Lawyers for Washington state will consider past grocery chain mergers — and their negative consequences — as they go to court to block a proposed merger between Albertsons and Kroger.
The case is one of three cases in which the $24.6 billion dealwhich was announced almost two years ago. The Federal Trade Commission is currently fight against the merger in a federal court in Oregon, where oral arguments are expected Tuesday. Colorado has also filed a lawsuit to block the merger.
But if the merger goes through, Washington residents will feel the impact more than those in any other state. Albertsons and Kroger own more than 300 supermarkets in the state and control more than half of grocery sales there.
Under a plan to alleviate the concerns of regulatorsKroger and Albertsons would sell 579 overlapping stores, 124 of them in Washington, if the merger goes through. That’s the most among the 19 states with stores on the list. The state’s attorney general’s office says the proposed buyer, C&S Wholesale Grocers has little experience running retail stores or pharmacies.
Washington wants to avoid the situation it found itself in a decade ago, when Albertsons bought the Safeway chain. To appease regulators worried about the deal’s potential impact on grocery competition and consumers, Albertsons sold 146 stores to Haggen, a small grocery chain based in Bellingham, Washington.
But Haggen struggled to expand. Within six months, it had closed 127 stores, including 14 in Washington, and laid off thousands of workers. Haggen sold its remaining stores to Albertsons in 2016. Now, 10 Haggen stores in Washington are on the list for sale if the merger goes through.
“It’s pretty scary,” said Tina McKim, a founding member of Birchwood Food Desert Fighters, a group formed in 2016 after Albertsons closed a store in Bellingham’s Birchwood neighborhood.
Washington Attorney General Bob Ferguson, a Democrat running for governor, wants to block the merger not just in the state but nationwide. In his complaintfiled in King County Superior Court in Seattle, Washington, argues that eliminating the “robust competition” that exists between Albertsons and Kroger would lead to higher prices, lower quality and, most likely, store closures.
Albertsons and Kroger say the merger would help them better compete with growing rivals like Walmart and Costco. They are seeking to have the case dismissed, arguing that a state court is not the place to consider a nationwide ban.
“Under our federalist system, Washington cannot use its antitrust law to dictate merger policy for the rest of the country,” Albertsons and Kroger said in a court document.
Brad Weber, a Dallas partner at the law firm Locke Lord who specializes in antitrust issues, said the Supreme Court justice could decide to halt the merger nationwide or limit his ruling to Washington. Judge Marshall Ferguson could also order the companies to make changes to their store divestment plans to preserve competition.
Ferguson could also decide to delay the case until a ruling comes from the U.S. District Court in Oregon, Weber said. In that case, the Federal Trade Commission has asked a judge to temporarily block the merger until it is considered by an internal judge at the FTC.
Albertsons and Kroger maintain that their plan, including the sale of stores to C&S, will lower grocery prices and keep competition alive. But Washingtonians like McKim remain skeptical.
In 2016, Albertsons acquired a Haggen supermarket and then promptly closed an Albertsons store about a mile away in Birchwood. When it sold its former store two years later, Albertsons added a restriction: No supermarket could open in the Birchwood shopping center for the next 20 years.
It was a huge blow to the community, McKim said. The Birchwood store had served seniors, students, people with disabilities and low-income residents for 35 years, who suddenly found themselves without access to fresh food.
“We were all really shocked by that comment. How is it possible to deny a neighborhood access to food?” McKim said. “It made it very difficult for anyone without a car to get to another grocery store.”
McKim’s group tries to fill the gap by donating food and sourcing produce from local farms, but “it doesn’t provide nearly the access that people need,” she said.
This summer, after an investigation by the Washington attorney general, Albertsons lifted its restriction on the shopping center. A Big Lots that moved into the former supermarket will soon close, McKim said, and she hopes the space will attract another grocery store. But even if that happens, the community may never get back the union jobs it lost when Albertsons closed, she said.
McKim said there is a Walmart in her area, but it is farther from Birchwood than the Albertsons-operated Haggen store, which is on the list of stores that would be sold to C.&S. She is also not convinced that Kroger and Albertsons should merge to compete with Walmart.
“This city is growing so fast, the need for food everywhere is absolutely critical,” McKim said. “When you see other stores succeed, it’s because they’re focused on the needs of the neighborhood.”