Question
(redacted)
July 26, 2005
Via E-Mail
B. Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Room 303
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
RE: Application of Hart-Scott-Rodino Antitrust Improvements Act
Dear Mike:
Iam writing to confirm your advice regarding the application of theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), to the transaction described below, as we discussedthis morning during our telephone conversation. Based on your advice, theparties will not make any filings under the HSR ActAccordingly, please call me to confirm that this letter does not misstate theviews of the Premerger Notification Office on the matter.
Aswe discussed, "Licensor" intends to grant to "Licensee" an"exclusive license" to use a trademark (the "LicensedMark") in connection with the manufacture, distribution and sale ofcertain types of products (the "Licensed Products") in the U.S. (as well as Mexico and Canada). After discussions with the client and a review of thedraft license agreement, it became apparent that this "exclusivelicense" would have significant exceptions. In particular, the followingexceptions would exist:
1. Licensor would retain the right to sell the Licensed Productsto hotels, motels and other lodging facilities for use at such facilities (asopposed to resale).
2. Licensor must approve all parties to whom Licensee may sell theLicensed Products and, with the limited exception of a few listed parties, anyapproval that has been granted with respect to a party may be subsequentlywithdrawn by the Licensor.
3. Licensor may sell Licensed Products as part of a combinationsale, premium or giveaway with non-Licensed Products. These sales may even bemade to parties who are otherwise customers of Licensee for the LicensedProducts.
4. Licensor may sell directly to consumers through direct mail,the Internet and other direct-to-consumer vehicles. Consumers are currentlypurchasing the Licensed Products through the Licensor's web site.
5. Licensor-affiliated stores that are otherwise customers ofLicensee for Licensed Products can purchase "special Licensed Productsthat are not of the sort typically produced by Licensee" from anotherparty if the price charged by the other party is more than 10% less than theprice charged by Licensee (the addition of "more than 10% is newsince our conversation this morning).
6. Licensor (and not Licensee) may sell Licensed Products tocertain types of customers as stated in the license agreement, such as clubs(e.g., Costco, BJ's, etc.). We do not expect Licensor to sell to any clubs, butLicensor does retain this right.
Basedon the foregoing facts, you concurred with our analysis that this license wouldnot be "exclusive" for purposes of the HSR Act.Consequently, no transfer of an asset is occurring and the parties to thislicense agreement would not be required to file a Notification and Report Formunder the HSR Act with respect to this license grant.
Pleasecall me at (redacted) to confirm that this letter correctly reflects ourconversation and that it does not mischaracterize the views of the PremergerNotification Office. Unless I hear from you to the contrary, I will advise myclient to rely on our discussions. Thank you very much for taking the time todiscuss this matter with me, and I look forward to hearing from you soon.
(redacted)