Company Name: PetSmart, Inc.
Public Availability Date: April 14, 2006
Document Sections:
INQUIRY LETTER
APPENDIX
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
February 13, 2006
Office of Chief Counsel
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re: PetSmart, Inc. (File No. 0-21888) Stockholder Proposal from People for the
Ethical Treatment of Animals
Ladies and Gentlemen:
This letter is to inform you that it is the intention of our client, PetSmart,
Inc. (the "Company"), to omit from its proxy statement and form of proxy for the
Company's 2006 Annual Meeting of Stockholders (collectively, the "2006 Proxy
Materials") a stockholder proposal and statements in support thereof (the
"Proposal") received from People for the Ethical Treatment of Animals (the
"Proponent"). The Proposal would require the Company to issue a report to
stockholders by October 1, 2006, based on two studies for which the Company
provided funding to study pet bird relinquishment, and to indicate whether the
Company intends to end the sale of all birds in its stores. The Proposal is
attached hereto as Exhibit A.
On behalf of our client, we hereby notify the Division of Corporation Finance of
the Company's intention to omit the Proposal from its 2006 Proxy Materials on
any one or all of the bases set forth below, and we respectfully request that
the staff of the Division (the "Staff") concur in our view that:
I. The Proposal is excludable under Rule 14a-8(i)(7), because the Proposal deals
with matters related to the Company's ordinary business operations;
II. The Proposal is excludable under Rule 14a-8(i)(5), because it relates to
operations which account for less than 5 percent of the Company's total assets,
net earnings and gross sales, and is not otherwise significantly related to the
Company's business; and
III. The Proposal is excludable under Rule 14a-8(i)(3), because it contains
materially false or misleading statements.
Pursuant to Rule 14a-8(j), enclosed are six (6) copies of this letter and its
attachment. Also in accordance with Rule 14a-8(j), a copy of this letter and its
attachments are being mailed on this date to the Proponent, informing it of the
Company's intention to omit the Proposal from the 2006 Proxy Materials. The
Company intends to file its definitive 2006 Proxy Materials on or about May 8,
2006. Accordingly, pursuant to Rule 14a-8(j), this letter is being submitted not
less than 80 days before the Company files its definitive materials and form of
proxy with the Securities and Exchange Commission (the "Commission").
ANALYSIS
I. The Proposal May Be Excluded under Rule 14a-8(i)(7) Because the Proposal
Deals with Matters Relating to the Company's Ordinary Business Operations.
The Proposal may be properly omitted pursuant to Rule 14a-8(i)(7) because the
Proposal encompasses matters relating to the Company's ordinary business
operations. Specifically, the Proposal seeks to have the Company issue a report
to stockholders detailing whether the Company will establish a policy
prohibiting the sale of an entire class of animals, namely birds. As more fully
explained below, there is strong precedent that stockholder proposals requiring
a company to prepare a report to stockholders regarding the sale of a particular
product or service are within the ambit of a company's ordinary business
operations.
Rule 14a-8(i)(7) permits the omission of stockholder proposals dealing with
matters relating to a company's "ordinary business" operations. According to the
Commission's Release accompanying the 1998 amendments to Rule 14a-8, the
underlying policy of the ordinary business exclusion is "to confine the
resolution of ordinary business problems to management and the board of
directors, since it is impracticable for shareholders to decide how to solve
such problems at an annual meeting." Commission Release No. 34-40018 (May 21,
1998) (the "1998 Release"). The 1998 Release states that two central
considerations underlie this policy. First, "[c]ertain tasks are so fundamental
to management's ability to run a company on a day-to-day basis" they are not
proper subjects for shareholder proposals. The Commission stated the other
policy underlying Rule 14a-8(i)(7) is "the degree to which the proposal seeks to
micro-manage the company by probing too deeply into matters of a complex nature
upon which shareholders, as a group, would not be in a position to make an
informed judgment."
In its 1983 release, the Commission specifically addresses the issue of the
excludability under Rule 14a-8(i)(7) of proposals requesting reports to
stockholders on matters which relate to a company's ordinary business
operations. See Commission Release No. 34-20091 (Aug. 16, 1983). "[T]he staff
will consider whether the subject matter of the special report or the committee
involves a matter of ordinary business; where it does, the proposal will be
excludable." Id. As explained more fully below, the subject matter of the report
required by the Proposal involves management's decision on whether the Company
should sell birds. The sale of products as discussed below, has traditionally
been found to be a matter of a company's ordinary business operations and thus
the Proposal is excludable.
A. The Subject Matter of the Report Requested By the Proposal Involves the
Decision to Sell a Type of Pet Which Relates to the Company's Ordinary Business
Operations and Thus the Proposal is Excludable.
The Company is the nation's leading retail supplier of products, services, and
solutions for the lifetime needs of pets. An integral part of its business is
selecting and retaining various suppliers and selecting the type of products,
services and pets to be offered at its retail stores. The ability to make such
decisions is fundamental to management's ability to control the operations of
the Company, and is not appropriately delegated to, or micro-managed by, the
Company's stockholders. For example, the Company does not sell dogs or cats, but
does offer fish, small rodents, reptiles and certain birds for sale. The Company
works diligently to identify and sell only those species it believes would make
good pets. In this case, the sale of birds is controversial only to a very, very
small, albeit sometimes vocal, contingent of stockholders. The Staff has
consistently agreed with this assessment and taken the position that the sale or
distribution of a particular category of products and services, whether
considered controversial or not, is part of a company's ordinary business
operations. See, e.g., Marriott International, Inc. (avail, Feb. 13, 2004)
(proposal prohibiting the sale of sexually explicit material at Marriott owned
and managed properties excludable as relating to the sale and display of a
particular product). The Staff has previously granted no-action relief with
respect to stockholder proposals related to the sale or distribution of
periodicals containing certain content and the Staff concurred that such
proposals could be excluded because they related to the sale of a particular
product. See also Albertson's, Inc. (avail, Mar. 18, 1999) (proposal prohibiting
the sale and promotion of tobacco products was excludable because it involved
"the sale of a particular product"); J.C. Penney Co. (avail, Mar. 2, 1998)
(proposal prohibiting the sale of cigarettes was excludable because it involved
"the sale of a particular product"); Walgreen Co. (avail, Sept. 29, 1997)
(proposal prohibiting the sale of cigarettes was excludable because it involved
"the sale of a particular product").
