[Federal Register Volume 66, Number 10 (Tuesday, January 16, 2001)]
[Notices]
[Pages 3602-3604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1167]


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FEDERAL TRADE COMMISSION

[File No. 011 0022]


Winn-Dixie Stores, Inc., Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before February 8, 2001.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pennsylvania Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Richard Parker or James Fishkin, FTC/
H-374, 600 Pennsylvania Ave., NW., Washington, DC 20580. (202) 326-3300 
or 326-2663.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the 
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given 
that the above-captioned consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of thirty (30) days. The following Analysis to Aid Public 
Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for January 9, 2001), on the World Wide Web, at http://www.ftc.gov/os/2001/01/index.htm. A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, 600 Pennsylvania Avenue, NW., Washington, 
D.C. 20580, either in person or by calling (202) 326-3627.
    Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania, Ave., NW., 
Washington, DC 20580. Two paper copies of each comment should be 
accompanied, if possible, by a 3\1/2\ inch diskette containing an 
electronic copy of the comment. Such comments or views will be 
considered by the Commission and will be available for inspection and 
copying at its principal office in accordance with Sec. 4.9(b)(6)(ii) 
of the Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Analysis of the Complaint and Proposed Consent Order To Aid Public 
Comment

I. Introduction

    The Federal Trade Commission (``Commission'') has accepted for 
public comment from Winn-Dixie Stores, Inc. ``Winn-Dixie'' or ``the 
Proposed Respondent'') and Agreement Containing Consent Order ``the 
proposed consent order''). The Proposed Responent has also reviewed a 
draft complaint that the Commission contemplates issuing. The proposed 
consent order is designed to furnish the Commission with prospective 
relief in the markets affected by the proposed acquisition by Winn-
Dixie of supermarkets and other assets of Jitney-Jungle Stores of 
America, Inc. (``Jitney-Jungle''). A plan of sale pertaining to the 
supermarkets involved in this case has been confirmed by the United 
States Bankruptcy Court for the Eastern District of Louisiana in In re 
Jitney-Jungle Stores of America, Case No. 99-17191, on December 15, 
2000.

II. Description of the Parties and the Proposed Acquisition

    Jitney-Jungle, owned principally by Bruckmann, Rosser, Sherill & 
Co., an investment company, runs most of its stores under the names 
``Jitney-Jungle'' and ``Delchamps.'' Prior to its filing under Chapter 
11 of the Bankruptcy Act on October 12, 1999, Jitney-Jungle operated 
nearly 200 supermarkets, and a lesser number of nearby gas stations and 
liquor stores, in Mississippi, Alabama, Louisiana, Florida, Arkansas, 
and Tennessee. Following that filing, Jitney-Jungle has closed more 
than 45 supermarkets and sold off at least ten (10) others. Following 
the solicitation of buyers for any and all of its stores, Jitney-Jungle 
proposed to sell 72 supermarkets to Winn-Dixie for a total purchase 
price of $85 million. Following an auction held under the auspices of 
the bankruptcy court, and as limited by the proposed consent order, 
Winn-Dixie plans instead to acquire 68 of the Jitney-Jungle stores for 
a reduced consideration.
    Winn-Dixie is a Florida corporation headquartered in Jacksonville, 
Florida. It operates more than 1,000

[[Page 3603]]

supermarkets in fourteen southeastern states and the Bahamas. Winn-
Dixie reported sales of $14.1 billion for fiscal 1999.

