FTC Will Seek To Block Rite Aid/Revco Merger

The Federal Trade Commission said today it will seek a federal district court order to prevent Rite Aid Corporation from going ahead with its $1.8 billion acquisition of Revco D.S., Inc. The FTC said the deal would allow the combined firm, which would have nearly 5,000 stores, to control prices for prescription drugs, resulting in higher costs for consumers.

“If allowed to proceed, the combined Rite Aid-Revco firm would be the dominant pharmacy chain in numerous eastern and midwestern metropolitan areas,” said George S. Cary, Deputy Director of the FTC’s Bureau of Competition. “Rite Aid-Revco would have significantly more pharmacy locations than its closest competition and would have the ability to increase prices and harm consumers.”

The FTC’s case will focus in particular on retail sales through pharmacy benefit plans whereby employers and other third-party payors offer pharmacy benefits as part of their health plans. Due to the size of the competitive overlap, the proposed Rite Aid-Revco merger is the first drug store merger where the focus has been on anticompetitive price increases to the growing numbers of employees covered by these pharmacy benefit plans, rather than exclusively focusing on the cash paying customer.

The FTC will argue in court for a preliminary injunction on grounds that the Rite Aid- Revco merger would violate federal antitrust laws by substantially reducing competition for prescription drugs sold in retail pharmacy outlets in numerous geographic areas. They include areas of Ohio, Indiana, Maryland, Pennsylvania, Virginia, West Virginia, North Carolina, South Carolina and New York. The preliminary injunction would prevent the merger from going forward until the conclusion of an administrative trial and any appeals on the legality of the merger. If the court grants the FTC’s motion, the Commission will have 20 days within which to determine whether to issue an administrative complaint. That administrative complaint would mark the beginning of the administrative trial process.

Rite Aid is based in Camp Hill, Pennsylvania, and Revco is based in Twinsburg, Ohio. They are the two largest retail drug store chains in the United States. In recent years, the FTC has challenged other acquisitions of retail pharmacy chains by both companies, and negotiated consent agreements with the firms that required divestitures to restore competition in various areas of the country.

The Commission vote to authorize the preliminary injunction motion was 5-0. The motion will be filed in U.S. District Court for the Northern District of Ohio.

Copies of the FTC complaint seeking a preliminary injunction will be available upon filing in court from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-271 0. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov

(FTC File No. 961 0020)