Business

Haggen sues Albertsons for $1 billion in damages

Bellingham-based Haggen Food & Pharmacy is the largest independent grocery retailer in the Pacific Northwest, with stores throughout Washington, Oregon, southern California, Nevada and Arizona.
Bellingham-based Haggen Food & Pharmacy is the largest independent grocery retailer in the Pacific Northwest, with stores throughout Washington, Oregon, southern California, Nevada and Arizona. The Bellingham Herald

Bellingham-based Haggen has filed a lawsuit against Albertsons seeking more than $1 billion in damages over a deal that has become acrimonious.

The complaint alleges that Albertsons engaged in “coordinated and systematic efforts to eliminate competition and Haggen as a viable competitor in over 130 local grocery markets in five states.” It was filed on Tuesday, Sept. 1 in the U.S. District Court for the District of Delaware. Haggen estimates the damages would exceed $1 billion, with the actual amount to be determined at trial.

In the 55-page complaint, Haggen lists a variety of grievances against Albertsons that have taken place since the Bellingham grocer agreed to acquire 146 stores in five states in December. Those complaints include:

▪  Using Haggen’s confidential conversion scheduling information to create aggressive marketing campaigns intending to hurt Haggen grand openings;

▪  providing Haggen with false retail pricing data, forcing Haggen to unknowingly inflate prices;

▪  deliberately under-stocking certain inventory at Haggen-acquired stores and overstocking perishable inventory that Haggen had to throw away;

▪  diverting Haggen inventory to Albertsons stores.

In an email response, Brian Dowling, vice president of public affairs at Albertsons, said the allegations in the lawsuit “are completely without merit.”

Haggen’s huge acquisition — court documents indicate the 146-store sale was more than $300 million — has had a bumpy transition, particularly in the Southern California and Arizona markets. Last month Haggen announced the closure or sale of 27 stores, 26 of which were part of the acquisition from Albertsons and Safeway. The sale was originally part of the divestment process brought about by the Federal Trade Commission reviewing the Albertsons-Safeway merger. That merger was completed in January.

According to court documents, Haggen said it was committing almost $100 million to convert the purchased Albertsons and Safeway stores, taking an aggressive 15-week schedule to complete the process.

In the complaint, Haggen said Albertsons violated numerous laws and the FTC order as well as the purchase agreement, damaging the company’s brand and hamstringing Haggen’s ability to successfully operate the stores after taking ownership.

Court documents cite several examples Haggen alleges took place during the conversion of stores. At a store in Shoreline, Haggen said that Albertsons failed to maintain ordinary levels of product, forcing the Bellingham grocer to spend $208,000 in new inventory — about a quarter of the inventory for that store. At two stores in Bakersfield, Calif., Haggen said it found meat freezers to be loaded with 256 cases of frozen turkeys that were left over from Thanksgiving and Christmas holidays. Haggen said the out-of-season turkeys became unsellable merchandise.

It also cited several examples of media reports on the closures, noting that the articles indicated that it was Haggen’s fault for the closures, while Haggen alleges Albertsons is at fault.

“Albertsons’ anti-competitive conduct caused significant damage to Haggen’s image, brand and ability to build goodwill during its grand openings to the public,” according to the complaint.

A YEAR OF CHANGE FOR HAGGEN

The Bellingham-based grocer has been through quite a bit in the past year. Here’s a look at some of the significant events:

August 2014: The company hires John Clougher as its CEO.

December 2014: Haggen acquires 146 stores as a part of the divestment process brought about by the Federal Trade Commission's review of the Albertsons-Safeway merger. With the acquisition, Haggen expands from 18 stores and 16 pharmacies to 164 stores and 106 pharmacies across Washington, Oregon, California, Nevada and Arizona.

Early 2015: Haggen sets an ambitious goal of converting stores under its banner within a 15-week period.

July 2015: The company acknowledges layoffs and the reduction of hours for an undisclosed number of employees, mostly in the south region.

July 2015: According to several media outlets, Albertsons files a $41 million lawsuit accusing Haggen of fraud.

August 2015: Haggen announces the closure or sale of 27 stores, 26 of which were from the Albertsons-Safeway acquisition.

Sept. 1, 2015: Haggen sues Albertsons for more than $1 billion in damages.

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