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Wal-Mart Stores Inc. and Puerto Rico have settled their year-long antitrust fight over the Amigo supermarket chain, quashing a potential threat to the authority of U.S. states to review mergers. The spat was scheduled for argument today before the federal appeals court in Boston. Attorneys general for 12 states had warned that an adverse decision for Puerto Rico would imperil state antitrust enforcement. The settlement appears to mitigate those worries. It requires Wal-Mart to ask a federal judge to vacate a Dec. 26 decision that Puerto Rico violated the company’s constitutional rights by initiating its antitrust case. The federal judge also suggested Puerto Rico should have deferred to the Federal Trade Commission, which he said was better equipped to assess the competitive consequences of the deal. The settlement is dated Feb. 28, though it was not publicly disclosed until Tuesday. Kevin O’Connor, a partner at law firm La Follette, Godrey & Kahn in Madison, Wis., called the settlement a victory for state antitrust enforcers because it will result in the voiding of the Dec. 26 ruling, which some feared would become a model for challenges to state merger investigations. “The resolution not only affects the particular merger, but also establishes that concurrent jurisdiction is an important part of our antitrust system,” said O’Connor, who wrote a friend-of-the court brief advocating the states-rights issue on behalf of the American Antitrust Institute in Washington. Wal-Mart agreed in February 2002 to acquire Amigo for $225 million in cash. After a protracted antitrust review, the FTC in November dropped objections in exchange for Wal-Mart divesting four stores to Maximo Inc., a new company formed by former Amigo executives. Puerto Rico was not satisfied with the FTC deal, and it sought additional concessions, including a guarantee that Wal-Mart would maintain the current level of local agricultural purchases, keep all Amigo employees and seek a formal certification that the divestiture of Amigo stores to Maximo was fairly priced. Wal-Mart rejected those demands, prompting Puerto Rico’s Justice Department to file suit in superior court to block the merger. At the same time, Wal-Mart initiated a constitutional challenge to Puerto Rico’s case in federal court. According to legal documents, the settlement requires Wal-Mart to divest an Amigo outlet in Bayamon Gardens and a market in San Juanita. These are in addition to the four stores it sold as instructed under the FTC consent decree. Maximo gets first shot to acquire the two stores. If it passes, Wal-Mart has six months to find another buyer before a divestiture trustee takes over the sale. The trustee would be authorized to sell the stores for any price. In a concession to Puerto Rico, Wal-Mart also agreed to maintain its current level of local agricultural purchases for 10 years. Yet this commitment is not ironclad. Wal-Mart preserved its ability to reduce purchases based on supply shortages, total costs, quality and consumer demand. The discounter also said it will for 10 years maintain the current work force level at the Amigo outlets it is retaining. It also certified that it sold the Amigo stores to Maximo at a fair price. Puerto Rico had questioned if the price was too low. A Wal-Mart spokesman in Puerto Rico did not return a call for comment. Despite the concessions, the settlement constitutes a victory for Wal-Mart, which for 13 months has worked to close the deal. The company will soon be free to close the transaction and integrate Amigo into its Puerto Rico operations. Litigation likely would have lasted at least another year and could have involved a trip to the Supreme Court. Besides the expense of the fight, Wal-Mart also would have been deprived of the expected cost savings from the deal and subjected to adverse publicity. Copyright �2003 TDD, LLC. All rights reserved.

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