Kroger-Albertsons Merger Trial Underway with FTC

Reuters’ Jody Godoy and Deborah Bloom reported that “the U.S. Federal Trade Commission kicked off a trial on Monday in its bid to block Kroger’s $25 billion merger with Albertsons, telling a federal judge in Portland, Oregon, that the deal would eliminate competition between the top grocery store chains and hit consumers’ wallets.”

“The FTC and several states sued to block the deal in February, saying the merger would mean higher prices for consumers and less bargaining power for unionized grocery workers,” Godoy and Bloom reported. “FTC Chief Trial Counsel Susan Musser urged U.S. District Judge Adrienne Nelson on Monday to pause the deal, saying in opening statements that it would result in Kroger ‘swallowing’ Albertsons.”

“‘Stopping this multibillion-dollar deal will keep in place the vigorous competition that acts as a check on rising grocery prices and spurs improvements in quality and innovation,’ she said,” according to Godoy and Bloom’s reporting.

“Kroger attorney Matthew Wolf said in an opening statement that the merger would immediately lower some prices for shoppers at Albertsons, where prices are now 10-12% higher than at Kroger stores,” Godoy and Bloom reported. “…The merger is necessary, said Wolf, in order for the stores to compete with Walmart, the largest grocery retailer in the U.S., bulk shopping mainstay Costco and Amazon.com, which owns Whole Foods.”

“Albertsons’ lawyer Enu Mainigi said that Walmart is able to sell certain products at a price lower than the grocery store chain can buy them wholesale, and that a tie-up with Kroger gives Albertsons the best chance to survive,” Godoy and Bloom reported. “‘It could mean layoffs. It could include closing stores. It may include exiting certain markets altogether. These are the kind of things that are on the table if the merger does not go through,’ she said.”

“Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and the District of Columbia are pursuing the case alongside the FTC,” Godoy and Bloom reported. “Washington and Colorado have filed their own lawsuits to block the merger. The lawsuits are scheduled to go to trial after the Oregon case.”

What Happens If the Judge Agrees with the FTC?

The Associated Press’ Dee-Ann Durbin reported that “if the preliminary injunction is approved, Kroger and Albertsons would likely appeal to a higher court, said Mike Keeley, a partner and antitrust chair at Axinn, Veltrop & Harkrider, a Washington law firm. The case could then move through the FTC’s own judicial system, but since that can take a year or more, companies often abandon a deal before going through the process, Keeley said.”

“Kroger sued the FTC this month, alleging the agency’s internal proceedings are unconstitutional and saying it wants the merger’s merits decided in federal court,” Durbin reported. “In that case, filed in Ohio, Kroger cited a recent Supreme Court ruling that limited the power of the Securities and Exchange Commission to try some civil fraud complaints within the agency instead of in court.”

What Happens If the Judge Agrees with the Stores?

Durbin reported that “the FTC would likely appeal the ruling, but Keeley said it’s rare for an appeals court to reverse a lower court’s ruling on a merger, so the FTC might decide to drop the challenge. The case could still proceed through the FTC’s administrative process. It’s unclear what impact the presidential election could have on the case.”

“The Biden administration has been particularly aggressive in challenging mergers that it considered anti-competitive, but lawmakers from both parties expressed skepticism about the merger in a 2022 hearing,” Durbin reported.

Merger Facts

Durbin reported that “Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter. Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw’s. Together, the companies employ around 710,000 people.”

Godoy and Bloom reported that “Kroger has said it will sell 579 of the approximately 5,000 stores it would own if the deal is allowed to go through. Part of the trial will focus on whether buyer C&S Wholesale Grocers can successfully run them. Kroger has also pledged to lower grocery prices by $1 billion after the merger.“