Furthermore, the Staff has not only permitted the exclusion of proposals which
require the prohibition of the sale of a particular product, but the Staff has
also permitted the exclusion of proposals which are generally directed at the
sale of products. In Phillip Morris Companies (avail, Feb. 22, 1990), the Staff
permitted the exclusion of a proposal that required Phillip Morris to refrain
from lobbying activities and expenditures to influence legislation concerning
the sale and distribution of tobacco products. The Staff specified that since
the proposal was directed at the company's lobbying activities concerning its
products, the proposal involved Phillip Morris' ordinary business operations and
could thus be excluded. Similarly, although the Proposal does not explicitly
require the Company to stop selling birds, it is directly related to the
Company's decision as to whether it will continue the sale of birds. Thus, the
Proposal is excludable.
B. The Proposal Requires the Company to Prepare a Report to the Stockholders in
Order for the Stockholders to Evaluate the Risk of the Sale of a Type of Pet,
Which Relates to the Company's Ordinary Business Operations and Thus the
Proposal is Excludable.
Proposals which pertain to the evaluation of risk have been found to involve a
company's ordinary business operations, and are thus properly omitted pursuant
to Rule 14a-8(i)(7). In the matter at hand, the Proposal's focus is on the
reputation of the Company. The Proponent evidently believes there is a
"credibility gap" in connection with Company's "image as a humane industry
leader" and the Proposal implies that if the Company does not adopt a policy
which prohibits the sale of all birds, the Company will suffer "bad publicity."
Evaluation of risks related to damage to reputation, however, is a fundamental
part of ordinary business operations, and is best left to management and the
board of directors. See, e.g., Newmont Mining Corp. (avail, Feb. 4, 2004)
(proposal requesting a report on the risk to the company's operations,
profitability and reputation from its social and environmental liabilities
excludable on the basis that it pertained to the "evaluation of risk"). See
also, Weatherford International Ltd. (avail, Feb. 25, 2005) (proposal for the
disclosure of the impact of a past reincorporation of the company excludable as
an evaluation of items relating to its ordinary business operations); Dow
Chemical Co. (avail, Feb. 13, 2004) (proposal requesting a report on certain
toxic substances excluded as relating to the "evaluation of risks and
liabilities"); American Int'l Group, Inc. (avail, Feb. 19, 2004) (proposal to
review the effects of HIV/AIDS, tuberculosis and malaria pandemics on the
company's business strategy excludable as relating to an "evaluation of risks
and benefits"). In addition, the Company disagrees with the Proponent's
assertion of a "credibility gap." In fact, the Company has developed and
utilizes programs designed (1) to ensure vendors raise and transport pets in a
humane manner, (2) to ensure the proper care of the pets in its stores, and (3)
to educate pet owners on appropriate methods to care for and nurture their pets
in order to create a healthy happy home for their new "member of the family."
Although the Staff has previously determined certain proposals dealing with the
evaluation of risk in connection with foreign operations involve significant
policy considerations, this does not apply in the matter at hand because the
Proposal does not involve foreign operations, or even a significant policy
consideration. Since the Proposal requires a report which in part, focuses on a
supposed risk to the Company's reputation, it involves the Company's ordinary
business operations and thus is excludable.
C. The Proposal Seeks to Second-Guess the Company's Management in Requesting a
Report Regarding the Company's Decision to Sell a Particular Type of Pet and
Thus is Excludable as Involving the Company's Ordinary Business Operations.
As expressly stated in the 1998 Release and most state corporate laws, a
company's management and the board of directors and best situated to resolve
ordinary business problems and decisions. See, e.g., Pfizer, Inc. (avail, Jan.
28, 2005) (proposal requiring that the company make no more donations or
contributions designed to promote animal testing deemed excludable). Likewise,
proposals which potentially provide stockholders with an ability to second-guess
management's decisions regarding ordinary business decisions constitute an
attempt to interfere with the day-to-day conduct of ordinary business
operations. In the matter at hand, the Proposal requires the Company to issue a
report "detailing whether PetSmart intends to ...end all bird sales...." Not
only would the report address the Company's general business strategies and
operations which are generally excluded, see General Electric Co. (avail, Jan.
7, 2005) (proposal requiring the board of directors of the company to review
certain management was excludable), but the Proposal would also offer
stockholders of the Company an opportunity to second-guess the decisions of the
Company's management. As discussed more fully above, the Proposal requests a
report in order for stockholders to evaluate the risk to the Company's
reputation regarding the sale of birds. Even though the Company's stockholders
are not expressly given the right to evaluate the risk, in asking for
stockholders to be provided with a report detailing the Company's decision, the
Proposal invites stockholders to second-guess management in decisions about the
Company's ordinary business operations. On that basis it may be excluded.
D. The Proposal Requires an Additional Supplemental Disclosure by the Company of
Information Already Regulated by the Commission Which Relates to the Ordinary
Business Operations of the Company and Thus the Proposal Should be Excluded.
The Staff has consistently allowed the exclusion of proposals involving the
content of a company's report to its stockholders which exceed the legal
requirements because such proposals relate to the company's ordinary business
operations. See, e.g., International Business Machines Corp. (avail, Jan. 19,
1999) (proposal urging the board to establish corporate political contribution
guidelines and reporting provisions and publish those provisions in the annual
report to the stockholders on Form 10-K was deemed excludable). See also,
Circuit City Stores, Inc. (avail, Apr. 6, 1998) (the proposal was excludable
because it would, if implemented, require the company to supplement the
disclosures made in its annual report on Form 10-K and other periodic reports).
In Circuit City Stores, Inc. (avail, Apr. 6, 1998), the Staff emphasized that
even if the subject-matter of the proposal "does not necessarily involve matters
relating to the Company's ordinary business operations" the exclusion would
still apply if it would "require the Company to supplement the disclosures made
in its annual report on Form 10-K and other periodic reports."
The Proposal requires the Board of Directors to issue a report to stockholders
by October 1, 2006, which details whether the Company will continue to sell
birds. Although the Proposal does not require the report be included in any of
the Company's periodic reports, it would require supplemental disclosure, beyond
legal requirements, of the type of information already regulated by the
Commission. The Proposal not only requests additional information which is
already covered in the Company's Annual Report on Form 10-K, as discussed below,
but the Proposal also requires the report be issued by an arbitrary date,
October 1, 2006. From a practical perspective, the Company does not control the
academic process involved in the preparation or publication of the studies which
the Company funded. The studies may be published this year, or in years
following, depending on the academic process. From a regulatory perspective, the
Commission regulates disclosure by companies to ensure stockholders and
potential investors have sufficient information to make informed decisions about
such companies. The Commission's rules and regulations govern disclosure of not
only material information about current conditions affecting a company, but also
any known risks and uncertainties that might have future material financial
impacts on such company. Whether to disclose such information, in addition to
information required to be disclosed by the Commission, is properly left to the
judgment of the company's board of directors and management as a matter relating
to the conduct of ordinary business operations. See Weatherford International
Ltd. (avail, Feb. 25, 2005). The Company already addresses the risk and
potential adverse publicity associated with the sale of small pets, including
birds in its periodic reports. As noted in the Company's Annual Report on Form
10-K for the year ended January 30, 2005:
"Our business exposes us to claims that could result in adverse publicity, harm
to our brand and a reduction in our sales.
