UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

ALBERTSON’S, INC., a corporation;
LOCOMOTIVE ACQUISITION CORPORATION, a corporation;
BUTTREY FOOD AND DRUG STORE COMPANY, a corporation; and
FS EQUITY PARTNERS II, L.P., a limited partnership.

Docket No.

COMPLAINT

Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission ("Commission"), having reason to believe that respondent Albertson’s, Inc. ("Albertson’s") and respondent Locomotive Acquisition Corporation ("Locomotive"), a wholly-owned subsidiary of respondent Albertson’s, have entered into an agreement to acquire all of the outstanding shares of respondent Buttrey Food and Drug Store Company, Inc. ("Buttrey"), a corporation of which a majority of the voting securities is owned by respondent FS Equity Partners II, L.P. ("FS Equity Partners"), all subject to the jurisdiction of the Commission, in violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, that such acquisition, 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, and that a proceeding in respect thereof would be in the public interest, hereby issues its complaint, stating its charges as follows:

Definition

1. For the purposes of this complaint:

"Supermarket" means a full-line retail grocery store with annual sales of at least $2 million that carries a wide variety of food and grocery items in particular product categories, including bread and dairy products; refrigerated and frozen food and beverage products; fresh and prepared meats and poultry; produce, including fresh fruits and vegetables; shelf-stable food and beverage products, including canned and other types of packaged products; staple foodstuffs, which may include salt, sugar, flour, sauces, spices, coffee, and tea; and other grocery products, including nonfood items such as soaps, detergents, paper goods, other household products, and health and beauty aids.

Albertson’s, Inc.

2. Respondent Albertson’s is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at East Parkcenter Boulevard, Boise, Idaho 83726. Albertson’s had $14.7 billion in total sales for the fiscal year ending January 31, 1998.

3. Respondent Albertson’s is, and at all times relevant herein has been, engaged in the operation of supermarkets in 23 Western, Midwestern, and Southern states.

4. Respondent Albertson’s is, and at all times relevant herein has been, engaged in commerce as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. 12, and is a corporation whose business is in or affecting commerce as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. 44.

Locomotive Acquisition Corporation

5. Respondent Locomotive is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at c/o Albertson’s, Inc., East Parkcenter Boulevard, Boise, Idaho 83726. .

6. Respondent Locomotive is, and at all times relevant herein has been, a wholly-owned subsidiary of Albertson’s established to acquire the outstanding shares of Buttrey.

7. Respondent Locomotive is, and at all times relevant herein has been, engaged in commerce as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. 12, and is a corporation whose business is in or affecting commerce as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. 44.

Buttrey Food and Drug Stores Company

8. Respondent Buttrey is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its office and principal place of business located at 601 6th Street, S.W., Great Falls, Montana 59404. Buttrey had $391.4 million in total sales for the fiscal year ending January 31, 1998.

9. Respondent Buttrey is, and at all times relevant herein has been, engaged in the operation of supermarkets in Montana, Wyoming, and North Dakota.

10. Respondent Buttrey is, and at all times relevant herein has been, engaged in commerce as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. 12, and is a corporation whose business is in or affecting commerce as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. 44.

FS Equity Partners II, L.P.

11. Respondent FS Equity Partners is a limited partnership organized, existing, and doing business under and by virtue of the laws of the State of California, with its office and principal place of business located at 11100 Santa Monica Boulevard, Suite 1900, Los Angeles, California 90025.

12. Respondent FS Equity Partners is, and at all times relevant herein has been, the owner of a majority of the voting securities of Buttrey.

13. Respondent FS Equity Partners is, and at all times relevant herein has been, engaged in commerce as "commerce" is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. 12, and is a partnership whose business is in or affecting commerce as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. 44.

Acquisition

14. On or about January 19, 1998, Albertson’s and Locomotive entered into an Agreement and Plan of Merger with Buttrey to acquire through a cash tender offer all of the outstanding common stock of Buttrey for $15.50 per share. The total value of the proposed acquisition is approximately $174 million.

Trade and Commerce

15. The relevant line of commerce (i.e., the product market) in which to analyze the acquisition described herein is the retail sale of food and grocery products in supermarkets.

16. Supermarkets provide a distinct set of products and services for consumers who desire to one-stop shop for food and grocery products. Supermarkets carry a full line and wide selection of both food and nonfood products (typically more than 10,000 different stock-keeping units ("SKUs")) as well as a deep inventory of those SKUs. In order to accommodate the large number of food and nonfood products necessary for one-stop shopping, supermarkets are large stores that typically have at least 10,000 square feet of selling space.

17. Supermarkets compete primarily with other supermarkets that provide one-stop shopping for food and grocery products. Supermarkets primarily base their food and grocery prices on the prices of food and grocery products sold at nearby supermarkets. Supermarkets do not regularly price-check food and grocery products sold at other types of stores and do not significantly change their food and grocery prices in response to prices at other types of stores. Most consumers shopping for food and grocery products at supermarkets are not likely to shop elsewhere in response to a small price increase by supermarkets.

18. Retail stores other than supermarkets that sell food and grocery products, such as neighborhood "mom & pop" grocery stores, convenience stores, specialty food stores (e.g., seafood markets, bakeries, etc.), club stores, military commissaries, and mass merchants, do not effectively constrain prices at supermarkets because they operate significantly different retail formats. None of these stores offers a supermarket’s distinct set of products and services that enable consumers to one-stop shop for food and grocery products.

19. The relevant sections of the country (i.e., the geographic markets) in which to analyze the acquisition described herein are the areas in and near following cities and towns:

a. Billings, Montana;

b Bozeman, Montana;

c. Butte, Montana;

d Great Falls, Montana;

e. Helena, Montana;

f. Missoula, Montana;

g. Casper, Wyoming;

h. Cheyenne, Wyoming;

I. Cody, Wyoming;

j. Gillette, Wyoming; and

k. Laramie, Wyoming.

Market Structure

20. The relevant markets are highly concentrated, whether measured by the Herfindahl- Hirschman Index (commonly referred to as "HHI") or by two-firm and four-firm concentration ratios. The acquisition would substantially increase concentration in each market. Albertson’s and Buttrey have a combined market share of more than 35% in each geographic market. The post-acquisition HHIs in the geographic markets range from 2,264 to 10,000.

Entry Conditions

21. Entry would not be timely, likely, or sufficient to prevent anticompetitive effects in the relevant sections of the country.

Actual Competition

22. Albertson’s and Buttrey are actual and direct competitors in the relevant markets.

Effects

23. The effect of the acquisition, if consummated, may be substantially to lessen competition in the relevant line of commerce in the relevant sections of the country in violation of 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, in the following ways, among others:

a. by eliminating direct competition between supermarkets owned or controlled by Albertson’s and supermarkets owned or controlled by Buttrey;

b. by increasing the likelihood that Albertson’s will unilaterally exercise market power; and

c. by increasing the likelihood of, or facilitating, collusion or coordinated interaction,

each of which increases the likelihood that the prices of food, groceries or services will increase, and the quality and selection of food, groceries or services will decrease, in the relevant sections of the country.

Violations Charged

24. The Agreement and Plan of Merger between Albertson’s and Locomotive to acquire all of the outstanding stock of Buttrey violates Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. 45, and the proposed acquisition would, if consummated, 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.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this day of , 19 , issues its complaint against said respondents.

By the Commission.

SEAL:

Donald S. Clark
Secretary