Stop & Shop Companies, Inc

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IN THE MATTER OF THE STOP & SHOP COMPANIES, INC., ET AL.

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-3649. Consent Order, April 2, 1996--Modifying Order, June 20, 1997 This order reopens a 1996 consent order -- that required the respondents to divest specific supermarkets -- and this order modifies the consent order by terminating the requirement that Stop & Shop divest, among other stores, two Purity Supreme supermarkets in Massachusetts, in part, because increased competition from other entrants has made it extremely unlikely that the stores can be divested.

ORDER REOPENING AND MODIFYING ORDER On January 6, 1997, respondent The Stop & Shop Companies, Inc. ("Stop & Shop")! filed a Petition To Reopen and Modify Consent Order (Purity Supreme) ("Petition"). In its Petition, Stop & Shop requests that the Commission reopen the order in Docket No. C-3649 ("order") to set aside paragraphs II.A.3.a and II.A.6.a, which require Stop & Shop to divest Purity Supreme Store number 41 located at 630 American Legion Highway, Roslindale, Massachusetts ("the Roslindale store") and Purity Supreme store number 20 located at 525 Harvard Street, Brookline, Massachusetts ("the Brookline store"). The Petition addresses the remaining 2 of 17 supermarket divestitures required by the order. The Commission previously approved Stop & Shop's applications for divestiture of the other 15 supermarkets. For the reasons discussed below, the Commission has determined that Stop & Shop has demonstrated that it is in the public interest to reopen and modify the order to set aside these divestiture obligations. I. THE COMPLAINT AND ORDER This matter arose out of the 1995 acquisition by Stop & Shop of all of the supermarkets and related assets owned and operated by Purity Supreme, Inc. ("Purity"). The complaint in this matter charged that Stop & Shop's acquisition of Purity violated Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45. Specifically, the complaint alleged ! On July 21, 1996, Koninklijke Ahold N.V., a Netherlands corporation, acquired substantially all of the outstanding voting shares of Stop & Shop. ee Rg a a a Modifying Order 123 F,T.C.

that the effects of the acquisition may be substantially to lessen competition in5 1 4 1 2 3 1085 447 70 41 96.472366 thes 1 4 1 2 4 1185 444 120 44 96.246246 retails 1 4 1 2 5 1336 445 91 41 96.706306 sales 1 4 1 2 6 1457 444 55 42 96.139168 of5 1 4 1 2 7 1536 442 107 43 96.585449 foods 1 4 1 2 8 1673 442 81 43 96.533562 ands 1 4 1 2 9 1784 454 177 41 96.744461 grocery5 1 4 1 2 10 1989 441 206 54 96.585815 products5 1 4 1 2 11 2226 441 44 44 96.585815 in4 1 4 1 3 0 676 501 1595 66 -1 5 1 4 1 3 1 676 514 325 53 96.277794 supermarkets,5 1 4 1 3 2 1023 514 83 42 96.277794 ands 1 4 1 3 3 1123 526 213 30 96.762680 narrower5 1 4 1 3 4 1354 513 187 42 96.440605 markets5 1 4 1 3 5 1561 510 227 43 96.328453 contained5 1 4 1 3 6 1806 501 203 51 48.534218 therein’ in, among other markets, Brookline5 1 4 1 4 4 1342 580 118 54 95.985504 [and]5 1 4 1 4 5 1492 580 71 41 96.642593 thes 1 4 1 4 6 1589 578 251 43 96.915520 Roslindale5 1 4 1 4 7 1868 577 330 55 96.225616 neighborhood5 1 4 1 4 8 2228 577 44 43 95.783691 in4 1 4 1 5 0 675 640 1593 61 -1 5 1 4 1 5 1 675 651 268 41 25.738922 Boston...5 1 4 1 5 2 969 640 50 52 25.738922 . At the time of Stop & Shop's acquisition of Purity, Stop & Shop and Purity directly competed in Brookline and Roslindale. The concern thus arose that Stop & Shop would likely be able unilaterally to raise prices in the Brookline and Roslindale markets.

The Commission accepted a consent agreement with Stop & Shop on October 18, 1995, and the resulting consent order became final on April 2, 1996.* Under the terms of the order, Stop & Shop is required to divest, among other stores, absolutely5 1 4 2 4 7 1716 1189 83 43 96.919716 ands 1 4 2 4 8 1821 1188 45 43 96.932915 in5 1 4 2 4 9 1889 1188 115 54 96.940964 goods 1 4 2 4 10 2030 1188 144 50 78.920013 faith, the Roslindale and Brookline, Massachusetts supermarkets.’ The purpose of these divestitures, as of the others, is to ensure the continuation of the Roslindale and Brookline stores as ongoing, viable enterprises engaged in the supermarket business and to remedy the lessening of competition resulting from the acquisition as alleged in the Commission's complaint.° Il. THE PETITION In its Petition,’ Stop & Shop requests that the Commission modify the order to eliminate the remaining required divestitures under the order, the Roslindale and Brookline stores.* Stop & Shop bases its Petition on changed conditions of fact and public interest considerations.”

“ Complaint § 9.

3 Id. 12.c.

= Stop & Shop also entered into a separate consent agreement with the Massachusetts Attorney General. Generally, this agreement mirrors the terms of the Commission's consent agreement. See Commonwealth of Massachusetts v. SSC Associates, L.P. and Stop & Shop Companies, Inc., No. 95- 12377NG (D. Mass. Oct. 18, 1995) (Consent Decree). 2 Order (ILA.

‘ Id. F 11.B.

4 In support of its Petition, Stop & Shop provided the affidavits of Brian Hotarek, Vice President in charge of Real Estate and Development for the Stop & Shop Companies, Inc. ("Hotarek Affidavit"), and William C. Hamlin, Vice President, Chief Financial Officer and Secretary of C&S Wholesale Grocers, Inc. ("Hamlin Affidavit").

Order {fj I1.A.3.a. and IL.A.6.a.

9 , F Stop & Shop does not assert that any change of law requires reopening the order. THE STOP & SHOP COMPANIES, INC., ET AL. 1723 1721 Modifying Order Stop & Shop claims that there is no serious interest by potential acquirers in either store to be divested because of the increased competition surrounding each store and because of the decreased sales volume of the two stores. Stop & Shop claims that new entry has made it difficult for the Roslindale and Brookline stores to compete effectively in their respective markets.'° The record shows that a new Sav-A-Lot supermarket was opened immediately adjacent to the Roslindale store on January 20, 1996. Likewise, a new Star Markets superstore was opened less than one mile north of the Brookline store approximately 5 months before the order was issued by the Commission. In addition, a Trader Joe's store has opened less than one mile south of the Brookline store. There has been a significant decline in sales at both stores to be divested, which is likely to continue."

