Saturday, January 19, 2008

FTC Approves Mergers after Divestitures: A&P, Schering-Plough.

Earlier this month, the FTC approved final consent orders for the Great Atlantic & Pacific Tea Company's (A&P's) acquisition of Pathmark Stores, and Schering-Plough's acquisition of Organon BioSciences, but only after each acquirer divested certain assets.


A&P Acquisition of Pathmark Supermarket Stores - In March 2007, A&P proposed a $1.3 billion acquisition of all of the voting securities of Pathmark, which has about 141 supermarkets along the east coast. Last November, the FTC announced a complaint alleging that the merger would harm consumers in Staten Island and Long Island, New York because the markets are highly concentrated. As a condition for approval of the merger, the FTC required the sale of six grocery stores – five owned by A&P and one owned by Pathmark. Five stores would be sold to King Kullen Grocery Company, and one store to Stop & Shop, a subsidiary of Ahold. After a 30 day public comment period, the FTC announced final approval earlier this month. See In re A&P & Pathmark Stores, FTC File No. 071-0120. Pundits have observed that this decision helps clarify the FTC's stance on supermarket mergers.
The FTC's approval of the A&P merger follows its highly-publicized opposition last year to Whole Foods Market's acquisition of Wild Oats because the merger would allegedly eliminate competition in 18 local markets across the country. In that case, a federal court disagreed with FTC's opposition to the merger, and issued an order denying FTC's request for a preliminary injunction. The FTC had defined the product market as premium and natural organic supermarkets, but the U.S. District Court for the District of Columbia rejected that market definition, despite internal documents from Whole Foods' CEO stating that the merger would avoid price wars with Wild Oats. See FTC v. Whole Foods Market, Inc. & Wild Oats Markets, Inc., FTC File No. 071-0114.

Schering-Plough's Acquisition of Organon Biosciences - The FTC's case against Schering-Plough is very similar to its case against A&P. The FTC had announced a complaint last November challenging Schering Plough's proposed acquisition of healthcare products company Organon BioSciences for $14.4 billion from Dutch company Akzo-Nobel N.V. because the deal would allegedly harm competition in U.S. markets for the sale of three poultry vaccine in violation of the FTC Act § 5 and the Clayton Act § 7. FTC alleged that the product markets for those vaccines is highly concentrated, with Schering-Plough and a subsidiary of Organon BioSciences each controlling significant market shares. The FTC required divestiture of contracts and intellectual property related to the three vaccines. Final approval of the consent order was granted this month. See In re Schering-Plough Corp., FTC File No. 071-0132.
 

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