This PowerPoint relates on the following case: Case Open Date: Tuesday, June 11, 1996 Case Name: United States v. American Skiing Company and S-K-I Limited Case Type: Civil Merger Case Violation: Horizontal Merger

1. STRATEGY IN THE DIGITAL ECONOMY
Corigliano – Koslowski – Migliacci – Scemama

2. PLAN
I. Market Presentation
II. Market Conduct
III.Firm Focus
IV.Antitrust Activity

3. 1. INTRODUCTION & MARKET
PRESENTATION

4. INTRODUCTION: AMERICAN SKIING COMPANY
AND S-K-I DOMINATE THE EASTERN NEW
ENGLAND AND MAINE SKI MARKET
● Situation : Together, the two operators represent 43% of all
skier days (ASC: 17% / S-K-I: 26%) in Eastern New England
and 51% in Maine (ASC: 32% / S-K-I: 19%) across the same
mountains chain, in the middle of the region
● Skiing business definition : “All services related to providing
access to downhill skiing and snowboarding, included but not
limited to providing lifts, ski patrol, snowmaking design,
building, grooming of trails, skiing entertainment and
lodging” - complaint
● The same target set of customers: residents of Eastern
New England and Maine
1994-95
ASC
S-K-I
Target
Market
1994-95
ASC
S-K-I
Target
Market

5. MARKET PARTICULARITIES:
CATCHMENT AREAS OF NEW
ENGLAND’S SKI RESORTS ARE
SIGNIFICANTLY CONDITIONED BY
A GEOGRAPHICAL PROXIMITY
FACTOR AND BARRIERS TO ENTRY
ARE HUGE
● Travel time and expense: important constraint
on available alternatives to a skier
● “Geographic markets for skiing are regional.
Skiers are not willing to travel an unlimited
distance to ski”, “Travelling to distant ski resorts
imposes a burden on the skier, either in the form
of excessive driving time or of a large additional
expense for airfare”
● Barriers to entry are huge and quite
insurmountable because of legal environmental
restrictions and high fixed and sunk costs.
What’s more, Ski Resorts is by nature subject to a
strong climate elasticity.
● Nature and quality of services are homogeneous
and ski resorts remain substitutable when
operating in the same regional geographic area

6. RELATED CASE:
UNITED STATES OF
AMERICA VS.
AMERICAN SKIING
COMPANY AND S-
K-I
• Aim: Prevent the proposed acquisition by ASC of S-K-I
Limited ($153 millions)
• Reasons:
• Considering that ASC and S-K-I already are the 2
largest operators in New England, this acquisition
would combine 8 of the largest ski resorts in the
region and would significantly increase
concentration among practically available resorts
for customers, bringing the threat of increases in
prices and reductions of discounts
• As shown in a previous slide, the acquisition would
result in 43% share of all skier days in Eastern New
England and 51% in Maine
• Transaction: $153 millions for all four S-K-I ski
resorts along with services, operation and
subsidiaries
DATE: June 11, 1996
PLAINTIF: USA
DEFENDANTS: ASC and S-K-I

7. II. MARKET CONDUCT

8. NEW ENGLAND SKI MARKET COMPONENTS
• Many ski resorts, few areas managers
A.S.C. S-K-I Ltd.
Union
Terminal
Piers, Inc.
Endriunas
Brothers,
Inc.
Intrawest
1994-1996 1984-1996 1977-2007 1987-2007
1994-
present
Attitash Killington Berkshire eastBlue Hills
Stratton
mountain
Cranmore Mt. Snow/Haystack Cannonsburg
Ragged
Mountain
Sugarbush
Sugarloaf
Sunday river Waterville Valley
Resort Name Base Summit
Vertical
Drop
Longest
Run
Snow
Making
Attitash, NH 600ft 2350ft 1750ft 3mi 240ac
Cranmore Mountain
Resort, NH 600ft 2000ft 1200ft 1mi 192ac
Killington Resort, VT 1165ft 4241ft 3050ft 6mi 500ac
Mount Snow, VT 1900ft 3600ft 1700ft 2mi 480ac
Sugarbush, VT 1483ft 4083ft 2600ft 3mi 356ac
Sugarloaf, ME 1417ft 4237ft 2820ft 3.5mi 618ac
Sunday River, ME 825ft 3150ft 2340ft 3mi 552ac
Waterville Valley, NH 1984ft 4004ft 2020ft 3mi 220ac

9. PRICES
• Companies’ prices are directly
impacted by the diversity of
alternatives presented to skiers
in these markets. Good
competitors are
• well capitalized,
• well managed
• significant capital
improvement
• real estate development
programs.
• Provision of weekend and day skiing
 product market
• Eastern New England and Maine 
geographic markets.
• Examples: Skier origin data collected
• Sunday River: approx. 43% of its
weekend skiers reside in
Massachusetts.
• Killington and Mount Snow: approx.
23% and 35%, respectively, of their
weekend skiers reside in New York !
MARKETS
COMPETITION MODEL
Tickets in 95-96 season

10. BUT…
Skiers do not wish to travel an
unlimited distance to ski.
 Burden on the skier
(excessive driving time or large
additional expense for airfare).
However, the longer the ski trip, the
greater a skier's willingness to
travel.

