FTC Agreement with Shaw's Supermarkets and Star Markets Preserves Supermarket Competition in Greater Boston Area

The Federal Trade Commission today announced a proposed settlement agreement with Shaw's Supermarkets, Inc. and Star Markets, Inc. The agreement would resolve FTC charges that the proposed acquisition of Star Markets by Shaw's would substantially lessen supermarket competition in the Greater Boston metropolitan area and could result in higher prices or reduced quality and selection for consumers. The proposed agreement permits the acquisition but would require Shaw's to divest 10 supermarkets -- three Shaw's supermarkets and seven Star Markets supermarkets -- in eight communities.

"Consumers in the Boston area can now be assured that they will continue to receive the benefits of competition - lower prices and good quality and selection - from supermarkets in their communities," said William J. Baer, Director of the FTC's Bureau of Competition.

Shaw's operates 126 supermarkets in Massachusetts, Connecticut, Maine, New Hampshire, Rhode Island, and Vermont, all under the "Shaw's" trade name. Shaw's is a wholly-owned subsidiary of London, England-based J Sainsbury plc. Star Markets, based in Cambridge, Massachusetts, operates 53 supermarkets in that state under the "Star Markets" and "Wild Harvest" trade names. In November 1998, J Sainsbury plc and Star Markets entered into a Stock Purchase Agreement whereby J Sainsbury, through its Shaw's subsidiary, would acquire all of the outstanding voting securities of Star Markets for approximately $490 million.

According to the FTC's complaint, Shaw's and Star Markets are direct competitors and compete against each other in and near the areas of Waltham, Quincy-Dorchester, Norwood, Milford, Salem-Lynn, Norwell, Hudson-Stow, and Saugus-Melrose-Stoneham. The complaint alleges that the effect of the acquisition, if consummated, may be to substantially lessen competition in these areas by:

• eliminating direct competition between Shaw's and Star Markets; and
• increasing the likelihood of, or facilitating, collusion or coordinated interaction.

Entry into these markets would be difficult and would not be timely, likely, or sufficient to prevent anticompetitive effects, the FTC said. The proposed acquisition, the complaint charges, could result in price increases, and decreases in the quality and selection of food, groceries or services.

The proposed settlement would resolve the FTC's antitrust concerns. Shaw's would have to divest 10 designated Shaw's or Star Markets supermarkets in eight communities. The three Shaw's stores to be divested are located in Norwood, North Quincy, and Waltham. The seven Star Markets stores to be divested are located in Milford, Norwell, North Lynn, Swampscott, Stowe, Sudbury, and Saugus. The Shaw's stores in Waltham, North Quincy, and Norwood; and the Star Markets stores in Milford and Norwell, will be divested to Victory Super Markets, based in Leominster, Massachusetts. The Star Markets stores in North Lynn and Swampscott will be divested to Foodmaster Super Markets, Inc., based in Chelsea, Massachusetts. The remaining three stores, Star's Saugus, Stowe, and Sudbury stores, would be divested within three months after the date the consent agreement was signed.

Under the terms of the proposed consent order, Shaw's would have to divest the supermarkets to be sold to Victory no later than 20 days after Star Markets becomes a wholly-owned subsidiary of Shaw's or four months from the date the consent order was signed, whichever is earlier. The divestitures to Foodmaster must be made within ten days after the order becomes final. Shaw's and Star Markets would have to maintain the marketability and viability of all supermarkets pending their divestiture.

For a period of ten years from the date the proposed consent order becomes final, Shaw's would be required to provide notice to the Commission prior to acquiring supermarket assets in or near the communities of the stores required to be divested. For a period of ten years, the proposed order also would prohibit Shaw's from entering into or enforcing any agreement in those same areas if that agreement restricts anyone who acquires an interest in a supermarket from operating a supermarket at that site.

The proposed consent agreement also contains a number of recordkeeping and reporting requirements designed to assist the FTC in monitoring compliance with the terms of the order.

The Commission vote to announce the proposed consent agreement for public comment was 4-0.

A summary of the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, 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.

Copies of the complaint, proposed consent order, and an analysis of the proposed consent order to aid public comment are available from the FTC's web site: http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 202-326-2502. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 991 0075)