 3 5 995 2676 78 22 96.996292 where5 1 8 1 3 6 1084 2676 37 22 96.994812 thes 1 8 1 3 7 1132 2676 98 30 94.368294 petitions 1 8 1 3 8 1252 2676 64 23 94.368294 itself5 1 8 1 3 9 1331 2677 51 21 96.551666 does5 1 8 1 3 10 1395 2681 38 17 96.931778 not5 1 8 1 3 11 1445 2677 68 29 96.877411 plead5 1 8 1 3 12 1527 2676 58 23 96.873009 facts5 1 8 1 3 13 1597 2676 118 30 96.788147 requiring5 1 8 1 3 14 1727 2676 187 24 76.475159 modification.”5 1 8 1 3 15 1934 2677 33 23 69.061874 /d. S.C. JOHNSON & SON, INC. 1293 1290 Modifying Order The Commission may modify an order when, although changed circumstances would not require reopening, the Commission determines that the public interest requires such action. Jd. Therefore, Section 2.51 of the Commission's Rules of Practice invites respondents in petitions to reopen to show how the public interest warrants the requested modification. In the case of a request for modification based on public interest grounds, a petitioner must demonstrate as a threshold matter some affirmative need to modify the order. See Damon Corp., Docket No. C-2916, Letter to Joel E. Hoffman, Esq., (March 29, 1983) (unpublished), at 2. If the showing of need is made, the Commission will balance the reasons favoring the requested modification against any reasons not to make the modification. Id. The Commission will also consider whether the particular modification sought is appropriate to remedy the identified harm. Whether the request to reopen is based on changed conditions or on public interest considerations, the burden is on the respondent to make the requisite satisfactory showing. The language of Section 5(b) plainly anticipates that the petitioner must make a satisfactory4 1 3 2 5 0 574 1686 1318 46 -1 5 1 3 2 5 1 574 1686 184 45 93.512924 showing of changed conditions to obtain reopening of the order. The legislative history also makes it clear that the petitioner has the burden of showing, other than by conclusory statements, why an order should be modified.* If the Commission determines that the petitioner has made the required showing, the Commission must reopen the order to consider whether modification is required and, if so, the nature and extent of the modification. The Commission is not required to reopen the order, however, if petitioner fails to meet its burden of making the satisfactory showing required by the statute. The petitioner's burden is not a light one given the public interest in repose and the finality of Commission orders.° 4 The Commission may properly decline to reopen an order if the request is “merely conclusory or otherwise fails to set forth specific facts demonstrating in detail the nature of the changed conditions and the reasons why these changed conditions require the requested modification of the order." S. Rep. No. 96-500, 96th Cong., Ist Sess. 9-10 (1979). See also Rule 2.51(b), which requires respondents to submit affidavits in support of petitions to reopen and modify. 5 See Federated Department Stores Inc. v. Moitie, 425 U.S. 394 (1981) (strong public interest considerations support repose and finality). Modifying Order 116 F.T.C.

The Order Should Be Reopened and Modified Johnson has shown that public interest considerations warrant reopening and modifying the order to remove its obligations to divest the international Renuzit assets and abide by the Hold Separate.®° Johnson appears to have met its burden of showing a threshold injury caused by the continued operation of the order. Johnson claims that in view of the divestiture to Dial of the North American Renuzit assets, of Dial's lack of interest in acquiring the international Renuzit assets and of the allegation in the complaint that the relevant geographic market is the United States, the requirement of the order that Johnson hold the international Renuzit assets separate and divest them is causing it unforeseen harm and having a negative impact on Johnson's ability to compete. Johnson also asserts that there is an affirmative need to release it from its obligation to divest these assets in order to remove the impediment to competition. Johnson argues that since it has completed the divestitures of substantially all of the Renuzit Assets, the Hold Separate has already achieved its purpose and the continuing harm from its application was not contemplated by the order. In T&N plc, Docket No. C-3312 (November 6, 1991), the Commission found that respondent demonstrated an affirmative need to modify the order by showing that requiring T&N to divest remaining inventory not wanted by the acquirer could create an impediment to T&N's ability to compete effectively. The Commission further found that T&N demonstrated that the continued application of the hold separate requirements to the remaining inventory imposed considerable costs on respondent's operations and limited its ability to respond to changes in the market. In Chevron Corp., Docket No. C-3147, 105 FTC 228 (1985), the Commission held that the costs associated with continuing a hold separate agreement after a respondent has complied substantially with the divestiture requirements of the order are relevant in determining whether to reopen and As previously noted, Johnson does not request a reopening and modification on the basis of a change of law or fact.

