Existing law, upon change in control of a grocery establishment, establishes a transitional period of employment for eligible grocery workers, as specified.

This bill would prohibit a person from acquiring any voting securities or assets of a retail grocery firm or retail drug firm, as those terms are defined, unless both parties give, or in the case of a tender offer, the acquiring party gives, specified notice to the Attorney General no less than 180 days before the acquisition is made effective. The bill would require an acquiring party who is required to file notice pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 to submit the form and documentary material required to be submitted under that federal act, and would specify information to be included in the notice for a party who is not required to file notice pursuant to that federal act, including information required to assess the competitive effects of the proposed acquisition and to assess the economic and community impact of any planned divestiture or store closures. The bill would require the notice to be given under oath and affirmation. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The bill would give the Attorney General 180 days to evaluate the transaction, and would require the Attorney General to charge the acquiring party a filing fee, as specified, incident to the cost for the Attorney General to receive, review, and analyze the notice. The bill would authorize the Attorney General to adopt regulations to effectuate the bills provisions. The bill would deem as confidential any information submitted to the Attorney General under provisions of federal law rendering them confidential. The bill would make a violation of the bills provisions subject to injunctive relief and other equitable remedies, and would entitle Attorney General to recover attorneys fees and costs and impose civil penalties of up to $20,000 for each day of noncompliance.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, upon change in control of a grocery establishment, establishes a transitional period of employment for eligible grocery workers, as specified.

This bill would prohibit a person from acquiring any voting securities or assets of a retail grocery firm or retail drug firm, as those terms are defined, unless both parties give, or in the case of a tender offer, the acquiring party gives, specified notice to the Attorney General no less than 180 days before the acquisition is made effective. The bill would require an acquiring party who is required to file notice pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 to submit the form and documentary material required to be submitted under that federal act, and would specify information to be included in the notice for a party who is not required to file notice pursuant to that federal act, including information required to assess the competitive effects of the proposed acquisition and to assess the economic and community impact of any planned divestiture or store closures. The bill would require the notice to be given under oath and affirmation. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The bill would give the Attorney General 180 days to evaluate the transaction, and would require the Attorney General to charge the acquiring party a filing fee, as specified, incident to the cost for the Attorney General to receive, review, and analyze the notice. The bill would authorize the Attorney General to adopt regulations to effectuate the bills provisions. The bill would deem as confidential any information submitted to the Attorney General under provisions of federal law rendering them confidential. The bill would make a violation of the bills provisions subject to injunctive relief and other equitable remedies, and would entitle Attorney General to recover attorneys fees and costs and impose civil penalties of up to $20,000 for each day of noncompliance.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, upon change in control of a grocery establishment, establishes a transitional period of employment for eligible grocery workers, as specified.

The bill would prohibit a person from acquiring any voting securities or assets of a retail grocery firm or retail drug firm, as those terms are defined, unless both parties give, or in the case of a tender offer, the acquiring party gives, specified notice to the Attorney General no less than 180 days before the acquisition is made effective. The bill would require an acquiring party who is required to file notice pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 to submit the form and documentary material required to be submitted under that federal act, and would specify information to be included in the notice for a party who is not required to file notice pursuant to that federal act, including information required to assess the competitive effects of the proposed acquisition and to assess the economic and community impact of any planned divestiture or store closures. The bill would require the notice to be given under oath and affirmation. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The bill would give the Attorney General 180 days to evaluate the transaction, and would require the Attorney General to charge the acquiring party a filing fee, as specified, incident to the cost for the Attorney General to receive, review, and analyze the notice. The bill would authorize the Attorney General to adopt regulations to effectuate the bills provisions. The bill would deem as confidential any information submitted to the Attorney General under provisions of federal law rendering them confidential. The bill would make a violation of the bills provisions subject to injunctive relief and other equitable remedies, and would entitle Attorney General to recover attorneys fees and costs and impose civil penalties of up to $20,000 for each day of noncompliance.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, upon change in control of a grocery establishment, establishes a transitional period of employment for eligible grocery workers, as specified.

The bill would prohibit a person from acquiring any voting securities or assets of a retail grocery firm or retail drug firm, as those terms are defined, unless specified written notice is given both parties give, or in the case of a tender offer, the acquiring party gives, specified notice to the Attorney General no less than 180 days before the acquisition is made effective. The bill would specify information required to be included in the notice, require an acquiring party who is required to file notice pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 to submit the form and documentary material required to be submitted under that federal act, and would specify information to be included in the notice for a party who is not required to file notice pursuant to that federal act, including information required to assess the competitive effects of the proposed acquisition and to assess the economic and community impact of any planned divestiture or store closures. The bill would require the notice to be given under oath and affirmation. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The bill would give the Attorney General 180 days to evaluate the transaction, and would require the Attorney General to charge the acquiring party a filing fee, as specified, incident to the cost for the Attorney General to receive, review, and analyze the notice. The bill would authorize the Attorney General to adopt regulations to effectuate the bills provisions, and would exempt the adoption of those regulations from the Administrative Procedure Act. provisions. The bill would prohibit the Attorney General from making specified information public. deem as confidential any information submitted to the Attorney General under provisions of federal law rendering them confidential. The bill would make a violation of the bills provisions subject to injunctive relief and other equitable remedies, and would entitle Attorney General to recover attorneys fees and costs. costs and impose civil penalties of up to $20,000 for each day of noncompliance.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, upon change in control of a grocery establishment, establishes a transitional period of employment for eligible grocery workers, as specified.

The bill would prohibit a person from acquiring any voting securities or assets of a retail grocery firm or retail drug firm, as those terms are defined, unless specified written notice is given to the Attorney General at least no less than 180 days before the acquisition is to become made effective. The bill would specify information required to be included in the notice, including information required to assess the competitive effects of the proposed acquisition and to assess the economic and community impact of any planned divestiture or store closures. The bill would require the notice to be given under oath and affirmation. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The bill would authorize the Attorney General to adopt regulations to effectuate the bills provisions, and would exempt the adoption of those regulations from the Administrative Procedure Act. The bill would prohibit the Attorney General from making specified information public. The bill would make a violation of the bills provisions subject to injunctive relief and other equitable remedies, and would entitle Attorney General to recover attorneys fees and costs.

Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.

This bill would make legislative findings to that effect.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law, upon change in control of a grocery establishment, requires an incumbent grocery employer, within 15 days after the execution of the transfer document, to provide to the successor grocery employer a list of eligible grocery workers, as specified, and requires the successor grocery employer to maintain a preferential hiring list of eligible grocery workers, to hire from that list for 90 days after the grocery establishment is fully operational and open to the public under the successor grocery employer, and to retain each eligible grocery worker hired for at least 90 days after their commencement date, except as specified. Existing law exempts from those provisions grocery establishments that are located in geographic areas designated by the United States Department of Agriculture as a food desert if specified conditions apply. establishes a transitional period of employment for eligible grocery workers, as specified.

The bill would prohibit a successor grocery store employer to cause a grocery establishment that is located in a geographic area designated as a food desert to cease being fully operational and open to the public until the establishment provides notice to the city council, city attorney, board of supervisors, county counsel, State Department of Public Health, and Attorney General 180 days before the establishment ceases to be fully operational and open to the public. The bill would require the notice to include, among other things, a written analysis and explanation, including data, on how residents living in the geographic area will be able, at a comparable cost, including transportation cost and time off work and childcare costs, to purchase food. person from acquiring any voting securities or assets of a retail grocery firm or retail drug firm, as those terms are defined, unless specified written notice is given to the Attorney General at least 180 days before the acquisition is to become effective. The bill would specify information required to be included in the notice, including information required to assess the competitive effects of the proposed acquisition and to assess the economic and community impact of any planned divestiture or store closures. The bill would require the notice to be given under oath and affirmation. By expanding the scope of the crime of perjury, the bill would impose a state-mandated local program. The bill would authorize the Attorney General to adopt regulations to effectuate the bills provisions, and would exempt the adoption of those regulations from the Administrative Procedure Act. The bill would prohibit the Attorney General from making specified information public. The bill would make a violation of the bills provisions subject to injunctive relief and other equitable remedies, and would entitle Attorney General to recover attorneys fees and costs.

Existing law, upon change in control of a grocery establishment, requires an incumbent grocery employer, within 15 days after the execution of the transfer document, to provide to the successor grocery employer a list of eligible grocery workers, as specified, and requires the successor grocery employer to maintain a preferential hiring list of eligible grocery workers, to hire from that list for 90 days after the grocery establishment is fully operational and open to the public under the successor grocery employer, and to retain each eligible grocery worker hired for at least 90 days after their commencement date, except as specified. Existing law exempts from those provisions grocery establishments that are located in geographic areas designated by the United States Department of Agriculture as a food desert if specified conditions apply.

The bill would prohibit a successor grocery store employer to cause a grocery establishment that is located in a geographic area designated as a food desert to cease being fully operational and open to the public until the establishment provides notice to the city council, city attorney, board of supervisors, county counsel, State Department of Public Health, and Attorney General 180 days before the establishment ceases to be fully operational and open to the public. The bill would require the notice to include, among other things, a written analysis and explanation, including data, on how residents living in the geographic area will be able, at a comparable cost, including transportation cost and time off work and childcare costs, to purchase food.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 853

Author:(Maienschein)

As Amended Ver:July 13, 2023

Majority vote

SUMMARY

Requires parties engaging in the transfer or acquisition of retail grocery stores to provide notice to the Attorney General.

Major Provisions

1. Prohibits any person from acquiring, directly or indirectly, any voting securities or assets of a retail grocery firm or retail drug firm unless both parties, or in the case of a tender offer, the acquiring party, gives written notice to the Attorney General.
2. Requires the written notice required to be filed with the Attorney General no less than 180 days before the acquisition is made effective. Requires the notice to be made under oath or affirmation, and comply with requirements set out by subsequent provisions of this bill, subject to specified exceptions.
3. If the acquiring party is required to file notice with the Federal Trade Commission (FTC) or United States Department of Justice (USDOJ) pursuant to specified federal law, requires the notice to contain the same form and additional documentary material required under the federal law and any implementing regulations.
4. If the acquiring party is not required to file notice with the FTC or USDOJ, requires the notice to contain all of the following information:
   1. The name and address of each acquiring party, and a report of the nature of its business operations during the past five years or for a lesser period if the person and their predecessors have been in existence less than five years.
   2. An informative description of the business intended to be done by the person and the person's subsidiaries, as specified.
   3. A list of all individuals who are or have been selected to become directors or executive officers or who perform or will perform functions appropriate to the positions.
   4. The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction in which funds were or are to be obtained, including any pledge of the drug or grocery retail firm's stock or the stock of any of its subsidiaries or controlling affiliates, and the identity of persons furnishing the consideration If a source of the consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential upon request of the person filing the statement.
   5. Fully audited financial information as to the earnings and the financial condition of each acquiring party for the preceding five fiscal years or for a lesser period if the acquiring party and its predecessors have been in existence for less than five years, and similar unaudited information as of a date not earlier than 90 days before the written notice.
   6. Any plans or proposals that an acquiring party may have to liquidate the retail grocery or retail drug firms, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure.
   7. The information required to assess the competitive effects of the proposed acquisition, giving particular attention to the effects on the proposed chain retail grocery store acquisition on consumers, including, but not limited to, consumer choice, food pricing, access to food, and food deserts, and factors affecting the supply of experienced grocery workers, including wages, benefits, and unemployment and chain retail pharmacy on patients, including, but not limited to, patient choice, medicine pricing, access to medications, and factors affecting the supply of licensed pharmacists, pharmacy technicians, and pharmacists-in-training.
   8. Information required to assess the economic and community impact of any planned divestiture or store closures, including, but not limited to, the impact on food deserts, food supply, economic mobility, unemployment, and small businesses.
5. Requires the Attorney General to charge the acquiring party a filing fee for the cost to the AG to process any notice under this section, as specified.
6. Authorizes the AG to use the notice, documents, and information disclosed under this section in a judicial action in state or federal court or an administrative action involving the merger of acquisition.
7. Authorizes the Attorney General, in the event the office determines they cannot complete an evaluation of the competitive effects of the acquisition before the parties intend to consummate the acquisition, to seek an order from the superior court for the County of Sacramento temporarily staying or preliminarily enjoining the acquisition for such time as is reasonably necessary for the Attorney General to complete the analysis.
8. Requires the Attorney General to consider the extent to which information required to be submitted to the United States Department of Justice and the Federal Trade Commission (FTC) may satisfy some or all of the need to carry out the applicable provisions of this bill, if the acquisition requires disclosures under existing provisions of federal law. Makes any information submitted to the Attorney General under provisions of federal law rendering them confidential privileged under California law.
9. Establishes that failure to provide written notice, amendment to written notice, or other material required to be provided under the provisions of this bill as a violation of the title.
10. Authorizes the Attorney General to seek injunctive relief and other equitable remedies a court deems appropriate, as well as attorney's fees and costs, and civil penalties of up to $20,000 for each day of noncompliance with the notice requirements.
11. Makes various findings and declarations regarding the state's interest in maintaining the confidentiality of the disclosures required by this bill's provisions.

Senate Amendments

1. Streamline compliance requirements for parties subject to notice requirements pursuant to federal law and subsequently clarify requirements for parties not subject to federal law.
2. Clarify enforcement tools provided to the Attorney General including authorization of additional civil penalties.

