Supermarket Development Corporation

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF SUPERMARKET DEVELOPMENT CORPORATION, ET AL. CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SEC. 7 OF THE CLAYTON AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACTS Docket C~3224. Complaint, Mar. 17, 1988—Decision, Mar. 17, 1988 This consent order requires, among other things, Furr’s, a wholly owned subsidiary of Supermarket Development Corporation, to divest supermarkets in 12 towns and cities in Texas and New Mexico, to obtain prior Commission approval for future acquisitions by Furr’s of grocery stores located in the geographic area covered by the El Paso division, and to hold separate the El Paso division until the required divestitures are completed. :

Appearances For the Commission: Joan Greenbaum.

For the respondents: Joseph A. DeFrancis, Latham & Watkins, Washington, D.C. Joushua F. Greenberg and Michael Malina, Kay, Scholer, Fierman, Hays & Handler, New York City. -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, having reason to believe that respondents, Supermarket Development Corp. (“SDC” or “Furr’s”) and SSI Associates, L.P. (“Safeway”), entities subject to the jurisdiction of the Federal Trade Commission, have entered into an agreement, described in paragraph 10 herein, that, if consummated, would violate the provisions of Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45; that said agreement and the actions of the respondents to implement that agreement constitute violations of Section 5 of the FTC Act, 15 U.S.C. 45; and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint, stating its charges as follows:

I. DEFINITIONS 1. For the purposes of this complaint, the following definition shall apply:

Supermarket means any full-line retail food store with annual sales Complaint 110 F.T.C.

of not less than $1.5 million, and which sells primarily a wide variety of canned or frozen foods; dry groceries; non-edible grocery items; fresh meat, poultry and produce (vegetables and fruits). In addition, these stores often sell delicatessen items, bakery items, fresh fish, or other specialty items.

Ii, SUPERMARKET DEVELOPMENT CORP.

2. Respondent, Supermarket Development Corp., is a corporation organized and existing under the laws of the State of Texas, with executive offices located in Dallas, Texas. 3. SDC owns one hundred percent of the voting securities of Furr’s, Inc. and controls the operations of Furr’s, Inc. 4, Furr’s, Inc. is a corporation organized and existing under the laws of the state of Texas, with its principal place of business in Lubbock, Texas.

5. For the year ending December 31, 1986, SDC had net sales of $906,331,507. , 6. Furr’s 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. III. SSI ASSOCIATES, L.P.

7. SSI Associates, L.P. (“Safeway”), is a limited partnership organized and existing under the laws of the State of Delaware, with its ' principal place of business in San Francisco, California. 8. Safeway owns 96.4 percent of the voting securities of Safeway Stores, Inc. and controls the operations of Safeway Stores, Inc. 9. Safeway Stores, Inc. is a corporation organized and existing under the laws of the state of Delaware, with its principal place of business in Oakland, California.

10. For the year ending January 3, 1987, Safeway had net sales of $20,311,480,000.

11. Safeway 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. IV. THE ACQUISITION 12. On or about April 9, 1987, SDC entered into an agreement with Safeway whereby SDC will purchase the El Paso Division of Safeway (“El Paso Division”), which comprises one closed and 59 open conven- SUPERMARKET DEVELOPMENT CORPORATION, ET AL. 371 369 Complaint tional supermarkets; one food warehouse; a milk plant; and an ice cream plant. Almost half of the El Paso Division’s stores are in Albuquerque, New Mexico, and El Paso, Texas. The rest of the Division’s stores are in smaller metropolitan areas and towns in New Mexico and Texas. All are operated under the “Safeway” trade name and are conventional supermarkets. In 1986, the El Paso Division had grocery sales of $530. million. There are nineteen cities and towns in which SDC’s Furr’s stores and Safeway both operate grocery stores. V. TRADE AND COMMERCE A. Relevant Line of Commerce 13. A relevant line of commerce in which to analyze Furr’s acquisition of the El Paso Division is the retail sale and distribution of food and grocery items in supermarkets.

B. Relevant Section of the Country 14. Relevant sections of the country are individual cities and towns in the portions of West Texas and New Mexico served by the El Paso Division.

VI. MARKET STRUCTURE 15. Retail sale and distribution of food and grocery items in supermarkets in each of the following relevant sections of the country is extremely concentrated, whether measured by Herfindahl-Hirschman Indices (“HHI”) or by two-firm and four-firm concentration ratios: Fort Stockton and Pecos in Texas; and Alamogordo, Artesia, Clovis, Espanola, Hobbs, Las Vegas, Lovington, Portales, Roswell and Silver City in New Mexico.

VII. BARRIERS TO ENTRY 16. Entry into the markets set out in paragraph 15 herein, in the event of substantial price rises, is unlikely. VIII. ACTUAL COMPETITION _ 17. SDC and Safeway are actual competitors in the markets alleged herein.

IX. EFFECT 18. The effect of the acquisition, if consummated, may be substantially to lessen competition in relevant product markets in relevant sections of the country in violation of Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45, in the following ways, among others: Decision and Order 110 F.T.C.

a. by eliminating direct competition between SDC and Safeway; _ b. by increasing the likelihood that SDC will unilaterally exercise market power; and c. by increasing the likelihood of, or facilitating, collusion where the acquisition would significantly increase already high concentration; all of which increase the likelihood that firms will increase prices and restrict the output of food and groceries both in the near future and for a longer period of time. © X. VIOLATIONS CHARGED 19. The proposed acquisition of Safeway stores in the twelve markets described above in paragraph 15 would, if consummated, violate Section 7 of the Clayton Act, 15 U.S.C. 18, and Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45.

20. The Acquisition agreement set forth in paragraph 12 herein constitutes a violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of the acquisition of certain assets of SSI Associates, L.P. (“Safeway”) by Furr’s, Inc., a wholly owned subsidiary of Supermarket Development Corporation (hereinafter collectively ‘“Furr’s”), and Furr’s and Safeway, 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 Furr’s and Safeway with violations of the Clayton Act and Federal Trade Commission Act; and Respondents Furr’s and Safeway, 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, 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 that 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, and having duly considered the com- SUPERMARKET DEVELOPMENT CORPORATION, ET AL. 373 369 Decision and Order ments filed thereafter by interested persons pursuant to Section 2.34 of its Rules, 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:

SDC, which owns 100 percent voting securities and controls Furr’s, Inc., is a corporation organized and existing under the laws of the State of Texas with its executive offices located at 1500 Diamond Shamrock Tower, Dallas, Texas;

Furr’s, Inc., is a corporation organized and existing under the laws of the State of Texas with its executive offices located at 1708 Avenue G., Lubbock, Texas (hereinafter, SDC and Furr’s will be referred to as “Furr’s”);

SSI Associates, L.P., which owns 96.4 percent of the voting securities of Safeway and controls Safeway, is a limited partnership organized and existing under the laws of the State of Delaware with its executive offices located c/o Kohlberg Kravis Roberts & Company, 101 California Street, San Francisco, California; Safeway is a corporation organized and existing under the laws of the State of Delaware, with its executive offices located at 201 Fourth Street, Oakland, California (hereinafter, SSI and Safeway will be referred to as “Safeway”).

The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of Furr’s and Safeway, and the proceeding is in the public interest.

ORDER I.

As used in this order, the following definitions shall apply: (A) “Furr’s” means Furr’s, Inc., its predecessors, subsidiaries, divisions, groups and affiliates controlled by Furr’s and their respective directors, officers, employees, agents and representatives and their respective successors and assigns, and Supermarket Development Corporation, its predecessors, subsidiaries, divisions, groups and affiliates controlled by Supermarket Development Corporation and their respective directors, officers, employees, agents and representatives and their respective successors and assigns. (B) “Safeway” means Safeway, its predecessors, subsidiaries, divisions, groups and affiliates controlled by Safeway and their respective directors, officers, employees, agents and representatives and their respective successors and assigns and SSI Associates, L.P., its prede- Decision and Order; 110 F.T.C.

cessors, subsidiaries, divisions, groups and affiliates controlled by SSI Associates, L.P. and their respective directors, officers, employees, agents and representatives and their respective successors and assigns.

(C) “Acquisition” means Furr’s acquisition of the assets of Safeway’s El Paso Division.

(D) “El Paso Division” means the sixty grocery stores of Safeway in its El Paso Division, inventory, an administrative building, a distribution center and all related real property and facilities, excluding the dairy and ice cream plants.

(E) “Assets to be divested” means the assets described in paragraph II (A), also known as “II (A) properties.” (F) To5 1 3 5 1 3 1007 977 37 32 96.776588 be5 1 3 5 1 4 1054 977 162 41 96.859810 acquired5 1 3 5 1 5 1225 977 113 33 94.047234 store”5 1 3 5 1 6 1345 989 122 22 96.715431 means5 1 3 5 1 7 1469 973 18 51 96.874420 a5 1 3 5 1 8 1509 979 102 32 96.874420 retails 1 3 5 1 9 1621 989 142 30 96.210403 grocery5 1 3 5 1 10 1774 982 91 30 95.700089 stores 1 3 5 1 11 1876 980 37 31 95.700089 in5 1 3 5 1 12 1924 980 60 32 96.886864 thes 1 3 5 1 13 1995 980 40 32 95.458687 El5 1 3 5 1 14 2046 980 88 33 96.974907 Paso4 1 3 5 2 0 825 1028 164 32 -1 5 1 3 5 2 1 825 1028 164 32 96.530098 Division.2 1 4 0 0 0 1458 1130 39 32 -1 3 1 4 1 0 0 1458 1130 39 32 -1 4 1 4 1 1 0 1458 1130 39 32 -1 5 1 4 1 1 1 1458 1130 39 32 75.712738 Il.2 1 5 0 0 0 863 1230 363 39 -1 3 1 5 1 0 0 863 1230 363 39 -1 4 1 5 1 1 0 863 1230 363 39 -1 5 1 5 1 1 1 863 1230 33 33 95.444092 It5 1 5 1 1 2 913 1231 28 32 96.219475 is5 1 5 1 1 3 958 1230 148 39 96.206215 ordered,5 1 5 1 1 4 1126 1231 100 32 95.642082 That:2 1 6 0 0 0 802 1306 1329 1264 -1 3 1 6 1 0 0 821 1306 1310 399 -1 4 1 6 1 1 0 864 1306 1266 42 -1 5 1 6 1 1 1 864 1306 54 37 93.047455 (A)5 1 6 1 1 2 937 1306 116 33 91.795143 Furr’s5 1 6 1 1 3 1072 1307 91 32 96.810715 shall5 1 6 1 1 4 1183 1307 121 38 96.630104 divest,5 1 6 1 1 5 1324 1307 194 41 96.125748 absolutely5 1 6 1 1 6 1537 1307 69 34 96.505119 ands 1 6 1 1 7 1625 1308 36 32 96.502586 in5 1 6 1 1 8 1680 1308 86 40 96.856178 goods 1 6 1 1 9 1785 1309 99 38 96.840530 faith,5 1 6 1 1 10 1904 1309 124 32 96.459732 within5 1 6 1 1 11 2047 1310 83 32 96.498154 nine4 1 6 1 2 0 822 1358 1308 40 -1 5 1 6 1 2 1 822 1358 141 33 96.764473 months5 1 6 1 2 2 980 1358 90 33 96.356491 from5 1 6 1 2 3 1087 1359 61 33 96.334740 thes 1 6 1 2 4 1165 1359 80 33 95.973404 dates 1 6 1 2 5 1262 1359 72 33 96.884926 this5 1 6 1 2 6 1351 1359 101 33 96.143837 orders 1 6 1 2 7 1468 1359 157 33 96.257721 becomes5 1 6 1 2 8 1642 1360 97 38 96.356827 final,5 1 6 1 2 9 1758 1361 113 32 96.090302 either5 1 6 1 2 10 1888 1372 21 22 96.048134 a5 1 6 1 2 11 1926 1365 93 29 96.048134 stores 1 6 1 2 12 2036 1365 36 29 96.890785 to5 1 6 1 2 13 2088 1362 42 33 96.658272 be4 1 6 1 3 0 821 1410 1308 42 -1 5 1 6 1 3 1 821 1410 164 39 96.663696 acquired5 1 6 1 3 2 996 1420 38 22 96.511414 or5 1 6 1 3 3 1045 1421 21 21 95.449211 a5 1 6 1 3 4 1076 1420 142 30 96.259384 grocery5 1 6 1 3 5 1229 1413 93 30 96.847130 stores 1 6 1 3 6 1333 1411 178 40 96.455841 presently5 1 6 1 3 7 1522 1411 163 39 96.676826 operated5 1 6 1 3 8 1696 1411 45 41 93.298599 by5 1 6 1 3 9 1751 1412 117 32 92.164665 Furr’s5 1 6 1 3 10 1879 1413 37 31 96.889755 in5 1 6 1 3 11 1927 1413 87 32 96.673088 each5 1 6 1 3 12 2025 1413 40 32 96.636406 of5 1 6 1 3 13 2069 1413 60 32 96.072868 thea 1 6 1 4 0 822 1461 1309 40 -1 5 1 6 1 4 1 822 1461 175 39 96.318108 following5 1 6 1 4 2 1017 1461 176 32 96.627350 locations:5 1 6 1 4 3 1215 1461 45 36 95.888771 (a)5 1 6 1 4 4 1279 1461 241 40 96.423927 Alamogordo,5 1 6 1 4 5 1541 1461 86 33 96.523399 News 1 6 1 4 6 1645 1462 145 38 93.297050 Mexico;5 1 6 1 4 7 1810 1462 46 37 92.717926 (b)5 1 6 1 4 8 1875 1463 149 38 96.402306 Artesia,5 1 6 1 4 9 2046 1463 85 32 96.620567 New4 1 6 1 5 0 822 1512 1309 40 -1 5 1 6 1 5 1 822 1512 145 38 92.470650 Mexico;5 1 6 1 5 2 986 1512 41 36 92.470650 (c)5 1 6 1 5 3 1045 1512 124 37 96.867737 Clovis,5 1 6 1 5 4 1188 1512 86 31 96.632965 News 1 6 1 5 5 1291 1512 145 39 92.078606 Mexico;5 1 6 1 5 6 1455 1512 45 36 92.078606 (d)5 1 6 1 5 7 1519 1512 183 40 96.388268 Espanola,5 1 6 1 5 8 1721 1513 85 32 96.209663 News 1 6 1 5 9 1824 1513 145 39 93.299004 Mexico;5 1 6 1 5 10 1988 1514 43 36 93.107574 (e)5 1 6 1 5 11 2049 1514 82 32 96.932770 Fort4 1 6 1 6 0 822 1561 1307 42 -1 5 1 6 1 6 1 822 1561 176 39 96.499756 Stockton,5 1 6 1 6 2 1014 1563 119 37 93.015854 Texas;5 1 6 1 6 3 1150 1562 36 37 91.939247 (f)5 1 6 1 6 4 1201 1562 127 38 96.414345 Hobbs,5 1 6 1 6 5 1345 1563 85 32 95.785126 News 1 6 1 6 6 1444 1563 145 39 92.836494 Mexico;5 1 6 1 6 7 1605 1563 44 39 91.650482 (g)5 1 6 1 6 8 1664 1563 65 33 96.479874 Lass 1 6 1 6 9 1744 1563 124 40 96.479874 Vegas,5 1 6 1 6 10 1885 1564 85 32 96.888260 News 1 6 1 6 11 1985 1564 144 39 96.887344 Mexico;4 1 6 1 7 0 822 1613 1307 41 -1 5 1 6 1 7 1 822 1613 47 36 92.768982 (h)5 1 6 1 7 2 882 1614 201 39 92.813026 Lovington,5 1 6 1 7 3 1097 1613 85 32 96.925232 News 1 6 1 7 4 1194 1614 145 38 96.351540 Mexico;5 1 6 1 7 5 1352 1614 36 36 96.955421 (i)5 1 6 1 7 6 1400 1614 114 37 96.562103 Pecos,5 1 6 1 7 7 1527 1614 120 38 93.094429 Texas;5 1 6 1 7 8 1660 1614 35 40 93.094429 (j)5 1 6 1 7 9 1707 1614 167 39 96.216011 Portales,5 1 6 1 7 10 1887 1615 86 32 96.716637 News 1 6 1 7 11 1985 1615 144 38 96.716637 Mexico;4 1 6 1 8 0 821 1664 1119 41 -1 5 1 6 1 8 1 821 1664 48 36 83.666733 (k)5 1 6 1 8 2 886 1664 155 38 96.501785 Roswell,5 1 6 1 8 3 1059 1664 86 32 96.575851 News 1 6 1 8 4 1161 1664 144 38 96.242035 Mexico;5 1 6 1 8 5 1323 1664 69 33 96.738907 ands 1 6 1 8 6 1409 1664 36 37 73.368103 (1)5 1 6 1 8 7 1462 1664 111 33 96.337128 Silvers 1 6 1 8 8 1589 1665 87 40 95.710190 City,5 1 6 1 8 9 1694 1665 85 32 96.189926 News 1 6 1 8 10 1795 1665 145 33 96.189926 Mexico.3 1 6 2 0 0 820 1714 1310 194 -1 4 1 6 2 1 0 862 1714 1268 41 -1 5 1 6 2 1 1 862 1715 52 36 92.232819 (B)5 1 6 2 1 2 925 1715 116 31 91.389435 Furr’s5 1 6 2 1 3 1052 1714 69 33 96.057472 ands 1 6 2 1 4 1132 1714 159 41 96.263763 Safeway5 1 6 2 1 5 1301 1715 91 32 96.058029 shall5 1 6 2 1 6 1403 1716 174 31 96.496277 maintains 1 6 2 1 7 1588 1716 60 32 96.496277 thes 1 6 2 1 8 1658 1716 159 39 95.948242 viability5 1 6 2 1 9 1828 1716 69 33 92.669479 ands 1 6 2 1 10 1908 1716 222 33 92.248238 marketabil-4 1 6 2 2 0 821 1765 1309 41 -1 5 1 6 2 2 1 821 1766 51 39 96.475212 ity5 1 6 2 2 2 885 1765 40 32 96.124649 of5 1 6 2 2 3 931 1765 61 32 96.964218 thes 1 6 2 2 4 1005 1768 110 29 96.437126 assets5 1 6 2 2 5 1129 1765 161 40 96.197418 required5 1 6 2 2 6 1303 1768 35 29 96.927567 to5 1 6 2 2 7 1350 1765 42 32 96.478928 be5 1 6 2 2 8 1405 1766 155 32 96.352097 divested5 1 6 2 2 9 1573 1766 69 32 96.949524 ands 1 6 2 2 10 1656 1767 90 31 95.432007 shall5 1 6 2 2 11 1760 1770 61 29 96.597824 not5 1 6 2 2 12 1834 1777 103 23 95.781136 causes 1 6 2 2 13 1951 1777 38 22 95.781136 or5 1 6 2 2 14 2002 1767 128 39 96.562347 permit4 1 6 2 3 0 820 1816 1309 41 -1 5 1 6 2 3 1 820 1816 61 32 96.547058 thes 1 6 2 3 2 898 1816 223 38 96.337921 destruction,5 1 6 2 3 3 1139 1816 154 32 96.281281 removal5 1 6 2 3 4 1309 1827 39 21 96.281281 or5 1 6 2 3 5 1363 1817 226 39 96.383522 impairment5 1 6 2 3 6 1605 1817 39 31 96.559242 of5 1 6 2 3 7 1654 1827 70 30 95.370514 any5 1 6 2 3 8 1738 1820 112 30 96.640968 assets5 1 6 2 3 9 1865 1828 39 22 96.614319 or5 1 6 2 3 10 1918 1817 160 33 96.502403 business5 1 6 2 3 11 2094 1821 35 29 96.502403 to4 1 6 2 4 0 821 1866 1309 42 -1 5 1 6 2 4 1 821 1866 42 33 96.943298 be5 1 6 2 4 2 879 1866 155 33 96.441345 divested5 1 6 2 4 3 1050 1869 121 37 95.807999 excepts 1 6 2 4 4 1186 1867 37 32 95.807999 in5 1 6 2 4 5 1239 1867 61 32 95.862244 thes 1 6 2 4 6 1315 1867 166 41 96.610504 ordinary5 1 6 2 4 7 1495 1877 121 22 96.793083 courses 1 6 