UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
- Robert Pitofsky, Chairman
- Sheila F. Anthony
- Mozelle W. Thompson
- Orson Swindle
|In the Matter of
THE KROGER CO., a corporation, and
THE JOHN C. GROUB COMPANY, INC., a corporation.
DOCKET NO. C-3905
DECISION AND ORDER
The Federal Trade Commission ("Commission"), having initiated an
investigation of the proposed acquisition by The Kroger Co. ("Kroger"), through
its wholly-owned subsidiary, Kroger Limited Partnership I, of substantially all of the
assets of The John C. Groub Company, Inc. ("Groub"), and it now appearing that
Kroger and Groub, hereinafter sometimes referred to as "Respondents," having
been furnished with a copy of a draft complaint that the Bureau of Competition proposed to
present to the Commission for its consideration and which, if issued by the Commission,
would charge Respondents with violations of Section 5 of the Federal Trade Commission Act,
as amended, 15 U.S.C. § 45, and Section 7 of the Clayton Act, as amended, 15 U.S.C. §
The Respondents, their attorneys, and counsel for the Commission having thereafter
executed an agreement containing a consent order, an admission by Respondents of all the
jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the
signing of said agreement is for settlement purposes only and does not constitute an
admission by Respondents that the law has been violated as alleged in such complaint, or
that the facts as alleged in such complaint, other than jurisdictional facts, are true,
and waivers and other provisions as required by the Commission's Rules; and
The Commission having thereafter considered the matter and having determined that it
had reason to believe that the Respondents have violated the said Acts, and a complaint
should issue stating its charges in that respect, and having thereupon accepted the
executed consent agreement and placed such agreement on the public record for a period of
sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34
of its Rules, the Commission hereby issues its complaint, makes the following
jurisdictional findings and enters the following Order:
- 1. Respondent Kroger is a corporation organized, existing, and doing business under and
by virtue of the laws of the State of Ohio, with its office and principal place of
business located at 1014 Vine Street, Cincinnati, Ohio 45202.
- 2. Respondent Groub is a corporation organized, existing, and doing business under and
by virtue of the laws of the State of Indiana, with its office and principal place of
business located at 900 "A" Avenue East, Seymour, Indiana 47274.
- 3. The Federal Trade Commission has jurisdiction of the subject matter of this
proceeding and of the Respondents, and the proceeding is in the public interest.
IT IS ORDERED that, as used in this Order, the following definitions
- A. "Kroger" means The Kroger Co., its directors, officers, employees, agents,
representatives, predecessors, successors, and assigns; its subsidiaries, divisions,
groups, and affiliates controlled by The Kroger Co., and the respective directors,
officers, employees, agents, representatives, successors, and assigns of each.
B. "Groub" means The John C. Groub Company, Inc., its directors, officers,
employees, agents, representatives, predecessors, successors, and assigns; its
subsidiaries, divisions, groups, and affiliates controlled by The John C. Groub Company,
Inc., and the respective directors, officers, employees, agents, representatives,
successors, and assigns of each.
C. "Respondents" means Kroger and Groub, individually and collectively.
D. "Commission" means the Federal Trade Commission.
E. "Acquisition" means Kroger's proposed acquisition of substantially all of the
assets of Groub pursuant to the Asset Purchase Agreement Between Kroger Limited
Partnership I and the John C. Groub, Company, Inc. dated October 12, 1998.
F. "Assets To Be Divested" means the Supermarkets To Be Divested in this Order
and all assets, leases, properties, government permits (to the extent transferable),
customer lists, businesses and goodwill, tangible and intangible, related to or utilized
in the Supermarkets To Be Divested, but shall not include those assets consisting of or
pertaining to any of the Respondents' trade marks, trade dress, service marks, or trade
G. "Supermarket" means a full-line retail grocery store that carries a wide
variety of food and grocery items in particular product categories, including bread and
dairy products; frozen and refrigerated 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.
H. "Supermarkets To Be Divested" means the following Supermarkets:
1. Groub store no. 92 operating under the "Foods Plus" trade name, which is
located at 1343 North National Road, Columbus, Indiana 47201;
2. Groub store no. 89 operating under the "Jay C" trade name, which is located
at 2540 Eastbrook Plaza, Columbus, Indiana 47201; and
3. Kroger store no. 304 operating under the "Kroger" trade name, which is
located at 748 Jefferson Court, Madison, Indiana 47250.
