U.S. discount retailer Dollar Express has filed a lawsuit accusing rival Family Dollar and its parent company Dollar Tree Inc (DLTR.O) of driving it out of business, the third government-required divestiture to fail in recent years.
Dollar Express was formed in 2015 when private equity group Sycamore Partners II LP bought some 330 stores in 35 states from Family Dollar and Dollar Tree. Family Dollar had to sell the stores in order to win antitrust approval to merge with Dollar Tree.
In the lawsuit filed Thursday, Dollar Express accuses Dollar Tree of using confidential information to open new shops near the divested stores to drive them out of business.
It also accused Dollar Tree of putting underqualified and inattentive store managers in divested stores.
“Dollar Express’s damages, which include the lost prospective value of the acquisition of the stores, may exceed one-half billion dollars, with the ultimate amount of damages to be determined at trial,” Dollar Express said in its complaint.
Dollar Express in the lawsuit says these and other actions lead to it obtaining Federal Trade Commission approval in April to go out of business and sell its stores to Dollar General Corp (DG.N).
Dollar Tree did not respond to a request for comment.
U.S. regulators often insist on divestitures as a way of protecting competition without having to file lawsuits to prevent mergers that would lead to monopolies.
The FTC is reviewing divestitures that may allow Walgreens Boots Alliance Inc (WBA.O) to buy Rite Aid Corp (RAD.N).
Dollar Express marks the third divestiture to fail recently.
In 2015, Albertsons purchase of Safeway led to the sale of 168 stories to smaller rival Haggen, which filed for bankruptcy within months.
In 2012, Hertz Global Holdings bought Dollar Thrifty and was required to sell its Advantage Rent a Car brand. Advantage filed for bankruptcy within months and is now owned by a Canadian investment firm.
Chris Sagers, who teaches antitrust at Cleveland-Marshall College of Law, said customers would be hurt if the companies formed from divested assets fail.
“The agencies want to avoid suing to block. They don’t want to litigate merger challenges. Litigating these things is a huge resource drain,” he added. “Merger parties are well-heeled and outspend them.”
REUTERS
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