We are occasionally subject to claims due to the injury or death of a pet in our
stores or while under our care in connection with the pet services we provide.
In addition, we sell certain small pets including fish, birds, reptiles and
small rodents in our stores. Given the large number of small pets we sell,
deaths or injuries of these small pets sometimes occur while they are within our
care. As a result, we may be subject to claims that we do not properly care for
these small pets. We may also be subject to claims resulting from the transfer
of diseases from pets in our stores to other animals, associates and customers.
In addition, from time to time, we have been subject to product liability claims
for some of the products we sell. Any negative publicity or claims relating to
any of the foregoing could harm our reputation and business, as well as expose
us to litigation expenses and damages."
E. The Proposal Does Not Raise Significant Social Policy Issues Because it Does
Not Relate to the Mistreatment or Abuse of Animals by the Company, But Instead
Relates to the Selection of the Types of Pets for Sale by the Company.
The Company does not believe the Proposal raises a significant social policy
issue of the type excluded from the scope of Rule 14a-8(i)(7). The Staff has
found that some of the issues that raise a "significant social policy issue"
include (i) animal testing, see 3M Co. (avail, Feb. 22, 2005); Wyeth (avail,
Feb. 4, 2004); (ii) food safety and the inhumane killing of animals, see Wendy's
Int'l, Inc. (avail, Feb. 8, 2005) and Hormel Foods Corp. (avail, Nov. 10, 2005);
(iii) animal abuse, see Woolworth Corp. (avail, April 11, 1991); and (iv) drug
safety and women's health concerns, see Wyeth (avail, Feb. 8, 2005). The
Proposal does not involve, and is not related, to any of the above issues, but
instead involves a report that merely details whether the Company has determined
whether to sell birds as pets. It is important to note the mere fact a proposal
is tied to a social issue does not prohibit the application of Rule 14a-8(i)(7).
See, e.g., Pfizer, Inc. (avail, Jan. 28, 2005) (proposal prohibiting the company
from making donations which contribute to animal testing was excludable). The
sale of healthy pets to our customers is "controversial" only to a very small
group and as a result the Company believes the Proposal is excludable under Rule
14a-8(i)(7).
In addition, the Staff has consistently drawn a distinction between the
manufacturer and the vendor of products with respect to proposals dealing with
tobacco, firearms and other products that may be deemed to raise significant
policy issues and time after time takes the position that proposals regarding
the selection of products for sale realte to a company's ordinary business
operations and thus are excludable from the company's proxy materials pursuant
to Rule 14a-8(i)(7). Compare Wal-Mart Stores, Inc. (avail, Mar. 9, 2001)
(proposal requesting that the retailer stop selling handguns and their
accompanying ammunition was excludable) with Sturm, Ruger & Co. (avail, Mar. 5,
2001) (proposal seeking a report on company policies aimed at "stemming the
incidence of gun violence in the United States" where the company's "principal
business continues to be the manufacture and sale of firearms" was not
excludable). Albertson's, Inc. (avail, Mar. 18, 1999), J.C. Penney Co. (avail,
Mar. 2, 1998), and Walgreen Co. (avail, Sept. 29, 1997) all provide additional
examples of situations where the Staff found the proposals requiring that
retailers stop selling tobacco or cigarettes were excludable under Rule
14a-8(i)(7). As the Company is not a breeder of birds, but instead offers
customers the opportunity to purchase a bird as merely one aspect of the
products, services and amenities available through the Company's retail stores,
the Company believes the Proposal may be omitted from the 2006 Proxy Materials
pursuant to Rule 14a-8(i)(7).
II. The Proposal May Be Excluded under Rule 14a-8(i)(5) Because it Relates to
Operations Which Account for Less than 5 Percent of the Company's Total Assets,
Net Earnings and Gross Sales, and is Not Otherwise Significantly Related to the
Company's Business.
Rule 14a-8(i)(5) permits the omission of a proposal which relates to operations
which account for less than 5 percent of a company's total assets at the end of
its most recent fiscal year, and for less than 5 percent of its net earnings and
gross sales for its most recent fiscal year, and is not otherwise significantly
related to a company's business.
The Proposal requests a report regarding the sale of birds by the Company. The
Company's operations involving the sale of birds account for far less than 5% of
its assets at the end of its most recent fiscal year, far less than 5% of its
net earnings for its most recent fiscal year and the Proposal itself notes that
the sale of birds represents a fraction of the 3% of the Company's revenue that
is generated by animal sales. The Company presently has no future plans that
will significantly increase these percentages. As such, the relation of the
Proposal to the Company's operations does not meet any of the economic tests
provided by Rule 14a-8(i)(5).
The Staff has recognized that "certain proposals, while relating to only a small
portion of the issuer's operations, raise policy issues of significance to the
issuer's business." Commission Release No. 34-19135 (Oct. 14, 1982). This can
occur where a particular corporate policy "may have a significant impact on
other portions of the issuer's business or subject the issuer to significant
contingent liabilities." Id. The Company's business includes (i) the sale of
various types of pet food and supplies, (ii) the offer of complete pet training,
education, grooming, styling and adoption services, (iii) the sale of a full
line of equine products, (iv) the operation of veterinary hospitals inside many
of its stores, and (v) the operation of pet boarding and day camp services. The
sale of birds does not have a significant impact on any other segment of the
Company's business and could not reasonably be expected to "subject the Company
to significant contingent liabilities."
Even where a proposal raises a policy issue, the policy must be more than
ethically or socially "significant in the abstract." It must have a "meaningful
relationship to the business" of the company in question. See Lovenheim v.
Iroquois Brands, Ltd., 618 F. Supp. 554, 561 & n.16 (D.D.C. 1985), in which a
proposal relating to the mistreatment of animals, namely the procedure used to
force-feed geese for the production of pate de fois gras was "otherwise
significantly related" and thus was not excludable. See also, J.P. Morgan & Co.
