CENTRAL VALLEY, NY—In an usual move, Simon Property Group after settling litigation with the New York State Attorney General over alleged anticompetitive tactics it employed in connection with its Woodbury Common Premium Outlets property here, released a highly critical statement of the probe calling it “meritless” and an “unnecessary distraction.”
New York State Attorney General Eric Schneiderman announced on Monday that Indianapolis-based Simon Property Group has agreed to pay New York State $945,000 to settle charges it engaged in anticompetitive tactics to thwart the development of competing outlet centers in New York City. Specifically, the AG charged that due to its 60-mile radius provision with tenants at its highly successful Orange County, NY property, Simon prevented outlet store development in New York City’s outer boroughs and thwarted its tenants from opening locations at outlet centers in those markets.
Under terms of the settlement, Simon has agreed to immediately modify contractual radius restrictions that have prevented retailers at its flagship Woodbury Common center, which generates more than $1.3 billion in annual sales, from opening outlet stores in New York City locations. The settlement will allow for the opening of outlet malls in the Bronx, Brooklyn, the Bronx, Queens and Staten Island, according to the New York State Attorney General.
“No business should be allowed to stifle an entire industry at the expense of consumers—but for years, that’s exactly what Simon Property Group did to New Yorkers,” says New York State Attorney General Schneiderman. “Simon’s anticompetitive conduct blocked competition and drove up prices for New York consumers. That ends today.”
The AG reports that the probe revealed that several developers had attempted to develop outlet centers in New York City, but were thwarted in signing the necessary retailers due to the Woodbury Common radius restrictions. There are more than 200 outlet centers across the US, but one outlet center—Woodbury Common—dominates the New York City area, the Attorney General related.
Simon Property Group, while acknowledging the settlement terms, was highly critical of the investigation in a prepared statement and says it never sought to limit competition. “At a time when retail stores face increasing challenges from online competitors, Woodbury Common remains an economic engine for Orange County, the lower Hudson Valley, and New York State,” the REIT states. “That is why it was always hard to understand the reason the New York Attorney General would undertake a meritless investigation into the property. Now after two years, the investigation has become an unnecessary distraction.”
The retailer notes that Woodbury Common’s 60-mile radius provision was used since 1985, well before it acquired Woodbury Common as part of its 2004 acquisition of Chelsea Property Group.
“Woodbury’s radius provisions have been upheld as lawful, reasonable and consistent with industry practice in the courts, as recent as 2010. While we have agreed to reduce the reach of the radius provisions in Woodbury Common leases, these provisions will continue to cover Woodbury Common’s essential trade area, extending to all of Manhattan,” Simon Property Group states.
Woodbury Common Premium Outlets features 240 high-end fashion and designer retail brands including: Tory Burch, Nike, Celine, Bottega Veneta, Polo Ralph Lauren, Michael Kors, Burberry, Coach and The North Face. Simon has undertaken major capital improvements valued in the hundreds of millions of dollars at the property over the last three years.
Simon operates 91 premium outlets in the United States, Puerto Rico, Canada, Japan, Malaysia, Mexico and South Korea. In addition to Woodbury Common, some of its other premium outlet locations include Orlando, FL; Desert Hills (Palm Springs, CA), Las Vegas and Wrentham Village Premium Outlets (Wrentham, MA, which is a suburb of Boston).