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The Federal Trade Commission is working on a consent decree for Wal-Mart Stores Inc.’s acquisition of the Supermercados Amigos grocery store chain in Puerto Rico that antitrust experts say would represent a retreat from the Clinton administration’s tough stance on supermarket deals. The FTC may allow Wal-Mart to find a buyer for divested stores after it closes the deal. The commission in recent years has required up-front buyers in supermarket mergers. Staff at the agency also may not require so-called clean sweeps in various geographic markets where divestitures are required, sources said. FTC policy under former chairman Robert Pitofsky was to require chains to sell either all the stores of the target or acquirer in a specific market rather than permit the company to cherry-pick the most viable stores. FTC staff also favor including club stores such as Sam’s Club in the market definition, sources said. The FTC historically has refused to consider club stores because they sell bulk goods. For most supermarket deals, adding club stores reduces market concentration scores, which makes it easier to secure antitrust approval for a merger. In this case, inclusion of club stores actually hurts Wal-Mart because it owns the majority of such stores in Puerto Rico. The sources caution that the agreement is not final and that FTC competition bureau director Joseph Simons has yet to endorse the decree. Much of the investigation is being conducted by the FTC’s New York office. Sources said Wal-Mart already has met the agency’s “second request” for information on the deal, although it was unclear when the standard waiting period expires. Under the Hart-Scott-Rodino Antitrust Improvements Act, a company may not close a deal until 30 days after it complies with the document demand. An FTC spokesman declined to comment. Any staff-negotiated consent decree still must be approved by the five FTC commissioners. A Wal-Mart spokeswoman said the company will not comment on negotiations with the government. “It is a very confidential process, and we are not discussing it,” she said. Work on the Wal-Mart deal comes just a few weeks after FTC chief economist David Scheffman told the American Bar Association spring antitrust meeting that the agency is re-evaluating how it defines the market for grocery deals. “We are taking a fresh look given the evolution of the supermarket industry,” he said. A source familiar with the Wal-Mart Amigo negotiations said other supermarket companies will see the decree as a green light to proceed with mergers. “It is going to make it a very receptive climate for supermarket mergers,” the source said. “There have been a lot of deals that just couldn’t get approval before that have not been proposed.” A second source with knowledge of the deal said the change would permit more in-market mergers. “This would be a return to the days of the 1980s,” the source said. “The repercussions would be significant.” Albert Foer, president of the American Antitrust Institute, said it would be discouraging if the FTC accepted a decree that included club stores and did not require a clean sweep or up-front buyers. “This would be a step back from the type of approach they have taken in the past,” he said. “It does not sound like the type of continuity that the commission has talked about.” Foer said he hopes that if the commission decides to proceed that it explain the reasons for the policy change. “If they are making a major statement of a change in policy, they better spell it out in a completely transparent way,” he said. The FTC has approved one significant supermarket deal since Timothy J. Muris became chairman a year ago. Royal Ahold NV in December closed its $500 million acquisition of Bruno’s Supermarkets Inc., a 185-store chain based in Birmingham, Ala., that operates in the Southeast. The FTC cleared the deal Dec. 7 after Ahold agreed to divest two stores. The agency also is considering a joint acquisition of bankrupt Big V stores by Ahold and Pathmark Stores Inc. Antitrust experts have always expected Muris to alter the analysis of supermarket mergers. They say he gives greater weight to efficiencies and to non-traditional sources of competition than Pitofsky did. Wal-Mart agreed Feb. 7 to acquire Supermercados Amigos, which with 35 stores is the leading grocer in Puerto Rico. Terms were not disclosed. After the merger, Wal-Mart will operate 52 outlets on the island, making it one of Puerto Rico’s largest employers. Copyright (c)2002 TDD, LLC. All rights reserved.

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