11. COMPETITION BY
COUPONS & DISCOUNTS
• Complete privacy by lack of information
• “Ski & Stay”
• Price adapted by duration of stay, distance traveled,
hostel choice
PRICE DISCRIMINATION

12. PRODUCTS & INSTALLATIONS
Lifts: Similar kind of product, few producersAmong products a Ski resort can propose to
skier to access to downhill skiing and
snowboarding:
• Providing lifts
• Ski patrol
• Snowmaking,
• Design, building, and grooming of trails
• Skiing lessons
• Ancillary services such as food service
• entertainment, and lodging Innovation are not the leitmotiv for consumer’s choice
or competition between ski areas managers

13. CRANMORE MT. KILLINGTON
PRODUCTS & INSTALLATION (2)

14. HOTELLING’S LAW NOTIONS
(1895-1973)
• In 1929, Hotelling developed a location
model that demonstrates the relationship
between location and pricing behavior
of firms. Assuming all consumers are
identical (except for location) and
consumers are evenly dispersed along the
line, both the firms and consumer respond
to changes in demand and the economic
environment.
Harold Hotelling was a Stanford University
economist who defined an economic theory
involving a principle of minimum
differentiation, which says that “rival sellers
tend to gravitate toward each other, (in
location, price, and product offerings) because
otherwise they risk losing some of the broad
 Based on a zero spatial
demand elasticity and lead to
a Nash equilibrium

15. INCUMBENT FIRM REACTION TO ENTRY
• “Finally, the DOJ Complaint alleges that successful
entry or expansion in the skiing business would
be difficult, time consuming, and costly, as well as
extremely unlikely. Entry or expansion therefore
would not be timely, likely, or sufficient to
prevent any harm to competition.”

16. SKI RESORT MARKET
EVOLUTION
1980: A ski resort opened: Beaver Creek (Colorado).
That was the last major ski resort to open in the
United States.
Environmental regulations: huge barrier to building
new ski resorts in North America.
 Most investors looking to start a ski resort from scratch are
looking abroad to China, Japan, and South America.
Then, it also takes a long time (decades) to :
• build community support.
• design the ski experience and build the resort

17. III. FIRM FOCUS AMERICAN SKIING
COMPANY

18. COMPANY PRESENTATION
Description: American Skiing Company
(ASC) is a holding company that operates
through various subsidiaries in two
business segments: ski resorts and real
estate.
CEO & Founder:
Leslie B. Otten

19. STRATEGY: FROM THE FIRST RESORT TO EXPANSION
Sunday River
(Maine)
Mutli Resort Company
(Multi resort Strategy)
Attitash Bear Peak
(New Hampshire)
198
0
199
4
- Construction
- Snowmaking technology
=> Biggest resort in the US
- Snowmaking and new chair lifts
- Creation: all children's programs, adaptive
programs, and snowboarders.
=> recognized as a family-oriented resort
1996
Introduction: Edge card program, frequent-skier
program and he Magnificent 7 card
=> Allowed guests to obtain lift tickets at a
reduced rate when they purchased a seven-day
package. (Later linked to credit cards)

20. DIVERSIFICATION STRATEGY
Ski
Services
"Original
Golf
School »
First
Resort
Hotel
Resort
Multi Ski
Resorts
Shopping
Casino
Snowmaking
System
Condomi
-nium
Payment
facilities
Vertical integration
Industry 1
Industry 2
Diversification

21. MAJOR COMPETITORS
2 factions
Resort only for Skiing
• Aspen Skiing Company: focus on “purist” customers – Skiers
only
Commercial idea of generalized recreation
• Vail (Colorado - biggest competitor to ASC)
• Booth Creek Ski Holdings (New entrant – Can only purchase
less fashionable resort)
They are few players. Highly concentrated national market – but
each well differentiate by region and specialties

22. ANTITRUST ACTIVITYIV. ANTITRUST ACTIVITY

23. ECONOMIC ARGUMENTS
PRESENTED BY THE US GOV
TO INTERFERE IN THE
FIRMS' MERGE
Important information and dates
In February 1996, American Skiing
Company (ASC), formerly known as LBO
Resorts Enterprises Corp. Proposed to
acquire S-K-I Ltd common stock for
approx. 137M$
These merging of the largest
owners/operators of ski resorts caused a
DOJ anti-trust lawsuit in June 1996 right
after S-K-I gave its agreement on the
acquisition operation proposed by ASC

