FTC SETS PRECEDENT WITH RULING, ALLOWS AMIGO ACQUISITION IN P.R.

WASHINGTON -- The Federal Trade Commission here considered club stores and supermarkets to be the same class of trade for antitrust purposes for the first time when it issued its recent approval of Wal-Mart's acquisition of Supermercados Amigos, San Juan, Puerto Rico.To complete the acquisition, Wal-Mart Stores, Bentonville, Ark., must sell four locations of the 36-unit Amigo chain, which is the largest

WASHINGTON -- The Federal Trade Commission here considered club stores and supermarkets to be the same class of trade for antitrust purposes for the first time when it issued its recent approval of Wal-Mart's acquisition of Supermercados Amigos, San Juan, Puerto Rico.

To complete the acquisition, Wal-Mart Stores, Bentonville, Ark., must sell four locations of the 36-unit Amigo chain, which is the largest supermarket operator in Puerto Rico. The terms of the acquisition, which adds about $500 million to Wal-Mart's revenues, were not disclosed.

The FTC said in a prepared statement that its consideration of club stores and supercenters as direct competitors of supermarkets "does not indicate a change in policy," but instead underscores that mergers are considered on a case-by-case basis. It said consumers in the Puerto Rico markets it studied use supermarkets, supercenters and club stores interchangeably to fulfill their weekly shopping needs.

As a result of its current presence there with either Sam's Clubs or its supercenter, Wal-Mart is required to sell the Amigo stores in Cidra, Ponce, Manati and Vega Baja. Wal-Mart is seeking to sell those locations to rival Supermercados Maximo, based in Hato Rey, Puerto Rico, which the FTC has already approved as a buyer.

Bert Foer, president, American Antitrust Institute, here, said the FTC appeared to take a practical approach to its consideration of the Puerto Rican marketplace, but he said it remains to be seen what effect the decision might have on future antitrust investigations in the continental U.S.

"I think it probably raises the difficulty in the next supermarket case of arguing for the more traditional market definition," he said. "That's not to say a narrower definition will not prevail in the future, but rather they have permitted an openness to arguments about where people do their weekly shopping. If a significant number of people do their weekly shopping at both types of outlets, they will consider them to be in the same market."

Although he said the FTC's finding does appear to consider how shoppers currently use the various retail outlets, the ruling does not appear to have explored the potential for future competition in the market.

"Who is most likely to enter the market and give Wal-Mart a run for its money?" he said. "Well, that would be the largest chain, and by acquiring that chain, Wal-Mart has arguably eliminated its most important competitor. It bothers me that that wasn't discussed."

Nutritional Sourcing Corp., Pompano Beach, Fla., which operates 42 Pueblo Xtra supermarkets in Puerto Rico, reportedly was opposed to the acquisition. The company, which filed for bankruptcy protection earlier this year, could not be reached for comment.

A spokesman for Wal-Mart told SN that the company was "delighted" by the FTC's announcement.

"We've been working at it a long time, and we're pleased to be at the position we are now," said Ray Bracy, vice president, international corporate affairs, Wal-Mart.

He said the company "supports the FTC's decision" to require the sale of the four stores. Bracy said Wal-Mart planned to retain the Amigo name on the stores that it does not divest.

"We think Amigo's got a great brand, and we'll continue to use it," he said.