Grand Union Co. must sell Colonial Stores Inc. because a merger of the two in 1978 limited supermarket industry competition in the Southeast, a Federal Trade Commission law judge ruled yesterday in a preliminary order.
In particular, the $121-million purchase would have "forever foreclosed" the potential competitive benefit of Grand Union entering Southeastern markets and competing directly with Colonial stores, the official ruled.
The order, written by administrative law judge Ernest Barnes, can be reviewed by the full FTC either at the commission's motion or at the request of either company. It would become a final order if it is not appealed within 30 days.
When the complaint beginning an administrative proceeding was issued in 1978, Grand Union operated 479 stores in 13 states in the South and Northeast with sales of more than $1.6 billion. Colonial at the time operated 378 markets in seven Southeastern states and had sales of $1.05 billion. The two chains had been operating under a "hold separate" order issued by the FTC in 1978.
Grand Union, a subsidiary of Generale Occidentale of Paris and based in Elmwood Park, N.J., said it would ask immediately for a review of the decision. The company insisted yesterday that the purchase was lawful and that it has increased competition in markets where Colonial operates.
The purchase of Colonial on June 29, 1978, followed by eight days the expiration of a 10-year-old consent decree between Grand Union and FTC that barred the company from making any acquisitions involving major grocery chains without FTC permission.
When the decree expired, Grand Union publicly stated its plans to expand from its Northeast base to the more prosperous Southeast and the Colonial purchase was to be the cornerstone of those corporate plans, the judge said.
The judge ruled theat Grand Union's acquisition violated antitrust laws because the deal "eliminated Grand Union as an actual potential entrant into the markets in which Colonial operated."