Stop & Shop asserts that operating the Roslindale and Brookline stores has caused significant losses to Stop & Shop and that it needs to end the losses being sustained by the Roslindale and Brookline stores to maintain Stop & Shop's competitive vigor in the relevant markets. Removing the divestiture requirement would enable Stop & Shop to close the stores, halting any further losses.” Ill. STANDARD FOR REOPENING AND MODIFYING FINAL ORDERS 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 4 1 3 10 1864 2015 24 69 97.011192 a5 1 4 1 3 11 1920 2019 265 54 96.333488 satisfactory4 1 4 1 4 0 593 2088 1593 60 -1 5 1 4 1 4 1 593 2094 199 54 96.070839 showings 1 4 1 4 2 822 2094 87 42 96.961548 that5 1 4 1 4 3 940 2094 194 53 96.608452 changed5 1 4 1 4 4 1166 2092 241 43 96.313484 conditions5 1 4 1 4 5 1438 2091 53 42 96.726067 of5 1 4 1 4 6 1515 2091 83 43 96.069061 laws 1 4 1 4 7 1629 2104 47 29 95.912834 or5 1 4 1 4 8 1706 2089 108 43 94.077499 fact so require. A satisfactory showing sufficient to require reopening is made when a request to reopen identifies significant changes in circumstances and shows that the changes eliminate the need for the order or make continued application of it inequitable or harmful to competition. S. Rep. No. 96-500, 96th Cong., 2d Sess. 9 (1979) (significant changes or changes causing unfair disadvantage); Louisiana-Pacific Corp., Docket No. C-2956, Letter to John C. Hart (June 5, 1986), at 4 (unpublished) ("Hart Letter")."° y Petition at 7-10.

e Petition at 12-14.

os Petition at 17. See also Hotarek Affidavit, J] 16 and 18. a See also United States v. Louisiana-Pacific Corp., 967 F.2d 1372, 1376-77 (9th Cir. 1992) ("A decision to reopen does not necessarily entail a decision to modify the order, Reopening may occur even where the petition itself does not plead facts requiring modification."). Modifying Order 123 F.T.C.

Section 5(b) also provides that the Commission may modify an order when, although changed circumstances would not require reopening, the Commission determines that the public interest so requires. Respondents are therefore invited in petitions to reopen to show how the public interest warrants the requested modification. Hart Letter at 5; 16 CFR 2.51. In such a case, the respondent must demonstrate as a threshold matter some affirmative need to modify the order. Damon Corp., Docket. No. C-2916,.Letter to Joel E. Hoffman, Esq. (March 29, 1983), 1979-83 Transfer Binder, FTC complaints and orders (CCH) 922,007 at 22,585 ("Damon Letter"), at 2. For example, it may be in the public interest to modify an order to5 1 3 1 12 2 721 1126 160 43 96.846092 relieves 1 3 1 12 3 899 1141 83 40 96.631477 any5 1 3 1 12 4 999 1126 278 55 96.555344 impediments 1 3 1 12 5 1293 1132 43 37 97.014503 to5 1 3 1 12 6 1355 1125 204 43 95.913773 effective5 1 3 1 12 7 1576 1123 285 55 96.026260 competitions 1 3 1 12 8 1877 1123 88 42 96.998779 that5 1 3 1 12 9 1980 1137 104 39 95.976601 may5 1 3 1 12 10 2098 1124 131 41 96.423927 result4 1 3 1 13 0 633 1190 1594 59 -1 5 1 3 1 13 1 633 1195 116 43 96.828629 from5 1 3 1 13 2 767 1196 73 42 96.691345 thes 1 3 1 13 3 859 1195 158 43 96.059090 order. Damon Corp., Docket No. C-2916, 101 FTC 689, 692 (1983). Once such a showing of need is made, the Commission will balance the reasons favoring the requested modification against any reasons not to make the modification. Damon Letter at 2. The Commission also will consider whether the particular modification sought is appropriate to remedy the identified harm. Damon Letter at 4.

The language of Section 5(b) plainly anticipates that the burden is on the petitioner to make a satisfactory5 1 3 2 2 9 1713 1734 221 54 96.167091 showing of changed conditions to obtain reopening of the order. The legislative history also makes clear that the petitioner has the burden of showing, other than by conclusory statements, why an order should be modified. The Commission may5 1 3 2 6 4 1226 2011 198 55 96.757484 properly5 1 3 2 6 5 1452 2008 170 44 96.713577 declines 1 3 2 6 6 1651 2014 44 37 96.423973 to5 1 3 2 6 7 1723 2021 161 42 96.387451 reopens 1 3 2 6 8 1912 2020 54 29 96.047729 an5 1 3 2 6 9 1994 2007 124 42 96.047729 orders 1 3 2 6 10 2145 2005 41 44 95.458473 if5 1 3 2 6 11 2207 2019 25 29 96.612213 a4 1 3 2 7 0 632 2073 1599 62 -1 5 1 3 2 7 1 632 2086 172 49 96.534126 requests 1 3 2 7 2 824 2079 36 44 96.971558 is5 1 3 2 7 3 879 2080 164 55 96.861900 merely5 1 3 2 7 4 1061 2075 255 59 96.231712 conclusory5 1 3 2 7 5 1335 2092 48 29 96.855980 or5 1 3 2 7 6 1400 2077 229 44 96.873901 otherwise5 1 3 2 7 7 1651 2076 98 43 96.962326 fails5 1 3 2 7 8 1769 2082 43 36 97.002884 to5 1 3 2 7 9 1834 2080 64 38 96.894707 sets 1 3 2 7 10 1920 2074 111 43 96.277252 forth5 1 3 2 7 11 2052 2073 179 56 96.854317 specifica 1 3 2 8 0 634 2142 1598 60 -1 5 1 3 2 8 1 634 2149 105 41 96.537476 facts5 1 3 2 8 2 754 2148 330 54 96.798615 demonstrating5 1 3 2 8 3 1098 2148 44 42 96.960487 in5 1 3 2 8 4 1156 2148 126 42 96.960487 details 1 3 2 8 5 1296 2148 69 42 96.922447 thes 1 3 2 8 6 1380 2152 143 37 96.844162 nature5 1 3 2 8 7 1538 2145 55 43 96.844162 of5 1 3 2 8 8 1600 2145 70 42 96.868515 thes 1 3 2 8 9 1686 2144 193 54 96.618462 changed5 1 3 2 8 10 1894 2142 239 44 95.853470 conditions5 1 3 2 8 11 2150 2142 82 43 96.892258 anda 1 3 2 9 0 632 2211 1600 59 -1 5 1 3 2 9 1 632 2217 72 41 96.586380 thes 1 3 2 9 2 734 2230 177 30 96.537125 reasons5 1 3 2 9 3 939 2217 102 53 96.598297 why5 1 3 2 9 4 1067 2217 118 41 96.561035 these5 1 3 2 9 5 1214 2215 194 54 96.610077 changed5 1 3 2 9 6 1436 2214 247 43 96.536034 conditions5 1 3 2 9 7 1712 2212 167 55 96.675476 requires 1 3 2 9 8 1907 2212 71 42 96.899971 thes 1 3 2 9 9 2006 2211 226 54 96.353928 requested4 1 3 2 10 0 632 2280 1597 58 -1 5 1 3 2 10 1 632 2284 296 43 96.812798 modifications 1 3 2 10 2 943 2284 53 43 97.007362 of5 1 3 2 10 3 1003 2285 69 42 96.827911 thes 1 3 2 10 4 1088 2285 153 42 90.238449 order. S. Rep. No. 96-500, 96th Cong., Ist Sess. 9-10 (1979); see also Rule 2.51(b) (requiring affidavits in support of petitions to reopen and modify). If the Commission determines that the petitioner has made the necessary 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 the petitioner fails to meet its burden of making the satisfactory showing required by the statute. The petitioner's burden is not a light one in view of the public interest in repose and the finality of Commission orders. See Federated Department Stores, Inc. v. Moitie, 425 U.S. 394 (1981) (strong public interest considerations support repose and finality). THE STOP & SHOP COMPANIES, INC., ET AL. 1725 1721 Modifying Order IV. REOPENING AND MODIFYING THE ORDER IS IN THE PUBLIC INTEREST Based on the record in this matter, Stop & Shop has not demonstrated changes of fact that justify eliminating the remaining divestiture requirement. However, public interest considerations warrant ending the requirement to divest the Roslindale and Brookline supermarkets. Stop & Shop has demonstrated an affirmative need for the change, and the reasons to modify the order outweigh the reasons to retain the divestiture requirement as written. A. Stop & Shop Has Not Demonstrated Changes of Fact Reopening is not required for changes in circumstances that were reasonably foreseeable at the time the consent order was entered. See Pay Less Drug Stores Northwest, Inc., Docket No. C-3309, Letter to H.B. Hummelt (Jan. 22, 1982) (changed conditions must be unforeseeable, create severe competitive hardship, and eliminate the dangers that the order sought to remedy). With respect to the Roslindale market, the record shows that Sav-A-Lot's entry” took place shortly before the order was issued by the Commission. Consequently, Sav-A-Lot's entry, as a factual matter, does not constitute the requisite significant change in circumstances that requires reopening of the order. Likewise, with respect to the Brookline market, Star's entry took place approximately five months before the order in this matter was issued by the Commission. Thus, as a factual matter, Star's entry does not constitute a changed fact that would warrant modification of the order with respect to the Brookline store.