(avail, Feb. 5, 1999), in which the Staff concurred that the company could rely
on Rule 14a-8(i)(5) to omit a proposal asking it to discontinue banking services
with Swiss entities until all claims made by victims of the Holocaust and their
heirs are settled and total restitution made, because the company's operations
related to Switzerland were less than 5% and the proposal was not otherwise
significantly related to the company's business. In addition, in Hewlett-Packard
Co. (Reik) (avail, Jan 7, 2003) the Staff allowed the exclusion of a proposal
which sought to require the relocation or closure of Hewlett-Packard's offices
in Israel due to Israel's violation of numerous United Nation Resolutions and
human rights violations.
The Company is aware of the Commission's position concerning the inclusion of
stockholder proposals that have ethical or social significance and of the
nation's public policy against "unnecessary cruelty to animals." See Humane
Society of Rochester v. Lyng, 633 F. Supp. 480 (W.D.N.Y. 1986). With respect to
the treatment of animals, the Commission has been unwilling to exclude proposals
pursuant to Rule 14a-8(i)(5) which have generally addressed (i) the testing of
animals by pharmaceutical companies, cosmetic companies, see Avon Products, Inc.
(avail, March 30, 1988), and consumer product companies, see Proctor & Gamble
Co. (avail, July 27, 1988), and (ii) issues such as the "factory farming" of
animals by food processors, see PepsiCo., Inc. (avail, Mar. 9, 1990). However,
the Proposal in the matter at hand is significantly different because it merely
requests a report regarding whether a type of animal will be sold by a pet
retail store. The Proposal does not relate to "cruelty to animals" in any way,
but rather to the business issue of whether the Company, which services the
needs of pets and their owners, intends to continue its sale of a specific type
of pet. It is important to note one point in the Proposal that is not without
significant justification, which is that the Proponent identified the Company as
a recognized humane industry leader.
Furthermore, the Staff's interpretation of Rule 14a-8(i)(5) recognizes that some
issues that are of social significance are not necessarily of concern to a
company's stockholders because of the minimal impact those issues have on the
company's business. In American Stores Co. (avail, Mar. 25, 1994) (sale of
tobacco products by one of nation's leading food and drug retailers was "not
otherwise significantly related to" its business); Kmart Corp. (avail, Mar. 11,
1994) (sale of firearms in Kmart stores was "not otherwise significantly related
to" its business).
The Proposal requires the Company to prepare a report to stockholders detailing
whether it intends to continue the sale of birds. The Company is in the business
of operating retail stores which service a variety of pet needs throughout the
lifetime of those pets. The subject of the report, namely the sale of birds, is
not integral to the Company's business. Thus, even if the Proposal is considered
to raise a policy issue that might be considered "significant in the abstract,"
that issue has "no meaningful relationship" to the Company's business.
For the reasons set forth above, as well as the reasons set forth in the
Company's discussion of Rule 14a-8(i)(7) relating to its ordinary business
operations, the Company believes the Proposal may be omitted from the 2006 Proxy
Materials pursuant to Rule 14a-8(i)(5).
III. The Proposal is Excludable Under Rule 14a-8(i)(3), Because it Contains
Materially False or Misleading Statements.
Rule 14a-8(i)(3) of the Exchange Act provides that a proposal may be omitted if
it is "contrary to any of the Commission's proxy rules, including Rule 14a-9,
which prohibits materially false or misleading statements in proxy soliciting
materials." The Staff has permitted the exclusion of certain portions of
stockholder proposals and supporting statements from its proxy materials when
such proposals and supporting statements contained false and misleading
statements or omitted materials facts necessary to make statements made therein
not false or misleading. See Farmer Bros. Co. (avail, Nov. 28, 2003); Monsanto Co. (avail, Nov. 26, 2003); Sysco Corp. (avail, Aug. 12, 2003); Siebel Sys.,
Inc. (avail Apr. 15, 2003). Specifically, the Staff stated in Staff Legal
Bulletin No. 14B that companies may rely "on Rule 14a-8(i)(3) to exclude or
modify a statement ... where [(a)] statements directly or indirectly impugn
character, integrity, or personal reputation, or directly or indirectly make
charges concerning improper, illegal, or immoral conduct or association, without
factual foundation; [(b)] the company demonstrates objectively that a factual
statement is materially false or misleading ..." Staff Legal Bulletin No. 14B
(Sept. 15, 2004).
The Proponent has made the following statements in support of the Proposal which
the Company considers to be materially false and misleading in violation of the
Commission's proxy rules for the reasons set forth below:
1. Proponent's Statement: "[1.] [R]ampant breeding and selling of pet birds has
created an overpopulation crisis, resulting in 40 to 60 million pet birds in the
United States saturating the pet market, private homes, and rescue shelters ...
and ... [2.] the complex needs and longevity of birds, coupled with millions of
unprepared pet bird owners and irresponsible participants in the pet industry,
has led to pervasive cases of cruelty, neglect, improper weaning and care, fatal
release to the wild, relinquishment to shelters, and subsequently homeless
birds."
The Proponent fails to cite factual authority in support of clause one of this
proposition, and when clause one is read in connection with clause two, the
statement directly impugns the character, integrity, and reputation of the
Company and the Company's customers. In addition, clause two of the statement
implies that the Company's customers, and by association the Company, are
irresponsible, unprepared, neglectful and even cruel to their pets.
The statement also attributes pervasive cases of cruelty, neglect, improper
weaning and care to the Company's customers and by association, the Company. For
all of the foregoing reasons, the above statements should be excluded because
the statements not only directly impugn the character, integrity, and reputation
of the Company without factual foundation, but the statements also are
materially false, misleading and inflammatory.
2. Proponent's Statement: "'Our competitor PETCO agreed to end large bird sales
as one facet of the "company's ongoing effort to improve animal well-being,'saying
on April 12, 2005, '[W]e recognize that most of our bird customers are what we
call 'beginning hobbyists.' Large birds are not necessarily appropriate for
these individuals due to their long lifespan, size and care requirements.'"
This statement is materially false and misleading for several reasons.
First, the statement is materially misleading because this Proposal requires the
Company to prepare a report regarding whether the Company will stop the sale of
all birds and from a cursory reading of this statement, it appears Petco also
agreed to end the sale of all birds. This is not the case. Petco ended the sale
of certain large birds but still sells other birds like parakeets and yellowtail
cockatoos. The Proponent fails to note this fact. Thus this statement is
materially misleading and the statement should be excluded.
