Preserving Competition, FTC Requires Divestitures Before Allowing Wal-Mart's Acquisition of Supermercados Amigo In Puerto Rico

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Company Would be Required to Divest Four Amigo Stores to Supermercados Maximo, Inc.

Under the terms of a proposed consent order accepted for public comment by the Federal Trade Commission and announced today, Wal-Mart Stores, Inc. (Wal-Mart) would be allowed to purchase Supermercados Amigo, Inc. (Amigo), the largest supermarket chain in Puerto Rico on the condition that it divest four existing Amigo stores to Supermercados Maximo (Maximo) to ensure continued competition among supermarkets, supercenters, and club stores on the island. The stores are located in Cidra, Ponce, Manati, and Vega Baja, Puerto Rico.

According to the Commission, there is ample evidence that a significant portion of Puerto Rico consumers use full-service supermarkets, supercenters and club stores interchangeably. This led the FTC to define a product market that consists of full-service supermarkets, supercenters, and the retail sale of supermarket-type items at club stores or similar stores that allow consumers to complete substantially all of their weekly food shopping in one visit.

"In this particular investigation, the Commission determined that Wal-Mart's supercenters and club stores do, in fact, compete directly with Amigo supermarkets in several geographic areas in Puerto Rico," said Joe Simons, Director of the FTC's Bureau of Competition. "While this is the first 'supermarket' investigation in which the Commission has included club stores in the market definition, it does not indicate a change in policy. Instead, it underscores the fact that the Commission conducts merger investigations on a case-by-case basis, considers all of the relevant facts, and makes an informed decision based on those facts."

Parties to the Transaction

Wal-Mart is a global food and general merchandise retailer headquartered in Arkansas.

The company operates or services approximately 4,200 stores in the United States, Europe, Latin America, and Asia and had sales of over $191 billion in 2001. In Puerto Rico, Wal-Mart, through its subsidiary Wal-Mart Puerto Rico, Inc., operates nine traditional Wal-Mart Stores, one Wal-Mart Super Center, and eight SAM's Clubs.

Amigo, headquartered in San Juan, Puerto Rico, is the largest supermarket chain in Puerto Rico, based on dollar sales. With annual sales in 2001 of approximately $542 million, Amigo operates 36 supermarkets under the Amigo trade name in Puerto Rico.

On February 5, 2002 Wal-Mart and Amigo signed an agreement through which Wal-Mart will buy all outstanding voting securities of Amigo through the merger of W-M Puerto Rico Acquisition Corp., an indirect wholly owned subsidiary of Wal-Mart, with Amigo. Amigo will continue as the surviving corporation. As a result of the merger, Wal-Mart will hold 100 percent of the voting securities of Amigo.

Market Definition Background

Unlike prior supermarket investigations by the Commission, this investigation involved geographic markets in Puerto Rico. The markets at issue have characteristics that support a broader relevant product market than those identified in past supermarket investigations.

There are approximately 250 supermarkets across Puerto Rico, with the majority in the San Juan metropolitan area. There are numerous small and mid-sized supermarket chains throughout the island. A substantial portion of retail purchasers in Puerto Rico regard full-service supermarkets, supercenters, and club stores as reasonably interchangeable for fulfilling substantially all of their weekly food and grocery shopping requirements in one visit. These stores all offer a distinct set of products and services that enable them to compete in the relevant line of commerce described above.

The Commission's Complaint

According to the Commission's complaint, Wal-Mart's acquisition of all of the outstanding voting securities of Amigo, if consummated, may substantially lessen competition in the identified geographic markets in violation of Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act by eliminating direct competition between supercenters and club stores owned or controlled by Wal-Mart and supermarkets owned and controlled by Amigo; by increasing the likelihood that Wal-Mart will unilaterally exercise market power; and 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 that the quality and selection of food, groceries or services will decrease, in the relevant markets.

The complaint also alleges that entry by a competitor would not be timely, likely, or sufficient to prevent anticompetitive effects in the relevant geographic markets.

Terms of the Proposed Consent Order

Under the terms of the proposed consent order, to remedy the alleged anticompetitive effects of the transaction, within 10 days after the acquisition is consummated Wal-Mart would be required to divest four Amigo supermarkets, in Cidra, Ponce, Manati, and Vega Baja, Puerto Rico. All four stores will be sold to Maximo, a Commission-approved buyer headquartered in Hato Rey, Puerto Rico. The proposed buyer includes as its founders and management two former long-time members of Amigo's board, and managers at the four stores are expected to remain in place, facilitating the stores' continued operation as competitive entities.

The proposed order allows Wal-Mart to divest the stores to Maximo during the public comment period. If the Commission, in making the proposed order final, finds that the buyer is not an acceptable acquirer, Wal-Mart must immediately rescind the transaction and divest the assets to another buyer within three months. In addition, the proposed order enables the Commission to appoint a trustee to divest any supermarkets or sites identified in the order that have not been divested to its satisfaction. It also allows the FTC to seek civil penalties against Wal-Mart for non-compliance with the order's terms.

Further, the proposed order would require Wal-Mart to maintain the viability and competitiveness of the supermarkets to be divested pending their sale; to do nothing to cause a deterioration of their marketability or viability; to continue to honor existing relationships with suppliers, customers, and employees; and to keep the supermarkets open for business and maintain inventory levels consistent with past practices. For 10 years, Wal-Mart also would be prohibited from acquiring - without providing the FTC with prior notice - any supermarket, supercenter, or club store (or any interest in any of such stores) in the municipalities that include Cayey, Cidra, Ponce, Juana Diaz, Barceloneta, Manati, and Vega Baja, Puerto Rico. The proposed order would not, however, restrict Wal-Mart from building new supermarkets, supercenters, or club stores in these areas; nor would it restrict Wal-Mart from leasing facilities not operated as such stores in the previous six months.

Finally, in addition to requiring compliance with certain terms designed to allow entry by competitors who wish to acquire supermarket sites previously owned by Wal-Mart, the order would require Wal-Mart to file compliance reports with the Commission for 10 years.

The Commission vote to accept the consent order and place a copy on the public record was 4-0, with Commissioner Sheila F. Anthony recused. The order will be subject to public comment for 30 days, until December 20, 2002, after which the Commission will decide whether to make it final. Comments should be sent to: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Ave., 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.

The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail:; Telephone (202) 326-3300. For more information on the laws that the Commission enforces, the Commission has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at

(FTC File No. 021-0090)

Contact Information

Media Contact:
Mitchell J. Katz,
Office of Public Affairs
Staff Contact:
Barbara Anthony,
Regional Director, FTC Northeast Region
Michael J. Bloom,
Senior Counsel, FTC Northeast Region