The planned acquisition of various Safeway stores by Albertsons grocery chain may be slowed up, since to states’ attorneys general filed lawsuits in two separate federal courts. Nevada’s AG Adam Laxalt protested the merger, as did Washington Attorney General Bob Ferguson, according to this brief on Legal Newsline. And for Nevada merger and acquisition attorneys, it’s easy to understand why. For everyone else, it gets a little fuzzy.
It’s not exactly complicated, per se. The argument that the AGs are using is that the “proposed merger is unlawful and will hurt businesses.” The fear of reduced competition and rising prices isn’t one that just extends to businesses, either, citizens will have to bear the burden of higher food costs if the AGs are right. But that may be a matter to be decided by the U.S. District Court for the District of Nevada. And the U.S. District Court for the Western District of Washington, in Seattle. But seriously, you almost have to be one of the Nevada merger and acquisition attorneys to follow the legal line of reasoning here.
It has to do with the Herfindahl-Hirschman Index, or the HHI. If you’re already lost, don’t worry, most people are. Apparently, the proposed acquisition of Safeway stores by Albertons will “increase concentration in each of the relevant markets” measured by the HHI. Or also by the “Merger Guidelines’ standard measure of market concentration.” Or just by sheer number, so the Nevada merger and acquisition attorneys on the AG’s side could tell you.
The HHI specifically, though, has some relevance here. It’s easy to say “mergers reduce competition!” But it’s much harder to prove it. By wielding specifically calibrated tools like the HHI, the opponents can prove that acquisitions are “presumed to create or enhance market power or facilitate its exercise if it increases the HHI by more than 200 points and results in a post-acquisition HHI that exceeds 2,500 points.” See, it’s all very technical.
So, you could get a Nevada business lawyer like Scott A. Knight to interpret all that Index mumbo jumbo for you, or you could just read to the end of the article to find out that “simply put, the attorneys general argue the merger will ‘substantially lessen’ competition.” Which, let’s be honest, we’d probably be okay with if the merger were between Costco and HEB. Or Fresh & Easy and Sunflower Farmers Market. Or even Trader Joe’s and Natural Grocers. Because when we already love the quality of the product, we’re probably less likely to complain about it being more abundant, even if the prices do rise slightly. Like when Whole Foods Market bought Wild Oats. Oh, wait, that merger was somewhat controversial.
Still, Albertsons and Safeway are hopeful. Issuing statements that reflect confidence and strength, the CEOs of both companies report looking forward to the “transformative day” for both stores that will result in a dedication of “bringing a better shopping experience to more customers across the country.” That is, if they get away with it in court.