Advisory opinion concluding that proposed acquisition by Coca-Cola would require prior Commission approval under the Commission's order of August 3, 1983

724 	FEDERAL TRADE COMMISSION DECISIONS
111 F.T.C.
Proposed acquisition by Coca-Cola would require prior Commis-
sion approval under the Commission's order of August 3,
1983. [The Coca-Cola Company, C-3113]
May 9, 1988 1
Dear Mr. Prescott:
This is in response to your request for advice ("Request") on behalf
of The Coca-Cola Company ("Coca-Cola") as to whether its proposed
acquisition of the Institutional Food Service Group of H.P. Hood, Inc.
("Hood") requires prior Commission approval pursuant to Part III of
the consent order in Docket No. C-3113 ("the order"). The Commis-
sion has carefully considered Coca-Cola's request and has concluded
that the proposed acquisition is covered by Part III of the order.
Accordingly, Coca-Cola must obtain the Commission's prior approval.
before Coca-Cola may acquire Hood.
Background
The complaint in this matter, which was issued with the consent
order, challenged under section 7 of the Clayton Act and section 5 of
the Federal Trade Commission Act, Coca-Cola's acquisition of Doric
Foods Corporation ("Doric") in 1982. The complaint alleged that
Coca-Cola's acquisition of Doric may have had the effect of substan-
tially lessening competition or tending to create a monopoly. Com-
plaint, paragraph 9. The consent order required the divestiture of
Doric, which Coca-Cola completed in 1983. Part III of the order
prohibits Coca-Cola, for a ten-year period, from acquiring without
prior Commission approval, any interest in any firm that is engaged
directly or indirectly in the manufacture and sale of "drinks, punches
and ades." The order defines drinks, punches and ades as "non-
carbonated, ready to serve, naturally or artificially flavored fruit
drinks, fruit punches or fruit ades which contain 50% or less fruit juice
and are customarily sold under refrigeration to the consumer."
The Request
The proposed transaction would involve the acquisition by Coca-
Cola of the institutional food 	service group of Hood, consisting
primarily of the Dunedin facility located in Dunedin, Florida ("Dune-
din"). According to the Request, Dunedin procures raw fruit which it
1 This matter was inadvertently o~itted from Volume 110.

724
delivers to Alcoma Packing Company ("Alcoma") in Lake Wales,
Florida, 	pursuant 	to 	contract. 	Alcoma 	processes 	the 	fruit 	into
concentrate. The juice is then mixed, packaged and sold by Dunedin to
institutional customers located in all fifty states. The Request states
that Coca-Cola will likely succeed to co-packing arrangements that
Dunedin 	presently 	has 	with 	Golden 	State 	Food 	Corporation of
Pasadena, California and with Trenton Cold Storage Ltd. in Trenton,
Ontario, Canada. The Request explains that under the co-packing
agreements, the co-packer mixes, packages and warehouses fruit
juices and other products according to formulas and specifications
provided by Dunedin. Dunedin delivers to the co-packer substantially
all the necessary ingredients and packaging materials (except purified
water); the product is processed and packaged by the co-packer and
then sold through the Dunedin distribution network. Request at 3, 4.
The Hood Institutional Food Service Group sells only to institutional
customers, 	as 	distinct from 	grocery stores 	or 	retail 	customers.
Institutional 	customers 	are 	said 	to 	include 	such 	purchasers 	as
restaurants, schools, hospitals and other non-grocery store purchas-
ers. The Request states that Dunedin processes and sells. 15 different
kinds of juice and juice drinks to institutional customers: orange,
grapefruit, 	apple, 	grape, 	pineapple, 	cranberry, 	orange-pineapple,
peach nectar, pear nectar, apricot nectar, fruit punch, lemonade,
orange-grapefruit, prune and tomato. Request at 4.
The Request asserts three reasons why the proposed acquisition
does not require prior Commission approval under Part III of the
order: (1) the proposed transaction would take place in a different
market from that with which the order was concerned; (2) virtually all
of the products sold by Hood and Coca-Cola in the relevant market do
not constitute "drinks, punches and ades" as defined in the order; and,
(3) the amount of fruit ·drinks (as distinct from 100% fruit juice) sold
by Hood is de minimis in relation to Hood's total sales and so small as
to be of "no conceivable competitive significance" as a share of total
sales of fruit drinks to institutional buyers in the United States.
Request at 2. In the alternative, respondent has requested that the
Commission waive the prior approval provision both because the
proposed transaction requires a premerger filing under the Hart-
Scott-Rodino Act and because, in its view, delay could have an adverse
impact on the value of the proposed acquisition to Coca-Cola. Request
at 11, 12.

