FTC’s mission is, in part, to prevent business practices that are  anticompetitive, deceptive, or unfair to consumers. These applications also must be placed on  the record for public comment generally for 30 days. FTC Developed Preferences for Clean Sweep Divestitures, Single Buyers, and Up- Front Buyers During the Mid-1990s

According to FTC staff, FTC decisions to use particular divestiture  approaches are (1) based on the unique facts of each case and do not  readily translate into written guidelines or systematic aggregation and  (2) tied to proprietary company information that FTC is statutorily  prohibited from disclosing to the public. Clean Sweep Divestitures, Single Buyers, and Up-Front Buyers Have Been Used Across Retail Industries, but Have Been Increasingly Used in Grocery Store Divestitures Since Fiscal Year 1996

During fiscal years 1990 through 2000, clean sweep divestitures, single  buyers, and/or up-front buyers were used in the 31 divestiture orders in the  four industries we reviewed—grocery stores, drug stores, funeral services,  and gas stations—although up-front buyers were not used at all prior to  fiscal year 1996. FTC Has Not Measured the Impact of Its Divestiture Practices Since Announcing Changes in the Mid- 1990s

FTC has not systematically measured the success or failure of the  divestitures it has approved since it developed preferences for approaches  like clean sweep and up-front buyers. In 1999, FTC reported the results of  the Bureau of Competition staff’s study of divestiture orders made final  during fiscal years 1990 through 1994 that, according to FTC staff,  confirmed the need to make the changes that FTC had made starting in the  mid-1990s. Consequently, FTC cannot  state that recent divestiture orders have, among other things, maintained or  restored competition in the affected markets, or that smaller buyers  continue to be as competitive as their larger counterparts in operating the  divested assets. Objectives, Scope, and Methodology

Our objectives were to describe (1) the history of Federal Trade  Commission’s (FTC) clean sweep divestiture, single buyer, and up-front  buyer practices within the context of FTC’s overall merger remedies, and  the circumstances under which these practices have been used; (2) the  extent of FTC’s use of these practices in the grocery store, drug store,  funeral services, and gas station industries; (3) the level of small business  participation in purchasing divested assets in the four industries and the  factors that may explain the level of small business participation; and  (4) FTC’s efforts to gauge the success or failure of these divestiture  practices and the impact of these practices on the marketplace, especially  small businesses. Approval Process for Proposed Consent Agreement

FTC staff negotiate a proposed consent agreement with the merging  parties. Divestitures

Most orders relating to a merger will require a divestiture—the selling of a  business or assets by one or both of the merging parties—in order to  maintain or restore the level of competition that existed before the merger.
What GAO Found

The Federal Trade Commission (FTC) seeks to prevent business practices that are anticompetitive, deceptive, or unfair to consumers. If FTC determines that a merger may harm competition in the marketplace, the agency may decide to block the merger or select a remedy that addresses the anticompetitive problems it has identified. FTC's preferred remedy is divestiture--the selling of a business or assets by one or both of the merging parties to maintain or restore competition where it might be harmed by the merger. When divestiture is chosen as a remedy, FTC usually drafts a proposed agreement with the merging parties that contains an order requiring the divestiture needed to remedy the anticompetitive problems. If all parties agree, FTC issues a proposed order which is made available to the public for comment for 30 days and, in most cases, authorizes the parties to consummate the merger. According to FTC staff, FTC decisions to use particular divestiture approaches are (1) based on the unique facts of each case and do not readily translate into written guidelines or systematic aggregation and (2) tied to proprietary company information that FTC is statutorily prohibited from disclosing to the public. From fiscal years 1990 through 2000, FTC used clean sweep divestitures, single buyers, or up-front buyers in the 31 divestiture orders announced for public comment in the grocery store, drug store, funeral services, and gas station industries (up-front buyers were not used at all in these industries prior to fiscal year 1996). Although there were too few buyers to analyze the level of smaller business participation in purchasing divested drug store, funeral services, and gas station assets for the period reviewed, GAO's analysis found that, after 1996, the smaller buyers were significantly less likely to purchase divested assets. FTC has not systematically measured the success or failure of the divestitures it has approved since it developed preferences for approaches like clean sweep and up-front buyers. In 1999, FTC reported the results of a study on divestiture orders made final during fiscal years 1990 through 1994 that found (1) FTC's divestiture orders had created viable competitors in the relevant markets and (2) smaller buyers succeeded at least at the same rate as larger buyers. However, without current information on the economic impact of its divestiture practices on the marketplace, especially given the changes it has made since the period covered by its 1999 study, FTC cannot state that divestiture orders have, among other things, restored or maintained competition in the affected markets.