Federal Register, Volume 75 Issue 223 (Friday, November 19, 2010)

[Federal Register Volume 75, Number 223 (Friday, November 19, 2010)]
[Notices]
[Pages 70921-70923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29163]

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FEDERAL TRADE COMMISSION

[File No. 101 0061]

Simon Property Group, Inc.; Analysis of Proposed Agreement
Containing Consent Orders To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint and the terms of the consent order--embodied in the consent
agreement--that would settle these allegations.

DATES: Comments must be received on or before December 10, 2010.

ADDRESSES: Interested parties are invited to submit written comments
electronically or in paper form. Comments should refer to ``Simon
Property, File No. 101 0061'' to facilitate the organization of
comments. Please note that your comment--including your name and your
state--will be placed on the public record of this proceeding,
including on the publicly accessible FTC Web site, at
http:[sol][sol]www.ftc.gov[sol]os[sol]publiccomments.shtm.
Because comments will be made public, they should not include any
sensitive personal information, such as an individual's Social Security
Number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. Comments also
should not include any sensitive health information, such as medical
records or other individually identifiable health information. In
addition, comments should not include any ``[t]rade secret or any
commercial or financial information which is obtained from any person
and which is privileged or confidential * * *,'' as provided in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule 4.10(a)(2),
16 CFR 4.10(a)(2). Comments containing material for which confidential
treatment is requested must be filed in paper form, must be clearly
labeled ``Confidential,'' and must comply with FTC Rule 4.9(c), 16 CFR
4.9(c).\1\
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\1\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR
4.9(c).
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Because paper mail addressed to the FTC is subject to delay due to
heightened security screening, please consider submitting your comments
in electronic form. Comments filed in electronic form should be
submitted by using the following weblink: https://ftcpublic.commentworks.com/ftc/simonproperty and following the
instructions on the web-based form. To ensure that the Commission
considers an electronic comment, you must file it on the web-based form
at the weblink: https://ftcpublic.commentworks.com/ftc/simonproperty.
If this Notice appears at
http:[sol][sol]www.regulations.gov[sol]search[sol]index.jsp, you may
also file an electronic comment through that Web site. The Commission
will consider all comments that regulations.gov forwards to it. You may
also visit the FTC Web site at http:[sol][sol]www.ftc.gov[sol] to read
the Notice and the news release describing it.
A comment filed in paper form should include the ``Simon Property,
File No. 101 0061'' reference both in the text and on the envelope, and
should be mailed or delivered to the following address: Federal Trade
Commission, Office of the Secretary, Room H-135 (Annex D), 600
Pennsylvania Avenue, NW., Washington, DC 20580. The FTC is requesting
that any comment filed in paper form be sent by courier or overnight
service, if possible, because U.S. postal mail in the Washington area
and at the Commission is subject to delay due to heightened security
precautions.
The Federal Trade Commission Act (``FTC Act'') and other laws the
Commission administers permit the collection of public comments to
consider and use in this proceeding as appropriate. The Commission will
consider all timely and responsive public comments that it receives,
whether filed in paper or electronic form. Comments received will be
available to the public on the FTC Web site, to the extent practicable,
at http:[sol][sol]www.ftc.gov[sol]os[sol]publiccomments.shtm. As a
matter of discretion, the Commission makes every effort to remove home
contact information for individuals from the public comments it
receives before placing those comments on the FTC Web site. More
information, including routine uses permitted by the Privacy Act, may
be found in the FTC's privacy policy, at
http:[sol][sol]www.ftc.gov[sol]ftc[sol]privacy.shtm.

FOR FURTHER INFORMATION CONTACT: Joe Lipinsky (206-220-4473), FTC
Northwest Regional Office, 600 Pennsylvania Avenue, NW., Washington, DC
20580.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 the
Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that
the above-captioned consent agreement containing a consent order to
cease and desist, having been filed with and accepted, subject to final
approval, by the Commission, has been placed on the public record for a
period of thirty (30) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for November 10, 2010), on the World Wide Web, at
http:[sol][sol]www.ftc.gov[sol]os[sol]actions.shtm. A paper copy can be
obtained from the FTC Public Reference Room, Room 130-H, 600
Pennsylvania Avenue, NW., Washington, DC 20580, either in person or by
calling (202) 326-2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. All comments should be filed as
prescribed in the ADDRESSES section above, and must be received on or
before the date specified in the DATES section.