726 	FEDERAL TRADE COMMISSION DECISIONS
111 F.T.C.
Prior Commission Approval Is Required
The Commission 	has concluded that the 	proposed transaction
requires prior approval pursuant to Part III of the order. The order is
applicable to Coca-Cola's acquisition of any interest in a firm that is
engaged in the manufacture of drinks, punches and ades as defined in
the order and the information supplied in the Request indicates that
Hood is so engaged. The order does not contain any exclusion for
institutional sales nor does it contain a de minimis exception.
Coca-Cola contends the acquisition of Hood's Institutional Food
Service Group does not require prior approval under the order because
the proposed transaction would take place in a different market from
that with which the order was concerned. According to the Request,
the Doric transaction involved the retail market, while the proposed
Hood acquisition involves only the institutional market. However,
neither the complaint nor the order identifies or draws a distinction
between 	a 	retail 	market or an 	institutional 	market. 	While 	the
characteristics of the covered products are set forth in detail, nothing
in either the complaint or the order limits the order's coverage to a
particular channel of distribution. Part III of the order requires prior
approval of acquisitions of assets of a firm that is engaged "directly or
indirectly in the manufacture and sale of drinks, punches and ades."
Coca-Cola does not seriously contend that Hood is not engaged in that
activity. There is nothing in the· order to suggest that the defined
products are not covered unless they are sold in grocery stores or
other retail stores. It would have been simple to draft a proviso
excluding institutional sales from the coverage of Part III of the order
if that had been intended. However, there is no basis for reading such
an exclusion into the order at this time.
Coca-Cola claims that nearly all of the products sold by Hood and
Coca-Cola to institutional customers do not fall within the definition of
"drinks, punches and ades" set forth in the order. One of the
categories respondent attempts to exclude from order coverage is
products "sold to institutions (not to consumers)." Request at 7.
However, as discussed above, there is no exclusion in the order for
sales to institutions. And, of course, products sold to institutions
ultimately reach the consumer, often by sale.* Coca-Cola concedes
that some products sold by Hood come within the definition of drinks,
punches and ades. Respondent acknowledges that [ 	] of Hood's
*There is no requirement in the order that any sale that may be involved has to be made directly to the
ultimate consumer by the manufacturer or distributor of the drink, punch or ade product.

ADVISORY OPINION 	'I "L.'I
724
sales consist of non-frozen non-concentrate single strength juices or
fruit drinks that "might" be considered ready to serve and under
refrigeration. Request at 8. Coca-Cola also acknowledges that a small
percentage of Hood's institutional sales are products containing 50%
or less fruit juice. Request at 9. While much of the institutional
product sold by Hood may be outside the scope or the. order the
requirement or prior approval is not limited to companies whose sales
consist solely of the covered products or a specific percentage of the
covered products.
Finally, Coca-Cola argues that Hood's sales of fruit drink products
possibly covered by the order represent an extremely small part of the
Hood institutional business and amount only to a de minimis share of
total United States sales of fruit drinks to institutional buyers.
However, this order, unlike some other Commission orders, does not
contain any de minimis exception. The order requires respondent to
seek prior Commission approval for all proposed transactions covered
by Part III of the order not merely for those that reach some
subjective standard of competitive significance. The purpose of the
prior approval requirement is to give the Commission the opportunity
to determine the competitive effects of the proposed transaction.
The Commission has also considered Coca-Cola's request for a
waiver of the prior approval provision in this matter because the
proposed transaction requires a Hart-Scott-Rodino Act premerger
filing and because of Coca-Cola's concern that delay could have an
adverse impact on the value of the proposed transaction to Coca-Cola.
The Commission finds 	no grounds for a waiver of the 	order's
requirements in this case, even if it is assumed such a waiver is
permissible. At the time that respondent agreed to this order, the
Hart-Scott-Rodino procedures were in effect and Coca-Cola neverthe-
less agreed to the· prior approval requirement. Similarly, Coca-Cola
has failed to show any special costs or consequences of the prior
approval requirement that were not contemplated when it agreed to
the order. Accordingly, there is no basis for a waiver of the prior
approval requirements of the order.
Based on the foregoing, the Commission is of the opinion that the
proposed transaction requires prior Commission approval pursuant to
Part III of the order in this matter.
By direction of the Commission.

