The Grand Union Company

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Ix THE 1\1.-\ TTER OF THE GRAND UNION COJYIPANY coxsext ORDER, ETC., I~ REGARD TO THE ALLEGED VIOLATION OF SECTION OF THE CL~ YTOX ACT Docket C-1,J.50. Complaint, June 1f!6S-Decision., .JUIIC , 1968 Consent order prohibiting a large grocery chain with headquarters in East Paterson, x'J. , from acquiring for a period of 10 years, without prior approval of the Conuni:';l'=ion, any grocery store or chain of more than fire units, or ,","hose annual sales excped $5 million, or ,yhol'=e combined annual ~ales of re:,;pondel1t and proposed acquired store exceeds 5 percent of the trade area. ,';iiles.

CO)IPL.-UXT The Federal Trade Con1mi:;;.~ion, hinTing reason to believe that The Grand rnion Company has ,-inlated the prm-jsions of Section 7 of the Clayton Act, as amended (H) c. Section 18), through its acquisition of the n,,~ets and bllSillPSS of Stc~n~ns :Markets, Inc., and it appearing that. a proceeding: by the Commission in respect thereto ,,"ould be to the interest of the public, i~sues this complaint stating its charges as foJ1mys:

1. DEFIXITIOXS 1. "Food stores" art' estnbIishments primarily seIJing food for home preparation and consumption. This definition corresponds to Bureau of Census :\Iajor Group Classification Xo. 54. 2. "Grocery stores" are, food store establishments primarily selling (1) a. wide variety of canned or frozen foods such as vegetables, fruits and soups: (2) dry groceries, either packaged or in bulk, such as 'tea ffee, cocoa ~ drive.d fruits, spices, sugar, flour and crackers; and (3) other proeessed food and nonedible grocery items. In addition, these establishments often sell smoked and prepared meats, fresh fish and poultry, fresh vegetables and fruits, and fresh or frozen meats. This definition corresponds to Bureau of Census Industry Classification No. 5411.

II. TI-IE GR..-\::\'D UNION COl\IP.\XY 3. The Grand Union Company is named a respondent herein and is hereafter referred to as "Gral1dlinion. It is a. corporation organized alld existing under the la,,-s of the State, of Delaware, with its principal office and place of business located at 100 Broadway, East Paterson New .Jersey, 07407.

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THE GRAND UNION CO. 1051 1050 ,Complaint 4. Grand Union engages principally in the grocery store business operating 510 such stores with sales of $768 11lillion in 1966 and ranking among the nation s 10 largest grocery store chains in that year. Grand Union also operated 31 Grand ,V fly department stores in 1966, and engaged in shopping center development enterprises, Tripletrading stamp distribution, and performance incentive program sales through subsidiary and affiliate corporations. Grand Union has generated an increasing cash flo", for several years, rising to $19 million in 1966.

5. In 1963 Grand Union s Florida division operated 31 grocery stores, 27 of ",which were located in Dade and Broward Counties Florida. Grand Union ranked third in sales among Dade County food chains and fifth in sales among Bl'owarc1 County food chains in 1963. 6. At all times relevant herein, Grand Union purchased products in interstate commerce and engaged in :'commerce within the meaning of the Clayton Act.

III. STEVEXS )IAHKETS , IKC.

7. Stevens )Iarkets, Inc. (herea,after "Stevens ) , prior to the acquisition of substantially all its assets and business bv Grand Union. was a corporation organized and existing under the laws of the State Florida with its principal ofi1ce and place of business located at 5701 :N1Y. , 35th Ave. , l\liami, Florida 33142, 8. Stevens was the leading independent grocery store company in both Dade and Broward Counties: Florida, ranking sixth and seventh respectively among food chains in those counties in 1963. From its founding with one store in 1948, Stevens expanded to 9 modern groce~y stores with sales of $31.7 million and profits of $17 000 in 1963. 9. At all times relevant herein, Stevens purchased products in interstate commerce and engaged 'in "commerce': within the meaning of the CIa vton Act.

IV. K A TCRE OF TRADE AXD CO)DIERCE A. Genera17y 10. Food stores account for the la.rgest single segment of retail trade in the tTnited States. In 1063, food store sales "ere approximately $57 billion: or 23% of all retail trade in the lTnitec1 States. Grocery stores account for by far the largest portion of food store sales. In 1963, the 245,000 grocery stores in the rnitec1 States represented 77% of the number of food store establishments. and their $53 billion in sales represented over 92% of all food store sales.

