Federal Trade Commission Votes to Challenge Hicks, Muse's Proposed Acquisition of Claussen Pickle Company

The Federal Trade Commission today authorized its staff to seek a preliminary injunction in federal district court to block the proposed acquisition of Claussen Pickle Company (Claussen) by private investment firm Hicks, Muse, Tate & Furst Equity Fund V, L.P. (Hicks, Muse), owner of Vlasic Pickle Company (Vlasic). According to the FTC, the proposed transaction would combine the dominant firm in the market for refrigerated pickles, Claussen, with its most significant competitor in refrigerated pickles and the largest national brand of shelf-stable pickles, Vlasic.

"This transaction would result in a dominant firm merging with its most significant competitor by far, leading the Commission to the conclusion that the transaction would have anticompetitive consequences," said Joe Simons, Director of the FTC's Bureau of Competition.

Parties to the Transaction

Vlasic, which makes and sells shelf-stable and refrigerated pickles, was spun off by Campbell Soup Company as Vlasic Food International in 1998, after which it was purchased by Hicks, Muse in May 2001. Hicks, Muse is a Dallas-based private investment firm that owns Pinnacle Food Corporation (Pinnacle), the firm that now operates the Vlasic business and which is the nation's largest pickle producer. Pinnacle produces Vlasic pickles at its plants in Imlay, Michigan and Millsboro, Delaware.

Claussen, which makes and sells primarily refrigerated pickles, is a business operated by Kraft's Oscar Mayer Foods division. Oscar Mayer bought the Claussen Pickle Company in 1970, before being acquired by Kraft, which is owned by Philip Morris. Philip Morris is a Virginia corporation with its principle place of business in New York. In addition to owning Kraft, it is a prominent producer of cigarettes, beer, and food, including Post cereal, Maxwell House coffee, Jell-O desserts, and Altoids mints.

On May 4, 2002, Pinnacle and Kraft entered into an agreement under which Pinnacle would acquire Claussen's pickle business, including relish, sauerkraut, and pickled tomatoes. The Claussen assets being sold include the brand trademark, as well as a Kraft production facility in Woodstock, Illinois used to make dill pickles.

The Commission's Complaint

According to the FTC's complaint, Hicks Muse's proposed acquisition of Claussen would eliminate competition and the unique rivalry between the two national pickle brands. Claussen is the dominant producer of refrigerated pickles and Vlasic serves as the primary price constraint on Claussen. Together, the companies would have a monopoly share of the refrigerated pickle market in the United States.

The complaint alleges that the effect of the proposed acquisition, if consummated, may be to lessen competition substantially and lead to increases in prices or a reduction in competitive vigor. The complaint also alleges that Vlasic is the leading seller of premium shelf-stable pickles and that Vlasic's shelf-stable pickles also operate as a competitive constraint on Claussen.

Finally, the Commission contends that entry into the refrigerated pickles market by a competitor is likely to be neither sufficient nor timely enough to alleviate the likely anticompetitive effects of the transaction as proposed.

Today's Commission Action

Today's action authorizes staff to seek a federal district court order to prevent Hicks, Muse's proposed acquisition of Claussen. The Commission has authorized staff to file a motion for preliminary injunction on the grounds that the transaction, as currently proposed, would violate federal antitrust laws. If the court grants the FTC's motion, the Commission will have 20 days to determine whether to issue an administrative complaint.

The Commission vote authorizing staff to seek a preliminary injunction was 5-0. The FTC anticipates that it will file its motion for a preliminary injunction in the U.S. District Court for the District of Columbia no later than October 23, 2002.

Copies of the complaint will be available upon filing in federal court from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm