By CRAIG MURPHY
Of the Keizertimes
An ugly grocery store battle has escalated into an all-out war.
Casualties in the Haggen vs. Albertsons battle include 27 recently rechristened Haggen stores, such as the one on River Road in Keizer.
As mentioned recently in the Keizertimes, Haggen announced in mid-August the Keizer location – rechristened in late April after formerly being an Albertsons – will be closing by mid-October. Store closure and going out of business signs are all over the store, including a large banner on the store front.
Washington-based Haggen purchased 146 Albertsons and Safeway stores last December, the result of a merger between the two large grocery store chains. Prior to the purchase of the new stores, Haggen had just 18 stores in Washington and Oregon.
In July, Albertsons sued Haggen for $41 million, claiming Haggen failed to pay for inventory that was part of the changeover at 38 of the acquired stores.
Now Haggen is fighting back.
On Tuesday, Haggen attorneys filed a complaint against Albertsons seeking more than $1 billion in damages. The complaint was filed in the United States District Court for the District of Delaware and makes a number of accusations about Albertsons acting in violation of various federal and state laws, including Federal Trade Commission orders, and attempting to eliminate competition.
Haggen alleges the actions by Albertsons forced the announced store closures.
“This action arises from Albertsons’ coordinated and systematic efforts to eliminate competition and Haggen as a viable competitor in over 130 local grocery markets in five states,” the complaint reads in part. “Albertsons’ illegal campaign includes premeditated acts of unfair and anticompetitive conduct that were calculated to circumvent Albertsons’ obligations under federal antitrust laws, FTC orders, and contractual commitments to Haggen, all of which were intended to prevent and delay the successful entry of Haggen into local grocery markets that Albertsons now dominates.
“The result of Albertsons’ conduct is the reduction of competition in the affected local markets, thereby reducing consumer choice and decreasing quality while increasing prices for thousands of consumers throughout California, Oregon, Washington, Nevada and Arizona; needless loss of jobs held by innocent workers and infliction of severe brand, reputational and financial harm on Haggen,” the complaint added.
According to the complaint, Haggen paid “in excess of $300 million” to purchase the stores last year but Albertsons didn’t uphold its part of the deal.
“In order to convince Haggen to purchase 146 stores, Albertsons made false representations to both Haggen and the FTC about Albertsons’ commitment to a seamless transformation of the stores into viable competitors under the Haggen banner,” the complaint reads. “Haggen was induced by Albertsons’ false statements to seek the FTC’s approval to purchase 146 stores in five states and those false statements impacted the strategies Haggen developed for the success of all stores… Through false statements to Haggen, Albertsons secured the cooperation and commitment it needed from Haggen in order to meet the conditions that the FTC imposed on the merger.”
The complaint noted Haggen was trying to get a foothold in new markets but faced difficulties since Albertsons acted contrary to FTC orders.
“Recognizing that its competitor’s success or failure hinged on its initial fair pricing of an appropriate inventory of products, Albertsons embarked on an unlawful scheme to undermine the very competition that the FTC sought to preserve,” the complaint states. “As the stores were nearing the dates on which they would be transitioned to Haggen stores and thereafter, Albertsons used Haggen’s confidential, proprietary business information to unfairly compete with, and ultimately destroy the profitability of, Haggen’s newly acquired stores.”
The complaint lists several ways Albertsons did that: forcing Haggen to acquire the stores under an aggressive time frame and making false representations about data systems; misusing confidential information; providing inaccurate data about inventory on store shelves; providing inaccurate, incomplete and misleading price information, causing Haggen to tag products with inflated prices and leading customer to view Haggen as price gouging; sabotaging the quantity, assortment and quality of inventory to make sure some items were out of stock during grand openings; removing store fixtures and inventory Haggen had already paid for; cutting off store advertising for Haggen-acquired stores in order to decrease customer traffic and failing to perform routine maintenance on stores.
Haggen’s complaint places the blame squarely at Albertsons’ feet for the announced closures.
“(Haggen was) forced to close 26 of the stores that it newly acquired as a part of the Albertsons’ divestiture, and faces the potential closure of additional stores,” the complaint stated. “Albertsons’ anti-competitive actions critically damaged the operations, customer service, brand goodwill and profitability of the divested stores from the outset…and have caused significant harm to competition, local communities, employees and consumers.”
According to the complaint, Haggen couldn’t focus on the business of running its new stores.
“Haggen has had to focus on strategies to recover from Albertsons’ wrongful acts, which include, sadly, Haggen’s efforts to find new jobs for displaced employees who too are victims of Albertsons’ actions,” the complaint read.
The complaint further alleges that Albertsons did a number of “malicious and unfair actions” to strain Haggen’s resources and “created substantial distraction.”
A common concern about Haggen stores, both in Keizer and elsewhere, has been prices that seem to be higher than the competition. The complaint alleges Albertsons intentionally created that perception by not providing accurate pricing information as required.
“In many instances, Albertsons represented that it was providing the active or current retail prices, but Haggen later discovered that these prices were not the prices that Albertsons had charged in the ordinary course of business at the stores prior to conversion,” according to the complaint. “The practical result of this deception was a consumer walking into a brand new Haggen store and finding the same item on the same shelf, but now priced higher than it was immediately prior to store conversion. Albertsons achieved its goal of driving away Haggen shoppers by creating an inaccurate first impression that Haggen was far more expensive than Albertsons’ own nearby stores.”
Recent stories about the impending Haggen closure in Keizer were highly viewed on the Keizertimes Facebook page, attracting nearly 100 comments.
A poll asking which grocery chain would be desired garnered more than 300 responses, with Winco getting 58 percent of the votes to far outdistance Roth’s. Once Haggen closes, Safeway will be the only grocery store left in Keizer.