Trader Joe's entry in Brookline also does not constitute a changed fact that eliminates the need for the divestiture of the Brookline store. Trader Joe's potential entry into the relevant market was not an unforeseen event; the record indicates that Trader Joe's was actively looking for sites for stores in the relevant Boston metropolitan area market, which includes Roslindale and Brookline, considerably before the order was issued by the Commission. More important, however, the Commission does not consider the Trader Joe's store to be a supermarket as that term is defined in the order and its entry Although Sav-A-Lot offers many items sold through supermarkets, Stop & Shop has not demonstrated that the Sav-A-Lot carries all relevant product categories identified in paragraph I.E of the order. Nor has it demonstrated that the Sav-A-Lot carries the variety of brands and sizes within a category that would be found in Stop & Shop's comparable supermarkets. Nonetheless, it is evident that the Sav-A-Lot is attracting business away from Stop & Shop's supermarkets. Modifying Order 123 F.T.-C.

into the Brookline market thus does not remedy the competitive harm resulting from Stop & Shop's acquisition of the Purity supermarket in Brookline. See order { I.E.

B. Public Interest Considerations Stop & Shop has demonstrated an affirmative need to modify the order. The record in this case shows that Stop & Shop has made good faith efforts to locate purchasers for both the Roslindale and Brookline stores, but has been unable to divest the two stores. Stop & Shop engaged the services of a well-known investment banking firm to prepare offering packages to potential acquirers. Subsequently, Stop & Shop contacted numerous potential buyers regarding these supermarkets including, among others, parties who ultimately acquired other stores Stop & Shop was required to divest under the order. Stop & Shop offered the Roslindale and Brookline stores as part of larger packages, but the potential acquirers desired only the other assets. Stop & Shop also offered to divest the stores’ equipment and fixtures for $1 and to subsidize the rent, but again no acquirers expressed interest. In sum, none of the parties contacted was interested in acquiring either the Roslindale or the Brookline store. When the order was entered, the Commission believed that the Roslindale and Brookline stores were divestable, and there is no indication that Stop & Shop has not properly maintained and operated these stores since entry of the order. The declining sales and losses experienced by the Roslindale and Brookline supermarkets thus do not appear to be caused by any failure of Stop & Shop to maintain them. Rather, the declining sales and losses appear to be primarily related to the recent entry by Star and Sav-A-Lot. Although the entries occurred prior to the order becoming final, neither Commission staff nor Stop & Shop anticipated the extent of competitive impact these two entrants have had on the Roslindale and the Brookline store, respectively.

The increased competition in Roslindale and Brookline has adversely affected the Roslindale and Brookline supermarkets’ viability and marketability, and it appears that the two stores will continue to sustain significant losses. Consequently, continuation of the requirement to divest and the requirement to maintain the viability and marketability of the stores, which are steadily losing sales, imposes unanticipated costs on Stop & Shop that it asserts impede its ability to compete in the relevant markets. See Promodes, S.A., et al., THE STOP & SHOP COMPANIES, INC., ET AL. 1727 1721 Dissenting Statement Order Granting Request to Reopen and Modify Order Issued May 17, 1990 (January 28, 1994). This constitutes the affirmative need showing under the public interest test.

The remedial purpose of the order was to restore and increase competition in, among other markets, the Boston metropolitan area through the sale of a specified number of supermarkets, including the Roslindale and Brookline stores. Stop & Shop was able to divest all of the specified stores except the stores located in Roslindale and Brookline. These two stores could not be divested in more than fifteen months” of serious efforts by Stop & Shop and the investment banker it retained to assist it in its divestiture efforts. Given Stop & Shop's efforts to divest, and the limited time remaining on the Brookline store's lease, it is extremely unlikely that the stores can be divested consistent with the terms of the order. Stop & Shop asserts that it is suffering continuing losses due to the operation of the Roslindale and Brookline stores, which are competitively harming Stop & Shop. Because it is extremely unlikely that the stores can be divested, whether by Stop & Shop or by a trustee appointed by the Commission, the remedial purpose of the order will not be achieved. Accordingly, on balance, the need to achieve the marginal benefit of divesting two non-competitive supermarkets is outweighed by the continuing costs that the divestiture obligation is imposing on Stop & Shop. Therefore, It is ordered, That this matter be, and it hereby is, reopened and that the Commission's order be, and it hereby is, modified to set aside paragraph IJ.A.3.a and paragraph II.A.6.a, as of the effective date of this order.

Commissioner Azcuenaga dissenting, and Commissioner Starek concurring in the result only.

DISSENTING STATEMENT OF COMMISSIONER MARY L. AZCUENAGA The Commission today permits Stop and Shop to avoid its obligation under the order to divest two stores in the Boston, Massachusetts, area, because Stop and Shop has failed to divest the stores and the continuing effort to do so is costly. Although I did not agree that these two stores should be required to be divested,’ the Stop & Shop began its divestiture efforts immediately after signing the consent agreement in October 1995, 1 . .