Second, the statement directly impugns the character, integrity, reputation, and
moral standing of the Company as the statement implies that the Company falls
short of a standard business practice merely because one competitor adopted a
policy it claims improves "animal well-being" which the Company has not adopted.
The Proponent fails to note the fact that thousands of other pet retailers still
sell birds and have not adopted Petco's policies. For the above reasons the
statement should be excluded.
3. Proponent's Statement: "[T]he Los Angeles Times reported that PETsMART
commissioned two studies in 2003 to collect statistics regarding pet bird
relinquishment and overpopulation ..." This statement is materially false and
misleading because it incorrectly paraphrases the source.
The article actually states, "PetsMart is financing two parallel studies to the
tune of $100,000. In progress now, they are examining why bird owners relinquish
their birds, how many rescue centers there actually are and how many birds they
have taken in." Mira Tweti, Plenty to Squawk About, L.A. TIMES, July 20, 2003,
at 124. Thus, the reference to the study of overpopulation is materially false
and misleading and should be excluded from the Proposal because a review of
rescue centers for birds is not equivalent to a study regarding bird
overpopulation.
4. Proponent's Statement: "[PetSmart] simultaneously pledged to end bird sales
if the results indicated a serious problem." This statement is also materially
false and misleading because it incorrectly paraphrases the Company's statement
within the article.
The article states, "PetsMart promotes the fact that the company policy is not
to sell dogs or cats because of the large numbers that are euthanized ... Store
executive Fitzgerald says they will do the same for birds if their survey shows
there is a problem with overpopulation.'I will tell you because of the legacy of
this company, that we will do the right thing based on the information that we
see.'" Mira Tweti, Plenty to Squawk About, L.A. L.A. TIMES, July 20, 2003, at
124.
The Company's pledge to "do the right thing" is not equivalent to a pledge to
end all bird sales. Thus the statement is materially false and misleading and
should be excluded from the Proposal.
5. Proponent's Statement: "[A]lthough the company is to be commended as a humane
industry leader for refusing to sell dogs and cats, a credibility gap arises
with respect to the company's disparate policy regarding birds." The Proponent
does not cite factual foundation for the proposition that the sale of birds is
viewed as inhumane, except by the Proponent.
Furthermore, this statement directly impugns the character, integrity, and
reputation of the Company because it implies that that by selling birds, the
Company is not humane in its treatment of animals. The Proponent fails to cite
any factual authority alleging or proving inhumane treatment of birds by the
Company. For the foregoing reasons, the statement should be excluded.
6. Proponent's Statement: "[T]ransitioning to adoptions would preserve
PETsMART's image as a humane industry leader, reduce high operational costs
associated with bird sales, and reduce public safety liabilities (i.e., disease
transmission and injury concerns)." This statement is materially false and
misleading for several reasons.
First, the statement implies that if the Company does not end all bird sales and
transition to bird adoptions, it will not preserve its "image as a humane
industry leader." The Proponent does not cite any factual foundation for this
proposition, and the statement, through its implications, directly impugns the
character, integrity, and reputation of the Company.
The Proponent does not cite any factual foundation for the propositions that: (i)
there are high operational costs associated with bird sales, (ii) that the
operational costs would be reduced if the Company decided to transition to bird
adoptions in lieu of sales, (iii) that there are public safety liabilities
associated with the sale of birds, and (iv) that the public safety liabilities
would be reduced if the Company decided to transition to bird adoptions in lieu
of sales. In addition, the Proponent has mischaracterized the costs associated
with the sale of birds implying that such costs are disproportionate to the
revenue generated by the sale of birds, which as noted by the Proponent is a
fraction of the 3% of revenue attributable to the Company's sale of small
animals.
The propositions discussed in (iii) and (iv) directly impugn the character,
integrity, and reputation of the Company without factual foundation because the
propositions imply that the there are public safety liabilities, namely disease
transmission and injury concerns, which the Company has not resolved and if the
Company chooses to not adopt the policy that will supposedly reduce these
liabilities, the Company's reputation and integrity may be diminished.
7. Proponent's Statement: "San Diego State University Professor of Marketing
George Belch praised PETCO's decision to end certain bird sales, saying, "[It's]
a pretty good move on PETCO's part ... They have to look at it and say, these
birds are a small percentage of our sales, and the trade-off of bad publicity of
being on PETA's list probably isn't worth it." This statement is materially
false and misleading for several reasons.
First, the statement is materially misleading because this Proposal requires the
Company to prepare a report regarding whether the Company will stop the sale of
all birds and from a cursory reading of the above statement, it appears the
professor is praising Petco's decision to stop the sale of all birds. This is
not the case. Petco stopped selling large birds but still sells other birds like
parakeets and yellowtail cockatoos. Thus this statement is materially misleading
and should be excluded.
Second, the statement is materially misleading and self-serving because the
quote is used to bolster the Proponent's own opinion of the matter at hand and
attempts to burnish the Proponent's reputation. The quote stands for the
proposition that because one professor of marketing thinks it is not advisable
from a marketing standpoint to oppose the Proponent, companies should adhere to
the Proponent's views. Due to the foregoing reasons, the statement should be
excluded.
8. The Proponent has made the following statement in the proposed stockholder
resolution contained within the Proposal which the Company considers to be
materially false and misleading in violation of the Commission's proxy rules for
the reasons set forth below:
Proponent's Statement: "NOW, THEREFORE, BE IT RESOLVED that shareholders of
PETsMART request that the Board issue a report to shareholders by October 1,
2006, based on the findings of PETsMART's sponsored studies, detailing whether
PETsMART intends to fulfill its promise to end all bird sales in the face of
overwhelming evidence of an overpopulation (and subsequent relinquishment)
crisis."
Several portions of this statement are materially false and misleading. First,
the statement is misleading because it seeks to have the Company state whether
it will "fulfill its promise to end all bird sales." As discussed above, the
Company did not promise to end all bird sales, but merely to "do the right
thing." Even Petco, which the Proponent praises in its proposal, did not "end
all bird sales," but merely stopped selling certain large birds. This portion of
the statement should be excluded from the statement.
Second, the statement is misleading because it refers to the "overwhelming
evidence of an overpopulation (and subsequent relinquishment) crisis." The
Proponent never cited factual authority for this statement, and because it
directly impugns the character, integrity, and reputation of the Company, it
should be excluded.
