[Federal Register Volume 79, Number 42 (Tuesday, March 4, 2014)]
[Notices]
[Pages 12195-12198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-04708]
=======================================================================
-----------------------------------------------------------------------
FEDERAL TRADE COMMISSION
[File No. 131 0162]
Lone Star Fund V (U.S.), L.P., Bi-Lo Holdings, LLC,
Etablissements Delhaize Fr[egrave]res et Cie ``Le Lion'' (Group
Delhaize) SA/NV, and Delhaize America, LLC; Analysis of Agreement
Containing Consent Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
-----------------------------------------------------------------------
SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis of Agreement Containing Consent Orders to Aid
Public Comment describes both the allegations in the draft complaint
and the terms of the consent orders--embodied in the consent
agreement--that would settle these allegations.
DATES: Comments must be received on or before March 27, 2014.
ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/biloconsent online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Bi-Lo Holdings, LLC--
Consent Agreement; File No. 131-0162'' on your comment and file your
comment online at https://ftcpublic.commentworks.com/ftc/biloconsent 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: Joshua Smith, Bureau of Competition,
(202-326-3018), 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 February 25, 2014), 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 March 27, 2014.
Write ``Bi-Lo Holdings, LLC--Consent Agreement; File No. 131-0162'' 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.
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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/biloconsent 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 ``Bi-Lo Holdings, LLC--
Consent Agreement; File No. 131-0162'' 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 March 27, 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.
[[Page 12196]]
Analysis of Agreement Containing Consent Orders 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 Orders (``Consent Order'') from Lone Star Fund V (U.S.), L.P.
(``Lone Star''), Bi-Lo Holdings, LLC (``Bi-Lo''), Etablissements
Delhaize Fr[egrave]res et Cie ``Le Lion'' (Group Delhaize) SA/NV
(``Delhaize''), and Delhaize America, LLC (``Delhaize America'')
(collectively ``Respondents''). The purpose of the proposed Consent
Order is to remedy the anticompetitive effects that otherwise would
result from Bi-Lo's acquisition of certain supermarkets owned by
Delhaize America (the ``Acquisition''). Under the terms of the proposed
Consent Order, Bi-Lo is required to divest its supermarkets and related
assets in eleven local geographic markets to Commission-approved
buyers. The divestitures must be completed no later than 10 days
following the Acquisition.
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
comments received, and decide whether it should withdraw the Consent
Order, modify the Consent Order, or make it final.
On May 27, 2013, Bi-Lo and Delhaize America executed an agreement
whereby Bi-Lo agreed to acquire from Delhaize America 73 Sweetbay
stores (and leases to 10 closed stores), 72 Harveys stores, and 11
Reid's stores for $265 million. Respondents amended their agreement on
January 31, 2014 to exclude one Reid's and one Harveys store from the
original acquisition agreement, and adjusted the purchase price
accordingly.\2\ The Commission's Complaint alleges that the Acquisition
as amended, 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 from eleven local geographic markets
(``relevant geographic markets''): Arcadia, Dunnellon, Lake Placid,
Madison, and Wauchula, Florida; Bainbridge, Statesboro, Sylvania,
Vidalia, and Waynesboro, Georgia; and Batesburg, South Carolina. The
elimination of this competition would result in significant competitive
harm, specifically higher prices and diminished quality and service
levels in these markets. The proposed Consent Order would remedy the
alleged violations by requiring Respondent Bi-Lo to divest the acquired
Delhaize America supermarkets in the relevant geographic markets. The
divestitures will establish a new independent competitor to Respondent
Bi-Lo in the relevant geographic markets, replacing competition that
otherwise would be eliminated as a result of the Acquisition.
