FTC Agreement with Albertson's and American Stores Requires Selling of 144 Stores in Order to Preserve Supermarket Competition in California, Nevada and New Mexico:

Albertson's, Inc. and American Stores Company have agreed to sell 144 supermarkets and five supermarket sites in order to resolve Federal Trade Commission charges that Albertston's proposed acquisition of American Stores would substantially lessen supermarket competition in California, Nevada and New Mexico. The proposed acquisition, the FTC charged, could result in higher prices or reduced quality and selection for consumers. The divestiture agreement, the agency said, is the largest retail divestiture ever required by the Commission. Under the consent agreement, which was announced today for public comment, the companies would have to sell 104 Albertston's supermarkets, 40 American Stores' supermarkets, three Albertson's sites, and two American Stores' sites in 57 local markets.

"Today's joint action by the FTC and three state Attorneys General will ensure that consumers in California, Nevada and New Mexico 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. "The agreement with Albertson's and American Stores, the largest retail divestiture the Commission has ever obtained, will aid millions of consumers. The agreement also ensures that there will be a speedy divestiture of all 144 stores to strong, capable acquirers, so that there is no interruption in service to consumers."

The Attorneys General of California, Nevada and New Mexico participated in the investigation and consent negotiations, and are today commencing lawsuits and filing consent decrees in federal District Courts in their respective states.

Headquartered in Boise, Idaho, Albertson's, the nation's fourth largest supermarket chain, operates approximately 994 supermarkets in 25 Western, Midwestern, and Southern states. Albertson's supermarkets operate primarily under the "Albertson's," "Max Grocery Warehouse," "Seessel's" and "Smitty's" trade names. Albertson's competes with American Stores in California, Nevada and New Mexico. Albertson's operates 177 supermarkets in California, 31 supermarkets in Nevada, and 19 supermarkets in New Mexico. After the merger with American Stores, Albertson's will become the second largest supermarket chain in the United States.

American Stores, the second largest supermarket chain in the United States, is headquartered in Salt Lake City, Utah, and operates approximately 802 supermarkets and 773 stand-alone pharmacies in 31 states. American Stores operates supermarkets, including combination supermarket and pharmacies, in 12 Western, Midwestern and Eastern states under the "Lucky," "Lucky Sav-On," "SuperSaver," "Acme Markets," and "Jewel Food Stores" trade names. American Stores operates approximately 411 supermarkets in California, 25 supermarkets in Nevada, and 11 supermarkets in New Mexico.

According to the FTC, the proposed acquisition of American Stores by Albertson's raises competitive issues in 57 markets in California, Nevada and New Mexico. (See attached List A.) These 57 markets contain: 132 of the 177 (75 percent) of the Albertson's supermarkets and 228 of the 411 (55 percent ) American Stores in California; 19 of the 31 (63 percent) Albertson's supermarkets and 24 of the 25 (96 percent) American Stores in Nevada; and 10 of the 22 (45 percent) Albertson's supermarkets and 10 of the 11 (91 percent) American Stores in New Mexico. Over half of the parties' supermarkets in California, New Mexico and Nevada are direct competitors.

Each of the local markets at issue would be highly concentrated after this merger, as defined by the Commission's Merger Guidelines. The FTC's complaint charges that by eliminating direct competition and actual potential competition in the relevant markets, Albertson's proposed acquisition of American Stores could result in price increases, and decreases in the quality and selection of food, groceries or services. The complaint outlining the charges alleges that entry in these markets is difficult and would not be timely, likely, or sufficient to prevent anticompetitive effects.

The proposed consent order would remedy the Commission's concerns by requiring the divestiture of 144 supermarkets and five supermarket sites (see attached List B) in the relevant markets to five different buyers. The companies would have to divest 104 Albertson's supermarkets and three Albertson's sites, and 40 American Stores' supermarkets and two American Stores' sites. The 104 Albertson's supermarkets consist of 96 stores that operate under the "Albertson's" trade name and eight stores that operate under the "Max Grocery Warehouse" trade name. The 40 American Stores supermarkets consist of 36 stores that operate under the "Lucky" trade name, three stores that operate under the "SuperSaver" trade name, and one store that operates under the "Lucky Sav-On" trade name.

The five upfront buyers, the number of stores and land sites each is acquiring are as follows: 27 stores and one land site in Nevada and New Mexico to Raley's; 40 stores and two land sites to Ralphs (a Kroger/Fred Meyer subsidiary), primarily in Northern California; 43 stores and one land site to Stater Bros. in Southern California; 31 stores to Certified Grocers of California, primarily in Southern California; and three stores and one land site to Vons (a Safeway subsidiary).

Certified Grocers is a food wholesaler that does not operate many corporate-owned stores. Certified intends to transfer most of these stores to experienced operators. The Commission proposes to pre-approve specific buyers for 27 of the stores to be acquired by Certified Grocers. The proposed consent order would require Certified Grocers to divest at least 20 of the stores within 90 days from the time the order becomes final. According to the proposed order, Certified Grocers must seek prior approval from the Commission to divest, within three years of the final order, any supermarkets to any firms not pre-approved in the proposed consent order to acquire specific stores. The pre-approved independent buyers that Certified Grocers plans to sell identified supermarkets to are listed in attached List B.

The proposed order would require that the divestitures occur no later than the earlier of (i) 30 to 120 days from when the Commission accepts the agreement for public comment, depending on the business plans of the specific upfront buyer, or (ii) four months after the Commission accepts the agreement for public comment. The amount of time required for the divestitures varies with each of the acquirers based on the acquirer's need to convert large numbers of new stores into its operations. The proposed order also would require Albertson's to immediately rescind any transaction that the Commission finds not acceptable at the time the agency decides to make the proposed order final.

Albertson's and American Stores also would have to maintain the marketability and viability of all supermarkets pending divestiture, and an independent auditor trustee shall be appointed to ensure that the parties maintain these stores.

For a period of 10 years from the date the proposed consent order becomes final, the companies would be required to provide notice to the Commission prior to acquiring supermarket assets located in Alameda, Amador, Contra Costa, Kern, Los Angeles, Monterey, Napa, Nevada, Orange, Placer, Riverside, Sacramento, San Bernardino, San Diego, San Luis Obispo, Santa Barbara, Santa Cruz, Solano, Sonoma, Ventura, or Yolo counties in California; Clark County in Nevada; or Bernalillo, Dona Ana, Sandoval, or Santa Fe counties in New Mexico. For a period of 10 years, the proposed consent order also would prohibit the companies from entering into or enforcing any agreement, in those same counties, that restricts anyone that acquires an interest in a supermarket to operate a supermarket at that site if such supermarket was formerly owned or operated by Albertson's or American Stores.

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, 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 proposed complaint, the proposed consent order and the analysis 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, 600 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. 981 0339)