Albertson’s, Inc.

9810134
B248941

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS:: Robert Pitofsky, Chairman; Sheila F. Anthony; Mozelle W. Thompson; Orson Swindle

In the Matter of

ALBERTSON’S, INC., a corporation;
LOCOMOTIVE ACQUISITION CORPORATION, a corporation;
BUTTREY FOOD AND DRUG STORE COMPANY, a corporation; and
FS EQUITY PARTNERS II, L.P., a limited partnership.

Docket No. C-3838

Decision and Order

The Federal Trade Commission ("Commission") having initiated an investigation of the proposed acquisition of Buttrey Food and Drug Store Company ("Buttrey"), a majority of which is owned by FS Equity Partners II, L.P. ("FS Equity Partners"), by Albertson’s, Inc. ("Albertson’s") and Locomotive Acquisition Corporation ("Locomotive") (collectively, "Respondents"), and Respondents having been furnished with a copy of a draft complaint that the Bureau of Competition proposed to present to the Commission for its consideration, and which, if issued by the Commission, would charge Respondents with violations of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, and Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18; and

Respondents, their attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by Respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by Respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission's Rules; and

The Commission having thereafter considered the matter and having determined that it had reason to believe that the Respondents have violated the said Acts, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following Order:

Respondent Albertson’s, Inc. is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at 250 East Parkcenter Boulevard, Boise, Idaho 83726.
Respondent Locomotive Acquisition Corporation is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at c/o Albertson’s, Inc., 250 East Parkcenter Boulevard, Boise, Idaho 83726.
Respondent Buttrey Food and Drug Store Company is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at 601 6th Street, S.W., Great Falls, Montana 59404.
Respondent FS Equity Partners II, L.P. is a limited partnership organized, existing, and doing business under and by virtue of the laws of the State of California, with its office and principal place of business located at 11100 Santa Monica Boulevard, Suite 1900, Los Angeles, California 90025.
The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the Respondents, and the proceeding is in the public interest.

ORDER

IT IS ORDERED that, as used in this Order, the following definitions shall apply:

A. "Albertson’s" means Albertson’s, Inc., its directors, officers, employees, agents, representatives, predecessors, successors, and assigns; its subsidiaries, divisions, groups and affiliates controlled by Albertson’s, and the respective directors, officers, employees, agents, representatives, successors, and assigns of each. Albertson’s includes Locomotive and, after consummation of the Acquisition, includes Buttrey.

B. "Locomotive" means Locomotive Acquisition Corporation, its directors, officers, employees, agents, representatives, predecessors, successors, and assigns; its subsidiaries, divisions, groups and affiliates controlled by Locomotive, and the respective directors, officers, employees, agents, representatives, successors, and assigns of each. Locomotive is a wholly- owned subsidiary of Albertson’s.

C. "Buttrey" means Buttrey Food and Drug Store Company, its directors, officers, employees, agents, representatives, predecessors, successors, and assigns; its subsidiaries, divisions, groups and affiliates controlled by Buttrey, and the respective directors, officers, employees, agents, representatives, successors, and assigns of each.

D. "FS Equity Partners" means FS Equity Partners II, L.P., its predecessors, successors, assigns, subsidiaries, divisions, groups and affiliates controlled by FS Equity Partners and their respective general partners, officers, employees, agents, representatives, and the respective successors and assigns of each. FS Equity Partners owns a majority of the voting securities of Buttrey.

E. "Respondents" means Albertson’s, Locomotive, Buttrey, and FS Equity Partners, individually and collectively.

F. "Commission" means the Federal Trade Commission.

G. "Acquisition" means Albertson’s and Locomotive’s proposed acquisition of all of the outstanding voting securities of and merger with Buttrey pursuant to the Agreement and Plan of Merger dated January 19, 1998.

H. "Assets To Be Divested" means the Supermarkets identified in Schedule A and Schedule B of this Order and all assets, leases, properties, permits (to the extent transferable), customer lists, businesses and goodwill, tangible and intangible, related to or utilized in the Supermarket business operated at those locations, but shall not include those assets consisting of or pertaining to any of the Respondents' trade marks, trade dress, service marks, or trade names.

I. "Supermarket" means a full-line retail grocery store that carries a wide variety of food and grocery items in particular product categories, including bread and dairy products; refrigerated and frozen food and beverage products; fresh and prepared meats and poultry; produce, including fresh fruits and vegetables; shelf-stable food and beverage products, including canned and other types of packaged products; staple foodstuffs, which may include salt, sugar, flour, sauces, spices, coffee, and tea; and other grocery products, including nonfood items such as soaps, detergents, paper goods, other household products, and health and beauty aids.