2 4 8 1632 1867 40 32 95.997711 of5 1 6 2 4 9 1680 1867 159 33 95.997711 business5 1 6 2 4 10 1855 1868 70 32 95.985764 ands 1 6 2 4 11 1940 1871 123 37 95.985764 excepts 1 6 2 4 12 2077 1868 53 33 96.895180 fore 1 6 3 0 0 802 1917 771 44 -1 4 1 6 3 1 0 802 1917 771 44 -1 5 1 6 3 1 1 802 1917 184 44 0.000000 ordinary5 1 6 3 1 2 1002 1927 93 23 96.658585 wears 1 6 3 1 3 1111 1917 69 33 96.447823 ands 1 6 3 1 4 1197 1920 86 30 96.447823 tear.3 1 6 4 0 0 819 1968 1310 347 -1 4 1 6 4 1 0 862 1968 1267 41 -1 5 1 6 4 1 1 862 1968 51 37 93.087143 (C)5 1 6 4 1 2 927 1968 72 33 96.847603 Thes 1 6 4 1 3 1014 1968 222 33 96.875618 divestitures5 1 6 4 1 4 1251 1969 161 39 96.735985 required5 1 6 4 1 5 1426 1969 45 40 96.840698 by5 1 6 4 1 6 1486 1969 197 40 96.265083 paragraphs 1 6 4 1 7 1698 1970 30 32 95.724075 II5 1 6 4 1 8 1743 1970 55 36 96.892395 (A)5 1 6 4 1 9 1812 1970 91 32 96.705528 shall5 1 6 4 1 10 1917 1970 43 32 96.705528 be5 1 6 4 1 11 1975 1970 154 32 96.643913 divested4 1 6 4 2 0 820 2020 1309 40 -1 5 1 6 4 2 1 820 2022 37 29 96.867310 to5 1 6 4 2 2 872 2030 46 22 96.883324 an5 1 6 4 2 3 934 2020 159 39 96.332558 acquirers 1 6 4 2 4 1108 2030 38 22 96.780762 or5 1 6 4 2 5 1162 2020 186 39 96.565216 acquirers,5 1 6 4 2 6 1364 2020 69 33 96.481125 ands 1 6 4 2 7 1449 2020 82 40 96.225113 only5 1 6 4 2 8 1546 2021 36 31 96.074158 in5 1 6 4 2 9 1597 2031 22 22 96.241638 a5 1 6 4 2 10 1634 2031 158 28 96.952118 manner,5 1 6 4 2 11 1808 2021 79 32 96.359909 that5 1 6 4 2 12 1902 2022 152 31 96.359909 receives5 1 6 4 2 13 2069 2021 60 32 96.505783 thea 1 6 4 3 0 820 2070 1309 41 -1 5 1 6 4 3 1 820 2070 95 40 96.844185 prior5 1 6 4 3 2 928 2070 165 40 96.541389 approvals 1 6 4 3 3 1106 2070 40 33 95.600708 of5 1 6 4 3 4 1152 2070 60 33 96.584488 thes 1 6 4 3 5 1225 2070 238 33 95.733749 Commission.5 1 6 4 3 6 1477 2070 73 33 96.852554 Thes 1 6 4 3 7 1562 2081 148 30 96.603363 purposes 1 6 4 3 8 1723 2071 40 33 96.740387 of5 1 6 4 3 9 1769 2071 60 33 96.389076 thes 1 6 4 3 10 1842 2071 205 33 96.707520 divestitures 1 6 4 3 11 2060 2072 69 32 96.291351 anda 1 6 4 4 0 820 2121 1308 42 -1 5 1 6 4 4 1 820 2124 220 37 96.199493 agreements5 1 6 4 4 2 1060 2121 29 32 95.543724 is5 1 6 4 4 3 1108 2124 35 29 96.803513 to5 1 6 4 4 4 1162 2131 127 23 96.521172 ensures 1 6 4 4 5 1309 2121 60 33 96.636642 thes 1 6 4 4 6 1389 2122 241 32 95.953232 continuations 1 6 4 4 7 1650 2122 39 33 96.487312 of5 1 6 4 4 8 1702 2122 61 33 96.487312 thes 1 6 4 4 9 1782 2125 110 30 96.315025 assets5 1 6 4 4 10 1912 2133 39 22 96.740158 as5 1 6 4 4 11 1970 2123 158 40 96.397705 ongoing,4 1 6 4 5 0 819 2172 1310 41 -1 5 1 6 4 5 1 819 2172 115 32 96.769089 viable5 1 6 4 5 2 946 2172 211 40 96.468323 enterprises5 1 6 4 5 3 1171 2172 154 40 96.568008 engaged5 1 6 4 5 4 1338 2172 37 32 96.324265 in5 1 6 4 5 5 1387 2172 61 33 96.679443 thes 1 6 4 5 6 1461 2172 103 33 96.782402 retails 1 6 4 5 7 1576 2173 73 33 96.876427 sales 1 6 4 5 8 1662 2173 40 33 96.993996 of5 1 6 4 5 9 1708 2174 170 39 96.783203 groceries5 1 6 4 5 10 1891 2174 70 32 96.403885 ands 1 6 4 5 11 1973 2177 36 29 93.260254 to5 1 6 4 5 12 2022 2184 107 22 92.691345 reme-4 1 6 4 6 0 820 2223 1309 42 -1 5 1 6 4 6 1 820 2223 45 40 96.907845 dy5 1 6 4 6 2 880 2223 61 33 96.570351 thes 1 6 4 6 3 957 2223 175 40 96.199860 lessening5 1 6 4 6 4 1147 2223 39 33 96.199860 of5 1 6 4 6 5 1196 2223 225 40 96.577660 competitions 1 6 4 6 6 1437 2224 171 40 96.577660 resulting5 1 6 4 6 7 1623 2224 89 33 96.511078 from5 1 6 4 6 8 1728 2224 61 33 96.478935 thes 1 6 4 6 9 1805 2226 207 39 96.455437 acquisitions 1 6 4 6 10 2029 2235 38 22 92.283844 as5 1 6 4 6 11 2083 