Las Vegas Sun

March 20, 2019

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FTC allows buyout of Vegas-area Raley’s

Smith's Food for Drug said it will take possession of 10 Raley's stores in Las Vegas Friday following the completion of the Federal Trade Commission's review of parent company Kroger Co.'s proposed acquisition of 18 stores in the Las Vegas area.

The acquisition of 18 Las Vegas-area Raley's supermarkets by Kroger would not harm consumers, the Federal Trade Commission said Wednesday, after a two-month investigation of information from Kroger, Raley's and other competitors prompted by concerns voiced by the state attorney general's office.

"Rather, consumers in this market have benefited and are expected to continue to benefit from rivalry among at least the four remaining major competitors, including Wal-Mart," the FTC said.

"This conclusion is supported by ... several important facts: concentration in the Las Vegas/Henderson geographic market has declined significantly since 1999 because of substantial entry and expansion by existing competitors (Albertsons, Kroger and Vons), the FTC said.

"There has been substantial reduction in Raley's share; the combined share and competitive significance of a Kroger/Raley's combination is too small, particularly in this rapidly growing market with four major competitors to raise credible concerns of potential unilateral effects, and the staff found no basis for a closest competitor theory," the FTC said.

West Sacramento, Calif.-based Raley's only entered the Las Vegas market three years ago, but blamed slow growth and a tough local competition as reasons to sell.

Raley's has said it would use the proceeds from the sale to build and remodel its stores in Reno and throughout Northern California.

Smith's said all 10 Raley's stores it is acquiring will close about 6 p.m. Thursday and Smith's will close three of them and reopen the remaining seven stores under their new name by Nov. 21.

Smith's spokeswoman Marsha Gilford said the company plans to hire almost all of Raley's employees from the seven stores acquired.

"Those who have prescriptions at Raley's stores will continue to be provided service at Smith's," she said. "Smith's will open the pharmacies at 9 a.m. on Friday at four Raley's stores that have pharmacies to ensure service is uninterrupted to those who need prescriptions. These stores are at 4015 S. Buffalo Drive, 6150 W. Flamingo Road, 55 S. Valley Verde Drive and 1421 N. Jones Blvd."

The U.S. Bank branches at the four Raley's stores at 4015 S. Buffalo Drive, 55 S. Valley Verde Drive, 3160 N. Rainbow Blvd. and 4821 W. Craig Road will remain open during the remodelling as well, she said.

Meanwhile, Food 4 Less said it will take possession of eight other Raley's stores by Sunday and start converting them to that Kroger brand.

"It'll take us up to nine weeks to convert the Raley's stores to Food 4 Less," said Food 4 Less spokesman Terry O'Neil. "The conversion is expected to be completed by the end of January. All eight Food 4 Less stores will be opened by the end of January. The first two stores will begin conversion late November."

Responding to the FTC's review, Senior Deputy Attorney General Chris Van Dyck said he wasn't surprised by the FTC's conclusion but had a mixed reaction to it.

"On the positive side, there's no doubt that with new entrants such as the Wal-Mart supercenters, there are more competitive players in the Las Vegas grocery store market," he said.

"Whereas, other existing competitors like Albertson's and Vons have been growing, Raley's has been stagnant," he said. "It did not appear that Raley's would continue to be a viable competitor in this rapidly growing market. Allowing this deal to go through is a better outcome than having most or all of the Raley's stores simply shut down with no buyers."

"On the negative side, this decision does not come without negative consequences. In particular, we're disappointed that Kroger did not take care of labor's concerns, in particular, Kroger refused to require Food 4 Less stores to hire back Raley's employees. There are a lot of loyal employees with many years of experience who are now being asked to start over," he said.

But Food 4 Less's O'Neil disagreed.

"Food 4 Less officials approached the United Food and Commercial Workers union Local 711 early in the process with a plan to enable our stores to offer employment to Raley's employees. We thought tentative agreement was reached, but that wasn't the case," he said.

"We have interviewed and accepted applications of Raley's stores employees who expressed interest in joining Food 4 Less. We will staff all of the eight converted Food 4 Less stores with Raley's employees and existing Food 4 Less employees transfers and are planning to hire as well. We now have about 400 employees at our five existing stores," he said.

"We're more of a warehouse type supermarket, we don't have courtesy clerks, our staffing needs are different than those of a traditional supermarket," he said.

Roberta West, president of UFCW Local 711, disputed O'Neil's views.

"The UFCW is happy that almost 700 of Raley's employees from the 10 stores acquired by Smith's will be keeping their jobs," she said. "But that's not the case with Food 4 Less. Food 4 Less wanted to negotiate lower wages than the industry level for their new stores' employees as a condition for rehiring some 450 Raley's workers from the eight stores.

"We said we would agree only if other grocery stores under contract with us, i.e. Albertsons, Vons and Smith's agreed to waive what's called the favored-nations clause in our contract, which would have allowed Food 4 Less to pay lower wages while the other grocery stores continued to pay a higher wage and the other grocery stores refused."

West said Food 4 Less won't talk to the union about the Raley's employees.

"We're hoping they'll hire as many as they can," she said. "It's strange that Smith's agreed to do the right thing but Food 4 Less didn't."

UFCW Local 711 represents 7,000 workers at Smith's, Vons, Albertsons and Food 4 Less stores in the Las Vegas area.