FTC Agreement with Kroger and Fred Meyer Preserves Supermarket Competition in Arizona, Wyoming and Utah

The Federal Trade Commission today announced a proposed settlement agreement with Kroger Co. and Fred Meyer Stores, Inc. The agreement would resolve FTC charges that the proposed acquisition of Fred Meyer by Kroger would substantially lessen supermarket competition in Arizona, Wyoming, and Utah and could result in higher prices or reduced quality and selection for consumers. The proposed agreement would require Kroger and Fred Meyer to divest eight supermarkets in seven communities. Under the consent agreement, Kroger would have to divest five supermarkets in the three states and Fred Meyer would have to divest three stores in Arizona and Wyoming.

"Consumers in Arizona, Wyoming, and Utah can now be assured that they will continue to receive the benefits of competition - lower prices and good quality and selection - from supermarkets in their communities," said William J. Baer, Director of the FTC's Bureau of Competition. "This agreement also ensures that there will be a speedy divestiture of the stores so that there is no interruption in service to consumers."

Kroger, the largest supermarket chain in the United States, is based in Cincinnati, Ohio, and operates approximately 1,300 stores in 24 states. Kroger's supermarkets operate under the "Kroger," "Fry's," "Dillons," "King Sooper," "City Market," and "Gerbes" trade names. In the three states where Kroger competes with Fred Meyer, Kroger operates under the "Fry's," "City Market" and "King Sooper" trade names.

Fred Meyer, based in Portland, Oregon, operates approximately 800 supermarkets in 12 western states. Fred Meyer's supermarkets operate under the "Smith's Food & Drug Centers" trade name in Arizona and Utah, and the "Price Rite" trade name in Arizona.

According to the FTC, Kroger and Fred Meyer currently compete against each other in and near Prescott, Sierra Vista, and Yuma, Arizona; Green River and Rock Springs, Wyoming; and Price, Utah. In Cheyenne, Wyoming, Kroger is an actual potential competitor against Fred Meyer. In these seven markets, the FTC charged, the acquisition would increase concentration and, as a result, decrease competition. Entry into these markets would be difficult and would not be timely, likely, or sufficient to prevent anticompetitive effects, the agency said. The proposed acquisition, the agency charged, could result in price increases, and decreases in the quality and selection of food, groceries or services.

The proposed settlement would resolve the FTC's antitrust concerns. Kroger and Fred Meyer would have to divest eight specific supermarkets in the seven communities. Kroger would have to sell two "Fry's" supermarkets and three "City Market" supermarkets in the three states. Fred Meyer would have to sell two "Smith's" in Cheyenne, Wyoming, and one "Smith's" in Sierra Vista, Arizona. These divestitures include either all of the Kroger stores or all of the Fred Meyer supermarkets in each market.

The proposed consent agreement would require the following supermarkets to be divested to Nash-Finch Company, one of the largest food wholesalers in the United States and an operator of many company-owned supermarkets:

"Smith's Food & Drug Centers," located at 1600 E. Pershing Blvd., Cheyenne, Wyoming;

"Smith's Food & Drug Centers," located at 3745 East Lincoln Way, Cheyenne, Wyoming;

The following supermarket would be sold to Albertson's, Inc., one of the largest retail food and drug chains operating in the United States:

"City Market," located at 760 Price River Dr., Price, Utah.

Five supermarkets would be sold to Fleming Companies, Inc., the second largest supermarket wholesaler in the United States and an operator of many company-owned supermarkets:

"City Market," located at 401 N. Center, Rock Springs, Wyoming;

"City Market," located at 400 Uinta Drive, Green River, Wyoming;

"Fry's," located at 1519 W. Gurley Road, Prescott, Arizona;

"Smith's Food & Drug Centers," located at 85 South Highway 92, Sierra Vista, Arizona;

"Fry's," located at 2600 W. 16th Street, Yuma, Arizona.

Under the terms of the proposed consent order, Kroger and Fred Meyer would have to divest the supermarkets no later than 20 days after Fred Meyer becomes a wholly-owned subsidiary of Kroger or four months after the proposed consent order is signed (April 29, 1999), whichever is earlier. The proposed order also would require that Kroger immediately rescind any transaction that the Commission finds not acceptable at the time the agency decides to make the proposed order final.

Kroger and Fred Meyer also would have to maintain the marketability and viability of all supermarkets pending divestiture.

For a period of ten years from the date the proposed consent order becomes final, Kroger and Fred Meyer would be required to provide notice to the Commission prior to acquiring supermarket assets in Cochise, Yavapai, or Yuma counties, Arizona; Laramie or Sweetwater counties, Wyoming; or Carbon County, Utah. For a period of ten years, the proposed order also would prohibit the companies from entering into or enforcing any agreement, in those same counties, that restricts anyone that acquires an interest in a supermarket to operate a supermarket at that site if such supermarket was formerly owned or operated by Kroger or Fred Meyer. In addition, except for certain exceptions, Kroger and Fred Meyer may not remove fixtures or equipment from a store or property owned or leased in the six counties, that is no longer in operation as a supermarket.

The Commission vote to announce the proposed consent agreement for public comment was 4-0.

A summary of the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission 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.

NOTE: A consent agreement 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 order, and an analysis of the proposed consent order to aid public comment are available from the FTC's web site: http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 991 0024)