---------------------------------------------------------------------------
\2\ Respondents amended the acquisition agreement to exclude one
Harveys in Americus, Georgia and one Reid's in Hampton, South
Carolina, from the Acquisition. Accordingly, the proposed Consent
Order does not require a divestiture in Americus, Georgia and
Hampton, South Carolina. By amending the acquisition agreement so
that Delhaize retains these two stores (which will be operated as
part of its Food Lion division), the Acquisition does not increase
market concentration and the competitive status quo is maintained in
Americus and Hampton. Resolving the Commission's concerns through an
amendment to the acquisition agreement is suitable under the
specific circumstances of this case. In particular, the selling
company is selling only a small fraction of its assets, has
substantial and similar operations remaining post-transaction that
will absorb easily and maintain profitably the retained stores, and
where the Commission has concluded that Delhaize will be an
effective operator of those stores post-transaction.
---------------------------------------------------------------------------
II. The Respondents
Bi-Lo is the parent company of the Bi-Lo and Winn-Dixie grocery
store chains, which are located in the Southeastern United States. As
of July 10, 2013, Bi-Lo operated 685 supermarkets throughout Alabama,
Florida, Georgia, Louisiana, Mississippi, North Carolina, South
Carolina, and Tennessee under its Winn-Dixie and BI-LO banners. Lone
Star Funds, a private equity firm specializing in distressed assets,
through Respondent Lone Star, is the majority owner of Bi-Lo.
Delhaize America is a wholly owned subsidiary of Delhaize. Delhaize
owns supermarket chains in North America, Europe, and Indonesia. In the
Northeast and Southeast of the United States, Delhaize America operates
six supermarket chains: Sweetbay, Harveys, Reid's, Hannaford, Bottom
Dollar Food, and Food Lion. Food Lion is Delhaize America's primary
banner, and it accounts for 73% (1,127 stores) of its total 1,553 U.S.
stores.
III. Supermarket Competition in the Relevant Areas in Florida, Georgia,
and South Carolina
Bi-Lo's proposed acquisition of Delhaize's Sweetbay, Harvey's, and
Reid's supermarkets poses substantial antitrust concerns in the retail
sale of food and other grocery products in supermarkets in the relevant
geographic markets.\3\ 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 non-food grocery needs. The
ability to offer consumers one-stop shopping is a critical
differentiating factor between supermarkets and other food retailers.
---------------------------------------------------------------------------
\3\ The Acquisition raises competitive concern in five markets
in Florida, five markets in Georgia, and one market in South
Carolina.
---------------------------------------------------------------------------
The relevant product market includes supermarkets within
``hypermarkets,'' such as Wal-Mart Supercenters. 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 convenience stores, specialty
food stores, limited assortment stores, hard-discounters, and club
stores--also sell certain food and non-food grocery items. However,
these types of retailers do not compete 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 food and other
grocery retailers as adequate substitutes for supermarkets.\4\ Further,
although these other types of retailers offer some competition to
supermarkets, supermarkets do not view them as providing as significant
or close competition as traditional supermarkets. Thus, consistent with
prior Commission precedent, these other types of retailers are not
considered as competitors in the relevant product market.\5\
---------------------------------------------------------------------------
\4\ Shoppers 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).
\5\ See, e.g., AB Acquisition, LLC, Docket C-4424 (Dec. 23,
2013); Koninklijke Ahold N.V./Safeway Inc., Docket C-4367 (Aug. 17,
2012); Shaw's/Star Markets, Docket C-3934 (June 28, 1999); Kroger/
Fred Meyer, Docket C-3917 (Jan. 10, 2000); Albertson's/American
Stores, Docket C-3986 (June 22, 1999); Ahold/Giant, Docket C-3861
(Apr. 5, 1999); Albertson's/Buttrey, Docket C-3838 (Dec. 8, 1998);
Jitney-Jungle Stores of America, Inc., Docket C-3784 (Jan. 30,
1998). But see Wal-Mart/Supermercados Amigo, Docket C-4066 (Nov. 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).
