UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

FEDERAL TRADE COMMISSION, Plaintiff
v.
CONSO INTERNATIONAL CORPORATION, MP HOLDINGS, INC.,and
THE McCALL PATTERN COMPANY,

Defendants.

Civil Action No.

COMPLAINT FOR PRELIMINARY INJUNCTION PURSUANT TO SECTION 13(b) OF THE FEDERAL TRADE COMMISSION ACT

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), by its designated attorneys, petitions the Court, pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), for a preliminary injunction enjoining defendant Conso International Corporation ("Conso"), including its domestic and foreign agents, divisions, subsidiaries, affiliates, partnerships, or joint ventures, from acquiring through a merger or otherwise any stock, assets, or other interest, either directly or indirectly, from MP Holdings, Inc., ("MP") or The McCall Pattern Company ("McCall"); thereby maintaining the status quo during the pendency of an administrative proceeding, challenging defendant's proposed combination, that will be commenced by the Commission pursuant to Section 5 of the FTC Act, 15 U.S.C. § 45, and Sections 7 and 11 of the Clayton Act, 15 U.S.C. §§ 18 and 21.

JURISDICTION AND VENUE

1. Jurisdiction is based on Section 13(b) of the FTC Act, 15 U.S.C. § 53(b) and 28 U.S.C. §§ 1337 and 1345. Venue is proper under Section 13(b) of the FTC Act; 28 U.S.C. § 1391(b) and (c); and Section 12 of the Clayton Act, 15 U.S.C. § 22.

THE PARTIES

2. The Commission is an administrative agency of the United States Government established, organized, and existing pursuant to the FTC Act, 15 U.S.C. § 41 et seq., with its principal offices at Sixth Street and Pennsylvania Avenue, NW, Washington, DC 20580. The Commission is vested with authority and responsibility for enforcing, inter alia, Section 7 of the Clayton Act and Section 5 of the FTC Act.

3. Defendant Conso is a for-profit corporation organized and existing under the laws of the state of South Carolina, with its principal place of business at 513 North Duncan Bypass, Union, SC 29379. Conso also does business as Conso Products Company. In June 1998, Conso acquired all the outstanding common stock of Simplicity Capital Corporation, the parent company of Simplicity Pattern Company, Inc. ("Simplicity"). Simplicity is the largest manufacturer of sewing patterns in the United States with a market share of about 45%.

4. Defendant MP is a for-profit corporation organized and existing under the laws of the state of Delaware, with its principal place of business at 11 Penn Plaza, New York, NY 10001. MP owns defendant McCall.

5. Defendant McCall is a for-profit corporation organized and existing under the laws of the state of Delaware, with its principal place of business at 11 Penn Plaza, New York, NY 10001. McCall is owned by defendant MP. McCall is the second-largest manufacturer of sewing patterns in the United States with a market share of about 31.5%.

6. Conso, MP, and McCall are engaged in commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44, and Section 1 of the Clayton Act, 15 U.S.C. § 12.

7. Conso, MP, and McCall agree that they are subject to the personal jurisdiction of this Court for the purposes of this litigation.

SECTION 13(b) OF THE FTC ACT

8. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), provides in pertinent part:

(b) Whenever the Commission has reason to believe --

(1) that any person, partnership or corporation is violating, or is about to violate, any provision of law enforced by the Federal Trade Commission, and

(2) that the enjoining thereof pending the issuance of a complaint by the Commission and until such complaint is dismissed by the Commission or set aside by the court on review, or until the order of the Commission made thereon has become final, would be in the interest of the public --

the Commission by any of its attorneys designated by it for such purpose may bring suit in a district court of the United States to enjoin any such act or practice. Upon a proper showing that, weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest, and after notice to the defendant, a temporary restraining order or a preliminary injunction may be granted without bond. . . .

THE PROPOSED MERGER AND THE COMMISSION'S RESPONSE

9. Pursuant to a Letter of Intent dated February 25, 2000, Conso through Citicorp Venture Capital Ltd. proposes to acquire all of the stock of McCall for approximately $22 million (plus assumption of up to $7.5 million in debt), and to merge with McCall.

10. On August 2, 2000, the Commission authorized the commencement of an action under Section 13(b) of the FTC Act to seek injunctive relief barring the proposed merger during the pendency of administrative proceedings.

11. The defendants have informed the Commission that they will delay consummation of the proposed acquisition until after this Court rules on the Commission's request for a preliminary injunction.

12. In authorizing the commencement of this action, the Commission determined that such an injunction is in the public interest and that it has reason to believe that the aforesaid proposed merger would violate Section 7 of the Clayton Act because the acquisition may substantially lessen competition and/or tend to create a monopoly in the manufacture and sale of sewing patterns.

LIKELIHOOD OF SUCCESS ON THE MERITS AND NEED FOR RELIEF

13. The Commission is likely ultimately to succeed in demonstrating, in administrative proceedings to adjudicate the legality of the proposed merger, that the proposed merger would violate Section 7 of the Clayton Act. In particular, the Commission is likely ultimately to succeed in demonstrating, inter alia, that:

a. The relevant line of commerce (i.e., the product market) in which the competitive effects of the proposed merger may be assessed is the manufacture and sale of sewing patterns (including the manufacture of sewing patterns under contract for sale by other sellers of patterns under their own names).

b. The relevant section of the country (i.e., the geographic market) within which to assess the competitive effects of the proposed merger is the United States.

c. For many decades there have been only three major competitors in the United States sewing pattern market -- Simplicity, McCall, and Butterick, and this merger would leave only two firms controlling the entire sewing pattern market. This market is already highly concentrated and will become substantially more so if the proposed acquisition is consummated. An HHI, or Herfindahl-Hirschman Index of 1800 characterizes a highly concentrated market. The proposed acquisition would increase the HHI about 2825 points to approximately 6346, a substantial increase in an already highly concentrated market.

d. Substantial and effective entry into the relevant market(s) is difficult.

e. The effect of the proposed acquisition, if consummated, may be to substantially lessen competition in markets for the manufacture and sale of sewing patterns in the United States by, among other things:

i. substantially increasing concentration, and further heightening barriers to entry, thereby increasing the likelihood of successful anticompetitive coordinated interaction, and actual or tacit collusion among the two remaining firms;

ii. eliminating substantial head-to-head competition and potential competition between Simplicity and McCall in the manufacture and sale of sewing patterns in the United States; and

iii. eliminating McCall as a substantial, independent, and competitive force in the market.

14. The reestablishment of Conso and McCall as independent viable competitive entities if they were to merge would be difficult, and there is a substantial likelihood that it would be difficult or impossible to restore the businesses as they originally existed. Furthermore, it is likely that substantial interim harm to competition would occur even if suitable divestiture remedies could be devised.

15. For the reasons stated above, the granting of the injunctive relief sought is in the public interest. WHEREFORE, the Commission requests that the Court:

1. Preliminarily enjoin defendant Conso and all its affiliates from taking any further steps to consummate, directly or indirectly, the proposed merger with McCall, or any other acquisition of stock, assets, or other interest, either directly or indirectly, in MP or McCall;

2. Maintain the status quo pending the issuance of an administrative complaint by the Commission challenging such acquisition, and until such complaint is dismissed by the Commission or set aside by a court on review, or until the order of the Commission made thereon has become final; and

3. Award such other and further relief as the Court may determine to be proper

and just, including costs.

Respectfully submitted,

Dated: August 4, 2000