COMMENTS

In October 2022, Kroger announced its plan to purchase Albertsons in a blockbuster deal valued at $24.6 billion. Kroger owns and operates nearly 3,000 stores nationwide, including Ralphs and Food 4 Less. On its own, Kroger employs 420,000 employees. Albertsons, which owns and operates stores such as Safeway and Vons, employs nearly 300,000 workers and operates approximately 2,300 stores across the country. In California, Kroger and Albertsons own 302 and 593 stores, respectively. (California State Impact, Kroger, available at [https://www.thekrogerco.com/wp-content/uploads/2022/01/Kroger-FactSheet-California.pdf], and Number of Albertsons Companies stores in the United States as of February 2022, by state, Statista, available at [https://www.statista.com/statistics/1167508/albertsons-operating-stores-by-state-us/]). As part of its proposal to the FTC, Kroger has announced a preemptive divestiture plan, which would see Kroger sell off a portion of grocery stores in a given geographic area to other retailers in order to ensure sufficient competition within that area. Most recently, the plan appears to propose divestiture of approximately 650 Albertsons stores. (Kroger-Albertsons Divestiture Bid Aims to Head Off Challenge (1), Dan Papscun, Bloomberg Law (October 14, 2022), available at [https://news.bloomberglaw.com/antitrust/kroger-albertsons-divestiture-plan-is-bid-to-deflect-regulators]).

While some of the financial inaccessibility of healthy food and fresh produce is due to nationwide inflation levels, there is concern that the pending merger will further exacerbate these issues. Moreover, an additional potential consequence of the divestiture is the ultimate failure of the separated stores, resulting in even less access to grocery retailers, as well as potential job loss for the workers employed by the separated stores. Many of the vulnerable workers are considered low-income, with the average employee at an Albertsons-operated store in California earning $36,011 annually. (Albertsons Companies Salaries in California, Zippia: The Career Expert, available at [https://www.zippia.com/albertsons-co-careers-14070/salary/california/]) Grocery stores also employ workers with highly specialized knowledge, including pharmacists and workers with training in sanitation and health procedures, all of whom may be impacted by store closures. Considering the financial realities these workers face, as well as their role in the communities they serve, the threat of job loss in the grocery retail sector stemming from such a massive merger is significant.

This bill proposes a new notice procedure whereby any entity intending to purchase controlling stock in a grocery retailer, as defined, must first submit specified information to the Attorney General (AG). Other industries have similar notice requirements, notably the health care and hospital industry. For example, since 1996, nonprofit health care facilities have been required to obtain written consent from the Attorney General before entering into any sale or acquisition agreement. The intent behind the original bill establishing the AG's oversight of specified health care mergers and acquisitions was to ward off any reduction in access to health care services for underinsured or uninsured individuals. In essence, the AG's office should receive notice of potential risks that the consolidation of a service provider would result in a lack of necessary services to any community within the state.

Similarly, in the event of an acquisition or merger between two or more grocery retailers, this bill would require the participating parties to provide notice to the AG's office at least six months prior to the effectuation of the merger in order to allow the AG's office the opportunity to evaluate the proposed transaction. The notice would include details regarding the parties engaging in the transaction in order to flag any potentially concerning consolidation. The notice would also include information regarding any potential impacts on food pricing, access to food, expansion or diminution of food deserts, the supply of grocery workers or impact on the same work force, and other factors that may impact the availability of a robust grocery retailer environment. In the event the retailers fail to file the requisite notice, the bill authorizes the Attorney General to seek injunctive relief to freeze the merger. Notably, apart from injunctive relief, this bill does not include any monetary liability for grocery retailers. Rather, the bill simply seeks to provide additional transparency about pending acquisitions of grocery retailers, and the various ways in which the transaction may affect distinct communities. By requiring notice to the Attorney General, this bill arguably achieves its intended goal.

According to the Author

Mergers and acquisitions in the food and drug-retail industries disproportionately impact underserved and marginalized communities. The public has a right to know about any future proposed merger or acquisition involving essential goods and services like food and medicine. AB 853 is a simple notice bill that requires parties to grocery and drug-retail mergers or acquisitions to offer forecasts and analyses to the Attorney General and, hence, the public, about the public policy consequences of their merger so that an informed debate can occur about what, if anything, to do about the merger.

Arguments in Support

This bill is sponsored by the United Food and Commercial Workers Union, and is supported by a variety of labor and food access organizations. In support of the measure the sponsors write:

In many areas in California, residents lack cars and must travel to grocery stores by walking or public transit, which prevents them from traveling outside the community areas in which they work or live to shop at alternative grocery stores. As a result, the majority of consumers' grocery shopping occurs at stores located very close to where they live or work. Thus, for many California families, accessibility of supermarkets by foot or by public transit is critical for the communities' health as a whole. Yet, access to adequate high-quality food and grocery stores is already an issue for many Californians. In 2016, before many mergers, nearly one million Californians, 45% of whom are low-income, live without access to nearby supermarkets or large grocery stores in communities known as "food deserts. These types of environments encourage poor eating habits, which can lead to poor health.

If Kroger's proposed acquisition of Albertsons is consummated, the companies' combined power will be used to increase prices for groceries, decrease the quality of food, eliminate jobs, close stores and offer less choice for consumers due to the overlap in geographic areas. And, as is customary in these acquisitions, the first casualties of the removal of competition will be the firing of employees who were only needed when competition existed. Staffing will decrease, leading to worse service for consumers and worse conditions for workers. Prices will go up, and promotions will decrease, and that translates directly into the quantity and quality of food that families can put on their tables. Grocery store mega-mergers are, for all these reasons, indisputably infused with the public interest.

Arguments in Opposition

This bill is opposed by the California Grocers Association and the California Retailers Association. They write:

While the California Grocers Association and the undersigned organizations are still reviewing the impacts of the bill, the Attorney General notice and stay order requirements within AB 853 are overreaching and will inhibit the stability of the grocery retail industry. Due to the overly broad definition of "retail grocery firm," as proposed, the noticing requirements in the bill would apply where an independent grocer wishes to purchase even a single store from successor, which is not covered under the Federal Trade Commission criteria.

Also, providing notice at such a significant length in advance will delay what should be a straightforward process. This may have the unintended consequences of placing grocers, including independent grocers, through an unnecessary waiting period, costly legal battles, and dramatically impact the price of the grocery asset. These impacts will discourage grocers from siting acquisitions in areas, including food deserts, that should otherwise be an opportunity for greater community investment, in favor of nongrocery retail locations. The business constraints that would be caused by AB 853 are paradoxically some of the very real issues we all want to rectify—job loss, food inaccessibility and community divestment.

FISCAL COMMENTS

According to the Senate Appropriations Committee:

1. Annual, ongoing costs in the low millions to the Department of Justice to draft and promulgate regulations, review notices, and handle related litigation. The DOJ reports costs of $1.2 million in 2023-24 and $2.1 million annually thereafter (General Fund)
2. Unknown court workload cost pressures to the extent this bill results in increased litigation as a result of the Attorney General's authority to intervene in a retail grocery or drug store merger and seek injunctive relief or enforce the bill's notice requirement in court.

VOTES:

ASM JUDICIARY: 7-2-2

YES: Maienschein, Connolly, Haney, Pacheco, Papan, Reyes, Robert Rivas

NO: Dixon, Sanchez

ABS, ABST OR NV: Essayli, Kalra

ASM APPROPRIATIONS: 11-4-1

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

NO: Megan Dahle, Dixon, Mathis, Sanchez

ABS, ABST OR NV: Robert Rivas

ASSEMBLY FLOOR: 62-16-2

YES: Addis, Aguiar-Curry, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Mike Fong, Friedman, Gabriel, Garcia, Gipson, Grayson, Haney, Hart, Holden, Irwin, Jackson, Jones- Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Schiavo, Soria, Ting, Valencia, Villapudua, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NO: Alanis, Megan Dahle, Davies, Dixon, Essayli, Flora, Vince Fong, Gallagher, Hoover, Mathis, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

ABS, ABST OR NV: Chen, Lackey

SENATE FLOOR: 32-8-0

YES: Allen, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dodd, Durazo, Eggman, Glazer, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min, Newman, Padilla, Portantino, Roth, Rubio, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

NO: Alvarado-Gil, Dahle, Grove, Jones, Nguyen, Niello, Ochoa Bogh, Seyarto

SENATE FLOOR: 40-0-0

YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dahle, Dodd, Durazo, Eggman, Glazer, Gonzalez, Grove, Hurtado, Jones, Laird, Limón, McGuire, Menjivar, Min, Newman, Nguyen, Niello, Ochoa Bogh, Padilla, Portantino, Roth, Rubio, Seyarto, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

SENATE FLOOR: 33-7-0

YES: Allen, Alvarado-Gil, Archuleta, Ashby, Atkins, Becker, Blakespear, Bradford, Caballero, Cortese, Dodd, Durazo, Eggman, Glazer, Gonzalez, Hurtado, Laird, Limón, McGuire, Menjivar, Min, Newman, Padilla, Portantino, Roth, Rubio, Skinner, Smallwood-Cuevas, Stern, Umberg, Wahab, Wiener, Wilk

NO: Dahle, Grove, Jones, Nguyen, Niello, Ochoa Bogh, Seyarto

UPDATED

VERSION: July 13, 2023

CONSULTANT: Manuela Boucher / JUD. / (916) 319-2334 FN: 0001824

 THIRD READING  

Bill No: AB 853

Author: Maienschein (D)

Amended: 7/13/23 in Senate

Vote: 21

SENATE JUDICIARY COMMITTEE: 10-1, 7/11/23

AYES: Umberg, Wilk, Allen, Ashby, Caballero, Durazo, Laird, Min, Stern, Wiener

NOES: Niello

SENATE APPROPRIATIONS COMMITTEE: 5-2, 9/1/23

AYES: Portantino, Ashby, Bradford, Wahab, Wiener

NOES: Jones, Seyarto

ASSEMBLY FLOOR: 62-16, 5/30/23 - See last page for vote

SUBJECT: Retail grocery stores and retail drug stores: acquisition: notice to Attorney General

SOURCE: United Food and Commercial Workers, Western States Council

DIGEST:

This bill prohibits a person from acquiring any voting securities or assets of a retail grocery firm or retail drug firm unless both parties give, or in the case of a tender offer, the acquiring party gives, written notice to the Attorney general (AG) no less than 180 days before the merger, as specified.

ANALYSIS:

Existing law:

1. Provides, under the federal Sherman Act, that every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is illegal. (15 U.S.C. Section 1.)
2. Establishes the Cartwright Act as California’s antitrust law that prohibits anticompetitive activity. (Bus. & Prof. Code § 16000 et. seq.) Provides that, except as expressly provided, every trust is unlawful, against public policy and void. (Bus. & Prof. Code § 16726.)
3. Defines a “trust” to mean a combination of capital, skill or acts by two or more persons to create or carry out restrictions in trade or commerce, to limit or reduce the production or increase the price of merchandise or of any commodity, to prevent competition in manufacturing, making, transportation, sale, or purchase of merchandise, produce or any commodity, and to enter into contracts or agreements that agree to pool, combine, or directly or indirectly unite any interests that they may have connected with the sale or transportation of any article or commodity, that its price might in any manner be affected. (Bus. & Prof. Code § 16720.)
4. Establishes the Unfair Competition Law, which provides for a civil penalty for unfair competition, defined to include any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising. (Bus. & Prof. Code § 17200 et seq.)
5. Prohibits, under the Unfair Practices Act, acts which injure competition, including sales below cost, locality discrimination, and secret rebates or unearned discounts. (Bus. & Prof. Code §17000 et seq.)
6. Requires any nonprofit corporation that operates or controls a health facility, or operates or controls a facility that provides similar health care, to provide written notice to, and to obtain the written consent of, the AG prior to entering into any agreement or transaction, to do either of the following:
7. Sell, transfer, lease, exchange, option, convey, or otherwise dispose of, its assets to a for-profit corporation or entity or to a mutual benefit corporation or entity when a material amount of the assets of the nonprofit corporation are involved in the agreement or transaction.
8. Transfer control, responsibility, or governance of a material amount of the assets or operations of the nonprofit corporation to any for-profit corporation or entity or to any mutual benefit corporation or entity. (Corp. Code § 5914(a).)
9. Provides, pursuant to the California Constitution, that the people have the right of access to information concerning the conduct of the people’s business, and, therefore, the meetings of public bodies and the writings of public officials and agencies are required to be open to public scrutiny. (Cal. const. art. I, § 3(b)(1).)
10. Requires a statute to be broadly construed if it furthers the people’s right of access, and narrowly construed if it limits the right of access. (Cal. const. art. I, § 3(b)(1).)
11. Requires a statute that limits the public’s right of access to be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest. (Cal. const. art. I, § 3(b)(1).)
12. Governs the disclosure of information collected and maintained by public agencies pursuant to the CPRA. (Gov. Code §§ 7920.000 et seq.)

