Monday, November 15, 2010

FTC Conditionally Approves Mall Operator Combination

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

To resolve FTC concerns over its acquisition of a portfolio of outlet centers from Prime Outlets Acquisition Company LLC, mall operator Simon Property Group, Inc. has agreed to divest an outlet center located in Southwest Ohio and to life certain lease restrictions on tenants under the terms of a proposed FTC consent order.

If approved by the Commission, the FTC consent order would resolve allegations that the acquisition would harm competition in the market for outlet centers in parts of Southwest Ohio, Chicago, and Orlando.

Radius Restrictions

In addition to requiring the divestiture of either Prime Outlets-Jeffersonville or Simon’s Cincinnati Premium Outlets in Southwest Ohio, the proposed consent order would require Simon to remove radius restrictions for tenants with stores in its outlet malls serving the Chicago and Orlando markets.

Many of Simon’s leases include radius restrictions that prevent the tenants from opening other stores in outlet malls within a specified distance, according to the FTC. Removing these restrictions will allow competing outlet centers or outlet mall developers wanting to enter the markets to sign leases with tenants that otherwise would have been unable to do so.

Relevant Markets

In defining the relevant markets, the FTC alleged that outlet centers generally attract customers from large geographic areas, often exceeding 60 miles. The agency identified three relevant geographic markets in which to analyze the effects of the acquisition: Southwest Ohio, Chicago, and Orlando.

Prime Outlets-Jeffersonville and Simon’s Cincinnati Premium Outlets are the only outlet centers in Southwest Ohio.

Simon and Prime operate the only outlet centers serving the Chicago metropolitan area. Simon owns Lighthouse Place Premium Outlets in Michigan City, Indiana; Chicago Premium Outlets in Aurora, Illinois; and Gurnee Mills in Gurnee, Illinois. Prime Outlets are located in Huntley, Illinois, and Pleasant Prairie, Wisconsin.

In Orlando, Simon owns one outlet center—Orlando Premium Outlets—and Prime owns two outlet centers—Prime Outlets-Orlando and Prime Outlets-Orlando Marketplace. Three other outlet centers in the Orlando area are owned by neither Simon nor Prime.

The proposed consent order is In the Matter of Simon Property Group, Inc., FTC File No. 101-0061. Text of the Agreement Containing Consent Orders appears here on the FTC website. A news release appears here.

Further details will appear at CCH Trade Regulation Reporter ¶16,519.

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