2225 46 32 92.283844 al-4 1 6 4 7 0 820 2274 719 41 -1 5 1 6 4 7 1 820 2274 99 40 92.221947 leged5 1 6 4 7 2 936 2274 36 32 96.289337 in5 1 6 4 7 3 988 2274 61 33 93.298927 thes 1 6 4 7 4 1066 2274 258 33 91.662827 Commission’s5 1 6 4 7 5 1340 2274 199 41 95.631165 complaint.3 1 6 5 0 0 819 2325 1310 245 -1 4 1 6 5 1 0 861 2325 1268 41 -1 5 1 6 5 1 1 861 2325 54 37 91.995384 (D)5 1 6 5 1 2 933 2325 35 32 93.279556 If5 1 6 5 1 3 980 2325 117 33 92.236671 Furr’s5 1 6 5 1 4 1115 2325 64 33 96.304016 has5 1 6 5 1 5 1198 2328 61 30 96.304016 not5 1 6 5 1 6 1276 2325 144 34 96.622108 secured5 1 6 5 1 7 1438 2326 166 40 96.070114 approvals 1 6 5 1 8 1622 2326 90 33 95.840729 from5 1 6 5 1 9 1730 2326 60 33 96.758896 thes 1 6 5 1 10 1808 2326 230 33 96.469177 Commissions 1 6 5 1 11 2056 2327 40 32 68.224487 of5 1 6 5 1 12 2108 2337 21 22 61.099045 a4 1 6 5 2 0 820 2376 1309 42 -1 5 1 6 5 2 1 820 2376 205 33 96.686340 divestitures 1 6 5 2 2 1041 2376 40 33 96.795242 of5 1 6 5 2 3 1090 2376 49 33 96.627487 all5 1 6 5 2 4 1154 2376 60 33 96.808723 thes 1 6 5 2 5 1231 2377 192 39 96.600067 properties5 1 6 5 2 6 1438 2377 124 32 96.600067 within5 1 6 5 2 7 1578 2377 60 33 96.430984 thes 1 6 5 2 8 1655 2377 219 33 96.295944 nine-months 1 6 5 2 9 1891 2378 118 40 93.299500 periods 1 6 5 2 10 2025 2379 104 39 92.970589 speci-4 1 6 5 3 0 819 2428 1310 41 -1 5 1 6 5 3 1 819 2428 71 32 96.908432 fied5 1 6 5 3 2 907 2428 37 32 96.593361 in5 1 6 5 3 3 961 2428 197 39 96.172005 paragraphs 1 6 5 3 4 1176 2428 30 32 73.969864 II5 1 6 5 3 5 1223 2428 65 38 93.297981 (A),5 1 6 5 3 6 1306 2428 117 33 92.150940 Furr’s5 1 6 5 3 7 1440 2431 161 30 96.537994 consents5 1 6 5 3 8 1618 2431 35 30 96.946541 to5 1 6 5 3 9 1670 2428 60 33 96.224007 thes 1 6 5 3 10 1747 2429 244 40 96.176491 appointments 1 6 5 3 11 2007 2429 45 40 96.902313 by5 1 6 5 3 12 2068 2429 61 32 96.974190 thea 1 6 5 4 0 819 2479 1310 41 -1 5 1 6 5 4 1 819 2479 230 32 96.109726 Commissions 1 6 5 4 2 1060 2479 40 32 96.732384 of5 1 6 5 4 3 1106 2490 21 21 95.454796 a5 1 6 5 4 4 1138 2482 133 30 95.454796 trustees 1 6 5 4 5 1283 2482 36 29 96.700714 to5 1 6 5 4 6 1330 2479 112 33 96.763092 divests 1 6 5 4 7 1453 2479 61 33 96.854759 thes 1 6 5 4 8 1525 2480 202 40 96.542038 properties.5 1 6 5 4 9 1739 2480 40 32 96.998512 In5 1 6 5 4 10 1790 2480 61 32 96.828789 thes 1 6 5 4 11 1863 2483 104 29 96.384872 events 1 6 5 4 12 1978 2480 80 32 96.451736 that5 1 6 5 4 13 2068 2480 61 32 96.942184 thea 1 6 5 5 0 819 2530 1309 40 -1 5 1 6 5 5 1 819 2530 230 33 94.445412 Commissions 1 6 5 5 2 1063 2530 118 40 96.266289 brings5 1 6 5 5 3 1196 2541 46 22 96.918678 an5 1 6 5 5 4 1257 2530 115 33 96.316040 actions 1 6 5 5 5 1387 2533 173 37 96.485970 pursuant5 1 6 5 5 6 1574 2533 35 30 96.655777 to5 1 6 5 5 7 1624 2530 137 33 96.804405 Sections 1 6 5 5 8 1777 2532 19 31 95.468300 55 1 6 5 5 9 1810 2531 37 37 85.484039 (1)5 1 6 5 5 10 1861 2532 40 32 96.400505 of5 1 6 5 5 11 1909 2531 60 33 96.559799 thes 1 6 5 5 12 1984 2531 144 33 96.873291 Federal SUPERMARKET DEVELOPMENT CORPORATION, ET AL. 875 369 Decision and Order Trade Commission Act, 15 U.S.C. 45(), or any other statute enforced by the Commission, Furr’s consents to the appointment of a trustee in such action. The appointment of a trustee shall not preclude the Commission from seeking civil penalties and other relief available to it for any failure by Furr’s to comply with this order. (E) If a trustee is appointed by the Commission or a court pursuant to paragraph II (D) of this order, Furr’s consents to the following terms and conditions regarding the trustee’s duties and responsibilities:

