FTC Requires Divestitures in Ahold/Delhaize of 81 Stores and Gives Upfront Buyers More Time to Complete Acquisitions; Continues Focus on "Traditional Supermarket" Competition

July 29, 2016

Key Points:

• The FTC required divestitures in many local markets in Ahold/Delhaize despite the fact that there were between three and six remaining competitors (i.e., 4-to-3, 5-to-4, 6-to-5, and 7-to-6 markets)—in fact, most of the divestiture markets had at least this many remaining competitors. In requiring divestitures in these markets, the FTC was influenced by the close proximity of the parties’ stores, their similarity in formats, and the moderate to high concentration levels.

• The FTC continues to limit its product market to "traditional supermarkets," including supermarkets located within Walmart and Target supercenters and excluding non-traditional supermarkets such as Whole Foods, Aldi, and Trader Joe's.

• The consent order provides some upfront buyers with significantly more time to acquire the divested stores compared to prior retail consent orders, apparently balancing the buyers' interest in having extra time to prepare for a successful transition against the risk of the divestiture assets deteriorating.

After an investigation setting a longevity record for supermarket deals,1 on July 22, 2016, the FTC accepted for public comment a consent order requiring Ahold, which operates Stop & Shop, Giant, and Martin's supermarkets, to divest 81 stores in 46 local markets to seven "upfront buyers" in order to obtain clearance to acquire Delhaize, which operates Food Lion and Hannaford supermarkets. The post-merger Herfindahl-Hirschman Index (HHI) in the 46 local markets ranged from as low as 2,268 points, which is "moderately concentrated" under the 2010 Horizontal Merger Guidelines, to 10,000 points—a merger to monopoly.

Read the full article here.