Two judges, one federal and another in Washington state, ruled on Tuesday against Kroger’s $25 billion takeover bid for Albertsons, granting court orders blocking the deal.
After holding a more than three-week "mini-trial" in August and September, U.S. District Court Judge Adrienne Nelson in Portland, Oregon, decided the Federal Trade Commission's case to stop the deal was "likely to succeed." She granted a preliminary injunction to block the merger until the agency's in-house judge decides for or against the deal.
"Plaintiffs (the FTC) are likely to succeed on the merits and the equities weigh in favor of an injunction. Accordingly, plaintiffs' motion for preliminary injunction is granted," Nelson wrote in her decision.
Less than an hour later, King County Superior Court Judge Marshall Ferguson ruled against the deal and issued a permanent injunction against the merger for the state of Washington, after presiding over a trial that ended in October.
"The evidence has shown that the proposed merger is unlawful," Ferguson wrote in his judgement.
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.
Though a major setback for the grocers, the ruling is subject to appeal. Kroger said Tuesday it was "disappointed" and "reviewing its options."
A third antitrust lawsuit brought by the Attorney General's Office in Colorado is still being deliberated by a state judge in Denver District Court.
Regulators crow, workers cheer, Kroger plots next move
Regulators welcomed the rulings.
The FTC applauded the decision, saying it was good for consumers:
"Today's win protects competition in the grocery market, which will prevent prices from rising even more," spokesman Douglas Farrar said in a statement. "(It) makes it clear that strong, reality-based antitrust enforcement delivers real results for consumers, workers, and small businesses."
In a separate statement, Attorney General Bob Ferguson hailed his win in Washington.
"This is an important victory for affordability, worker protections and the rule of law," Ferguson said. “We went to court to block this illegal merger to protect Washingtonians’ struggling with high grocery prices and the workers whose jobs were at stake."
Meanwhile, Kroger said in a statement the judges got it wrong and that the merger was beneficial to consumers, workers and the grocery companies alike.
"Kroger is disappointed in the opinions ... which overlook the substantial evidence presented at trial showing that a merger between Kroger and Albertsons would advance the company’s decades-long commitment to lowering prices, respecting collective bargaining agreements, and is in the best interests of customers, associates, and the broader competitive environment in a rapidly evolving grocery landscape," Kroger said. "The company is currently reviewing its options.”
Albertsons expressed similar "disappointment" and added it was "evaluating our options," in its own statement.
Workers represented by several chapters of the United Food and Commercial Workers International Union (UFCW) cheered the decision and urged Kroger to drop its bid. In a joint statement by UFCW Locals 7, 324, 400, 770, 1564 and 3000, they said:
"The well-reasoned decisions today by both courts make plain what union grocery workers have known all along – this mega-merger would be bad for workers," the unions said, adding it would have also hurt consumers, local communities, farmers and other suppliers. “We call on Kroger and Albertsons executives to abandon this misguided merger."
A big, controversial deal from the start affecting millions of shoppers
Originally pitched in October of 2022, the merger proposal drew immediate controversy, attracting the opposition of politicians as well as consumer and union groups. One of the largest proposed mergers in the history of the retail industry, the outcome of the deal would affect millions of consumers, the ownership of nearly 5,000 stores and the employment of some 700,000 workers.
Cincinnati-based Kroger and its Boise, Idaho, rival Albertsons claimed teaming up would allow them to be more efficient and compete more effectively against nontraditional grocers, such as Walmart, Costco and Amazon. The supermarket chains said they would be able to pass along $1 billion in savings to consumers and preserve union jobs. They pledged no front-line jobs would be cut or stores would be closed in the deal.
Divestiture deal didn’t calm competitive concerns
Kroger and Albertsons attempted to blunt antitrust concerns when they arranged to sell off 579 stores to a major supermarket supplier: C&S Wholesale Foods, but critics expressed concerns the New Hampshire-based company wasn’t an experienced retail grocer and may ultimately choose to resell or even close hundreds of divested stores. Regulators and unions also worried about the job security of the 60,000 workers at the stores being sold.
But earlier this year after months of investigations, the Federal Trade Commission and the state attorneys general of Washington and Colorado separately sued to stop the merger, claiming it would reduce competition and ultimately lead to higher prices for consumers as well as risk store closures and lost jobs for workers.
Merger sought during a period of historic food inflation
The legal fight has taken place as American consumers have seen their grocery bills skyrocket more 25% since March of 2020 compared with the overall inflation of 22% in the same period, according to the U.S. Bureau of Labor Statistics. The rate of the increase of food prices has ebbed significantly but only notched a pre-COVID-19 level in August. Economists blame the worst inflation since the late 1970s and early 1980s on the fallout from the COVID-19 pandemic and the Russian invasion of Ukraine.
How would the merger affect America?
While some recent mergers in tech and other industries sport larger dollar values, other numbers reveal the outsize impact of a Kroger-Albertsons combination.
The total employees at both companies represent one out of six of all U.S. supermarket, supercenter and warehouse club workers. The rivals' combined nearly $180 billion food sales (excluding gas and pharmacy) also account for nearly one of every six of the nearly $1.1 trillion Americans spend on groceries.
How big would Kroger get if the merger went through?
Cincinnati-based Kroger proposed to buy all outstanding shares of Boise, Idaho-based Albertsons, adding most of its 285,000 employees and nearly 2,300 stores to its supermarket operation.
If the deal is completed and after the divestiture of nearly 600 stores, Kroger would:
-
Operate more than 4,400 supermarkets, up from 2,700 right now.
-
Generate about $208 billion in annual sales, compared to $150 billion.
-
Employ about 640,000 workers, up from about 414,000 currently. That would make it one of the 10 largest private employers in the world.
For the latest on Kroger, P&G, Fifth Third Bank and Cincinnati business, follow @alexcoolidge on X (formerly Twitter).
This article originally appeared on Cincinnati Enquirer: A federal judge issues an injunction blocking the Kroger's merger