1. The Commission shall select the trustee, subject to Furr’s consent, which shall not be unreasonably withheld. The trustee shall be a person with experience and expertise in acquisitions and divestitures.

2. The trustee shall have the power and authority to divest any properties listed in paragraph II (A) in any location listed therein in which a store has not been divested or for which a contract of sale has not been approved by the Commission within the time period for divestiture in paragraph II (A). The trustee shall have six months from the date of appointment to accomplish the divestiture, which shall be subject to the prior approval of the Commission and, if the trustee is appointed by a court, subject also to the prior approval of the court.

3. If, at the end of the six-month period, the trustee has not secured approval of divestiture as required by paragraph II (A), the trustee may, if the Commission requires in order to accomplish the divestiture, add such other assets acquired pursuant to the acquisition as are required to effectuate the divestiture of the II (A) properties. 4. The trustee shall have full and complete access to the personnel, books, records and facilities of any store that the trustee has the duty to divest, and Furr’s shall develop such financial or other information relevant to the assets to be divested as such trustee may reasonably request. Furr’s shall cooperate with the trustee, and shall take no action to interfere with or impede the trustee’s accomplishment of the divestiture.

5. The power and authority of the trustee to divest shall be at the most favorable price and terms available consistent with the order’s absolute and unconditional obligation to divest and the purposes of the divestiture as stated in paragraph II (C). 6. The trustee shall serve at the cost and expense of Furr’s on such reasonable and customary terms and conditions as the Commission or a court may set. The trustee shall account for all monies derived from the sale and all expenses incurred. After approval by the Commission or the court of the account of the trustee, including fees for his or her Decision and Order . 110 F.T.C.

services, all remaining monies shall be paid to Furr’s 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 divesting the trust property. 7. Within 20 days of the appointment of the trustee, Furr’s shall, subject to the Commission’s prior approval, and consistent with provisions of this order, transfer to the trustee all rights and powers necessary to permit the trustee to cause divestiture and sign agreements for the divestiture of the trust properties. 8. If the trustee ceases to act or fails to act diligently, a substitute trustee shall be appointed.

9. The trustee shall report in writing to the Commission and Furr’s every sixty days concerning the trustee’s efforts to accomplish divestiture.

(F) The Agreement to Hold Separate shall continue in effect until such time as a store in each of the locations listed in paragraph II (A) has been divested either by Furr’s or a trustee. Ill.

It is further ordered, That within sixty days after the date of service of this order, and every sixty days thereafter until Furr’s and Safeway have fully complied with the provisions of paragraph II of this order, Furr’s and Safeway shall submit to the Commission a verified written report setting forth in detail the manner and form in which they intend to comply, are complying with, or have complied with that provision. Furr’s and Safeway shall include in compliance reports, among other things that are required from time to time, a full description of contacts or negotiations for the divestiture of the II (A) properties, including the identity of all parties contacted. Furr’s and Safeway also shall include in compliance reports copies of all written communications to and from such patties, and all internal memoranda, reports and recommendations concerning divestiture. IV.

