The biggest grocery store merger proposal in American history is headed to trial.
Supermarket companies Kroger and Albertsons are on one side, claiming that their impending merger will give them an advantage over competitors like Costco. Federal Trade Commission antitrust officials, on the other hand, argue that the combination would reduce competition and drive up grocery costs during a period of already significant food price inflation.
A federal district court judge in Portland, Oregon, will hear arguments from both parties starting on Monday before determining whether to approve the FTC’s request for a preliminary injunction.
While the FTC brings an internal lawsuit against the agreement before an administrative law judge, the merger would be put on hold in the event of an injunction.
With its headquarters in Cincinnati, Ohio, Kroger runs 2,800 locations throughout 35 states under the Ralphs, Smith’s, and Harris Teeter brands. With 2,273 locations throughout 34 states, Albertsons, a company headquartered in Boise, Idaho, is home to brands like Safeway, Jewel Osco, and Shaw’s. The companies collectively have almost 710,000 employees.
Before the hearing, which is scheduled to go until September 13, here are some things to be aware of.
Why do Albertsons and Kroger want to combine?
Two of the biggest supermarket chains in the United States, Kroger and Albertsons, announced their intention to merge in October 2022. The firms claim that by combining their store brands and gaining more negotiating power with suppliers, the $24.6 billion acquisition will keep costs low.
They claim that a merger would also enable them to take on major competitors like Walmart, which now has around 22% of the market for groceries in the United States. Together, Kroger and Albertsons would have around 13% of the market.
Why is the FTC attempting to prevent the merger?
Antitrust authorities claim that the planned merger would destroy competition, raising costs, lowering quality, and lowering employee compensation and benefits. The FTC filed a complaint in February with the FTC Administrative Judge in an attempt to stop the transaction.
Simultaneously, the Federal Trade Commission filed a case in federal court in Oregon, requesting a preliminary injunction. The federal case was joined by the attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming.
What would happen if the judge in Oregon sides with Albertsons and Kroger?
Although Keeley noted that it is uncommon for an appeals court to overturn a lower court’s decision on a merger, the FTC may choose to abandon its case despite the likelihood that it will appeal the decision. The FTC’s administrative procedure might still be used to pursue the complaint.
What effect the presidential election might have on the case is unknown. In 2022, politicians from both parties expressed doubts about the merger, despite the Biden administration’s vigorous efforts to block mergers that it believed to be anti-competitive.
If Kroger and Albertsons merge, would some of their stores close?
They decline. Kroger and Albertsons have agreed to sell 579 shops in areas where their stores overlap if the merger is approved. C&S Wholesale Grocers, a supplier to independent supermarkets based in New Hampshire that also owns the Grand Union and Piggly Wiggly store brands, would be the buyer.
At first, Kroger and Albertsons intended to sell 413 stores, but the FTC claimed that strategy would have prevented C&S from being a strong rival. In April, Kroger and Albertsons decided to sell off more shops.
With 124 stores, Washington has the most that would be sold off, followed by Colorado (91) and California (63).
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Could state courts still stop the merger if the federal court allows it to go forward?
Washington and Colorado have filed separate lawsuits in state courts to prevent the merger. States are typically co-plaintiffs in federal lawsuits, thus this is an unusual circumstance.
However, both states think there’s a lot on the line. Washington boasts more than 300 Kroger and Albertsons stores, whereas Colorado has over 200. If the FTC loses, Keeley said, both states might seek their own injunctions from a different court.
However, if Kroger and Albertsons prevail in the federal action, it would be unexpected for another court to prevent the merger.
