IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA UNITED STATES OF AMERICA c/o Department of Justice Antitrust Division Washington, D.C. 20530, Plaintiff, v. THE LOEWEN GROUP INC. 4126 Norland Avenue Burnaby, B.C. V5G 3S8 Canada, and LOEWEN GROUP INTERNATIONAL, INC. 50 East River Center Blvd. Suite 820 Covington, KY 41011, Defendants. Civil Action No. 1 : 9 8 CVO O 815 Filed: March 31, 1998 COMPLAINT FOR CML PENALTIES FOR VIOLATIONS OF PREACQUISITION REPORTING REQUIREMENTS OF THE HART-SCOTT-RODINO ACT The United States of America, Plaintiff, by its attorneys, acting under the direction of the Attorney General of the United States and at the request of the Federal Trade Commission, brings this civil action to obtain monetary relief in the form of a civil penalty against the Defendants named herein for violation of the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a ("HSR Act"), and rules promulgated thereunder, 16 C.F.R Parts 800-803, both by failing to make the mandatory preacquisition notifications to the Federal Trade Commission and the Department of Justice, as required by the HSR Act, and by failing to observe the mandatory preacquisition waiting periods established by the HSR Act. Plaintiff alleges as follows: JURISDICTION AND VENUE 1. This Complaint is filed and these proceedings are instituted under Section 7 A of the Clayton Act, 15 U.S.C. § 18a, ("HSR Act") added by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, to recover a civil penalty for violation of tHAT section. 2. This Court has jurisdiction over the Defendants and over the subject matter of this action pursuant to Section 7A(g) of the Clayton Act, 15 U.S.C. § 18a(g), and pursuant to 28 U.S.C. §§ 1331, 1337, 1345 and 1355. 3. Venue is properly based in this District under Section 12 of th e Clayton Act, 15 U.S.C. § 22, and under 28 U.S.C. §§ 1391 and 1395, and by virtue of Defendants' consent in the Stipulation relating hereto, to the maintenance of this action and entry of the Final Judgment in this District. DEFENDANTS THE LOEWEN GROUP INC. AND LOEWEN GROUP INTERNATIONAL, INC. 4. The Loewen Group Inc. is made a defendant herein. Defendant The Loewen Group Inc. is a corporation organized under the laws of Canada, with its principal office and place of business at 4126 Norland Avenue, Burnaby, B.C. V5G 3S8, Canada. 5. Defendant The Loewen Group Inc. directly or indirectly is engaged in the ownership and operation of funeral homes and cemeteries in North America, including the United States. Defendant The Loewen Group Inc. is engaged in commerce, or in activities affecting commerce, within the meaning of Section 1 of the Clayton Act, 15 U.S.C. § 12, and Section 7A(a)(l) of the Clayton Act, 15 U.S.C. § 18a(a)(l). During 1995, Defendant The Loewen Group Inc. had total assets in excess of $2.26 billion. 6. Loewen Group International, Inc. is made a defendant herein. Defendant Loewen Group International, Inc., a wholly-owned subsidiary of Defendant The Loewen Group Inc., is a corporation organized under the laws of Delaware, with its principal office and place of business at 50 East River Center Boulevard, Suite 820, Covington, KY 4 I 0 l I. 7. Defendant Loewen Group International, Inc. directly or indirectly is engaged in the ownership and operation of funeral homes and cemetaries in the United States. 8. Defendant The Loewen Group Inc. owns the voting securities of Defendant Loewen Group International, Inc. and is the "ultimate parent entity" of Defendant Loewen Group International, Inc., as that term is defined in 16 C.F .R. § 80 I. I ( a)(3) . (The Loewen Group Inc. and Loewen Group International, Inc. are referred to collectively as "Loewen.") OTHER ENTITIES 9. Golder, Thoma, Cressey Fund III Limited Partnership ("Golder, Thoma") is a limited partnership organized under the laws of Illinois for the purpose of investing in securities of U.S. companies, with its principal office and place of business at 6100 Sears Tower, Chicago, Illinois, 60606. During I995, Golder, Thoma had annual net sales of approximately $2I2 million. Golder, Thoma is engaged in commerce, or in activities affecting commerce, within the meaning of Section 1 ofthe Clayton Act, 15 U.S.C. § 12, and Section 7A(a)(l) ofthe Clayton Act, 15 U.S.C. § 18a(a)(l). 10. Prime Succession, Inc. ("Prime") was, at times relevant to this complaint, a corporation organized under the laws of Delaware with its principal place of business in Batesville, Indiana. It directly or indirectly owned and operated funeral homes and cemeteries in the United States. 