This bill:

1. Prohibits any person from acquiring, directly or indirectly, any voting securities or assets of a retail grocery firm or retail drug firm unless both parties, or in the case of a tender offer, the acquiring party, gives written notice to the Attorney General.
2. Defines the following for the purpose of this bill:
   1. “Acquiring party” means a person by whom or on whose behalf the merger or other acquisition of control is to be effected and is either of the following:
      1. Required to provide notice of the merger or acquisition to the Federal Trade Commission (FTC) or the U.S. Department of Justice (U.S. DOJ) pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C. § 18a).
      2. Is acquiring more than a total of 20 retail drug firms or retail grocery firms.
   2. “Retail drug firm” means a person, as defined in existing provisions of the Labor Code, including a proprietorship, joint venture, corporate officer or executive, that has one or more businesses or establishments located within the state and is identified as a retail business or establishment in the North American Industry Classification System within the retail trade category 45611.
   3. “Retail grocery firm” means a person, as defined in existing provisions of the Labor Code, including a proprietorship, joint venture, corporate officer or executive, that has one or more businesses or establishments located within the state and is identified as a retail business or establishment in the North American Industry Classification System within the retail trade category 44511 and 455211.
3. Requires the written notice to be filed with the Attorney General at least 180 days before the acquisition is made effective, and be made under oath or affirmation.
   1. If any transaction requiring written notice commences before the effective date of this section, the written notice must be given to the AG within 30 days before the transaction is made effective. Upon receiving this notice, the AG has 180 days to evaluate the transaction, during which time the effective days of the transaction must be tolled.
   2. If any material change occurs in the facts set forth in the written notice filed with the AG, an amendment setting forth the change and copies of all documents and other relevant material must be filed with the AG within 2 business days after the amendment is made by, or provided to, the acquiring party.
4. Requires the notice given to the AG, if the acquiring party is required to file notice with the FTC or the U.S. DOJ pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 (Hart-Scott-Rodino Act), to contain the same form and additional documentary material required under that act and any implementing regulations under that act. (15 U.S.C. § 18a.)
5. Requires the notice given to the AG, if the acquiring party is not required to file notice with the FTC or the U.S. DOJ pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976, to specified information, including:
   1. The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction in which funds were or are to be obtained, including any pledge of the drug or grocery retail firm’s stock or the stock of any of its subsidiaries or controlling affiliates, and the identity of persons furnishing the consideration. If a source of the consideration is a loan made in the lender’s ordinary course of business, the identity of the lender shall remain confidential upon request of the person filing the statement.
   2. Fully audited financial information as to the earnings and the financial condition of each acquiring party for the preceding five fiscal years or for a lesser period if the acquiring party and its predecessors have been in existence for less than five years, and similar unaudited information as of a date not earlier than 90 days before the written notice.
   3. Any plans or proposals that an acquiring party may have to liquidate the retail grocery or retail drug firms, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure.
   4. The information required to assess the competitive effects of the proposed acquisition, giving particular attention to the effects on the proposed chain retail grocery store acquisition on consumers, including, but not limited to, consumer choice, food pricing, access to food, and food deserts, and factors affecting the supply of experienced grocery workers, including wages, benefits, and unemployment and chain retail pharmacy on patients, including, but not limited to, patient choice, medicine pricing, access to medications, and factors affecting the supply of licensed pharmacists, pharmacy technicians, and pharmacists-in-training.
   5. Information required to assess the economic and community impact of any planned divestiture or store closures, including, but not limited to, the impact on food deserts, food supply, economic mobility, unemployment, and small businesses.

1. Authorizes the Attorney General to adopt regulations to implement these provisions that are necessary or appropriate for the protection of workers, consumers, and the public interest, including authorization for the Attorney General to request additional materials.
2. Authorizes the Attorney General to specify exemptions from the notice requirement for acquisitions that, by virtue of the size, business volume, or number of employees are unlikely to materially affect competitive markets in California.
3. Authorizes the Attorney General, in the event the office determines they cannot complete an evaluation of the competitive effects of the acquisition before the parties intend to consummate the acquisition, to seek an order from the superior court for the County of Sacramento temporarily staying or preliminarily enjoining the acquisition for such time as is reasonably necessary for the Attorney General to complete the analysis.
4. Requires the Attorney General to consider the extent to which information required to be submitted to the United States Department of Justice and the Federal Trade Commission may satisfy some or all of the need to carry out the applicable provisions of this bill, if the acquisition requires disclosures under existing provisions of federal law. Makes any information submitted to the Attorney General under provisions of federal law rendering them confidential privileged under California law.
5. Allows the submitting party to designate information submitted as privileged. If the Attorney General disputes any claim of privilege, they may give notice to the submitting party of that fact and give the submitting party, or other person interested in the claim of privilege, an opportunity to seek an order from a superior court for the County of Sacramento requiring the Attorney General not to make the designated information public. Makes all information except that which the Attorney General agrees is privileged or the court determines is privileged, available to the public under the California Public Records Act.
6. Exempts regulations adopted by the Attorney General pursuant to the provisions of this bill from the Administrative Procedures Act.
7. Establishes that failure to provide written notice, amendment to written notice, or other material required to be provided as a violation.
8. Authorizes the Attorney General to seek injunctive relief and other equitable remedies a court deems appropriate, as well as attorney’s fees and costs.
9. Makes various findings and declarations regarding the state’s interest in maintaining the confidentiality of the disclosures required by the bill’s provisions.

Comments

Since the announcement of the Kroger and Albertsons merger, the Federal Trade Commission (FTC) has initiated its regulatory review process of the proposal and faces pressure from state and federal lawmakers, as well as consumer advocacy groups, to fully evaluate the impact of the merger. Kroger announced a preemptive divestiture plan as part of its proposal to the FTC, which would require Kroger to sell off a portion of grocery stores in a given geographic area to other retailers with the goal of ensuring sufficient competition within that area. The most recent plan appears to propose divestiture of approximately 650 Albertsons stores.

In light of this, this bill proposes a new notice procedure whereby any entity intending to acquire, whether directly or indirectly, stock or assets in a retail grocery firm or retail drug firm must first submit specified information to the AG. Existing law already contains similar notice requirements for other industries, such as the health care and hospital industry. For example, since 1996, nonprofit health care facilities have been required to obtain written consent from the Attorney General before entering into any sale or acquisition agreement. (Corp. Code § 5914.) The purpose behind the original bill establishing the AG’s oversight of specified health care mergers and acquisitions was to ward off any reduction in access to health care services for underinsured or uninsured individuals, and that by providing the AG’s office with notice so the AG can assess whether the potential risks of consolidation of a service provider would result in a lack of necessary services to any community within the state.

In a similar vein, this bill requires notice of a merger or acquisition of a retail grocery firm or retail drug firm in order to allow the AG’s office the opportunity to evaluate the proposed transaction. The bill requires the notice to be provided 180 days before the acquisition is made effective. In regards to transactions that commences before the effective date of the bill, notice must be given to the AG within 30 days before the transaction is made effective. The AG will have 180 days to evaluate the transaction upon receiving notice from the submitting party, during which time the effective date of the transaction is to be tolled. Recent amendments to the bill limit the bill’s provisions to only requiring notice from either: an acquiring party that is required to provide notice of a merger or acquisition to the FTC or the U.S. DOJ pursuant to the Hart-Scott-Rodino Act; or is acquiring more than a total of an unspecified number of drug firms or retail grocery firms. The author’s office has indicated that they have been negotiating with stakeholders, including the opposition, to find an appropriate number of stores being acquired that should trigger the notice requirements under this bill. Recent amendments to the bill seek to streamline the notification requirements for those persons who are also required to report under the Hart-Scott-Rodino Act by providing that notice to the AG is to contain the same form and additional documentary material required under the Hart-Scott-Rodino Act and any implementing regulations.

The notice that must be provided for those acquiring more than a total of 20 drug firms or retail grocery firms is required to include details regarding the parties engaging in the transaction in order to flag any potentially concerning consolidation. The notice would also include information regarding any potential impacts on food pricing, access to food, expansion or diminution of food deserts, the supply of grocery workers or impact on the same work force, and other factors that may impact the availability of a robust grocery retailer environment. In the event the retailers fail to file the requisite notice, the bill authorizes the Attorney General to seek injunctive relief to freeze the merger, and specifies that the AG is entitled to recover attorney’s fees and costs and a civil penalty of up to $20,000 for each day of noncompliance. The bill requires the AG to charge a filing fee to receive, review, and analyze the notice. The filing fee is prohibited from exceeding the reasonable regulatory costs to the Attorney General incident to performing its administrative duties, but provides that the fee is not to exceed .00045 percent of the combined sales of the parties to the merger or acquisition for the fiscal year prior to the filing of the notice.

In recognition that the information being provide to the AG under this bill contains sensitive and proprietary financial information, the bill specifies that any information that has been submitted to the AG under provisions of federal law rendering them confidential are deemed confidential under state law. The bill allows the submitting party to designate information as privileged or confidential. If the AG disputes any claim of privilege or confidentiality, the AG must give the submitting party notice and the submitting party may seek an order from the Superior Court of the County of Sacramento requiring the information to not be disclosed. California generally recognizes that public access to information concerning the conduct of the people’s business is a fundamental and necessary right. At the same time, the state recognizes that this right must be balanced against the right to privacy. The CPRA already contains an exemption for information that is privileged under the Evidence Code. (Gov. Code § 7927.705.) In light of the proprietary nature of information required to be provided to the AG, the potential limiting of access to public records in this bill seems warranted.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee:

• Annual, ongoing costs in the low millions to the Department of Justice to draft and promulgate regulations, review notices, and handle related litigation. The DOJ reports costs of $1.2 million in 2023-24 and $2.1 million annually thereafter (General Fund)
• Unknown court workload cost pressures to the extent this bill results in increased litigation as a result of the Attorney General’s authority to intervene in a retail grocery or drug store merger and seek injunctive relief or enforce the bill’s notice requirement in court.

SUPPORT: (Verified 9/5/23)

United Food and Commercial Workers, Western States Council (source)

Agricultural Institute of Marin

Alchemist CDC

California Employment Lawyers Assn.

California Food and Farming Network

California Indivisible Statestrong

California Labor Federation

California State Legislative Board, Sheet Metal, Air, Rail and Transportation Workers

Center for Food Safety

Central California Environmental Justice Network

Centro Binacional Para El Desarrollo Indigena Oaxaqueno

Ceres Community Project

Community Alliance with Family Farmers

Economic Security Project Action

Los Angeles Alliance for a New Economy

Los Angeles County Federation of Labor

Los Angeles Food Policy Council

Pesticide Action Network North America

Public Health Advocates

Roots of Change

Sacramento Food Policy Council

San Diego Food System Alliance

San Mateo Labor Council, AFL-CIO

Sierra Harvest

Small Business Majority

TechEquity Collaborative

The Praxis Project

Western Center on Law and Poverty

OPPOSITION: (Verified 9/5/23)

None received

ARGUMENTS IN SUPPORT: The author writes:

Mergers and acquisitions in the food and drug-retail industries disproportionately impact underserved and marginalized communities. The public has a right to know about any future proposed merger or acquisition involving essential goods and services like food and medicine. AB 853 is a simple notice bill that requires parties to grocery and drug-retail mergers or acquisitions to offer forecasts and analyses to the Attorney General and, hence, the public, about the public policy consequences of their merger so that an informed debate can occur about what, if anything, to do about the merger.

The United Food and Commercial Workers, Western States Council writes in support stating:

The [Kroger] acquisition allows for a divestiture of as many as 650 Albertsons stores. However, past supermarket divestitures have struggled within months of being separated and ultimately failed. Unless this merger of the first and second largest national competitors in retail sales last year among the U.S. food and grocery supermarket operators is prohibited, the unified company will become the largest supermarket by revenue in the United States with a current national market share of 36 percent. Albertsons, with a national market share of 12.4 percent, will be eliminated. […] If Kroger’s proposed acquisition of Albertsons is consummated, the companies’ combined power will be used to increase prices for groceries, decrease the quality of food, eliminate jobs, close stores and offer less choice for consumers due to the overlap in geographic areas. And, as is customary in these acquisitions, the first casualties of the removal of competition will be the firing of employees who were only needed when competition existed. Staffing will decrease, leading to worse service for consumers and worse conditions for workers. Prices will go up, and promotions will decrease, and that translates directly into the quantity and quality of food that families can put on their tables.

ASSEMBLY FLOOR: 62-16, 5/30/23

AYES: Addis, Aguiar-Curry, Alvarez, Arambula, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes, Connolly, Mike Fong, Friedman, Gabriel, Garcia, Gipson, Grayson, Haney, Hart, Holden, Irwin, Jackson, Jones-Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein, McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan, Pellerin, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Santiago, Schiavo, Soria, Ting, Valencia, Villapudua, Ward, Weber, Wicks, Wilson, Wood, Zbur, Rendon

NOES: Alanis, Megan Dahle, Davies, Dixon, Essayli, Flora, Vince Fong, Gallagher, Hoover, Mathis, Jim Patterson, Joe Patterson, Sanchez, Ta, Waldron, Wallis

NO VOTE RECORDED: Chen, Lackey

Prepared by: Amanda Mattson / JUD. / (916) 651-4113

9/5/23 13:05:19

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

AB 853 (Maienschein) - Retail grocery stores and retail drug stores: acquisition: notice to Attorney General

Bill Summary:

AB 853 would prohibit a person from acquiring any voting securities or assets of a retail grocery firm or retail drug firm unless both parties give, or in the case of a tender offer, the acquiring party gives, written notice to the Attorney general (AG) no less than 180 days before the merger, as specified.

Fiscal Impact:

• Annual, ongoing costs in the low millions to the Department of Justice to draft and promulgate regulations, review notices, and handle related litigation. The DOJ reports costs of $1.2 million in 2023-24 and $2.1 million annually thereafter (General Fund).
  
• Unknown court workload cost pressures to the extent this bill results in increased litigation as a result of the Attorney General’s authority to intervene in a retail grocery or drug store merger and seek injunctive relief or enforce the bill’s notice requirement in court. See Staff Comments for additional detail.

