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Haggen lawsuit claims Albertsons tried to eliminate competition

The Haggen supermarket chain claims Albertsons engaged in “coordinated and systematic efforts to eliminate competition” after inducing Haggen to purchase 146 stores in five states, including Nevada.

“If Albertsons is successful in destroying Haggen as a viable competitor, Haggen’s damages, which include the lost prospective value of the acquisition, may exceeed $1 billion,” according to a federal lawsuit filed by Haggen Holdings LLC.

Haggen, which is based in Bellingham, Wash., filed the complaint this week in Delaware.

The lawsuit accuses Albertsons of attempted monopolization, breach of contract, fraud, unfair competition and misappropriation of trade secrets. Albertsons previously filed a lawsuit that accuses Haggen of breaching the purchase agreement and committing fraud.

In a statement, Albertsons called the allegations in the Haggen complaint “completely without merit” and vowed to defend the case “vigorously.”

“Recently, Albertsons was forced to sue Haggen for an amount in excess of $40 million for unpaid inventory. Rather than paying the amounts owing, Haggen responded by filing this lawsuit against us in an attempt to deflect attention from their failure to comply with basic contractual obligations.”

According to the Haggen complaint, Albertsons’ conduct has decreased quality and increased prices for thousands of customers in Nevada, California, Oregon, Washington, and Arizona. In addition, the lawsuit alleges, it has caused the “needless loss of jobs held by innocent workers” and inflicted severe financial harm on Haggen.

Albertsons’ campaign “fits hand-in-glove with its recent acquisition” of Safeway, according to the complaint.

The two chains announced in March 2014 that they intended to merge. In January, the Federal Trade Commission announced that Albertsons and Safeway had agreed to sell some of their stores to win U.S. antitrust approval for the merger.

“In order to convince Haggen to purchase 146 stores, Albertsons made false representations to both Haggen and the FTC about Albertsons’ commitment to a seamless transformation of the stores into viable competitors under the Haggen banner,” the Haggen lawsuit alleges.

Deal for stores totaled $300 million

Haggen reached a deal in December to buy the stores for more than $300 million. During the transfer process, the company’s lawsuit alleges, Albertsons “launched its plan to gain market power” by hamstringing Haggen’s ability to operate the stores successfully after taking ownership.

“Recognizing that its competitor’s success or failure hinged on its initial fair pricing of an appropriate inventory of products, Albertsons embarked on an unlawful scheme to undermine the very competition that the FTC sought to preserve,” according to the complaint.

For instance, the lawsuit alleges, Albertsons provided inaccurate and incomplete price information to Haggen about products on the shelves of transferred stores, “causing Haggen to tag products with inflated prices and causing customers to conclude that Haggen was price gouging on products that, just 48 hours earlier, had been priced much cheaper.”

The document also claims Albertsons cut off advertising for Haggen-acquired stores “in order to decrease customer traffic prior to and leading into the conversion.”

At one Henderson store, for example, the lawsuit claims Albertsons “stopped sending any advertisements two weeks prior to conversion.”

“Albertsons’ anti-competitive actions critically damaged the operations, customer service, brand goodwill and profitability of the store from the outset,” the lawsuit alleges. “Haggen never intended to close any of the stores it acquired. 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, and its plan was to bring new communities under the respected Haggen banner.”

Albertsons’ conduct recently forced Haggen to close 26 of the stores that it had acquired as part of the Albertsons divestiture, according to the complaint, and Haggen “faces the potential closure of additional stores.”

Seven stores in Southern Nevada

Haggen has opened seven stores in Southern Nevada in recent months. No Nevada stores appeared on the list of 27 store closures announced by Haggen in mid-August.

The lawsuit also accuses Albertsons of diverting Haggen inventory to Albertsons stores. Days before the conversion of one Las Vegas store, for example, a store manager ordered inventory that was meant for Haggen.

“However, Albertsons diverted the shipment to an Albertsons store that was not changing ownership and billed the Haggen Las Vegas, NV store for the inventory that it never received,” according to the complaint.

In its statement, Albertsons specifically denied it has engaged in anti-competitive or inappropriate practices in its dealings with Haggen.

“The divesture of stores to Haggen followed the process determined by the Federal Trade Commission (FTC) order. Like the process followed by Albertsons in prior divestitures, our process with Haggen was the subject of regular reports to the FTC and review by the monitor trustee appointed by the FTC. From the outset, Albertsons has satisfied its obligations and worked to ensure the success of the transition of the divested stores to Haggen and several other companies.”

According to the Haggen lawsuit, the company provided Albertsons with notice of its breaches of the purchase agreement on June 29 “in an attempt to address some of the parties’ disputes without the need for litigation.”

Without responding to the notice, “Albertsons raced to the courthouse” to file its own lawsuit, according to the Haggen complaint.

The Haggen lawsuit seeks unspecified damages. Alternatively, it seeks a declaration that Haggen has the right to rescind the purchase agreement.

Contact reporter Carri Geer Thevenot at cgeer@reviewjournal.com or 702-384-8710. Find her on Twitter: @CarriGeer

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