[[Page 70922]]

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction

The Federal Trade Commission (``Commission'' or ``FTC'') has
accepted, subject to final approval, an Agreement Containing Consent
Orders (``Consent Agreement'') from Simon Property Group, Inc.
(``Simon'') that will remedy the anticompetitive effects likely to
result from Simon's acquisition of Prime Outlets Acquisition Company,
LLC (``Prime''). Under the terms of the proposed Consent Agreement,
Simon is required, among other things, to divest either Prime Outlets-
Jeffersonville or Simon's Cincinnati Premium Outlets, both located in
Southwest Ohio. Additionally, the proposed Consent Agreement prohibits
Simon from enforcing any radius restriction with respect to any lease
with any tenant in either of the following geographic areas: the
Chicago, IL, metropolitan area or Orlando, FL. Finally, from the time
when the Order becomes final through January 1, 2015, all tenants in
Prime Outlets Orlando, Prime Outlets Orlando Marketplace, and Orlando
Premium Outlets may unilaterally opt to extend any existing lease under
its existing terms, without penalty, until January 1, 2015.
The proposed Consent Agreement has been placed on the public record
for thirty (30) days for receipt of comments by interested persons.
Comments received during this period will become part of the public
record. After thirty (30) days, the Commission will again review the
proposed Consent Agreement, and will decide whether to withdraw from
the proposed Consent Agreement, modify it, or make it final.
On December 8, 2009, Simon and Prime entered into an acquisition
agreement under which Simon would acquire the entire Prime portfolio of
outlet centers, consisting of 22 properties. The total value of the
transaction was approximately $2.3 billion. On June 28, 2010, the
parties amended the agreement to remove Prime's St. Augustine, FL,
outlet center and its development projects at Livermore, CA, and Grand
Prairie, TX, from the schedule of properties to be acquired by Simon.
The acquisition was consummated on August 30, 2010. The Commission's
complaint alleges that Simon's acquisition violates Section 7 of the
Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal
Trade Commission Act, as amended, 15 U.S.C. 45, by eliminating an
actual, direct, and substantial competitor from certain local markets
in the United States.

II. Description of the Parties

Simon, a publicly traded real estate investment trust, is based in
Indianapolis, Indiana. Simon is engaged in the business of developing
and managing real estate. In particular, Simon develops and operates
outlet centers under the Premium Outlets and Mills brands. Simon also
develops and operates other real estate platforms.
Prime is a privately held subsidiary, jointly owned by entities
controlled by David Lichtenstein and the Lightstone Group, a real
estate investment company. Headquartered in Baltimore, MD, Prime is a
developer and operator of outlet centers under the Prime Outlets brand.