24. ECONOMIC ARGUMENTS PRESENTED BY THE US
GOV TO INTERFERE IN THE FIRMS’ MERGE (2)
Anticompetitive effects (violation of the section 7 of the Clayton act)
- a competition substantially lessened among firms in eastern New England (Vermont, New Hampshire and Maine states) in
providing skiing which could lead to an increase in price and less discounting incentives for customers who go for skiing week-
end trips
- particularly in Maine, where less competition could lead to raise prices and decrease discounts for customers who go for day
skiing trips
Effects fueled by :
- The ski resorts industry is constituted by geographical markets where it is difficult for customers to switch from one to the other
- The DOJ considers that any successful entry in the skiing business would be difficult, costly and time consuming. We will see
that ASC and SKI Ltd competitors are far behind in terms of market shares
=> High risk of « unilateral anticompetitive effects » (US Federal Trade Commission)

25. ECONOMIC ARGUMENTS OF THE
FIRMS
Moreover, the firms argument was pretty
simple : dividends !
SHAREHOLDER
PRESSURE
S-K-I Ltd. decided the best action for its
shareholders would be to sell its assets.
Meanwhile, LBO Resort Enterprises Corp
(in other words, ASC) was growing and
expanding in the New England market.
Therefore, ASC proposed to acquire SKI
Ldt with a 58.7M$ debt assumption

26. OUTCOME OF THE INVESTIGATION BY THE DOJ
Final judgment
- The US government allows the firms to merge if they both proceed to divestitures in order to preserve healthy
competition in prices for the customers, under certain conditions
Settlement proposed by the DOJ
- ASC and S-K-I Ltd must sell all their rights, titles, and interests in the Waterville Valley (SKI Ltd) and Mt Cranmore
(ASC) ski resorts in eastern New England, to one or more purchasers, within 180 calendar days after filling the Final
judgment
- These assets and interests have to be sold to one or more purchasers who demonstrate that they will be an effective
competitor to the merged firm
- SKI and ASC must ensure that until the divestitures are completed, Waterville Valley and Mt Cranmore will be held
separate from SKI and ASC other assets and businesses in order to make them as much saleable and economically
viable possible for any prospective buyer
- If the divestitures are not completed before the deadline (180 days) the DOJ will appoint a trustee to complete the
divestitures

27. WHY IMPOSING DIVESTITURES?
East. New England week-
end trips
HHI Index Change in HHI 2 firms combined market share
Next larger
competitor
market share
If no divestitures 2100 900 ASC 17% + SKI 26% = 43% 7%
If divestitures completed <1800 <40%
Maine day skiing trips
If no divestitures >2900 1200 ASC 32% + 19% = 51% 12%
If divestitures completed 1900 <35%
Market concentration impact
DOJ HHI ’s interpretation rules
The U.S. Department of Justice considers a market with an HHI of less than 1,500 to be a
competitive marketplace, an HHI of 1,500 to 2,500 to be a moderately concentrated
marketplace, and an HHI of 2,500 or greater to be a highly concentrated marketplace.
As a general rule, mergers that increase the HHI by more than 200 points in highly
concentrated markets raise antitrust concerns.
 With the divestitures, DOJ will keep the market moderately concentrated and
limit the risk of unilateral anticompetitive effect in the best interest of the
customers

28. IMPACT OF THE DOJ INTERVENTION IN THE MARKET
State Vermont
before-acq 1995-1996 S-K-I Ltd Haystack 35$
state prices 1995-1996 38,8$ mean min price 35$ Haystack max price 48$ Stowe
post-acq 1996-1997 ASC Haystack 37$ (+5,7%)
state prices 1996-1997 40,75$ mean (+5%) min price 32$ Mad River max price 49$ Stratton
State Maine
before-acq 1994-1995 S-K-I Ltd Sugarloaf 43$
post-acq 1996-1997 ASC Sugarloaf 46$ (+7%)
state prices 1996-1997 33,5$ mean min price 24$ Camden max price 46$ Sugarloaf
State New Hampshire
before-acq 1994-1995 ASC (LBO) Cranmore 35$
state prices 1994-1995 32,79$ mean min price 22,95$ King Ridge max price 38$ Cannon
post-acq 1997-1998 Sold to Booth Creek Cranmore 39$ (+11%)
state prices 1997-1998 37,15$ mean (+13%) min price 25$ Whaleback max price 46$ Bear Peak
1) Impact on prices