---------------------------------------------------------------------------
[[Page 12197]]
The relevant geographic markets in which to analyze the
Acquisition's effects are the areas within an approximate three- to
ten-mile radius of the parties' supermarkets in each of the following
eleven localized areas: Arcadia, Dunnellon, Lake Placid, Madison, and
Wauchula, Florida; Bainbridge, Statesboro, Sylvania, Vidalia, and
Waynesboro, Georgia; and Batesburg, South Carolina. Where the
Respondents' supermarkets are located in rural, isolated areas, the
relevant geographic areas are larger than areas where the Respondents'
supermarkets are located in more densely populated suburban areas. A
hypothetical monopolist of the retail sale of food and non-food grocery
products in supermarkets in each relevant geographic market could
profitably impose a small but significant non-transitory increase in
price.
The evidence gathered during the course of staff's investigation
demonstrates that Respondents are close and vigorous competitors in
terms of format, service, product offerings, promotional activity, and
location in the relevant geographic markets. Bi-Lo and Delhaize America
have the only supermarkets in Madison, Florida and Sylvania, Georgia.
Additionally, Bi-Lo and Delhaize America have the only traditional
supermarkets in eight of the relevant geographic markets; the remaining
competitor in each of these eight markets is a hypermarket, Wal-Mart
Supercenter. Moreover, the Bi-Lo and Delhaize stores are located near
each other--less than 1 mile apart in three markets, 1 to 2 miles apart
in six markets, and 2 to 3 miles apart in two markets. Competition in
food retailing is primarily a function of similarity of format and
proximity between competing stores. Stores with similar formats located
nearby each other provide a greater competitive constraint on each
other's pricing than do stores of different formats or stores located
farther apart from each other. Absent the relief, the Acquisition would
eliminate significant head-to-head competition between Respondents and
would increase Respondent Bi-Lo's ability and incentive to raise prices
unilaterally post-Acquisition. The Acquisition also would decrease
incentives to compete on non-price factors, such as service levels,
convenience, and quality. Finally, absent the relief, the Acquisition
may also facilitate coordination in markets where only the parties'
stores and one other traditional supermarket competitor remains post-
Acquisition. Given the transparency of pricing and promotional
practices between supermarkets and the fact that supermarkets ``price
check'' competitors in the ordinary course of business, reducing the
number of nearby competitors from three to two may facilitate collusion
between the remaining supermarket competitors by making coordination
easier to establish and monitor.
The relevant geographic markets are highly concentrated already,
and would become significantly more so post-Acquisition. The
Acquisition would result in an effective merger-to-monopoly in two
relevant areas, Madison, Florida and Sylvania, Georgia, and an
effective merger-to-duopoly in nine relevant areas.\6\ The Acquisition
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''), in the relevant geographic markets by a range of 540 to
4,978 points, with post-Acquisition HHI total levels ranging from 5,005
to 10,000 points. These concentration levels far exceed the levels
required to trigger the presumption that the Acquisition likely
enhances Respondent Bi-Lo's market power in each of the relevant
geographic markets.
---------------------------------------------------------------------------
\6\ See Appendix A.
---------------------------------------------------------------------------
New entry or expansion in the relevant geographic markets is
unlikely to deter or counteract the anticompetitive effects of the
Acquisition. 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 divestiture of the Delhaize
America stores in the relevant geographic markets to a Commission-
approved purchaser, will restore the competition that otherwise would
be eliminated in these markets as a result of the Acquisition.
Respondents Lone Star and Bi-Lo have agreed to divest the Delhaize
America stores to four separate buyers. These purchasers are well
suited and well positioned to enter the relevant geographic markets and
prevent the increase in market concentration and likely competitive
harm that otherwise would result from the Acquisition. The supermarkets
currently owned by the purchasers are all located outside the relevant
geographic markets.
Respondents have agreed to divest the Sweetbays located in Arcadia
(1883), Dunnellon (1795), Lake Placid
(1879), and Wauchula (1791), Florida to Rowe's IGA
Supermarkets (``Rowe's''). Rowe's currently operates five supermarkets
in the greater Jacksonville, Florida area under the ``Rowe's IGA''
banner.
