The largest proposed supermarket merger in U.S. history is heading to court.
On one side are the supermarket chains Kroger and Albertsons, which say their planned merger will help them compete with rivals like Costco. On the other side are antitrust regulators from the Federal Trade Commission, who say the merger eliminate competition and increase food prices at a time of already high food price inflation.
Starting Monday, a federal district judge in Portland, Oregon, will consider 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 conducting an internal case against the deal before an administrative judge.
KrogerBased in Cincinnati, Ohio, it operates 2,800 stores in 35 states, including brands such as RalphsSmith’s and Harris Teeter. Albertsonsbased 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 U.S. — announced in October 2022 that they planned to merge. The companies say the $24.6 billion deal would 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 larger rivals like Walmartwhich now controls about 22% of U.S. grocery sales. Together, Kroger and Albertsons are said to control about 13%.
Antitrust regulators say the proposed merger eliminate competitionleading to higher prices, poorer quality and lower wages and benefits for employeesIn February, the FTC filed a complaint seeking to block the merger before an administrative law judge at the FTC. At the same time, the FTC filed a lawsuit in federal court in Oregon seeking a preliminary injunction. The attorneys general of California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming all joined the federal lawsuit.
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 supplier to independent supermarkets 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 would not have allowed Plan C&S to be a robust competitor. Kroger and Albertsons agreed in April to divest additional stores. Washington has the most stores that would be divested, with 124, followed by Colorado with 91 and California with 63.
If the preliminary injunction is granted, Kroger and Albertsons will likely appeal to a higher court, said Mike Keeley, partner and chairman of the antitrust committee at Axinn, Veltrop & Harkrider, a Washington law firm. The case could then go through the FTC’s own court system, but since that can take a year or more, companies often back out of a deal before going through the process, Keeley said. Kroger sued the FTC this month, claiming that the agency’s internal procedures are unconstitutional and that it wants the merits of the merger to be decided in federal court. In that case, filed in Ohio, Kroger cited a recent Supreme Court ruling that the Securities and Exchange Commission’s authority to handle some civil fraud complaints within the agency itself, rather than through the courts, was limited.
The FTC would likely appeal the ruling, but Keeley said it’s rare for an appeals court to overturn a lower court ruling on a merger, so the FTC could decide to drop the charges. The case could still go 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 sees as anti-competitive, but lawmakers from both parties expressed skepticism about the merger at a hearing in 2022.
Colorado And Washington have separately filed a lawsuit to block the block the merger in state courts. That’s an unusual situation; normally, states are co-plaintiffs in a federal lawsuit. But both states believe the stakes are high. Colorado has more than 200 Kroger and Albertsons stores, while Washington has more than 300. Keeley said both states could seek their own injunctions from another court if the FTC loses, but it would be surprising if another court blocked the merger if Kroger and Albertsons were successful in the federal case.