See Separate Statement of Commissioner Mary L. Azcuenaga, Concurring in Part and Dissenting in Part, in The Stop and Shop Companies, Inc., Docket C-3649 (April 8, 1996). (pr eS SSS Concurring Statement 123 F.T.C.

respondent's obligation under a final order of the Commission should not be so readily excused. The Commission's action opens the door for all respondents to postpone divestiture, claim that the effort is costly, and avoid the obligation under the order. The order in this matter provides for the appointment of an independent trustee to accomplish divestiture if Stop and Shop fails to do so in a timely manner, but no trustee has been appointed. In Promodes, S.A.,’ cited as precedent for modifying this order, the obligation to divest was set aside only after a trustee had been appointed and had failed to locate an acquirer for the stores required to be divested. The inability of the trustee to find an acquirer was cited in Promodes as evidences 1 4 2 8 6 1445 1132 91 42 96.500015 that5 1 4 2 8 7 1561 1130 248 43 96.594368 divestitures 1 4 2 8 8 1834 1129 54 43 96.340149 of5 1 4 2 8 9 1905 1130 71 42 96.589706 thes 1 4 2 8 10 2000 1135 88 36 96.386909 two5 1 4 2 8 11 2115 1134 136 36 96.760086 stores4 1 4 2 9 0 654 1188 1599 66 -1 5 1 4 2 9 1 654 1200 120 53 95.949585 [was]5 1 4 2 9 2 793 1200 233 54 96.914391 extremely5 1 4 2 9 3 1041 1200 231 54 93.268791 unlikely. I concurred in Promodes,’ on the ground that [i]f5 1 4 2 10 3 896 1267 72 43 96.579803 thes 1 4 2 10 4 997 1273 154 37 96.774506 trustees 1 4 2 10 5 1182 1274 158 36 96.837364 cannot5 1 4 2 10 6 1369 1266 185 55 96.775314 identify5 1 4 2 10 7 1581 1265 206 56 96.640144 potential5 1 4 2 10 8 1816 1265 170 54 96.651146 buyers,5 1 4 2 10 9 2018 1263 235 43 96.758926 continued4 1 4 2 11 0 651 1330 1601 60 -1 5 1 4 2 11 1 651 1334 246 54 96.731750 imposition5 1 4 2 11 2 912 1335 54 42 97.003151 of5 1 4 2 11 3 974 1335 69 42 96.846329 thes 1 4 2 11 4 1058 1335 244 43 96.568115 divestitures 1 4 2 11 5 1316 1335 282 55 96.248337 requirements 1 4 2 11 6 1614 1347 56 29 97.004684 no5 1 4 2 11 7 1688 1333 152 54 96.304169 longer5 1 4 2 11 8 1855 1345 143 30 97.003532 serves5 1 4 2 11 9 2016 1332 72 42 97.013100 thes 1 4 2 11 10 2104 1330 148 55 96.953789 publica 1 4 2 12 0 650 1398 1603 59 -1 5 1 4 2 12 1 650 1401 202 44 94.835495 interest. Comparable evidence of the public interest is not available here, because no independent trustee has been appointed. We have instead allegations of burden resulting from costs that surely were anticipated at the time the order was signed. See Louisiana-Pacific Corporation, 112 FTC 547 (1989).

I dissent.

CONCURRING STATEMENT OF COMMISSIONER MARY L. AZCUENAGA I concur in the decision to reopen and modify the order, relieving the respondents of the obligation to divest certain supermarkets in Chattanooga, Tennessee. The Commission-appointed trustee, during a 21-month period, has not accomplished the required divestitures. In classic understatement, the Commission concludes that the trustee's lack of success is evidences 1 6 1 6 7 1506 2303 88 42 97.019142 that5 1 6 1 6 8 1609 2301 242 43 96.500061 divestitures 1 6 1 6 9 1867 2300 53 42 96.657059 of5 1 6 1 6 10 1928 2299 71 43 96.841713 thes 1 6 1 6 11 2015 2305 87 37 96.862312 two5 1 6 1 6 12 2119 2304 136 36 96.827454 stores4 1 6 1 7 0 650 2371 532 55 -1 5 1 6 1 7 1 650 2371 36 43 96.329582 is5 1 6 1 7 2 704 2372 233 54 96.845627 extremely5 1 6 1 7 3 953 2371 229 55 87.082901 unlikely. A Commission-appointed trustee serves as a neutral arbiter to establish whether the divestiture required by the order can be accomplished (assuming the trustee's good faith and diligence and the absence of evidence that the respondent has frustrated the trustee's efforts). If the trustee cannot identify potential buyers, continued imposition of the divestiture requirement no longer serves the public Promodes, S.A., Order Granting Request To Reopen and Modify Order Issued May 17, 1990 (Jan. 28, 1994), reprinted in 5 Trade Reg. Rep. (CCH) ¥] 23,540. A copy of my concurring statement in Promodes is attached. THE STOP & SHOP COMPANIES, INC., ET AL. 1729 1721 Concurring Statement interest. In these circumstances, the requirement imposes costs, and the respondent need not make a particularized showing of those costs. The Commission has in the past recognized that an obligation to divest particular assets may be modified in the public interest when the respondent has5 1 3 2 3 4 1024 669 110 42 96.960205 been5 1 3 2 3 5 1149 667 151 43 96.987114 unable5 1 3 2 3 6 1315 672 43 38 97.004585 to5 1 3 2 3 7 1376 667 92 43 97.016495 finds 1 3 2 3 8 1483 681 55 28 96.899521 an5 1 3 2 3 9 1552 663 191 59 96.243027 acquirers 1 3 2 3 10 1761 666 85 54 96.708176 [for5 1 3 2 3 11 1861 667 126 42 96.922729 those5 1 3 2 3 12 2004 666 152 54 96.304932 assets]4 1 3 2 4 0 559 730 1600 62 -1 5 1 3 2 4 1 559 744 41 37 96.840561 at5 1 3 2 4 2 631 751 83 41 96.583862 any5 1 3 2 4 3 743 730 157 62 90.843292 price. RSR Corporation, 98 FTC 872 (1981); compare Louisiana-Pacific Corporation, 112 FTC 547, 561 (1989) (asserted financial disadvantage distinguished from impossibility). The trustee having failed to effect divestiture, the requirement now should be lifted.

Response to Petition 123 F:T.C, Re: Altmeyer Home Stores, Inc. Petition to Quash or Limit Civil Investigative Demands. File No. 962-3063. February 12, 1997 Dear Mr. Farnan:

This is to advise you of the Federal Trade Commission's ruling on the Petition to Quash Civil Investigative Demands ("Petition") that you filed on behalf of your client, Altmeyer Home Stores, Inc. ("Altmeyer" or Petitioner), in the above-referenced matter. The ruling set forth below has been made by Commissioner Roscoe B. Starek, III, pursuant to authority delegated under Commission Rule of Practice 2.7(d)(4), 16 CFR 2.7(d)(4). Pursuant to Rule 2.7(f), 16 CFR 2.7(f), within three days after service of this decision, Petitioner may file with the Secretary of the Commission a request for full Commission review. The timely filing of such request shall not stay the return date in this ruling unless the Commission otherwise specifies.

Commissioner Starek has carefully reviewed the petition and the accompanying materials. He has also considered the oral presentation on the Petition conducted on January 21, 1997. The Petition is granted in part and denied in part for the reasons discussed below. I. BACKGROUND The Civil Investigative Demands ("CIDs") in this matter arise in the context of a Commission investigation to determine whether Altmeyer may have engaged in acts or practices in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, as amended, and the Fair Credit Reporting Act ("FCRA") provisions regarding the use of credit reports for employment purposes.' On March 22, 1995, staff of the FTC's Chicago Regional Office sent a letter to Altmeyer requesting that the company voluntarily provide certain information and documents regarding its policies and procedures for the FCRA in connection with Altmeyer's use of consumer reports for employment purposes. By letter dated May 2, 1995, you, as counsel for Altmeyer, agreed to permit FTC staff to : The relevant provision of the FCRA is Section 615(a), 15 U.S.C, 1681m(a), which requires users of consumer credit reports, who deny emplcyment applications based in whole or in part on those reports, to provide consumers with the name and address of the consumer reporting agency from which they obtained the report.

