It’s been more than 15 months since the Cincinnati-based supermarket giant announced its controversial $25 billion plan. Antitrust legal experts say all eyes are turning to U.S. District Court in Portland, Oregon, where a judge has already been assigned and federal regulators have gotten a temporary order barring the deal from going through until arguments are heard in court.
Here are legal experts' first impressions of the FTC’s case and a preview of what lies ahead:
The FTC actually filed two cases against the Kroger merger. Why?
The FTC is fighting the merger through two related legal actions: In Oregon, it’s suing to halt the merger, while it has also filed a complaint through an in-house administrative court at the FTC in Washington, D.C.
Antitrust cases can take a year if they go through the full administrative proceeding that functions as a federal trial, legal experts said.
In theory, the FTC wants a court order from the Oregon court, so it can focus on prosecuting its administrative case back in Washington, D.C. But, in practice, antitrust experts say to watch the Oregon case, which could end the dispute quickly.
How important is this Oregon case seeking a preliminary injunction? (Hint: it's huge)
The FTC's Oregon case seeking a preliminary injunction will be a "mini-trial" with evidence and witnesses (but no jury) that could decide the whole thing, antitrust experts said.
If the Oregon court awards a preliminary injunction, it could mean an unacceptable delay for Kroger and prompt it to call off the merger.
“In practice, the grant or denial of the preliminary injunction is the end of the matter,” Kovacic told The Enquirer. “If they (Kroger) lose at PI stage, they won't take the time and expense of trying to obtain favorable results … It's a tremendous drain on the productivity of the company ... Can you imagine how much work has gotten done at Kroger or at Albertsons in the last couple of months?”
Either party could also contest an unfavorable preliminary injunction decision to a federal appellate court, but after that there’s a strong possibility the case would be dropped before heading back to the FTC administrative court.
Kroger declined to discuss how far it will press its case against the FTC and several attorneys general seeking to kill the merger.
Albertsons employee Shelly Elmquist gathers shopping carts at the Albertsons parking lot in Phoenix in 2023.
Why Oregon?
There are several federal courts in the U.S. with deep benches of judges with experience in antitrust: Washington, D.C., New York, San Francisco and Seattle, for example. Oregon is not one of them, yet the FTC filed its case there.
Antitrust experts aren’t sure why.
It’s an appropriate venue since both Kroger and Albertsons have dozens of stores in the state – and several are targeted for divestiture to C&S Wholesale Grocers. Beyond that, experts say regulators might be hoping to speed the case along by contesting it in a court with a lighter docket. Or the state’s attorney general, who joined as a plaintiff, might figure into proceedings. Or they think an Oregon court might be more sympathetic to the case.
Federal Trade Commission chairperson Lina Khan speaks at a Kroger town hall meeting in Phoenix.
Who's the Oregon judge?
The work in court is already underway. The FTC has been granted a temporary restraining order blocking the merger from taking place while regulators seek the preliminary injunction. Kroger and Albertsons agreed to the routine measure.
The case has also been assigned to a judge: Adrienne Nelson, a Biden appointee, who was confirmed to the federal bench last year after serving five years on the state Supreme Court. From 2006 to 2018, she served as a circuit court judge on the Multnomah County Circuit Court in Portland. Prior to taking the bench, she worked as a coordinator and senior attorney for Portland State University from 2004 to 2006.
Early in her career, Nelson worked as a public defender representing indigent defendants who were charged withstate crimes. Later, from 1999 to 2004, she worked for a law firm where she gained experience in civil litigation, personnel disputes, employment law matters, commercial cases, family law, arbitrations and mediations.
What arguments are in the FTC’s case?
Antitrust experts said much of the FTC’s case is a traditional argument that the acquisition by Kroger would give it too many stores in several markets, which would reduce competition. The lack of strong local rivals would allow the grocer to raise prices on consumers who wouldn’t have good enough options to shop elsewhere.
Antitrust experts say it’s a strong argument – and you can tell because Kroger and Albertsons arranged a divestiture deal for at least 413 stores to C&S Wholesale Foods to mollify those concerns. Eleanor Fox, a trade regulation professor at New York University, said deciding whether the deal to sell off stores is enough to maintain competition in affected markets will be critical to the case.
