[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]
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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.
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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 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.
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\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).
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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\
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\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).
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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\
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\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).
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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