728 	FEDERAL TRADE COMMISSION DECISIONS
111 F.T.C.
Letter of Request
March 30, 1988
Dear Ms. Rock:
Pursuant to 	sections 	1.1-1.4 	and 	2.41(d) 	of the 	Commission
Procedures and Rules of Practice, 16 CFR 1.1-1.4 and 2.41(d), The
Coca-Cola Company ("the Company") hereby requests advice con-
firming that its proposed acquisition of the Institutional Food Service
Group of H.P. Hood, Inc. ("Hood") is outside the·scope of the Decision
and Order dated August 3, 1983 in the matter of The Coca-Cola
Company, 102 FTC 1102, 1103 (Docket No. C-3113) (the "Consent
Order").
Specifically, the Company requests a ruling that the proposed
acquisition does not require the prior approval of the Commission
under 	Part 	III 	of the 	Consent 	Order 	because 	(1) 	the 	present
transaction would take place in a different market from that with
which the Consent Order was concerned; (2) virtually all of the
products sold by Hood and the Company in the relevant market do not
constitute "drinks, punches and ades" as defined in the Consent Order
(i]IC); and (3) the amount of fruit drinks (as distinct from 100% fruit
juices) sold by Hood is de minimis in relation to Hood's total sales and
so small as to be of no conceivable competitive significance as a share
of total sales of fruit drinks to institutional buyers in the United
States.
Alternatively, if the proposed transaction is deemed to fall within
the Consent Order, the Company requests that the prior approval
provision be waived with respect to the present transaction for the
foregoing reasons and for the further reason that a complete ·Hart-
Scott-Rodino filing will be made with respect to this transaction.
Therefore, the benefits which would result from the prior approval
provision of the Consent Order would be fully served by the premerger
filing under the Hart-Scott-Rodino Act. Any unnecessary delay which
might be occasioned by the prior approval provision of the Consent
Order carries with it a risk that the value of this acquisition to the
Company would be substantially impaired. Therefore, for serious
business reasons, the Company wishes to avoid any undue delay in
closing this transaction.

