Federal judge blocks Kroger’s $25B acquisition of Albertsons
In a major win for the Federal Trade Commission (FTC), a federal judge temporarily blocked The Kroger Co.'s $24.6 billion acquisition of rival Albertsons in a deal that would have created the largest supermarket chain in the U.S.
The preliminary injunction was passed down by U.S. District Judge Adrienne Nelson after a three-week trial in Portland, Ore., at which the FTC said the merger would eliminate head-to-head competition between the two top traditional grocery operators and lead to higher prices for shoppers. It also said the deal would lessen the bargaining leverage for unionized workers. (Unionized employees make up most of the Kroger and Albertsons workforce.)
For its part, Kroger said the deal would lead to lower prices, particularly at Albertsons stores, where it said prices run 10 to 12% higher than at Kroger store.
The judge agreed with the FTC that the deal would undermine competition in the grocery industry. She also said that Kroger’s and Albertsons’ plan to reduce grocery prices and divest more than 500 stores failed to address concerns about reduced competition in the grocery sector and the impact it could have on consumers and workers.
Kroger and Albertsons also said they needed to merge to compete with the likes of Walmart, Amazon and Costco. But the judge rejected that argument in her ruling, saying that supermarkets are “distinct from other grocery retailers” and are not direct competitors to Walmart, Amazon and other companies that sell a wider range of goods.
The judge also said that despite the ruling, the companies could look to address antitrust issues and secure approval to move forward with a reconfigured merger.
"Although defendants may choose to abandon the merger because of the preliminary injunction, this order in no way forces them to do so, and leaves open the possibility that they may pursue the merger at a later date should it be deemed lawful in the administrative proceedings," Nelson wrote.
UFCW local unions representing more than 100,000 grocery store employees working at Albertsons and Kroger-owned stores in 14 states and the District of Columbia applauded the decision to reject the mega-merger.
“The merger would be detrimental to our communities, would harm farmers and suppliers who deserve a healthy balance to negotiate fair prices for their hard work. Instead, the proposed merger would create an out-of-balance system that drives up prices, drives out competition, and drives down wages and safety standards,” the unions said in a release. “We call on Kroger and Albertsons executives to abandon this misguided merger and turn their focus back where it belongs: operating grocery stores. They should redirect the billions of dollars that had been earmarked to pay off Albertsons’ shareholders to instead re-invest in our stores."
