WILLIAMSVILLE, N.Y. — The Federal Trade Commission has ordered Tops Friendly Markets here to sell seven acquired locations to settle antitrust concerns, but some industry observers said few buyers are likely to emerge amid the glut of retail space in the flagging economy.
“I think what may happen is one or two stores may sell,” said Burt P. Flickinger III, managing director, Strategic Resource Group, New York.
The FTC decision, which is open for public comment before it becomes final, came after Tops’ acquisition earlier this year of 79 stores from Syracuse, N.Y.-based Penn Traffic Co., which was going through its third bankruptcy. Tops then sold 24 stores — including some to Schenectady, N.Y.-based Price Chopper and Pittsburgh-based Giant Eagle — and has been converting the remaining locations to the Tops banner.
Flickinger said he questioned the FTC’s decision to force the divestiture of the seven stores — five in New York and two in Pennsylvania — noting that the FTC did not consider nontraditional stores such as Aldi, Save-A-Lot, BJ’s Wholesale Club and Wal-Mart to be direct competitors of conventional supermarkets.
“This would have helped Tops to have sufficient size and scale against the Wal-Mart tsunami that is coming into that region,” he told SN.
Flickinger noted that the weak economy in upstate New York has already created a lot of vacant real estate. The market has been littered with sites from the Ames department store chain, for example, following that company’s 2002 bankruptcy.
“Unemployment is high in those areas, as almost all of the region’s major manufacturing businesses have either liquidated, closed or gone offshore,” he said. “Now there may be a real risk that these stores may not sell.”
He said he did not think many of New York’s independent operators would be interested in the locations.
In addition, Flickinger cited the narrow geographic range that the FTC used in defining the competitive scope of the markets. In its order, however, the FTC said it would have reached the same conclusion even if it had considered competition within a broader geographic area.
“The high concentration levels and staff’s ultimate conclusions regarding the competitive harm likely to result from the acquisition are not sensitive to changes in the precise contours of the relevant geographic markets,” the FTC wrote. “Indeed, the transaction would be presumptively unlawful in the geographic areas at issue even if the relevant geographic markets were defined by radii as large as 15 to 20 miles.”
If Tops cannot find a buyer for the stores, the FTC said it could appoint a divestiture trustee to dispose of the stores.
The FTC said it has appointed John J. MacIntyre, a former Penn Traffic employee with more than 30 years of experience in the supermarket industry, as interim monitor to ensure that Tops maintains the viability of the stores that are to be put up for sale.