Background:

In 2019, mergers and acquisitions in the food industry exceeded 300. Nearly one-million Californians live without access to a nearby grocery store in communities called food deserts, which leads to health disparities and high rates of chronic disease. In October 2022, Kroger and Albertsons, the first and second largest grocery chain in the nation, announced an unprecedented $25 billion merger for what would be the largest proposed grocery store merger in American history. The combination of these two giant grocery chains will create a combined market share and control of 36 percent of the US grocery supermarket operators.

Since the announcement of the Kroger and Albertsons merger, the Federal Trade Commission (FTC) has initiated its regulatory review process of the proposal and faces pressure from state and federal lawmakers, as well as consumer advocacy groups, to fully evaluate the impact of the merger. Kroger announced a preemptive divestiture plan as part of its proposal to the FTC, which would require Kroger to sell off a portion of grocery stores in a given geographic area to other retailers with the goal of ensuring sufficient competition within that area. The most recent plan appears to propose divestiture of approximately 650 Albertsons stores.

Proposed Law:

• Prohibits any person from acquiring, directly or indirectly, any voting securities or assets of a retail grocery firm or retail drug firm unless both parties, or in the case of a tender offer, the acquiring party, gives written notice to the Attorney General.
• Requires the written notice to be filed with the Attorney General at least 180 days before the acquisition is made effective, and be made under oath or affirmation.
  • If any transaction requiring written notice commences before the effective date of this section, the written notice must be given to the AG within 30 days before the transaction is made effective. Upon receiving this notice, the AG has 180 days to evaluate the transaction, during which time the effective days of the transaction must be tolled.
  • If any material change occurs in the facts set forth in the written notice filed with the AG, an amendment setting forth the change and copies of all documents and other relevant material must be filed with the AG within 2 business days after the amendment is made by, or provided to, the acquiring party.
• Requires the notice given to the AG, if the acquiring party is required to file notice with the FTC or the U.S. DOJ pursuant to Federal Law, as specified, to contain the same form and additional documentary material.
• Requires the notice given to the AG, if the acquiring party is not required to file notice with the FTC or the U.S. DOJ pursuant to Federal Law, as specified, to contain specific details regarding the parties to the transaction and financial information, as specified.

Authorizes the Attorney General to adopt regulations to implement these provisions that are necessary or appropriate for the protection of workers, consumers, and the public interest, including authorization for the Attorney General to request additional materials.

• Authorizes the Attorney General to specify exemptions from the notice requirement for acquisitions that, by virtue of the size, business volume, or number of employees are unlikely to materially affect competitive markets in California.
• Authorizes the Attorney General, in the event the office determines they cannot complete an evaluation of the competitive effects of the acquisition before the parties intend to consummate the acquisition, to seek an order from the superior court for the County of Sacramento temporarily staying or preliminarily enjoining the acquisition for such time as is reasonably necessary for the Attorney General to complete the analysis.
• Requires the Attorney General to consider the extent to which information required to be submitted to the United States Department of Justice and the Federal Trade Commission may satisfy some or all of the need to carry out the applicable provisions of this bill, if the acquisition requires disclosures under existing provisions of federal law.
• Allows the submitting party to designate information submitted as privileged and provides for a procedure by which the AG may challenge the claim of privilege.
• Exempts regulations adopted by the Attorney General pursuant to the provisions of this bill from the Administrative Procedures Act.
• Establishes that failure to provide written notice, amendment to written notice, or other material required to be provided as a violation.
• Authorizes the Attorney General to seek injunctive relief and other equitable remedies a court deems appropriate, as well as attorney’s fees and costs.

Related Legislation:

• AB 647 (Holden, 2023) increases the period of time during which a successor grocery employer to hire from a recall list provided by the incumbent grocery employer from 90 to 120 days, and increases the period of time during which the successor grocery employer must retain the eligible employees from 90 to 120 days. AB 647 is pending in this Committee.
• SB 725 (Smallwood-Cuevas, 2023) prohibits a grocery establishment, where the change in control is a merger, from ordering a mass layoff, relocation, or termination at a covered establishment unless, 180 days before the order takes effect, the employer gives notice of the order to the employees of the covered establishment affected by the order, the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. SB 725 is pending on the Assembly Floor.
• AB 359 (Gonzalez, Ch. 212, Stats. 2015) requires, upon a change in ownership of a grocery store, that an incumbent employer prepares a list of specified eligible grocery workers for a successor grocery employer, and requires the successor grocery employer to hire from this list during a 90-day transition period, as provided.

Staff Comments:

It is unknown how many additional civil actions would be brought by the AG as a result of the implementation of this bill. However, it generally costs about $8,000 to operate a courtroom for one eight-hour day. Although courts are not funded on the basis of workload, increased pressure on the trial courts and staff may create a need for increased funding for courts from the General Fund (GF) to perform existing duties. Numerous trial court operations are funded through the imposition and collection of criminal fines and fees. However, the Legislature has reduced and eliminated criminal fines and fees over the past decade. As a result, the 2023-24 budget includes an ongoing annual allocation of $105.1 million backfill from the General Fund in order to address declining revenue to the Trial Court Trust Fund.

-- END --

SENATE JUDICIARY COMMITTEE

Senator Thomas Umberg, Chair

2023-2024 Regular Session

Bill No: AB 853 (Author:Maienschein)

Version: July 3, 2023

Hearing Date: July 11, 2023

Fiscal: Yes

Urgency: No

Consultant: AM

SUBJECT

Retail grocery stores and retail drug stores: acquisition: notice to Attorney General

DIGEST

This bill prohibits a person from acquiring any voting securities or assets of a retail grocery firm or retail drug firm unless both parties give, or in the case of a tender offer, the acquiring party gives, written notice to the Attorney general (AG) no less than 180 days before the merger, as specified.

EXECUTIVE SUMMARY

According to the proponents of the bill, the number of grocery stores nationwide declined by roughly 30 percent from 1993 to 2019 as the combined market share of the four largest grocery retailers tripled to 69 percent. In 2019 alone, mergers and acquisitions in the food industry exceeded 300. Nearly one-million Californians live without access to a nearby grocery store in communities called food deserts, which leads to health disparities and high rates of chronic disease. In October 2022, Kroger and Albertsons, the first and second largest grocery chain in the nation, announced an unprecedented $25 billion merger for what would be the largest proposed grocery store merger in American history.^[1] The combination of these two giant grocery chains will create a combined market share and control of 36 percent of the US grocery supermarket operators. In order to provide more information regarding the consolidation in the retail food industry, the bill requires a person acquiring any voting securities or assets of a retail grocery firm or retail drug firm to provide notice to the AG.

The bill is sponsored by the United Food and Commercial Workers, Western States Council. It is supported by a broad coalition of labor and various other progressive organizations. There is no known opposition.

PROPOSED CHANGES TO THE LAW

Existing law:

1. Provides, under the federal Sherman Act, that every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is illegal. (15 U.S.C. Section 1.)
2. Establishes the Cartwright Act as California’s antitrust law that prohibits anticompetitive activity. (Bus. & Prof. Code § 16000 et. seq.) Provides that, except as expressly provided, every trust is unlawful, against public policy and void. (Bus. & Prof. Code § 16726.)
3. Defines a “trust” to mean a combination of capital, skill or acts by two or more persons to create or carry out restrictions in trade or commerce, to limit or reduce the production or increase the price of merchandise or of any commodity, to prevent competition in manufacturing, making, transportation, sale, or purchase of merchandise, produce or any commodity, and to enter into contracts or agreements that agree to pool, combine, or directly or indirectly unite any interests that they may have connected with the sale or transportation of any article or commodity, that its price might in any manner be affected. (Bus. & Prof. Code § 16720.)
4. Establishes the Unfair Competition Law, which provides for a civil penalty for unfair competition, defined to include any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising. (Bus. & Prof. Code § 17200 et seq.)
5. Prohibits, under the Unfair Practices Act, acts which injure competition, including sales below cost, locality discrimination, and secret rebates or unearned discounts. (Bus. & Prof. Code §17000 et seq.)
6. Requires any nonprofit corporation that operates or controls a health facility, or operates or controls a facility that provides similar health care, to provide written notice to, and to obtain the written consent of, the AG prior to entering into any agreement or transaction, to do either of the following:
7. Sell, transfer, lease, exchange, option, convey, or otherwise dispose of, its assets to a for-profit corporation or entity or to a mutual benefit corporation or entity when a material amount of the assets of the nonprofit corporation are involved in the agreement or transaction.
8. Transfer control, responsibility, or governance of a material amount of the assets or operations of the nonprofit corporation to any for-profit corporation or entity or to any mutual benefit corporation or entity. (Corp. Code § 5914(a).)
9. Provides, pursuant to the California Constitution, that the people have the right of access to information concerning the conduct of the people’s business, and, therefore, the meetings of public bodies and the writings of public officials and agencies are required to be open to public scrutiny. (Cal. const. art. I, § 3(b)(1).)
10. Requires a statute to be broadly construed if it furthers the people’s right of access, and narrowly construed if it limits the right of access. (Cal. const. art. I, § 3(b)(1).)
11. Requires a statute that limits the public’s right of access to be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest. (Cal. const. art. I, § 3(b)(1).)
12. Governs the disclosure of information collected and maintained by public agencies pursuant to the CPRA. (Gov. Code §§ 7920.000 et seq.)
13. States that the Legislature, mindful of the individual right to privacy, finds and declares that access to information concerning the conduct of the people’s business is a fundamental and necessary right of every person in this state. (Gov. Code § 7921.000.)
14. Defines “public records” as any writing containing information relating to the conduct of the public’s business prepared, owned, used, or retained by any state or local agency regardless of physical form or characteristics. (Gov. Code § 7920.530.)
15. Provides that all public records are accessible to the public upon request, unless the record requested is exempt from public disclosure. (Gov. Code § 7922.530.)
16. Provides an exemption from disclosure for records, the disclosure of which is exempted or prohibited pursuant to federal or state law, including, but not limited to, provisions of the Evidence Code relating to privilege. (Gov. Code § 7927.705.)

This bill:

1. Prohibits any person from acquiring, directly or indirectly, any voting securities or assets of a retail grocery firm or retail drug firm unless both parties, or in the case of a tender offer, the acquiring party, gives written notice to the Attorney General.
2. Defines the following for the purpose of this bill:
   1. “Acquiring party” means a person by whom or on whose behalf the merger or other acquisition of control is to be effected and is either of the following:
      1. Required to provide notice of the merger or acquisition to the Federal Trade Commission (FTC) or the U.S. Department of Justice (U.S. DOJ) pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C. § 18a).
      2. Is acquiring more than a total of unspecified number of retail drug firms or retail grocery firms.
   2. “Retail drug firm” means a person, as defined in existing provisions of the Labor Code, including a proprietorship, joint venture, corporate officer or executive, that has one or more businesses or establishments located within the state and is identified as a retail business or establishment in the North American Industry Classification System within the retail trade category 45611.
   3. “Retail grocery firm” means a person, as defined in existing provisions of the Labor Code, including a proprietorship, joint venture, corporate officer or executive, that has one or more businesses or establishments located within the state and is identified as a retail business or establishment in the North American Industry Classification System within the retail trade category 44511 and 455211.
3. Requires the written notice to be filed with the Attorney General at least 180 days before the acquisition is made effective, and be made under oath or affirmation.
   1. If any transaction requiring written notice commences before the effective date of this section, the written notice must be given to the AG within 30 days before the transaction is made effective. Upon receiving this notice, the AG has 180 days to evaluate the transaction, during which time the effective days of the transaction must be tolled.
   2. If any material change occurs in the facts set forth in the written notice filed with the AG, an amendment setting forth the change and copies of all documents and other relevant material must be filed with the AG within 2 business days after the amendment is made by, or provided to, the acquiring party.
4. Requires the notice given to the AG, if the acquiring party is required to file notice with the FTC or the U.S. DOJ pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 (Hart-Scott-Rodino Act), to contain the same form and additional documentary material required under that act and any implementing regulations under that act. (15 U.S.C. § 18a.)
5. Requires the notice given to the AG, if the acquiring party is not required to file notice with the FTC or the U.S. DOJ pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976, to contain all of the following information:
   1. The name and address of each acquiring party, and a report of the nature of its business operations during the past five years or for a lesser period if the person and their predecessors have been in existence less than five years.
   2. An informative description of the business intended to be done by the person and the person’s subsidiaries, as specified.
   3. A list of all individuals who are or have been selected to become directors or executive officers or who perform or will perform functions appropriate to the positions.
   4. The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction in which funds were or are to be obtained, including any pledge of the drug or grocery retail firm’s stock or the stock of any of its subsidiaries or controlling affiliates, and the identity of persons furnishing the consideration. If a source of the consideration is a loan made in the lender’s ordinary course of business, the identity of the lender shall remain confidential upon request of the person filing the statement.
   5. Fully audited financial information as to the earnings and the financial condition of each acquiring party for the preceding five fiscal years or for a lesser period if the acquiring party and its predecessors have been in existence for less than five years, and similar unaudited information as of a date not earlier than 90 days before the written notice.
   6. Any plans or proposals that an acquiring party may have to liquidate the retail grocery or retail drug firms, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure.
   7. The information required to assess the competitive effects of the proposed acquisition, giving particular attention to the effects on the proposed chain retail grocery store acquisition on consumers, including, but not limited to, consumer choice, food pricing, access to food, and food deserts, and factors affecting the supply of experienced grocery workers, including wages, benefits, and unemployment and chain retail pharmacy on patients, including, but not limited to, patient choice, medicine pricing, access to medications, and factors affecting the supply of licensed pharmacists, pharmacy technicians, and pharmacists-in-training.
   8. Information required to assess the economic and community impact of any planned divestiture or store closures, including, but not limited to, the impact on food deserts, food supply, economic mobility, unemployment, and small businesses.