11. At all times relevant to this complaint, Golder, Thoma or entities under its control controlled Prime, within the meaning of 16 C.F.R. § 801.l(b), and Golder, Thoma was the "ultimate parent entity" of Prime, as that term is defined in 16 C.F.R. § 801.l(a)(3). THE HART-SCOTT-RODINO ACT AND RULES 12. The Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. § 18a, requires certain acquiring persons and certain persons whose voting securities or assets are acquired (1) to file preacquisition notifications with the Federal Trade Commission and the Department of Justice and (2) to observe a waiting period, before consummating certain acquisitions of voting securities or assets. 15 U.S.C. § 18a(a)-(b ). The mandatory preacquisition notification and waiting period are intended to give the federal antitrust agencies prior notice of, and information about, proposed transactions. The mandatory waiting period is also intended to provide the antitrust agencies with an opportunity to investigate proposed transactions and to determine whether to seek an injunction against the consummation of a transaction on the grounds that it would violate the antitrust laws if consummated. 13. The notification and waiting period requirements of the HSR Act apply to direct or indirect acquisitions when the HSR Act's size-of-person and commerce tests are met and an acquiring person would, as a result of the acquisition, hold an aggregate total amount of the voting securities and assets of an acquired person in excess of $15 million. 15 U.S.C. § 18a(a)(3). 14. Where an acquisition is subject to the HSR Act, the ultimate parent entity of an acquiring person is obligated by the HSR Act and regulations promulgated thereunder to file preacquisition Notification and Report Forms with the Federal Trade Commission and the Department of Justice and to observe a preacquisition waiting period before consummating the acquisition. 15 U.S.C. § 18a(a)-(b),(d)-(e); 16 C.F.R § 803.2. 15. Any person who fails to comply with any provision of the HSR Act is liable to the United States for a civil penalty for each day during which that person is in violation. The maximum amount of civil penalty is $10,000 per day through November 19, 1996, pursuant to Section 7A(g)(l) of the Clayton Act, 15 U.S.C. § 18a(g)(l), and $11,000 per day thereafter, pursuantto the Debt Collection Improvement Act of 1996, Pub. L. 104-134, § 3 l00l(s) (amending the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461 note), and Federal Trade Commission Rule 1.98, 16 C.F.R § 1.98, 61 Fed. Reg. 54548 (Oct. 21, 1996). THE ACQUISITION 16. In May and June of 1996, Loewen structured a leveraged buyout of Prime from Golder, Thoma with a partner, Blackstone Capital Partners II Merchant Banking Fund, L.P. ("Blackstone''). Under the terms of a May 29, 1996, Term Sheet signed by Loewen and Blackstone, Loewen was to contribute $60 million toward the leveraged buyout of Prime --$10 million for voting securities and $50 million for non-voting securities.--and Blackstone was to contribute $40 million for voting securities, with the remainder of the $320 million cost to be raised through debt to be issued by Prime. The May 29 Term Sheet also provided for put/call options that would eventually result in Loewen owning all of Prime. 17. Counsel for Loewen reviewed the planned leveraged buyout of Prime described in paragraph 16 and concluded that the step involving Loewen's planned acquisition of $10 million of Prime voting securities would not be subject to the notification and waiting period requirements of the HSR Act. 18. Pursuant to the Stock Purchase Agreement, dated June 14, 1996, Loewen paid Golder, Thoma a $20 million downpayment. 19. Before the leveraged buyout of Prime was undertaken, its structure was changed from that described in paragraph 16. On August 26, 1996, Loewen and Blackstone acquired Prime in a $320 million leveraged buyout. Loewen paid a total of $78 million --$62 million for non- voting securities and $16 million for 24 percent of Prime's voting securities. Blackstone paid $52 million for 76 percent of Prime's voting securities. The remaining $190 million was raised through debt issued by Prime. 20. Loewen acquired $16 million of the voting securities of Prime ("the Acquisition") on August 26, 1996 without having filed premerger Notification and Report Forms with the Federal Trade Commission or the Department of Justice. 