Discount retail giants Dollar Tree and Family Dollar have received the green light to merge, but with a significant condition. To address antitrust concerns raised by the Federal Trade Commission (FTC), Dollar Tree, Inc. will need to sell off 330 Family Dollar stores. This decision comes after the FTC scrutinized Dollar Tree’s proposed $9.2 billion acquisition of Family Dollar, fearing it would stifle competition in the discount retail market. The buyer for these divested stores is Sycamore Partners, a private equity firm.
The FTC’s investigation revealed that Dollar Tree and Family Dollar are direct competitors in numerous local markets across 35 states. Both chains offer a similar range of deeply discounted general merchandise, including groceries, household essentials, clothing, and seasonal goods, often priced below $10. Dollar Tree stores, known for their signature $1 price point, and Family Dollar stores compete on price, product selection, store locations, and customer service. The FTC argued that allowing the merger to proceed without intervention would eliminate crucial head-to-head competition in 330 specific local markets.
Debbie Feinstein, Director of the FTC’s Bureau of Competition, emphasized the importance of dollar stores for consumers seeking value and convenience. “Dollar stores offer convenience and value by providing a broad assortment of general merchandise at discounted prices in stores close to where consumers live or work,” Feinstein stated. “This settlement will ensure that consumers will continue to benefit from competition among their local dollar stores.” The FTC believed that without requiring the divestiture, the merger would likely reduce competition, giving Dollar Tree the power to unilaterally influence market conditions to the detriment of consumers.
To resolve these competitive concerns, the FTC mandated that Dollar Tree divest 330 Family Dollar stores to Sycamore Partners within 150 days of the acquisition’s completion. An Order to Maintain Assets is also in place to ensure Family Dollar maintains these stores in operational condition until the divestiture is finalized. Furthermore, the FTC has appointed a monitor to oversee Dollar Tree and Family Dollar’s adherence to the settlement terms. Detailed information about the divestiture, including a list of affected cities, is available in the FTC’s analysis for public comment.
The Commission’s vote to issue the complaint and accept the proposed consent order was 4-1. While the majority supported the settlement, Commissioner Joshua D. Wright dissented, and issued a separate statement explaining his reasoning. The FTC has released a public statement regarding the matter, and Commissioner Wright’s dissenting statement is also publicly available. The consent agreement package was published in the Federal Register, initiating a 30-day public comment period, concluding on August 3, 2015. Following this period, the Commission would decide whether to finalize the proposed consent order.
It’s important to note that an FTC administrative complaint indicates the Commission has “reason to believe” a law violation has occurred and that action is in the public interest. A consent order, once finalized, carries legal weight for future actions, with potential civil penalties of up to $16,000 per day for each violation. The FTC encourages individuals to report any anticompetitive business practices to their Bureau of Competition.
This settlement aims to preserve competition in the dollar store sector, ensuring that consumers continue to have access to affordable goods and competitive prices at both Family Dollar And Dollar Tree locations, and in the newly divested stores under Sycamore Partners’ ownership.