1. Authorizes the Attorney General to adopt regulations to implement these provisions that are necessary or appropriate for the protection of workers, consumers, and the public interest, including authorization for the Attorney General to request additional materials.

1. Authorizes the Attorney General to specify exemptions from the notice requirement for acquisitions that, by virtue of the size, business volume, or number of employees are unlikely to materially affect competitive markets in California.
2. Authorizes the Attorney General, in the event the office determines they cannot complete an evaluation of the competitive effects of the acquisition before the parties intend to consummate the acquisition, to seek an order from the superior court for the County of Sacramento temporarily staying or preliminarily enjoining the acquisition for such time as is reasonably necessary for the Attorney General to complete the analysis.

1. Requires the Attorney General to consider the extent to which information required to be submitted to the United States Department of Justice and the Federal Trade Commission may satisfy some or all of the need to carry out the applicable provisions of this bill, if the acquisition requires disclosures under existing provisions of federal law. Makes any information submitted to the Attorney General under provisions of federal law rendering them confidential privileged under California law.
2. Allows the submitting party to designate information submitted as privileged. If the Attorney General disputes any claim of privilege, they may give notice to the submitting party of that fact and give the submitting party, or other person interested in the claim of privilege, an opportunity to seek an order from a superior court for the County of Sacramento requiring the Attorney General not to make the designated information public. Makes all information except that which the Attorney General agrees is privileged or the court determines is privileged, available to the public under the California Public Records Act.
3. Exempts regulations adopted by the Attorney General pursuant to the provisions of this bill from the Administrative Procedures Act.
4. Establishes that failure to provide written notice, amendment to written notice, or other material required to be provided as a violation.
5. Authorizes the Attorney General to seek injunctive relief and other equitable remedies a court deems appropriate, as well as attorney’s fees and costs.
6. Makes various findings and declarations regarding the state’s interest in maintaining the confidentiality of the disclosures required by the bill’s provisions.

COMMENTS

1. Stated need for the bill

The author writes:

Mergers and acquisitions in the food and drug-retail industries disproportionately impact underserved and marginalized communities. The public has a right to know about any future proposed merger or acquisition involving essential goods and services like food and medicine. AB 853 is a simple notice bill that requires parties to grocery and drug-retail mergers or acquisitions to offer forecasts and analyses to the Attorney General and, hence, the public, about the public policy consequences of their merger so that an informed debate can occur about what, if anything, to do about the merger.

1. Bill is intended to address concerns about consolidation of grocery stores and drug retail stores by providing notice to the AG of the proposed merger

Since the announcement of the Kroger and Albertsons merger, the Federal Trade Commission (FTC) has initiated its regulatory review process of the proposal and faces pressure from state and federal lawmakers, as well as consumer advocacy groups, to fully evaluate the impact of the merger.^[2] Kroger announced a preemptive divestiture plan as part of its proposal to the FTC, which would require Kroger to sell off a portion of grocery stores in a given geographic area to other retailers with the goal of ensuring sufficient competition within that area. The most recent plan appears to propose divestiture of approximately 650 Albertsons stores.^[3]

In light of this, the bill proposes a new notice procedure whereby any entity intending to acquire, whether directly or indirectly, stock or assets in a retail grocery firm or retail drug firm must first submit specified information to the AG. Existing law already contains similar notice requirements for other industries, such as the health care and hospital industry. For example, since 1996, nonprofit health care facilities have been required to obtain written consent from the Attorney General before entering into any sale or acquisition agreement. (Corp. Code § 5914.) The purpose behind the original bill establishing the AG’s oversight of specified health care mergers and acquisitions was to ward off any reduction in access to health care services for underinsured or uninsured individuals, and that by providing the AG’s office with notice so the AG can assess whether the potential risks of consolidation of a service provider would result in a lack of necessary services to any community within the state.

In a similar vein, this bill requires notice of a merger or acquisition of a retail grocery firm or retail drug firm in order to allow the AG’s office the opportunity to evaluate the proposed transaction. The bill requires the notice to be provided 180 days before the acquisition is made effective. In regards to transactions that commences before the effective date of the bill, notice must be given to the AG within 30 days before the transaction is made effective. The AG will have 180 days to evaluate the transaction upon receiving notice from the submitting party, during which time the effective date of the transaction is to be tolled. Recent amendments to the bill limit the bill’s provisions to only requiring notice from either: an acquiring party that is required to provide notice of a merger or acquisition to the FTC or the U.S. DOJ pursuant to the Hart-Scott-Rodino Act; or is acquiring more than a total of an unspecified number of drug firms or retail grocery firms. The author’s office has indicated that they have been negotiating with stakeholders, including the opposition, to find an appropriate number of stores being acquired that should trigger the notice requirements under this bill. Recent amendments to the bill seek to streamline the notification requirements for those persons who are also required to report under the Hart-Scott-Rodino Act by providing that notice to the AG is to contain the same form and additional documentary material required under the Hart-Scott-Rodino Act and any implementing regulations.

The notice that must be provided for those acquiring more than a total of an unspecified number of drug firms or retail grocery firms is required to include details regarding the parties engaging in the transaction in order to flag any potentially concerning consolidation. The notice would also include information regarding any potential impacts on food pricing, access to food, expansion or diminution of food deserts, the supply of grocery workers or impact on the same work force, and other factors that may impact the availability of a robust grocery retailer environment. In the event the retailers fail to file the requisite notice, the bill authorizes the Attorney General to seek injunctive relief to freeze the merger, and specifies that the AG is entitled to recover attorney’s fees and costs and a civil penalty of up to $20,000 for each day of noncompliance. Recent amendments also require the AG to charge a filing fee to receive, review, and analyze the notice. The filing fee is prohibited from exceeding the reasonable regulatory costs to the Attorney General incident to performing its administrative duties, but provides that the fee is not to exceed .00045 percent of the combined sales of the parties to the merger or acquisition for the fiscal year prior to the filing of the notice.

In recognition that the information being provide to the AG under this bill contains sensitive and proprietary financial information, the bill specifies that any information that has been submitted to the AG under provisions of federal law rendering them confidential are deemed confidential under state law. The bill allows the submitting party to designate information as privileged or confidential. If the AG disputes any claim of privilege or confidentiality, the AG must give the submitting party notice and the submitting party may seek an order from the Superior Court of the County of Sacramento requiring the information to not be disclosed. California generally recognizes that public access to information concerning the conduct of the people’s business is a fundamental and necessary right. At the same time, the state recognizes that this right must be balanced against the right to privacy. The CPRA already contains an exemption for information that is privileged under the Evidence Code. (Gov. Code § 7927.705.) In light of the proprietary nature of information required to be provided to the AG, the potential limiting of access to public records in this bill seems warranted.

1. Proposed Amendment

The California Grocers Association was in opposition to this bill. However, the most recent amendments to the bill and a commitment from the author to amend in 20 stores as the threshold reporting requirement for entities who do not need to report under the Hart-Scott-Rodino Act have moved them to neutral. In light of this, the author has proposed to amend the bill to add in 20 as the threshold reporting requirement.

The specific amendment is:

Section 14700 as added to the Corporations Code, is amended to read:

14700. (a) No person shall acquire, directly or indirectly, any voting securities or assets of a retail grocery firm or retail drug firm unless both parties give, or in the case of a tender offer, the acquiring party gives, written notice to the Attorney General in accordance with this part.

(b) For purposes of this part, the following definitions apply:

(1) “Acquiring party” means a person by whom or on whose behalf the merger or other acquisition of control is to be effected and is either of the following:

(A) Is required to provide notice of the merger or acquisition to the Federal Trade Commission or the United States Department of Justice pursuant to the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C. Sec. 18a).

(B) Is acquiring more than a total of ___ 20 retail drug firms or retail grocery firms.

(2) “Retail drug firm” means a person, as defined in Section 18 of the Labor Code, including a proprietorship, joint venture, corporate officer or executive, that has one or more businesses or establishments located within the state and is identified as a retail business or establishment in the North American Industry Classification System within the retail trade category 45611.

(3) “Retail grocery firm” means a person, as defined in Section 18 of the Labor Code, including a proprietorship, joint venture, corporate officer or executive, that has one or more businesses or establishments located within the state and is identified as a retail business or establishment in the North American Industry Classification System within the retail trade category 44511 and 455211.

1. Statements in Support

The United Food and Commercial Workers, Western States Council, the sponsor of the bill, writes in support stating:

In the wake of the largest proposed grocery store merger in American history, the United Food and Commercial Workers Western States Council (UFCW), on behalf of its over 180,000 members, is proud to sponsor AB 853 which simply requires vast grocery chains to analyze and forecast the consequences of their mergers for California families and workers. […]

The [Kroger] acquisition allows for a divestiture of as many as 650 Albertsons stores. However, past supermarket divestitures have struggled within months of being separated and ultimately failed. Unless this merger of the first and second largest national competitors in retail sales last year among the U.S. food and grocery supermarket operators is prohibited, the unified company will become the largest supermarket by revenue in the United States with a current national market share of 36 percent. Albertsons, with a national market share of 12.4 percent, will be eliminated.

In California, Kroger owns and operates approximately 214 stores under the Ralphs banner and an additional 19 under Food 4 Less. A majority of these stores are located in Southern California. The Albertsons Company operates approximately 579 grocery stores in California: 125 stores under the Albertsons banner, along with 26 Pavilion, 243 Safeway, and 185 Vons stores.

In many areas in California, residents lack cars and must travel to grocery stores by walking or public transit, which prevents them from traveling outside the community areas in which they work or live to shop at alternative grocery stores. As a result, the majority of consumers’ grocery shopping occurs at stores located very close to where they live or work. Thus, for many California families, accessibility of supermarkets by foot or by public transit is critical for the communities’ health as a whole. Yet, access to adequate high-quality food and grocery stores is already an issue for many Californians. In 2016, before many mergers, nearly one million Californians, 45 percent of whom are low-income, live without access to nearby supermarkets or large grocery stores in communities known as “food deserts.” These types of environments encourage poor eating habits, which can lead to poor health.

If Kroger’s proposed acquisition of Albertsons is consummated, the companies’ combined power will be used to increase prices for groceries, decrease the quality of food, eliminate jobs, close stores and offer less choice for consumers due to the overlap in geographic areas. And, as is customary in these acquisitions, the first casualties of the removal of competition will be the firing of employees who were only needed when competition existed. Staffing will decrease, leading to worse service for consumers and worse conditions for workers. Prices will go up, and promotions will decrease, and that translates directly into the quantity and quality of food that families can put on their tables.

SUPPORT

United Food and Commercial Workers, Western States Council (sponsor)

Agricultural Institute of Marin

Alchemist CDC

California Food and Farming Network

California Labor Federation

Center for Food Safety

Ceres Community Project

Community Alliance With Family Farmers

Los Angeles Food Policy Council

Pesticide Action Network North America

Public Health Advocates

Roots of Change

Sacramento Food Policy Council

San Diego Food System Alliance

Sierra Harvest

Small Business Majority

The Praxis Project

OPPOSITION

None known

RELATED LEGISLATION

Pending Legislation:

AB 647 (Holden, 2023) increases the period of time during which a successor grocery employer to hire from a recall list provided by the incumbent grocery employer from 90 to 120 days, and increases the period of time during which the successor grocery employer must retain the eligible employees from 90 to 120 days. AB 647 is pending in this Committee on the same day at this bill.

SB 627 (Smallwood-Cuevas, 2023) requires an employer, for a year after the closure of a covered establishment, to provide to all covered workers the opportunity to remain employed by the employer and to transfer to a location of the chain within 25 miles of the covered establishment subject to closure as positions become available, as provided. SB 627 is pending in the Assembly Judiciary Committee.

SB 725 (Smallwood-Cuevas, 2023) prohibits a grocery establishment, where the change in control is a merger, from ordering a mass layoff, relocation, or termination at a covered establishment unless, 180 days before the order takes effect, the employer gives notice of the order to the employees of the covered establishment affected by the order, the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. SB 725 is pending in the Assembly Labor and Employment Committee.

Prior Legislation:

SB 93 (Committee on Budget and Fiscal Review, Ch. 16, Stats. 2021), requires hospitality and service industry employers to offer to rehire qualified former employees who were laid off due to the COVID-19 pandemic, and requires them to be rehired for the same or similar positions as they last held.

AB 359 (Gonzalez, Ch. 212, Stats. 2015) requires, upon a change in ownership of a grocery store, that an incumbent employer prepares a list of specified eligible grocery workers for a successor grocery employer, and requires the successor grocery employer to hire from this list during a 90-day transition period, as provided.

PRIOR VOTES

Assembly Floor (Ayes 62, Noes 16)

Assembly Appropriations Committee (Ayes 11, Noes 4)

Assembly Judiciary Committee (Ayes 7, Noes 2)

**************

1. John Yang, What the proposed Kroger and Albertsons merger could mean for shoppers and food prices, PBS News Hour (Nov. 25, 2022), available at https://www.pbs.org/newshour/show/what-the-proposed-kroger-and-albertsons-merger-could-mean-for-shoppers-and-food-prices. ↑

2. Alina Selyukh, Kroger and Albertsons plan merger to combine 2 largest supermarket chains, NPR (October 14, 2022), available at https://www.npr.org/2022/10/14/1129014897/kroger-and-albertsons-plan-merger-to-combine-2-largest-supermarket-chains. ↑

3. Dan Papscun, Kroger-Albertsons Divestiture Bid Aims to Head Off Challenge , Bloomberg Law (October 14, 2022), available at https://news.bloomberglaw.com/antitrust/kroger-albertsons-divestiture-plan-is-bid-to-deflect-regulators. ↑

ASSEMBLY THIRD READING

ATR Bill Id:AB 853

Author:(Maienschein)

As Amended Ver:March 29, 2023

Majority vote

SUMMARY

Requires parties engaging in the transfer or acquisition of retail grocery stores to provide notice to the Attorney General.

