With two judges ruling against its merger proposal Tuesday, Kroger’s $25 billion bid to take over rival Albertsons was delayed at least a year and possibly forever, legal experts said.
A federal judge in Oregon and a Washington state judge both issued court orders barring the Cincinnati-based supermarket giant from acquiring its next largest competitor headquartered in Boise, Idaho. Separately, both judges agreed with regulators the merger posed a risk to reducing competition and also expressed doubts that Kroger's divestiture plan would alleviate the loss of a strong rival.
Both decisions are subject to appeal and both Kroger and Albertsons issued statements admitting disappointment but saying they were evaluating their next options.
Antitrust experts said the rulings were major setbacks but Kroger and Albertsons could continue to fight in court.
“It looks bleak − in any other merger, the companies would have abandoned it already,” Christine Bartholomew, a law professor at the University at Buffalo, told The Enquirer. “So, is the merger dead? Beats me.”
What legal appeals would look like
To reverse the rulings, Kroger and Albertsons would have to appeal both decisions in separate courts.
First, the federal case would be appealed to the U.S. Court of Appeals for the Ninth Circuit based in San Francisco, where a panel of three federal judges could overturn the ruling. The FTC’s lawsuit to kill the merger would still be tried in the agency’s in-house administrative court before the FTC’s commission members would issue a final ruling.
If Kroger and Albertsons lose the FTC decision, which most experts believe is likely, the grocers could appeal again in federal court to overturn that decision. If that appeal were unsuccessful, Kroger and Albertsons could appeal again to the U.S. Supreme Court.
To fight the Washington state decision, the two supermarket chains need to file an appeal to the state’s Court of Appeals. However that decision is reached, it could be further appealed to the state’s Supreme Court.
Further legal battles could last months, create risk
Sounds involved?
That’s because it is. And time-consuming. And very expensive − the two retailers have already spent a combined $1.2 billion in their legal fight to merge, according to their latest financials.
Appeals will add a year or more to a merger deal that was first proposed more than two years ago and that Kroger and Albertsons originally envisioned would be completed at the start of 2024. Besides the uncertainty of persuading multiple judges, antitrust experts predict the months of litigation threaten to distract the grocers from day-to-day operations. That’s why most companies walk away from protracted antitrust battles.
“Do they see any options beyond the ray of light that is very far?” Douglas Ross, an antitrust law professor at the University of Washington, asked. “I think this merger is dead.”
Ross estimated it would take about a year to get through the FTC trial and get a ruling that will likely have to be appealed. He added the state appeal in Washington, which would have to be pursued at the same time as the federal appeal, would take about the same amount of time. Further appeals would take additional months.
William Kovacic, the director of the Competition Law Center at George Washington University, guessed Kroger’s likelihood of winning regulatory approval for the merger dropped from about 50% to 10%-20% with the two rulings on Tuesday. He added that he wouldn’t be surprised if Kroger announced next week it was dropping the fight to buy Albertsons.
“This type of defeat usually means you throw in the towel,” Kovacic said. “The hard call is: Are you willing to spend another year on this and what are your prospects of success?”
This article originally appeared on Cincinnati Enquirer: Kroger, Albertsons merger blocked: What's next?