Jitney-Jungle Stores of America, Inc.; Bruckmann, Rosser, Sherrill & Co., L.P.; Delta Acquisition Corp.; Delchamps, Inc.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 971-0093]

Jitney-Jungle Stores of America, Inc.; Bruckmann, Rosser,

Sherrill & Co., L.P.; Delta Acquisition Corp.; Delchamps, Inc.;

Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft

complaint that accompanies the consent agreement and the terms of the

consent order--embodied in the consent agreement--that would settle

these allegations.

DATES: Comments must be received on or before November 24, 1997.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave. NW, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

George S. Cary, Federal Trade Commission, H-374, 6th St. and

Pennsylvania Ave. NW, Washington, DC 20580, (202) 326-3741. Phillip L.

Broyles, Federal Trade Commission, S-2105, 6th St. and Pennsylvania

Ave. NW, Washington, DC 20580. (202) 326-2805.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Sec. 2.34 of the

Commission's rules of practice (16 CFR 2.34), notice is hereby given

that the above-captioned consent agreement containing a consent order

to cease and desist, having been filed with and accepted, subject to

final approval, by the Commission, has been placed on the public record

for a period of sixty (60) days. The following Analysis to Aid Public

Comment describes the terms of the consent agreement, and the

allegations in the accompanying complaint. An electronic copy of the

full text of the consent agreement package can be obtained from the

Commission Actions section of the FTC Home Page (for September 12,

1997), on the World Wide Web, at ``http://www.ftc.gov/os/

actions97.htm.'' A paper copy can be obtained from the FTC Public

Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, NW,

Washington, DC 20580, either in person or by calling (202) 326-3627.

Public comment is invited. Such comments or views will be considered by

the Commission and will be available for inspection and copying at its

principal office in accordance with Sec. 4.9(b)(6)(ii) of the

Commission's rules of practice (16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

I. Introduction

The Federal Trade Commission (``Commission'') has accepted for

public comment from Jitney-Jungle Stores of America, Inc. (``Jitney-

Jungle''), Bruckmann, Rosser, Sherrill & Co., L.P. (``Bruckmann''),

Delta Acquisition Corporation (``Delta''), and Delchamps, Inc.

(``Delchamps'') (collectively ``the proposed Respondents'') an

Agreement Containing Consent Order (``the proposed consent order'').

Bruckmann owns a majority of the voting securities of Jitney-Jungle,

and Delta is wholly-owned subsidiary of Jitney-Jungle. The proposed

consent order is designed to remedy likely anticompetitive effects

arising from Jitney-Jungle and Delta's proposed acquisition of the

outstanding shares of Delchamps.

II. Description of the Parties and the Acquisition

Jitney-Jungle, which is headquartered in Jackson, Mississippi, is

one of the leading supermarket chains in the Southeast. Jitney-Jungle

operates 105 supermarkets in the states of Alabama, Arkansas,

Louisiana, Mississippi, Florida, and Tennessee. The company is the

largest supermarket operator in Mississippi with 72 stores. The company

operates under three formats: (1) 78 conventional supermarkets under

the ``Jitney-Jungle'' trade name; (2) 23 discount supermarkets under

the ``Sack and Save,'' ``Mega Market,'' and ``Mega Pantry'' trade

names; and (3) four premium supermarkets under the ``Jitney Premier''

trade name. Jitney-Jungle has sales of approximately $1.13 billion at

its supermarkets, and total sales of $1.28 billion, in its 1997 fiscal

year. The ultimate parent entity of Jitney-Jungle is Bruckmann, which

owns a majority of the voting securities of Jitney-Jungle.

Delchamps, which is headquartered in Mobile, Alabama, is another

leading supermarket chain in the Southeast. Delchamps operates a total

of 118 conventional supermarkets under the ``Delchamps'' trade name.