Major Provisions

1. Prohibits any person from acquiring, directly or indirectly, any voting securities or assets of a retail grocery firm or retail drug firm unless both parties, or in the case of a tender offer, the acquiring party, gives written notice to the Attorney General.
2. Requires the written notice required to be filed with the Attorney General no less than 180 days before the acquisition is made effective. Requires the notice to be made under oath or affirmation, and comply with requirements set out by subsequent provisions of this bill, subject to specified exceptions.
3. Requires the notice to contain all of the following information:
   1. The name and address of each acquiring party, and a report of the nature of its business operations during the past five years or for a lesser period if the person and their predecessors have been in existence less than five years.
   2. An informative description of the business intended to be done by the person and the person's subsidiaries.
   3. A list of all individuals who are or have been selected to become directors or executive officers or who perform or will perform functions appropriate to the positions.
   4. The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction in which funds were or are to be obtained, including any pledge of the drug or grocery retail firm's stock or the stock of any of its subsidiaries or controlling affiliates, and the identity of persons furnishing the consideration If a source of the consideration is a loan made in the lender's ordinary course of business, the identity of the lender shall remain confidential upon request of the person filing the statement.
   5. Fully audited financial information as to the earnings and the financial condition of each acquiring party for the preceding five fiscal years or for a lesser period if the acquiring party and its predecessors have been in existence for less than five years, and similar unaudited information as of a date not earlier than 90 days before the written notice.
   6. Any plans or proposals that an acquiring party may have to liquidate the retail grocery or retail drug firms, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure.
   7. The information required to assess the competitive effects of the proposed acquisition, giving particular attention to the effects on the proposed chain retail grocery store acquisition on consumers, including, but not limited to, consumer choice, food pricing, access to food, and food deserts, and factors affecting the supply of experienced grocery workers, including wages, benefits, and unemployment and chain retail pharmacy on patients, including, but not limited to, patient choice, medicine pricing, access to medications, and factors affecting the supply of licensed pharmacists, pharmacy technicians, and pharmacists-in-training.
   8. Information required to assess the economic and community impact of any planned divestiture or store closures, including, but not limited to, the impact on food deserts, food supply, economic mobility, unemployment, and small businesses.
4. Authorizes the Attorney General, in the event the office determines they cannot complete an evaluation of the competitive effects of the acquisition before the parties intend to consummate the acquisition, to seek an order from the superior court for the County of Sacramento temporarily staying or preliminarily enjoining the acquisition for such time as is reasonably necessary for the Attorney General to complete the analysis.
5. Requires the Attorney General to consider the extent to which information required to be submitted to the United States Department of Justice and the Federal Trade Commission (FTC) may satisfy some or all of the need to carry out the applicable provisions of this bill, if the acquisition requires disclosures under existing provisions of federal law. Makes any information submitted to the Attorney General under provisions of federal law rendering them confidential privileged under California law.
6. Establishes that failure to provide written notice, amendment to written notice, or other material required to be provided under the provisions of this bill as a violation of the title.
7. Authorizes the Attorney General to seek injunctive relief and other equitable remedies a court deems appropriate, as well as attorney's fees and costs.
8. Makes various findings and declarations regarding the state's interest in maintaining the confidentiality of the disclosures required by the bill's provisions.

COMMENTS

In October 2022, Kroger announced its plan to purchase Albertsons in a blockbuster deal valued at $24.6 billion. Kroger owns and operates nearly 3,000 stores nationwide, including Ralphs and Food 4 Less. On its own, Kroger employs 420,000 employees. Albertsons, which owns and operates stores such as Safeway and Vons, employs nearly 300,000 workers and operates approximately 2,300 stores across the country. In California, Kroger and Albertsons own 302 and 593 stores, respectively. (California State Impact, Kroger, available at [https://www.thekrogerco.com/wp-content/uploads/2022/01/Kroger-FactSheet-California.pdf], and Number of Albertsons Companies stores in the United States as of February 2022, by state, Statista, available at [https://www.statista.com/statistics/1167508/albertsons-operating-stores-by-state-us/]). As part of its proposal to the FTC, Kroger has announced a preemptive divestiture plan, which would see Kroger sell off a portion of grocery stores in a given geographic area to other retailers in order to ensure sufficient competition within that area. Most recently, the plan appears to propose divestiture of approximately 650 Albertsons stores. (Kroger-Albertsons Divestiture Bid Aims to Head Off Challenge (1), Dan Papscun, Bloomberg Law (October 14, 2022), available at [https://news.bloomberglaw.com/antitrust/kroger-albertsons-divestiture-plan-is-bid-to-deflect-regulators]).

While some of the financial inaccessibility of healthy food and fresh produce is due to nationwide inflation levels, there is concern that the pending merger will further exacerbate these issues. Moreover, an additional potential consequence of the divestiture is the ultimate failure of the separated stores, resulting in even less access to grocery retailers, as well as potential job loss for the workers employed by the separated stores. Many of the vulnerable workers are considered low-income, with the average employee at an Albertsons-operated store in California earning $36,011 annually. (Albertsons Companies Salaries in California, Zippia: The Career Expert, available at [https://www.zippia.com/albertsons-co-careers-14070/salary/california/]) Grocery stores also employ workers with highly specialized knowledge, including pharmacists and workers with training in sanitation and health procedures, all of whom may be impacted by store closures. Considering the financial realities these workers face, as well as their role in the communities they serve, the threat of job loss in the grocery retail sector stemming from such a massive merger is significant.

This bill proposes a new notice procedure whereby any entity intending to purchase controlling stock in a grocery retailer, as defined, must first submit specified information to the Attorney General (AG). Other industries have similar notice requirements, notably the health care and hospital industry. For example, since 1996, nonprofit health care facilities have been required to obtain written consent from the Attorney General before entering into any sale or acquisition agreement. The intent behind the original bill establishing the AG's oversight of specified health care mergers and acquisitions was to ward off any reduction in access to health care services for underinsured or uninsured individuals. In essence, the AG's office should receive notice of potential risks that the consolidation of a service provider would result in a lack of necessary services to any community within the state.

Similarly, in the event of an acquisition or merger between two or more grocery retailers, this bill would require the participating parties to provide notice to the AG's office at least six months prior to the effectuation of the merger in order to allow the AG's office the opportunity to evaluate the proposed transaction. The notice would include details regarding the parties engaging in the transaction in order to flag any potentially concerning consolidation. The notice would also include information regarding any potential impacts on food pricing, access to food, expansion or diminution of food deserts, the supply of grocery workers or impact on the same work force, and other factors that may impact the availability of a robust grocery retailer environment. In the event the retailers fail to file the requisite notice, the bill authorizes the Attorney General to seek injunctive relief to freeze the merger. Notably, apart from injunctive relief, this bill does not include any monetary liability for grocery retailers. Rather, the bill simply seeks to provide additional transparency about pending acquisitions of grocery retailers, and the various ways in which the transaction may affect distinct communities. By requiring notice to the Attorney General, this bill arguably achieves its intended goal.

According to the Author

Mergers and acquisitions in the food and drug-retail industries disproportionately impact underserved and marginalized communities. The public has a right to know about any future proposed merger or acquisition involving essential goods and services like food and medicine. AB 853 is a simple notice bill that requires parties to grocery and drug-retail mergers or acquisitions to offer forecasts and analyses to the Attorney General and, hence, the public, about the public policy consequences of their merger so that an informed debate can occur about what, if anything, to do about the merger.

Arguments in Support

This bill is sponsored by the United Food and Commercial Workers Union, and is supported by a variety of labor and food access organizations. In support of the measure the sponsors write:

In many areas in California, residents lack cars and must travel to grocery stores by walking or public transit, which prevents them from traveling outside the community areas in which they work or live to shop at alternative grocery stores. As a result, the majority of consumers' grocery shopping occurs at stores located very close to where they live or work. Thus, for many California families, accessibility of supermarkets by foot or by public transit is critical for the communities' health as a whole. Yet, access to adequate high-quality food and grocery stores is already an issue for many Californians. In 2016, before many mergers, nearly one million Californians, 45% of whom are low-income, live without access to nearby supermarkets or large grocery stores in communities known as "food deserts. These types of environments encourage poor eating habits, which can lead to poor health.

If Kroger's proposed acquisition of Albertsons is consummated, the companies' combined power will be used to increase prices for groceries, decrease the quality of food, eliminate jobs, close stores and offer less choice for consumers due to the overlap in geographic areas. And, as is customary in these acquisitions, the first casualties of the removal of competition will be the firing of employees who were only needed when competition existed. Staffing will decrease, leading to worse service for consumers and worse conditions for workers. Prices will go up, and promotions will decrease, and that translates directly into the quantity and quality of food that families can put on their tables. Grocery store mega-mergers are, for all these reasons, indisputably infused with the public interest.

Arguments in Opposition

This bill is opposed by the California Grocers Association and the California Retailers Association. They write:

While the California Grocers Association and the undersigned organizations are still reviewing the impacts of the bill, the Attorney General notice and stay order requirements within AB 853 are overreaching and will inhibit the stability of the grocery retail industry. Due to the overly broad definition of "retail grocery firm," as proposed, the noticing requirements in the bill would apply where an independent grocer wishes to purchase even a single store from successor, which is not covered under the Federal Trade Commission criteria.

Also, providing notice at such a significant length in advance will delay what should be a straightforward process. This may have the unintended consequences of placing grocers, including independent grocers, through an unnecessary waiting period, costly legal battles, and dramatically impact the price of the grocery asset. These impacts will discourage grocers from siting acquisitions in areas, including food deserts, that should otherwise be an opportunity for greater community investment, in favor of nongrocery retail locations. The business constraints that would be caused by AB 853 are paradoxically some of the very real issues we all want to rectify—job loss, food inaccessibility and community divestment.

FISCAL COMMENTS

According to the Assembly Appropriations Committee:

1. Costs in the low millions of dollars annually (General Fund) to DOJ. DOJ reports staffing costs of approximately $1.8 million in FY 2023-24 and approximately $3.3 million in FY 2025-26 and ongoing to draft regulations, review submitted notices, and handle related litigation.
2. Cost pressures to the courts (Trial Court Trust Fund, General Fund) to the extent this bill leads to increased litigation. The bill authorizes the Attorney General to seek a court order to pause or prohibit an acquisition and to enforce a violation of the bill's notice requirement in court. The additional civil litigation resulting from this bill will increase workload for the courts. Although courts are not funded on the basis of workload, increased pressure on the Trial Court Trust Fund may create a need for increased funding for courts from the General Fund. If funding is not provided for the new workload created by this and other bills this session, it may result in delays and prioritization of court cases.

VOTES

ASM JUDICIARY: 7-2-2

YES: Maienschein, Connolly, Haney, Pacheco, Papan, Reyes, Robert Rivas

NO: Dixon, Sanchez

ABS, ABST OR NV: Essayli, Kalra

ASM APPROPRIATIONS: 11-4-1

YES: Holden, Bryan, Calderon, Wendy Carrillo, Mike Fong, Hart, Lowenthal, Papan, Pellerin, Weber, Ortega

NO: Megan Dahle, Dixon, Mathis, Sanchez

ABS, ABST OR NV: Robert Rivas

UPDATED

VERSION: March 29, 2023

CONSULTANT: Manuela Boucher-de la Cadena / JUD. / (916) 319-2334 FN: 0000447

Date of Hearing: May 3, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 853

Author:(Maienschein) – As Amended Ver:March 29, 2023

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill requires parties engaging in the transfer or acquisition of retail grocery stores to provide notice to the Attorney General, authorizes the Attorney General to promulgate related regulations, and authorizes the Attorney General to take legal action to enforce a violation of the notice requirement.

Specifically, this bill:

1. Prohibits any person from acquiring, directly or indirectly, any voting securities or assets of a retail grocery firm or retail drug firm unless proper written notice, as specified, is given to the Attorney General.
2. Requires the written notice to be filed with the Attorney General no fewer than 180 days before the acquisition is made effective.
3. Authorizes the Attorney General to adopt regulations to effectuate the provisions of this bill that are necessary or appropriate for the protection of workers, consumers, and the public interest, including authorization for the Attorney General to request additional materials.
4. Authorizes the Attorney General, in the event the Department of Justice (DOJ) determines it cannot complete an evaluation of the competitive effects of the acquisition before the parties intend to consummate the acquisition, to seek an order from the superior court for the County of Sacramento temporarily staying or preliminarily enjoining the acquisition for such time as is reasonably necessary for the Attorney General to complete the analysis.
5. Authorizes the Attorney General to seek injunctive relief and other equitable remedies for a violation of the notice requirement, as well as attorney’s fees and costs.

FISCAL EFFECT:

1. Costs in the low millions of dollars annually (General Fund) to DOJ. DOJ reports staffing costs of approximately $1.8 million in FY 2023-24 and approximately $3.3 million in FY 2025-26 and ongoing to draft regulations, review submitted notices, and handle related litigation.
2. Cost pressures to the courts (Trial Court Trust Fund, General Fund) to the extent this bill leads to increased litigation. The bill authorizes the Attorney General to seek a court order to pause or prohibit an acquisition and to enforce a violation of the bill’s notice requirement in court. The additional civil litigation resulting from this bill will increase workload for the courts. Although courts are not funded on the basis of workload, increased pressure on the Trial Court Trust Fund may create a need for increased funding for courts from the General Fund. If funding is not provided for the new workload created by this and other bills this session, it may result in delays and prioritization of court cases.