ALTMEYER HOME STORES, INC. 1731 1730 Response to Petition inspect the requested information and documentation at your Pittsburgh law office between May 8, and May 25, 1995. Letter from Thomas J. Farnan to John Hallerud, FTC Chicago Regional Office (May 2, 1995). According to FTC staff, you then indicated in a conversation with John Hallerud, the FTC attorney responsible for the investigation at the time, that Altmeyer lacked the necessary policies and procedures for complying with the FCRA. Based on the information from this purported conversation, FTC staff decided to forgo inspecting Altmeyer's documents. Instead, FTC staff offered Altmeyer the opportunity to enter into a consent agreement resolving the investigation without further expense to the company. You have strongly denied that you ever made such a statement to FTC staff, and maintain that Altmeyer is and was in compliance with the law. Letter from Thomas Farnan to Commissioner Roscoe B. Starek, III (Jan. 23, 1997). See also Letter from Thomas Farnan to C. Steven Baker, FTC Chicago Regional Office (November 6, 1996). Later FTC staff renewed its request for access to Altmeyer's documents and information regarding compliance with the FCRA and, once again, you (acting on behalf of the company) agreed to cooperate voluntarily with the request. Instead of providing FTC staff with access to the requested materials from the entire period under investigation (January 1994 to the present), however, Altmeyer submitted only materials from the months of October 1995, March 1996, and September 1996. FTC staff considered this response unsatisfactory because it provided information about Altmeyer's practices and procedures that occurred after the company learned that a Commission investigation was underway. At this point, you withdrew Altmeyer's offer to produce the requested materials voluntarily.

When the prospects for further cooperation between Altmeyer and FTC staff in the investigation appeared remote, the Commission issued two CIDs on December 2, 1996. The CIDs were authorized by the Commission's resolution of June 27, 1990, directing the use of compulsory process in FTC investigations to determine whether unnamed consumer reporting agencies or others are engaged in unfair or deceptive acts or practices in violation of Section 5 of the FTC Act and in violation of the FCRA. One of the CIDs required the Response to Petition 123 F.T.C.

production of 16 categories of documents. The other CID required the oral testimony of Altmeyer's Vice President, Judy Altmeyer.’ On December 18, 1996, the Secretary of the Commission received the Petition from Altmeyer objecting to the CIDs. Pursuant to the Commission's Rules of Practice, a petition to quash or limit a CID must be filed within 20 days after service of the CID (or, if a return date is less than 20 days after service, before the return date). 16 CFR 2.7(d)(1). Because the return date for the CID requesting the production of documents was December 16, the instant Petition (received by the Commission on December 18) was not timely as to this CID. Petitioner neither requested additional time to file a response to that CID nor advanced any explanation for the late filing. The Petition, however, was timely with respect to the CID requesting oral testimony. Despite Petitioner's failure to comply fully with the Commission's procedural requirements for submitting a timely petition to quash, the Commission has determined that it will not dismiss the petition on this basis and will consider each of Petitioner's objections.

II. SPECIFIC OBJECTIONS A. Petitioner alleges that before it must produce the requested documents and testimony, the Commission is required to present evidence that Altmeyer violated the law. At the oral presentation, you stated that FTC's demand for access to information relating to Altmeyer's practices for complying with the FCRA amounted to a fishing5 1 7 1 3 6 1473 2145 283 56 91.317795 expedition. Oral Presentation Transcript at 5 (Jan. 21, 1997). You asserted that it is improper for the Commission to order production of the information covered by the CIDs without first advising Altmeyer of the evidence already in the Commission's possession that Altmeyer has engaged in unlawful activity. You also asserted a right to conduct discovery depositions relating to the bases for the Commission's investigation of Altmeyer. Oral Presentation Transcript at 6. Your argument is incorrect and does not take into account the broad scope of the Commission's investigatory powers and the procedural safeguards that are applicable to this agency's pre-complaint investigations. The CID requesting production of documents indicated a return date of December 16, 1996, and the CID for oral testimony specified a return date of December 27, 1996. ALTMEYER HOME STORES, INC. 1733 1730 Response to Petition The Commission has broad investigatory powers to secure relevant information in order to determine whether a law violation has occurred. United States v. Morton Salt Co., 338 U.S. 632, 642 (1950) (analogizing FTC's compulsory process powers to those of a grand jury). As the Supreme Court stated, the FTC does5 1 3 1 5 11 1918 643 74 37 96.734825 not5 1 3 1 5 12 2008 637 171 55 96.205101 depend4 1 3 1 6 0 585 705 1594 60 -1 5 1 3 1 6 1 585 728 59 29 86.298714 on5 1 3 1 6 2 657 727 135 29 86.298714 acase5 1 3 1 6 3 806 727 49 28 96.166855 or5 1 3 1 6 4 867 717 269 48 96.512131 controversy5 1 3 1 6 5 1151 711 64 42 97.010628 for5 1 3 1 6 6 1226 722 147 43 96.572983 powers 1 3 1 6 7 1385 714 44 37 97.007256 to5 1 3 1 6 8 1446 713 69 49 96.904945 gets 1 3 1 6 9 1530 706 203 44 96.349075 evidences 1 3 1 6 10 1746 706 75 43 96.940636 but5 1 3 1 6 11 1835 720 81 29 96.379959 cans 1 3 1 6 12 1930 705 249 54 93.228416 investigate4 1 3 1 7 0 584 772 1595 64 -1 5 1 3 1 7 1 584 783 165 53 96.902344 merely5 1 3 1 7 2 777 795 57 29 96.643440 on5 1 3 1 7 3 862 780 217 54 96.877197 suspicion5 1 3 1 7 4 1107 778 86 43 97.017654 that5 1 3 1 7 5 1220 778 70 43 96.950905 thes 1 3 1 7 6 1318 777 84 42 96.916992 laws 1 3 1 7 7 1430 776 36 42 96.551872 is5 1 3 1 7 8 1493 775 132 54 96.551872 beings 1 3 1 7 9 1653 774 200 51 96.777481 violated,5 1 3 1 7 10 1883 787 49 29 97.006592 or5 1 3 1 7 11 1958 787 110 29 96.970490 even5 1 3 1 7 12 2088 772 91 55 96.919556 just4 1 3 1 8 0 584 841 1596 52 -1 5 1 3 1 8 1 584 851 186 42 95.881943 because5 1 3 1 8 2 790 849 32 42 96.676315 it5 1 3 1 8 3 840 853 134 38 96.919426 wants5 1 3 1 8 4 996 860 223 30 95.901825 assurances 1 3 1 8 5 1238 846 88 42 95.901825 that5 1 3 1 8 6 1346 844 32 43 96.374718 it5 1 3 1 8 7 1397 844 37 43 96.374718 is5 1 3 1 8 8 1454 844 111 43 94.777428 not. Morton Salt, 338 U.S. at 642-43. Accord, FTC v. Carter, 636 F.2d 781, 786 (D.C. Cir. 1980); FTC v. Texaco, Inc., 555 F.2d 862, 873, n.23 (D.C. Cir.)(en banc), cert. denied, 431 U.S. 974 (1977). The Commission's power to compel the production of documents and testimony from the target of an investigation through a subpoena is not conditioned on the possession of a specific quantum of evidence or a showing of probable cause to believe that the law has been violated. United States v. Powell, 379 U.S. 48, 57 (1964) (rejecting a probable cause requirement); Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 216 (1946) (same).’ Indeed, it is well established that the Commission may compel the production of information provided that it is sought for a legitimate purpose and is reasonably5 1 3 1 20 11 1904 1656 210 42 96.449997 relevant or not plainly5 1 3 1 21 3 874 1729 238 43 96.820915 irrelevant to that purpose, and that the inquiry is not too indefinite or unduly burdensome. Morton Salt, 338 U.S. at 652-53, FTC v. Anderson, 631 F.2d 741, 744-45 (D.C. Cir. 1979). Finally, with respect to the issue of relevance, courts have ruled that these standards are far less rigid in the context of an agency investigation than in an adjudicative matter, FTC v. Green, 252 F. Supp. 153 (S.D.N.Y. 1966), and have generally deferred to an agency's appraisal of relevance which must5 1 3 1 28 5 1210 2205 54 41 96.935593 be5 1 3 1 28 6 1282 2202 206 54 96.736053 accepted5 1 3 1 28 7 1506 2215 48 29 96.948410 so5 1 3 1 28 8 1575 2202 102 53 96.606232 long5 1 3 1 28 9 1696 2214 44 29 96.984360 as5 1 3 1 28 10 1758 2200 31 42 96.788574 it5 1 3 1 28 11 1807 2200 37 42 96.788574 is5 1 3 1 28 12 1860 2205 77 37 96.460220 not5 1 3 1 28 13 1954 2199 234 53 96.774818 obviously4 1 3 1 29 0 590 2268 1596 59 -1 5 1 3 1 29 1 590 2275 186 52 95.020088 wrong. FTC v. Invention Submission Corp., 965 F.2d 1086, 1089 (D.C. Cir. 1992), cert, denied, 113 S. Ct. 1255 (1993).* ‘ You have stated that you are unaware of any legal decision in which a court has required a corporation to open its private files to a government agency without articulating a reason to believe that the law is being violated. Oral Presentation Transcript at 14, As support for this view, you cited (id. at 15) to Micro Motion, Inc. y. Kane Steel Co., Inc., 894 F.2d 1318, 1327 (Fed. Cir. 1990), a patent infringement case involving two private parties engaged in a discovery dispute. In that case, the appellate court ruled that one of the private parties to the lawsuit could not obtain discovery of certain information held by a non-party based on only a5 1 5 1 7 10 1444 2732 67 27 96.777222 bare5 1 5 1 7 11 1530 2730 158 36 96.341286 allegations 1 5 1 7 12 1706 2730 34 28 97.005463 of5 1 5 1 7 13 1754 2728 217 37 95.245834 wrongdoing. That private discovery decision case is not relevant to the FTC matter at hand, which involves the exercise of the agency's power to gather evidence in an investigation by subpoena. 4 The relevance of a CID is measured against the scope and purpose of an agency's investigation, which in this instance are set forth in the Commission's Resolution authorizing issuance of compulsory process, attached to the CIDs. FTC v. Texaco, 555 F.2d at 874. Moreover, it is respondent's burden to show that the information sought by the investigative demand is irrelevant. FTC v. Invention Submission Corp., 965 F.2d at 1090.