29. IMPACT OF THE DOJ INTERVENTION IN THE MARKET
Vermont
The ASC resort price price evolution followed the overall state increase tendency but stayed below
the state’s increase mean. The resort’s price became more closer the cheapest ski resort.
Maine
The ASC resort stayed the most expensive in the state (far from its competitors if we look at the
mean price in the whole state), even if its price increased at a reasonable rate.
New Hampshire
The resort’s price is closer to the state mean prices compared to before the divestiture knowing
that the overall price range substantially increased (from approx 23-38$, to 25$-46$ after). So we
could say the divestiture had a positive impact on prices here.
1) Impact on prices (lift prices for the skiier)

30. IMPACT OF THE DOJ INTERVENTION IN THE MARKET
2) Impact on investments
As seen on the previous slides, the DOJ
intervention lead to a lower market
concentration in New England of the firm
ASC. After the acquisition, the firm has also
stopped its expansion in this market but
started investing in ski resorts in other states
(Utah, Colorado, California, red box on the
graph)

31. IMPACT OF THE DOJ INTERVENTION IN THE MARKET
3) Impact on the market structure – NEW ENTRY !
ASC and S-K-I Ltd respected the DOJ judgement for
the merger to happen. Cranmore and Waterville
Valley were sold to Booth Creek Ski Holdings Inc.
for 17,2$ million on the 27th, November 1996. Booth
Creek was founded on October 8th, 1996 (in other
words, while the divestitures were taking place).
Cranmore and Waterville Valley were the very first
investments of the young firm, which invested in ski
resorts in several states in the same year (1996) and
kept investing in New England with another ski
resort acquisition at the end of 1997 (Loon ski resort).

32. THANK YOU FOR
YOUR ATTENTION
• References
Our Antitrust Case :
https://www.justice.gov/atr/case/us-v-
american-skiing-company-and-s-k-i-ltd
Timeline New England ski history 95-96http://www.newenglandskihistory.com/timeline/timemachine.php?season=1995-96
Maps by country
http://www.newenglandtravelplanner.com/outdoors/ski/ne_ski_map.html
http://www.newenglandtravelplanner.com/outdoors/ski/vt/vt_ski_map.html
http://www.newenglandtravelplanner.com/outdoors/ski/nh/nh_ski_map.html
http://www.newenglandtravelplanner.com/outdoors/ski/me/maine_ski_map.html
Gmaps of NE ski resorts https://www.google.com/maps/d/viewer?mid=1zDQpMKkIYdjIpS-
KVgXghcEqXYU&ll=43.78053325863693%2C-71.17918186548007&z=7
NE’s ski resorts list with descriptive
http://www.newenglandtravelplanner.com/outdoors/ski/me/index.html
http://www.newenglandtravelplanner.com/outdoors/ski/nh/index.html
http://www.newenglandtravelplanner.com/outdoors/ski/vt/index.html
History American SkiingCo. http://www.fundinguniverse.com/company-histories/american-skiing-company-
history/
ASC Nasdaq homepage http://www.nasdaq.com/markets/ipos/company/american-skiing-co-me-9367-9229
History S-K-I Ltd http://www.newenglandskihistory.com/skiareamanagement/skiltd.php
Bloomberg - American Skiing Co. http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=105872
PR Newswire article on ASC
http://www.prnewswire.com/news-releases/american-skiing-company-announces-
comprehensive-plan-to-improve-capital-structure-and-enhance-future-operating-
performance-71976377.html
Price evolution through years http://www.newenglandskihistory.com/timeline/vt-ticketprices.php
Ski coupons
https://books.google.fr/books?id=kJcXO3bC82AC&pg=RA1-PA235&lpg=RA1-
PA235&dq=ski+coupons+95-96&source=bl&ots=dCIxcPQNdn&sig=siP1V9Ki4lIstq-
o7vJNH59r7Xk&hl=fr&sa=X&ved=0ahUKEwi1p5nTmffSAhUOOsAKHZ2eBywQ6AEIJjA
C#v=onepage&q=coupon&f=false
NE’s Ski resorts table compare http://www.onthesnow.com/new-england/statistics.html
Explanation HHI index
Explanation HHI - anticompetitive
unilateral effects
http://www.investopedia.com/terms/h/hhi.asp
https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-
laws/mergers/competitive-effects
Economics of big ski resorts https://www.theatlantic.com/business/archive/2012/02/no-business-like-snow-
business-the-economics-of-big-ski-resorts/252180/
Hotelling law https://fr.wikipedia.org/wiki/Loi_de_Hotelling
http://www2.ef.jcu.cz/~klufova/spatial_economy/Palgrave_spatial_economics.pdf
Location model https://en.wikipedia.org/wiki/Location_model#Hotelling.27s_Location_Model
Spatial economics
https://www.slideshare.net/DISPAR/chapter-3-classical-location-theory-of-the-firm
http://www.encyclopedia.com/social-sciences/applied-and-social-sciences-
magazines/spatial-economics
Nasdaq IPO full report http://www.nasdaq.com/markets/ipos/filing.ashx?filingid=520682