NEW YORK--For Federated Department Stores, it's one antitrust hurdle down, one to go.
Federated said Friday that the Federal Trade Commission has approved its merger with R.H. Macy & Co.
"The FTC does not have any problems with the Federated-Macy merger," a Federated spokeswoman said. "In their view, there are no antitrust issues, and the merger can move forward."
Federated, however, still has some regulatory hoops to jump through.
New York Attorney General G. Oliver Koppell is conducting an antitrust probe into the merger's potential impact on competition in the state. No target date for completing the investigation has been announced.
"If Koppell wants to argue that Federated would have controlling share of the moderate-and-above price lines, he could--persuasively," said one retail source who estimated Federated/Macy's will have a 75 percent share of the moderate and higher-priced women's apparel department store market in New York.
However, the retailer will have an 11.4 percent share of GAFO (general merchandise, apparel, furnishings and other goods) in the New York metro area, including an 18.8 percent share of the total women's market.
Koppell's investigation does not appear to threaten the merger, but it could bring about an altered retail scene. In 1988, when Macy's tried to acquire Federated, the attorney general insisted that Macy's would have to sell Federated's 11 Abraham & Straus units in New York.
The FTC action keeps Federated on track to meet its December target date for closing the deal and the merger.
It's possible Federated will shed some stores, even though the federal government will not require it. Federated had no comment on that, but plans to file a disclosure statement on Aug. 31, which will include consolidation plans.
The FTC had no comment Friday but informed Federated that it had concluded its probe. It is expected that the FTC move will be announced Monday in a listing from the FTC.
Market observers were not surprised by the FTC decision.
"In the history of regulatory intervention in retail, the government, through several administrations, has always taken the tack that the entire retail mix should be examined together as the market--not an individual sector or slice," said Isaac Lagnado of Tactical Retail Solutions. Tactical's data was used in the FTC investigation.
In arguing that a combined Federated and Macy's wouldn't cut competition in the marketplace, store attorneys said consumers would still have a myriad of places to shop. They contended that department stores are part of a huge retail mix.
The Federal Trade Commission attorney who headed the investigation agreed.
"I think the industry, industry studies and surveys indicate the market has changed, that consumers continue to be more price sensitive and knowledgeable of their options and are willing to shop around, which is shown by the continued growth of outlet centers and the like that are opening up in response to demand," said Joseph Krauss, deputy assistant for the Bureau of Competition.
According to antitrust observers, the states don't necessarily follow the federal viewpoint.
"The rule of the road is this: The states prize their independence fiercely. They make a big point of saying they will take counsel and be guided by what the federal enforcement agencies will do," said one antitrust attorney, who asked not to be named. "What happens is the federal people look at state antitrust as irrelevant, and the state people guard their independence. That is particularly true of the large and active antitrust states, of which New York is one."
The FTC conducted a six-month investigation, Federated's lead antitrust counsel, Phillip Roger, attorney in the Washington, D.C., office of Jones, Day, Reavis & Pogue, said in the statement.
He noted the FTC "undertook a thorough and detailed investigation" into issues of market competition and company operations before concluding that the merger does not warrant further investigation.

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