FTC Puts Conditions on Konkinlijke Ahold’s Acquisition of Genuardi’s Supermarkets

The Federal Trade Commission will require Koninklijke Ahold N.V., the parent company of Giant Food Stores, LLC, to sell a supermarket outside of Philadelphia, Pennsylvania, to settle charges that its proposed acquisition of the Genuardi’s supermarket chain from Safeway Inc. otherwise would be anticompetitive. To preserve competition in the local grocery market, Ahold will sell the supermarket, located in Newtown, Pennsylvania, to McCaffrey’s supermarkets, under an agreement with the FTC.

Ahold owns or has an interest in 2,970 supermarkets and specialty stores in the United States and Europe. It had net sales of $36.8 billion in 2010, and is organized into four retail divisions: Giant Carlisle, Giant Landover, Stop & Shop New York Metro, and Stop & Shop New England.

Safeway is one of the largest food and drug retailers in the country, with more than 1,700 stores nationwide operating under brand names including Safeway, Vons, Randalls, Tom Thumb, Carrs, and Genuardi’s. In 2010, Safeway had net sales of $41 billion. It is exiting the Philadelphia metropolitan market by selling or closing the remaining 24 of 36 Genuardi’s it purchased in February 2001.

According to the FTC’s complaint, Ahold’s acquisition of Genuardi’s from Safeway would violate the FTC Act and Section 7 of the Clayton Act. Specifically, the FTC alleges that it would reduce the number of supermarket competitors in Newtown, Pennsylvania, from three to two, with Giant and Acme being the only remaining retail grocery stores. The Newtown market is already highly concentrated, and would become significantly more so post-acquisition, according to the FTC. The transaction, if completed, would eliminate competition between Giant and Genuardi’s, allowing the combined firm to raise prices unilaterally. The transaction also would increase the likelihood that Giant and Acme would be able to tacitly or expressly work together to raise prices or otherwise reduce competition in a way that would harm local consumers, the FTC alleged.

The proposed order settling the FTC’s charges preserves competition that otherwise would have been eliminated by Ahold’s acquisition of Genuardi’s supermarkets in the Philadelphia metro area. It requires Ahold to sell the Genuardi’s supermarket in Newtown, Pennsylvania, to an FTC-approved buyer. Ahold has agreed to sell the Newtown store to McCaffrey’s, which the FTC considers well-positioned to enter the market to replace the competition that otherwise would have been lost through the transaction. All of the current McCaffrey’s supermarkets are located outside the Newtown area.

Under the proposed order, Ahold and Safeway must sell the Newtown Genuardi’s supermarket to McCaffrey’s no later than 10 days after Ahold acquires the 16 stores covered by the asset purchase agreement. The proposed order also contains other provisions designed to ensure the sale to McCaffrey’s is successful. For example, for one year, Ahold and Safeway are prohibited from interfering with McCaffrey’s hiring or employing anyone currently working at the Newtown Genuardi’s. Also, for 10 years, Ahold must notify the FTC in advance if it plans to acquire a supermarket, or any interest in a supermarket, in Newtown.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 5-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through July 16, 2012, after which the Commission will decide whether to make the proposed consent order final.

Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. Comments can be submitted electronically by clicking here. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the respondent has actually violated the law. A consent order is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. 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 up to $16,000.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

(FTC File No. 121-0055)

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