9910308

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

ETABLISSEMENTS DELHAIZE FRERES ET CIE "LE LION" S.A., a corporation; DELHAIZE AMERICA, INC., a corporation; and HANNAFORD BROS. CO., a corporation.

Docket No. C-3962

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 Delhaize America, Inc. ("Delhaize America"), of which respondent Etablissements Delhaize Freres et Cie "Le Lion" S.A. ("Delhaize") is the majority owner, have entered into an agreement to acquire all of the outstanding voting stock of respondent Hannaford Bros. Co. ("Hannaford"), 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.

Etablissements Delhaize Freres et Cie "Le Lion" S.A.

2. Respondent Delhaize is a corporation organized, existing, and doing business under and by virtue of the laws of Belgium, with its office and principal place of business located at rue Osseghem, 1080 Brussels, Belgium.

3. Respondent Delhaize, through Delhaize America, of which Delhaize is the majority owner, is, and at all times relevant herein has been, engaged in the operation of supermarkets in Virginia, North Carolina, South Carolina, Georgia, Florida, Tennessee, Kentucky, West Virginia, Pennsylvania, Delaware, and Maryland. Delhaize through Delhaize America operates more than 1200 supermarkets in these states under the trade names "Food Lion," "Save 'N Pack," and Kash n' Karry. Delhaize had $11 billion in total sales in the United States for 1999.

4. Respondent Delhaize 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.

Hannaford Bros. Co.

5. Respondent Hannaford is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Maine, with its office and principal place of business located in Portland, ME.

6. Respondent Hannaford is, and at all times relevant herein has been, engaged in the operation of supermarkets in Virginia, North Carolina, South Carolina, Maine, Massachusetts, New Hampshire, Vermont, and New York. Hannaford operates approximately 50 supermarkets in Virginia, North Carolina, and South Carolina under the "Hannaford" trade name. Hannaford had $3.46 billion in total sales for 1999.

7. Respondent Hannaford 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.

Acquisition

8. On August 17, 1999, Delhaize America and Hannaford entered into an Agreement and Plan of Merger. Delhaize America will acquire all of the outstanding voting stock of Hannaford for approximately $3.5 billion.

Trade and Commerce

9. 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.

10. 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.

11. 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.

12. 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.

13. The relevant sections of the country (i.e., the geographic markets) in which to analyze the acquisition described herein are the county or counties that include the following incorporated cities and towns in North Carolina:

a) the Wilmington, NC MSA;
 
b) Columbus County, NC;
 
c) Pender County, NC;
 
d) Duplin County;
 
e) the Greater Raleigh area, consisting of Wake County excluding the cities and towns of Wake Forest, Rolesville, Zebulon, and Wendell;
 
f) the Richmond, VA MSA;
 
g) the portion of the Norfolk-Virginia Beach-Newport News VA MSA that includes Newport News, Hampton, and other parts of the MSA north of the James River: and
 
h) the portion of the Norfolk-Virginia Beach-Newport News VA MSA that includes Norfolk, Virginia Beach, Portsmouth, and other parts of the MSA south of the James River.

Market Structure

14. 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. Delhaize America and Hannaford would have a combined market share that ranges from 36.7 percent to 93.7% percent in each geographic market. The post-acquisition HHIs in the geographic markets range from 2764 points to 8817 points.

Entry Conditions

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

Actual Competition

16. Delhaize through Delhaize America and Hannaford are actual and direct competitors in the relevant markets.

Effects

17. 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 Delhaize and supermarkets owned and controlled by Hannaford;
 
b) by increasing the likelihood that Delhaize 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

18. The Agreement and Plan of Merger between Delhaize America and Hannaford to acquire all of the outstanding voting stock of Hannaford 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 twenty-fourth day of July, 2000, issues its complaint against said respondents.

By the Commission.

SEAL:

Donald S. Clark
Secretary