Most people think of a dollar store as a store where every item costs $1. This is not the case for Family Dollar, a discount chain, or and Dollar General, one of the suitors seeking to acquire it. Dollar Tree, the company’s other suitor, is a traditional dollar store. As the chains compete to merge, there’s one important question: who do these stores compete with?

Sources close to the (potential) deal told the New York Post that the Federal Trade Commission is concerned that the various stores with “dollar” in their names mostly compete with each other. If the FTC finds that to be the case, it could have tough consequences for either company that’s looking to acquire Family Dollar. Dollar General had assumed that it would only need to sell 1,500 stores, but that number could be as high as 4,000 stores.

The management of Dollar Tree apparently assumed that it mostly competes with other stores where everything costs $1 or less, and that it wouldn’t have to sell any stores, but those same sources told the Post that the smaller chain would also have to sell some stores, too.

The government requires these divestments not because they’re just being mean, but to protect consumers from the artificially high prices and crappy service that can happen when mergers result in a local monopoly. If you live in a remote area that has only a Dollar General and a Family Dollar and those two stores combine, that leaves your area without real discount retail competition. The FTC could force Dollar General to sell to a fellow discount store or dollar store. The same would go for Dollar Tree if it wins the Dollar Store Wars (that mostly include stores that aren’t dollar stores.)

While Family Dollar shareholders have accepted the offer from Dollar Tree, they have not yet accepted the higher offer (by $5.50 per share) from Dollar General. That offer now expires on December 31st.

Dollar General may have to ax more than 4K stores [New York Post]