I. "Roundy's" means Roundy's, Inc., a corporation organized, existing and doing
business under and by virtue of the laws of the State of Wisconsin, with its principal
place of business located at 23000 Roundy Drive, Pewaukee, Wisconsin 53702.
J. "Groub Agreement" means the Purchase Agreement between Roundy's and Groub
executed on June 10, 1999, for the divestiture by Groub of its stores listed in the
Supermarkets To Be Divested.
K. "Kroger Agreement" means the Purchase Agreement between Roundy's and Kroger
executed on June 22, 1999, for the divestiture by Kroger of its store listed in the
Supermarkets To Be Divested.
L. "Roundy's Agreements" means the Groub Agreement and the Kroger Agreement.
M. "Acquirer(s)" means Roundy's and/or the entity or entities approved by the
Commission to acquire the Assets To Be Divested pursuant to this Order, individually and
N. "Third Party Consents" means all consents from any other person, including
all landlords, that are necessary to effect the complete transfer to the Acquirer(s) of
the Assets To Be Divested.
IT IS FURTHER ORDERED that:
A. Respondents shall divest, absolutely and in good faith, the Assets To Be Divested to
Roundy's, in accordance with the Roundy's Agreements (which agreements shall not be
construed to vary or contradict the terms of this Order), no later than
- 1. twenty (20) days after the date on which the Acquisition is consummated, or
- 2. four (4) months after the date on which Respondents sign the Agreement Containing
whichever is earlier.
Provided, however, that if Respondents have divested the Assets To Be Divested
to Roundy's pursuant to the Roundy's Agreements prior to the date the Order becomes final,
and if, at the time the Commission determines to make the Order final, the Commission
notifies Respondents that Roundy's is not an acceptable Acquirer or that either the Kroger
Agreement or the Groub Agreement is not an acceptable manner of divestiture, then
Respondents shall immediately rescind the respective transaction with Roundy's and shall
divest the respective Assets To Be Divested within three (3) months of the date the Order
becomes final, absolutely and in good faith, at no minimum price, to an Acquirer that
receives the prior approval of the Commission and in a manner that receives the prior
approval of the Commission.
Provided, further, that Respondents shall not be required to divest any
front-end system, computer scanners, Kroger bascarts, satellite dishes, leased cable
lines, fixtures, equipment or inventory, at any Supermarket To Be Divested that the
Acquirer of the Assets To Be Divested indicates that it does not want to acquire, if the
Commission approves the divestiture to such Acquirer and approves the manner of the
divestiture excluding such assets.
B. Respondents shall obtain all required Third Party Consents prior to the closing of
the Roundy's Agreements, or any other agreement pursuant to which the Assets To Be
Divested are divested to an Acquirer.
C. The purpose of the divestitures is to ensure the continuation of the Assets To Be
Divested as ongoing viable enterprises engaged in the Supermarket business and to remedy
the lessening of competition resulting from the Acquisition as alleged in the Commission's
IT IS FURTHER ORDERED that:
A. If Respondents have not divested, absolutely and in good faith and with the
Commission's prior approval, the Assets To Be Divested within the time required by
Paragraph II of this Order, the Commission may appoint a trustee to divest the Assets To
Be Divested. In the event that the Commission or the Attorney General brings an action
pursuant to Section 5(l) of the Federal Trade Commission Act, 15 U.S.C.
§ 45(l), or any other statute enforced by the Commission, Respondents shall
consent to the appointment of a trustee in such action. Neither the appointment of a
trustee nor a decision not to appoint a trustee under this Paragraph shall preclude the
Commission or the Attorney General from seeking civil penalties or any other relief
available to it, including a court-appointed trustee, pursuant to Section 5(l)
of the Federal Trade Commission Act, or any other statute enforced by the Commission, for
any failure by the Respondents to comply with this Order.
