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Kroger and Albertsons saw their $24.6 billion merger blocked on Tuesday by judges in two separate cases, one brought by federal regulators and the other by the Washington state attorney general. What would be the biggest grocery merger in U.
S. history is now in legal peril after over two years of delays . The companies could choose to continue their legal appeals or abandon the deal.
They await another ruling in a third lawsuit in Colorado. Kroger runs many familiar grocery stores, including Ralphs, Harris Teeter, Fred Meyer and King Soopers. Albertsons owns Safeway and Vons.
In statements on Tuesday, the companies argued the courts erred in their judgment and said they were evaluating their options. Tuesday's first ruling is a big win for the Federal Trade Commission. It — together with several states — had asked a federal court in Oregon to stop the merger .
The government argued that the resulting colossus would lead to higher food prices and fewer choices for shoppers and workers. In many markets, the two chains are each other's biggest rival. Kroger and Albertsons, in turn, have argued that together, they actually would have more power to lower prices, as well as to compete against other huge retailers that sell food, including Walmart, Costco and Amazon.
U.S. District Judge Adrienne Nelson on Tuesday ruled that the merger must halt while it undergoes the administrative review inside the FTC — a procedure that Kroger is separately challenging in court as unconstitutional.
About an hour later, a Washington state court judge separately ruled that the merger violated that state's consumer-protection law. "Both defendants gestured toward a future in which they would not be able to compete against ever-growing Walmart, Amazon, or Costco," Nelson wrote in her order. "The overarching goals of antitrust law are not met, however, by permitting an otherwise unlawful merger in order to permit firms to compete with an industry giant.
" Together, Kroger and Albertsons have nearly 5,000 stores and employ some 720,000 people across 48 states. They particularly overlap in western states. During the three-week federal trial in a Portland courtroom , the FTC and the companies painted differing views of the grocery market.
Kroger and Albertsons described their merger as existential to survival. They argued the FTC's view of competition — focused on options a shopper might have in their neighborhood — was outdated in the wake of big-box behemoths and the sprawl of dollar stores. Kroger officials testified that they typically compared their prices to Walmart, rather than Albertsons, and struggled to keep up given Walmart's ability to negotiate better deals with suppliers thanks to its scale.
Walmart is the biggest seller of groceries in the U.S., followed by Kroger and Costco.
The FTC, however, argued that someone who shops at Walmart, Costco, CVS or even Trader Joe's likely still relies on their neighborhood supermarket. Government lawyers said enough people were concerned about the merger that the agency received an unprecedented 100,000 public comments. Federal officials also shared complaints raised by labor unions.
Kroger and Albertsons are the rare unionized shops in retail. The companies argue that, in fact, serves as a reason why they should be allowed to unite to face up to bigger, non-unionized rivals. But the FTC says a merger would give the companies much more power over contract negotiations, leading to lower pay and worse benefits.
The judge separately weighed the plan by Kroger and Albertsons to sell hundreds of their stores to a firm called C&S Wholesale Grocers as a condition of their merger, meant to appease regulators. The idea is to create a new grocery rival in markets where Kroger and Albertsons currently overlap and, therefore, a merger would eliminate competition. C&S, a grocery supplier, had agreed to buy 579 stores in 18 states and in Washington, D.
C. But the FTC argued C&S would struggle to compete. The firm currently runs only 23 stores, mostly under the Piggly Wiggly brand, without much nationwide name recognition.
Government lawyers shared internal notes, in which C&S executives raised concerns about the quality of stores they would acquire. Kroger and C&S executives presented C&S as an experienced grocery company that could hit the ground running. Judge Nelson remained skeptical.
"There are serious concerns about C&S' ability to run a large-scale retail grocery business that can successfully compete against the proposed merged business, as would be required to offset the competitive harm of the merger," she wrote in Tuesday's order. Copyright 2024 NPR.
