Federal Register, Volume 79 Issue 4 (Tuesday, January 7, 2014)

[Federal Register Volume 79, Number 4 (Tuesday, January 7, 2014)]
[Notices]
[Pages 825-828]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-31224]

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FEDERAL TRADE COMMISSION

[File No. 131 0227]

AB Acquisition, LLC; Analysis of Agreement Containing Consent
Order To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis of
Agreement Containing Consent Order to Aid Public Comment describes both
the allegations in the draft complaint and the terms of the consent
order--embodied in the consent agreement--that would settle these
allegations.

DATES: Comments must be received on or before January 22, 2014.

ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/albertsonsunitedconsent online or on
paper, by following the instructions in the Request for Comment part of
the SUPPLEMENTARY INFORMATION section below. Write ``AB Acquisition,
LLC--Consent Agreement; File No. 131 0227'' on your comment and file
your comment online at https://ftcpublic.commentworks.com/ftc/albertsonsunitedconsent by following the instructions on the web-based
form. If you prefer to file your comment on paper, mail or deliver your
comment to the following address: Federal Trade Commission, Office of
the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue NW.,
Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Jeremy Morrison, Bureau of
Competition, (202-326-3149), 600 Pennsylvania Avenue NW., Washington,
DC 20580.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission, has been
placed on the public record for a period of thirty (30) days. The
following Analysis to Aid Public Comment describes the terms of the
consent agreement, and the allegations in the complaint. An electronic
copy of the full text of the consent agreement package can be obtained
from the FTC Home Page (for December 23, 2013), on the World Wide Web,
at http://www.ftc.gov/os/actions.shtm. A paper copy can be obtained
from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue
NW., Washington, DC 20580, either in person or by calling (202) 326-
2222.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before January 22,
2014. Write ``AB Acquisition, LLC--Consent Agreement; File No. 131
0227'' on your comment. Your comment--including your name and your
state--will be placed on the public record of this proceeding,
including, to the extent practicable, on the public Commission Web
site, at http://www.ftc.gov/os/publiccomments.shtm. As a matter of
discretion, the Commission tries to remove individuals' home contact
information from comments before placing them on the Commission Web
site.

[[Page 826]]

Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which . . . is privileged or confidential,'' as discussed in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/albertsonsunitedconsent by following the instructions on the web-
based form. If this Notice appears at http://www.regulations.gov/#
!home, you also may file a comment through that Web site.
If you file your comment on paper, write ``AB Acquisition, LLC--
Consent Agreement; File No. 131 0227'' on your comment and on the
envelope, and mail or deliver it to the following address: Federal
Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600
Pennsylvania Avenue NW., Washington, DC 20580. If possible, submit your
paper comment to the Commission by courier or overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before January 22, 2014. You can find more
information, including routine uses permitted by the Privacy Act, in
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

Analysis of Agreement Containing Consent Order To Aid Public Comment

I. Introduction and Background

The Federal Trade Commission (``Commission'') has accepted for
public comment, subject to final approval, an Agreement Containing
Consent Order (``Consent Order'') from AB Acquisition, LLC
(``Respondent''). The purpose of the proposed Consent Order is to
remedy the anticompetitive effects that otherwise would result from the
merger of Respondent with United Supermarkets, L.L.C. (``United'').
Under the terms of the proposed Consent Order, Respondent is required
to divest its supermarkets and related assets in Amarillo and Wichita
Falls, Texas to a Commission-approved purchaser. The divestitures must
be completed no later than 10 days following the date of Respondent's
merger with United.
The proposed Consent Order has been placed on the public record for
30 days to solicit comments from interested persons. Comments received
during this period will become part of the public record. After 30
days, the Commission again will review the proposed Consent Order and
any comments received, and decide whether it should withdraw the
Consent Order, modify the Consent Order, or make it final.
On September 9, 2013, Respondent and United entered into a merger
agreement whereby Respondent agreed to purchase 100% of United's
equity. The Commission's Complaint alleges that the proposed merger, if
consummated, would violate Section 7 of the Clayton Act, as amended, 15
U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as
amended, 15 U.S.C. 45, by removing an actual, direct, and substantial
supermarket competitor in Amarillo and Wichita Falls, Texas. The
elimination of this competition would result in significant competitive
harm, specifically higher prices and diminished quality and service
levels in both markets. The proposed Consent Order would remedy the
alleged violations by requiring Respondent to divest its supermarkets
in the two affected markets. The divestitures will establish a new
independent competitor to Respondent in both relevant areas, replacing
the competition that otherwise would be lost as a result of the
proposed merger.