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1052 FEDERAL TRADE COl\:ThHSSION DECISIONS: IComplaint 73 F.

11. Grocery stores are recognized as a separate class of retail establishment, distinguished by their trade in a wide variety of food and other high-volume low-markup consumer goods. 12. Concentration in the grocery store industry is high and has been increasing. Between 1949 and 1963 the number of grocery stores in the nation declined from 359 000 to 245 000. During the same period the share of grocery store sales accounted for by the top twenty companies increased from 26% in 1948 to 34% in 1963.

13. :Mergers and acquisitions have been responsible for a substantial portion of the increase in concentration in the grocery store industry. Between 1949 and 1964 the nation s top twenty grocery store companies acquired 297 companies operating 3 063 grocery stores with sales of $3.1 billion.

14. The competitive impact of mergers and concentration in the grocery store industry, and of the growth of national chains, has been felt both in local and regional markets on both the selling and buying side of the market.

One of the sig11ific.ant effects of the merger movement and the trend to,yard concentration in the grocery store industry has been that mergers have become a substitute for the entry of new competition. The merger movement has eliminated potential competition, has tended to remove the threat of entry and the restraining influence which entry has upon noncompetitiye behavior, and has tended to discipline the market behayior of smaller competitors reluctant to enter into competitive warfare with chains many times their size and with manv times their resources. The merger movement and the trend toward concentration have tended to dampen the vigor of competition by increasing an awareness of multimarket interdependence among grocery store chains "which face one another in several markets. On the buying side of the market, suppliers have te,nded to favor the large chains, including Granc1ITnion, with preferences and advantages over other purchasers by reason of the chains' economic power as large buyers. The merger movement and the trend toward concentration have also weakened the ability of independent grocery store chains to compete and have tended to precipitate additional acquisitions and mergers and the disappearance of such independent chains from the grocery store and food store industries.

15. Grand Union has been a leading participant in the food and grocery store merger movement, with $197 n1illion in acquired grocery store sales ranking it fifth in acquired sales among grocery store chains in the neriod1949 to 1964. Grand Union s series of fifteen acquisit ions bet"een 1951 anc11958 "ere the subject to Commission proceed- THE GRAND UNION CO. 1053 1050 ,Complaint ings in Docket No. 8458 from January 1962 to June 1965. In August , 1965, Grand Union exchanged its supermarket in Orlando, Florida with Food Fair Stores Inc., the 4th largest national chain in 1966, for the Food Fair store at ,Vinchester Virginia; and in January, 1967 acquired from Stop & Shop, Inc., the nation s 14th largest chain, the fixtures and equipment of its stores located in Green"IT"ich and Stamford, Connecticut.

B. The Local ill Ct1'kets 16. The Greate1' ill iami JJl Cll'ketlng A1' consisting of Dade County, Florida, has been among the fastest gro"IT"ing areas of the country, increasing from a population of 495 08:1: in 1950 to about 1 160 000 in 1966. Concentration in the sale of grocery and related products through food stores in the Greater :M:iami :Jlarketing Area is high, with the foul' largest food store chains accounting for 48% of the $377 million in food store sales in 1963. Combined, third-ranked Grand Union and sixth-ranked Stevens accounted for 15% of 1963 food store sales in that area.

17. The Gl'eate1' illarketing A,'eci of BrOtCCi,'d consists of Broward County, Florida, an area that has gro\\n rapidly from about 84 000 people in 1950 to one- half million in 1!J66. The share of food store sales held by four leading chains increased from 54% in 1963 to 57% in 1966 R, period during which fifth-ranked Grand union and seventh-ranked Stevens combined to become the fourth largest food chain in that area by 1966.

V. THE VIOLATION OF II-IE cL1.1:""TO~ ACT 18. On :l\Iay 3, 1864, Grand Union acquired substantially all the assets and business of Stevens, pursuant to an agreement dated :JIarch 27, 1964, for a consideration in excess of $4.8 million. EFFECTS OF THE V'IOLATIOX CHARGED 19. The effects of the acquisition of Stevens by Grand Union, as alleged in paragraph 18, have been or may be substantially to lessen competition or to tend to create a monopoly in the sale of grocery and related products through food or grocery stores in the Greater l\ia-rketing Areas of I\iiami or Broward, or in portions thereof, in violation of Section 7 of the Clayton Act, in the follo,\ing among other ways: (a) Substantial actual or potential competition has been eliminated between Grand Union or Stevens;

