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Kroger and Albertsons merger goes to court


Kroger and Albertsons merger goes to court

The largest proposed grocery store merger in U.S. history is going through the courts.

On one side are supermarket chains Kroger and Albertsons, who say their planned merger will help them compete against rivals like Costco. On the other side are antitrust regulators at the Federal Trade Commission, who say the merger would eliminate competition and drive up grocery prices at a time of already high food price inflation.

Starting Monday, a federal district judge in Portland, Oregon, will review both sides and decide whether to grant the FTC’s request for a preliminary injunction. A preliminary injunction would delay the merger while the FTC conducts an internal case against the deal before an administrative law judge.

Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands such as Ralphs, Smith’s and Harris Teeter. Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states, including Shaws and Star Market in Massachusetts, and Safeway, Jewel Osco and others in the rest of the country. Together, the companies employ about 710,000 people.

The two companies 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 over suppliers and allowing them to combine their private labels. They say a merger would also help them compete with major rivals like Walmart, which currently controls about 22% of U.S. grocery sales. Together, Kroger and Albertsons would control about 13%.

The antitrust authorities then stated that the planned merger would eliminate competition and thus lead to higher prices, lower quality and lower wages and social benefits for employees.

In February, the FTC filed a lawsuit to block the merger before an FTC administrative law judge. 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 joined the federal lawsuit.

If the merger is approved, Kroger and Albertsons have agreed to sell 579 stores in locations where their operations overlap. The buyer would be C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the private labels Grand Union and Piggly Wiggly. Kroger and Albertsons had originally planned to divest 413 stores, but the FTC said that plan would not have made C&S a strong competitor. Kroger and Albertsons agreed in April to divest more stores. Washington will have the most stores to divest, with 124, followed by Colorado with 91 and California with 63.

If the injunction is approved, Kroger and Albertsons will likely appeal in a higher court, said Mike Keeley, a partner and chairman at the Washington antitrust law firm Axinn, Veltrop & Harkrider. The case could then go through the FTC’s own judicial system, but because 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, claiming the agency’s internal procedures are unconstitutional and seeking to have the merits of the merger decided in federal court. In that case, filed in Ohio, Kroger cited a recent Supreme Court ruling that limited the SEC’s authority to try some civil fraud claims within the agency rather than in court.

If the Oregon judge rules in favor of Kroger and Albertsons, the FTC would likely appeal the ruling. But Keeley said it’s rare for an appeals court to overturn a lower court’s ruling on a merger, so the FTC could decide to drop the case.

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 viewed as anticompetitive, but lawmakers from both parties expressed skepticism about the merger in a 2022 hearing.

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