Shaw’s strategy raises competition questions

With its recent acquisition of the local Butson’s Market in Littleton, Shaw’s Supermarkets is “the only show in town,” said Town Manager Jason Hoch. Shaw’s, in fact, is the only supermarket for a number of towns around Littleton.

“There’s an independent (store) in Franconia that’s loosely affiliated with Hannaford (Brothers),” Hoch said, calling to mind the handful of supermarkets in the area that are not Shaw’s. “There are a couple of stores across the river in St. Johnsbury.”

When Shaw’s moved in next door to Butson’s a few years ago, town officials thought the store would answer the need for competition in the local food market. “So there’s a certain irony to returning to a situation where there isn’t any competition at the moment,” Hoch said.

The Butson’s in Laconia was the only supermarket in that city, sandwiched between a Shaw’s in Belmont and another in Gilford. “As the crow flies, it’s no more than five miles between them,” Mayor Mark Fraser said of the neighboring Shaw’s stores. There also is a Hannaford’s in Gilford and another Shaw’s in Tilton.

Now Shaw’s holds the lease on the Butson’s property, having acquired it in a multi-store purchase announced at the end of September. Within a couple of weeks, the store was closed. While Shaw’s has several years left on the lease, the company has said it does not plan to open another supermarket there. Neither, apparently, will anyone else.

“They made it very clear there will not be a grocery store in there,” said Fraser, who has contacted the company about finding an active tenant for what had been an anchor store in the downtown shopping center. “I’m sure they felt they didn’t need the competition.”

In Lebanon, all nine city councilors signed a statement pledging they would no longer shop at Shaw’s. About 30 residents recently gathered in a city park to publicly cut up and throw away their Shaw’s cards to protest the closing of the Butson’s store in downtown Lebanon, where Shaw’s also has acquired the lease.

One local resident, N.H. Sen. Clifton Below, has asked state Attorney General Peter Heed and Tom Colantuono, the U.S. attorney for New Hampshire, to look into the possibility that Shaw’s may be violating state or federal anti-trust laws.

Up in the air

Shaw’s, a regional chain based in West Bridgewater, Mass, purchased five other Butson’s stores and leases on three other sites from GU Markets LLC of Brattleboro, Vt. The stores — in Lancaster, Newport, Walpole and Woodsville and Vergennes, Vt. — would be temporarily closed and reopened by the end of October, the company said in its Sept. 30 announcement. The “additional retail locations” — in Littleton, Laconia and Lebanon — “are no longer planned to operate as supermarkets,” the company said.

The lease on the downtown Lebanon store is good for another 15 months. Below and others in the city are concerned that Shaw’s may simply hold the lease on the empty store or sublet the property to another company on the condition that it will run something other than a grocery business there. Either way, they say, it would have the effect of keeping a potential competitor out of the downtown store, while drawing more business to the two Shaw’s supermarkets on Route 12-A in West Lebanon.

“Apparently they think it’s worth it to pay (rent) on vacant space just to eliminate that competition,” said Below.

The owner of the building, Rob Caro of Caro Properties in Nashua, said at least four different grocers have inquired about the possibility of opening a market at the Butson’s site. But Caro said he has no way of knowing what Shaw’s plans to do with the lease. “We haven’t been able to get hold of them,” he said. “Our hands are tied.”

While there are other supermarkets in Lebanon, including a P&C and a Price Chopper, Butson’s was the only market easily accessible to elderly and low-income residents in the downtown area who don’t have cars to get to the outlying shopping centers, Below said. Mayor Ralph Akins, who also is a state representative, said the closing of the market is a blow to city efforts to revitalize what he describes as “one of the most treasured areas of a New England town, the village center.”

The closing of a downtown store is nothing new, he said, but in this case, the circumstances are different.

“In the last few years, we had a Woolworth store that went out of business because they couldn’t make a profit. The hardware store went out of business because they couldn’t make a profit. In this case, you have a very large corporation that has taken a very essential service out of the village district by buying it and taking it away.”

Eminent domain?

Akins, along with the eight other council members and others attending the Oct. 15 council meeting, signed the following statement: “I will not shop at Shaw’s until they reopen the downtown Lebanon grocery, formally Butson’s IGA, or sell the store to someone who will.”

Stephen Teeter, who brought the petition to the public meeting, said about 300 people have signed it so far.

“We might as well get right to the point– it’s called a boycott,” said Nancy Cohen, a former city councilor who supports the effort. “I think the only way we can get the message across is to hit them in the pocketbook.”

Talk of a boycott apparently has gotten the attention of Shaw’s officials. Public relations director Terry Donelin expressed dismay at the action of the city councilors. “In our estimation it was nothing more than political grandstanding,” he said.

The leases Shaw’s acquired were part of a package deal the company agreed to when it purchased the five other stores, he said.

“We have from day one, since the transaction was announced, asked the public to be patient and asked them to allow us to make a determination as to what we plan to do with those leases,” Donelin said. “When we see comments coming from the city council that they’re going to ‘browbeat’ Shaw’s, when they say they’re going to boycott a company that’s a staple in the community and in New England, a company that is a stable employer in a bad economy, what are they saying to the 200 associates who work in our two stores in the Lebanon area? I think everyone needs to cool down a bit and allow us to come to a conclusion. That will be in weeks, not months,” he said.

After the dust settles, Shaw’s, a subsidiary of J Sainsbury plc, a UK-based corporation, will have 34 New Hampshire stores, following the reopening of the former Butson’s locations and the opening of new store in Manchester in November.

The company has 191 stores in New England and employs 4,500 to 4,600 people in New Hampshire, Donelin said. The company had not yet taken possession of the leases on the three Butson’s stores that were being shut down, he said.

“We are not the ones closing the stores,” Donelin said. “We’re saving jobs in five other stores. There’s a big picture to look at for the state of New Hampshire.” The store’s critics, he said, “are missing the point.”

In his letter to the attorney general, Below wrote of an apparent strategy by some supermarket chains “to dominate markets by buying out competitors and shutting them down as well as acquiring sites that block the entry of possible new competitors. If you are unaware of any state or federal antitrust laws that might help deal with such anti-competitive practices, perhaps you could suggest some for introduction as new legislation,” he suggested. “Also, might the city of Lebanon be able to exercise eminent domain power, even on a lease, in such a circumstance as the community now faces?”

Deputy Attorney General Kelly Ayotte said the request has been forwarded to the department’s Consumer Protection and Antitrust Division for consideration.

“Certainly, it would be very unusual to use the eminent domain process in that way,” said Ayotte. “It’s generally used by a state or municipality to take land for state or municipal purpose — a school or a road or something like that.”

But Mayor Akins recalls that Guilford Industries several years ago was holding onto a section of railroad line to keep other companies off the track.

“They wanted to control the intersection that goes into White River Junction and into Vermont,” he said. Akins, Below and others sponsored a bill in the Legislature to authorize the taking of the property by eminent domain. The bill was still in the Public Works Committee when Gilford Industries decided to sell the property to the state, he said.

Lebanon City Councilor Steve Wood thinks the moral of that story might apply to Shaw’s and its hold on the former Butson’s site.

“You don’t have to shoot a loaded cannon,” he said. “But if you think you might need it, it’s a good idea to load it. I think that’s what’s going on up here.”