August 6, 2010
FTC orders Tops to sell stores
7 P&C stores, including Riverside Plaza, seen as anticompetitive
The Federal Trade Commission announced Thursday that it will require Tops Markets to sell its newly acquired P&C store in Cortland along with six others due to concerns over anticompetitive business environments.
The FTC wrote in a news release that Tops agreed to sell the stores to FTC-approved buyers within three months to settle charges that its acquisitions were anticompetitive.
The order will be subject to a 30-day public comment period ending Sept. 7, after which the commission will decide whether to make it final, according to the release.
Tops bought the P&C supermarket in the Riverside Plaza on Clinton Avenue in the city when it purchased all of Penn Traffic’s supermarkets in February. The store began selling Tops brand products but retained the P&C name, pending a renovation that was delayed by the FTC review.
Tops also operates a store two miles away on the other side of the city on Route 281 in Cortlandville.
The FTC staff found five areas where competition was an issue: Bath, Cortland, Ithaca and Lockport in New York state, and Sayre, Pa.
“Over the past six months Tops has cooperated fully during the FTC investigation leading up to today’s order,” Kate McKenna, a spokeswoman for Tops, said Thursday in a written statement. “The initial reaction of Tops Friendly Markets is one of disappointment because of the company’s desire to run a majority of the stores that were cited in the order.”
During the public comment period, people can write to the FTC about their thoughts on the decision and mail their comments to the FTC’s office in Washington, D.C., or submit them electronically at ftcpublic.commentworks.com/ftc/penntraffic/.
Mitchell Katz, a spokesman for the FTC, said Tops can apply for an extension if it cannot sell the store within three months, and the FTC can help Tops find a buyer.
Dave Muraco, owner of the Riverside Plaza and the building Tops purchased from Penn Traffic, said he has been aware of the FTC’s investigation for a few months and that he met with a new potential buyer about a month and a half ago.
“They have a potential buyer from what I’ve heard. It hasn’t been finalized in any way, but that doesn’t mean it’s not very much still alive,” Muraco said.
He said he heard the potential buyer is considering operating the store under the name P&C, buying its groceries from Tops and carrying some Tops brand items.
Muraco said he thinks it is in Tops’ best interest to find a buyer, rather than letting the store become vacant, because Tops signed a lease with him that does not end until 2020, and the company is liable to pay him more than $2 million in rent.
If another company buys the store, Muraco said the new owner will have to pay him the agreed amount of rent for the next 10 years.
Muraco said he does not understand why the FTC has become so involved in the issue, but he is hoping Tops and the FTC resolve it soon.
“It’s been nothing but aggravating. I can’t wait till it’s over,” Muraco said. “I think this is the last leg of it here.”
In November 2009, Penn Traffic filed for Chapter 11 bankruptcy. Tops bought 79 of Penn Traffic’s supermarkets in New York, Pennsylvania, Vermont, and New Hampshire for about $85 million through an expedited bankruptcy proceeding.
Tops’ officials announced in February that they would convert the Riverside Plaza store to a Tops, then announced in March that they would close the P&C store on Homer Avenue.
Tops’ acquisition of the 79 stores raised competition issues in several areas of New York and Pennsylvania, according to the FTC’s news release.
Because a full FTC investigation before the deal was completed could have led the bankruptcy court to liquidate the Penn Traffic supermarket assets, the FTC staff reached an agreement with Tops that allowed the transaction to close immediately, while allowing the FTC to complete its review after the deal was completed, according to the release.
Tops agreed to keep all the newly acquired Penn Traffic stores open and to sell any stores that posed competitive concerns for the FTC, the release states.
In each market there are no more than three supermarkets within a 10- to 15-mile radius, the release states.
The FTC staff concluded that other chains such as Aldi’s, buying clubs, and other food stores would not constrain prices after the merger was completed.
The FTC staff found that new competitors were unlikely to enter the market quickly enough to prevent the acquisition’s anticompetitive effects. In markets that other stores might enter in the future, the FTC found that the markets would still be highly concentrated and that Tops’ acquisition of the Penn Traffic stores is anticompetitive.
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