By and  on May 31, 1994

 NEW YORK -- Federated Department Stores' attempted takeover of R.H. Macy has caught the eye of the Federal Trade Commission.

The FTC, in what sources said Friday could be the start of an antitrust probe, sent out letters to Federated and Macy's two weeks ago requesting information regarding their operations.

The letters reportedly inquired about the locations of Macy's and Federated stores, and the areas in which they compete. The FTC, said sources, is curious about the impact a merger would have on suppliers, retail prices and consumers.

Macy's has argued a merger would be disruptive to the marketplace, while Federated has contended it would benefit consumers by providing more cost-effective operations, leading to lower prices in the stores.

In addition, Cyrus R. Vance, the court-appointed mediator in the Macy bankruptcy case, has been seeking a meeting with Federated on the antitrust issue. According to a Federated spokeswoman, a meeting was scheduled but then canceled by Vance.

Vance could not be reached for comment. The FTC would not comment on the situation.

"Traditionally the agencies have not gotten too exercised about two retail stores merging," said Daniel Margolis, an antitrust lawyer with Patton, Boggs & Blow in Washington. "But this is a little unusual since we're talking about such large chains, with so many stores in the same cities."

Federated operates Bloomingdale's, Stern's and Abraham & Straus stores that compete with Macy's stores in the New York metropolitan area. There are also overlaps in the Atlanta and Texas markets.

A merger of Macy's and Federated would create the largest traditional department store group in the country, with sales of $13.5 billion. May Department Stores Co. is currently the biggest, with annual sales of about $11 billion. While J.C. Penney Co. and Sears, Roebuck & Co. are larger retail concerns, they are generally considered national chains.

In recent years, the federal government has not been active in retail antitrust cases because it has examined such mergers in the context of the overall retailing industry, rather than breaking it up into smaller markets such as department stores, mass merchants or specialty chains, where head-to-head competition is more apparent. A Macy's and Federated merger would represent just a small fraction of the market. Wal-Mart's $67 billion in volume dwarfs a Macy-Federated combination.

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