[Federal Register Volume 75, Number 154 (Wednesday, August 11, 2010)]
[Notices]
[Pages 48686-48689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19780]
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FEDERAL TRADE COMMISSION
[File No. 101 0074]
Tops Markets LLC; Analysis of Agreement Containing Consent Orders
to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair or deceptive acts or
practices or unfair methods of competition. The attached Analysis to
Aid Public Comment describes both the allegations in the draft
complaint and the terms of the consent order -- embodied in the consent
agreement -- that would settle these allegations.
DATES: Comments must be received on or before September 7, 2010.
ADDRESSES: Interested parties are invited to submit written comments
electronically or in paper form. Comments should refer to``Tops-Penn
Traffic, File No. 101 0074'' to facilitate the organization of
comments. Please note that your comment -- including your name and your
state -- will be placed on the public record of this proceeding,
including on the publicly accessible FTC website, at (http://www.ftc.gov/os/publiccomments.shtm).
Because comments will be made public, they should not include any
sensitive personal information, such as an individual's Social Security
Number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. Comments also
should not include any sensitive health information, such as medical
records or other individually identifiable health information. In
addition, comments should not include any ``[t]rade secret or any
commercial or financial information which is obtained from any person
and which is privileged or confidential. . . .,'' as provided in
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and Commission Rule
4.10(a)(2), 16 CFR 4.10(a)(2). Comments containing material for which
confidential treatment is requested must be filed in paper form, must
be clearly labeled
[[Page 48687]]
``Confidential,'' and must comply with FTC Rule 4.9(c), 16 CFR
4.9(c).\1\
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\1\ The comment must be accompanied by an explicit request for
confidential treatment, including the factual and legal basis for
the request, and must identify the specific portions of the comment
to be withheld from the public record. The request will be granted
or denied by the Commission's General Counsel, consistent with
applicable law and the public interest. See FTC Rule 4.9(c), 16 CFR
4.9(c).
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Because paper mail addressed to the FTC is subject to delay due to
heightened security screening, please consider submitting your comments
in electronic form. Comments filed in electronic form should be
submitted by using the following weblink: (https://ftcpublic.commentworks.com/ftc/penntraffic/) and following the
instructions on the web-based form. To ensure that the Commission
considers an electronic comment, you must file it on the web-based form
at the weblink: (https://ftcpublic.commentworks.com/ftc/penntraffic/).
If this Notice appears at (http://www.regulations.gov/search/index.jsp), you may also file an electronic comment through that
website. The Commission will consider all comments that regulations.gov
forwards to it. You may also visit the FTC website at (http://www.ftc.gov/) to read the Notice and the news release describing it.
A comment filed in paper form should include the ``Tops-Penn
Traffic, File No. 101 0074'' reference both in the text and on the
envelope, and should be mailed or delivered to the following address:
Federal Trade Commission, Office of the Secretary, Room H-135 (Annex
D), 600 Pennsylvania Avenue, NW, Washington, DC 20580. The FTC is
requesting that any comment filed in paper form be sent by courier or
overnight service, if possible, because U.S. postal mail in the
Washington area and at the Commission is subject to delay due to
heightened security precautions.
The Federal Trade Commission Act (``FTC Act'') and other laws the
Commission administers permit the collection of public comments to
consider and use in this proceeding as appropriate. The Commission will
consider all timely and responsive public comments that it receives,
whether filed in paper or electronic form. Comments received will be
available to the public on the FTC website, to the extent practicable,
at (http://www.ftc.gov/os/publiccomments.shtm). As a matter of
discretion, the Commission makes every effort to remove home contact
information for individuals from the public comments it receives before
placing those comments on the FTC website. More information, including
routine uses permitted by the Privacy Act, may be found in the FTC's
privacy policy, at (http://www.ftc.gov/ftc/privacy.shtm).
FOR FURTHER INFORMATION CONTACT: Jeffrey Perry (202-326-2331), FTC,
Bureau of Competition, 600 Pennsylvania Avenue, NW, Washington, D.C.
20580.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and Sec. 2.34 the
Commission Rules of Practice, 16 CFR 2.34, notice is hereby given that
the above-captioned consent agreement containing a consent order to
cease and desist, having been filed with and accepted, subject to final
approval, by the Commission, has been placed on the public record for a
period of thirty (30) days. The following Analysis to Aid Public
Comment describes the terms of the consent agreement, and the
allegations in the complaint. An electronic copy of the full text of
the consent agreement package can be obtained from the FTC Home Page
(for August 4, 2010), on the World Wide Web, at (http://www.ftc.gov/os/actions.shtm). A paper copy can be obtained from the FTC Public
Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW, Washington,
D.C. 20580, either in person or by calling (202) 326-2222.
Public comments are invited, and may be filed with the Commission
in either paper or electronic form. All comments should be filed as
prescribed in the ADDRESSES section above, and must be received on or
before the date specified in the DATES section.
