FTC Accepts Ahold/Giant Settlement

The Federal Trade Commission today announced that it had accepted a proposed settlement with Koninklijke Ahold nv and Giant Food Inc., which will keep supermarket prices competitive in eight communities in Maryland and Pennsylvania. The agreement would settle FTC charges that Ahold's acquisition of Giant would violate antitrust laws and harm consumers by reducing competition, raising prices or reducing quality and selection at supermarkets in the affected markets. The agreement would require Ahold to divest 10 supermarkets in eight geographic markets where Ahold and Giant directly compete or would be competing but for the merger. Ahold has agreed to divest the 10 supermarkets to five different upfront buyers.

"If this merger had been approved as proposed, consumers in these communities could have been faced with higher prices for their groceries," said William J. Baer, Director of the FTC's Bureau of Competition. "This settlement ensures that prices remain competitive and that consumers continue to enjoy good quality and choice. The Commission's goal when it mandates the selling of stores is to maintain competition and to ensure speedy divestiture by identifying the buyers and requiring that the stores be sold in a timely fashion."

Ahold, a Dutch firm, is the seventh largest supermarket firm in the United States, with 822 stores in 14 states. Ahold had $14.29 billion in U.S. revenues in the fiscal year that ended December 1997. The acquisition of Giant would make Ahold the fifth largest supermarket firm in the United States. Ahold's supermarkets that compete directly against Giant's supermarkets in the affected areas are part of Ahold USA, Inc.'s Giant-Carlisle division, which operates stores under the "Martin's" trade name in Maryland and under the "Giant" trade name in Pennsylvania.

Giant is headquartered in Landover, Maryland, and is the 15th largest supermarket chain in the United States and one of the nation's premier regional supermarket chains. Giant operates 179 supermarkets and three free-standing drug stores in Virginia, Maryland, Delaware, New Jersey, Pennsylvania, and the District of Columbia. Giant operates supermarkets under the "Giant" trade name in Virginia, Maryland and the District of Columbia, and under the "Super G" trade name in Delaware, New Jersey and Pennsylvania. Giant had $4.23 billion in total sales for the fiscal year that ended in February 1998.

According to the FTC complaint outlining the charges, Ahold and Giant are direct competitors in and near Bel Air, Eldersburg, Frederick, and Westminster, Maryland, and Norristown, Warminster, and Yardley, Pennsylvania. But for the acquisition, Ahold and Giant would become direct competitors in the Hilltown, Pennsylvania, market, the FTC said. Therefore, the complaint states, Ahold's proposed acquisition of Giant may substantially lessen competition by eliminating direct competition; by eliminating actual potential competition; by increasing the likelihood that Ahold will unilaterally exercise market power; and by increasing the likelihood of collusion among the remaining supermarket firms, the complaint states. Each of these effects increases the likelihood that the prices of food, groceries or services will increase and the quality and selection of food, groceries or services will decrease in these communities, the Commission said.

The complaint also states that entry is difficult and would not be timely, likely, or sufficient to prevent anticompetitive effects in the relevant geographic markets.

The proposed consent agreement would require the following 10 supermarkets to be divested:

• Ahold's "Martin's Food Market," located at 550 West McPhail Road, Bel Air, Md., to Fleming Companies, Inc. (the second largest supermarket wholesaler in the United States);

• Ahold's "Martin's Food Market," located at 66 Waverly Drive in the Frederick Towne Mall Shopping Center, Frederick, Md., to Frederick County Foods LLC (an independent operator affiliated with Supervalu Inc., the largest wholesaler to supermarkets and the 13th largest retail operator of supermarkets in the United States);

• Ahold's "Martin's Food Market," located at 1305 West 7th Street in the Frederick Shopping Center, Frederick, Md., to Frederick County Foods;

• Ahold's "Martin's Food Market," located at 551 Jermor Lane, Westminster, Md., to Richfood Holdings, Inc.'s Food-A-Rama division (a wholly-owned subsidiary that operates "Metro" supermarkets based in Baltimore);

• Giant, located at 1313 Londontowne Boulevard in the Londontowne Square Shopping Center, Eldersburg, Md., to Safeway, Inc. (the second largest supermarket chain in the U.S.);

• Giant's "Super G," located at 1601 Big Oak Road in the Oxford Oaks Shopping Center, Lower Makefield Township, Pa., to Supervalu;

• Giant's "Super G," located at 942 West Street Road in the Towne Square Shopping Center, Warminster, Pa., to Supervalu;

• Giant's "Super G," located at 1591 Bethlehem Pike in the Hilltown Crossings Shopping Center, Hilltown Township, Pa., to Supervalu;

• Giant's "Super G," located at 2775 West Main Street in the Park-Ridge Shopping Center, Lower Providence Township, Pa., to Supervalu;

• Giant's "Super G," located at 55 Germantown Pike in the Norriton Square Shopping Center, East Norriton Township, Pa., to Supervalu.

Under the terms of the proposed consent order, Ahold and Giant would have to divest the supermarkets within 20 days after Ahold acquires Giant or four months after the companies signed the proposed consent order, whichever is earlier. The proposed agreement also would require Ahold to rescind any divestiture for which the Commission decided to reject the upfront buyer. The agreements also contain provisions that apply only to the eight geographic markets where there are divestitures: Ahold must provide prior notice to the Commission if it desires to acquire additional supermarkets; it cannot enforce agreements, effective since January 1998, that restrict anyone from operating a supermarket; and it cannot remove any fixtures or store equipment from a supermarket that is no longer in operation, except prior to a sale or sublease or to relocate those fixtures in the ordinary course of business to any other supermarket owned or operated by Ahold.

Ahold and Giant also would have to maintain the marketability and viability of all 10 supermarkets pending divestiture.

The Commission vote to accept 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, 6th Street and 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 agreement and the analysis of the proposed agreement to aid public comment are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. 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. 9810254)