II. The Parties

Respondent, through its wholly owned indirect subsidiary,
Albertson's LLC (``Albertson's''), owns and operates 606 supermarkets
in the western and southern United States under the Albertsons banner.
In Texas, Albertson's operates 72 supermarkets under the Albertsons
banner, the majority of which are in the Dallas-Fort Worth Metroplex.
Albertson's operates 10 Albertsons banner stores in North and West
Texas.
United is a privately held regional grocery retailer that owns and
operates 51 traditional and specialty supermarkets and 7 convenience
stores across North and West Texas. United operates its supermarkets
under three different banners: United Supermarkets, Market Street, and
Amigos. United Supermarkets is a traditional supermarket banner. Market
Street offers everyday grocery needs, as well as gourmet and specialty
items, whole health products, and prepared food. Amigos is operated as
a specialty store with a focus on traditional and authentic items
targeted to Hispanic shoppers. United also owns three distribution
centers, an ice manufacturing plant, and a food manufacturing plant.

III. Supermarket Competition in Amarillo and Wichita Falls, Texas

Respondent's proposed merger with United poses substantial
antitrust concerns for the retail sale of food and other grocery
products in supermarkets. Supermarkets are defined as traditional full-
line retail grocery stores that sell, on a large-scale basis, food and
non-food products that customers regularly consume at home--including,
but not limited to, fresh meat, dairy products, frozen foods,
beverages, bakery goods, dry groceries, detergents, and health and
beauty products. This broad set of products and services provides a
``one-stop shopping'' experience for consumers by enabling them to shop
in a single store for all of their food and grocery needs. The ability
to offer consumers one-stop shopping is a critical differentiating
factor between supermarkets and other food retailers.
The relevant product market includes supermarkets within
``hypermarkets,'' such as Wal-Mart Supercenters.

[[Page 827]]

Hypermarkets also sell an array of products that would not be found in
traditional supermarkets. However, hypermarkets, like conventional
supermarkets, contain bakeries, delis, dairy, produce, fresh meat, and
sufficient product offerings to enable customers to purchase all of
their weekly grocery requirements in a single shopping visit.
Other types of retailers--such as hard discounters, convenience
stores, specialty food stores and club stores--also sell food and
grocery items. However, these types of retailers are not in the
relevant product market because they do not have a supermarket's full
complement of products and services. Shoppers typically do not view
these other food and grocery retailers as adequate substitutes for
supermarkets. Further, although these other types of retailers offer
some competition, supermarkets do not view them as providing as close
competition as traditional supermarkets.\2\ Thus, consistent with prior
Commission precedent, grocery items sold in stores other than
supermarkets are excluded from the relevant product market.\3\
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\2\ Shoppers typically do not view these other food and grocery
retailers as adequate substitutes for supermarkets and would be
unlikely to switch to one of these retailers in response to a small
but significant price increase or ``SSNIP'' by a hypothetical
supermarket monopolist. See U.S. DOJ and FTC Horizontal Merger
Guidelines Sec. 4.1.1 (2010).
\3\ See, e.g., Konkinlijke Ahold N.V./Safeway Inc., Docket C-
4367 (August 17, 2012); Shaw's/Star Markets, Docket C-3934 (June 28,
1999); Kroger/Fred Meyer, Docket C-3917 (January 10, 2000);
Albertson's/American Stores, Docket C-3986 (June 22, 1999); Ahold/
Giant, Docket C-3861 (April 5, 1999); Albertson's/Buttrey, Docket C-
3838 (December 8, 1998); Jitney-Jungle Stores of America, Inc.,
Docket C-3784 (January 30, 1998). But see Wal-Mart/Supermercados
Amigo, Docket C-4066 (November 21, 2002) (the Commission's complaint
alleged that in Puerto Rico, club stores should be included in a
product market that included supermarkets because club stores in
Puerto Rico enabled consumers to purchase substantially all of their
weekly food and grocery requirements in a single shopping visit).
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There are two relevant geographic markets in which to analyze the
merger's effects: (1) the western half of Amarillo, Texas (``West
Amarillo''), and (2) the southwest area of Wichita Fall, Texas
(``Southwest Wichita Falls''). Specifically, West Amarillo includes the
area from the western city limit to the railroad tracks that run
parallel to, and are located to the east of, the Interstate 40 and U.S.
Route 87/287 corridor. Southwest Wichita Falls is the area within the
city limits that runs south of U.S. Route 277 and west of U.S. Route
281. A hypothetical monopolist of the retail sale of food and other
grocery products in supermarkets in each relevant area could profitably
impose a small but significant non-transitory increase in price.
Interviews with the merging parties' executives and market
participants, as well as a review of party documents, demonstrate that
Albertson's and United are close and vigorous competitors in terms of
format, service, product offerings, promotional activity, and location
in the West Amarillo and Southwest Wichita Falls markets. For example,
Albertson's and United are the only supermarkets in Amarillo and
Wichita Falls that retain a traditional supermarket format, with both
emphasizing specialty departments like meat and fresh seafood. Both are
also the only traditional supermarket operators in Amarillo and Wichita
Falls that carry a broad range of products catering to the entire
community. Additionally, Albertson's and United's stores have the most
similar store formats and size among supermarket operators in Amarillo
and Wichita Falls, including the amount of floor space devoted to food
and other grocery products. Absent relief, the proposed merger would
eliminate significant head-to-head competition between Respondent and
United and would increase Respondent's ability and incentive to raise
prices unilaterally post-merger. The proposed merger would also
decrease incentives to compete on non-price factors, such as service
levels, convenience, and quality.
The West Amarillo and Southwest Wichita Falls markets already are
highly concentrated, and would become significantly more so post-
merger. The merger would reduce the number of supermarket competitors
from three to two; Wal-Mart Supercenter would be the only remaining
competitor in each of the two relevant areas. In West Amarillo, the
proposed merger would increase the Herfindahl-Hirschman Index
(``HHI''), which is the standard measure of market concentration under
the 2010 Department of Justice and Federal Trade Commission Horizontal
Merger Guidelines (``HMG''), 503 points, from 4501 to 5004. In
Southwest Wichita Falls, the proposed merger would increase the HHI 811
points, from 4193 to 5004. Under the HMG, these concentration levels
trigger the presumption that the merger likely enhances Respondent's
market power in West Amarillo and Southwest Wichita Falls.
New entry or expansion in the relevant markets is unlikely to deter
or counteract the anticompetitive effects of the proposed merger.
Moreover, even if a prospective entrant existed, the entrant must
secure a viable location, obtain the necessary permits and governmental
approvals, build its retail establishment or renovate an existing
building, and open to customers before it could begin operating and
serve as a relevant competitive constraint. It is unlikely that entry
sufficient to achieve a significant market impact and act as a
competitive constraint would occur in a timely manner.