B. If a trustee is appointed by the Commission or a court pursuant to Paragraph III.A.
of this Order, Respondents shall consent to the following terms and conditions regarding
the trustee's powers, duties, authority, and responsibilities:
- 1. The Commission shall select the trustee, subject to the consent of Respondents, which
consent shall not be unreasonably withheld. The trustee shall be a person with experience
and expertise in acquisitions and divestitures. If Respondents have not opposed, in
writing, including the reasons for opposing, the selection of any proposed trustee within
ten (10) days after receipt of written notice by the staff of the
Commission to Respondents of the identity of any proposed trustee, Respondents shall be
deemed to have consented to the selection of the proposed trustee.
- 2. Subject to the prior approval of the Commission, the trustee shall have the exclusive
power and authority to divest the Assets To Be Divested.
- 3. Within ten (10) days after appointment of the trustee, Respondents shall execute a
trust agreement that, subject to the prior approval of the Commission and, in the case of
a court-appointed trustee, of the court, transfers to the trustee all rights and powers
necessary to permit the trustee to effect each divestiture required by this Order.
- 4. The trustee shall have twelve (12) months from the date the Commission or court
approves the trust agreement described in Paragraph III.B.3. to accomplish the
divestitures, which shall be subject to the prior approval of the Commission. If, however,
at the end of the twelve-month period, the trustee has submitted a plan of divestiture or
believes that divestiture can be achieved within a reasonable time, the divestiture period
may be extended by the Commission, or, in the case of a court-appointed trustee, by the
court; provided, however, the Commission may extend the period for no more than
two (2) additional periods.
- 5. The trustee shall have full and complete access to the personnel, books, records, and
facilities related to the Assets To Be Divested or to any other relevant information, as
the trustee may request. Respondents shall develop such financial or other information as
such trustee may reasonably request and shall cooperate with the trustee. Respondents
shall take no action to interfere with or impede the trustee's accomplishment of the
divestitures. Any delays in divestiture caused by Respondents shall extend the time for
divestiture under this Paragraph in an amount equal to the delay, as determined by the
Commission or, for a court-appointed trustee, by the court.
- 6. The trustee shall use his or her best efforts to negotiate the most favorable price
and terms available in each contract that is submitted to the Commission, subject to
Respondents' absolute and unconditional obligation to divest expeditiously at no minimum
price. The divestitures shall be made in a manner that receives the prior approval of the
Commission and to an Acquirer or Acquirers that receive the prior approval of the
Commission; provided, however, if the trustee receives bona fide offers for an
asset to be divested from more than one acquiring entity, and if the Commission determines
to approve more than one such acquiring entity, the trustee shall divest such asset to the
acquiring entity or entities selected by Kroger from among those approved by the
Commission; provided further, however, that Kroger shall select such entity
within five (5) days of receiving notification of the Commission's approval.
- 7. The trustee shall serve, without bond or other security, at the cost and expense of
Respondents, on such reasonable and customary terms and conditions as the Commission or a
court may set. The trustee shall have the authority to employ, at the cost and expense of
Respondents, such consultants, accountants, attorneys, investment bankers, business
brokers, appraisers, and other representatives and assistants as are necessary to carry
out the trustee's duties and responsibilities. The trustee shall account for all monies
derived from the divestitures and all expenses incurred. After approval by the Commission
and, in the case of a court-appointed trustee, by the court, of the account of the
trustee, including fees for his or her services, all remaining monies shall be paid at the
direction of Kroger, and the trustee's power shall be terminated. The trustee's
compensation shall be based at least in significant part on a commission arrangement
contingent on the trustee's divesting the Assets To Be Divested.
- 8. Respondents shall indemnify the trustee and hold the trustee harmless against any
losses, claims, damages, liabilities, or expenses arising out of, or in connection with,
the performance of the trustee's duties, including all reasonable fees of counsel and
other expenses incurred in connection with the preparation for or defense of any claim,
whether or not resulting in any liability, except to the extent that such liabilities,
losses, damages, claims, or expenses result from misfeasance, gross negligence, willful or
wanton acts, or bad faith by the trustee.
9. If the trustee ceases to act or fails to act diligently, a substitute trustee shall be
appointed in the same manner as provided in Paragraph III.A. of this Order.