Response to Petition 123 F.T-C.

It is clear that the target of a Commission investigation such as Petitioner does not have the rights accorded to a litigant in an adjudicative proceeding. In carrying out its investigative functions, the Commission may proceed on a non-public, ex parte basis against targets without according adjudicative procedures such as discovery of any evidence that my have been gathered or the right to confront witnesses called by the agency. Hannah vy. Larche, 363 U.S. 420, 440-41, 446 (1960); Genuine Parts Co. v. FTC, 445 F.2d 1382, 1387- 88 (Sth Cir. 1971); see SEC v. Jerry T. O'Brien, Inc., 467 U.S. 735, 742 (1984). Due process rights do not apply in this context because the agency's investigation does not involve an allegation of wrongdoing or an adjudication ‘of legal rights. SEC v. Jerry T. O'Brien, 467 U.S. at 742. Such procedural rights will attach only if and when the Commission determines to issue a complaint against Altmeyer. See Hannah vy. Larche, 363 U.S. at 446. The CIDs at issue in this matter seek production of relevant information to help the Commission to determine whether Altmeyer may have engaged in conduct that violates the FTC Act and the FCRA. Accordingly, at the pre-complaint phase of the investigation, Altmeyer is not entitled to the procedural rights that would apply to an adjudication. No formal charges against Altmeyer need be formulated in order to secure information relevant to the Commission's investigation. Further, the Commission is under no obligation to divulge to Altmeyer any evidence of wrongdoing that it might have in its possession as a prerequisite to demanding the information from Altmeyer covered by the CID. Accordingly, Petitioner's objection to the CIDs on this basis is denied. B. Petitioner argues that the CIDs violate the Fourth Amendment. Petitioner also seeks to quash the CIDs on the ground that they violate the Fourth Amendment prohibition against unreasonable search and seizure. Petitioner argues that the Federal Government is held to a higher standard when it seeks to enter the premises of a private citizen and gain access to private documents. Petition at 2. Petitioner further contends that, in defining the Federal Government's right to enter the private property of a citizen to conduct an investigation, courts have required that the government have some4 1 6 1 9 0 608 2921 1604 60 -1 5 1 6 1 9 1 608 2924 101 44 96.775093 kinds 1 6 1 9 2 726 2926 53 42 97.015038 of5 1 6 1 9 3 788 2926 204 55 96.317772 probable5 1 6 1 9 4 1009 2940 130 29 96.973648 causes 1 6 1 9 5 1157 2940 47 28 96.906662 or5 1 6 1 9 6 1221 2940 110 28 96.198898 even5 1 6 1 9 7 1348 2924 248 44 96.544090 reasonable5 1 6 1 9 8 1614 2923 221 55 96.464325 suspicion5 1 6 1 9 9 1852 2923 89 42 96.956375 that5 1 6 1 9 10 1958 2936 25 28 96.956375 a5 1 6 1 9 11 1999 2921 213 43 96.921394 violation4 1 6 1 10 0 609 2991 1446 59 -1 5 1 6 1 10 1 609 2994 36 42 96.984612 is5 1 6 1 10 2 663 2994 146 55 96.825783 taking5 1 6 1 10 3 825 2995 158 55 96.867821 place. Jd. See also Oral Hearing Transcript at 8-10. ALTMEYER HOME STORES, INC. 1735 1730 Response to Petition In raising this objection, Petitioner has overlooked the critical distinction between an actual search and an agency subpoena, as well as the difference between rights of privacy for a corporation and an individual. The Fourth Amendment standards applicable to a search are more stringent than those governing an agency subpoena. Donovan v. Lone Star, Inc., 464 U.S. 408, 413-15 (1984); FTC v. Carter, 636 F.2d at 787. As the Supreme Court explained in Oklahoma Press Publishing Co. v. Walling, 327 U.S. at 195, agency subpoenas “present no question of actual search and seizure, but raise only the question whether orders of the court for production of specified records have been validly made ." Accord, FTC v. Carter, 636 F.2d at 787-88. It is thus clear that when the Commission investigates by subpoena, the Fourth Amendment simply is not implicated.