As noted above, the Proposal contains numerous materially false and misleading
statements which the Company believes would make the Staff's review unproductive
and would require such detailed and extensive editing to correct, that the
Proposal should be completely excluded. The Company respectfully submits that
the Proposal may be excluded by virtue of Rule 14a-8(i)(3) and that the Staff
should not allow the defects in the Proposal to be corrected by amendment.
In the alternative, if the Staff is unable to concur with our conclusion that
the Proposal should be excluded in its entirety because of the numerous false
and misleading statements contained therein, we respectfully request that the
Staff recommend the exclusion of the statements specifically discussed above. In
the event that the Staff permits the Proponent to make the substantial revisions
necessary to bring the Proposal within the requirements of the proxy rules, we
respectfully request explicit confirmation from the Staff that such revisions,
whether submitted by the Proponent or any person purportedly acting on behalf of
the Proponent, are subject to complete exclusion by the Company if they cause
the Proposal to exceed the 500-word limitation set forth in Rule 14a-8(d) of the
Exchange Act.
CONCLUSION
Based on the foregoing, we hereby respectfully request that the Staff not
recommend any enforcement action if the Proposal is excluded from the Company's
2006 Proxy Materials. Should you disagree with the conclusions set forth in this
letter, we respectfully request the opportunity to confer with you prior to the
determination of the Staff's final position. We would be pleased to provide you
with any additional information and answer any questions you may have regarding
this subject. Please do not hesitate to call me at (650) 843-5053 or John
McKenna at (650) 843-5059, if we can be of any further assistance in this
matter.
Sincerely,
/s/
Robert J. Brigham
cc: Scott A. Crozier, Esq.
John T. McKenna, Esq.
[APPENDIX]
EXHIBIT A PETsMART SHAREHOLDER RESOLUTION
WHEREAS rampant breeding and selling of pet birds has created an overpopulation
crisis, resulting in 40 to 60 million pet birds in the United States saturating
the pet market, private homes, and rescue shelters; and
WHEREAS the complex needs and longevity of birds, coupled with millions of
unprepared pet bird owners and irresponsible participants in the pet industry,
has led to pervasive cases of cruelty, neglect, improper weaning and care, fatal
release to the wild, relinquishment to shelters, and subsequently homeless
birds; and
WHEREAS our comoetitor PETCO agreed to end large bird sales as one facet of the
"company's ongoing effort to improve animal well-being," saying on April 12,
2005, "[W]e recognize that most of our bird customers are what we call
'beginning hobbyists,' Large birds are not necessarily appropriate for these
individuals due to their long lifespan, size and care requirements"; and
WHEREAS the Los Angeles Times reported that PETsMART commissioned two studies in
2003 to collect statistics regarding pet bird relinquishment and overpopulation
and simultaneously pledged to end bird sales if the results indicated a serious
problem1,2; and
WHEREAS the Los Angeles Times also reported that PETsMART does not sell dogs or
cats because of the overpopulation crises and resulting euthanasia rates and
stated that the company would adopt a commensurate policy with respect to birds
if studies revealed an overpopulation problem; and
WHEREAS, although the company is to be commended as a humane industry leader for
refusing to sell dogs and cats, a credibility gap arises with respect to the
company's disparate policy regarding birds; and
WHEREAS transitioning to adoptions would preserve PETsMART's image as a humane
industry leader, reduce high operational costs associated with bird sales, and
reduce public safety liabilities (i.e., disease transmission and injury
concerns) because birds account for only a fraction of the 3 percent of
PETsMART's revenue generated by animal sales, yet facilitating bird adoptions,
as PETsMART has done with dogs and cats, would still provide a similar animal
presence to bring in store traffic and generate loyal customers to purchase
food, supplies, and services, which account for 97 percent of PETsMART's
revenue; and
WHEREAS San Diego State University Professor of Marketing George Belch praised
PETCO's decision to end certain bird sales, saying, "[It's] a pretty good move
on PETCO's part... They have to look at it and say, these birds are a small
percentage of our sales, and the trade-off of bad publicity of being on PETA's
list probably isn't worth it"
3;
NOW, THEREFORE, BE IT RESOLVED that shareholders of PETsMART request that the
Board issue a report to shareholders by October 1, 2006, based on the findings
of PETsMART's sponsored studies, detailing whether PETsMART intends to fulfill
its promise to end all bird sales in the face of overwhelming evidence of an
overpopulation (and subsequent relinquishment) crisis.
-----FOOTNOTES-----
1 Mira Tweti, Los Angeles Times 20 Jul. 2003: 124.
2 PETsMART has yet to disclose any results.
3 Rachel Laing, San Diego Union-Tribune 13 Apr. 2005: Cl.
[INQUIRY LETTER]
March 1, 2006
Office of the Chief Counsel
Division of Corporation Finance
U.S. Securities and Exchange Commission
100 F. St. N.W.
Washington, DC 20549
Via regular and electronic mail: cletters@sec.gov
Re: Shareholder proposal of People for the Ethical Treatment of Animals ("PETA")
for inclusion in the 2006 Proxy Statement of PetSmart Inc. (File No. 0-21888)
Ladies and Gentlemen:
This letter is filed in response to a letter dated February 13, 2006, submitted
to the SEC by PetSmart Inc. ("PetSmart" or "the company"). The company seeks to
exclude a shareholder proposal submitted by PETA based on Rule 14a-8(i)(7),
asserting that it deals with ordinary business operations; Rule 14a-8(i)(5),
arguing that it relates to operations accounting for less than 5 percent of the
company's total assets, net earnings, and gross sales and is not otherwise
significantly related to the company's business; and Rule 14a-8(i)(3), alleging
that it contains materially false or misleading statements.
For the reasons that follow, PETA requests that the SEC recommend enforcement
action if the proposal is omitted from the proxy materials.
I. The Proposal Does Not Involve Ordinary Business Under Rule 14a-8(i)(7)
The company argues that the proposal seeks a report on "the sale of a particular
product" and thus implicates ordinary business operations and is an attempt to
micromanage the company. As such, PetSmart asserts that the proposal falls
within the ambit of Rule 14a-8(i)(7) and should be excluded.
A. The Subject Matter of the Proposal, Namely the Sale of Large Birds, Is Not
Ordinary Business
The company completely overlooks the fact that the proposal seeks a report that
was commissioned in 2003 and that is based on PetSmart's studies of pet birds.
Instead, the company states that the resolution relates exclusively to the sale
of birds.
