Attorney General Lockyer Announces Settlement to Keep Supermarket Prices Competitive for Consumers

SACRAMENTO – Attorney General Bill Lockyer today announced one of the largest California-Federal Trade Commission supermarket divestment plans involving Albertson's merger with American Stores Company, owner of Lucky and Super Saver, that will preserve competition to keep prices low for California consumers. The settlement of antitrust claims requires the merging companies to divest 117 supermarkets and three supermarket sites in 21 California counties to pre-approved buyers.

"This major settlement helps California consumers by ensuring continued competition among supermarkets at a time when the industry has been growing more concentrated," Lockyer said. "In reviewing the planned merger, we found Albertson's and American Stores competing in 59 geographic areas of the state. Under this agreement, the merging companies will sell stores in 52 of those areas to other supermarkets to help working families and preserve competition, encourage choice and foster lower prices for consumers."

Over the past several months, the California Attorney General's office has been investigating the competitive impact of this transaction along with the Federal Trade Commission and the Attorneys General of the States of Nevada and New Mexico. Settlements in the case are expected to be announced today also by the Federal Trade Commission and the Attorneys General of Nevada and New Mexico.

The antitrust claims stem from the nearly $12 billion merger of Albertson's, the nation's fourth largest supermarket chain, and American Stores Company, which operates Lucky Stores and SuperSaver. Albertson's, a Delaware corporation with headquarters in Boise, Idaho, operates some 177 in California, while American Stores Company with headquarters in Salt Lake City, Utah, operates 411 supermarkets in California.

The August 1998 acquisition plan reported that Albertson's would have a combined 2,470 stores in 37 states with projected revenues of $36 billion. Kroger, the nation's top supermarket chain based in Cincinnati, Ohio, currently operates 2,200 grocery stores in 31 states with $43 billion in annual sales.

"The consolidation of supermarket chains is making it more difficult for new stores to enter a community and more likely – without careful scrutiny – to reduce competition which is harmful to consumers," Lockyer said. "By requiring these major divestitures, supermarkets will continue competing in neighborhoods and consumers should be able to find good quality and continued selection at a low price."

Under the settlement, Albertson's and American Stores will divest 117 stores and three supermarket sites in 96 California cities to pre-approved buyers. A list of the stores [PDF format] to be divested and the operators is available here.

The 31 stores divested in northern California will be purchased by Ralphs Grocery Company, which currently operates primarily in southern California. The bulk of the southern California stores will be divested to California-based Stater Bros., Inc. and to Certified Grocers of California, Ltd., a supermarket wholesaler that represents independent supermarket operators.

A majority of the stores to be divested to Certified will be transferred to independent supermarket operators that have been approved by the Attorney General. The Certified operators include Gelson's, Jon's, Top-Valu and Vallarta Markets. The remaining five southern California supermarkets will be divested to The Vons Companies, Inc., a division of Safeway, Inc. based in El Monte, Calif.

The settlement, consisting of a complaint and consent decree, was filed in federal court Tuesday. The Consent Decree settles antitrust claims for violations of Section 1 of the Sherman Act, Section 7 of the Clayton Act and California's Unfair Competition Act and provides for the Attorney General's recovery of investigative costs. Albertson's and American Stores have both denied that their proposed joint venture violates these laws.