Royal Ahold-Big V Faces Antitrust Scrutiny

Apr 16, 2002

The Deal reports
that a joint bid by Royal Ahold NV and Pathmark Stores Inc. for bankrupt Big
V Supermarkets Inc. is raising a novel antitrust issue that could make it tough
for the companies to complete the transaction.

The Federal Trade Commission is investigating whether the $225 million deal would harm competition outside the markets where the chains compete head-to-head, known as “raising rivals’ costs.” Wakefern’s argument with the FTC is that Big V’s departure from the coop would cause it to lose enough volume that it would have to pay higher prices for goods. It would then have to pass those higher prices on to its members, which would make them less competitive against Ahold and Pathmark stores in New Jersey, New York, Pennsylvania and Connecticut. Under this analysis, acquiring Big V could give Ahold and Pathmark competitive advantage over all the remaining ShopRite supermarkets.

Moderator Comment: If Big V were to leave, would it
cause Wakefern to lose enough volume that it would have to pay higher prices
to suppliers and in the process find itself at a competitive disadvantage?

It is unlikely that Wakefern will win with its rivals’
cost argument to the FTC. The importance of the deal to Wakefern’s is clear,
however, as the coop is using all legal means at its disposal to block Stop
& Shop and Pathmark from taking control of the Big V stores. [George
Anderson – Moderator

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