J. "Smith’s" means Smith’s Food & Drug Centers, Inc., a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its principal place of business located at 1550 South Redwood Road, Salt Lake City, Utah 84104. Smith’s is a wholly-owned subsidiary of Fred Meyer, Inc.

K. "Supervalu" means Supervalu Inc., a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its principal place of business located at 11840 Valley View Road, Eden Prairie, Minnesota 55344; and Supervalu Holdings, Inc. a corporation organized, existing and doing business under and by virtue of the laws of the State of Missouri, with its principal place of business located at 11840 Valley View Road, Eden Prairie, Minnesota 55344. Supervalu Holdings, Inc. is a wholly-owned subsidiary of Supervalu Inc.

L. "Smith’s Agreement" means the Purchase Agreement between Smith’s and Albertson’s executed on August 10, 1998, and all subsequent amendments thereto, for the divestiture by Respondents to Smith’s of the Schedule A Assets To Be Divested.

M. "Supervalu Agreement" means the Purchase Agreement between Supervalu and Albertson’s executed on August 12, 1998, and all subsequent amendments thereto, for the divestiture by Respondents to Supervalu of the Schedule B Assets To Be Divested.

N. "Acquirer(s)" means Smith’s and Supervalu, and/or the entity or entities approved by the Commission to acquire the Assets To Be Divested pursuant to this Order, individually and collectively.

O. "Third Party Consents" means all consents from any other person, including all landlords, that are necessary to effect the complete transfer to the Acquirer(s) of the assets required to be divested pursuant to this Order.

II.

IT IS FURTHER ORDERED that:

A. Respondents shall divest, absolutely and in good faith, the Schedule A Assets To Be Divested to:

1. Smith’s, in accordance with the Smith’s Agreement (which agreement shall not be construed to vary or contradict the terms of this Order or the Asset Maintenance Agreement) dated August 10, 1998, no later than

a. ten (10) days after the date on which the Acquisition is consummated, or

b. four (4) months after the date Respondents signed the Agreement Containing Consent Order, whichever is earlier; or

2. an Acquirer that receives the prior approval of the Commission and only in a manner that receives the prior approval of the Commission, within three (3) months after the date on which this Order becomes final.

Respondents shall obtain all required Third Party Consents prior to the closing of the Smith’s Agreement or any other agreement pursuant to which the Schedule A Assets To Be Divested are divested to an Acquirer.

B. Respondents shall divest, absolutely and in good faith, the Schedule B Assets To Be Divested to:

1. Supervalu, in accordance with the Supervalu Agreement (which agreement shall not be construed to vary or contradict the terms of this Order or the Asset Maintenance Agreement) dated August 12, 1998, no later than

a. ten (10) days after the date on which the Acquisition is consummated, or

b. four (4) months after the date Respondents signed the Agreement Containing Consent Order, whichever is earlier; or

2. an Acquirer that receives the prior approval of the Commission and only in a manner that receives the prior approval of the Commission, within three (3) months after the date on which this Order becomes final.

Respondents shall obtain all required Third Party Consents prior to the closing of the Supervalu Agreement or any other agreement pursuant to which the Schedule B Assets To Be Divested are divested to an Acquirer.

C. A condition of approval by the Commission of the divestiture transaction described in Paragraph II.B. shall be a written agreement by Supervalu that it will not sell or lease the Schedule B Assets To Be Divested, for a period of three (3) years from the date on which this Order becomes final, directly or indirectly, through subsidiaries, partnerships or otherwise, without the prior approval of the Commission.

D. The purpose of the divestitures is to ensure the continuation of the Assets To Be Divested as ongoing viable enterprises engaged in the supermarket business and to remedy the lessening of competition resulting from the Acquisition alleged in the Commission's complaint.

III.

IT IS FURTHER ORDERED that:

A. If Respondents have not divested, absolutely and in good faith and with the Commission’s prior approval, the Assets To Be Divested within the time required by Paragraph II of this Order, the Commission may appoint a trustee to divest the Assets To Be Divested. In the event that the Commission or the Attorney General brings an action pursuant to § 5(l) of the Federal Trade Commission Act, 15 U.S.C. § 45(l), or any other statute enforced by the Commission, Respondents shall consent to the appointment of a trustee in such action. Neither the appointment of a trustee nor a decision not to appoint a trustee under this Paragraph shall preclude the Commission or the Attorney General from seeking civil penalties or any other relief available to it, including a court-appointed trustee, pursuant to § 5(l) of the Federal Trade Commission Act, or any other statute enforced by the Commission, for any failure by the Respondents to comply with this Order.

