Federal antitrust investigators will review the proposed acquisition of Washington's Drug Fair stores by Gray Drug Stores Inc. of Cleveland, Justice Department officials said yesterday.
Either the Justice Department's Antitrust Division or the Federal Trade Commission will study the Drug Fair takeover, a Justice spokesman said.
Describing the review as "routine," he said the agencies will determine whether the merger will reduce competition in the Washington market for prescription drugs and related products.
The antitrust divisions yesterday imposed special conditions on another drugstore merger, the acquisition by Revco-DS Inc. of the Skillern's chain in Texas and New Mexico.
The Justice Department ruled that Ohio-based Revco can buy Skillern's from its present owners, the Zale Corp. of Dallas.
But the government said Revco will have to sell at least 28 stores and possibly as many as 31 units to maintain competition in three Texas markets -- Dallas-Fort Worth, El Paso and Tyler.
On Monday the Justice Department filed a lawsuit in Dallas federal court to block the merger. The agency charged the merger would violate the Clayton Antitrust Act by "substantially lessening competition" in the retail drug business.
Yesterday the government and the two drug chains filed a proposed consent agreement to settle the case. Under the agreement, Revco agreed to dispose of stores in several local markets in which the Justice Department claimed combining the two chains would hamper competition.
Merger of Drug Fair and Gray would not cut competition because the two chains do not compete directly, said Drug Fair spokesman Paul Forbes. "We don't have stores in any of the same markets," he said, "I don't see any problems [with the antitrust laws]."
The Drug Fair takeover was criticized by the National Association of Retail Druggists, a trade association based here. NARD in December had asked the Federal Trade Commission to block the Revco-Skillern combination.
William E. Woods, executive vice president of the retail druggists group, urged the government to look into the Drug Fair acquisition "to provide a strong signal to corporate drug chains that the department will no longer stand idly by as corporate giants overtook the retail drug industry." Woods' group represents primarily independently owned drugstores.
The Washington market "is probably one of the most highly concentrated drug markets in the country," Woods said. The local drug business is dominated by Drug Fair, Peoples Drug Stores and Dart Drug.
Woods also criticized a plan approved 10 days ago by Peoples' shareholders to increase the number of shares of stock in the company to create additional stock that could be used for acquisitions.