Kroger, Albertsons hope to merge but must first face U.S. government skepticism in court
The largest grocery store merger in U.S. history is now before the courts.
On one side are supermarket chains Kroger and Albertsons, which claim that their planned merger This will help them compete with rivals like Costco. On the other side are antitrust regulators at the Federal Trade Commission, who say the merger eliminate competition and raise grocery prices at a time when prices are already high food price inflation.
Starting Monday, a U.S. District Court judge in Portland, Oregon, will hear both sides and decide whether to grant the FTC’s request for a preliminary injunction. An injunction would delay the merger while the FTC is taking internal action against the agreement before an administrative judge.
KrogerBased in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like RalphSmith and Harris Teeter. AlbertsonBased in Boise, Idaho, operates 2,273 stores in 34 states, including brands such as Safeway, Jewel Osco and Shaw’s. Together, the companies employ about 710,000 people.
Here’s what you need to know ahead of the hearing, which is expected to last until September 13.
Kroger and Albertsons, two of the largest grocery chains in the United States, announced plans to merge in October 2022. The companies say the $24.6 billion deal would help keep prices low by giving them more leverage. with suppliers and allow them to combine their store brands. They say a merger would also help them compete with their larger rivals like Walmartwhich today controls about 22% of U.S. grocery sales. Together, Kroger and Albertsons would control about 13%.
Antitrust regulators say the proposed merger eliminate competitionresulting in higher prices, lower quality and lower wages and benefits for workersIn February, the FTC filed a complaint with an FTC administrative judge seeking to block the merger. At the same time, the FTC filed a complaint in federal court in Oregon seeking the preliminary injunction. The attorneys general of California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming have all joined the federal complaint.
They say no. If the merger is approved, Kroger and Albertsons will have agreed to sell 579 stores in places where their stores overlap. The buyer would be C&S Wholesale Grocers, a New Hampshire-based independent supermarket supplier that also owns the Grand Union and Piggly Wiggly store brands. Kroger and Albertsons initially planned to sell 413 stores, but the FTC said that plan would not have allowed C&S is expected to be a strong competitor. Kroger and Albertsons agreed to divest additional stores in April. Washington state has the largest number of stores that would be divested, with 124, followed by Colorado with 91 and California with 63.
If the preliminary injunction is approved, Kroger and Albertsons would likely appeal to a higher court, said Mike Keeley, partner and antitrust chairman at Axinn, Veltrop & Harkrider, a Washington law firm. The case could then go through the FTC’s court system, but because that can take a year or more, companies often abandon a deal before it goes through the process, Keeley said. Kroger filed a lawsuit against the FTC this month, alleging that the agency’s internal procedures were unconstitutional and saying it wanted the merits of the merger to be decided in federal court. In that case, filed in Ohio, Kroger cited a recent Supreme Court decision This limited the Securities and Exchange Commission’s authority to handle certain civil fraud claims within the agency rather than in court.
The FTC would likely appeal the decision, but Keeley said it’s rare for an appeals court to overturn a lower court’s decision on a merger, so the FTC could decide to drop the challenge. The case could still work its way through the FTC’s administrative process. It’s unclear what impact the presidential election might have on the case. The Biden administration has been particularly aggressive in challenging mergers it considers anticompetitive, but lawmakers from both parties expressed his skepticism about the merger at a hearing in 2022.
Colorado And Washington have separately filed a lawsuit to block the merger States have the right to file their own lawsuits in state court. It’s an unusual situation: Normally, states are co-plaintiffs in a federal lawsuit. But both states believe they have a lot to lose. Colorado has more than 200 Kroger and Albertsons stores, while Washington has more than 300. Keeley said both states could seek their own injunctions in another court if the FTC loses, but it would be surprising if another court blocked the merger if Kroger and Albertsons win the federal case.