PetSmart tries to support its contention that the sale of birds is ordinary
business by citing to the Staff opinions that found the following activities to
be ordinary business: i) the sale of sexually explicit material at Marriott
hotels; ii) the sale of tobacco products, generally; iii) the sale of
cigarettes, specifically; and iv) lobbying activity designed to influence
legislation on the sale of tobacco products. In short, PetSmart argues that the
sale of a single type of animal is analogous to the sale of any single type of
product, such as cigarettes. Equating the sale of a sentient, highly intelligent
bird, who is capable of living a life as long as that of a human being, to the
sale of a cigarette contradicts the company's expressed concern for the welfare
of animals.
The report that PETA's proposal seeks from the Board goes beyond ordinary
business concerns. As the Staff has recognized, a resolution that focuses on
"sufficiently significant social policy issues ... generally would not be
considered to be excludable, because the [proposal] would transcend the
day-to-day business matters and raise policy issues so significant that it would
be appropriate for a shareholder vote." See Exchange Act Release No. 40,018 (May
21, 1998). The proposal under review has virtually nothing to do with the "sale
of a particular category of products...." It has everything to do with important
public policy issues relating to animal welfare. Accordingly, the proposal is
not subject to exclusion under Rule 14a-8(i)(7).
As evidence of the importance of animal welfare concerns to PetSmart, the
company argues in its letter seeking to omit the shareholder resolution that it
"does not sell dogs or cats" but "works diligently to identify and sell only
those species it believes will make good pets." Dogs and cats, however, are
generally considered to make the best pets, so PetSmart's policy decision not to
sell such popular companion animals was clearly based on other compelling animal
welfare factors. On its Web site, PetSmart explains:
At PetSmart, we are passionate about pets. We believe that every pet should have
a loving family and healthy, happy life. For this reason, we made a conscious
decision to not sell cats or dogs. Rather, we dedicate space in every store to
more than 3,400 local animal welfare organizations to help homeless dogs and
cats find loving homes.
PetSmart's decision not to sell dogs or cats, to pass on a financially lucrative
market with immediate profits, is clearly not a decision that can be categorized
as "ordinary business" or as the simple selection of specific products or
product linesit was a defining, watershed statement of brand identity and
corporate responsibility that determined the direction of the company and
influenced the direction of the entire industry. The very same logic and
principles that were used to make this decision apply to the overpopulation and
neglect issues surrounding the pet bird trade. PetSmart's biggest competitor,
PETCO, has instituted a policy not to sell large birds for these same reasons,
and PetSmart has pledged to "do the same for birds [as it has done for dogs and
cats] if [the] survey shows there to be a problem with overpopulation." Thus,
this is a pivotal decision that has enormous implications for PetSmart's animal
welfare policies, company direction, and brand image.
B. The Proposal Has Nothing to Do With Evaluating the Risk of Selling a Type of
Pet
In what can only be characterized as an exercise in obfuscation, the company
argues that one "Whereas" clause in the proposal relates to "damage to
reputation ... [which] is a fundamental part of ordinary business operations,
best left to management" (No-Action Letter, p. 4). In terms of incorrect
interpretation, the fact that the proposal contains not the slightest reference
to an evaluation of risk is second only to the company's enthusiasm for plumbing
each "Whereas" clause in the hopes of finding an ill-fated word that it can
craft into an exemption.
The Staff's Legal Bulletin No. 14 B of September 15, 2004, was designed to rein
in the flood of no-action letters. As the Staff remarked, "many companies have
begun to assert deficiencies in virtually every line of a proposal's supporting
statement as a means to justify exclusion of the proposal in its entirety."
Unfortunately, the trend continues, as evidenced by PetSmart's parsing of each
word in an effort to eke out even the most tenuous argument for omitting PETA's
resolution.
C. The Proposal Has Nothing to Do With Second-Guessing Management
It has already been shown that this resolution is not about the sale of a
category of products, damage to reputation, or any other ordinary business
operation. It is about the Board's issuing to the shareholders a report on a
significant policy matter. Additionally, the company's argument that the
proposal seeks to micromanage the company is illogical, because management
cannot be second-guessed on the contents of a report on pet birds that was
commissioned in 2003 and that has never been disseminated.
D. The Proposal Has Nothing to Do With the Disclosure of Information Regulated
by the SEC
PetSmart released statements, which were reported in the Los Angeles Times,
confirming that the company had commissioned two studies on pet birds and
pledging to end the sale of birds if the studies conclusively showed a pet bird
overpopulation problem. PETA's resolution simply asks PetSmart to account for
its policy statements to shareholders and report on the findings of the studies.
The proposal is clear in requesting a report "based on the findings" and does
not seek a release of the studies or particular statistics. PetSmart has full
discretion to summarize and select the material shared and can exclude any
proprietary knowledge or any information that is not pertinent to this
particular public issue.
E. The Proposal Raises Significant Social Policy Concerns
PETA's proposal provides as much detail as the 500-word limit permits, in terms
of describing how the abuse and mistreatment of birds is rampant throughout the
entire pet bird trade and constitutes a major animal welfare issue. It is
disingenuous of PetSmart to claim that this proposal concerns a trivial issue of
product selection. During private negotiations with PetSmart and in its publicly
available literature, PETA detailed the extent of this issue. However, in
Section II of its no-action letter, the company argues that this resolution is
simply about "requesting a report" and not about "cruelty to animals."
Additionally, the company argues that, unlike manufacturers, it has no
responsibility as a vendor of the "product," claiming that pet sellers and
breeders/suppliers are separate components of the bird trade. On one hand,
PetSmart characterizes itself as passionate about helping to ensure that dogs
and cats find loving homes, while on the other hand, it sheds all responsibility
for the rampant breeding of birds and the resulting overpopulation problem,
claiming that the responsibility lies with breeders and suppliers.
II. PetSmart's Contention That the Proposal Is Excludable Under Rule 14a-8(i)(5)
Is Without Merit
Although animal sales account for approximately 3 percent of PetSmart's total
revenue, live-animal sales and the presence of live animals in stores are
considered by the pet industry to be instrumental in boosting the sales of
lucrative products such as pet food, pet supplies, pet services, and pet luxury
items. Former PETCO CEO Brian Devine asserted that "you sell five times as much
of the hard goods as you do without the live stock" (California CEO, January 1,
2002).
By drawing in store traffic and committing customers to years of supply and
service needs, the financial implications of the sale of animals extend far
beyond the purchase price and obviously have "a significant impact on the other
portions of the issuer's business." PetSmart's decision not to sell dogs and
cats attests to the fact that animal sales, or the decision not to engage in
them, have a "meaningful relationship to the business."