Analysis of Agreement Containing Consent Order to Aid Public Comment
I. Introduction and Background
The Federal Trade Commission (``Commission'') has accepted for
public comment, and subject to final approval, an Agreement Containing
Consent Orders (``Consent Agreement'') from Morgan Stanley Capital
Partners V U.S. Holdco LLC (``Holdco''), its subsidiary, Tops Markets
LLC (``Tops''), and The Penn Traffic Company (``Penn Traffic''),
(collectively ``Respondents''), that is designed to remedy the
anticompetitive effects that would otherwise result from Tops'
acquisition of the supermarket assets of Penn Traffic. The proposed
Consent Agreement requires divestiture of seven Penn Traffic
supermarkets and related assets to a Commission-approved buyer.
On November 18, 2009, Penn Traffic filed for Chapter 11 bankruptcy.
Through the expedited bankruptcy proceeding, Tops sought to acquire
substantially all of Penn Traffic's assets, including its 79
supermarkets in New York, Pennsylvania, Vermont, and New Hampshire (the
``Acquisition''). The purchase price for the Acquisition was $85
million. In addition, Tops agreed to assume from Penn Traffic
approximately $70 million in liabilities and claims. Because the only
remaining bidder for the supermarkets was a liquidator, the Acquisition
represented the only opportunity to avoid mass closing of the Penn
Traffic supermarkets.
In light of the extremely tight deadlines inherent in the
bankruptcy proceeding, and in an effort to avoid mass liquidation of 79
supermarkets in more than 50 metropolitan areas, Commission staff
crafted a remedy that would permit timely consummation of the
Acquisition while preserving the Commission's ability to obtain full
relief to cure the anticompetitive harm that the Acquisition would
otherwise cause in certain local areas where Tops and Penn Traffic
operated competing supermarkets. In light of this extraordinary set of
circumstances, the Commission determined that this unique remedy would
best serve the interests of consumers.
In particular, before the Acquisition was consummated, Respondents
agreed in writing to divest all of the Penn Traffic stores in each
local geographic market in which the transaction presented potential
competitive concerns. Respondents further agreed to maintain the
viability of the acquired stores and to cooperate fully with staff's
investigation, which continued after the Acquisition was consummated.
As a result of this agreement, even before a meaningful investigation
could be completed, Respondents had committed themselves in writing to
the broadest relief that might ultimately be necessary, thereby
preserving completely the Commission's ability to protect consumers
through remedial action, while at the same time enabling Tops to
consummate the Acquisition and prevent the mass shuttering of Penn
Traffic stores.
In accordance with the agreement reached between Respondents and
staff, early termination of the HSR waiting period was granted on
January 25, 2010. A few days later, Respondents closed on the
Acquisition.
The proposed Complaint alleges that the agreement among Respondents
for the sale of the Penn Traffic assets to Tops constitutes a violation
of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C.
Sec. 45, and that the
[[Page 48688]]
Acquisition constitutes a violation of Section 7 of the Clayton Act, as
amended, 15 U.S.C. Sec. 18, and Section 5 of the Federal Trade
Commission Act, as amended, 15 U.S.C. Sec. 45, by lessening
competition in connection with the retail sale of food and other
grocery products in supermarkets.
II. The Parties
Tops is a New York limited liability company with its office and
principal place of business in Williamsville, New York. Prior to the
Acquisition, Tops owned and operated 71 supermarkets in New York and
Pennsylvania, all under the Tops banner. In addition, five supermarkets
are owned and operated by franchisees under the Tops banner. Tops is a
subsidiary of Holdco, a Delaware limited liability company with its
office and principal place of business in New York, New York.
Penn Traffic is a Delaware corporation headquartered in Syracuse,
New York. Prior to the Acquisition, Penn Traffic operated 79
supermarkets in New York, Pennsylvania, Vermont, and New Hampshire
under the following banners: Bi-Lo, P&C Foods (``P&C''), and Quality
Markets.
III. The Proposed Complaint
As outlined in the proposed Complaint, the relevant product market
in which to analyze the Acquisition is the retail sale of food and
other grocery products in supermarkets. Supermarkets are full-line
grocery stores that carry a wide variety of food and grocery items in
particular product categories, including bread and dairy products,
refrigerated and frozen food and beverage products, fresh and prepared
meats and poultry, produce, shelf-stable food and beverage products,
staple foodstuffs, and other grocery products, including non-food
items, household products, and health and beauty aids. The hallmark of
supermarkets is that they offer consumers the convenience of one-stop
shopping for food and grocery products. To achieve this, supermarkets
typically carry more than 10,000 different products and have at least
10,000 square feet of selling space.
As alleged in the proposed Complaint, supermarkets compete
principally with other supermarkets and base their prices primarily on
the prices of food and grocery products sold in other supermarkets.
Other types of retail stores, including neighborhood ``mom & pop''
grocery stores, convenience stores, specialty food stores, club stores,
limited assortment stores (e.g., ALDI, Save-A-Lot), and mass merchants,
do not, individually or collectively, effectively constrain the prices
of food and grocery products in supermarkets because they do not offer
a supermarket's distinct set of products and services that provide
consumers with the convenience of one-stop shopping for food and
grocery products. Although stores such as limited assortment stores do
sell food and certain other grocery items, they do not offer the
breadth of services and products sold at supermarkets and thus do not
provide an effective constraint on prices in supermarkets. The evidence
and the Commission's conclusions on these issues are consistent with
its prior supermarket investigations.
