Schnucks to Pay $3 Million, Divest Two Additional Stores to Settle FTC Charges of Running Down Supermarkets Before Divesting

The Federal Trade Commission today announced the settlement it has reached with Schnuck Markets, Inc., of St. Louis, Missouri, under which Schnucks has agreed to pay a $3 million civil penalty -- one of the largest ever obtained for violation of an FTC order -- and to divest to supermarket operators two currently closed supermarket properties. The agreement with the FTC will settle charges that the supermarket chain allowed 24 stores that it was required to divest under a 1995 settlement with the FTC to become dirty, damaged, understaffed and understocked before completing the required divestitures, thereby undermining the intent of the 1995 settlement to maintain supermarket competition in the area. Schnucks also issued check- out coupons stating that the stores to be divested would close, and directing the consumers to stores that would remain under Schnucks’ control, the FTC will allege. As a result, the FTC will charge, sales at the 24 stores dropped significantly.

"The purpose of the 1995 order was to maintain the level of competition among supermarkets in the St. Louis area, so that consumers could continue to benefit from lower prices and better products and service that a contest for their shopping dollars always brings," said William J. Baer, Director of the FTC’s Bureau of Competition. "We were prepared to prove in court that Schnucks allowed these stores to deteriorate badly before they were sold and that supermarket customers in St. Louis suffered as a result. The settlement order accepted by the Commission shows that the FTC may insist on substantial civil penalties, as well as additional remedies, for violations of its orders."

The store properties to be divested under the settlement announced today are located at 6155 S. Grand Avenue in St. Louis, and at the Ferguson Square Shopping Center at 49 North Florissant Road in Ferguson. The divestitures will have to be completed within six months to Commission-approved buyers who would reopen the properties as supermarkets and operate them in competition with Schnucks. If the divestitures have not been completed on time, the Commission may appoint a trustee to follow through.

The 1995 consent order that Schnucks allegedly violated settled FTC charges in connec tion with Schnucks’ acquisition of supermarkets owned by National Holdings, Inc. The FTC had alleged in that case that the acquisition would substantially reduce supermarket competition in the St. Louis metropolitan area. Schnucks agreed under the order to divest 24 specifically-named stores -- 18 National stores and six Schnucks stores -- by June 1996, and to maintain them in viable, competitive and marketable condition until the divestitures were completed. Schnucks divested 23 of the stores to Family Company of America in March 1996, and the 24th store to Wild Oats Markets, Inc. in May 1996.

Rather than maintaining the stores to be divested as required by the order, however, the government complaint will allege that Schnucks:

• inadequately stocked groceries and advertised merchandise;
• closed or reduced the operations of various departments, including bakery, deli, seafood, floral and video departments;
• failed to perform routine cleaning, repair and maintenance;
• depleted the inventory of the stores and stocked unsalable merchandise;
• de-listed the telephone numbers;
• copied the pharmacy records of the stores to be divested; and
• issued check-out coupons stating that the stores would close and directing consumers to alternative Schnucks locations.

The complaint also will allege that Schnucks did not attempt to improve sales at the stores to be divested.

In addition, the government will charge Schnucks with failing to divest all the required assets within the allotted time. Specifically, the complaint will allege, Schnucks did not divest the real estate underlying four of the stores it divested to Family Company of America until October 1996.

The complaint and proposed stipulation will be filed in U.S. District Court for the Eastern District of Missouri by FTC attorneys. The Commission vote to notify the Department of Justice of its intention to file the settlement was 5-0.

NOTE: This stipulation is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Settlements have the force of law when signed by the judge.

Copies of the complaint, the stipulation and documents associated with the FTC’s 1995 case against Schnucks will be available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202- 326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC Docket No. C-3585; File No. 961 0048)