The CID requiring Altmeyer to produce specified documents does not require the company to submit to anything resembling a search within the meaning of the Fourth Amendment. Furthermore, Instruction 10 of the CID requesting production of documents permits Altmeyer to avoid the presence of FTC staff on its premises simply by sending the responsive materials to the Commission.” In fact, the instructions to this CID state that Altmeyer may comply with the demand by producing documents and information by mail if it prefers that Commission staff not enter its business premises. Altmeyer declined to pursue either of these options with Commission staff, choosing instead to file this Petition.

The instant case also does not implicate the privacy concerns that might arise if the agency were seeking to compel the production of private personal financial records from an individual who was not the target of the investigation. In re McVane, 44 F.3d 1127, 1136 (2d Cir. 1995). Here, the Commission is seeking corporate records and the testimony of a corporate officer in order to determine whether Altmeyer has complied and is complying with federal statutes that the agency is charged by Congress with enforcing. Thus, any assertion of personal privacy interests is misplaced. See id. at 1137. It has long been established that so long as a federal agency's demand for information issued to a corporation (or its agents) is not unreasonable, it will be enforced. Morton Salt, 338 U.S. at 652. The CID requiring Judy Altmeyer to present oral testimony seeks information regarding 5 :

Section 20(c)(3)(B) of the FTC Act requires the recipients of a CID only to make documents “available for inspection and copying or reproduction." 15 U.S.C. 57b-1(c)(3)(B). Response to Petition 123 F.T.C.

matters within the scope of her official position as an owner of Altmeyer. This information is clearly relevant to the FTC's inquiry to _ determine whether Altmeyer is in compliance with the law and does not implicate a Fourth Amendment privacy concern. Similarly, no Fourth Amendment concerns is implicated by the CID requesting production of corporate document. Petitioner's challenge to the CIDs based on Fourth Amendment protection is thus denied. C. Petitioner asserts that the CIDs are unduly burdensome and overbroad.

Petitioner also argues that Altmeyer has already made the documents covered by the CIDs available to the Commission voluntarily. The Petition states that requiring the company to prodcue the same materials again, for a second time, is patently5 1 5 1 4 11 2002 1285 238 53 96.257233 harassing,4 1 5 1 5 0 427 1349 1814 65 -1 5 1 5 1 5 1 427 1366 5 41 61.024040 |5 1 5 1 5 2 642 1359 254 55 96.676697 oppressive5 1 5 1 5 3 917 1359 82 43 93.250534 ands 1 5 1 5 4 1019 1349 281 52 35.089966 vexatious.° Petition at 2. In raising this objection, Petitioner appears to assert that FTC staff's decision not to follow up on Altmeyer's initial offer to inspect the documents on a voluntary basis precludes the Commission from seeking them on a compulsory basis later. In addition, Petitioner argues that the CID requesting production of materials seeks access to documents and categories of documents that exceed the scope of the FTC staff's investigation of Altmeyer. See Petition at 3. You also raised these arguments on behalf of your client at the oral presentation. Petitioner has not met the heavy burden to sustain either of these allegation, which the Commission construes as objections to the reasonableness of the CIDs. As the court stated in FTC v. Texaco Inc.,". .. the question is whether the demand is unduly burdensome or unreasonably broad." 555 F.2d at 882 (emphasis in original). The court said:

Some burden on subpoenaed parties is to be expected and is necessary in furtherance of the agency's legitimate inquiry and the public interest. The burden of showing that the request is unreasonable is on the subpoenaed party. Further, the burden is not easily met where . . . the agency inquiry is pursuant to a lawful purpose and the requested documents are relevant to that purpose . Thus, courts have refused to modify investigative subpoenas unless compliance threatens to disrupt or seriously hinder normal operations of a business. ' Id. (footnotes omitted).

Because the holiday season is over, Petitioner's argument regarding the burden of complying with the CIDs during Christmas has become moot. — ALTMEYER HOME STORES, INC. 1737 1730 Response to Petition Petitioner simply asserts, without either factual or legal support, that Altmeyer will be harmed by having to undertake the task of producing documents for the Commission a second time and presenting Judy Altmeyer for testimony. You stated at the oral presentation that it had been burdensome and costly for the company to gather the records the first time because there5 1 3 1 6 10 1692 715 69 29 96.581642 ares 1 3 1 6 11 1778 700 219 44 96.198219 hundreds5 1 3 1 6 12 2016 700 83 44 96.695427 anda 1 3 1 7 0 496 769 1601 57 -1 5 1 3 1 7 1 496 774 229 43 96.265999 thousands5 1 3 1 7 2 741 775 54 43 96.751167 of5 1 3 1 7 3 802 775 150 51 96.770889 them, and that it would be similarly burdensome to do so again. Oral Presentation Transcript at 11-12. You also stated that requiring Judy Altmeyer to appear to give testimony would be burdensome because you5 1 3 1 10 4 1115 991 68 29 96.884369 ares 1 3 1 10 5 1199 976 151 55 96.524734 asking5 1 3 1 10 6 1366 990 24 29 96.524734 a5 1 3 1 10 7 1404 988 173 31 96.157852 woman5 1 3 1 10 8 1590 979 45 38 96.061050 to5 1 3 1 10 9 1652 975 98 42 96.061050 takes 1 3 1 10 10 1767 987 25 29 96.996399 a5 1 3 1 10 11 1808 974 85 54 96.952553 days 1 3 1 10 12 1909 973 89 43 96.042923 off (Id. at 12) and that [a]ny5 1 3 1 11 6 1022 1047 215 41 96.698242 endeavors 1 3 1 11 7 1252 1045 89 42 96.593727 that5 1 3 1 11 8 1356 1045 122 41 96.652023 takes5 1 3 1 11 9 1495 1043 112 54 93.297867 Judy5 1 3 1 11 10 1623 1042 225 53 92.718353 Altmeyer5 1 3 1 11 11 1865 1054 49 29 96.956787 or5 1 3 1 11 12 1930 1054 169 40 96.426315 anyone4 1 3 1 12 0 498 1108 1601 61 -1 5 1 3 1 12 1 498 1114 90 42 95.860321 else5 1 3 1 12 2 628 1120 41 37 92.783379 at5 1 3 1 12 3 706 1115 244 54 92.111374 Altmeyers5 1 3 1 12 4 990 1120 75 37 96.242882 outs 1 3 1 12 5 1103 1114 54 41 96.811501 of5 1 3 1 12 6 1188 1112 108 44 96.539871 theirs 1 3 1 12 7 1334 1112 166 43 96.547592 normal5 1 3 1 12 8 1539 1115 304 49 96.605392 management5 1 3 1 12 9 1881 1108 142 44 96.605392 duties5 1 3 1 12 10 2062 1108 37 43 95.969948 is4 1 3 1 13 0 498 1182 480 54 -1 5 1 3 1 13 1 498 1182 286 54 96.432289 oppressive. Jd, at 9.

