Deal Will Allow Partial Merger of Market Chains : Antitrust: American Stores has gotten an OK from the state Attorney General’s Office to combine its Lucky and Alpha Beta units in Northern California.
American Stores said Tuesday that it has reached an agreement with the state Attorney General’s Office that will allow the company to merge its Alpha Beta and Lucky supermarkets in Northern California.
Salt Lake City-based American Stores will sell about 13 of its 36 Alpha Beta stores in Northern California. The 23 other stores north of San Luis Obispo, Kern and San Bernardino counties will immediately be renamed Lucky and put under the management of that chain.
The compromise was signed by Judge David V. Kenyon in U.S. District Court in Los Angeles, who on Sept. 29, 1988, issued the preliminary injunction that prohibited American Stores from integrating the two chains throughout California.
Both American Stores and Atty. Gen. John K. Van de Kamp emphasized that the agreement does not affect the ongoing antitrust suit, to be considered by the U.S. Supreme Court early next year, as it relates to the company’s 174 Alpha Beta and 186 Lucky stores in Southern California, where the stakes are much larger.
American Stores, which continues to appeal Kenyon’s injunction, has denied any antitrust violations but said Tuesday that it entered into the agreement because of “the severe and adverse impact” on the morale of its 2,000 employees in Northern California and on its ability to hire managers.
In a statement, American Stores Chief Executive Jonathan L. Scott said the agreement “was an important step in providing certainty for our employees, while at the same time helping to alleviate a difficult operating problem.”
American Stores bought Lucky Stores in June, 1988, with the intention of integrating its Alpha Beta stores with the more successful Lucky operation. In August, the Federal Trade Commission approved the merger on the condition that American Stores sell 37 stores. Van de Kamp then sued to block the integration, saying it would reduce competition and force up food prices.
Kenyon agreed, ruling that the merger should not be allowed. A federal appeals court in San Francisco reversed Kenyon, but the U.S. Supreme Court kept the prohibition in place until it hears the case.
Van de Kamp said in a statement that the sale of the 13 Northern California Alpha Beta stores, which analysts estimated account for about $150 million in annual sales, “advances our objective of restoring competition and reducing concentration.”
However, one supermarket analyst speculated that prices might go up as a result.
“A number of these are OK stores that the company didn’t want to close,” said Jonathan H. Ziegler, with the Sutro & Co. brokerage in San Francisco. “But employee morale was low and turnover high. If they go into the hands of independents, by definition (those operators) are less efficient. No independent is going to go cutting prices.”
Van de Kamp, he contended, “won the battle but lost the war” as far as pricing is concerned.
The 13 stores to be sold--in Contra Costa, Monterey, San Mateo, Santa Clara and Alameda counties--together have about 700 employees, according to American Stores spokesman Michael T. Miller. He said it was too soon to know whether any jobs would be lost, but he said the company hopes that most will be picked up by the new owners once the stores are sold.
The company has a year in which to sell the stores, Miller said, adding that he expected deals would be reached before then. Under the agreement, American Stores must sell eight or nine of the stores to other supermarket operators.
The 23 Alpha Beta stores that are being merged into Lucky account for only 4% of the statewide sales of Lucky and Alpha Beta combined.
Under certain circumstances, according to the agreement, Kenyon may order American Stores to sell additional locations in Northern California. Further, American Stores is prohibited from opening or acquiring stores in Napa, Calif., for the next three years.
Ziegler speculated that American Stores would not sell any stores to Oakland-based Safeway Stores, which already has 240 stores and about a 26% market share in Northern California. Smaller competitors in the region include Nob Hill, Petrini, Raley’s and Cala Foods, owned by Los Angeles-based Quality Foods International (formerly Boys Markets).
