Court Upholds California’s Right to Block Merger of Lucky, Alpha Beta Chains

The Supreme Court ruled today that state regulators, consumers and other private citizens may use federal antitrust law to break up corporate mergers.

In a major judicial victory for California Atty. Gen. John K. Van de Kamp, the justices ruled 9-0 that he is empowered by a key 1914 trust-busting law to challenge a $2.5-billion merger of the Lucky and Alpha Beta supermarket chains.

If the state wins its lawsuit and splits up the business deal, officials said California consumers could save $440 million a year in grocery bills.

Justice John Paul Stevens, writing for the court, said any opponent of a merger--not just the federal government--has the right to sue to force divestiture of merged businesses.

The ruling, however, does not give states and individuals the same sweeping power enjoyed by the federal government.

Stevens said federal officials can force divestiture merely by proving an antitrust violation but said, “A private litigant . . . must prove threatened loss or damage to his own interests in order to obtain relief.”

The decision sends the supermarkets’ merger case back to lower courts where the state will try to prove the merger is illegal.

Justice Anthony M. Kennedy, in a separate concurring opinion, said that Van de Kamp’s office still faces some hurdles at trial. The state knew of the impending supermarket merger in early 1988 but waited months before it sued, he said.

Kennedy noted that the Federal Trade Commission permitted the merger and that the break-up will “upset labor agreements and other matters.”

“These considerations should bear upon the ultimate disposition of the case,” he said.

It was widely assumed before today’s decision that states and private citizens could prevent anti-competitive business combinations but could not interfere once such deals were completed.

But Stevens said the Clayton Act, passed in 1914 when Congress was preoccupied with trust-busting on a national scale, can be a weapon even against a completed merger.

Lucky, California’s largest supermarket chain, and Alpha Beta, the fourth-largest, operate about 600 stores in the state.

Alpha Beta’s parent company, American Stores, acquired Lucky in June, 1988, to merge the two chains under the Lucky name. American has 1,500 stores in 40 states, while Lucky’s operations are in seven Western and Midwestern states.

American Stores said California customers would save more than $40 million a year because of increased efficiency. But state officials said the merger would drive other competitors out of business and would lead to $440 million in higher grocery prices each year.

U.S. District Judge David V. Kenyon in Los Angeles temporarily blocked the merger in 1988 and ordered separate operation of the two chains pending further litigation.

But the U.S. 9th Circuit Court of Appeals overturned the judge’s ruling and lifted the break-up order.