The relevant geographic markets in which to analyze the likely
competitive effects of the Acquisition are: Bath, New York; Cortland,
New York; Ithaca, New York; Lockport, New York; and Sayre,
Pennsylvania. All of these relevant markets were already highly
concentrated before the Acquisition, and the Acquisition has
substantially increased concentration in each of these markets, as
measured by the Herfindahl Hirschman Index (``HHI''). Post-Acquisition
HHIs in the relevant geographic markets range from 5,000 to 10,000, and
the Acquisition has increased HHI levels by between 1,145 and 4,996
points. 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. 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 fifteen to twenty
miles.
According to the proposed Complaint, the Acquisition has
substantially lessened competition in the relevant markets by
eliminating direct competition between Tops and Penn Traffic, by
increasing the likelihood that Tops will unilaterally exercise market
power, and by increasing the likelihood of successful coordinated
interaction among the remaining firms. Absent relief, the ultimate
effect of the Acquisition would be to increase the likelihood that
prices of food and other grocery products would rise above competitive
levels, or that there would be a decrease in the quality or selection
of food, other grocery products, or services.
For the entry of a new competitor or the expansion of an existing
competitor to deter or counteract the anticompetitive effects of an
acquisition, entry must be timely, likely, and sufficient. According to
the proposed Complaint, new entry or expansion by supermarket
competitors in the relevant geographic markets is unlikely to deter the
alleged anticompetitive effects of the Acquisition. The affected
markets are insulated from new entry or expansion by significant entry
barriers, including the time and costs associated with the need to
conduct market research, select an appropriate location for the
supermarket, obtain necessary permits and approvals, construct a new
supermarket or convert an existing structure to a supermarket, and
generate sufficient sales to have a meaningful impact on the market.
Commission staff evaluated and considered pending and potential future
entry by supermarket competitors in each of the affected geographic
markets, as well as entry by other retailers such as mass merchants. In
many of the markets, there is unlikely to be any entry in a time period
that would prevent the anticompetitive effects. And, in those markets
where entry may occur in the near future, the acquisition, despite new
entry, still would result in highly concentrated markets, and that
entry would not eliminate the anticompetitive harm of the acquisition.
IV. The Proposed Consent Agreement
The proposed Consent Agreement includes two proposed orders: a
Decision and Order and an Order to Maintain Assets (collectively
``Consent Orders''). The purpose of the proposed Consent Agreement is
to: (1) ensure the continued use, and provide for the future use, of
the Penn Traffic supermarket assets, subject to divestiture, in the
operation of supermarkets at the respective locations; (2) create a
viable and effective competitor that is independent of the Respondents
in the operation of supermarkets in the relevant geographic markets;
and (3) remedy the lessening of competition that has resulted from the
Acquisition.
To achieve the above goals, the proposed Consent Agreement requires
the divestiture of seven Penn Traffic supermarkets, together with their
related assets, to a Commission-approved buyer at no minimum price
within ninety (90) days of the Decision and Order becoming final. Tops
and Holdco must secure all third-party consents and waivers necessary
to facilitate the divestitures and to allow the Commission-approved
buyer(s) to continue the operation of the Penn Traffic stores as
supermarkets at their respective locations. As set forth in the Consent
Orders, the stores to be divested are located in Bath, NY; Cortland,
NY; Ithaca, NY (two stores); Lockport, NY; and Sayre, PA (two
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stores). In the event Respondents do not meet their obligations to
divest the Penn Traffic assets, the Commission may appoint a
divestiture trustee to divest the assets in a manner consistent with
the Decision and Order and subject to Commission approval.
Until all of the Penn Traffic assets are divested, the Consent
Orders further require Respondents to maintain the viability,
competitiveness, and marketability of the seven Penn Traffic
supermarkets and related assets. This includes keeping the supermarkets
open for business, performing routine maintenance, providing
appropriate marketing and advertising, maintaining inventory levels at
the stores, and using best efforts to preserve relationships with
suppliers, distributors, customers, and employees. The Consent
Agreement provides that the Commission may appoint an interim monitor
whose principal duties are to ensure that Tops complies with its
obligations under the Consent Orders. The Commission has appointed John
J. MacIntyre, a former Penn Traffic employee with more than thirty
years of experience in the supermarket industry, as interim monitor.
V. Opportunity for Public Comment
The proposed Consent Agreement has been placed on the public record
for thirty (30) days to solicit comments from interested persons.
Comments received during this period will become part of the public
record. After thirty (30) days, the Commission will again review the
proposed Consent Agreement, as well as the comments received, and will
decide whether to withdraw its acceptance of the proposed Consent
Agreement or issue its final Consent Orders.
The sole purpose of this analysis is to facilitate public comment
on the proposed Consent Agreement. This analysis does not constitute an
official interpretation of the proposed Consent Agreement, nor does it
modify its terms in any way.
By direction of the Commission.
Donald S. Clark
Secretary.
[FR Doc. 2010-19780 Filed 8-10-10; 8:45 am]
BILLING CODE 6750-01-S