III. The Draft Complaint

    The draft complaint alleges that the relevant line of commerce 
(i.e., the product market) is the retail sale of food and grocery items 
in supermarkets. Supermarkets provide a distinct set of products and 
services for consumers who desire to one-stop shop for food and grocery 
products. They carry a full line and wide selection of both food and 
nonfood products (typically more than 10,000 different stock-keeping 
units (``SKUs'')), as well as a deep inventory of those SKUs in a 
variety of brand names and sizes. To accommodate the large number of 
food and nonfood products necessary for one-stop shopping, supermarkets 
are large stores that typically have at least 10,000 square feet of 
selling space. So called ``supercenters'' operated by mass merchants 
such as Wal-Mart, which have full-line supermarkets attached to general 
merchandise stores, are included in the product market.
    Supermarkets compete primarily with other supermarkets that provide 
one-stop shopping for food and grocery products. Supermarkets base 
their food and grocery prices on the prices primarily of food and 
grocery products sold at nearby supermarkets. They do not regularly 
price-check food and grocery products sold at other types of stores 
such as cub stores or limited assortment stores, and do not 
significantly change their food and grocery prices in response to 
prices at other types of stores. Most consumers shopping for food and 
grocery products at supermarkets are not likely to shop elsewhere in 
response to a small price increase by supermarkets.
    Retail stores other than supermarkets that sell food and grocery 
products, such as neighborhood ``mom & pop'' grocery stores, limited 
assortment stores, convenience stores, specialty food stores (e.g., 
seafood markets, bakeries, etc.), club stores, and mass merchants, do 
not effectively constrain most prices at supermarkets. These other 
stores operate significantly different retail formats and sell far more 
limited assortments of items. None of these formats would constrain a 
price increase taken by supermarkets.
    The draft complaint alleges that the relevant sections of the 
country in which to analyze the acquisition include, among others, the 
areas in and near the following cities and towns: Niceville, Florida; 
Gulf Breeze, Florida; Destin, Florida; and the Gulfport-Biloxi area of 
Mississippi, which consists of the parts of Hancock, Harrison, and 
Jackson counties that include Waveland, Bay Saint Louis, Pass 
Christian, Long Beach, Gulfport, Biloxi D'Iberville, and Ocean Springs, 
and narrower markets contained therein, including Gulfport and Biloxi 
(the ``Relevant Geographic Markets'').
    Jitney-Jungle and Winn-Dixie are actual and direct competitors in 
all of the above listed markets. The acquisition will eliminate that 
competition. The draft complaint alleges that each of the post-merger 
markets would be highly concentrated, whether measured by the 
Herfindahl-Hirschman Index (commonly referred to as ``HHI'') or by 
four-firm concentration ratios.\1\ The acquisition would substantially 
increase concentration in each market. Jitney-Jungle and Winn-Dixie 
would have a combined market share that ranges from slightly less than 
34% to 100% in the Relevant Geographic Markets. The post-acquisition 
HHIs in the Relevant Geographic Markets range from just over 2,400 
points to 10,000 points.
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    \1\ The HHI is a measurement of market concentration calculated 
by summing the squares of the individual market shares of all the 
participants.
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    The draft complaint further alleges that entry is difficult and 
would not be timely, likely, or sufficient to prevent anticompetitive 
effects in the Relevant Geographic Markets.
    Notwithstanding all of this, Winn-Dixie's acquisition of Jitney-
Jungle assets is not likely to create or enhance market power, or 
facilitate its exercise, to the extent that the imminent failure of 
Jitney-Jungle would cause those assets, or some of them, to exit the 
market. To that extent, post-acquisition performance in the relevant 
market is not likely to be worse than performance had the acquisition 
been blocked and the assets exited.
    As previously indicated, Jitney-Jungle has sought protection from 
its creditors pursuant to Chapter 11 of the Bankruptcy Act. A review of 
that proceeding indicates that Jitney-Jungle will not be able to 
reorganize successfully under Chapter 11, and that but for the auction 
sale conducted under the auspices of the bankruptcy court Jitney-Jungle 
would be thrown into liquidation proceedings under Chapter 7 of the 
Bankruptcy Act. The key question, therefore, is whether Jitney-Jungle 
has made unsuccessful good-faith efforts to elicit reasonable 
alternative offers of acquisition of the Jitney-Jungle assets. Through 
a variety of means, including the retention of appropriate 
professionals to elicit offers for its assets and culminating in the 
previously mentioned auction sale under the auspices of the bankruptcy 
court, Jitney-Jungle has sought to elicit reasonable alternative bids. 
In the four Relevant Geographic Markets, Jitney-Jungle has been able to 
elicit bids that are timely, above the liquidation value of the assets, 
and otherwise acceptable to creditors. Therefore, the Commission 
concluded that in the Relevant Geographic Markets the proposed 
acquisition would be anticompetitive because it would eliminate 
substantial, direct, and ongoing competition. In all other areas where 
Winn-Dixie directly competes against Jitney-Jungle, Jitney-Jungle has 
been unable to elicit bids that are timely, likely, above liquidation 
value of the assets, and otherwise acceptable to creditors. Therefore, 
the other areas where Winn-Dixie and Jitney-Jungle directly compete are 
not being challenged.
    The draft complaint alleges that Winn-Dixie's proposed acquisition 
of various supermarket assets of Jitney-Jungle, if consummated, may 
substantially lessen competition in the four Relevant Geographic 
Markets in violation of Section 7 of the Clayton Act, as amended, 15 
U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as 
amended, 15 U.S.C. 45, by eliminating direct competition between 
supermarkets presently owned or controlled by Jitney-Jungle and 
supermarkets owned or controlled by Winn-Dixie; by increasing the 
likelihood that Winn-Dixie will unilaterally exercise market power; and 
by increasing the likelihood of, or facilitating, collusion or 
coordinated interaction among the remaining supermarket firms. Each of 
these effects raises the likelihood that the prices of food, groceries 
or services will increase, and the quality and selection of food, 
groceries or services will decrease, in the Relevant Geographic Markets 
alleged in the proposed complaint.