724
The Proposed Transaction
Under the letter of intent (Exhibit A hereto),* the Company would
acquire assets constituting the institutional food service group of
Hood, consisting primarily of the Dunedin facility located in Dunedin,
Florida. ("Dunedin"). The total purchase price would be approximate-
ly $45 million. The closing is planned for May 1, 1988, and the
transaction is subject to obtaining any necessary government approv-
als.
Dunedin procures raw fruit which, pursuant to contract, it delivers
to Alcoma Packing Company, located in Lake Wales, Florida. Alcoma
processes the fruit into concentrate. The juice is then mixed, packaged
and sold by Dunedin to institutional customers located in all fifty
states. The Company will likely succeed to co-packing agreements
between Dunedin and Golden State Food Corporation of Pasadena,
California and Trenton Cold Storage Ltd. located in Trenton, Ontario,
Canada. 1 Under the co-packing agreements, the co-packer mixes,
packages and warehouses fruit juices and other products 2 according
to formulas and specifications provided by Dunedin. Dunedin delivers
to the co-packer substantially all the necessary ingredients and
· packaging materials (except purified water); the product is processed
and packaged by the co-packer and then sold through the Dunedin
distribution network.
The Hood Institutional Food Service Group sells only to institution-
al customers, as distinct from grocery stores or retail customers.
Institutional 	customers 	include 	such 	purchasers 	as 	restaurants,
schools, hospitals and other non-grocery store purchasers. Dunedin
processes and sells 15 different kinds of juice and juice drinks to
institutional customers: orange, grapefruit, apple, grape, pineapple,
cranberry, 	orange-pineapple, 	peach 	nectar, 	pear 	nectar, 	apricot
nectar, fruit punch; lemonade, orange-grapefruit, prune and tomato.
I. The present transaction is outside the scope of the consent order
because it would not take place in the product market with which
the consent order was concerned.
The Commission has held that sales of orange juice to institutional
*Not reproduced herein.
1 The Trenton facility sells solely in Canada.
2 Golden State also produces Shake-Ups, a dairy product similar to a milk shake. Dunedin has co-packing
arrangements with Dairymens Inc. of Jacksonville, Florida and Dairylea of Oneida, New York for the
production of Shake-Ups. Dunedin has a co-packing arrangement with Hood for the production of Frogurt, a
frozen yogurt product.

730 	FEDERAL TRADE COMMISSION DECISIONS
111 F.T.C.
customers constitute a separate line of commerce distinct from sales
to retail customers:
"The ALJ held that the evidence 'overwhelmingly shows' a separate line of
commerce for COJ [chilled orange juice] [8] sold to the retail market, I.D. 56,
justifying the exclusion of orange juice ·sales to institutions from consideration in
assessing the competitive impact of the merger. 1.D.F. 29-40. We agree with the
AL.J's determination to exclude institutional sales, and note that respondents have not
seriously challenged it on appeal."
Beatrice Foods Co., 101 FTC 733, 100 (1983). In so holding, the
Commission referred to the "fundamental soundness of the ALJ's
finding of a separate market of COJ sales to the retail segment". Id.
at 800-801 n.7. See also id. at 743, 744, 785, 818.
The Consent Order dealt with sales in the retail market, while the
Institutional Food Service Group of Hood sells solely to the institu-
tional market. The Consent Order was concerned with the acquisition
and divestiture of Doric Foods Corporation, a company which was
involved solely in sales to the retail market. The data presented in
connection with the Consent Order dealt with sales in the retail
market and it was clearly those sales with which the Commission was
concerned. 3 Thus, the Consent Order dealt with a market which the
Commission has held to be separate. and distinct from that in which
the present acquisition would take place.
The Consent Order was addressed to "a line of commerce in a
section of the country." (Complaint i]9, 102 FTC at 1103). We believe
that it should not be construed to cover acquisitions in lines of
commerce that clearly were not involved in the transaction out of
which the Consent Order arose.
The Consent Order was negotiated between the Commission and the
Company 	at 	an 	early 	stage 	of the 	proceedings 	before 	a 	full
investigation by the Commission could be completed. In a spirit of
cooperation, the Company agreed to divest Doric Foods in order to
resolve the Commission's antitrust concerns without incurring the
large time commitment and expense which would have been involved
in a full investigation and litigation of that matter. This type of
cooperation should be encouraged by the Commission .. As a matter of.
policy, the Company should not now be penalized by an overly
expansive reading of the Consent Order.
3 The market data submitted to the Commission was published by SAMI ("Selling Area Market
Intelligence") and the A.C. Nielsen Company, which only publish data for sales to the retail market, not for the
institutional market.