Respondents have agreed to divest Harveys 2336 in Vidalia,
Georgia, and Harveys 2374 and 2375 in Statesboro,
Georgia, to HAC Inc. (``HAC''). HAC is an employee-owned supermarket
company based in Oklahoma City, Oklahoma. HAC operates approximately 80
stores consisting of Homeland and United Supermarkets in Oklahoma,
Country Mart Stores in Lawton, Kansas, Super Save Stores in North
Central Texas, and Piggly Wiggly and Food World stores in Georgia. HAC
will operate the stores in Statesboro under the Food World banner and
the store in Vidalia under the Piggly Wiggly banner.
Respondents have agreed to divest Reid's 442 in Batesburg,
South Carolina, Harveys 2349 in Waynesboro, Georgia, and
Harveys 2370 in Sylvania, Georgia, to W. Lee Flowers & Co.,
Inc. (``Flowers''). Currently, Flowers operates 35 supermarkets under
its Floco Foods subsidiary in South Carolina and Georgia. Flowers is
also a wholesale grocery distributer, and the company supplies many IGA
supermarkets in South Carolina.
Finally, Respondents have agreed to divest Harveys 2379 in
Madison, Florida, and Harveys 2378 in Bainbridge, Georgia, to
Food Giant. Food Giant operates 108 stores under several different
banner names, including Food Giant and Piggly Wiggly, throughout eight
states, including Tennessee, Kentucky, Arkansas, Mississippi, Alabama,
and Missouri. Food Giant will re-banner both stores to the Food Giant
name. Food Giant already operates four stores in Florida and two in
Georgia.
The proposed Order requires Respondents Lone Star and Bi-Lo to
divest the Delhaize America supermarkets and related assets in the
[[Page 12198]]
eleven relevant geographic markets to the four buyers no later than 10
days following the respective closing date under the Respondents'
agreement. Pursuant to the Respondents' acquisition agreement, the
Acquisition will be effectuated through eight separate closings over a
period of approximately 10 weeks. This staged closing will allow both
Bi-Lo and the buyers of the divested stores to re-banner the acquired
stores in a timely and orderly manner. The divestitures will take place
no later than 10 days after the closing involving the relevant
divestiture store. If any of the buyers are not approved by the
Commission to purchase the assets, Lone Star and Bi-Lo must immediately
rescind the divestiture agreement and divest the Delhaize America store
and related assets to a buyer that receives the Commission's prior
approval. Further, for a period of one year, the Order prohibits
Respondents from interfering with the hiring of or employment of any
employees currently working at the Delhaize America stores in the
divestiture markets. Additionally, for a period of 10 years, Lone Star
and Bi-Lo are required to provide the Commission with prior notice of
plans to acquire a supermarket, or an interest in a supermarket, that
has operated or is operating in the counties that include the relevant
geographic markets.
* * *
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.
Exhibit A
----------------------------------------------------------------------------------------------------------------
City State Merger result HHI (pre) HHI (post) Delta
----------------------------------------------------------------------------------------------------------------
Arcadia..................... FL 3 to 2.............. 4645 5331 686
Bainbridge.................. GA 3 to 2.............. 5016 5556 540
Batesburg................... SC 3 to 2.............. 4074 5062 988
Dunnellon................... FL 3 to 2.............. 4294 5081 787
Lake Placid................. FL 3 to 2.............. 3881 5005 1124
Madison..................... FL 2 to 1.............. 5556 10000 4444
Statesboro.................. GA 3 to 2.............. 4798 5423 625
Sylvania.................... GA 2 to 1.............. 5022 10000 4978
Vidalia..................... GA 3 to 2.............. 5002 5556 554
Wauchula.................... FL 3 to 2.............. 4215 5115 900
Waynesboro.................. GA 3 to 2.............. 4316 5149 833
----------------------------------------------------------------------------------------------------------------
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2014-04708 Filed 3-3-14; 8:45 am]
BILLING CODE 6750-01-P