Neither of these objections, however, even comes close to the standard articulated in Texaco -- that the burden of compliance must threaten[]5 1 3 2 3 2 771 1392 42 38 97.017189 to5 1 3 2 3 3 832 1386 164 55 96.714157 disrupt5 1 3 2 3 4 1014 1401 50 27 96.512558 or5 1 3 2 3 5 1082 1386 212 53 96.524490 seriously5 1 3 2 3 6 1312 1384 152 43 96.524490 hinders 1 3 2 3 7 1481 1383 167 43 96.519402 normal5 1 3 2 3 8 1668 1381 283 56 95.057854 operations. More significantly, there is no indication that at any time you told FTC staff that complying with the CID timetables would cause great hardship to Altmeyer or Ms. Altmeyer. You never asked FTC staff for an extension of time to respond to the CIDs in order to lessen the alleged burden of production. - It should be noted that Altmeyer's initial agreement to make the requested corporate documents available to FTC staff voluntarily, and its production of a portion of these materials, do not make clear why complying with the CIDs at this time would be unduly burdensome for the company. In fact, the previous willingness of the company to produce these documents voluntarily suggests that collecting and providing them to staff at the present time is not unduly timeconsuming.’ Petitioner has also failed to demonstrate that the CID seeking access to documents is unreasonably broad in light of the Commission's need for such materials. The Petition did not indicate which specific aspect of the CID is alleged to be overbroad. At the oral presentation, you objected only to Specification 1's requirement to produce articles of incorporation, bylaws, minutes, and annual reports for Altmeyer as examples of excessively broad requests. Oral ‘a In rendering a decision on Petitioner's assertion of undue burden, the Commission need not resolve the factual dispute between Petitioner and the FTC staff regarding the circumstances surrounding the staff decision not to review Altmeyer's documents when voluntarily offered for inspection in May 1995. Oral Presentation Transcript at 6, 19-25. This dispute raises the issue of Altmeyer's substantive compliance with the law, which is not ripe for determination at this stage of the investigation. Response to Petition 123 F.T.C, Presentation Transcript at 10. On its face, this CID calls only for minimal information on Altmeyer's corporate organization and management (Specifications 1-6). The remaining specifications (7- 16) call for information specifically directed to Altmeyer's policies and procedures for complying with the FCRA. For example, it is certainly necessary for the Commission to seek information on related entities (Specification 3) to determine what entities might possess information relevant to the investigation and who is legally responsible for any violations that may be uncovered. Similarly, information on corporate management and compliance with the FCRA (Specifications 6 and 12) is essential for obtaining relevant testimony and information on compliance and for assessing personal responsibility for any violations that might be uncovered. Each of the specifications is narrowly tailored to obtain information germane to the Commission's investigative purpose as set forth in the Resolution. Further, the CID seeking document production is itself selflimiting in significant respects and provides Altmeyer with various options for minimizing its scope. For instance, Instruction 6 of the CID permits substitution of written statements in lieu of documents for certain specifications. In addition, Instruction 11 specifically permits Altmeyer to submit a negotiated sample of applicant files if the required response to Specification 16 involves more than 500 files. Instruction 11 also provides that, if Altmeyer believes the scope of the demand can be narrowed consistent with the FTC's need for information, the company is encouraged to discuss possible modifications with FTC staff. Finally, Instruction 12 provides that documents that have previously been provided to the Commission need not be produced again.

However, in recognition of the fact that Altmeyer has incurred some expense in providing documents to the Commission, Specification 1 of the CID requiring production of documents is modified to delete the requirement to produce corporate by-laws. Specification 1 is also modified to require the production of corporate minutes only insofar as the minutes discuss the FCRA, Altmeyer['s] (as this term is defined in the CID) compliance with that statute, or any change in corporate policy or policies relating to the FCRA.

ALTMEYER HOME STORES, INC. 1739 1730 Response to Petition D. Petitioner asserts that a cease and desist order is unnecessary. Petitioner also argues that because Altmeyer has supplied documents to the Commission that allegedly demonstrate its current compliance with the FCRA, there is no need for a cease and desist order, and presumably there is no basis for the CIDs to be upheld. Petition at 3. It is premature for Altmeyer to raise the defense of subsequent compliance with the law at this stage, when the Commission has yet to consider whether a law violation has occurred. Once the Commission has gathered the necessary information, the agency can turn to the task of assessing whether the company violated or has ceased violating the FCRA and what the appropriate remedy for such practices might be.

In addition, in raising this argument, Petitioner overlooks the fact even if Altmeyer did bring itself into compliance with the FCRA upon learning of the Commission's investigation, neither is that a defense to liability for violating the FCRA nor does it relieve the company of its responsibility to comply with a validly issued subpoena. “Voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the cases, i.e., does not make the case moot," unless the defendant meets the heavy burden of demonstrating that there5 1 3 2 9 6 1354 1788 37 42 96.373474 is5 1 3 2 9 7 1406 1802 57 28 96.789124 no5 1 3 2 9 8 1479 1788 244 42 96.838539 reasonable5 1 3 2 9 9 1741 1786 272 55 96.564430 expectations 1 3 2 9 10 2029 1786 89 42 97.010185 that4 1 3 2 10 0 522 1855 1595 57 -1 5 1 3 2 10 1 522 1858 72 41 96.768425 thes 1 3 2 10 2 611 1864 149 48 96.038406 wrong5 1 3 2 10 3 777 1858 87 41 96.506752 will5 1 3 2 10 4 881 1858 54 41 96.131966 be5 1 3 2 10 5 951 1858 232 53 96.020699 repeated. SCM Corp. v. FTC, 565 F.2d 807, 812 (2d Cir. 1977) (quoting United States v. W.T. Grant Co., 345 U.S. 629, 632 (1953)). Accordingly, Petitioner's argument that a cease and desist order is unnecessary because Altmeyer is in compliance with the FCRA does not provide a basis for quashing the CIDs. Ill. CONCLUSION For the foregoing reasons, the Petition is granted in part and denied in part. Pursuant to Rule 2.7(e), Petitioner is directed to comply with the CID for documentary evidence (except as modified supra at 8) on or before February 26, 1997 and with the CID for oral testimony on or before March 12, 1997.

Pursuant to Rule 2.7(f), 16 CFR 2.7(f), within three days after service of this decision, Petitioner may file with the Secretary of the Commission a request for full Commission review. The timely filing of such request shall not stay the return date in this ruling unless the Commission otherwise specifies.

- Response to Petition + 123 F.T.C.

Re: Altmeyer Home Stores, Inc. Petition for Review by Full Commission Pursuant to Rule 2.7(f).

File No. 962-3063.

February 21, 1997 Dear Mr. Farnan:

The Commission has considered (a) the Petition to Quash the Civil Investigative Demands ("CID") that you filed on behalf of Altmeyer Home Stores, Inc. ("Petition"); (b) the transcript of the oral presentation on the Petition, held on January 21, 1997; (c) the February 12, 1997 letter ruling by Commissioner Roscoe B. Starek, IIL, granting in part and denying in part the Petition; (d) your request, filed on February 14, 1997, for full Commission review of that letter ruling; and (e) the CIDs at issue.

The Commission has determined that your request for full Commission review does not raise any new issues regarding the Petition, and that the Petition was properly denied in part and granted in part for the reasons stated in the February 12, 1997 ruling. Accordingly, the full Commission concurs with, and hereby adopts, the February 12 letter ruling in this matter. The February 12 letter ruling specified a February 26, 1997 return date for the CID for documentary evidence and a return date of March 12, 1997 for the CID for oral testimony. Your request for full Commission review did not stay those return dates. Altmeyer Home Stores, Inc. is thus directed to comply with the CIDs by those dates.