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Supermarket merger draws attention of FTC

The Federal Trade Commission has asked for further information regarding the proposed merger between the Safeway and Albertsons grocery chains. After the transaction, the resulting company would own approximately 2,400 stores. Due to the substantial overlap of locations in Texas, Southern California, Washington, Oregon, Colorado and Arizona, it is expected that the merger will lead to closure of certain locations and the sale of other stores to competitors.

The FTC reviews proposed business combinations and acquisitions that meet certain threshold requirements in an attempt to ensure that an industry does not become monopolized by one or more businesses. A monopoly occurs when a business has too much market power and is able to dictate pricing and other terms of sale to consumers.

Once the FTC has received notice of the proposed business transaction, it can approve the transaction, sue to block it, request further information or negotiate certain terms to mitigate the anticompetitive impact. In a significant majority of the cases, the proposed transactions are approved. For example, in 2012, the FTC sued to block only 1 percent of transaction and requested further information in only 3 percent of the proposals.

In the Safeway transaction, the FTC will be reviewing the information with respect to the impact store closings and store sales will have on the local markets. In particular, the agency will want to ensure that competitors will be able to successfully open supermarkets in the areas where Safeway and Albertsons hold large market shares. Mergers and acquisitions can raise a host of legal and regulatory issues, making it advisable for companies to consult with a business attorney very early in the process. Doing so may help avoid mistakes that can derail or delay a transaction.

Source: San Jose Mercury News, "FTC asks Safeway for details on merger plans", Heather Somerville, April 11, 2014