This story is part of a new Prospect series called Rollups, looking at obscure markets that have been rolled up by under-the-radar monopolies. If you know of a rollup like this, contact us at rollups(at)prospect.org.
Stop & Shop is a large Northeastern supermarket chain now owned by the European conglomerate Ahold Delhaize. On Cape Cod, if you live in the 32-mile stretch between Eastham at the bend in the Cape’s elbow and Provincetown at the outer tip, your effective choice of supermarkets is Stop & Shop or … Stop & Shop. They have one store in Provincetown, and another on the Orleans/Eastham line. The nearest competing market is on the other side of Orleans.
And Stop & Shop wants to keep things that way. In 2012, a golf driving range in Eastham called T-Time shut down, leaving a supermarket-sized parcel of land for sale. There were reports that Whole Foods was thinking of coming in.
At that point, in 2013, Stop & Shop swooped in and bought the 11-acre land for $1.3 million, adding a restrictive covenant to the deed that is shamelessly brazen in its intent and its detail. The covenant is worth quoting in all its richness:
No portion of or premises on the Property shall be used, leased, occupied or licensed for a food supermarket, a food superstore, a food warehouse store, a specialty food store (e.g. a butcher shop, fish market, fruit and/or vegetable market or stand), a wholesale club store operation or a convenience store, or for the sale of food or food products for off-premises consumption (whether by humans or animals).
This parcel of land was only a few miles up the road from one of Stop & Shop’s existing stores. So they did not buy the land in order to build another supermarket, just to prevent anyone else from building one. Credit goes to the feisty Provincetown Independent for unearthing this nasty little story.
Once the restrictive covenant was in place, Stop & Shop had no need to tie up that capital in land it did not intend to use. It ended up selling the land to the Town of Eastham for $1.6 million, for a mixed-use redevelopment of affordable housing and retail. But the town, to its frustration, found that retail could not include a morsel of food.
If this sleazy maneuver by Stop & Shop does not violate antitrust laws, what does? Antitrust experts tell me that it easily meets the law’s definition of a “restraint of trade.” Happily, President Biden has appointed some of the best people in the country to revive antitrust from its prolonged induced coma, from Federal Trade Commissioner Lina Khan, to Assistant Attorney General for Antitrust Jonathan Kanter, to Khan’s senior counsel at FTC John Kwoka, one of a small handful of scholars whose empirical work refuted the theoretical claims of Robert Bork and company that we didn’t need antitrust.
But here’s the practical problem. According to my sources, neither the FTC, Justice Department, nor the Massachusetts state attorney general’s office (which has its own small antitrust division) would consider this case a big enough deal to allocate scarce staff resources.
In principle, there could be a private antitrust lawsuit, but that would require an injured party. In this case, no competing supermarket emerged. The Town of Eastham is surely injured, but cobbling together political support to buy the land and create a mixed-use development was a heavy lift all by itself, and town officials did not have the stomach or spare legal funds to sue Stop & Shop.
The grocery chain has pulled this stunt before. The Boston Globe ran a story in 2009 about a mysterious deed restriction in the town of Halifax, Massachusetts, where Stop & Shop was trying to block Walmart from opening a supercenter. According to the Globe story, the parcel of land was bought and sold through a straw buyer, Halifax Farms Realty, LLC, but the language of the deed restriction barring any Walmart-type supercenter for 30 years states that it “was put in place to benefit Stop and Shop.”
In 1999, one of Stop & Shop’s shell companies sold a property in Quincy, Massachusetts with deed restrictions explicitly naming Stop & Shop as the beneficiary. The restrictions state that the property cannot be used to sell fresh fruits and vegetables, baked goods, dairy products, frozen foods, fish, poultry, and meat. The restrictions remain for 99 years. Another shell company with ties to Stop & Shop placed similar deed restrictions on a property in Harwich, Massachusetts.
In 2003, Connecticut Attorney General Richard Blumenthal (now a U.S. senator) opened the only state investigation I’ve been able to find into Stop & Shop’s land-acquisition practices. But Stop & Shop was able to fend off any further action.
I asked Stop & Shop for a comment on their strategy as a possible antitrust violation. Their media relations director, Jennifer Brogan, emailed me back, “Stop and Shop will decline to provide comment here.”
THE ABILITY OF MONOPOLISTS, whether local or national, to work within the cracks of our antitrust system has created this farcical situation, where there’s a clear violation but no enforcer with the wherewithal to do anything about it.
After four decades of antitrust slumber, during which industry enjoyed open season for anti-competitive concentration, the need compared to the available resources is staggering. One indicator: The law requires large mergers to submit plans for preclearance by the FTC or the Justice Department. “Large” is currently defined as $90 million or more.
Last year, about 3,000 filings were submitted to the government. But the agencies are so short-staffed that they can review only about 50. That means that only the most grotesque cases get reviewed, and a lot of other abuses persist.
The system is also not set up to handle the local and regional nature of some monopolies. Antitrust authorities have been indulgent of a wave of supermarket mergers. Stop & Shop was bought by the Dutch conglomerate Ahold in 1995. Ahold, in turn, merged with Belgium-based food company Delhaize in 2015, creating Ahold Delhaize.
Another large, nominally separate New England chain, Giant, is owned by the same corporate parent. Ahold also runs the U.S. supermarket brands Food Lion, Bottom Dollar Food, and Hannaford, along with online groceries FreshDirect and Peapod.
The other dominant New England chain, Star Market, was independently owned by the Mugar family. It was sold and merged with another prominent chain, Shaw’s. Both familiar brands were maintained, though the two effectively became one company. Both were then sold to a private equity firm, Cerberus Capital Management.
But compared to other industries, supermarkets do not seem super-concentrated because more than a dozen large chain companies operate nationally and regionally. Nationally, Ahold Delhaize ranks fifth.
This apparent plethora of consumer choices, however, is misleading. Just as all politics is local, all competition is local. The practical question is: How far does a consumer have to travel to find a competing supermarket? This question drives Stop & Shop’s restrictive-deed strategy.
Besides being a dubious neighbor when it comes to restricting consumer choice, Stop & Shop has a troubled labor history. As one of the unionized supermarket chains represented by the United Food and Commercial Workers, Stop & Shop keeps trying to get workers to give back benefits won in previous contracts. And thanks to strong community support of workers, the company keeps losing.
There are contract negotiations coming up in February. At the time of the last contract renewal in April 2019, Stop & Shop demanded givebacks such as workers having to pay a larger share for their health insurance. The company got their clock cleaned. The 31,000 striking workers stayed out 11 days and beat back the company demands.
In Provincetown, customers respected picket lines and brought food to strikers. Grocery items rotted on shelves in empty stores. This year, with retail workers scarce and COVID-averse, would be an even less opportune time for any such corporate demands.
More people seem to be paying attention to whether large corporations are good neighbors. Ultimately, that matters as much as antitrust.
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