III. The Complaint

The Commission's complaint alleges that Simon's acquisition of
Prime may substantially lessen competition in the provision of retail
space at outlet centers in the Southwest Ohio; Chicago, IL; and
Orlando, FL, areas in violation of Section 7 of the Clayton Act, as
amended, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission
Act, as amended, 15 U.S.C. 45.
The complaint alleges that the relevant product market in which to
analyze the effects of the acquisition is retail space at outlet
centers. Outlet centers are shopping centers featuring outlet stores,
which sell discounted brand name merchandise. By clustering together,
outlet tenants derive strong benefits from the network effect of
creating a shopping destination, which is strengthened by the presence
of tenants with desirable brands.
The complaint also alleges that the relevant geographic markets are
local in nature. Competition between owners and developers of outlet
centers occurs in local areas where more than one outlet center exists.
In local overlap areas, tenants are able to use competition between
landlords to get more favorable price and non-price terms in leases.
The three geographic areas of concern outlined in the complaint are:
(1) Southwest Ohio; (2) the Chicago, IL, metropolitan area; and (3)
Orlando, FL.
In Southwest Ohio, Simon owns one outlet center, Cincinnati Premium
Outlets in Monroe, OH, and Prime owns one, Prime Outlets-Jeffersonville
in Jeffersonville, OH. These are the only outlet centers serving
Southwest Ohio. Absent the proposed divestiture of one of these outlet
centers, Simon's acquisition of Prime would give Simon a monopoly in
the retail space in outlet centers market in Southwest Ohio, increasing
the risk that Simon would unilaterally raise rents or reduce non-price
benefits provided to tenants.
In the Chicago metropolitan area, the acquisition of Prime's
Huntley, IL, and Pleasant Prairie, WI, outlet centers would give Simon
ownership of all five outlet centers currently serving the Chicago
metropolitan area market. However, there are two other outlet centers
planned for this market: Craig Realty Group's planned outlet center in
Country Club Hills, IL; and AWE Talisman's planned outlet center in
Rosemont, IL. Absent the proposed relief in the Chicago metropolitan
area, Simon may be able to prevent or limit this planned entry. Many of
the tenants at the current Chicago area outlet centers have radius
restrictions in their leases. This prevents or makes it very expensive
for these outlet tenants to open additional stores within the Chicago,
IL metropolitan area, which has the effect of preventing potential
entry because the new developers cannot sign many of the tenants that
are subject to radius restrictions.
In Orlando, the acquisition of Prime's outlet centers would give
Simon ownership of three of the six outlet centers serving the Orlando
area. However, Simon is acquiring the two closest competitors for many
tenants. Absent the proposed relief in Orlando, Simon's acquisition of
Prime would increase the risk that Simon would unilaterally raise
prices or otherwise reduce tenant benefits due to lost competition.
Based on the above facts, the complaint alleges that Simon's
acquisition of Prime could eliminate actual, direct, and substantial
competition between Simon and Prime in the relevant markets, and
increase Simon's ability to unilaterally exercise market power in
Southwest Ohio; Chicago; and Orlando.
As stated in the complaint, entry would not be timely, likely, or
sufficient to deter or counteract the anticompetitive effects of this
acquisition. It takes more than two years to develop an outlet center,
or to reposition another type of shopping center into an outlet center.
In addition, entry is not likely because the relevant markets affected
by this transaction are protected by radius restrictions, which prevent
or make it very expensive for outlet tenants to open additional stores
within a certain proscribed radius of an existing outlet center. This
has the effect of preventing potential entry because new developers
cannot sign tenants already bound by radius restrictions.

[[Page 70923]]

IV. The Terms of the Proposed Consent Agreement

The proposed Consent Agreement will remedy the likely competitive
effects resulting from Simon's acquisition of Prime's outlet centers in
each of the relevant markets discussed above. Pursuant to the proposed
Consent Agreement, Simon will divest one outlet center in Southwest
Ohio. This will remedy the competitive harm in that market by ensuring
that Simon will not have a monopoly. The proposed Consent Agreement
also requires Simon to waive enforcement of radius restrictions in the
Chicago metropolitan area, which will eliminate a significant entry
barrier that otherwise would likely preclude entry in Chicago. Finally,
in Orlando, the proposed Consent Agreement requires Simon to waive
enforcement of radius restrictions, which will make new entry
substantially easier. Additionally, the proposed Consent Agreement
requires Simon to provide tenants at all three outlet centers it will
own in Orlando with the unilateral right to extend existing leases
under existing lease terms up to January 1, 2015, with no penalty.
Finally, the proposed Consent Agreement requires Simon to maintain
the Southwest Ohio outlet centers at full economic viability,
marketability, and competitiveness until the divestiture of one of the
outlet centers to a Commission-approved acquirer is complete.

V. Opportunity for Public Comment

The proposed Consent Agreement has been placed on the public record
for thirty (30) days for receipt of comments by interested persons.
Comments received during this period will become part of the public
record. After thirty (30) days, the Commission will review the comments
received, and decide whether to withdraw from the proposed Consent
Agreement, modify it, or make it final. By accepting the proposed
Consent Agreement subject to final approval, the Commission anticipates
that the competitive problems alleged in the complaint will be
resolved. The purpose of this analysis is to inform and invite public
comment on the proposed Consent Agreement, including the proposed
divestiture, and to aid the Commission in its determination of whether
to make the proposed Consent Agreement final. This analysis is not
intended to constitute an official interpretation of the proposed
Consent Agreement, nor to modify the terms of the proposed Consent
Agreement in any way.

By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2010-29163 Filed 11-18-10; 8:45 am]
BILLING CODE 6750-01-P