Delchamps' supermarkets are located in Alabama, Florida, Louisiana, and

Mississippi. In addition, the company operates ten liquor stores in the

state of Florida. Louisiana, and Mississippi. In addition, the company

operates ten liquor stores in the state of Florida. Delchamps had sales

of approximately $1.08 billion at its supermarkets, and total sales of

$1.1 billion, in its 1997 fiscal year.

On or about July 8, 1997, Jitney-Jungle and Delta, a wholly-owned

subsidiary of Jitney-Jungle, entered into a cash tender offer agreement

with Delchamps to acquire all of the outstanding common stock of

Delchamps for $30 per share. The total value of the proposed

acquisition is approximately $228 million.

III. The Complaint

The draft complaint accompanying the proposed consent order alleges

that the acquisition, as well as the agreement to enter into the

acquisition, would substantially lessen competition in violation of

section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and section 5

of the FTC Act, as amended, 15 U.S.C. 45.

According to the draft complaint, the relevant line of commerce

(i.e., the product market) is the retail sale of food and grocery items

in supermarkets, and Jitney-Jungle and Delchamps are direct

competitors. Stores other than

[[Page 49688]]

supermarkets are not in the relevant product market because they do not

have a significant price-constraining effect on food and grocery

products sold at supermarkets. Most consumers shopping for food and

grocery products at supermarkets are not likely to shop elsewhere in

response to a small price increase by supermarkets. In addition,

supermarkets do not regularly price-check food and grocery products

sold at other types of stores and do not typically change their food

and grocery prices in response to prices at other types of stores.

Food stores other than supermarkets, such as convenience stores,

``mom & pop'' stores, and specialty food stores (e.g., seafood markets,

bakeries, etc.) are not in the relevant product market because they

typically offer far fewer items than the average supermarket and charge

higher prices for many of the same or similar items. Other types of

stores that sell some food and grocery products, such as large drug

stores and mass merchandisers, offer only a limited number of items

sold in the typical supermarket. The small number of membership club

stores in the relevant market, which offer only a limited number of

food and grocery products primarily in bulk sizes, do not have a

significant effect on market concentration.

Military commissaries are also not in the relevant product market.

Military commissaries, which are not open to the public, operate as

supermarkets for eligible military personnel and their families with

retail prices substantially below the average retail prices at

supermarkets for the same or similar items in the Gulfport-Biloxi area

in Mississippi, and in Pensacola, Florida. Retail prices at military

commissaries are not advertised and are uniform throughout the country

based on the actual cost of the item plus a nationwide uniform

surcharge determined by rules established by the Secretary of Defense.

Retail prices at military commissaries are not based on local market

conditions. Supermarkets do not price-check food and grocery products

sold at military commissaries and do not base their prices on the

retail prices at the military commissaries.

According to the draft complaint, the relevant sections of the

country (i.e., the geographic markets) in which to analyze the

acquisition of Delchamps by Jitney and Delta are the following:

a. The Gulfport-Biloxi area of Mississippi, which consists of the

parts of Hancock, Harrison, and Jackson counties that include Waveland,

Bay Saint Louis, Pass Christian, Long Beach, Gulfport, Biloxi,

D'Iberville, and Ocean Springs, and narrower markets contained therein,

including Waveland/Bay Saint Louis, Gulfport, north Gulfport, and

Biloxi/D'Iberville.

b. Pensacola, Florida, and narrower markets contained therein;

c. Hattiesburg, Mississippi, and the area immediately west of

Hattiesburg; and

d. Vicksburg, Mississippi.

According to the draft compliant, these markets are highly

concentrated, whether measured by the Herfindahl-Hirschman Index

(commonly referred to as ``HHI'') or by two-firm and four-firm

concentration ratios. The HHI is a measurement of market concentration

calculated by summing the squares of the individual market shares of

all the participants. The acquisition would significantly increase the

HHIs in each of the already highly concentrated markets.

