Haggen hits Albertsons with billion dollar lawsuit
In early 2015, Albertsons and Safeway officially divested 146 locations throughout California, Oregon, Washington, Nevada and Arizona to an up-and-coming Washington-based regional grocer called Haggen. At the time, the benefits for both chains seemed clear: the divestiture allowed Albertsons and Safeway to merge without incurring the ire of the Federal Trade Commission; meanwhile Haggen, little known outside of the Pacific Northwest just months ago, had its presence along the West Coast exploded almost overnight.
But it was not a smooth transition. Haggen has struggled with the massive expansion from the start, facing criticism for offering the same product at higher prices and attracting negative attention with an error that caused nearly 1,000 products to be significantly overpriced at some California locations. In July Albertsons hit Haggen with a $41.1 million lawsuit, accusing Haggen of not paying for inventory at 38 of the stores it acquired. Then in August, Haggen announced that it would be closing 27 of its new locations.
Now what started as a rocky transition is bursting at the seams altogether: this week Haggen filed a lawsuit against Albertsons LLC and Albertsons Holdings LLC , seeking more than $1 billion in damages. The allegation: that Albertsons “made false representations to both Haggen and the FTC about Albertsons’ commitment to a seamless transformation of the stores into viable competitors” and engaged in “coordinated and systematic efforts” to eliminate Haggen as a competition.
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In a press release issued by Haggen, the grocer alleges that Albertsons deceived the FTC by bringing a new competitor into a wider market, all the while engaging in a number of “malicious and unfair actions” to maintain its dominance on the supermarket landscape and eliminate Haggen as a competitor. Some of these alleged actions include: providing “false, misleading and incomplete” retail pricing data (triggering mistakenly inflated prices); illicitly accessing Haggen’s confidential data to gain a competitive edge and time promotions to undermine Haggen grand openings, and; deliberately understocking certain inventory just before conversion to prompt frequent out-of-stock situations, while overstocking perishable inventory forcing Haggen to throw away and waste “significant amounts of inventory it paid for.”
“Albertson’s anti-competitive conduct caused significant damage to Haggen’s image, brand, and ability to build goodwill during its grand openings to the public,” reads the lawsuit filed by Haggen. “Albertson’s unlawful acts destroyed or substantially lessened the economic viability, marketability and competitiveness of the [Haggen] Stores, depriving consumers in each of the Relevant Markets the benefits of substantial competition from a new market entrant.”
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What does Haggen hope to gain with this lawsuit? If the United States District Court for the District of Delaware finds truth in these allegations, $1 billion could significantly help Haggen regain a foothold in its new markets without having to fold any additional locations (a very real possibility for the chain at the moment). It would also send a strong message that all’s not fair between competing brands, and deals made in good faith must be upheld without any fear of misdirection and subterfuge.
The risk in the lawsuit is that, if the District Court finds favor with Albertsons in this case, it could send Haggen even further into tailspin. But with the problems it’s already facing, and with its relationship with Albertsons already deteriorated to this point, Haggen has little to lose in this fight. If Haggen is successful, the consequences for both brands could be major.
Albertsons had no comment at press time, but is expected to issue a statement later today.
Six issues at the top of tax and finance leaders’ agenda
New Deloitte research reveals that tax leaders are under increasing pressure to add strategic value as companies accelerate business model transformation, from undergoing digital transformations to rethinking their supply chains or investing in green initiatives.
According to Phil Mills, Deloitte Global Tax & Legal Leader, to “truly deliver value to the business, the tax function needs to rethink its resourcing model and transform its technology infrastructure to create capacity and control costs”.
And the good news, according to Mills, is that tax and business leaders have more options at their disposal to achieve this.
Reflecting the insights of global tax and finance executives at global companies, Deloitte’s Tax Operations in Focus study reveals the six issues at the top of tax and finance leaders’ agenda.
Trend 1: Businesses seek more strategic counsel from tax
Companies are being pushed to develop new digital products and distribution channels and accelerate sustainable transformation and this is taking them into uncharted tax territory. Tax leaders say their teams must have the resources and skills to give deeper advisory support on digital business models (65%), supply chain restructuring (49%) and sustainability (48%) over the next two years. This means redrawing the boundaries of what tax professionals focus on, and accelerating adoption of advanced technologies and lower-cost resourcing models to meet compliance requirements and free up time.
According to Joanne Walker, Group Tax Director, BT Group PLC, "There’s still a heavy compliance load today, but the vision for the future would be that much of that falls away, and tax people become subject matter experts who help program the machine, ensure quality control, and redirect their time to advisory activity.”
Trend 2: Tipping point for resourcing models
Business partnering demands in the tax department are on the rise, but 93% of tax leaders say their department’s budget is remaining flat or falling. To ensure that the tax function can redefine itself as a strategic function at the pace that is required, leaders are choosing to move increasing amounts of compliance and reporting to a combination of shared service centers, finance departments, and outsourcing providers that have invested in best-in-class technology.
Trend 3: Digital tax administration is moving faster than expected
in addition to the rising focus of the corporate tax department partnering with their business counterparts, transformative changes to the way companies share tax information with revenue authorities is also creating an imperative to modernize operations at a faster pace. Nine in 10 (92%) respondents say that shifting revenue authority demands on digital tax administration will have a moderate or high impact on tax operations and resources over the next five years—and several heads of tax said the trend is moving faster than expected.
"It’s really stepped up in the last couple of years," says Anna Elphick, VP Tax, Unilever. "Tax authorities don't just want a faster turnaround for compliance but access into a company’s systems. It's not unreasonable to think that in a much shorter time than we expect, compliance will be about companies reviewing a return that's been drafted by the tax authorities."
Trend 4: Data simplification and lower-cost resourcing are top priorities
Tax leaders said that simplifying data management (53%) and moving to lower-cost resourcing models (51%) must be prioritized if tax is to become more proactive at delivering strategic insights to the business. Many tax teams are ensuring that they have a seat at the table as ERP systems are overhauled, which is paying dividends: 56% of those that have introduced NextGen ERP systems are now highly effective at supporting the business with scenario-modeling insights. Only 35% of those with moderate to low use of NextGen ERP systems said the same.
At Stryker, “we automated the source P&L process for transfer pricing which took a huge burden off of the divisions," says David Furgason, Vice President Tax. "Then we created a transfer price database to deposit and retrieve data so we have limited impact on the divisions. We are moving to a single ERP platform which will help us make take the next step with robotics.”
Trend 5: Skillsets are shifting
Embedding a new data infrastructure and redesigning processes are critical for the future tax vision. Tax leaders are aligned — data skills (45%) and technology process experience (43%) are ‘must have’ skills in a tax department of the future, but more traditional tax specialist knowledge also remains key (40%). The trick to success will be in tax leaders facilitating the way these professionals, with their different backgrounds, can work together collectively to unlock lasting value.
Take Infineon Technologies, which formed a VAT technology and governance group "that has the right knowledge about how to change the system to ensure it generates the right reports", according to Matthias Schubert, Global Head of Tax. "Involving them early was key as we took a greenfield approach, so we could think about what the optimal processes would look like and how more intelligent systems could make an impact
Trend 6: 2020 brought productivity improvements
Improved productivity (50%) and accelerating shifts to remote working (48%) were cited as the biggest operational benefits to emerge from COVID-19-driven disruption. But, as 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, 34% say maintaining productivity benefits is a top concern. And, as leaders think about building their talent pipeline and strengthening advisory skill sets, 47% say they must prioritize new approaches to talent recognition and career development over the next two years, while 36% say new processes for involving tax in business strategy decisions must be established.