S.C. JOHNSON & SON, INC. 1295 1290 ~ Modifying Order modify an order on public interest grounds. The continued costs that Johnson will incur by the continued application of the divestiture and hold separate requirements of the order compare closely to the costs that the Commission recognized as the threshold injury showings in T&N and Chevron.

There appears to be no reason to retain the requirement that Johnson divest the international Renuzit assets. Because Johnson has completed the divestiture of the North American Renuzit air freshener assets to Dial, the remedial purposes of the order have been fully accomplished. The complaint identified the relevant geographic market in this matter as the United States, and the divestiture to Dial of the domestic Renuzit business completely cured the competitive concerns raised by the complaint and order. The international Renuzit business appears to have no effect on competition in the U.S. air freshener market. No imports of international Renuzit products occur in North America. Thus, there is no need, based on domestic competitive concerns, to require Johnson to divest the international Renuzit assets. Balancing the reasons favoring the requested modification against any reason not to make the modification justifies modifying the order in the public interest. The harm and costs to Johnson associated with the continuing divestiture and hold separate requirements seem significant. On the other hand, it does not appear that there would be any benefits to domestic competition from retaining the requirement to divest the international assets. Where the potential harm to the respondent outweighs any further need for the order, the Commission may modify the order in the public interest to allow the respondent to retain the relevant assets.’ 7 In T&N, supra, the Commission modified the divestiture requirements of the order to permit the respondent to retain inventory not wanted by the acquirer. In Chevron, supra, the Commission reopened and modified the order to eliminate the hold separate requirement after the respondent had completed the majority of the divestitures required by the order. In Batus, Inc., Docket No. C-3099, 104 FTC 632 (1984), the Commission modified the order to excuse the respondent, which had been ordered to divest department stores sufficient to reduce its sales volume by $20 million, from divesting any additional department stores. The respondent had received Commission approval for divestitures totaling $17.9 million in sales volume, and the Commission determined that requiring an additional divestiture was unnecessary.

Concurring Statement 116 F.T.C.

In conclusion, Johnson has made a sufficient showing that public interest considerations support its Request that the Commission reopen and modify the order to remove the requirements that it hold separate and divest the international Renuzit assets. The hold separate and divestiture requirements are imposing costs on Johnson. Moreover, there do not appear to be any competitive reasons to retain the divestiture requirement. Accordingly, it is ordered, That the proceeding be, and it hereby is, reopened for the purpose of modifying the order entered therein; It is further ordered, That Schedule A, Part 2 of the order be, and hereby is, modified by including the following paragraph: (6) The international Renuzit assets, which are comprised of the air freshener patents, trademarks, inventory and technology reasonably necessary to produce Renuzit air freshener products for sale outside of the United States and all non-domestic territories or countries in North America, north of and including Panama, the Caribbean and Cuba.

CONCURRING STATEMENT OF COMMISSIONER ROSCOE B. STAREK, III Because of its successful effort to fulfill the core obligations in the order, the respondent's obligation to divest the international Renuzit assets became extremely difficult and costly. Were this obligation intended by the Commission as fencing-in relief, or were it to support the core relief in the order in any way, the removal of that obligation would not be warranted by the respondent's petition. But because I am not aware of any remedial purpose served by this obligation, the considerable costs that it appears to impose on the respondent justify its removal. Accordingly, I concur in the decision to modify the order.

OSRAM SYLVANIA INC. 1297 1297 Complaint