“This happens to be a really important question … The FTC is saying clearly that the spin-offs (stores sold to C&S Wholesale) cannot solve the anticompetitive problem and that you can't trust the spin-offs. It’s a big bet,” Fox told The Enquirer.
The FTC also makes another argument that combining Kroger and Albertsons will hurt union workers because they would no longer be able to make the two companies compete for their labor.
Douglas Ross, an antitrust law professor at the University of Washington, said the argument reflects the Biden Administration’s commitment to labor, but it might not work. He said grocery workers are a large, lower-skilled labor force and it could be argued they could get jobs for other companies and other fields, therefore their pay and prospects aren’t hurt by the merger.
“I’m skeptical whether this theory is really going to carry the day,” Ross told The Enquirer.
Kroger worker Desiderio Reynoso Morales disinfects shopping carts at a store in Newport, Kentucky, in 2020.
What evidence might make a difference in the FTC's case?
Though heavily redacted, the FTC’s lawsuit makes clear references to evidence that previously surfaced in antitrust cases filed by the Washington and Colorado attorneys general.
In Colorado, investigators uncovered an e-mail that revealed a secret deal struck between Kroger and Albertsons during a 10-day strike at Kroger's King Soopers stores in 2022. Worried about losing workers and pharmacy customers, Kroger persuaded its rival not to poach its workers or solicit customers, according to court documents.
“It doesn't look good, that's for sure. It makes it harder for the companies to insist their proposed merger doesn't create a risk to (labor) competition,” Bartholomew told The Enquirer. “If the collusion did occur, then the market might arguably be so concentrated that the risk of collusion has come to fruition. This would make the proposed merger that much more of a risk.”
Other electronic communication first revealed by Washington state investigators may come to haunt the two grocers. In a series of internal chats, Albertsons executives expressed misgivings about the promises of grocery prices going down after the merger and the legality of combining of the two companies, according to court documents.
One executive said the deal was “basically creating a monopoly.” Another executive wrote: “It’s all about pricing and competition and we all know prices will not go down.”
Are all the workers against the merger? (Hint: there's a twist)
Evidence will be presented and witnesses may be called during the proceedings in Oregon.
While the FTC has based part of its case on a stance of looking out for Kroger and Albertsons workers, one local chapter has endorsed the merger. UFCW Local 555, which represents 18,000 workers in Oregon, Washington, Idaho and Wyoming, on Feb. 19 issued a statement in favor of the deal.
That stands in stark contrast to most of the unions representing workers impacted by the proposal: The United Food and Commercial Workers International Union (UFCW), which represents 1.2 million workers in grocery and other industries across North America, applauded the FTC for suing to stop the deal. Similarly, UFCW Locals 5, 7, 324, 400, 770, 1564 and 3000, which represent 100,000 workers in California, Colorado, New Mexico, Oregon, Washington and Washington, D.C., have vigorously opposed the deal.
But Miles Eshaia, a spokesman for Local 555, said its membership is concerned that the investment firm that owns Albertsons plans to sell off the company. Their membership would prefer to work for Kroger and C&S Wholesale Grocers than some other buyer yet to be determined.
“We’re worried about the future: Albertsons is for sale. Cerberus (Capital Management) is not going to hold on to it forever,” Eshaia told The Enquirer.
A UFCW union button worn by Kroger workers in campaign during the COVID-19 pandemic.
Still, legal experts say decisions in the federal or two state courts could influence the other cases. They also noted the state cases could potentially delay the merger getting completed if the federal regulators’ case is unsuccessful, but one or both of the state cases remain viable.
“The federal proceedings are independent of the state attorneys general cases,” Bartholomew told The Enquirer. “Even if the FTC loses, those cases could still cause significant headaches for Albertsons and Kroger.”
Washington Attorney General Bob Ferguson (left) speaking at a 2023 event.
Ross predicted the federal case would move quickly and the state courts hearing the Washington and Colorado antitrust cases might wait to see what happens in Oregon.
“If the FTC doesn’t get the injunction … then we might see Washington or Colorado or both push their cases and ask for the same thing,” Ross said. “(The states) can take another bite at the apple.”
Colorado Attorney General Phil Weiser speaks during a Kroger-Albertsons merger town hall in 2023.
