Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Service Corporation International settles FTC charges in acquisition of rival funeral and cemetery services provider, (Dec 23, 2013)

By Linda O’Brien, J.D., LL.M.

The FTC announced today that Service Corporation International (SCI), the nation’s largest provider of funeral and cemetery services, has agreed to sell 53 funeral homes and 38 cemeteries to resolve FTC charges that its proposed $1.4 billion acquisition of Stewart Enterprises, Inc. is likely to substantially lessen competition in 59 communities throughout the United States.

SCI owns and operates more than 1,449 funeral service locations and 374 cemeteries, including 213 combined funeral service and cemetery locations. Its total revenue in 2012 was $2.41 billion. Stewart is the second largest funeral and cemetery services provider in the nation, with 217 funeral home and 141 cemeteries in 24 states and Puerto Rico. Stewart’s total revenue was approximately $524 million. In May 2013, SCI and Stewart entered into an agreement under which SCI would acquire Stewart for $1.4 billion.

In its complaint (In re Matter of Service Corporation International, Docket No. C-4423, File No. 131-0163), the FTC charged that SCI’s proposed acquisition of Stewart, if consummated, was likely to substantially reduce the competition for funeral and cemetery services in 59 local markets identified by the agency, in violation of Section 7 of the Clayton Act and Section 5 of the FTC Act. The complaint alleged that each of the local markets for funeral and cemetery services was highly concentrated and that the merger as proposed would eliminate direct competition between the companies. The proposed merger would enable the merged entity to unilaterally raise the prices charged to consumers in those local markets and substantially increase the risk of collusion between SCI and the few remaining competitors in the affected local markets. Additionally, entry into those markets would not be sufficient to prevent the likely anticompetitive effects of the merger.

The FTC, along with eight state attorneys general, conducted an intensive investigation covering dozens of local funeral and cemetery services markets that would be affected by SCI’s acquisition of Stewart, including how the merger would likely affect competition related to specific ethnic and religious populations in those markets.

The proposed order to settle the FTC charges required divestitures to ensure consumer in the affected communities would continue to have access to competitive funeral and cemetery services. Specifically, the order requires SCI and Stewart to sell 53 funeral homes and 38 cemeteries to buyers approved by the FTC within 180 days, and also requires SCI and Stewart to sell certain related assets and property needed to ensure that the buyers will be able to fully replicate the competition that would have been lost if the transaction were completed as proposed. Finally, the proposed order requires SCI and Stewart to hold certain facilities separate and maintain them as viable and competitive assets pending their sale.

The proposed order also includes terms to ensure that the sales are successful, and would allow the FTC to appoint a trustee to oversee the sales if they are not completed in the time required. Also, for 10 years, the FTC will be able to review any attempt by SCI to acquire any funeral or cemetery assets in the relevant geographic markets, as well as several other local areas where further acquisitions would likely lead to competitive harm, but may not require premerger notice under the Hart-Scott-Rodino Act.

Companies: Service Corporation International; Stewart Enterprises, Inc.

News: Antitrust ConsumerProtection FederalTradeCommissionNews