Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC conditionally approves grocery chain’s acquisition of rival’s outlets in three southeastern states, (Feb 25, 2014)

By Jeffrey May, J.D.

To resolve FTC concerns that a proposed acquisition will reduce competition in 11 markets in three southeastern states, Bi-Lo Holdings, LLC, parent company of the BI-LO and Winn-Dixie grocery store chains, has agreed to sell 12 supermarkets to Commission-approved buyers (In the Matter of Lone Star Fund V (U.S.), L.P., FTC File No. 1310162, FTC Dkt. C-4440).

In its complaint, the FTC identified the relevant product market as the market for the retail sale of food and other grocery products in supermarkets. The relevant product market includes supermarkets within “hypermarkets,” such as Wal-Mart Supercenters, according to the FTC’s analysis to aid public comment.

The market excludes retail stores other than supermarkets. Although retail stores may also sell food and grocery products, these types of stores—including convenience stores, specialty food stores, limited assortment stores, hard-discounters, and club stores—do not, individually or collectively, provide sufficient competition to effectively constrain prices at supermarkets, the FTC explained.

The relevant geographic markets include five communities in Florida; five communities in Georgia; and one community in South Carolina. According to the FTC, the proposed acquisition would reduce the number of meaningful competitors from two to one in two of the markets and from three to two in the remaining nine relevant geographic markets.

Under the terms of a proposed consent order, Bi-Lo/Delhaize would be required to sell 12 stores to Rowes IGA Supermarkets, HAC, Inc., W. Lee Flowers & Co., Inc. and Food Giant. In addition, the settlement would prohibit the respondents from interfering with the hiring of, or employment of, any employees currently working at the Delhaize America stores in the divestiture markets for a period of one year. Lone Star and Bi-Lo also would be required for a ten-year period 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.

In May 2013, Bi-Lo Holdings announced that it had entered into a definitive agreement with Delhaize Group to acquire 165 or substantially all of the stores in the Sweetbay, Harveys, and Reid’s supermarket chains from Delhaize for $265 million in cash. The agreement was modified in January 2014 to exclude one Reid’s and one Harveys store from the original acquisition agreement. Delhaize intends to retain those two stores and operate them as part of its Food Lion division.

Bi-Lo Holdings is the ninth-largest supermarket chain in the United States with 686 grocery stores in eight southeastern states. Its majority owner is Lone Star Funds, a firm that specializes in distressed assets.

Delhaize America is a subsidiary of Belgian grocery store operator Delhaize. It owns and operates 1,553 supermarkets in the Northeast and Southeast under six banners: Food Lion, Sweetbay, Harveys, Reid’s, Hannaford, and Bottom Dollar Food.

Companies: Lone Star Fund V (U.S.), L.P.; Bi-Lo Holdings, LLC; Etablissements Delhaize Frères et Cie “Le Lion” SA/NV; Delhaize America, LLC

News: Antitrust FederalTradeCommissionNews