Haggen sues Albertsons for $1B, alleging takeover sabotage
Boise, Idaho — Haggen’s acquisition of 146 Albertsons and Safeway stores is shaping up as a disaster and the reasons why are detailed in a new lawsuit that puts the blame squarely on the parent company — Albertsons Holdings — of the divested stores.
Haggen was a little known supermarket chain operating 18 stores in Washington and Oregon until December 2014 when Albertsons and Safeway agreed to sell the company 146 stores to gain approval of their merger from the Federal Trade Commission. The integration of the stores did not go smoothly and earlier this summer Haggen announced plans to close 26 stores and indicated that an unspecified number of additional closures are likely.
“Haggen never intended to close any of the stores it acquired," the lawsuit states. "To the contrary, Haggen saw these stores as an exciting opportunity to transform itself into a super-regional grocer with a presence up and down the west coast."
The company’s difficulties, according to the $1 billion lawsuit filed by Haggen, stem from Albertsons Holdings’ “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.”
The complaint filed in the United States District Court for the District of Delaware, pits an emerging regional operator against an industry giant in Albertsons Holdings with annual sales of $61 billion from 2,200 stores and portrays the company as an unscrupulous competitor who set out to sabotage Haggen’s efforts from the start.
“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. “Albertson’s anti-competitive actions critically damaged the operations, customer service, brand goodwill and profitability of the divested stores from the outset (and) have caused significant harm to competition, local communities, employees and consumers.”
The lawsuit alleges that after Haggen bought the Safeway and Albertsons stores, Albertsons 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.”
The lawsuit says Albertsons attempted to do this by:
• 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. “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.”
Albertsons said the lawsuit's allegations "are completely without merit."