Haggen, the West Coast regional grocer, announced Tuesday that the company has filed a lawsuit against Albertsons LLC and Albertsons Holdings LLC (“Albertsons”) seeking more than $1 billion in damages.
The complaint, which was filed in United States District Court for the District of Delaware, alleged that following Haggen’s December 2014 purchase of 146 Albertsons and Safeway stores, Albertsons engaged in “coordinated and systematic efforts to eliminate competition and Haggen as a viable competitor in over 130 local grocery markets in five states,” and “made false representations to both Haggen and the FTC about Albertsons’ commitment to a seamless transformation of the stores into viable competitors under the Haggen banner.”
Albertsons sought out Haggen in order to convince the Federal Trade Commission (“FTC”) that Haggen would be a new competitor in local markets, which enabled Albertsons to gain the FTC’s approval of a merger between Albertsons and Safeway—a merger that created “one of the largest food retailers in the United States, with over 2,200 stores and $61 billion in combined sales,” according to the complaint. Despite the FTC’s orders and Albertsons’ agreement to abide by all conditions of the sale, the complaint alleges, Albertsons engaged in an illegal campaign against Haggen including “premeditated acts of unfair and anti-competitive conduct that were calculated to circumvent Albertsons obligations under federal antitrust laws, FTC orders, and contractual commitments to Haggen, all of which were intended to prevent and delay the successful entry of Haggen (or any other viable competitor) into local grocery markets that Albertsons now dominates.”
“During the transfer process, Albertsons launched its plan to gain market power and/or monopoly power, acting in a manner that was designed to (and did) hamstring Haggen’s ability to successfully operate the Stores after taking ownership,” according to the complaint. As a result, despite Haggen’s plans to successfully operate and expand upon the acquired stores, Haggen was “forced to close 26 of the Stores that it newly acquired as a part of the Albertsons’ divestiture, and faces the potential closure of additional stores,” the complaint said.
“Albertson’s anti-competitive actions critically damaged the operations, customer service, brand goodwill and profitability of the divested stores from the outset,” the complaint alleged, “[and] have caused significant harm to competition, local communities, employees and consumers,” throughout California, Oregon, Washington, Nevada and Arizona. Instead of focusing on succeeding in the new markets, according to the complaint, “Haggen has had to focus on strategies to recover from Albertsons’ wrongful acts, which include, sadly, Haggen’s efforts to find new jobs for displaced employees who too are victims of Albertsons’ actions.”
In particular, Haggen alleged in its complaint that Albertsons, in violation of numerous laws, the FTC order and the purchase agreement, intentionally and deliberately undertook a number of “malicious and unfair actions” that “strained Haggen’s resources” and “created substantial distraction and diverted the attention of store-level and senior Haggen management” during the store conversion process, such as:
- Using proprietary and confidential conversion scheduling information to plan and execute aggressive marketing campaigns intended to undermine Haggen grand openings;
- Providing Haggen with false, misleading and incomplete retail pricing data, causing Haggen stores to unknowingly inflate prices;
- Cutting off Haggen-acquired store advertising in order to decrease customer traffic;
- Timing the remodeling and rebranding of its retained stores to impair Haggen’s entry into the relevant markets;
- Diverting customers by illegally accessing Haggen’s confidential data to gain an unfair competitive advantage;
- Deliberately understocking certain inventory at Haggen-acquired stores below levels consistent with the ordinary course of business just prior to conversion, resulting in out of stocks which negatively impacted the shopping experience upon Haggen grand openings;
- Deliberately overstocking perishable inventory at Haggen-acquired stores beyond levels consistent with the ordinary course of business just prior to conversion such that Haggen had to throw away significant amounts of inventory it paid for;
- Removing store fixtures and inventory from Haggen-acquired stores that Haggen paid for;
- Diverting Haggen inventory to Albertsons stores; and
- Failing to perform routine maintenance on stores and equipment.
“Albertson’s anti-competitive conduct caused significant damage to Haggen’s image, brand, and ability to build goodwill during its grand openings to the public,” according to the complaint. The complaint continued, “Albertson’s unlawful acts destroyed or substantially lessened the economic viability, marketability and competitiveness of the [Haggen] Stores, depriving consumers in each of the Relevant Markets the benefits of substantial competition from a new market entrant.”
As was reported December 22, 2014, in The Real Estate Daily News when AB Acquisition LLC (Albertsons) and Safeway Inc. (NYSE: SWY) first announced a merger subject to approval by the Federal Trade Commission (FTC), to sell 168 stores across eight states to four buyers. Haggen closed on the purchase of three stores in the Tucson market in May, 2015.
- A former Safeway at 10380 E. Broadway Blvd, Tucson;
- A former Albertsons at 1350 N. Silverbell Road, Tucson; and
- A former Safeway at 8740 E. Broadway Blvd, Tucson
Haggen, three months later in August, announced the closure of the two former Safeway stores.