IV. Terms of the Agreement Containing Consent Order

    The proposed consent order will furnish prospective relief in the 
markets affected by the proposed acquisition.\2\ Under the terms of the 
proposed consent order, the Proposed Respondent must not, for a period 
of ten (10) years from the date the proposed consent order becomes 
final, acquire any interest in four identified Jitney-Jungle

[[Page 3604]]

supermarkets without the prior approval of the Commission.
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    \2\ Acceptance of the proposed consent order for public comment 
terminates the Hart-Scott-Rodino waiting period and enables Winn-
Dixie immediately to acquire the Jitney-Jungle assets.
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    Also for a period of ten (10) years, the Proposed Respondent must 
provide written notice to the Commission prior to acquiring any 
interest in a supermarket owner or operator, or any facility that has 
operated as a supermarket within the previous six (6) months, located 
in any of the Relevant Geographic Markets. Following notice, Proposed 
Respondent may not complete such an acquisition until after it has 
provided any information requested by the Commission during a specified 
waiting period. This provision does not restrict the Proposed 
Respondent's construction of new supermarket facilities on its own; nor 
does it restrict the Proposed Respondent from leasing facilities not 
operated as supermarkets within the previous six (6) months.
    The proposed consent order also prohibits the Proposed Respondent, 
for ten (10) years, from entering into or enforcing any agreement that 
restricts the ability of any acquirer of any supermarket, leasehold 
interest in a supermarket, or interest in any retail location used as a 
supermarket within Okaloosa, Santa Rosa or Walton counties in Florida; 
Hancock, Harrison, Jackson or Lauderdale counties in Mississippi; St. 
Tammany Parish, Louisiana; or Mobile County, Alabama on or after 
January 1, 2000, to operate a supermarket at that site if such 
supermarket was formerly owned or operated by the Proposed Respondent. 
In addition, the Proposed Respondent may not remove fixtures or 
equipment from a store or property owned or leased in these counties 
that is no longer in operation as a supermarket, except (1) prior to a 
sale, sublease, assignment, or change in occupancy, (2) to relocate 
such fixtures or equipment in the ordinary course of business to any 
other supermarket owned or operated by Proposed Respondent, or (3) 
otherwise with the prior approval of the Commission.
    The Proposed Respondent is required to provide to the Commission a 
report of compliance with the consent order beginning one (1) year from 
the date the proposed consent order becomes final and annually for each 
of the following nine (9) years.

V. Opportunity for Public Comment

    The proposed consent order has been placed on the public record for 
30 days for receipt of comments by interested persons. Comments 
received during this period will become part of the public record. 
After 30 days, the Commission will again review the proposed consent 
order and the comments received and will decide whether it should 
withdraw from the agreement or make the proposed consent order final.
    By accepting the proposed consent order subject to final approval, 
the Commission anticipates that the competitive problems alleged in the 
complaint will be resolved. The purpose of this analysis is to invite 
public comment on the proposed consent order to aid the Commission in 
its determination of whether to make the proposed consent order final. 
This analysis is not intended to constitute an official interpretation 
of the proposed consent order nor is it intended to modify the terms of 
the proposed consent order in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 01-1167 Filed 1-12-01; 8:45 am]
BILLING CODE 6750-01-M