B. If a trustee is appointed by the Commission or a court pursuant to Paragraph III.A. of this Order, Respondents shall consent to the following terms and conditions regarding the trustee's powers, duties, authority, and responsibilities:

The Commission shall select the trustee, subject to the consent of Respondents, which consent shall not be unreasonably withheld. The trustee shall be a person with experience and expertise in acquisitions and divestitures. If Respondents have not opposed, in writing, including the reasons for opposing, the selection of any proposed trustee within ten (10) days after notice by the staff of the Commission to Respondents of the identity of any proposed trustee, Respondents shall be deemed to have consented to the selection of the proposed trustee.

Subject to the prior approval of the Commission, the trustee shall have the exclusive power and authority to divest the Assets To Be Divested.

Within ten (10) days after appointment of the trustee, Respondents shall execute a trust agreement that, subject to the prior approval of the Commission and, in the case of a court-appointed trustee, of the court, transfers to the trustee all rights and powers necessary to permit the trustee to effect each divestiture required by this Order.

The trustee shall have twelve (12) months from the date the Commission or court approves the trust agreement described in Paragraph III.B.3. to accomplish the divestitures, which shall be subject to the prior approval of the Commission. If, however, at the end of the twelve-month period, the trustee has submitted a plan of divestiture or believes that divestiture can be achieved within a reasonable time, the divestiture period may be extended by the Commission, or, in the case of a court-appointed trustee, by the court; provided, however, the Commission may extend the period for each divestiture only two (2) times.

The trustee shall have full and complete access to the personnel, books, records, and facilities related to the Assets To Be Divested or to any other relevant information, as the trustee may request. Respondents shall develop such financial or other information as such trustee may reasonably request and shall cooperate with the trustee. Respondents shall take no action to interfere with or impede the trustee's accomplishment of the divestitures. Any delays in divestiture caused by Respondents shall extend the time for divestiture under this Paragraph in an amount equal to the delay, as determined by the Commission or, for a court-appointed trustee, by the court.

The trustee shall use his or her best efforts to negotiate the most favorable price and terms available in each contract that is submitted to the Commission, subject to Respondents’ absolute and unconditional obligation to divest expeditiously at no minimum price. The divestitures shall be made in the manner and to the acquirer or acquirers as set out in Paragraph II of this Order; provided, however, if the trustee receives bona fide offers for an asset to be divested from more than one acquiring entity, and if the Commission determines to approve more than one such acquiring entity, the trustee shall divest such asset to the acquiring entity or entities selected by Albertson’s from among those approved by the Commission.

The trustee shall serve, without bond or other security, at the cost and expense of Respondents, on such reasonable and customary terms and conditions as the Commission or a court may set. The trustee shall have the authority to employ, at the cost and expense of Respondents, such consultants, accountants, attorneys, investment bankers, business brokers, appraisers, and other representatives and assistants as are necessary to carry out the trustee's duties and responsibilities. The trustee shall account for all monies derived from the divestitures and all expenses incurred. After approval by the Commission and, in the case of a court-appointed trustee, by the court, of the account of the trustee, including fees for his or her services, all remaining monies shall be paid at the direction of Albertson’s, and the trustee's power shall be terminated. The trustee's compensation shall be based at least in significant part on a commission arrangement contingent on the trustee's divesting the Assets To Be Divested.

Respondents shall indemnify the trustee and hold the trustee harmless against any losses, claims, damages, liabilities, or expenses arising out of, or in connection with, the performance of the trustee's duties, including all reasonable fees of counsel and other expenses incurred in connection with the preparation for or defense of any claim, whether or not resulting in any liability, except to the extent that such liabilities, losses, damages, claims, or expenses result from misfeasance, gross negligence, willful or wanton acts, or bad faith by the trustee.

If the trustee ceases to act or fails to act diligently, a substitute trustee shall be appointed in the same manner as provided in Paragraph III.A. of this Order.

The Commission or, in the case of a court-appointed trustee, the court, may on its own initiative or at the request of the trustee issue such additional orders or directions as may be necessary or appropriate to accomplish each divestiture required by this Order.

The trustee may also divest such additional ancillary assets and businesses and effect such arrangements as are necessary to assure the marketability and the viability and competitiveness of the Assets To Be Divested.

The trustee shall have no obligation or authority to operate or maintain the Assets To Be Divested.

The trustee shall report in writing to Respondents and the Commission every sixty (60) days concerning the trustee's efforts to accomplish each divestiture required by this Order.

IV.

