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Wal-Mart's Deal With Government Fails To End Monopoly Fears

By Iván Román

March 9, 2003
Copyright © 2003
THE ORLANDO SENTINEL. All rights reserved. 

SAN JUAN, Puerto Rico -- Once the attorneys general of 19 states entered the fray, Wal-Mart quickly came to an agreement last week with Puerto Rico's government on conditions to buy an island supermarket chain and keep from having a monopoly on the market.

But that doesn't mean the matter is completely settled.

Small-business owners fighting the world's largest retailer are crying foul, and one lawsuit is still pending. And still not happy, Justice Secretary Anabelle Rodríguez wants a federal appeals court to eliminate a federal district judge's order on the controversy. That order had, in essence, chided Rodríguez and accused her of being vindictive.

"That decision has the added effect that it can influence a state attorney general who would feel limited in discussions because anyone could just run to federal court for protection," Rodríguez said.

Wal-Mart's announcement last year that it was going to buy the Amigo supermarket chain's 38 stores for $225 million brought together a coalition of grocers and business leaders who decried that the retail giant was gobbling up too much of the island's food market -- up to 40 percent of it.

Shoppers flocking to 19 Wal-Mart and Sam's Club stores built on coastal plains and nestled in hillside cities reflect a longtime trend in Puerto Rico. The Amigo purchase is simply the latest -- and because of the players involved, the most visible and symbolic -- display of U.S. and foreign companies taking a bigger share of Puerto Rico's economy.

Legislators held hearings to document what happened in other Wal-Mart markets -- thousands of jobs lost, many stores forced out of business, and the retail behemoth, which takes in $220 billion annually worldwide, manipulating the work force into part-time, lower-paying jobs.

As Rodríguez sought conditions to protect jobs and sell some of the Amigo stores, Wal-Mart officials resisted for months. The Federal Trade Commission approved the sale in December, provided Amigo sold off four of the stores. Wal-Mart immediately did so and closed on the sale.

Hours later, Rodríguez filed a lawsuit in local courts alleging violations of local antimonopoly laws. The retailer's officials immediately ran to federal court claiming she was engaging in illegal protectionism and vindictive prosecution unfairly aimed at Wal-Mart.

U.S. District Judge Juan Pérez Giménez sided with Wal-Mart, ruling that Rodríguez was overreaching her authority by unconstitutionally seeking more than the conditions the FTC approved. He said the justice secretary's actions were "marked by a desire to avenge [Wal-Mart's] refusal to consent to her conditions" and placed an injunction on any legal action by the local authorities.

That order stirred the hornet's nest.

Nineteen attorneys general from California to Pennsylvania weighed in as friends of the court. The judge, they wrote, ignored a century of legal precedent that clearly establishes a state's right to set its own conditions as it enforces its antimonopoly laws regardless of -- and parallel to -- any federal action.

"The lower court's holding is not only wrong, but significantly impairs the ability of states to protect their consumers from anti-competitive conduct by enforcing state antitrust laws," the American Antitrust Institute, a coalition of lawyers and economists, wrote in another friends of the court brief.

With the growing chorus of legal experts against them, Wal-Mart's lawyers approached Rodríguez to try to settle. On Monday, three days before the appeal was scheduled to be heard in Boston, both sides made the agreement public.

Rodríguez exulted that it included her original conditions: keeping Amigo's 4,000 jobs for 10 years, buying from local producers at the same level for 10 years, and adding two more stores to the four the FTC already told them to sell off.

"This process has taken so much time; it has affected morale among employees and created so much uncertainty that we thought it was best to reach an agreement instead of going on in the courts," said Federico González Denton, Wal-Mart's director of corporate affairs in Puerto Rico.

Stunned Wal-Mart critics were surprised by the settlement, which they say doesn't solve the monopoly problem.

They are still discussing their next step, if any. A lawsuit by a consumers group pending before the Puerto Rico Supreme Court seems to be their only hope at the moment.

"It basically leaves us where we started from," said Julio Eduardo Torres, president of the Food Marketing, Industry and Distribution Association. "We're all going to suffer. How much? We'll have to see. But some of us will disappear, for sure."

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