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 Tuesday 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.
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▪ Providing Haggen with false retail pricing data, causing Haggen to unknowingly inflate prices. “The practical result of this deception was a consumer walking into a brand new Haggen store and finding the same item on the same shelf, but now priced higher than it was immediately before store conversion,” the lawsuit said.
▪ 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.
An email message left with the Albertsons media relations department was not immediately returned.
In July, Albertsons launched the first legal salvo with a lawsuit that accused Haggen of fraud for failing to pay millions for the inventory it acquired in the new stores. In its suit, Albertsons called Haggen’s actions “fraudulent in nature and done with malice.”
What was a huge acquisition for Haggen — court documents indicate the acquisition 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 part of the divestment process brought about by the Federal Trade Commission reviewing the recently completed Albertsons-Safeway merger.
According to court documents, Haggen said it was committing almost $100 million to convert the purchased Albertsons and Safeway stores.
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.”
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 it is Albertsons that 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.
The lawsuit outlines how Haggen executives met with Albertsons counterparts at that company’s headquarters in Boise, Idaho, last November. The Albertsons executives sought to convince Haggen of the technical feasibility of a seamless transition for the stores.
Key to that transition was the implementation of business processing software that would help Haggen get the data it needed. Albertson promised its support, but later didn’t provide it, the lawsuit said.
“Had Haggen known Albertsons’ true intentions, Haggen would never have purchased the stores, nor would the FTC have permitted such a purchase,” according to the lawsuit.
The Seattle Times and Los Angeles Times contributed to this report.
A YEAR OF CHANGE FOR HAGGEN
The Bellingham-based grocer has been through a lot 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 to acquire 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 100 stores under its banner within 100 days.
July 2015: The company acknowledges layoffs and the reduction of hours for several employees, mostly in the southern part of its region.
July 2015: Los Angeles Times reports 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.