[Federal Register Volume 77, Number 121 (Friday, June 22, 2012)]
[Notices]
[Pages 37674-37677]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-15308]


=======================================================================
-----------------------------------------------------------------------

FEDERAL TRADE COMMISSION

[File No. 121 0055]


Koninklijke Ahold N.V./Safeway, Inc.; Analysis of Agreement 
Containing Consent Orders To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

-----------------------------------------------------------------------

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 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 July 16, 2012.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Ahold, File No. 121 
0055'' on your comment, and file your comment online at https://ftcpublic.commentworks.com/ftc/aholdconsent, by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, mail or deliver your comment to the following address: 
Federal Trade Commission, Office of the Secretary, Room H-113 (Annex 
D), 600 Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Jill M. Frumin (202-326-2758), FTC, 
Bureau of Competition, 600 Pennsylvania Avenue NW., Washington, DC 
20580.

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 the 
Commission 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 June 15, 2012), on the World Wide Web, at http://www.ftc.gov/os/actions.shtm. 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.
    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or

[[Page 37675]]

before July 16, 2012. Write ``Ahold, File No. 121 0055'' on your 
comment. Your comment--including your name and your state--will be 
placed on the public record of this proceeding, including, to the 
extent practicable, on the public Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of discretion, the 
Commission tries to remove individuals' home contact information from 
comments before placing them on the Commission Web site.
    Because your comment will be made public, you are solely 
responsible for making sure that your comment does not include any 
sensitive personal information, like anyone's Social Security number, 
date of birth, driver's license number or other state identification 
number or foreign country equivalent, passport number, financial 
account number, or credit or debit card number. You are also solely 
responsible for making sure that your comment does not include any 
sensitive health information, like medical records or other 
individually identifiable health information. In addition, do not 
include any ``[t]rade secret or any commercial or financial information 
which is obtained from any person and which is privileged or 
confidential,'' as provided in Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2). In particular, do 
not include competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    If you want the Commission to give your comment confidential 
treatment, you must file it in paper form, with a request for 
confidential treatment, and you have to follow the procedure explained 
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept 
confidential only if the FTC General Counsel, in his or her sole 
discretion, grants your request in accordance with the law and the 
public interest.
---------------------------------------------------------------------------

    \1\ In particular, the written request for confidential 
treatment that accompanies the comment must include the factual and 
legal basis for the request, and must identify the specific portions 
of the comment to be withheld from the public record. See FTC Rule 
4.9(c), 16 CFR 4.9(c).
---------------------------------------------------------------------------

    Postal mail addressed to the Commission is subject to delay due to 
heightened security screening. As a result, we encourage you to submit 
your comments online. To make sure that the Commission considers your 
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/aholdconsent by following the instructions on the web-based form. 
If this Notice appears at http://www.regulations.gov/#!home, you also 
may file a comment through that Web site.
    If you file your comment on paper, write ``Ahold, File No. 121 
0055'' on your comment and on the envelope, and mail or deliver it to 
the following address: Federal Trade Commission, Office of the 
Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW., 
Washington, DC 20580. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Visit the Commission Web site at http://www.ftc.gov to read this 
Notice and the news release describing it. The FTC Act and other laws 
that the Commission administers permit the collection of public 
comments to consider and use in this proceeding as appropriate. The 
Commission will consider all timely and responsive public comments that 
it receives on or before July 16, 2012. You can find more information, 
including routine uses permitted by the Privacy Act, in the 
Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction and Background