It is further ordered, That for a period commencing on the date of service of this order and continuing for ten years from and after the date of service of this order, Furr’s shall cease and desist from acquiring, without the prior approval of the Federal Trade Commission, directly or indirectly, through subsidiaries or otherwise, any retail grocery store, including any facility that has been operated as a retail grocery store within six months of the date of the offer to purchase the facility, or any interest in a retail grocery store or any interest in SUPERMARKET DEVELOPMENT CORPORATION, ET AL. 377 369 , Concurring Statement any individual, firm, partnership, corporation or other legal or business entity that directly or indirectly owns or operates a retail grocery store in the following cities or towns: Albuquerque, New Mexico; Alamogordo, New Mexico; Artesia, New Mexico; Carlsbad, New Mexico; Clovis, New Mexico; El Paso, Texas; Espanola, New Mexico; Fort Stockton, Texas; Hobbs, New Mexico; Las Cruces, New Mexico; Las Vegas, New Mexico; Lovington, New Mexico; Midland, Texas; Odessa, Texas; Pecos, Texas; Portales, New Mexico; Roswell, New Mexico; Santa Fe, New Mexico; and Silver City, New Mexico. Provided, however, That these prohibitions shall not relate to the construction of new facilities by Furr’s or the leasing of a facility by Furr’s not presently a grocery store in those locations. One year from the date of service of this order and annually thereafter, Furr’s shall file with the Commission a verified written report of its compliance with this paragraph.

V.

For the purposes of determining or securing compliance with this order, and subject to any legally recognized privilege, upon written request and on reasonable notice to Furr’s or Safeway made to their principal offices, Furr’s and Safeway shall permit any duly authorized representatives of the Commission:

1. Access, during office hours and in the presence of counsel, to inspect and copy all books, ledgers, accounts and correspondence, memoranda and other records and documents in the possession or under the control of Furr’s or Safeway relating to any matters contained in this order; and 2. Upon five days’ notice to Furr’s or Safeway and without restraint or interference from them, to interview officers or employees of Furr’s or Safeway, who may have counsel present, regarding such matters. It is further ordered, That Furr’s shall notify the Commission at least thirty days prior to any change in its corporate structure that may affect compliance obligations arising out of this order including but not limited to dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change.

CONCURRING STATEMENT OF CHAIRMAN DANIEL OLIVER This case concerns an effort by Supermarket Development Corporation—and Furr’s, a wholly owned subsidiary—to acquire the El Paso Division of Safeway Stores, including sixty grocery stores and a vari- Concurring Statement 110 F.T.C.

ety of other assets. The order the Commission has accepted requires Furr’s, inter alia, to divest one store in each of twelve towns in Texas and New Mexico, and creates an elaborate mechanism to ensure that those divestitures are made. In particular, the order requires Furr’s to hold the entire Safeway El Paso Division separate from its own operations until it makes the twelve divestitures. Moreover, if Furr’s fails to make the divestitures within nine months, a trustee will be appointed to assume that responsibility. The order. also requires Furr’s to seek Commission approval—over a ten year period—of any acquisition of a retail grocery store in any of nineteen areas in Texas and New Mexico, including Albuquerque and Santa Fe, New Mexico; and El Paso, Odessa, and Midland, Texas.! As a consequence of these provisions, the consent order process has prevented Furr’s from immediately integrating the El Paso Division into its own operations. As a result, Furr’s has not yet been able to take advantage of the efficiencies associated with the acquisition, and consumers have not yet received the benefits of the acquisition, in the form of lower prices, better service, and other advantages. Consent orders frequently have adverse effects of this sort, but those effects are usually outweighed by the need to prevent or undo the anticompetitive aspects of the mergers they address. In this matter, however, there is good reason to think that the order need not have been imposed. In its earlier consultations with the Commission staff, Furr’s evinced a willingness to remedy all of the possibly anticompetitive aspects of the acquisition prior to its consummation. If the Commission had accepted that approach, the consent order would not have been necessary. Moreover, Furr’s would have been able to take advantage of the efficiencies the acquisition offers immediately, and to begin offering lower prices and other advantages to consumers immediately, instead of many months later. In short, in my view, the public interest would have been better served by accepting the Furr’s “fix-it-first” approach.

I regret that the Commission chose instead—in July 1987—to authorize our staff to seek to enjoin the entire acquisition. I opposed that decision because I felt that it was premature in light of the proposals that Furr’s had made. I have nevertheless voted to accept the consent order because that course is preferable to the litigation alternative. “Tn addition to the concerns with the consent order noted in the text, I do not believe that the prior approval provision in the order should apply to any markets other than the twelve in which divestitures are required. The Commission has determined that the appropriateness of prior approval provisions depends on “industry market structure and market conditions.” American Medical International, 104 FTC 1, 224.(1984); accord, Hospital Corp, of America, 106 FTC 361, 514-15 (1985), aff'd, 807 F.2d 1881 (7th Cir. 1986), cert. denied, No. 86-1492 (U.S. May 3, 1987). It is not clear from the record that “market conditions and market structure in [the seven additional markets] are such that all such acquisitions . . . necessarily [would be] anticompetitive.” See American Medical International, 104 FTC at 225; see also Hospital Corp. of America, 106 FTC at 513-17. DETROIT AUTO DEALERS ASSOC., INC., ET AL. 379 379 Interlocutory Order