Two facts are of overarching significance. First, the proposal seeks a report
from the Board, not control of a product line. Second, exclusion under the "5
percent rule" fails because of the social policy issue of significant concern to
the public. Each of those factors vitiates the argument for exclusion under Rule
14a-8(i)(5).
III. PetSmart's Allegations That the Proposal Contains Materially False or
Misleading Statements Are Themselves Misleading
A. The Statistics on Overpopulation Are Accurate and Come From Reliable Sources
The company suggests that there is no factual support for the statistic that
there are "40 to 60 million pet birds." There are several sources for that
statistic. The most widely known in the industry is the Pet Industry Joint
Advisory Council (PIJAC), which estimated that there were 40 million "pet" birds
in 1996an increase of 244.8 percent from 1990. Also, the Journal of the
American Veterinary Medical Association conducted a demographic study in 1998
and reported the U.S. pet bird population to be near 40 million. Both sources
have extrapolated the current population to be near 60 million, and this
estimate is shared by industry experts and animal welfare groups.
Moreover, Rule 14a-8(i)(3) prohibits a company from excluding a proposal merely
because it "objects to factual assertions because they are not supported."
B. The Proposal Contains No Misleading Statement About Large-Bird Sales
The company alleges that PETA's proposal misleads readers into concluding that
PETCO ended all bird sales and not just large-bird sales. The text of the
proposal reads:
Our competitor PETCO agreed to end large-bird sales as one facet of the
"company's ongoing effort to improve animal well-being," stating on April 12,
2005, "[W]e recognize that most of our bird customers are what we call
'beginning hobbyists.' Large birds are not necessarily appropriate for these
individuals due to their long lifespan, size, and care requirements."
The cited passage uses the words "large birds" twice and explains unambiguously
that it is the long lifespan and size of large birds that make them unsuitable
as pets.
C. The Proposal Contains No Materially False Statements About the PetSmart
Studies
The company alleges that the proposal's references to PetSmart's studies were
paraphrased and materially false, arguing that "a review of rescue centers is
not equivalent to a study regarding bird overpopulation." However, the Los
Angeles Times reported that PetSmart "will do the same for birds [as it did for
dogs and cats] if their survey shows there is a problem with overpopulation."
The studies were further described in the Los Angeles Times as addressing "why
bird owners relinquish their birds, how many rescue centers there actually are,
and how many birds they have taken in." Clearly, the proposal's statement that
the studies concerned the topics of "bird relinquishment and overpopulation" is
accurate by any commonsense standard.
D. The Proposal Did Not Misrepresent PetSmart's Pledge
The company absurdly contends that PetSmart pledged only to "do the right thing"
and did not pledge to end all bird sales. When the pledge quote is put in
context, it is clear that the company pledged to "do the right thing" in
reference to the preceding sentence, namely, "to do the same for birds [as it
did for dogs and cats] if [its] survey showed there is a problem with
overpopulation."
E. There Is a Factual Basis for the Assertion That the Sale of Birds Is Inhumane
The 500-word limit of the proposal restricts the number of sources that can be
included, but PetSmart is well aware of the opinions of veterinarians and animal
welfare groups condemning the pet bird trade, and PETA would be happy at any
point to provide expert witnesses to support those opinions. Were this not a
valid issue, PetSmart would have had no reason to commission two studies of it.
Furthermore, a proposal, even if it represents only the proponent's perspective,
cannot be excluded under Rule 14a-8(i)(3) merely because "the company objects to
statements because they represent the opinion of the shareholder proponent or
referenced source, but the statements are not identified specifically as such."
Accordingly, the argument for omitting the proposal on this basis is frivolous
and unsupportable.
F. There Is Factual Support for the Proposal's Statements About Bird Adoptions
The company continually touts its sponsorship and facilitation of dog and cat
adoptions to bolster its credibility on the issues under review, and we would
expect the facilitation of bird adoptions to offer similar rewards. Although the
company will not release specific figures regarding the operational costs and
liabilities associated with animal sales versus adoptions even though we have
requested such information, it is fair and reasonable to expect that a system in
which all breeds of live animal stocks are continually replenished and there are
surplus animals would incur more operational costs and liabilities than a more
limited and focused adoption-facilitation process in which space is offered to
rescue groups (such as the process the company uses for dogs and cats).
Additionally, PETA would be happy to provide binders of documentation about
cases of abuse and neglect of birds and the occurrence of bird diseases in major
pet stores, including PetSmart, to illustrate the liabilities of normal business
practices.
G. The Citation to a Quote From Expert George Belch, Professor of Marketing at
San Diego State University, Is Fair and Acceptable
It is both fair and acceptable to cite a quote from a respected nonpartisan
expert, in this case, George Welch, professor of marketing at San Diego State
University.
IV. Resolution
Again, PetSmart attempts to argue that the company merely "pledged to do the
right thing" and did not necessarily pledge to end all bird sales if its studies
concluded that there is a pet bird overpopulation problem. That argument
completely ignores the context of PetSmart's own statement and is both illogical
and flippant.
For the foregoing reasons, we respectfully request that the SEC advise PetSmart
that it will take enforcement action if the company fails to include PETA's
proposal in its 2006 Proxy Statement. Please feel free to contact me should you
have any questions or require further information. I may be reached directly at
SusanH@peta.org or 703-478-5995.
Very truly yours,
/s/
Susan L. Hall
Legal Counsel
SLH/pc
cc: Ronald O. Mueller, Esq.
The Staff Legal Bulletin No. 14 of July 13, 2001, permits revisions to
shareholder proposals if the revisions "are minor in nature and do not alter the
substance of the proposal."
[STAFF REPLY LETTER]
April 14, 2006
Response of the Office of Chief Counsel Division of Corporation Finance
Re: PetSmart, Inc. Incoming letter dated February 13, 2006
The proposal requests that the Board issue a report based on the findings of
PetSmart's studies detailing whether PetSmart will end all bird sales.
There appears to be some basis for your view that PetSmart may exclude the
proposal under rule 14a-8(i)(7) as relating to its ordinary business operations
(i.e., sale of particular goods). Accordingly, we will not recommend enforcement
action to the Commission if PetSmart omits the proposal from its proxy materials
in reliance on rule 14a-8(i)(7). In reaching this position, we have not found it
necessary to address the alternative bases for omission upon which PetSmart
relies.
Sincerely,
/s/
Ted Yu
Special Counsel
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