According to the draft complaint, entry into the retail sale of

food and grocery products in supermarkets in the relevant sections of

the country is difficult and would not be timely, likely, or sufficient

to prevent anticompetitive effects in the relevant geographic markets.

Jitney-Jungle and Delta's acquisition of Delchamps may reduce

competition in these markets by eliminating the direct competition

between Jitney-Jungle and Delchamps, by increasing the likelihood that

Jitney-Jungle will unilaterally exercise market power, or by increasing

the likelihood of, or facilitating, collusion or coordinated

interaction among the remaining competitors. Each of these effects

increases the likelihood that the prices of food, groceries or services

will increase, and the quality and selection of food, groceries or

services will decrease, in the relevant sections of the country.

IV. Terms of the Proposed Consent Order

The proposed consent order attempts to remedy the Commission's

competitive concerns about the acquisition. Under the terms of the

proposed consent order, the proposed Respondents must divest the ten

supermarkets listed below--five Jitney-Jungle owned and operated stores

(four of which are ``Jitney-Jungle'' stores and one is a ``Sack &

Save'' store) and five Delchamps--to Supervalu Holdings, Inc., a

wholly-owned subsidiary of Supervalu, Inc. (collectively

``Supervalu''), within either one month after the date on which the

proposed consent order becomes final, or five months after the

acceptance of the proposed consent order for public comment, whichever

is later, or to another acquirer that receives the prior approval of

the Commission within three months after the proposed consent order

becomes final. A sale to Supervalu by the proposed Respondents must be

in accordance with the agreement between Supervalu and Jitney-Jungle

dated August 29, 1997, and all subsequent amendments thereto.

If the proposed Respondents divest the ten listed supermarkets to

Supervalu within three months of the date on which the proposed consent

order becomes final, Supervalu may sell any of these supermarkets to

either R&M Foods, Inc. (``R&M Foods'') or Southeast Foods, Inc.

(``Southeast Foods''). R&M Foods currently operates 18 supermarkets,

and Southeast Foods currently operates 21 supermarkets. If Supervalu

does not sell the ten listed supermarkets to either R&M Foods or

Southeast Foods within three months of the date on which the proposed

consent order becomes final, Supervalu cannot sell the ten listed

supermarkets to anyone without the prior approval of the Commission.

Five of the ten supermarkets to be divested are located in the

Gulfport-Biloxi area; two are located in Pensacola, Florida; two are

located in Hattiesburg, Mississippi; and one is located in Vicksburg,

Mississippi. If the proposed Respondents fail to satisfy any of the

divestiture provisions, the Commission may appoint a trustee to divest

supermarkets to satisfy the terms of the proposed consent order. The

ten supermarkets to be divested are:

1. The following supermarket located in Hancock County,

Mississippi:

a. Delchamps store no. 64 operating under the ``Delchamps'' trade

name, which is located at Choctaw Plaza Shopping Center, 318 Highway

90, Waveland, MS 39576;

2. The following supermarkets located in Harrison County,

Mississippi:

a. Jitney-Jungle store no. 33 operating under the ``Jitney-Jungle''

trade name, which is located at 917 Division St., Biloxi, MS 39530;

b. Jitney-Jungle store no. 32 operating under the ``Jitney-Jungle''

trade name, which is located at 1225 Pass Road, Gulfport, MS 39501;

c. Jitney-Jungle store no. 42 operating under the ``Jitney-Jungle''

trade name, which is located at Handsboro Square Shopping Center, 1345

East Pass Road, Gulfport, MS 39501; and

d. Delchamps store no. 364 operating under the ``Delchamps'' trade

name, which is located at 11240-A Highway 49 North, Gulfport, MS 39503;

3. The following supermarkets located in Escambia County, Florida:

[[Page 49689]]

a. Jitney-Jungle store no. 54 operating under the ``Jitney-Jungle''

trade name, which is located at 4081-A East Olive Road, Pensacola, FL

32514.

b. Jitney-Jungle store no. 52 operating under the ``Sack & Save''

trade name, which is located at Brent Oaks Mall, East Brent Lane,

Pensacola, FL 32503.