IT IS FURTHER ORDERED that:

A. Pending divestiture of the Assets To Be Divested pursuant to this Order, Respondents shall take such actions as are necessary to maintain the viability, competitiveness, and marketability of the Assets To Be Divested, and to prevent the destruction, removal, wasting, deterioration, or impairment of any of Assets To Be Divested except for ordinary wear and tear.

B. Respondents shall comply with all the terms of the Asset Maintenance Agreement attached to this Order and made a part hereof as Appendix I. The Asset Maintenance Agreement shall continue in effect until such time as all Assets To Be Divested have been divested as required by this Order.

IT IS FURTHER ORDERED that, for a period of ten (10) years from the date this Order becomes final, Albertson’s shall not, without providing advance written notification to the Commission, directly or indirectly, through subsidiaries, partnerships, or otherwise:

A. Acquire any ownership or leasehold interest in any facility that has operated as a supermarket within six (6) months of the date of such proposed acquisition in Cascade, Gallatin, Lewis and Clark, Missoula, Silver Bow, and Yellowstone counties in Montana, and Albany, Campbell, Laramie, Natrona, and Park counties in Wyoming.

B. Acquire any stock, share capital, equity, or other interest in any entity that owns any interest in or operates any supermarket or owned any interest in or operated any supermarket within six (6) months of such proposed acquisition in Cascade, Gallatin, Lewis and Clark, Missoula, Silver Bow, and Yellowstone counties in Montana, and Albany, Campbell, Laramie, Natrona, and Park counties in Wyoming.

Provided, however, that advance written notification shall not apply to the construction of new facilities by Albertson’s or the acquisition of or leasing of a facility that has not operated as a supermarket within six (6) months of Albertson’s offer to purchase or lease.

Said notification shall be given on the Notification and Report Form set forth in the Appendix to Part 803 of Title 16 of the Code of Federal Regulations as amended (hereinafter referred to as "the Notification"), and shall be prepared and transmitted in accordance with the requirements of that part, except that no filing fee will be required for any such notification, notification shall be filed with the Secretary of the Commission, notification need not be made to the United States Department of Justice, and notification is required only of Albertson’s and not of any other party to the transaction. Albertson’s shall provide the Notification to the Commission at least thirty days prior to consummating any such transaction (hereinafter referred to as the "first waiting period"). If, within the first waiting period, representatives of the Commission make a written request for additional information or documentary material (within the meaning of 16 C.F.R. § 803.20), Albertson’s shall not consummate the transaction until twenty days after submitting such additional information or documentary material. Early termination of the waiting periods in this Paragraph may be requested and, where appropriate, granted by letter from the Bureau of Competition. Provided, however, that prior notification shall not be required by this Paragraph for a transaction for which notification is required to be made, and has been made, pursuant to Section 7A of the Clayton Act, 15 U.S.C. § 18a.

VI.

IT IS FURTHER ORDERED that, for a period of ten (10) years commencing on the date this Order becomes final:

A. Albertson’s shall neither enter into nor enforce any agreement that restricts the ability of any person (as defined in Section 1(a) of the Clayton Act, 15 U.S.C. § 12(a)) that acquires any supermarket, any leasehold interest in any supermarket, or any interest in any retail location used as a supermarket on or after January 1, 1998, in Cascade, Gallatin, Lewis and Clark, Missoula, Silver Bow, and Yellowstone counties in Montana, and Albany, Campbell, Laramie, Natrona, and Park counties in Wyoming to operate a supermarket at that site if such supermarket was formerly owned or operated by Albertson’s.

B. Albertson’s shall not remove any equipment from a supermarket owned or operated by Albertson’s in Cascade, Gallatin, Lewis and Clark, Missoula, Silver Bow, and Yellowstone counties in Montana, and Albany, Campbell, Laramie, Natrona, and Park counties in Wyoming, prior to a sale, sublease, assignment, or change in occupancy, except for replacement or relocation of such equipment in or to any other supermarket owned or operated by Albertson’s in the ordinary course of business, or except as part of any negotiation for a sale, sublease, assignment, or change in occupancy of such supermarket.

VII.

IT IS FURTHER ORDERED that:

A. Within thirty (30) days after the date Respondents signed the Agreement Containing Consent Order and every thirty (30) days thereafter until Respondents have fully complied with the provisions of Paragraphs II, III, and IV of this Order, Respondents shall submit to the Commission verified written reports setting forth in detail the manner and form in which they intend to comply, are complying, and have complied with Paragraphs II, III, and IV of this Order. Respondents shall include in their compliance reports, among other things that are required from time to time, a full description of the efforts being made to comply with Paragraphs II, III, and IV of the Order, including a description of all substantive contacts or negotiations for divestitures and the identity of all parties contacted. Respondents shall include in their compliance reports copies of all written communications to and from such parties, all internal memoranda, and all reports and recommendations concerning divestiture.