    The Federal Trade Commission (``Commission'') has accepted for 
public comment, and subject to final approval, an Agreement Containing 
Consent Orders (``Consent Agreement'') from Koninklijke Ahold N.V. 
(``Ahold''), its subsidiary, Giant Food Stores, LLC (``Giant''), 
Safeway Inc. (``Safeway''), and its subsidiary (``Genuardi's'') 
(collectively ``Respondents''), that is designed to remedy the 
anticompetitive effects that otherwise would result from Ahold's 
acquisition of certain Genuardi's supermarkets owned by Safeway. The 
proposed Consent Agreement requires divestiture of the Genuardi's 
supermarket in Newtown, Pennsylvania, and its related assets to a 
Commission-approved purchaser. The proposed Consent Agreement also 
requires Ahold and Safeway to divest all related assets and real 
property necessary to ensure the buyer of the divested supermarket will 
be able to quickly and fully replicate the competition that would have 
been eliminated by the acquisition.
    The proposed Consent Agreement has been placed on the public record 
for 30 days to solicit comments from interested persons. Comments 
received during this period will become part of the public record. 
After 30 days, the Commission again will review the proposed Consent 
Agreement and comments received, and decide whether it should withdraw 
the Consent Agreement, modify it, or make it final without 
modification.
    On January 4, 2012, Ahold and Safeway executed an agreement whereby 
Ahold would acquire 16 of the Genuardi's supermarkets from Safeway. The 
Commission's Complaint alleges that the proposed acquisition, if 
consummated, would violate 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 removing an actual, direct, and substantial 
supermarket competitor from the Newtown, Pennsylvania, geographic 
market. The proposed Consent Agreement would remedy the alleged 
violations by requiring a divestiture that will replace competition 
that otherwise would be eliminated in this market as a result of the 
acquisition.

II. The Parties

    Ahold owns or has an interest in 2,970 supermarkets and specialty 
stores in Europe and the United States. Net sales for 2010 were $36.8 
billion, which represents a 5.7% increase over 2009. Ahold USA is 
organized into four retail divisions: Giant Carlisle, Giant Landover, 
Stop & Shop New York Metro, and Stop & Shop New England. Peapod, a 
grocery delivery service, also is included within Ahold USA.
    Safeway is one of the largest food-and-drug retailers in the United 
States. It operates over 1,700 stores across the United States under a 
variety of banners, including Vons in southern California and Nevada, 
Randalls and Tom Thumb in Texas, Carrs in Alaska, Genuardi's in 
suburban Philadelphia, and Safeway throughout the rest of the country. 
There were 36 Genuardi's stores operating in Pennsylvania, New York, 
and New Jersey when Safeway purchased the chain in February 2001. 
Safeway is exiting the Philadelphia metropolitan market by selling or 
closing all 24 remaining Genuardi's markets in eastern Pennsylvania 
(Bucks, Montgomery, Delaware, and Chester counties), as well as four 
stores in New Jersey.

III. Supermarket Competition in Newtown, Pennsylvania

    Ahold's proposed acquisition of Genuardi's in Newtown presents 
antitrust concerns in the retail sale of groceries. Competition in food 
retailing depends on proximity in both retailing format and in 
geographic location. Stores with similar formats located nearby each 
other provide a greater competitive constraint on each other's pricing 
than do stores of different formats or stores located at a greater

[[Page 37676]]

distance. Giant and Genuardi's have stores in the Newtown area, and 
they have a very similar format.
    Giant and Genuardi's compete as supermarket retailers of grocery 
products. Supermarkets are full-line retail grocery stores that sell 
thousands of food and non-food products that typical families regularly 
consume at home (e.g., fresh meat and seafood, dairy products, frozen 
goods, beverages, bakery goods, dry groceries, soaps, detergents, and 
health and beauty aids) and offer these products in a variety of sizes 
and brands. Supermarkets are large stores with at least 10,000 square 
feet of selling space and 30,000 to 60,000 different items, typically 
referred to as stock-keeping units or ``SKUs.'' This broad set of 
products and services provides a ``one-stop shopping'' experience for 
consumers by enabling them to shop in a single store for all of their 
food and grocery needs. The ability to offer consumers one-stop 
shopping is a critical differentiating factor between supermarkets and 
other food retailers.
    Other types of retailers that sell food and grocery items compete 
less strongly with Giant and Genuardi's. These others include ``mom & 
pop'' stores, convenience stores, specialty food stores, ``premium 
natural and organic'' markets,\2\ mass merchants, and club stores. 
Although these types of retailers provide some level of competition to 
supermarkets, they do not have a supermarket's full complement of 
products and services, which means that if customers elect to shop at 
these retailers, they also must shop at a supermarket in order to 
satisfy their weekly grocery needs. Because of this, shoppers at one 
supermarket are more likely to respond to a price increase by switching 
to another supermarket than to choose a store with a different format, 
if both are equally convenient.\3\
---------------------------------------------------------------------------

