[Federal Register Volume 66, Number 245 (Thursday, December 20, 2001)]
[Notices]
[Pages 65711-65713]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31338]



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FEDERAL TRADE COMMISSION

[File No. 011 0247]


Koninklijke Ahold N.V. and Bruno's Supermarkets, 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 January 7, 2002.

ADDRESSES: Comments filed in paper form should be directed to: FTC/
Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, NW, 
Washington, DC 20580. Comments filed in electronic form should be 
directed to: [email protected], as prescribed below.

FOR FURTHER INFORMATION CONTACT: Susan Huber, Bureau of Competition, 
600 Pennsylvania Avenue, NW, Washington, DC 20580, (202) 326-3331.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 of 
the Commission's rules of practice, 16 CFR Sec. 12.34, 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 December 7, 2001), on the World Wide Web, at ``http://www.ftc.gov/
os/2001/12/index.htm.'' A paper copy can be obtained from the FTC 
Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, 
Washington, DC 20580, either in person or by calling (202) 326-2222.
    Public comments are invited, and may be filed with the Commission 
in either paper or electronic form. Comments filed in paper form should 
be directed to: FTC/Office of the Secretary, Room 159-H, 600 
Pennsylvania Avenue, NW, Washington, DC 20580. If a comment contains 
nonpublic information, it must be filed in paper form, and the first 
page of the document must be clearly labeled ``confidential.'' Comments 
that do not contain any nonpublic information may instead be filed in 
electronic form (in ASCII format, WordPerfect, or Microsoft Word) as 
part of or as an attachment to email messages directed to the following 
email box: [email protected]. Such comments 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 Draft Complaint and Proposed Decision Order To Aid 
Public Comment

I. Introduction

    The Federal Trade Commission (``Commission) has accepted for public 
comment from Koninklijke Ahold NV, (``Ahold''), and Bruno's 
Supermarkets Inc., (``Bruno's'') (collectively ``the Proposed 
Respondents'') an Agreement Containing Consent Orders (``the proposed 
consent order''). The Proposed Respondents have also reviewed a draft 
complaint contemplated by the Commission. The proposed consent order is 
designed to remedy likely anticompetitive effects arising from Ahold's 
proposed acquisition of all of the outstanding voting stock of Bruno's.

II. Description of the Parties and the Proposed Acquisition

    Ahold is a global food service and food retailer headquartered in 
the Netherlands. The company operates or services approximately 8,500 
stores in the United States, Europe, Latin America and Asia and had 
sales of over $49 billion in 2000. In the United States, Ahold, through 
its U.S. subsidiary Ahold U.S.A., Inc., operates over 1,300 retail food 
stores, including supermarkets under the Giant, Stop & Shop, Tops and 
BI-LO trade names. In the southeastern United States, Ahold owns and 
operates 294 BI-LO supermarkets as well as a number of Golden Gallon 
convenience stores.
    Bruno's, headquartered in Birmingham, is the largest supermarket 
chain in the state of Alabama. With annual sales in 2000 of over $1.5 
billion, Bruno's operates 169 supermarkets in Alabama (123), Georgia 
(25), Florida (16) and Mississippi (2) as well as 13 liquor stores and 
two gas stations. Bruno's operates supermarkets under the trade names 
Bruno's Fine Foods, Food World, FoodMax, Food Fair and Fresh Value.
    On September 4, 2001, Ahold and Bruno's signed an agreement whereby 
Ahold will purchase all of the outstanding voting securities of Bruno's 
through the merger of New Bronco Acquisition Corp., an indirect wholly 
owned subsidiary of Ahold, with and into Bruno's Supermarkets. Bruno's 
Supermarkets will continue as the surviving corporation. The value of 
the transaction is approximately $500 million.

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 one-stop shopping for food and 
grocery products. Supermarkets 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 an extensive inventory of 
those SKUs in a variety of brand names and sizes. In order to 
accommodate the large number of nonfood products necessary for one-stop 
shopping, supermarkets are large stores that typically have at least 
10,000 square feet of selling space.
    Supermarkets compete primarily with other supermarkets that provide 
one-stop shopping for food and grocery products. Supermarkets base 
their food and grocery prices primarily on the prices of food and 
grocery products sold at nearby supermarkets. 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, military commissaries, 
and mass merchants, do not effectively constrain prices at 
supermarkets. The retail format and variety of items sold at these 
other stores are significantly different from that of supermarkets. 
None of these other retailers offer a sufficient quantity and variety 
of products to enable consumers to one-stop shop for food and grocery 
products.
    The draft complaint alleges that the relevant sections of the 
country (i.e., the geographic markets) in which to analyze the 
acquisition are the areas in or near the towns of Milledgeville and 
Sandersville, Georgia. Ahold and Bruno's are direct competitors in both 
of

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the relevant markets. The draft complaint alleges that the post-merger 
markets would each be highly concentrated, whether measured by the 
Herfindahl-Hirschman Index (commonly referred to as ``HHI'') or four-
firm concentration ratios. The acquisition would substantially increase 
concentration in each market. The post-acquisition HHI in each of the 
geographic markets would be above 5400.
    The draft complaint further alleges that entry would not be timely, 
likely, or sufficient to prevent anticompetitive effects in the 
relevant geographic markets.
    The draft complaint also alleges that Ahold's acquisition of all of 
the outstanding voting securities of Bruno's, if consummated, may 
substantially lessen competition in the relevant line of commerce in 
the relevant 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 owned or controlled by Ahold and supermarkets 
owned and controlled by Bruno's; by increasing the likelihood that 
Ahold 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 increases 
the likelihood that the prices of food, groceries or services will 
increase, and that the quality and selection of food, groceries or 
services will decrease, in the geographic markets alleged in the 
complaint.

