This past April, I entered my local supermarket only to realize I was walking under a brand-new logo. My Albertsons had become Haggen. OK, I thought. I guess I’m shopping at Haggen now. Except that this new supermarket seemed to miss the mark on a few key things — pricing, to begin with — and it seemed to be pushing an upscale vibe when the ambience, groceries and merchandise clearly weren’t.

Then, a mere six months later, I hear that Haggen is filing for bankruptcy. The store near me will remain open, for now. What happened?

I came to find out that Haggen, an 18-store chain based in the Pacific Northwest, had been granted the “Antitrust Golden Ticket.” By the power of the Federal Trade Commission (FTC), Haggen was allowed to take over 146 supermarkets as a result of the merger of two of the country’s largest supermarket chains, Safeway and Albertsons.

The merger pulled the new company, Albertsons LLC, into second place behind the nation’s largest grocer, Kroger. To ease antitrust concerns, the FTC OK’d the merger as long as Albertsons divested a certain number of stores in markets where the merged company would have a controlling share.

But the deal essentially forced Haggen to put up all its Monopoly money — $1.4 billion — to buy Park Place, Boardwalk and Pennsylvania Ave. when it didn’t have the wherewithal to run them.
Is this beginning to sound familiar?

In 2012, the FTC bestowed the Antitrust Golden Ticket on Franchise Services of North America Inc. (FSNA), franchisors of the U-Save brand, allowing it to take over Advantage Rent a Car and operate 62 airport rental locations across the U.S.

The deal was a condition for the Hertz takeover of Dollar Thrifty Automotive Group. Per an FTC consent order, Hertz agreed to divest itself of Advantage, its discount brand, along with 29 Dollar or Thrifty stores in markets where the merged company would have a controlling share.

On Nov. 5, 2013, FSNA declared Advantage bankrupt — a mere four months after the FTC finalized the Hertz deal and Advantage divestiture. At that point, it was clear that FSNA, the franchise parent to mostly smaller, off-airport locations, was in no condition to run corporate airport stores.

But I don’t blame FSNA as much as I do the FTC, as it moved silver Monopoly pieces through a landscape it knew nothing about. A discount leisure brand was never going to work in markets such as Cleveland and Pittsburgh, period.

At the time, I wrote, “Though we’ll never see any outward signs, the FTC has to be smarting that Advantage declared bankruptcy mere months after the FTC finally blessed the deal …”
I wonder how the FTC feels now, after the Haggen deal.

Albertsons comes out fine, especially in markets where Haggen is closing stores that competed with Albertsons. Ironically, in a 180-degree turn from the intent of the FTC’s original engineering, Hertz and Avis took over a total of 12 stores, re-establishing market control for the major brands.

Though Advantage’s fate was precarious at the time, the 52-year-old company, started in San Antonio by the Walker family, landed on its feet. Bought by Catalyst Capital Group in 2013, a Canadian private equity firm, in 2015 Advantage merged with E-Z Rent-A-Car to form a strong, solvent discount brand serving leisure markets.

Haggen’s path is not so clear, though most likely it will shrink back to its Pacific Northwest roots, where it should’ve stayed in the first place.

There were signs that the FSNA and Advantage merger was derailing even before the ink was dry on the FTC’s final approval. There is no governing body to tell the FTC it screwed up; it just doesn’t work that way. Of course, while other antitrust divestitures have gone more smoothly, the Haggen and Advantage parallels are too similar to ignore.  

The rest of us are forced to sit and ride out these bad decisions. It’s the investors, suppliers, employees and customers who are left holding the (grocery) bags.  

Originally posted on Business Fleet

About the author
Chris Brown

Chris Brown

Associate Publisher

As associate publisher of Automotive Fleet, Auto Rental News, and Fleet Forward, Chris Brown covers all aspects of fleets, transportation, and mobility.

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