    \2\ See FTC v. Whole Foods Mkt., Inc., 533 F.3d 869 (D.C. Cir. 
2008).
    \3\ Shoppers typically do not view these other food and grocery 
retailers as adequate substitutes for supermarkets and would be 
unlikely to switch to one of these retailers in response to a small 
but significant price increase or ``SSNIP'' by a hypothetical 
supermarket monopolist. See U.S. DOJ and FTC Horizontal Merger 
Guidelines Sec.  4.1.1 (2010).
---------------------------------------------------------------------------

    To evaluate the effects of the acquisition on market concentration 
levels, we define the product market to be the retail sale of grocery 
products in supermarkets, consistent with practice in all but one prior 
grocery retailing case settled by consent order.\4\
---------------------------------------------------------------------------

    \4\ See, e.g., Shaw's/Star Markets, Docket C-3934 (June 28, 
1999); Kroger/Fred Meyer, Docket C-3917 (January 10, 2000); 
Albertson's/American Stores, Docket C-3986 (June 22, 1999); Ahold/
Giant, Docket C-3861 (April 5, 1999); Albertson's/Buttrey, Docket C-
3838 (December 8, 1998); Jitney-Jungle Stores of America, Inc., 
Docket C-3784 (January 30, 1998). But see Wal-Mart/Supermercados 
Amigo, Docket C-4066 (November 21, 2002) (the Commission's complaint 
alleged that in Puerto Rico, club stores should be included in a 
product market that included supermarkets because club stores in 
Puerto Rico enabled consumers to purchase substantially all of their 
weekly food and grocery requirements in a single shopping visit).
---------------------------------------------------------------------------

    Customers shopping at supermarkets are motivated primarily by 
convenience and, as a result, competition for supermarkets is local in 
nature. Generally, the overwhelming majority of consumers' grocery 
shopping occurs at stores located very close to where they live. 
Location is a critical component for closeness of competition between 
supermarkets. Supermarkets are a differentiated products industry with 
location serving as one of the primary drivers of differentiation and 
competition. A supermarket tends to be in most direct competition with 
those supermarkets located closest to it. Giant and Genuardi's are 
located approximately two miles from each other in the Newtown area, 
and the supermarkets' primary trade areas overlap significantly with 
each other. Acme is the only other supermarket operating in this area. 
The next-closest supermarket is located at least twice as far away as 
the Newtown supermarkets are to each other.
    The relevant geographic market in which to measure concentration 
and analyze the competitive implications of Ahold's proposed 
acquisition of the Newtown Genuardi's is a roughly three to three-and-
a-half mile circle measured from the center of Newtown and made up of 
the U.S. census tracts surrounding this area. Specifically, it consists 
of Newtown Township, Newtown Borough, and the portion of Middletown 
Township north of the line formed by Bridgetown Pike and Langhorne 
Yardley Road in Bucks County, Pennsylvania.
    The Newtown, Pennsylvania, market for the sale of retail food and 
groceries in supermarkets is already highly concentrated, and would 
become significantly more so post-acquisition. The acquisition would 
reduce the number of supermarket competitors from three to two, 
creating a duopoly between Giant and Acme Markets. Under the Herfindal-
Hirschman Index (``HHI''), which is the standard measure of market 
concentration under the 2010 Department of Justice and Federal Trade 
Commission Merger Guidelines, an acquisition is presumed to create or 
enhance market power or facilitate its exercise if it increases the HHI 
by more than 200 points and results in a post-acquisition HHI that 
exceeds 2,500 points. Giant's proposed acquisition of the Newtown 
Genuardi's creates market concentration levels well in excess of these 
thresholds. The post-acquisition HHI is 5000-5017, representing an 
increase of between 1221-1373 from pre-acquisition levels.
    Staff's investigation and analysis demonstrate that Giant and 
Genuardi's are close competitors that compete directly for grocery 
shoppers in Newtown. Because a substantial number of consumers in 
Newtown consider Giant's and Genuardi's stores to be close substitutes, 
a post-acquisition price increase at one (or both) of Giant's stores 
would be profitable because the other Giant-owned supermarket would 
likely recoup enough of the otherwise lost volume for the price 
increase to be profitable. Absent relief, the transaction may also 
facilitate tacit or express coordination since Acme would be Giant's 
only remaining competitor in Newtown post-acquisition. Given the 
transparency of pricing and promotional practices between supermarkets 
and the fact that supermarkets ``price check'' competitors in the 
ordinary course of business, reducing the number of nearby competitors 
from three to two may facilitate collusion between the remaining 
supermarket competitors by making coordination easier to establish and 
monitor.
    New entry is unlikely to deter or counteract the likely 
anticompetitive effects of the proposed acquisition. Normally, as here, 
it takes two or more years for an entrant to secure a viable location, 
obtain the necessary permits and governmental approvals, build its 
retail establishment, and open to customers. Moreover, incumbent 
supermarkets often oppose entry efforts by competitor supermarkets, 
delaying further any potential entry into the relevant market. It is 
unlikely that entry sufficient to achieve a significant market impact 
would occur in a timely manner.