724
II. Nearly all of the products sold by Hood and by the company's
institutional sales division fall outside the definition of "drinks,
punches and ades" set forth in the consent order.
The Consent Order dealt with sales of "drinks, punches and ades"
which were specifically defined as:
"non-carbonated, ready to serve, naturally or artificially flavored fruit drinks, fruit
punches or fruit ades which contain 50% or less fruit juice and are customarily sold
under refrigeration to the consumer." Consent Order ill.C. (emphasis supplied)
Nearly all of the juices sold by the Company and by Hood to
institutional customers do not fall within this definition because (1)
they are 100% fruit juice (not 50% or less fruit juice); (2) they are sold
as concentrate (not ready to serve); (3) they are sold frozen (not
merely chilled and ready to serve) and/or (4) they are sold to
institutions (not to consumers).
[ 	] of the juice sold by the Company's institutional sales group is
not sold in ready to serve form; it is sold as frozen concentrate, which
must be mixed with water in a ratio of 3 parts water to one part of
concentrate before it is served. The concentrate is sold in 32-ounce or
64-ounce containers which are mixed with water by hand or through a
fountain-type dispenser.
The majority [ 	] of Hood's sales (in gallons or gallon equivalents)
to institutional buyers are also made in frozen concentrate in 32-ounce
and 64-ounce sizes. In addition, Hood sells juices and juice drinks in
single strength "portion control" form; juice and juice drinks sold in
this form are typically transported and stored frozen and are then
thawed shortly before they are sold by the institutional buyer to its
customer. "Portion control" accounts for [ 	] of Hood's sales. Only
4	[ 	] 	of Hood's sales consist of non-frozen non-concentrate single
strength juices or fruit drinks and thus might be considered "ready to
serve" and under "refrigeration" rather than concentrated or frozen
at the time they are sold by Hood. But the great bulk of this [ 	]
consists of 100% orange juice and 100% grapefruit juice, not drinks,
punches or ades.
Moreover, institutional products are not "sold to consumers" as
required by the definition. They are sold to large institutions, such as
restaurant chains, hotels, hospitals, schools and large institutional
distributors. And they must be concerted to another form-mixed,
4 The [ ] is included in the [ ] figure, since the single-strength juices are sold in "portion control" fonn.
"Portion control" containers come in 4-ounce, 6-ounce and 10-ounce sizes.

732 	FEDERAL TRADE COMMISSION DECISIONS
111 F.T.C.
dispensed or thawed-before they are ultimately consumed. For this
reason as well, they do not fall within the terms of the Consent Order.
III. Hood's fruit drinks are a minimal portion of Hood's sales and a
minuscule portion of total U.S. sales of fruit drinks to institutional
customers.
Even if the products sold by the Hood Institutional Food Service
Group which contain 50% or less fruit juice were deemed to be
"drinks, punches or ades" for purposes of the Consent Order, such
products are an extremely small part of the Hood institutional
business. In fiscal year 1987 5 Hood sold to institutional customers a
total of [ 	] gallons of drinks containing 50% or less fruit juice.
Hood's total institutional sales in fiscal year 1987 were· [ 	] gallons.
Thus, products containing 50% or less fruit juice constituted less than
[ 	] of Hood's total institutional sales. In other words, over [ 	] of
Hood's institutional sales consist of products such as 100% orange
juice, 100% grapefruit juice and other 100% fruit juices which could
not conceivably be considered products containing 50% or less fruit
juice.
No market data is publicly available to the Company which specifies
total sales of "drinks, punches and ades" as defined in the Consent
Order. However, the U.S. Fruit Beverage Marketing and Packaging
Report 1987 published by Beverage Marketing Corporation ("Bever-
age Marketing Report") publishes figures for total U.S. sales of "fruit
drinks" (as distinguished from "fruit juice"). 6 In calender year 1987,
approximately 626,700,000 gallons of fruit drinks were sold in the
United States. 7 This would give the Hood Institutional Food Service
Group (which sold [ 	] gallons of drinks containing 50% or less fruit
juice in its fiscal year 1987) a share of [ 	]-a share which is
obviously de minimis. Approximately 68.31 million gallons of fruit
drinks were sold to institutional buyers in 1987. 8 Hood's 1987 sales
would give it a share of [ 	] of sales of fruit drinks to institutional
buyers-again a share which is de minimis by any standard.
Clearly, the proposed acquisition could have no conceivable anti-
competitive impact on sales of drinks, punches and ades in the United
States and there is no substantive antitrust reason to insist upon
6 Hood's fiscal year runs from July 1 to June 30. Hood sales data was provided to the Company by Hood.
6 "Fruit drinks" are defined as drinks which contain a percentage of fruit juice but are not 100% fruit juice.
These include such drinks as lemonade, orange-ade or drink, cranberry juice cocktail, grape drink, fruit punch
and other fruit drinks. Beverage Marketing Report at 54-55.
7 Beverage Marketing Report at 13.
8 Id. at 149.

