Preserving Competition, FTC Consent Order Allows Koninklijke Ahold NV Purchase of Bruno's Supermarkets, Inc.

Under the terms of a proposed consent order approved by the Federal Trade Commission and announced today, Koninklijke Ahold NV (Ahold), a global food service distributor and retailer headquartered in the Netherlands, would be permitted to acquire all of the outstanding voting stock of Bruno's Supermarkets, Inc. (Bruno's), a large supermarket chain in the southeastern United States, for approximately $500 million, while agreeing to remedy the likely anticompetitive effects of the transaction as proposed. Prior to completing the stock purchase, Ahold would be required to divest two of its BI-LO supermarkets in Georgia, one in Milledgeville and one in Sandersville. Under the terms of the proposed order, Ahold will sell its Milledgeville store to The Kroger Co. (Kroger) and its Sandersville store to Winn-Dixie Stores, Inc. (Winn-Dixie). In addition, Ahold would be required to ensure that both stores remain viable prior to their sale and to sell the supermarkets and related assets within 10 business days after consummating its merger with Bruno's.

"The merger would reduce the number of major supermarket competitors in Milledgeville and Sandersville, which already have high concentration," said Joe Simons, Director of the FTC's Bureau of Competition. "The consent order approved by the Commission ensures that competition will be maintained in these two areas."

The Proposed Transaction

On September 4, 2001, Ahold and Bruno's signed an agreement under which the former would purchase all of the latter's voting securities through the merger of New Bronco Acquisition Corp., an indirect wholly owned subsidiary of Ahold, with Bruno's. Under the terms of the transaction, Bruno's will continue as the surviving corporation.

Bruno's Supermarkets currently operates 169 supermarkets in Alabama (123 stores), Georgia (25), Florida (16), and Mississippi (2) under the trade names Bruno's Fine Foods, Food World, Food Max, Food Fair, and Fresh Value. In addition, it operates 13 liquor stores and two gas stations. Ahold operates 1,300 U.S. food stores through its Ahold U.S.A., Inc. subsidiary under the trade names Giant, Stop & Shop, Tops, and BI-LO. In the southeastern United States, it owns and operates 294 BI-LO supermarkets, as well as a number of Golden Gallon convenience stores.

The Commission's Complaint

According to the Commission's complaint, Ahold's purchase of Bruno's outstanding voting securities would violate Section 7 of the Clayton Act, as amended, and Section 5 of the FTC Act, as amended, by substantially reducing competition in the retail sale of food and grocery items in supermarkets in or near the towns of Milledgeville and Sandersville, Georgia, through the elimination of direct competition between supermarkets owned and controlled by Ahold and those owned or controlled by Bruno's.

In addition, the complaint contends that the proposed acquisition would increase the likelihood that Ahold will unilaterally exercise market power in each of the relevant markets and also increase the likelihood of, or facilitate, collusion or coordinated interaction among the remaining supermarket firms in each market. Each of these effects, the Commission contends, 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 defined by the areas in and around the two towns. The complaint further alleges that entry by a new competitor within these geographic markets would not be timely, likely, or sufficient to prevent the anticompetitive effects of the transaction as proposed.

Terms of the Consent Order

Under the terms of the proposed consent order, Ahold would be required to divest two BI-LO supermarkets, one in Milledgeville and one in Sandersville, Georgia, within 10 business days of its merger with Bruno's. In each community, Ahold owns only one supermarket. Both stores would be sold to up-front buyers approved by the Commission, with the Milledgeville BI-LO divested to Kroger and the Sandersville BI-LO divested to Winn-Dixie. Both Kroger and Winn-Dixie currently operate supermarkets in the southeastern United States and, according to the Commission, are well-qualified to maintain the assets as competitive and financially viable following their purchase from Ahold.

If Ahold consummates the divestitures during the public comment period regarding the consent agreement with the Commission, and if, at the time the FTC decides to make the order final, it notifies Ahold that Kroger or Winn-Dixie is not an acceptable acquirer (or that the relevant manner of divestiture is not acceptable), Ahold would be required to immediately rescind the transaction in question and divest the assets to another buyer within three months of the date the order becomes final. The new acquirer selected by Ahold would be subject to prior FTC approval, as would the manner of divestiture. If a Commission-approved buyer is unable to take or keep possession of any of the supermarkets identified for divestiture, the FTC could appoint a trustee to satisfy the order's divestiture requirements. A trustee could also be appointed to divest specific assets if Ahold does not complete the divestitures required by the order. In such a case, the order would also allow the Commission to seek civil penalties against Ahold for not complying with its terms.

In addition, the proposed order contains an Order to Maintain Assets, under which Ahold would be required to maintain the stores to be sold as viable, competitive, and marketable pending their divestiture to Kroger and Winn-Dixie. Ahold also would be prohibited from acquiring any supermarkets (or supermarket interests) in the counties that include Milledgeville and Sandersville for 10 years, without first providing prior notice to the FTC. Ahold may, however, build new supermarkets in these areas or lease facilities not operated as supermarkets within the previous six months.

For 10 years after entering into the agreement, however, Ahold would be prohibited from entering into or enforcing any agreement that restricts the ability of any person acquiring any location used as a supermarket (or interest thereof) to operate a supermarket at that site if the site was formerly owned or operated by Ahold or Bruno's in the defined counties. This and other more-detailed terms of the order are designed to allow new entry by competitors to occur with a few impediments as possible.

Finally, the proposed order contains reporting requirements for 10 years designed to ensure Ahold's compliance with its terms.

The Commission vote to accept the consent order and place a copy on the public record was 5-0. The order will be subject to public comment for 30 days, until January 7, 2002, after which the Commission will decide whether to make it final. Comments should be sent to: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, D.C. 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.