(b) The combination of the assets and business of Stevens may so increase Grand Union s facilities, financial, market and buying power 1054 FEDERAL TRADE CO:\IMISSION DECISIONS Decisiou and Order 73 F.

as to provide decisive competitive advantages over independent food store and grocery store operators;

( c) New entry into the food store or grocery store business may be inhibited or prevented;

( d) The acquisition challenged herein, separately and in the context of the merger nlovement described in paragraphs 12 and 13, contributes to an overall tendency.y toward increasing concentration and arresting tendencies toward declining concentration in the food and grocery store industries and forms a part of a. tendency tory(lnl oligopoly and a deterioration in the vigor of competition as described in paragraph 14;

(e) j)iembers of the consuming public have been denied the benefits of free and unrestricted competition between Stevens and Grand Union.

0. The acquisition by respondent, as alleged above, constitutes a violation of Section 7 of the Clayton ct, as amended ( 13 r. Section 18).

DECISION AXD ORDER The Federal Trade Commission ha. ,-ing initiated an investigation of certain acts and practice.s of the respondent named in the caption hereof, and the respondent having bee.n furnished thereafter with a copy of tt draft of complaint ,which the Bure,au of Restraint of Trade proposed to present to the Commission for its consideration and which if issued by the Commission, ,yould charge respondent with violation of Section '7 of the Clayton Act, as amended: and . The respondent and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said a.agreement is for settlement purposes only and does not constitute an admission by respondent that the hnv has been violated as alleged in such complaint, and \\waivers and other pro\-isiolls as required by the Commission s Rules; a, The Commission having thereafter considered the matter and having determined that it haclreason to believe that the respondent has yiolatec1 Section '7 of the Clayton Act, as amended, and that complaint should issue, stating its charges in that. respect anel having thereupon accepteel the executed consent agreement and placed sneh agreement on the public record for a period of thirty (30) days, nOlY ill further conformity "ith the. procec1nre prescribed in S :'2. 34 (b) of its Rules THE GRAND UNION CO. 1055 1050 Decision ancl Order the Commission hereby issues its complaint, makes the follo\\ing jurisdictional findings, and enters the following order: 1. Respondent The Grand union Company is a corporation organized, existing and doing Dusine8s under and by virtue of the laws of the State of Dela"\yare: with its office and principal place of business located at 100 Broad\\ay, in the city of East Paterson, State of New Jersey 07407.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent. ORDER It is onle' That for a. period of ten (10) years following the effective date of this Order, The Grand union Company shall not (A) merge with or acquire, directly or indirectly, through subsidiaries, or in any other manner, except ,,'ith the prior approval of the Commission upon written application, the whole 01' any part of any grocery store (an establishment c.Jassified in Indust.ry No. 5411, Standard Incll1strial Classification ~fanual, 1967 revision, or a grocery department in a nonfood store), where such acquisition or merger involves (1) five. or more grocery stores, (2) nnnual grocery store sa.Ies of more. than five (5) million dollars, or (3) combined (respondent and the grocery stores to be acquired or merged) grocery store sales of more than five (5) percent of total grocery or food store sales in any city county in the United States; and (B) without sixty (60) days prior notification to the Commission, merge with or acquire, directly or indirectly, through subsidiaries or in aij,Y other manner, any grocery store establishment for which prior approval is not required pursuant to subparagraph A.

'Yithill thirty (~JO) clays from the effective date of this Order, and annually thereafter until it has fully complied ,with this Order, Grand' lTnion shall submit a verified written report to the Federal Trade Commi~sion setting forth in detail the. manner and form in which it inte.nc1s to comply: is complying, 01' has complied with this Order. III It -is luFtlWt' ordered That the respondent corporation shall forthwith distribute a copy of this Order to each person having authority to approve grocery store Requisitions and mergers. /, , ,, Order 73 F.

I~ THE )IATTER OF ,VINN-DIXIE STORES, INC.

l\IODIFIED ORDER, ETC. ~ IX REGARD TO THE ALLEGED VIOLATION OF SECTION 7 OF THE CL)" YTOX ACT Docket C-11 10. Com.plaint, Scpt. 19GG-Dcci3ion, June 2-1, 1968 Order moc1ifyinga consent order dated September 14, 1966, 70 F. C. 611 which prohioited a chain grocery firm from acquiring any grocery stores without Commis~ion approval, by limiting prohibited acquisitions to grocery chains with (1) fi ye, 01' more stores, (2) annual sales oyer S5 million, or (3) a combinec1market share of oyer 5 percent in any trade area. ORDER REOPENIXG PROCEEDING AND ~IODIFYING ORDER Respondent, by petition filed February :21 , 10G8, has requested that this proceeding be reopened and that the order, which issued on September 14, 10GG, be modified.