21. By acquiring voting securities and non-voting securities of Prime on August 26, 1996, Loewen was able to avoid the risk of losing its downpayment, which would have been at risk had these acquisitions not occurred on or before September 20, 1996. 22. Loewen submitted Notification and Report Forms to the Federal Trade Commission and the Department of Justice to report the Acquisition on or about October, 1996, more than a month after the Acquisition was consummated. 23. The Federal Trade Commission issued Requests for Additional Information and Documentary Material ("Second Requests") to Defendant Loewen and the acquired person with respect to the Acquisition, pursuant to the HSR Act, on November 15, 1996. 24. The HSR waiting period expired on May 13, 1997. VIOLATION ALLEGED 25. As a result of the Acquisition of voting securities, described in paragraph 20, Defendants The Loewen Group Inc. and Loewen Group International, Inc. directly or indirectly held an aggregate total amount of voting securities of Prime in excess of $15 million. 26. The Acquisition described in paragraph 20 was subject to the mandatory notification and waiting requirements of the HSRAct, 15 U.S.C. § 18a, and the regulations promulgated thereunder, 16 C.F.R. Parts 800-803. 27. Defendants did not comply with the mandatory notification and waiting requirements of the HSR Act, described in paragraphs 12 through 15, prior to the time of the Acquisition, described in paragraph 20. 28. Defendants were in continuous violation of the HSR Act from August 26, 1996, until May 13, 1997, when the waiting period expired. PRAYER WHEREFORE, Plaintiff prays: 1. That the Court adjudge and decree that the August 26, 1996 acquisition by Defendants The Loewen Group Inc. and Loewen Group International, Inc. of $16 million of the voting securities of Prime was in violation of the HSR Act, 15 U.S.C. § 18a, and that Defendants were in violation of the HSR Act each day from August 26, 1996 through May 13, 1997. 2. That the Court order Defendants to pay to the United States an appropriate civil penalty as provided by the HSR Act, 15 U.S.C. § 18a(g)(l), the Debt Collection Improvement Act of 1996, Pub. L. 104-134, § 3 l00l(s) (amending the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461 note), and Federal Trade Commission Rule 1.98, 16 C.F.R. § 1.98, 61 Fed. Reg. 54548 (Oct. 21, 1996). 3. That the Court order such other and further relief as the Court may deem just and proper. 4. That the Court award the Plaintiff its costs of this suit. Dated: 1998. FOR THE PLAINTIFF UNITED STATES John I. Klein Assistant Attorney General Department of Justice Antitrust Division Washington, on, D.C. 20530 Mary Lou Leary D.C. Bar No. 337485 Acting United States Attorney Roberta S. Baruch D.C. Bar No. 269266 Special Attorney Kenneth M. Davidson D.C. Bar No. 970772 Special Attorney Federal Trade Commission Washington, D.C. 20580 (202) 326-2687 Signature: Joel I. Klein FOR PLAINTIFF STATE OF TEXAS: DAN MORALES Attorney General JORGE VEGA First Assistant Attorney General LAQUITA A. HAMILTON Deputy Attorney General PAUL ELLIOTT Assistant Attorney General Chief, Consumer Protection Div. MARK TOBEY Assistant Attorney General Chief, Antitrust Section AMYR. I KRASNER Assistant Attorney General TX Bar # 00991050 OFFICE OF THE ATTORNEY GENERAL OF THE STATE OF TEXAS P.O. Box 12548 Austin, TX 78711-2548 (512) 463-2185 (512) 320-0975 (Facsimile) Dated: July 14 , 1997 Signature: Amy R. Krasner Appendix A "HHI" means the Herfindahl-Hirschman Index, a measure of market concentration calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers. For example, for a market consisting of four firms with shares of 30, 30, 20, and 20 percent, respectively, the HHI is 260030 sqaured = 2600). The HHI, which takes into account the relative size and distribution of the firms in a market, ranges from virtually zero to 10,000. The index approaches zero when a market is occupied by a large number of firms of relatively equal size. The index increases as the number of firms in the market decreases and as the disparity in size between the leading firms and the remaining firms increases. Markets in which the HHI is between 1000 and 1800 are considered to be moderately concentrated, and those in which the HHI is in excess of 1800 points are considered to be highly concentrated. Transactions that increase the HHI by more than 100 points in highly concentrated markets presumptively raise significant antitrust concerns under the Department of Justice and Federal Trade Commission 1992 Horizontal Merger Guidelines.