IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MISSOURI

FEDERAL TRADE COMMISSION
Washington, D.C. 20580
Plaintiff,

v.

SCHNUCK MARKETS, INC.,
11420 Lackland Road
St. Louis, Missouri 63146-6928
Defendant.

Civil Action No.

COMPLAINT

Plaintiff, the Federal Trade Commission, by its undersigned attorneys designated by it, brings this action under Sections 16(a)(1) and 5(l) of the Federal Trade Commission Act, as amended, 15 U.S.C.  56(a)(1) and 45(l), for civil penalties and for such other equitable relief as the court deems appropriate, for violations of a final order to cease and desist issued by the Federal Trade Commission.

JURISDICTION AND VENUE

1. This Court has subject matter jurisdiction pursuant to 28 U.S.C.  1331, 1337, 1345, and 1355, and 15 U.S.C.  45(l) and 56(a)(1).

2. Venue in this District is proper by virtue of the fact that defendant is a Missouri corporation operating and doing business in this District.

3. Schnuck Markets, Inc. ("Schnucks") is made a defendant herein. Schnucks is a Missouri corporation with its principal place of business located at 11420 Lackland Road, St. Louis, Missouri 63146-6928. Schnucks is engaged in the retail sale of food and grocery products in supermarkets in the United States.

4. Schnucks, at all times relevant to this proceeding, has been engaged in commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C.  44.

PRIOR COMMISSION PROCEEDINGS

5. In a proceeding entitled In the Matter of SCHNUCK MARKETS, INC., FTC Docket No. C-3585, the Commission issued an administrative complaint charging Schnucks with violating Section 7 of the Clayton Act, 15 U.S.C.  18, and Section 5 of the Federal Trade Commission Act, 15 U.S.C.  45. The administrative complaint alleged, inter alia, that the acquisition by Schnucks of certain supermarket assets of National Holdings, Inc. and certain affiliates ("National") violated 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. The complaint alleged that the acquisition would lessen competition among supermarkets in the St. Louis MSA.

6. On June 8, 1995, the Commission issued its final order in FTC Docket No. C-3585 ("Order"), with the consent of Schnucks. The Order was duly served upon Schnucks and became final on June 13, 1995. The Order has not at any time been modified or set aside, and is now and has been at all times since June 13, 1995, in full force and effect.

7. Paragraph II of the Order requires in part that Schnucks divest, to an acquirer who has received prior approval of the Commission, the defined assets to be divested at 24 specified supermarket locations ("supermarkets to be divested") within twelve months of the date the Order becomes final and that, pending divestiture of the supermarkets to be divested, Schnucks, "shall take such actions as are necessary to maintain the viability, competitiveness, and marketability of the [supermarkets to be divested]. . . and to prevent [their] destruction, removal, wasting, deterioration, or impairment. . . except in the ordinary course of business and except for ordinary wear and tear." Eighteen of the supermarkets to be divested were supermarkets acquired from National ("National supermarkets to be divested") and six of the supermarkets to be divested were Schnucks supermarkets ("Schnucks supermarkets to be divested"). Paragraph II(D) of the Order further requires that Schnucks shall comply with all the terms of the March 8, 1995, Asset Maintenance Agreement entered between Schnucks and the Federal Trade Commission and that such Asset Maintenance Agreement shall continue in effect until Schnucks has divested the supermarkets to be divested, as required.

8. Paragraph 4 of the March 8, 1995, Asset Maintenance Agreement provides, in part, that, from the time Schnucks acquires any of the supermarkets to be divested, including the National supermarkets to be divested, it "shall maintain the viability, competitiveness and marketability" of the supermarkets to be divested and "shall not cause the wasting or deterioration" of the supermarkets to be divested, "nor shall it sell, transfer, encumber or otherwise impair their marketability or viability."

VIOLATIONS ALLEGED

9. On or about June 12, 1995, Schnucks acquired approximately 61 supermarkets from National.

10. On or about November 29, 1995, Schnucks entered into an agreement with Family Company of America ("Family") to divest 23 of the supermarkets to be divested. Among other terms, the contract conveyed a leasehold interest in 4 supermarkets for which Schnucks owned, directly or indirectly, the supermarket buildings and the underlying real estate. On or about December 29, 1995, Schnucks applied for Federal Trade Commission approval of its agreement to divest to Family. The Federal Trade Commission granted its approval on or about March 12, 1996. Schnucks divested to Family the 23 supermarkets to be divested on or about March 16, 1996.

11. On or about February 1, 1996, Schnucks entered into a contract to divest the supermarket identified at Paragraph II.A. 2.a. of the Order to Wild Oats Markets. On or about March 6, 1996, Schnucks applied for Federal Trade Commission approval of its agreement to divest to Wild Oats Markets. On or about May 9, 1996, The Federal Trade Commission granted its approval, and Schnucks divested the supermarket shortly thereafter.

12. On or about May 31, 1996, Schnucks applied for approval to divest to Four Store Partners the real estate underlying the four supermarkets leased to Family and referred to herein at Paragraph 10.

13. On or about September 27, 1996, Schnucks amended its contract with Family and its contract with Four Store Partners to include assets previously excluded from its agreement and divestiture.

