Regulatory Constrained Portfolio Restructuring: The US Department Store Industry in the 1990s

Abstract

The US department store industry has undergone a recent round of strategic acquisition-based portfolio restructuring. This paper analyses one such acquisition, studying how its geography is restructured in the premerger stage to conform to the Federal Trade Commission's 'fix-it-first' policy and to improve the strategic fit of the transaction. The article then investigates evidence, and analyses the effects, of a new era of stricter FTC enforcement, where divestiture may no longer be sufficient in cases of horizontal market overlap. Fundamentally, the paper considers the nature of 'real' regulation in action, as rules partially dictate investment decisions.

Regulation in practice: Power, resources and context at the local scale in UK food retailing

“…Wood, 2001;Wrigley, 2001;Wrigley et al, 2009), they have often charted the emergence of particular regulations (e.g. land-use planning) and the implications for particular retail formats.…”

Revisiting the US food retail consolidation wave: regulation, market power and spatial outcomes

“…For example, the Dutch retailer, Ahold, that had previously pursued a "hands-off" management style -operating US divisions as little more than holding companiesfrom 1995 changed its strategy with an initiative labelled 'Project Compete' and commenced the back office operational integration of its US fascias (Wrigley, 1997a). Such trends had parallels elsewhere within the US retail market, most notably in the US department store sector where there had been high profile Chapter 11 bankruptcy filings following failed leveraged restructurings, involving Macy's, Allied and Federated Department Stores, which led to a similar push toward centralised, consolidated and more efficient operations (Wood, 2001;. In addition, scale-related advantages and the centralisation of practices out of view of the customer were also met with increasingly larger retail formats, notably the 150,000 sq ft + supercenters.…”

“…As Wrigley (2001b, p 191) explains, the FTC tacitly agreed 'not to oppose mergers and acquisitions where the acquiring firm committed itself in advance (under the spirit of the Celler-Kefauver Act) to divest itself of all clear horizontal market overlaps that might be deemed to be uncompetitive at the local level' (see also Wood, 2001). However, state level Attorneys General often sought to impose greater levels of divestiture, with the American Stores merger providing a precedent that was subsequently replicated in numerous cases (Wrigley, 1997a).…”

Conceptualising innovative customer-facing responses to planning regulation: the UK food retailers

“…Meanwhile work in Continental Europe has investigated how legislation outlawing below-cost selling has had considerable implications for the price of major brands and the nature of retail competition (Colla, 2006). Other research has focused on the implications of competition legislation in merger and acquisition retail activity (Poole et al, 2003;Wood, 2001), as well as the effects of regional policy in channelling and promoting spatial developments of retailing (Lowe, 1991;Sparks, 1987). An interesting range of studies have also charted the emergence of 'management based regulation' where the retailer, in effect, replaces the State in policing specific aspects of its business (Marsden et al, 2000).…”