724
compliance with the prior approval provision. See, e.g., Beatrice Foods
Co., supra, 101 FTC at 818-19, 821, 825 (.57%); Federal Trade
Commission v. Beatrice Foods, Co., 587 F.2d 1225, 1230, _1234 (D.C.
Cir. 1978) (0.19% and 0.5%) (appendix to order denying motion for
rehearing en bane); Federal Trade Commission v. Tenneco, Inc., 433
F. Supp. 105, 114 n.21 (D.D.C. 1977) (0.3%).
The purchase price to be paid for the Hood Institutional Food
Service Group will be approximately $45 million. The transaction·wm
be subject to the provisions to the Hart-Scott-Rodino Act, 15 U.S.
Code §18a, 	and 	a 	complete 	premerger filing 	will 	be 	made 	in
accordance with the permerger notification rules. Therefore, the
Commission will have a full opportunity to review the competitive
impact, if any, of this transaction. Thus, any benefits which may exist
under the prior approval provision of the Consent Order would be fully
served by the premerger filing, 	on the facts 	of this 	particular
transaction. Compare Diamond Crystal Salt Co., 3 Trade Reg. Rep.
(CCH) il22,180 (Docket 7323, July 30, 1984); ITT Continental
Baking Co., 102 FTC 1298 (Docket 7880, October 12, 1983).
In 1987 the Premerger Notification Rules were modified to delete
paragraph (b) of Rule 802.70. In so doing, the Commission stated that
it wanted to "assure that the rule . . . does not create a barrier to
voluntary settlements of antitrust actions by unnecessarily requiring
public disclosures of information about acquisitions." 52 Fed. Reg. No.
44 p. 7073 (March 6; 1987). Much of the information needed to assess
the present acquisition would likely be proprietary and confidential
commercial information which the Company would not want to
disclose publicly. Section 7A(h) of the Hart-Scott-Rodino Act provides
that 	premerger filings 	under the 	Act 	are 	exempt from 	public
disclosure. 	For this 	reason 	as 	well, 	the 	Hart-Scott-Rodino 	Act
procedures would be preferable to the provisions of the Consent Order.
Finally,·the business reasons, undue delay in closing this transaction
would have a material adverse impact on the value of the acquisition
to the 	Company. 	The 	acquisition 	has 	been 	publicly 	announced.
Customers, employees, suppliers, co-packers and 	distributors for
Dunedin have expressed uncertainty as to their roles in the post-
acquisition Dunedin. Such uncertainty is exerting a negative impact
on Dunedin's sales. It is therefore essential that the acquisition be
closed as soon as possible in order to remove this uncertainty and
prevent deterioration in the value of Dunedin. For this reason as well,
we request expedited treatment of this application.

734 	FEDERAL TRADE COMMISSION DECISIONS
111 F.T.C.
For all of the above reasons, we believe that the acquisition of the
Hood Institutional Food Service Group would fall outside the terms of
the Consent Order, and we request the Commission's advice confirm-
ing our interpretation. Alternatively, the lack of any competitive
impact whatsoever in "drinks, punches and ades" 	is so readily
apparent that compliance with the prior approval provision should be
waived in this case.
We would be pleased to attempt to answer any questions which the
Commission may have and to provide additional information which the
Commission may believe to be necessary to respond to this request.
Respectfully submitted,
Darrell Prescott
Coudert Brothers
Counsel for The Coca-Cola Company