Haggen files $1 billion lawsuit against Albertsons

• Haggen grocery chain filed a $1 billion lawsuit against Albertsons, claiming it undermined the launch of stores in five states
• Haggen last month announced that it was closing 27 stores, including five in Arizona, to improve business. But on Tuesday, Haggent blamed Albertsons
• Albertsons said Tuesday the allegations are without merit

The Haggen grocery chain, which announced this month that it is closing five of 10 newly opened stores in Arizona, filed a $1 billion lawsuit against Albertsons on Tuesday, accusing it of undermining the successful launch of Haggen's new stores in five states.

Haggen claimed in a federal lawsuit that Albertsons violated antitrust laws by using the Bellingham, Wash.-based regional grocery store chain to help gain the Federal Trade Commission's approval of its merger with Safeway this year and then engaging in "coordinated and systematic efforts to eliminate competition."

Albertsons was supposed to divest 130 stores to foster local competition as part of the $9.2 billion merger, which created the one of the largest grocery store chains in the United States, with 2,200 stores and $61 billion in combined sales, according to the complaint.

In the lawsuit, Haggen claimed that Albertsons lied to the FTC and launched an illegal campaign "intended to prevent and delay the successful entry of Haggen ... into local grocery markets that Albertsons now dominates.”

Representatives of Alberstons denied the allegations on Tuesday.

“The allegations in the lawsuit are completely without merit," said Nancy Keane, a public affairs and government relations spokeswoman for Albertsons Safeway and Vons.

Albertsons accused Haggen of fraud in a July lawsuit for $41 million. Albertsons contends Haggen refused to pay for inventory at 38 stores.

Haggen said it was forced to close 27 of the stores that it bought as a part of the Albertsons’ divestiture, and could close more. It claimed in its suit that Albertsons "critically damaged the operations, customer service, brand goodwill and profitability of the divested stores from the outset."

Haggen said Albertsons engaged in an illegal campaign that included “premeditated acts of unfair and anti-competitive conduct that were calculated to circumvent Albertsons obligations under federal antitrust laws, FTC orders, and contractual commitments to Haggen."

Haggen is controlled by Comvest Partners, a private investment firm that owns a majority of the company's stock shares. Comvest provides equity and debt capital to business across the country. It has invested more than $2 billion in more than 140 public and private companies and has assets totaling more than $1.8 billion.

Haggen's purchase of 146 Albertsons and Safeway stores in December instantly changed its profile from a local Pacific Northwest regional market with 18 stores to a major national chain with 164 stores and 106 pharmacies in Arizona, California, Nevada, Oregon and Washington.

But two weeks ago, Haggen announced it would close five Arizona stores and 22 others in California, Washington and Oregon over the next two months.

Officials said in a statement last month that the closures were part of a move to improve business and strengthen the company’s competitive position. They did not say how many jobs will be lost as a result of the closures.

“Haggen’s goal going forward is to ensure a stable, healthy company that will benefit our customers, associates, vendors, creditors, stakeholders as well as the communities we serve,” Bill Shaner, chief executive officer of Haggen’s Pacific Southwest division, said in the statement.

In a statement on the lawsuit Tuesday, Haggen laid blame for the store closures squarely on Albertsons.

“During the transfer process, Albertsons launched its plan to gain market power and/or monopoly power, acting in a manner that was designed to (and did) hamstring Haggen’s ability to successfully operate the stores after taking ownership,” the statement said, adding that Alberstons "caused significant harm to competition, local communities, employees and consumers.”

Haggen said Albertsons violated the FTC order and purchase agreement through a series of acts that “created substantial distraction and diverted the attention of store-level and senior Haggen management” during the conversion process. Those included:

• Using proprietary and confidential information in an aggressive marketing campaign to undermine Haggen grand openings.
• Providing false, misleading and incomplete retail pricing data, causing Haggen stores to unknowingly inflate prices.
• Cutting off Haggen-acquired store advertising.
• Timing the remodeling of existing Albertsons stores to hinder Haggen’s entry into markets.
• Illegally accessing Haggen’s confidential data to divert customers.
• Understocking inventory at newly acquired stores just prior to conversion.
• Overstocking perishable inventory at Haggen-acquired stores, resulting in the disposal of significant amounts of inventory.
• Removing store fixtures and inventory from Haggen-acquired stores.
• Diverting Haggen inventory to Albertsons stores.
• Failing to perform routine maintenance on stores and equipment.

The lawsuit said instead of focusing on new store openings, “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."

Haggen store closings in Ariz.

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