IV. The Terms of the Agreement Containing Consent Orders

    The Agreement Containing Consent Orders (``proposed consent 
order'') will remedy the Commission's competitive concerns about the 
proposed acquisition. Under the terms of the proposed consent order, 
Ahold must divest two BI-LO supermarkets, one in Milledgeville and one 
in Sandersville, Georgia. In each community, Ahold owns only one 
supermarket. Both of the divestitures are to experienced up-front 
buyers who would be new entrants in the relevant geographic markets and 
who the Commission has pre-evaluated for competitive and financial 
viability. The Commission's evaluation process consisted of analyzing 
the financial condition of the proposed acquirers and the locations of 
their current supermarkets to ensure that divestitures to them would 
not increase concentration or decrease competition in the relevant 
markets and to determine that these purchasers are well qualified to 
operate the divested stores.
    In Milledgeville, Ahold will sell its BI-LO to The Kroger Co. 
(``Kroger''), which is headquartered in Cincinnati, Ohio. Kroger 
operates supermarkets in southeastern Georgia and throughout the United 
States. Ahold will sell its BI-LO in Sandersville to Winn-Dixie Stores, 
Inc. (``Winn-Dixie''), headquartered in Jacksonville, Florida. Winn-
Dixie also operates supermarkets in southeastern Georgia and throughout 
the U.S.
    Paragraph II.A. of the proposed consent order requires that the 
divestitures must occur no later than 10 business days after the merger 
is consummated. However, if Ahold consummates the divestitures to 
Kroger and Winn-Dixie during the public comment period, and if, at the 
time the Commission decides to make the order final, the Commission 
notifies Ahold that Kroger or Winn-Dixie is not an acceptable acquirer 
or that the asset purchase agreement with Kroger or Winn-Dixie is not 
an acceptable manner of divestiture, then Ahold must immediately 
rescind the transaction in question and divest those assets to another 
buyer within three months of the date the order becomes final. At that 
time, Ahold must divest those assets only to an acquirer that receives 
the prior approval of the Commission and only in a manner that receives 
the prior approval of the Commission. In the event that any Commission-
approved buyer is unable to take or keep possession of any of the 
supermarkets identified for divestiture the Commission may appoint a 
trustee with the power to divest any assets that have not been divested 
to satisfy the requirements of the proposed consent order.
    The proposed consent order also enables the Commission to appoint a 
trustee to divest any supermarkets or sites identified in the order 
that Ahold has not divested to satisfy the requirements of the proposed 
consent order. In addition, the proposed order enables the Commission 
to seek civil penalties against Ahold for non-compliance with the 
proposed consent order.
    The proposed consent also requires Proposed Respondents to maintain 
the viability, marketability and competitiveness of the supermarkets 
identified for divestitures. Among other requirements related to 
maintaining operations at these supermarkets, the proposed consent 
order also specifically requires the Proposed Respondents to: (1) 
Maintain the viability, competitiveness and marketability of the assets 
to be divested; (2) not cause the wasting or deterioration of the 
assets to be divested; (3) not sell, transfer, encumber, or otherwise 
impair their marketability or viability; (4) maintain the supermarkets 
consistent with past practices; (5) use best efforts to preserve 
existing relationships with suppliers, customers, and employees; and 
(6) keep the supermarkets open for business and maintain the inventory 
at levels consistent with past practices.
    The proposed consent order also prohibits Ahold from acquiring, 
without providing the Commission with prior notice, any supermarkets, 
or any interest in any supermarkets, located in the counties that 
include Milledgeville and Sandersville, Georgia for ten years. These 
are the areas from which the supermarkets to be divested draw 
customers. The provisions regarding prior notice are consistent with 
the terms used in prior Orders. The proposed consent order does not, 
however, restrict the Proposed Respondents from constructing new 
supermarkets in the above areas; nor does it restrict the Proposed 
Respondents from leasing facilities not operated as supermarkets within 
the previous six months.
    The proposed consent also prohibits Ahold, for a period of ten 
years, from entering into or enforcing any agreement that restricts the 
ability of any person acquiring any location used as a supermarket, or 
interest in any location used as a supermarket on or after January 1, 
2001, to operate a supermarket at that site if that site was formerly 
owned or operated by Ahold or Bruno's in any of the above areas. In 
addition, the Proposed Respondents are prohibited from removing 
fixtures or equipment from a store or property owned or leased by Ahold 
or Bruno's in Sandersville or Milledgeville, Georgia, that is no longer 
operated as a supermarket, except (1) prior to a sale, sublease, 
assignment, or change in occupancy or (2) to relocate such fixtures or 
equipment in the ordinary course of business to any other supermarket 
owned or operated by the Proposed Respondents.
    The Proposed Respondents are required to file compliance reports 
with the Commission, the first of which is due within thirty days of 
the date on which Proposed Respondents signed the proposed consent, and 
every thirty days thereafter until the divestitures are completed, and 
annually for ten 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

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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, including the proposed 
sale of supermarkets to Kroger and Winn-Dixie, in 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. 01-31338 Filed 12-19-01; 8:45 am]
BILLING CODE 6750-01-P