IV. The Proposed Consent Order

The proposed remedy, which requires the divestiture of the
Albertson's supermarkets in Amarillo and Wichita Falls to a Commission-
approved purchaser, will restore fully the competition that otherwise
would be eliminated in these markets as a result of the merger.
Respondent has agreed to divest the Albertson's supermarkets in
Amarillo and Wichita Falls to MAL Enterprises, Inc., which operates as
Lawrence Brothers IGA (``Lawrence Brothers''). Lawrence Brothers is a
family owned and operated supermarket chain based in Sweetwater, Texas,
with 18 supermarkets located throughout West Texas and two in New
Mexico, all of which are located outside the two relevant geographic
markets.\4\ Lawrence Brothers appears to be a highly suitable
purchaser, and it is well positioned to enter the relevant markets and
prevent the increase in market concentration and likely competitive
harm that otherwise would have resulted from the merger.
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\4\ Lawrence Brothers operates 14 stores under the ``Lawrence
Brothers'' banner, four stores under the ``Cash Saver'' banner, and
two stores under the ``Save-A-Lot'' banner. Lawrence Brothers plans
to convert the two Albertson's stores in Amarillo and Wichita Falls
to Cash Saver stores. Cash Saver stores are traditional supermarkets
with specialty departments such as pharmacies, delis, and bakeries.
Cash Saver prices all grocery products in its stores at 10% above
cost.
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The proposed Order requires Respondent to divest Albertson's
Amarillo and Wichita Falls stores and related assets to Lawrence by the
later of: (a) January 13, 2014, or (b) 10 days following Albertson's
merger with United. If Lawrence Brothers is not approved by the
Commission to purchase the assets, Albertson's must immediately rescind
the divestiture agreement and divest the Albertson's stores and related
assets to a buyer that receives the Commission's prior approval. The
proposed Consent Order contains additional provisions designed to
ensure the adequacy of the proposed relief. For example, for a period
of one year, the Consent Order prohibits Albertson's from interfering
with Lawrence Brothers' hiring or employment of any employees currently
working at the Albertson's stores in

[[Page 828]]

Amarillo and Wichita Falls. Additionally, for a period of 10 years,
Respondent is required to give the Commission prior notice of plans to
acquire any interest in a supermarket, or an interest in a supermarket,
that has operated or is operating in Amarillo and Wichita Falls.
The sole purpose of this Analysis is to facilitate public comment
on the proposed Consent Order. This Analysis does not constitute an
official interpretation of the proposed Consent Order, nor does it
modify its terms in any way.

By direction of the Commission.
Janice Podoll Frankle,
Acting Secretary.
[FR Doc. 2013-31224 Filed 1-6-14; 8:45 am]
BILLING CODE 6750-01-P [FEDREG][VOL]*[/VOL][NO]*[/NO][DATE]*[/
DATE][NOTICES]