ANTITRUST APPROVAL SEEN AS LIKELY – WITH CONDITIONS
Byline: JOANNA RAMEY
WASHINGTON — Now that Federated Department Stores and R.H. Macy & Co. have agreed to wed, will federal and state antitrust officials annul the marriage even before the two retail legends consummate it?
Antitrust experts interviewed agreed that government officials would be hard pressed to block the entire deal as anticompetitive. If there were any antitrust action, officials could force the sale of pieces of the new retail empire. The Macy’s-Federated merger would create the nation’s largest department store company, with $13.5 billion in annual sales.
These factors could influence the outcome:
President Clinton’s selections to fill two vacancies on the Federal Trade Commission, which is investigating the pending deal. Commissioner Dennis Yao is leaving in late August, and colleague Deborah Owen’s term expires in September. Replacements with populist views toward mega-mergers could raise red flags, influencing the commission’s other three members, who are considered enforcement-minded.
Whether Macy attorneys choose to raise a failing-firm defense, arguing that without Federated as a partner, Macy could never survive outside of bankruptcy. If that tack is taken and succeeds, antitrust enforcers would have to back off.
How antitrust authorities view the market niche each chain fills.
If the two companies are seen as competing only with other department stores — a dwindling entity in the U.S. — then antitrust action is considered almost certain. But experts said federal officials were not likely to take such a narrow view of the market. The FTC has been inclined to view department stores as businesses that offer a cluster of services and compete with specialty stores and other retailers, a view it might extend to Federated and Macy’s.
Whether officials look at specific lines of merchandise sold by each store, at each specific location, to judge whether there’s ample competition.
For example, in Atlanta, would Macy’s and the Rich’s division of Federated, where each has six stores, hold too much market concentration in women’s better dresses after a merger? Or, does competition from the single-store Atlanta locations of Neiman Marcus and Lord & Taylor, the four locations of Parisian and other specialty retailers provide enough competition?
Whether the acquisition would reduce the number of potential anchors in existing malls and new developments.
Antitrust experts said it was hard to judge what variables government officials would consider, but there are certain guideposts to follow.
In New York, there was a good chance that the state attorney general’s office could repeat in some fashion a 1988 order in which Macy’s agreed to sell 11 Abraham & Straus stores if the chain bought Federated. A statement released Wednesday by New York Attorney General G. Oliver Koppell said he still had “concerns over the possible effect of a Macy-Federated merger.”
A 1988 FTC decision to allow the then 131-unit Allied Stores to merge with the 631-store Federated chain could provide some insight into federal officials’ thinking. A staff memo, written by the FTC attorney who is conducting the current Macy-Federated inquiry, said it was impossible to look at department stores as filling their own market niche; rather, they compete with a host of other retailers, including mass merchandisers.
“I would be surprised if the Federal Trade Commission would look at this in the context of a separate department store market,” said David Clanton, an FTC commissioner from 1976 to 1983 and now a partner in the Washington law firm of Baker & McKenzie. He said a more likely scenario would be for the FTC to analyze the market niche and competition according to product lines.
— Fairchild News Service