The Federalist Society

New York, Vermont, Maine, and Maryland AGs on Rite Aid Divestiture

July 25, 2007

Recently, the Attorneys General of New York, Vermont, Maine, and Maryland announced that, as the result of a coordinated investigation by them and the Attorneys General of three other States as well as an investigation by the Federal Trade Commission, Rite-Aid Corporation would be required to divest 26 of the stores that it proposed to acquire through its acquisition of 1,854 Brooks and Eckerd drug stores from Jean Coutu Group. In June 2007, the Federal Trade Commission accepted a proposed consent agreement calling for Rite-Aid to divest 23 stores in nine states, and other state consent orders required by the FTC would result in the divestiture of three more stores. With the conditions imposed by those agreements, Rite-Aid was allowed to proceed with the acquisition, which will make it the largest drugstore chain on the East Coast and will strengthen its position as the third-largest chain in the United States. Rite-Aid also entered the market in four states: Massachusetts, Rhode Island, North Carolina, and South Carolina.

Attorney General Andrew Cuomo of New York said that his Office led the investigation for the participating States. Attorney General Bill Sorrell of Vermont noted that the settlement between Rite-Aid and Vermont preserved competition in more areas of Vermont than the FTC settlement did. Attorney General Sorrell noted, "While we are pleased to work with the FTC in ensuring Vermonters continue to enjoy the benefits of competition, we will continue to take an independent view of markets and competition in Vermont." As a result, Rite-Aid divested one more store in Vermont than the three stores that its agreement with the FTC called for.

In making their investigation, the participating Attorneys General likely invoked the parens patriae powers of their States. Those powers allow the State to speak for its citizens and protect them in circumstances where those citizens might lack a voice. The theory here is that private lawsuits under Section 7 of the Clayton Antitrust Act, 15 U.S.C. 18, can be difficult to pursue. The United States Supreme Court has explained that, in a Clayton Act case brought by the Government, proof of the antitrust violation may be sufficient to establish standing. California v. American Stores Co., 495 U.S. 271, 295-96, 110 S. Ct. 1853, 1866-67 (1990). In contrast, private litigants must show an injury to their interests, and their claims are subject to equitable defenses such as laches and "unclean hands." Id. In addition, the private litigant's injury must be the kind of injury that the antitrust laws are designed to prevent, and the plaintiff must be an efficient enforcer of those laws. See Paycom Billing Sevices, Inc v. Mastercard Int'l, Inc. 467 F. 3d 283, 290-91 (2d Cir. 2006); Abraham v. Intermountain Health Care, Inc., 461 F. 3d 1249, 1267-68 (10th Cir. 2006).


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