The. agreement containing a CO1l2ent order which "as acce,ptec1 by the Commission in final disposition of this matter provides, in part that:

'" in the event that the Federal Trade COElllli~sion issues any Order Rule ,y l1ich is less restricti ye than the pr()Yii~ions of this Order, in any proceedinginvolving mergers 01' acqui:"itions by a grocery store chain, then the Commission shall, upon the application of respondent, pursuant to Rule 3,28 of the Commission s Rules of Pr~ctice, reopen this proceed1ing' in order to mflke ,ybateyer re- Yisiol1s, if any, are necessary to bring the restrictions imposed upon respondent herein into conformity ,with tl1ose imposed Upo11 its competitors. As grounds for its present request, respondent contends that assurances of voluntary compliance recently accepted by the Commission in disposition of t"o matters involving aC(1uisitions by grocery store chains are "less restrictive" than its order. and that an assurance of voluntary compliance upon acceptance by the Commission, is an order" as that term is defined in the Administrative Procedure Act. The Chief, Division of ~iIergers, in his ans',er to respondents petition does not agree \\-ith this latter argument. I-Imycver, with a minor reyision agreed to by respondent, he does not oppose the modification requested.

The Commission has determined that the order should be modified for reasons other than those advanced by respondent. By order recently issl1ed, the Commission ac.cepted an agre.ement containing a consent order in final disposition of a matter involving an acquisition by a grocery store chain The Grand Union Company. Respondent under its present order is prohibited from making any , , , , "\VI1\l;;- - DIXIE STORES, INC. 1057 1056 Order acquisition of any retail food or grocery stores in the United States for a period of ten years, ,without prior Conllllission approval. Prior Commission approval under the Oi' and Union order is limited to cer- . tain categori~s of grocery store acquisitions, with the added requirement for sixty days prior notification to the Commission of any grocery store acquisition for ,,-which prior approval is not required. Thus the order issued in the OJ' and Union matter is less restrictive than respondents order.

Under the circumstances, the Commission is of the opinion that this proceeding should berecpenec1 and the order modified to conform to the restrictions imposed in the Gl'cmd Union' order. Accordingly, I t is o1Ylered That this :matter be, and it hereby is, reopened. It -2S .hvdlie'j1 ordered That tbe order issued in this matter on September 14, 1D66, be, and it hereby is, modified to read as follows: It -is OI'(lered That, for a period of ten (10) years from November 14, 1966 , "'"'Finn-Dixie Stores, Inc. , 8h:111 not (A) merge ,,-ith or acquire, directly or indirectly, through subsidiaries, or in any other manner, e~cept ,,-ith the prior approval of the Commission upon written application, the ,whole or any part of any grocery store (an establishment elns;~ifiec1 in Industry No. 5411, Standard Industrial Cla:::sification jIanual, 1067 revision. or a !2TOCerV department in a. nonfood store), ,,-here such acquisition or merger inyol yes (1) fi ,-e. or more grocery stores, (:2) fl1lnual grocery store sales of more than fiye (5) million do lIars, or (3) combined (respondent aIlcl the. grocery stores to be acquired or merged) grocery store. sales of more than five. (:5) percent of total grocery or food store sales in any city or county in the. United States; and (B) without sixty (60) days prior notification to the Commission, merge ,,-ith or acquire, directly or indirectly, through subsidiaries or in any other manner, any grocery store. establish- 111ent for ,which prior approval is not required pursuant to subparagraph A.

",Within thirty (30) clays from the effective date of this Order and annually thereafter until it has fully complied with this Order, \\Tinn-Dixie Stores, Inc. , sh:111 submit a verified ,written re.port to the Federal Trade Commission setting forth in detail the manner and form in which it intends to comply, is complying, or has complied with this Order.

It is fw,tliel' cl'del'ed That the respondent corpora.tion shall forth"ith distribute a copy of this Order to each person having authority to appl'oYe groc81'Y store acquisitions and mergers. Syllabus 'i3 F.