The Washington lawsuit filed in state court on Jan. 15 comes after more than a year of waiting for a decision by the Federal Trade Commission on whether to fight the merger. To the casual observer, the new legal challenge seems like a distraction from a much bigger potential fight with federal regulators, almost a nuisance lawsuit.
It’s not. The lawsuit or any other pending or future antitrust litigation could kill the whole deal, legal experts tell The Enquirer. In fact, U.S. antitrust law permits not just federal challenges but state and even consumer lawsuits.
One of the largest-ever proposed retail mergers, the Kroger proposal has been divisive from the start. The deal affects a combined network of nearly 5,000 stores in almost every U.S. state and the employment of more than 700,000 workers – more than the U.S. Postal Service.
So far, multiple states and one consumer group have taken legal action against the merger. Several states are pursuing antitrust investigations that could lead to more fights in court.
Here’s what’s happened so far, what’s being contested and what might still lie ahead:
Albertsons employee Shelly Elmquist gathers shopping carts at the Albertsons parking lot located at the Desert Ridge Marketplace in Phoenix on March 7, 2023.
‘A complete wild card.’ Washington’s Bob Ferguson sues to kill Kroger deal while running for governor
In announcing his lawsuit, Washington Attorney General Bob Ferguson made the stakes of his case clear: the litigation “seeks to block the merger of Kroger and Albertsons nationwide.” In his filing, he argued the deal would “substantially lessen supermarket competition” and “increase the likelihood that prices of food … will increase” for consumers.
Kroger officials vowed to defend the merger against Ferguson’s lawsuit.
Washington Attorney General Bob Ferguson speaks as Washington Gov. Jay Inslee, right, looks on before the signing of several bills aimed at protecting reproductive health and gender-affirming care on April 27, 2023, at the University of Washington's Hans Rosling Center for Population Health in Seattle. Attorney General Ferguson launched an exploratory campaign for governor on Tuesday, May 2, 2023, one day after incumbent Jay Inslee announced he would not run again.
Consumers say merger ‘threatened loss or damage’ to competition in California lawsuit
Lawsuits against mega-mergers don’t need a government entity to challenge them in court, antitrust experts say. But the reason most successful antitrust cases are brought by the federal or state governments is because they have the personnel and resources to file a strong case.
A lawsuit filed in U.S. District Court in San Francisco on behalf of two dozen consumers in 12 states was dismissed in December by federal judge Vince Chhabria after he found the consumers “failed to provide enough information about their own situations to adequately allege that they are likely to suffer an injury from the proposed merger.” He added “only a few allege they have shopped at an Albertsons or Kroger store at all.”
“Consumers are entitled to sue,” Herbert Hovenkamp, an antitrust law professor at the University of Pennsylvania told The Enquirer, but quickly added most consumer suits fail. “They would have to show harm to them as consumers and ordinarily that would higher prices - that is not an easy claim to make… (because following mergers) the big chains ( typically lower prices to) undersell single store operations or smaller chains.”
An updated lawsuit with additional consumer information was filed on Jan. 10, but might meet with further skepticism by the court.
Some of the consumers live in states where both Kroger and Albertsons operate that will be impacted by the merger with store divestitures and potential closings, such as Washington, California and Arizona.
But some of the consumers in the lawsuit are from states where only Kroger or only Albertsons operate, such as Massachusetts (which has no Krogers) and Michigan (no Albertsons stores). For the second group of consumers, the lawsuit argues the merger would harm "potential" competition they would enjoy in the future if the deal didn't take place.
“In addition to the actual competition in sections of the country where Kroger and Albertsons are direct competitors, the (merger) agreement also eliminates the potential competition," according to the updated complaint.
Kay Turnage of Clifton shops at Kroger's new Downtown store at the corner of Court and Walnut streets Wednesday, September 25, 2019. Turnage said always attends the openings of new Kroger stores and that she arrived at 6 a.m. for Wednesday’s opening.
The District of Columbia, California, Illinois and Washington sued to halt part of deal, but lost
In two early legal challenges to the proposed merger, attorneys general for the District of Columbia and three states sought to delay or stop part of the deal’s financing. As part of the $25 billion transaction, Albertsons planned to pay a one-time special dividend to shareholders that would cost $4 billion.
Washington sued in state court, while the others joined together in a federal lawsuit in U.S. District Court in Washington, D.C. In both lawsuits, the attorneys general argued the cash payout by Albertsons – which the grocer was paying for with a combination of cash on hand and borrowed dollars – would weaken the company and thus injure competition in the marketplace.
Both lawsuits succeeded in winning initial delays of the dividend, but ultimately the courts weren’t convinced to continue injunctions blocking the payout.
An Albertsons grocery store is seen in 2022 in Boise, Idaho. Washington state Attorney General Bob Ferguson on Monday, Jan. 15, 2024, sued to block the proposed merger of Kroger and Albertsons, two of the nation's largest grocery chains.
Besides the FTC, several states investigating the merger and considering ‘options’
As federal antitrust officials grind ahead, several states say they are also looking at the deal and further legal challenges are possible.
Arizona, California and Colorado told The Enquirer they are investigating the proposed merger for antitrust implications, but otherwise offered little comment.
“Our investigation is ongoing and we have no updates,” officials with the California Attorney General's office told The Enquirer.
“Given the ongoing nature of the investigation I am unable to comment further at this time,” an official with the Arizona Attorney General's office added.
After leading the failed dividend suit in federal court, the District of Columbia Attorney General's office said they would “not confirm, deny, or comment on investigative activity.”
The only state with both Kroger and Albertsons stores to rule out further action was Utah, which has dozens of Kroger stores (mostly under the Smith's banner) but hardly any Albertsons stores.
"We don't plan to get involved: Albertsons presence in Utah is two stores," an official with the Utah Attorney General's office, noting there was little concern about closures due to overlapping stores.
Montana's Attorney General officials told The Enquirer their office “shares similar concerns regarding the merger” as those raised by the Washington lawsuit and they were “actively examining the issue and considering options, which may include litigation.”
