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The Federal Trade Commission is holding up Wal-Mart Stores Inc.’s acquisition of Puerto Rico’s Supermercados Amigos chain, insisting that the discount giant find a buyer for divested stores before it closes the deal. Sources said Wal-Mart is having trouble finding an acquirer acceptable to antitrust regulators. Amigos is Puerto Rico’s biggest supermarket chain, and any buyer of divested stores would need to replace competition lost from the merger. Typically, a retailer would attempt to unload the stores to a rival, often discounting the price to expedite the transaction. But Puerto Rico makes that tough because few chains operate on the island. Also, it would be difficult for a chain to enter the market with just the divested stores because any acquirer would need to establish a distribution network, sources said. That is less of a problem on the mainland, where chains can truck materials into nearby areas. A Wal-Mart spokeswoman declined to comment, referring questions to the FTC. “We are still in the process of negotiations,” she said. An FTC spokesman declined to comment. Sources said the Amigos deal offers the best insight yet into FTC Chairman Timothy J. Muris’ approach to retail mergers. In what could be a boon to supermarket mergers in the continental United States, the agency for the first time has included club stores in the market definition, sources said. Club stores such as Price Club and Sam’s Club typically offer larger sizes and fewer selections than a typical supermarket. As such, the FTC historically has excluded them from the market definition. Antitrust lawyers have long disputed this policy. They have argued that consumers increasingly buy groceries from club stores, which means they limit the ability of supermarkets to profitably raise prices. Inclusion of club stores in several supermarket mergers in the last few years would have resulted in fewer divestitures. For instance, the FTC in June 2000 — which is about a year before Muris became chairman — challenged Kroger Co.’s acquisition of 74 Winn-Dixie Stores Inc. units in the Dallas-Fort Worth area. Antitrust lawyers have said inclusion of club stores in that case would have reduced the market concentration scores enough to mitigate the need for a challenge. In an odd twist, the inclusion of club stores in Puerto Rico actually makes the deal more problematic for Wal-Mart than less so. This is because Wal-Mart operates seven Sam’s Club units on the island. If club stores were excluded, then Wal-Mart likely would not have had to divest stores because it only operates one other store that sells groceries. This means the deal would have closed months ago, sources said. Antitrust lawyers said the FTC’s insistence on an up-front buyer also is significant. FTC officials have repeatedly said since Muris took over a year ago that they would require up-front buyers in circumstances where it may be tough to find an acceptable acquirer. Yet many antitrust lawyers did not expect the agency to continue the prior policy of requiring up-front buyers in supermarket deals. Still, one source cautioned against reading too much into the Amigos investigation. As an island, Puerto Rico’s economy differs substantially from the mainland. So some policies that make sense here may not be applicable there. The FTC’s investigation is being run by Michael Bloom, a senior counsel in the agency’s New York office. Bentonville, Ark.-based Wal-Mart agreed Feb. 6 to acquire the 35-store, San Juan, Puerto Rico-based Amigos chain. It has not disclosed terms of the deal. Copyright �2002 TDD, LLC. All rights reserved.

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