COMMENTS:

1. Author’s Statement. According to the author:

Mergers and acquisitions in the food and drug-retail industries disproportionately impact underserved and marginalized communities. The public has a right to know about any future proposed merger or acquisition involving essential goods and services like food and medicine. AB 853 is a simple notice bill that requires parties to grocery and drug-retail mergers or acquisitions to offer forecasts and analyses to the Attorney General and, hence, the public, about the public policy consequences of their merger so that an informed debate can occur about what, if anything, to do about the merger.

1. Background. Current law requires certain health care facilities and hospitals obtain written consent from the Attorney General before entering into any sale or acquisition agreement. This bill would create a similar notice requirement to the Attorney General for mergers and acquisitions of grocery retailers. For an acquisition or merger between two or more grocery retailers (parties), this bill would require the parties to provide notice to the DOJ at least six months prior to the effectuation of the merger to allow the DOJ to evaluate the proposed transaction. As written, the bill requires the notice to contain specified information about the transaction, and allows the DOJ to promulgate regulations that would allow the DOJ to obtain additional information about the transaction. In the event the retailers do not provide the required notice, the bill authorizes the Attorney General to seek injunctive relief.

Analysis Prepared by: Annika Carlson / APPR. / (916) 319-2081

Date of Hearing: March 28, 2023

ASSEMBLY COMMITTEE ON JUDICIARY

Brian Maienschein, Chair

ABPCA Bill Id:AB 853

Author:(Maienschein) – As Amended Ver:March 15, 2023

As Proposed to be Amended

SUBJECT: Retail grocery stores and retail drug stores: acquisition: notice to Attorney General

KEY ISSUE: IN ORDER TO AVOID THE FURTHER GROWTH OF FOOD DESERTS AND INACCESSIBLE FOOD SUPPLIES IN UNDERSERVED COMMUNITIES should grocery retailers be required to give notice to the attorney GENERAL OF PENDING ACQUISITIONS OF OTHER GROCERY RETAILERS?

SYNOPSIS

The impact and importance of available and competitive grocery stores cannot be overstated. Throughout California, approximately 1 million residents live in a “food desert.” Additionally, recent months have seen a staggering increase in grocery prices, further exacerbating the inaccessibility of healthy, fresh foods. In October 2022, Kroger announced its plan to purchase Albertsons in a blockbuster deal valued at $24.6 billion. Kroger owns and operates nearly 3,000 stores nationwide, including Ralphs and Food 4 Less. On its own, Kroger employs 420,000 employees. Albertsons, which owns and operates stores such as Safeway and Vons, employs nearly 300,000 workers and operates approximately 2,300 stores across the country. In California, Kroger and Albertsons own 302 and 593 stores, respectively. The merger of these two grocery titans, unsurprisingly, has drawn significant attention and criticism from state and federal governments. Some of the financial inaccessibility of healthy food and fresh produce is due to nationwide inflation levels, however, there is heightened concern that the pending merger will further exacerbate several issues.

This bill proposes a new notice procedure whereby any entity intending to purchase controlling stock in a grocery retailer, as defined, must first submit specified information to the Attorney General at least six months before the transaction is effective. The information would include details regarding the parties engaging in the transaction in order to flag any potentially concerning consolidation. In the event the retailers fail to file the requisite notice, the bill authorizes the Attorney General to seek injunctive relief to freeze the merger. As currently written, the bill is placed in the Civil Code. However, as the bill addresses business mergers and acquisitions, the author has proposed amendments to move the provisions into the Corporations Code, as well to incorporate various other clarifying amendments. These changes are incorporated into the summary and addressed in the COMMENTS section of this analysis, below.

The bill is sponsored by the United Food and Commercial Workers, Western States Council, and supported by a broad coalition of labor and various other progressive organizations. It is opposed by the California Grocers Association and the California Retailers Association.

SUMMARY: Requires parties engaging in the transfer or acquisition of retail grocery stores to provide notice to the Attorney General. Specifically, this bill:

1. Prohibits any person from acquiring, directly or indirectly, any voting securities or assets of a retail grocery firm or retail drug firm unless both parties, or in the case of a tender offer, the acquiring party, gives written notice to the Attorney General.
2. Defines the following for the purpose of this bill:
   1. “Acquiring party” means a person by whom or on whose behalf the merger or other acquisition of control is to be effected.
   2. “Retail drug firm” means a person, as defined in existing provisions of the Labor Code, including a proprietorship, joint venture, corporate officer or executive, that has 300 or more employees globally and is identified as a retail business or establishment in the North American Industry Classification System within the retail trade category 45611.
   3. “Retail grocery firm” means a person, as defined in existing provisions of the Labor Code, including a proprietorship, joint venture, corporate officer or executive, that has 300 or more employees globally and is identified as a retail business or establishment in the North American Industry Classification System within the retail trade category 44511 and 455211.
3. Requires the written notice required to be filed with the Attorney General no less than 180 days before the acquisition is made effective. Requires the notice to be made under oath or affirmation, and comply with requirements set out by subsequent provisions of this bill, subject to specified exceptions.
4. Requires the notice to contain all of the following information:
   1. The name and address of each acquiring party, and a report of the nature of its business operations during the past five years or for a lesser period if the person and their predecessors have been in existence less than five years.
   2. An informative description of the business intended to be done by the person and the person’s subsidiaries.
   3. A list of all individuals who are or have been selected to become directors or executive officers or who perform or will perform functions appropriate to the positions.
   4. The source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control, a description of any transaction in which funds were or are to be obtained, including any pledge of the drug or grocery retail firm’s stock or the stock of any of its subsidiaries or controlling affiliates, and the identity of persons furnishing the consideration If a source of the consideration is a loan made in the lender’s ordinary course of business, the identity of the lender shall remain confidential upon request of the person filing the statement.
   5. Fully audited financial information as to the earnings and the financial condition of each acquiring party for the preceding five fiscal years or for a lesser period if the acquiring party and its predecessors have been in existence for less than five years, and similar unaudited information as of a date not earlier than 90 days before the written notice.
   6. Any plans or proposals that an acquiring party may have to liquidate the retail grocery or retail drug firms, to sell its assets or merge or consolidate it with any person, or to make any other material change in its business or corporate structure.
   7. The information required to assess the competitive effects of the proposed acquisition, giving particular attention to the effects on the proposed chain retail grocery store acquisition on consumers, including, but not limited to, consumer choice, food pricing, access to food, and food deserts, and factors affecting the supply of experienced grocery workers, including wages, benefits, and unemployment and chain retail pharmacy on patients, including, but not limited to, patient choice, medicine pricing, access to medications, and factors affecting the supply of licensed pharmacists, pharmacy technicians, and pharmacists-in-training.
   8. Information required to assess the economic and community impact of any planned divestiture or store closures, including, but not limited to, the impact on food deserts, food supply, economic mobility, unemployment, and small businesses.
5. Authorizes the Attorney General to adopt regulations to effectuate the provisions of this bill that are necessary or appropriate for the protection of workers, consumers, and the public interest, including authorization for the Attorney General to request additional materials.
6. Authorizes the Attorney General to specify exemptions from the notice requirement for acquisitions that, by virtue of the size, business volume, or number of employees are unlikely to materially affect competitive markets in California.
7. Authorizes the Attorney General, in the event the office determines they cannot complete an evaluation of the competitive effects of the acquisition before the parties intend to consummate the acquisition, to seek an order from the superior court for the County of Sacramento temporarily staying or preliminarily enjoining the acquisition for such time as is reasonably necessary for the Attorney General to complete the analysis.
8. Requires the Attorney General to consider the extent to which information required to be submitted to the United States Department of Justice and the Federal Trade Commission may satisfy some or all of the need to carry out the applicable provisions of this bill, if the acquisition requires disclosures under existing provisions of federal law. Makes any information submitted to the Attorney General under provisions of federal law rendering them confidential privileged under California law.
9. Allows the submitting party to designate information submitted as privileged. If the Attorney General disputes any claim of privilege, they may give notice to the submitting party of that fact and give the submitting party, or other person interested in the claim of privilege, an opportunity to seek an order from a superior court for the County of Sacramento requiring the Attorney General not to make the designated information public. Makes all information except that which the Attorney General agrees is privileged or the court determines is privileged, available to the public under the California Public Records Act.
10. Exempts regulations adopted by the Attorney General pursuant to the provisions of this bill from the Administrative Procedures Act.
11. Establishes that failure to provide written notice, amendment to written notice, or other material required to be provided under the provisions of this bill as a violation of the title.
12. Authorizes the Attorney General to seek injunctive relief and other equitable remedies a court deems appropriate, as well as attorney’s fees and costs.
13. Makes various findings and declarations regarding the state’s interest in maintaining the confidentiality of the disclosures required by the bill’s provisions.

EXISTING LAW:

1. Prohibits, under the Cartwright Act, restraints on competition by, among other things, defining “a trust” as a combination of capital, skill or acts by two or more persons for any of the following purposes:
   1. To create or carry out restrictions in trade or commerce.
   2. To limit or reduce the production, or increase the price of merchandise or of any commodity.
   3. To prevent competition in manufacturing, making, transportation, sale or purchase of merchandise, produce, or any commodity.
   4. To fix at any standard or figure, whereby its price to the public or consumer shall be in any manner controlled or established, any article or commodity of merchandise, produce or commerce intended for sale, barter, use, or consumption in this State.
   5. To make, enter into, execute, or carry out any contracts, obligations, or agreements of any kind or description, by which they do all or any combination of any of the following:
      1. Bind themselves not to sell, dispose of, or transport any article or any commodity or any article of trade, use, merchandise, commerce, or consumption below a common standard figure, or fixed value.
      2. Agree in any manner to keep the price of such article, commodity, or transportation at a fixed or graduated figure.
      3. Establish or settle the price of any article, commodity, or transportation between them or themselves and others, so as directly or indirectly to preclude a free and unrestricted competition among themselves, or any purchasers or consumers in the sale or transportation of any such article or commodity.
      4. Agree to pool, combine, or directly or indirectly unite any interests that they may have connected with the sale or transportation of any such article or commodity, that its price might in any manner be affected. (Business & Professions Code Section 16720.)
2. Provides, with limited exceptions, that every trust is unlawful, against public policy and void. (Business & Professions Code Section 16726.)
3. Creates, under the Unfair Competition Law, a civil penalty for unfair competition, defined to include any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue, or misleading advertising. (Business & Professions Code Section 17200 et seq.)
4. Prohibits, under the Unfair Practices Act, acts which injure competition, including sales below cost, locality discrimination, and secret rebates or unearned discounts. (Business & Professions Code Section 17000 et seq.)
5. Provides, under the federal Sherman Act, that every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is illegal. (15 U.S.C. Section 1.)
6. Requires any nonprofit corporation that operates or controls a health facility, or operates or controls a facility that provides similar health care, to provide written notice to, and to obtain the written consent of, the AG prior to entering into any agreement or transaction to do either of the following:
7. Sell, transfer, lease, exchange, option, convey, or otherwise dispose of, its assets to a for-profit corporation or entity or to a mutual benefit corporation or entity when a material amount of the assets of the nonprofit corporation are involved in the agreement or transaction.
8. Transfer control, responsibility, or governance of a material amount of the assets or operations of the nonprofit corporation to any for-profit corporation or entity or to any mutual benefit corporation or entity. (Corporations Code Section 5914 (a).)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

COMMENTS: The impact and importance of competitive grocery stores cannot be overstated. Throughout California, approximately one million residents live in a “food desert.” According to the California Endowment, food deserts are defined as “places with large proportions of households with low incomes, inadequate access to transportation, and a limited number of food retailers providing fresh produce and healthy groceries for affordable prices.” In essence, a food desert occurs where people are unable to easily access fresh produce, ultimately resulting in poor eating habits and poor health outcomes. (California FreshWorks Food Access Report: An Examination of Three Northgate Gonzalez Grocery Store Investments, The California Endowment (May 2016), p. 2 available at https://www.gih.org/files/AudioConf/Freshworks-Food-Access-Report_WEB2_FINAL.pdf.) Recent months have also seen a staggering increase in grocery prices, further exacerbating the inaccessibility of healthy, fresh foods. (Here’s Why So Many Grocery Store Staples Are So Expensive Right Now, Nik Popli and Solcyre Burga, TIME (January 28, 2023) available at https://time.com/6250895/grocery-prices-rising-inflation/.)

