9810254 UNITED STATES OF AMERICA In the Matter of KONINKLIJKE AHOLD NV, a corporation; GIANT FOOD INC., a corporation; and THE 1224 CORPORATION, a corporation. Docket No. C-3861 COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and the Clayton Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission ("Commission"), having reason to believe that respondent Koninklijke Ahold nv ("Ahold") has entered into an agreement to acquire all of the Class AC voting securities of respondent Giant Food Inc. ("Giant") held by respondent The 1224 Corporation ("1224"), 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:
Koninklijke Ahold nv 2. Respondent Ahold is a corporation organized, existing, and doing business under and by virtue of the laws of The Netherlands, with its office and principal place of business located at Albert Heijnweg 1, 1507 EH Zaandam, The Netherlands. 3. Respondent Ahold, through Ahold USA, Inc., BI-LO, Inc., Giant Food Stores, Inc., The Stop & Shop Companies, Inc., and Top's Market, Inc., its wholly-owned domestic subsidiaries, is, and at all times relevant herein has been, engaged in the operation of supermarkets in Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Virginia, and West Virginia. Ahold and its wholly-owned domestic subsidiaries operate approximately 880 supermarkets in these states under the BI-LO, Edwards, Finast, Giant, Martin's, Stop & Shop, and Top's trade names. Ahold had $14.29 billion in total United States sales for the fiscal year that ended on December 28, 1997. 4. Respondent Ahold 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. Giant Food Inc. 5. Respondent Giant 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 6300 Sheriff Road, Landover, Maryland 20785. 6. Respondent Giant is, and at all times relevant herein has been, engaged in the operation of supermarkets in Delaware, Maryland, New Jersey, Pennsylvania, Virginia, and the District of Columbia. Giant operates approximately 179 supermarkets under the Giant and Super G trade names. Giant had $4.23 billion in total sales for the fiscal year that ended on February 28, 1998. 7. Respondent Giant 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. The 1224 Corporation 8. Respondent 1224 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 6300 Sheriff Road, Landover, Maryland 20785. 9. Respondent 1224 owns all of the Class AC voting stock of Giant, which elects five of the nine directors of Giant. 10. Respondent 1224 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 11. On or about May 19, 1998, Ahold and 1224 entered into a Stock Purchase Agreement pursuant to which Ahold will acquire all of the Class AC voting stock of Giant from 1224 and all of the Class A non-voting common stock of Giant for $43.50 per share for cash. The Class AC voting stock elects five of the nine directors of Giant. Separately, Ahold is acquiring from J Sainsbury USA Holdings, Inc., a subsidiary of J Sainsbury, plc, a United Kingdom corporation, all of the Class AL voting stock of Giant, which elects four of the nine directors of Giant. The total value of the proposed acquisition of the Class AC and Class AL voting stock is approximately $105.4 million. The total value of the proposed acquisition of the Class A non-voting common stock is approximately $2.6 billion. Trade and Commerce 12. 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. 13. 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. 14. 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. 15. 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. 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. 16. 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 the following cities and towns:
Market Structure 17. The Bel Air, Maryland, Eldersburg, Maryland, Frederick, Maryland, Westminster, Maryland, Norristown, Pennsylvania, Warminster, Pennsylvania, and Yardley, Pennsylvania, 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. Ahold and Giant would have a combined market share of near or greater than 35% in each geographic market. The post-acquisition HHIs in the geographic markets range from 3,008 to 6,716. 18. The Hilltown, Pennsylvania relevant market is highly concentrated. The market will remain highly concentrated as a result of this acquisition, and will be significantly more concentrated than it would have been but for this acquisition. Entry Conditions 19. Entry would not be timely, likely, or sufficient to prevent anticompetitive effects in the relevant markets. Actual Competition 20. Ahold and Giant are actual and direct competitors in and near Bel Air, Maryland, Eldersburg, Maryland, Frederick, Maryland, Westminster, Maryland, Norristown, Pennsylvania, Warminster, Pennsylvania, and Yardley, Pennsylvania. Actual Potential Competition 21. Ahold is an actual potential competitor against Giant in and near Hilltown, Pennsylvania. But for the acquisition, Ahold and Giant would have become direct competitors in the Hilltown, Pennsylvania, relevant market. The acquisition will eliminate that competition. Effects 22. 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:
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 23. The Stock Purchase Agreement between Ahold and 1224, pursuant to which Ahold will acquire all of the Class AC voting stock of Giant from 1224 and the Class A non-voting common stock of Giant, 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 fifth day of April, 1999, issues its complaint against said respondents. By the Commission. SEAL: Donald S. Clark |