FTC Agreement Allows Delhaize America, Inc. and Hannaford Bros. Co. Merger of East Coast Supermarkets

Thirty-seven Hannaford Stores and One Supermarket Site to be Divested to Up-front Buyers

For Release

The Federal Trade Commission today announced a consent agreement through which the proposed supermarket merger of Establissements Delhaize Freres et Cie "Le Lion" S.A. and Delhaize America, Inc. (collectively Delhaize) with Hannaford Bros. Co. (Hannaford) would be approved. The Office of the Attorney General of Virginia participated in the investigation that led to this consent.

Under the terms of the agreement, future competition in the Southeast United States would be ensured through the sale of 37 Hannaford supermarkets and one Hannaford site to three different up-front buyers selected by the parties and accepted by the Commission. The stores to be sold are located in a number of markets in Virginia and North Carolina, where Delhaize's Food Lion supermarkets directly compete with those of Hannaford. These markets include the Richmond MSA (Metropolitan Statistical Area) and the Norfolk-Virginia Beach Newport News MSA in Virginia, and several markets in North Carolina: greater Raleigh, the Wilmington MSA, Columbus County (Whiteville), Duplin County (Warsaw), and Pender County (Duplin).

According to the Commission complaint, the merger of Delhaize and Hannaford would lessen competition in the relevant markets in violation of Section 7 of the Clayton Act and Section 5 of the FTC Act. Reduced competition would likely occur through the elimination of direct competition between supermarkets owned or controlled by Delhaize and those owned by Hannaford, as well as by increasing the likelihood that Delhaize would exercise unilateral market power and raise prices for consumers. Finally, the complaint states that the transaction would increase the possibility of coordinated interaction between the remaining supermarket firms in the Southeast.

With 1,200 supermarkets in the Southeast and Mid-Atlantic United States, Delhaize America operates mostly under the names "Food Lion" and "Kash N' Karry." Delhaize America, a North Carolina corporation, had total sales of $11 billion in fiscal year 1999. Hannaford, a publicly traded firm with executive offices in Scarborough, Maine, had 1999 sales of $3.46 billion. It operates about 100 stores under the "Hannaford" or "Shop N' Save" banner in New England and New York and 50 stores under the "Hannaford" banners in Virginia and North Carolina. Hannaford began doing business in the Southeast in the mid-1990s. The value of the merger at the time it was announced on August 17, 1999, was approximately $3.6 billion.

Under the terms of the consent agreement, Delahize would be required to divest 37 supermarkets in Virginia and North Carolina to three FTC-approved buyers, including: Kroger Co. (20 stores in Virginia), Lowe's Food Stores, Inc. (12 stores in North Carolina), and the Sylvester Group (five stores in North Carolina), and one unbuilt supermarket site in North Carolina. The respondents would be required to divest each store to the appropriate buyer no later than ten days after the consent order becomes final. In some cases, more time will be allowed based on the buyer's need to convert large numbers of new stores to its own format.

The proposed order also requires the respondents to include provisions in its purchase and sales agreements that would allow Delhaize to rescind the transaction if, following the comment period, the Commission rejects an up-front buyer or a specific divestiture transaction. In addition, the respondents would be required to maintain the viability of the assets and ensure that they remain competitive and marketable prior to being divested. If the Commission determines that Delhaize or Hannaford has not divested the assets in a manner that complies with the order, it would be able to appoint a trustee to divest these assets and seek civil penalties against either company for noncompliance.

For 10 years from the date the order becomes final, the respondents would be required to provide the Commission with written notice before acquiring supermarket assets or related stock in any entity that owns or operates a supermarket located in the county or counties that include the relevant geographic area. They would not, however, be restricted from building their own supermarkets in this area. And for 10 years the respondents would be prohibited from entering into or enforcing any agreement that restricts the ability of any person to operate a supermarket at that site they have purchased. The order also contains routine reporting requirements to ensure compliance with its terms.

The Commission vote to accept the proposed consent agreement was 5-0. An announcement regarding the proposed consent agreement will be published in the Federal Register shortly, and will be subject to public comment for 30 days, after which the Commission (Hannaford - 7/25/00) will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580, and will be accepted through August 24, 2000.

NOTE: The consent agreement referenced in this release is for settlement purposes only and does not constitute an admission of a law violation. 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 $11,000.

Copies of the complaint, proposed consent agreement and an analysis to aid public comment are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Mitchell J. Katz,

Office of Public Affairs

202-326-2161

Richard G. Parker,

Director Bureau of Competition

202-326-2574

(FTC File No. 991-0380)

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