IV. The Proposed Consent Agreement

    The proposed remedy, which requires the divestiture of the 
Genuardi's store in Newtown to a Commission-approved purchaser, will be 
sufficient to restore fully the competition that otherwise would be 
eliminated in the market as a result of the acquisition.
    Respondents Ahold and Genuardi's have agreed to divest the Newtown 
Genuardi's supermarket to McCaffrey's. McCaffrey's appears to be a 
highly suitable purchaser, and is well-positioned to enter the relevant 
market and prevent the increase in market concentration and likely 
competitive harm that otherwise would have been caused by the 
acquisition.

[[Page 37677]]

    All of the current McCaffrey's supermarkets are located outside the 
relevant geographic area. Its Yardley, Pennsylvania, store is 
approximately six miles, and approximately 15 minutes driving time, 
from the Genuardi's in Newtown. The Newtown Genuardi's is outside 
McCaffrey's primary service area and vice versa.
    The proposed Order requires Respondents Ahold and Safeway to divest 
the assets of the Genuardi's to McCaffrey's no later than ten days 
following Ahold's acquisition of the 16 Genuardi's stores that are 
subject to the Asset Purchase Agreement. If McCaffrey's ultimately is 
not approved by the Commission to purchase the assets, Respondents must 
immediately rescind the divestiture and divest the Newtown Genuardi's 
assets to a buyer that receives the Commission's prior approval. The 
proposed Order contains additional provisions designed to ensure the 
adequacy of the proposed relief. For example, for a period of one year, 
the Order prohibits Respondents from interfering with the hiring of or 
employment of any employees currently working at the Newtown 
Genuardi's. Additionally, for a period of ten years, Ahold is required 
to give the Commission prior notice of plans to acquire a supermarket, 
or an interest in a supermarket, that has operated or is operating in 
Newtown, Pennsylvania.

V. Opportunity for Public Comment

    The proposed Consent Agreement has been placed on the public record 
for 30 days to solicit comments from 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 
Agreement, as well as the comments received, and will decide whether to 
modify the proposed Consent Agreement, withdraw its acceptance of the 
proposed Consent Agreement, or issue its final Consent Orders.
    The sole purpose of this Analysis is to facilitate public comment 
on the proposed Consent Agreement. This Analysis does not constitute an 
official interpretation of the proposed Consent Agreement, nor does it 
modify its terms in any way.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2012-15308 Filed 6-21-12; 8:45 am]
BILLING CODE 6750-01-P