FTC Puts Conditions on Simon Property Group's Acquisition of Prime Outlets

The Federal Trade Commission is requiring Simon Property Group, Inc. to divest property and modify tenant leases as part of a settlement designed to preserve outlet center competition in parts of southwest Ohio, Chicago, Illinois, and Orlando, Florida, in the wake of Simon’s purchase of Prime Outlets Acquisition Company, LLC.

Under the proposed settlement, Simon will sell either its Cincinnati Premium Outlet center located in Monroe, Ohio, or its Prime Outlets-Jeffersonville outlet center in Jeffersonville, Ohio. In addition, Simon has agreed to remove radius restrictions for tenants with stores in its outlet malls serving the Chicago and Orlando markets. This allows competing outlet centers or outlet mall developers wanting to enter those markets to sign leases with tenants that otherwise would have been prevented from doing so due to the radius restrictions.

On December 8, 2009, Simon, a real estate investment trust, and Prime signed an agreement under which Simon would acquire all of Prime’s 22 outlet centers for approximately $2.3 billion.

The settlement announced today resolves FTC competitive concerns that the transaction raised in several local markets. According to a complaint simultaneously filed by the FTC, without the settlement provisions, Simon’s acquisition of Prime would have illegally reduced outlet center competition by:

• eliminating direct and substantial competition between Simon and Prime in southwest Ohio; Chicago, Illinois; and Orlando, Florida;
• giving Simon a monopoly in outlet centers serving the Southwest Ohio market; and
• allowing Simon to prevent or limit new outlet center entry and competition in the Chicago and Orlando local markets.

In Chicago and Orlando, new entry is likely to prevent any increase in rents to outlet mall tenants. However, many of Simon’s leases include radius restrictions that prevent the tenants from opening other stores in outlet malls within a specified distance. As a result of these restrictions, an outlet mall developer wanting to open a new outlet center serving either Chicago or Orlando would find it difficult to sign key tenants to leases.

The Commission vote approving the complaint and proposed consent order was 5-0. The order will be published in the Federal Register shortly, and will be subject to public comment for 30 days, until December 10, 2010, after which the Commission will decide whether to make it final. Comments can be submitted electronically at the following link: https://ftcpublic.commentworks.com/ftc/simonproperty.

NOTE: The Commission issues a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent order is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

Copies of the complaint, consent order, and an analysis to aid public comment are available 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 works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 383, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

(FTC File No. 101-0061)