14. On or about October 16, 1996, the Federal Trade Commission granted Schnucks its approval to divest to Four Store Partners, and Schnucks divested the real estate shortly thereafter.

15. Prior to divesting the supermarkets to be divested, at those stores, Schnucks, among other things, inadequately stocked groceries or other merchandise; inadequately stocked advertised items; and closed or operated in a significantly reduced manner such departments as the bakery, delicatessen, seafood, floral and video departments.

16. Prior to divesting the supermarkets to be divested, Schnucks failed to maintain necessary levels of routine cleaning, repair, and maintenance at the supermarkets to be divested.

17. Prior to divesting the supermarkets to be divested, Schnucks removed important equipment from the supermarkets to be divested.

18. Prior to divesting the supermarkets to be divested, Schnucks did not adequately staff the supermarkets to be divested and transferred personnel from the supermarkets to be divested to other supermarkets operated by Schnucks.

19. Prior to divesting the supermarkets to be divested, Schnucks operated the supermarkets to be divested inadequately, and differently from the other supermarkets it operated, including providing inadequate signage and inadequate customer service, maintaining non-published telephone numbers, failing to make available certain promotional features and other ancillary services for customers, and failing to make available certain employee incentive programs.

20. On or about March 8, 1996 (a week prior to divestiture), at the check-out counters of the 23 supermarkets to be divested to Family, Schnucks issued to customers check-out coupons informing those customers that the issuing supermarket would soon close and directing those customers to shop at a designated, alternative Schnucks location or locations.

21. Prior to the March 16, 1996, sale to Family of 23 supermarkets to be divested, Schnucks engaged in actions to deplete the salable inventory at those supermarkets.

22. Prior to the March 16, 1996, sale to Family of 23 supermarkets to be divested, Schnucks transferred to those supermarkets unsalable merchandise and used video tapes.

23. Prior to Family's acquisition of 23 supermarkets to be divested, Schnucks copied the pharmacy records at some or all of those supermarkets and retained such copies.

24. After the Order became final and Schnucks acquired the National supermarkets, sales at the supermarkets to be divested dropped significantly and did not recover prior to divestiture.

25. After the Order became final, Schnucks did not attempt to improve sales performance at the supermarkets to be divested.

26. As a result of Schnucks' actions, consumers have been denied the full benefits of competition anticipated by the Order and the remedial purposes of the Order have not been served.

27. After acquiring the National supermarkets on or about June 12, 1995, Schnucks divided the property acquired from National at the supermarket to be divested specified in Paragraph II.A.4.a. of the Order ("Sugar Creek supermarket") into two parcels.

28. Schnucks included in its contract with Family only one of the parcels acquired from National at the Sugar Creek supermarket.

29. The parcel at the Sugar Creek supermarket that Schnucks did not convey to Family at the time of the divestiture contained, among other things, approximately one-third of the parking lot for the Sugar Creek supermarket, the drainage channel for the entire parking lot, the lines of sight for the supermarket, and other assets "utilized in the supermarket operations" at the Sugar Creek supermarket, within the meaning of Paragraph II.A. of the Order.

30. Schnuck did not divest all the assets utilized in the supermarket operations of the Sugar Creek supermarket until on or about October 16, 1996.

Violations Alleged

Count 1

31. The allegations contained in Paragraphs 15-26 hereof are repeated and realleged as though fully set forth herein.

32. Schnucks did not maintain the viability, competitiveness, and marketability of each the supermarkets to be divested, as required by Paragraph II.C. of the Order.

33. Schnucks was continuously in violation of the Order with regard to each of the supermarkets to be divested for each day of the period from June 13, 1995, through March 16, 1996.

Count 2

34. The allegations contained in Paragraphs 12-14 and 27-30 hereof are repeated and realleged as though fully set forth herein.

35. Schnucks did not divest all the assets utilized in the supermarket operations of the Sugar Creek supermarket within the time period specified by the Order.

36. Schnucks was continuously in violation of the Order for each day of the period from June 14, 1996 through at least October 16, 1996.

PRAYER

WHEREFORE PLAINTIFF PRAYS:

1. That this Court adjudge and decree that, with respect to the violations alleged in Count 1, the defendant was in violation of the Order from June 13, 1995, through March 18, 1996.

2. That this Court adjudge and decree that, with respect to the violation alleged in Count 2, the defendant was in violation of the Order from June 14, 1996, through October 16, 1996.

3. That this Court enter judgment against the defendant for an appropriate civil penalty as allowed by law, 15 U.S.C.  45(l).

4. That this Court order Schnucks to divest additional supermarkets.

5. That plaintiff be awarded costs and disbursements of this action and such other and further relief as the Court may deem just and proper.

Dated: St. Louis, Missouri

, 1997

FOR THE PLAINTIFF FEDERAL TRADE COMMISSION:

William Baer
Director

George S. Cary
Senior Deputy Director

Daniel P. Ducore
Assistant Director
Bureau of Competition
Federal Trade Commission
Washington, D.C. 20580

Roberta S. Baruch
Kenneth A. Libby
Anne R. Schenof
Attorneys for Plaintiff
Federal Trade Commission
Washington, D.C. 20580
(202) 326-2687