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.
READ MORE: What would a merger between Kroger and Albertsons mean for grocery shoppers? This is what the US government thinks
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 brands such as Safeway, Jewel Osco and Shaw’s. Together, the companies employ about 710,000 people.
Here’s what you should know ahead of the hearing, which is expected to last until September 13.
Why do Kroger and Albertsons want to merge?
Kroger and Albertsons – two of the largest grocery chains in the U.S. – announced their merger plans in October 2022. 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 percent of U.S. grocery sales. Together, Kroger and Albertsons would control about 13 percent.
Why does the FTC want to block the merger?
Antitrust regulators say the proposed merger would eliminate competition, leading to higher prices, poorer quality and lower wages and benefits for workers. In February, the FTC filed a lawsuit to block the merger before an FTC administrative law judge. At the same time, the FTC filed suit in federal court in Oregon, seeking a preliminary injunction. Attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming joined the federal lawsuit.
Will Kroger and Albertsons close some stores if they merge?
They say no. If the merger is approved, Kroger and Albertsons have agreed to sell 579 stores in places where their businesses 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 has the most stores to be divested, with 124, followed by Colorado with 91 and California with 63.
What happens if the judge in Oregon issues a temporary restraining order?
If the injunction is approved, Kroger and Albertsons will likely appeal to a higher court, said Mike Keeley, partner and chairman of the antitrust department at Washington 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, arguing 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 limited the Securities and Exchange Commission’s authority to try some civil fraud claims within the agency rather than in court.
What happens if the Oregon judge rules with 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 challenge. The case could still move 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.
If the Federal Court allows the merger, could state courts still prevent it?
Colorado and Washington have filed suit separately to block the merger in state courts. That’s an unusual situation; usually the states are co-plaintiffs in a federal case. 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 in 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.