4. The following supermarket located in Lamar County, Mississippi:

a. Delchamps store no. 67 operating under the ``Delchamps'' trade

name, which is located at Oak Grove Plaza Shopping Center, 4600 West

Hardy Street, Hattiesburg, MS 39401.

5. The following supermarket located in Forrest County,

Mississippi:

a. Delchamps store no. 9 operating under the ``Delchamps'' trade

name, which is located at 601 Broadway Street, Hattiesburg, MS 39401.

6. The following supermarket located in Warren County, Mississippi:

a. Delchamps store no. 115 operating under the ``Delchamps'' trade

name, which is located at Delchamps Plaza, 3046-D Indiana Avenue,

Vicksburg, MS 39180.

For a period of ten years from the date the proposed consent order

becomes final, the proposed Respondents are prohibited from acquiring,

without prior notice to the Commission, supermarket assets located in,

or any interest (such as stock) in any entity that owns or operates a

supermarket located in Hancock, Harrison, Jackson, Lamar, Forrest, and

Warren counties in Mississippi, and Escambia County, Florida. This

provision does not prevent the proposed Respondents from constructing

new supermarket facilities on their own; nor does it prevent the

proposed Respondents from leasing facilities not operated as

supermarkets within the previous six months.

For a period of ten years, the proposed consent order also

prohibits the proposed Respondents from entering into or enforcing any

agreement that restricts the ability of any person that acquires any

supermarket, any leasehold interest in any supermarket, or any interest

in any retail location used as a supermarket on or after July 1, 1997,

to operate a supermarket at that site if such supermarket was formerly

owned or operated by the proposed Respondents in Hancock, Harrison,

Jackson, Lamar, Forrest, and Warren counties in Mississippi, and

Escambia County, Florida. In addition, the proposed Respondents may not

remove any equipment from a supermarket they own or operate prior to a

sale, sublease, assignment, or change in occupancy, except in the

ordinary course of business, or except as part of any negotiation for a

sale, sublease, assignment, or change in occupancy of such supermarket.

The proposed Respondents are required to provide to the Commission

a report of compliance with the proposed consent order within sixty

(60) days following the date the proposed consent order becomes final,

every sixty (60) days thereafter until the divestitures are completed,

and annually for a period of ten years.

The proposed Respondents also entered into an Asset Maintenance

Agreement. Under the terms of the Asset Maintenance Agreement, from the

time Jitney-Jungle acquires the outstanding stock of Delchamps until

the divestitures have been completed, the proposed Respondents must

maintain their viability, competitiveness and marketability, and must

not cause their wasting or deterioration, and cannot sell, transfer, or

otherwise impair their marketability or viability. The Asset

Maintenance Agreement specifies these obligations in detail.

V. Opportunity for Public Comment

The proposed consent order has been placed on the public record for

sixty (60) days for receipt of comments by interested persons. Comments

received during this period will become part of the public record.

After sixty days, the Commission will again review the agreement and

the comments received and will decide whether it should withdraw from

the agreement or make final the agreement's proposed consent order.

By accepting the proposed consent order subject to final approval,

the Commission anticipates that the competitive problems alleged in the

complaint will be resolved. The purpose of this analysis is to invite

public comment on the proposed consent order, including the proposed

sale of supermarkets to Supervalu, R&M Foods, and Southeast Foods, to

aid the Commission in its determination of whether it should make final

the proposed consent order contained in the agreement. This analysis is

not intended to constitute an official interpretation of the agreement

and proposed consent order, nor is it intended to modify the terms of

the agreement and proposed consent order in any way.

Donald S. Clark,

Secretary.

[FR Doc. 97-25185 Filed 9-22-97; 8:45 am]

BILLING CODE 6750-01-M