B. One (1) year from the date this Order becomes final, annually for the next nine (9) years on the anniversary of the date this Order becomes final, and at other times as the Commission may require, Albertson’s shall file verified written reports with the Commission setting forth in detail the manner and form in which it has complied and is complying with this Order.

VIII.

IT IS FURTHER ORDERED that Respondents shall notify the Commission at least thirty (30) days prior to any proposed change in the corporate Respondents such as dissolution, assignment, sale resulting in the emergence of a successor corporation, or the creation or dissolution of subsidiaries or any other change in Respondents that may affect compliance obligations arising out of the Order.

IX.

IT IS FURTHER ORDERED that, for the purpose of determining or securing compliance with this Order, upon written request, Respondents shall permit any duly authorized representative of the Commission:

A. Access, during office hours and in the presence of counsel, to inspect and copy all books, ledgers, accounts, correspondence, memoranda and other records and documents in the possession or under the control of Respondents relating to any matters contained in this Order; and

B. Upon five (5) days' notice to Respondents and without restraint or interference from Respondents, to interview Respondents or officers, directors, or employees of Respondents in the presence of counsel.

IT IS FURTHER ORDERED that, upon consummation of the Acquisition, the obligations of Respondent FS Equity Partners under this Order shall terminate.

By the Commission.

Donald S. Clark
Secretary

SEAL:

ISSUED: December 8, 1998

Schedule A

1. The following supermarket located in Cascade County, Montana:

a. Buttrey store no. 3925 operating under the "Buttrey Big Fresh" trade name, which is located at 1601 Marketplace Drive, Great Falls, MT 59404.

2. The following supermarket located in Gallatin County, Montana:

a. Buttrey store no. 3934 operating under the "Buttrey Big Fresh" trade name, which is located at 2825 West Main Street, Bozeman, MT 59715.

3. The following supermarket located in Lewis and Clark County, Montana:

a. Buttrey store no. 3824 operating under the "Buttrey Fresh Foods" trade name, which is located at 1000 Boulder Avenue, Helena, MT 59601.

4. The following supermarket located in Missoula County, Montana:

a. Albertson’s store no. 226 operating under the "Albertson’s" trade name, which is located at 1906 Brooks Street, Missoula, MT 59801.

5. The following supermarkets located in Silver Bow County, Montana:

a. Buttrey store no. 3930 operating under the "Buttrey Fresh Foods" trade name, which is located at 3745 Harrison Avenue, Butte, MT 59701; and

b. Buttrey store no. 3985 operating under the "Buttrey Fresh Foods" trade name, which is located at 600 South Excelsior Street, Butte, MT 59701.

6. The following supermarkets located in Yellowstone County, Montana:

a. Albertson’s store no. 209 operating under the "Albertson’s" trade name, which is located at 1633 Grand Avenue, Billings, MT 59102; and

b. Albertson’s store no. 232 operating under the "Albertson’s" trade name, which is located at 1531 Main Street, Billings, MT 59101.

7. The following supermarket located in Albany County, Wyoming:

a. Albertson’s store no. 805 operating under the "Albertson’s" trade name, which is located at 1209 15th Street, Laramie, WY 82070.

8. The following supermarket located in Campbell County, Wyoming:

a. Buttrey store no. 3855 operating under the "Buttrey Fresh Foods" trade name, which is located at 906 Camel Drive, Gillette, WY 82716.

9. The following supermarkets located in Laramie County, Wyoming:

a. Albertson’s store no. 863 operating under the "Albertson’s" trade name, which is located at 3745 E. Lincoln Way, Cheyenne, WY 82001; and

b. Albertson’s store no. 1804 operating under the "Max" trade name, which is located at 1600 E. Pershing Blvd., Cheyenne, WY 82001.

10. The following supermarket located in Park County, Wyoming:

a. Buttrey store no. 3941 operating under the "Buttrey Fresh Foods" trade name, which is located at 1526 Rumsey Avenue, Cody, WY 82414.

Schedule B

1. The following supermarkets located in Natrona County, Wyoming:

a. Buttrey store no. 3872 operating under the "Buttrey Fresh Foods" trade name, which is located at 2101 East 12th Street, Casper WY 82601; and

b. Buttrey store no. 3878 operating under the "Buttrey Fresh Foods" trade name, which is located at 4075 Cy Avenue, Casper WY 82601.