10. The Commission or, in the case of a court-appointed trustee, the court, may on its own
initiative or at the request of the trustee issue such additional orders or directions as
may be necessary or appropriate to accomplish each divestiture required by this Order.
11. In the event that the trustee determines that he or she is unable to divest the Assets
To Be Divested in a manner consistent with the Commission's purpose as described in
Paragraph II, the trustee may divest additional ancillary assets of Respondents and effect
such arrangements as are necessary to satisfy the requirements of this Order.
- 12. The trustee shall have no obligation or authority to operate or maintain the Assets
To Be Divested.
13. The trustee shall report in writing to Respondents and the Commission every sixty (60)
days concerning the trustee's efforts to accomplish each divestiture required by this
IT IS FURTHER ORDERED that Respondents shall maintain the viability,
marketability, and competitiveness of the Assets To Be Divested, and shall not cause the
wasting or deterioration of the Assets To Be Divested, nor shall they cause the Assets To
Be Divested to be operated in a manner inconsistent with applicable laws, nor shall they
sell, transfer, encumber or otherwise impair the viability, marketability or
competitiveness of the Assets To Be Divested. Respondents shall comply with the terms of
this Paragraph until such time as Respondents have divested the Assets To Be Divested
pursuant to the terms of this Order. Respondents shall conduct or cause to be conducted
the business of the Assets To Be Divested in the regular and ordinary course and in
accordance with past practice (including regular repair and maintenance efforts) and shall
use their best efforts to preserve the existing relationships with suppliers, customers,
employees, and others having business relations with the Assets To Be Divested in the
ordinary course of business and in accordance with past practice. Respondents shall not
terminate the operation of any Supermarket To Be Divested. Respondents shall continue to
maintain the inventory of each Supermarket To Be Divested at levels and selections (e.g.,
stock-keeping units) consistent with those maintained by such Respondent(s) at such
Supermarket in the ordinary course of business consistent with past practice. Respondents
shall use best efforts to keep the organization and properties of each Supermarket To Be
Divested intact, including current business operations, physical facilities, working
conditions, and a work force of equivalent size, training, and expertise associated with
the Supermarket. Included in the above obligations, Respondents shall, without limitation:
- A. maintain operations and departments and not reduce hours at each Supermarket To Be
B. not transfer inventory from any Supermarket To Be Divested other than in the ordinary
course of business consistent with past practice;
C. make any payment required to be paid under any contract or lease when due, and
otherwise pay all liabilities and satisfy all obligations associated with any Supermarket
To Be Divested, in each case in a manner consistent with past practice;
D. maintain the books and records of each Supermarket To Be Divested;
E. not display any signs or conduct any advertising (e.g., direct mailing,
point-of-purchase coupons) that indicates that any Respondent is moving its operations at
a Supermarket To Be Divested to another location, or that indicates a Supermarket To Be
Divested will close;
F. not remove the trade marks, trade dress, service marks, or trade names of Respondents
at any of the Supermarkets To Be Divested;
G. not conduct any "going out of business," "close-out,"
"liquidation" or similar sales or promotions at or relating to any Supermarket
To Be Divested; and
H. not change or modify in any material respect the existing advertising practices,
programs and policies for any Supermarket To Be Divested, other than changes in the
ordinary course of business consistent with past practice for Supermarkets of the
Respondents not being closed or relocated.
IT IS FURTHER ORDERED that, for a period of ten (10) years from the
date this Order becomes final, Kroger shall not, directly or indirectly, through
subsidiaries, partnerships, or otherwise, without providing advance written notification
to the Commission:
- A. Acquire any ownership or leasehold interest in any facility that has operated as a
Supermarket within six (6) months prior to the date of such proposed acquisition in the
counties of Bartholomew or Jefferson, Indiana; or
B. Acquire any stock, share capital, equity, or other interest in any entity that owns any
interest in or operates any Supermarket or owned any interest in or operated any
Supermarket within six (6) months prior to such proposed acquisition in the counties of
Bartholomew or Jefferson, Indiana.
Provided, however, that advance written notification shall not apply to the
construction of new facilities by Kroger or the acquisition of or leasing of a facility
that has not operated as a Supermarket within six (6) months prior to Kroger's offer to
purchase or lease.