In October 2022, Kroger announced its plan to purchase Albertsons in a blockbuster deal valued at $24.6 billion. Kroger owns and operates nearly 3,000 stores nationwide, including Ralphs and Food 4 Less. On its own, Kroger employs 420,000 employees. Albertsons, which owns and operates stores such as Safeway and Vons, employs nearly 300,000 workers and operates approximately 2,300 stores across the country. In California, Kroger and Albertsons own 302 and 593 stores, respectively. (California State Impact, Kroger, available at https://www.thekrogerco.com/wp-content/uploads/2022/01/Kroger-FactSheet-California.pdf, and Number of Albertsons Companies stores in the United States as of February 2022, by state, Statista, available at https://www.statista.com/statistics/1167508/albertsons-operating-stores-by-state-us/.) The merger of these two grocery titans unsurprisingly has drawn significant attention and criticism from state and federal governments. Since the announcement of the merger, the Federal Trade Commission (FTC) has initiated its regulatory review process of the proposal and faces pressure from state and federal lawmakers, as well as consumer advocacy groups, to fully evaluate the impact of the merger. (Kroger and Albertsons plan merger to combine 2 largest supermarket chains, Alina Selyukh, NPR (October 14, 2022) available at https://www.npr.org/2022/10/14/1129014897/kroger-and-albertsons-plan-merger-to-combine-2-largest-supermarket-chains.) As part of its proposal to the FTC, Kroger has announced a preemptive divestiture plan, which would see Kroger sell off a portion of grocery stores in a given geographic area to other retailers in order to ensure sufficient competition within that area. Most recently, the plan appears to propose divestiture of approximately 650 Albertsons stores. (Kroger-Albertsons Divestiture Bid Aims to Head Off Challenge (1), Dan Papscun, Bloomberg Law (October 14, 2022), available at https://news.bloomberglaw.com/antitrust/kroger-albertsons-divestiture-plan-is-bid-to-deflect-regulators.)

While some of the financial inaccessibility of healthy food and fresh produce is due to nationwide inflation levels, there is concern that the pending merger will further exacerbate these issues. Moreover, an additional potential consequence of the divestiture is the ultimate failure of the separated stores, resulting in even less access to grocery retailers, as well as potential job loss for the workers employed by the separated stores. Many of the vulnerable workers are considered low-income, with the average employee at an Albertsons-operated store in California earning $36,011 annually. (Albertsons Companies Salaries in California, Zippia: The Career Expert, available at https://www.zippia.com/albertsons-co-careers-14070/salary/california/.) Grocery stores also employ workers with highly specialized knowledge, including pharmacists and workers with training in sanitation and health procedures, all of whom may be impacted by store closures. Considering the financial realities these workers face, as well as their role in the communities they serve, the threat of job loss in the grocery retail sector stemming from such a massive merger is significant.

According to the author:

Mergers and acquisitions in the food and drug-retail industries disproportionately impact underserved and marginalized communities. The public has a right to know about any future proposed merger or acquisition involving essential goods and services like food and medicine. AB 853 is a simple notice bill that requires parties to grocery and drug-retail mergers or acquisitions to offer forecasts and analyses to the Attorney General and, hence, the public, about the public policy consequences of their merger so that an informed debate can occur about what, if anything, to do about the merger.

This bill proposes a new notice procedure whereby any entity intending to purchase controlling stock in a grocery retailer, as defined, must first submit specified information to the Attorney General (AG). Other industries have similar notice requirements, notably the health care and hospital industry. For example, since 1996, nonprofit health care facilities have been required to obtain written consent from the Attorney General before entering into any sale or acquisition agreement. The intent behind the original bill establishing the AG’s oversight of specified health care mergers and acquisitions was to ward off any reduction in access to health care services for underinsured or uninsured individuals. In essence, the AG’s office should receive notice of potential risks that the consolidation of a service provider would result in a lack of necessary services to any community within the state.

Similarly, in the event of an acquisition or merger between two or more grocery retailers, this bill would require the participating parties to provide notice to the AG’s office at least six months prior to the effectuation of the merger in order to allow the AG’s office the opportunity to evaluate the proposed transaction. The notice would include details regarding the parties engaging in the transaction in order to flag any potentially concerning consolidation. The notice would also include information regarding any potential impacts on food pricing, access to food, expansion or diminution of food deserts, the supply of grocery workers or impact on the same work force, and other factors that may impact the availability of a robust grocery retailer environment. In the event the retailers fail to file the requisite notice, the bill authorizes the Attorney General to seek injunctive relief to freeze the merger. Notably, apart from injunctive relief, this bill does not include any monetary liability for grocery retailers. Rather, the bill simply seeks to provide additional transparency about pending acquisitions of grocery retailers, and the various ways in which the transaction may affect distinct communities. By requiring notice to the Attorney General, this bill arguably achieves its intended goal.

Opponents of the bill claim simultaneously that the bill is unnecessary (because of existing federal and state antitrust regulations), and that its new notice requirement creates an unduly burdensome process. With regard to the position that this bill imposes duplicative regulations, it is true that both the Federal Department of Justice and the AG have the authority to halt potentially monopolistic transactions. However, as stated by Supreme Court Justice Louis Brandeis, sunlight is the best disinfectant. In other words, the more transparency surrounding transactions that could impact communities’ access to fresh food and groceries, the better. Moreover, the approximately six-month lead time required by the bill would theoretically allow the AG greater opportunity to identify potentially problematic transactions. This lead time would arguably not only facilitate the AG’s ability to act in time to not only prevent a damaging change within already underserved communities, but also allow the parties involved to reevaluate the proposed acquisition.

Second, opponents of this bill argue that the proposed timeline by which the notice must be submitted to the Attorney General’s office – 6 months before the transaction is finalized – would be so burdensome to some retailers that it would prevent the acquisition from occurring at all. This argument arguably is somewhat extreme. In business transactions of all sizes, acquiring a separate entity takes significant forethought. Buyers generally have to consider numerous factors, including financing and the viability of the business they intend to acquire. While it is certainly possible that one grocery retailer intending to acquire another may discover new relevant information as the process moves on, nothing in this bill or existing law prevents the acquiring entity from submitting that new information. In fact, this bill would require the acquiring party to submit updated information regarding a material change in the acquisition, even after the six-month mark. In sum, it is likely that entities who plan to acquire new businesses would have the information necessary to complete the notice requirement proposed by this bill well in advance of the completed acquisition, and likely even earlier than six months before the final acquisition.

Authors amendments. The bill currently creates a new Title 8.5 in the Civil Code. However, this is arguably not the most appropriate placement for the new provisions. Additionally, there are various inconsistencies and superfluous language in the bill as currently written. In order to streamline the bill’s provisions and ensure the greatest degree of clarity, the author proposes to move the bill to the Corporations Code, and make the following technical amendments:

2250 14700. (a) No person shall acquire, directly or indirectly, any voting securities or assets of a retail grocery firm or retail drug firm unless both parties, or in the case of a tender offer, the acquiring party, gives written notice to the Attorney General in accordance with this title.

2251. For purposes of this title, the following definitions apply:

(a) (b) For purposes of this title, the following definitions apply:

(1) “Acquiring party” means a person by whom or on whose behalf the merger or other acquisition of control is to be effected.

(2) “Retail drug firm” means a person, as defined in Section 18 of the Labor Code, including a proprietorship, joint venture, corporate officer or executive, that has 300 or more employees globally and is identified as a retail business or establishment in the North American Industry Classification System within the retail trade category 45611.

(3) “Retail grocery firm” means a person, as defined in Section 18 of the Labor Code, including a proprietorship, joint venture, corporate officer or executive, that has 300 or more employees globally and is identified as a retail business or establishment in the North American Industry Classification System within the retail trade category 44511 and 455211.

2252 14701. (a) The written notice to be shall be filed with the Attorney General no less than 180 days before the acquisition is made effective. The notice shall be filed with the Attorney General shall be made under oath or affirmation, and shall comply with the requirements of subdivision (c).

(b) The notice shall be required 180 days before the offer or agreement of the type described in subdivision (c). If any transaction requiring written notice pursuant to this subdivision commences before the effective date of this section, the written notice shall be given to the Attorney General within 30 days of the effective date unless that 30-day time period would cause the Attorney General not to be able to evaluate the transaction before the acquisition or merger, in which case the Attorney General may request the information immediately. If any material change occurs in the facts set forth in the written notice filed with the Attorney General, an amendment setting forth the change and copies of all documents and other material relevant to the change shall be filed with the Attorney General within two business days after the person learns of the change.

(c) The notice shall contain all of the following information:

(1) (A) The name and address of each person by whom or on whose behalf the merger or other acquisition of control referred to in subdivision (b) is to be effected, hereinafter called the acquiring party, and a report of the nature of its business operations during the past five years or for a lesser period if the person and their predecessors have been in existence less than five years.

ARGUMENTS IN SUPPORT: This bill is sponsored by the United Food and Commercial Workers Union, and is supported by a variety of labor and food access organizations. In support of the measure the sponsors write:

In California, Kroger owns and operates approximately 214 stores under the Ralphs banner and an additional 19 under Food 4 Less. A majority of these stores are located in Southern California. The Albertsons Company operates approximately 579 grocery stores in California: 125 stores under the Albertsons banner, along with 26 Pavilion, 243 Safeway, and 185 Vons stores.

In many areas in California, residents lack cars and must travel to grocery stores by walking or public transit, which prevents them from traveling outside the community areas in which they work or live to shop at alternative grocery stores. As a result, the majority of consumers’ grocery shopping occurs at stores located very close to where they live or work. Thus, for many California families, accessibility of supermarkets by foot or by public transit is critical for the communities’ health as a whole. Yet, access to adequate high-quality food and grocery stores is already an issue for many Californians. In 2016, before many mergers, nearly one million Californians, 45 percent of whom are low-income, live without access to nearby supermarkets or large grocery stores in communities known as “food deserts. These types of environments encourage poor eating habits, which can lead to poor health.

If Kroger’s proposed acquisition of Albertsons is consummated, the companies’ combined power will be used to increase prices for groceries, decrease the quality of food, eliminate jobs, close stores and offer less choice for consumers due to the overlap in geographic areas. And, as is customary in these acquisitions, the first casualties of the removal of competition will be the firing of employees who were only needed when competition existed. Staffing will decrease, leading to worse service for consumers and worse conditions for workers. Prices will go up, and promotions will decrease, and that translates directly into the quantity and quality of food that families can put on their tables. Grocery store mega-mergers are, for all these reasons, indisputably infused with the public interest

ARGUMENTS IN OPPOSITION: This bill is opposed by the California Grocers Association and the California Retailers Association. They write:

While the California Grocers Association and the undersigned organizations are still reviewing the impacts of the bill, the Attorney General notice and stay order requirements within AB 853 are overreaching and will inhibit the stability of the grocery retail industry. Due to the overly broad definition of “retail grocery firm,” as proposed, the noticing requirements in the bill would apply where an independent grocer wishes to purchase even a single store from successor, which is not covered under the Federal Trade Commission criteria.

Also, providing notice at such a significant length in advance will delay what should be a straightforward process. This may have the unintended consequences of placing grocers, including independent grocers, through an unnecessary waiting period, costly legal battles, and dramatically impact the price of the grocery asset. These impacts will discourage grocers from siting acquisitions in areas, including food deserts, that should otherwise be an opportunity for greater community investment, in favor of nongrocery retail locations. The business constraints that would be caused by AB 853 are paradoxically some of the very real issues we all want to rectify—job loss, food inaccessibility and community divestment.

Pending or past related legislation. AB 647 (Holden, 2023) would increase the period of time during which a successor grocery employer to hire from a recall list provided by the incumbent grocery employer from 90 to 120 days. The bill would also increase the period of time during which the successor grocery employer must retain the eligible employees from 90 to 120 days.

SB 627 (Smallwood-Cuevas) of 2023 would require an employer, for a year after the closure of a covered establishment, to provide to all covered workers the opportunity to remain employed by the employer and to transfer to a location of the chain within 25 miles of the covered establishment subject to closure as positions become available. Would also require the employer to maintain a preferential transfer list of covered workers and make offers of transfer to qualified covered workers based on length of service, as specified. This bill is awaiting hearing in the Senate Committee on Labor, Public Employment and Retirement.

SB 725 (Smallwood-Cuevas) of 2023 would prohibit a grocery establishment, where the change in control is a merger, from ordering a mass layoff, relocation, or termination at a covered establishment unless, 180 days before the order takes effect, the employer gives notice of the order to the employees of the covered establishment affected by the order, the Employment Development Department, the local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs. This bill is awaiting hearing in the Senate Committee on Labor, Public Employment and Retirement.

SB 93 (Committee on Budget and Fiscal Review) Chapter 16, Statutes of 2021, requires hospitality and service industry employers to offer to rehire qualified former employees who were laid off due to the COVID-19 pandemic. These employees must be rehired for the same or similar positions as they last held.

AB 359 (Gonzalez) Chapter 212, Statutes of 2015, requires, upon a change in ownership of a grocery store, that an incumbent employer prepares a list of specified eligible grocery workers for a successor grocery employer, and requires the successor grocery employer to hire from this list during a 90-day transition period. This bill requires the successor grocery employer to retain eligible grocery workers for a 90-day period, prohibits the successor grocery employer from discharging those workers without cause during that period, and requires the successor employer to consider, upon the end of the period, offering continued employment to those workers.

REGISTERED SUPPORT / OPPOSITION:

Support

United Food and Commercial Workers, Western States Council (sponsor)

Agricultural Institute of Marin
California Employment Lawyers Association
California Food and Farming Network
California State Legislative Board, Sheet Metal, Air, Rail and Transportation Workers - Transportation Division (SMART-TD)
The Center for Food Safety
Central California Environmental Justice Network
Centro Binacional Para El Desarrollo Indígena Oaxaqueno
Ceres Community Project
Economic Security Project Action

Indivisible CA: StateStrong
LAANE (Los Angeles Alliance for A New Economy)
Los Angeles County Federation of Labor, AFL-CIO
Pesticide Action Network
Restaurant Opportunity Center United
Roots of Change
Sacramento Food Policy Council
San Mateo Labor Council, AFL-CIO
TechEquity Collaborative
The Praxis Project
Western Center on Law and Poverty

Opposition

California Grocers Association

California Retailers Association

Analysis Prepared by: Manuela Boucher-de la Cadena / JUD. / (916) 319-2334