The state of California has filed a lawsuit seeking to block American Stores Co.'s planned acquisition of Lucky Stores Inc., contending the merger would be anti-competitive and violate federal antitrust laws.
American Stores owns Alpha Beta stores in California as well as the 27-state Osco drug chain.The lawsuit contends the $2.5 billion merger, which would create by far the largest food retailer in California, would reduce competition in retail grocery industry in the state.
After a heated takeover battle, American Stores reached an agreement to acquire the Dublin, Calif.-based Lucky Stores on May 20. The merger received Federal Trade Commission approval on Aug. 31.
At a Friday press conference, California Attorney General John Van de Kamp said California consumers stand to have an extra $400 million added to their grocery bills as a result of the recent rash of mergers involving California supermarkets.
The lawsuit, filed on Thursday, says the American Stores acquisition would reduce competition, increase already high market concentration and increase the already high barriers to entry in California's grocery industry.
It seeks an immediate restraining order from the U.S. District Court halting the merger until a trial can be held.
In a prepared release, American Stores said the attorney general's challenge was expected.
"Counsel for American Stores has not yet had the opportunity to fully review the pleadings filed by the attorney general and at this time has no further comment on the specifics of the attorney general's allegations," the company said.
The Irvine, Calif.-based American Stores has, however, maintained that it plans to use Lucky's discount pricing strategy in all of its California stores after the merger.
But at the company's annual meeting in mid-June in Salt Lake City, the company's chairman, L.S. Skaggs of Salt Lake City, acknowledged that the company's net income would decline during the rest of the year as a result of the merger.