Said notification shall be given on the Notification and Report Form set forth in the
Appendix to Part 803 of Title 16 of the Code of Federal Regulations as amended
(hereinafter referred to as the "Notification"), and shall be prepared and
transmitted in accordance with the requirements of that part, except that no filing fee
will be required for any such Notification, notification shall be filed with the Secretary
of the Commission, Notification need not be made to the United States Department of
Justice, and Notification is required only of Kroger and not of any other party to the
transaction. Kroger shall provide the Notification to the Commission at least thirty (30)
days prior to consummating any such transaction (hereinafter referred to as the
"first waiting period"). If, within the first waiting period, representatives of
the Commission make a written request for additional information or documentary material
(within the meaning of 16 C.F.R. § 803.20), Kroger shall not consummate the
transaction until twenty (20) days after substantially complying with such request. Early
termination of the waiting periods in this Paragraph may be requested and, where
appropriate, granted by letter from the Bureau of Competition. Provided, however,
that prior notification shall not be required by this Paragraph for a transaction for
which notification is required to be made, and has been made, pursuant to Section 7A of
the Clayton Act, 15 U.S.C. § 18a.
IT IS FURTHER ORDERED that, for a period of ten (10) years commencing
on the date this Order becomes final:
- A. Kroger shall neither enter into nor enforce any agreement that restricts the ability
of any person (as defined in Section 1(a) of the Clayton Act, 15 U.S.C. § 12(a))
that acquires any Supermarket, any leasehold interest in any Supermarket, or any interest
in any retail location used as a Supermarket on or after July 13, 1999, in the counties of
Bartholomew or Jefferson, Indiana, to operate a Supermarket at that site if such
Supermarket was formerly owned or operated by Kroger.
B. Kroger shall not remove any fixtures or equipment from a property owned or leased by
Kroger in the counties of Bartholomew or Jefferson, Indiana, that is no longer in
operation as a Supermarket, except (1) prior to and as part of a sale, sublease,
assignment, or change in occupancy of such Supermarket; or (2) to relocate such fixtures
or equipment in the ordinary course of business to any other Supermarket owned or operated
IT IS FURTHER ORDERED that:
- A. Within thirty (30) days after the date Respondents signed the Agreement Containing
Consent Order and every thirty (30) days thereafter until Respondents have fully complied
with the provisions of Paragraphs II, III, and IV of this Order, Respondents shall submit
to the Commission verified written reports setting forth in detail the manner and form in
which they intend to comply, are complying, and have complied with Paragraphs II, III, and
IV of this Order. Respondents shall include in their compliance reports, among other
things that are required from time to time, a full description of the efforts being made
to comply with Paragraphs II, III, and IV of the Order, including a description of all
substantive contacts or negotiations for divestitures and the identity of all parties
contacted. Respondents shall include in their compliance reports copies of all written
communications to and from such parties, all internal memoranda, and all reports and
recommendations concerning divestiture.
B. One (1) year from the date this Order becomes final, annually for the next nine (9)
years on the anniversary of the date this Order becomes final, and at other times as the
Commission may require, Kroger shall file verified written reports with the Commission
setting forth in detail the manner and form in which it has complied and is complying with
IT IS FURTHER ORDERED that Respondents shall notify the
Commission at least thirty (30) days prior to any proposed change in the corporate
Respondents, such as dissolution, assignment, sale resulting in the emergence of a
successor corporation, or the creation or dissolution of subsidiaries or any other change
in Respondents that may affect compliance obligations arising out of the Order.
IT IS FURTHER ORDERED that, for the purpose of determining or securing
compliance with this Order, upon written request with five (5) days' notice, Respondents
shall permit any duly authorized representative of the Commission:
- A. Access, during office hours and in the presence of counsel, to inspect the facilities
and to inspect and copy all books, ledgers, accounts, correspondence, memoranda and other
records and documents in the possession or under the control of Respondents relating to
any matters contained in this Order; and
- B. Without restraint or interference from Respondents, to interview officers, directors,
or employees of Respondents in the presence of counsel.
By the Commission.
Donald S. Clark
ISSUED: November 8, 1999