Kroger-Albertsons merger stalled by dual court losses
Monique Merrill
(CN) — Just one hour before a Washington state court was set to issue a ruling in the state’s antitrust case against Kroger’s proposed $24.6 billion takeover of Albertsons, a federal court in Oregon beat it to the punch and issued a preliminary injunction preventing the merger from proceeding until antitrust regulators complete an internal probe.
In Seattle, King County Superior Court Judge Marshall Ferguson largely echoed the conclusion the federal judge in the neighboring state reached. Addressing a packed courtroom Tuesday afternoon, said the proposed merger between the chains specifically violates Washington consumer protection law.
“In my view, the evidence convincingly shows that the current competition between Kroger and Albertsons stores is fierce in the state of Washington,” Ferguson said. A merger would “substantially lessen” competition.
He noted that the parties are free to entertain merger discussions that don't run afoul of state consumer protections.
“This is a case of monumental complexity and monumental importance to grocery consumers in the state of Washington and beyond,” Ferguson said. In his 127-page ruling, Ferguson noted that the merger would be likely to produce anticompetitive effects, particularly because the state has 57 supermarket city areas where the two stores overlap.
Earlier Tuesday, in a 71-page order, U.S. District Judge Adrienne Nelson wrote that the Federal Trade Commission showed a likelihood of success on the merits following a 15-day preliminary injunction hearing that concluded in September. Nelson’s focus was on national antitrust concerns, where Ferguson focused specifically on Washington state law.
The federal judge noted that the preliminary injunction doesn't force the companies to abandon the merger, but rather pauses it until the Federal Trade Commission can carry out its administrative proceeding.
Without an injunction, the companies could have gone forward with a merger before the commission’s probe comes to an end — and if the investigation determined the merger violated antitrust laws, it would be difficult to “unscramble the egg,” Nelson wrote, and preserve competition after exchanging sensitive business information.
“Any harms defendants experience as a result of the injunction do not overcome the strong public interest in the enforcement of antitrust law, especially given the difficulty in disentangling a premature merger,” Nelson wrote.
Kroger first announced its proposed $24.6 billion plan to take over its rival Albertsons in October 2022. Together, the grocery stores would form one of the largest supermarket chains in the country, operating over 4,400 stores.
The proposal was met with sharp criticism from grocery store unions, state attorney’s general and federal antitrust watchdogs.
Washington state Attorney General Bob Ferguson led litigation efforts to halt the acquisition, filing suit in King County Superior Court in January.
The Federal Trade Commission, joined by eight states (Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming), filed suit against the companies in February, asking the court to issue a temporary injunction until the commission had the opportunity to complete an internal antitrust investigation.
Throughout the federal hearing, attorneys for Albertsons and Kroger largely characterized the proposed merger as a necessary step to compete with large, non-traditional grocers like Walmart, Amazon and Costco. The stores have promised the acquisition will lead to lower prices for consumers and stave off mass layoffs and store closures.
“The day that we merge is the day that we will begin lowering prices,” Kroger CEO Rodney McMullen said during direct questioning at the Federal Trade Commission’s preliminary injunction hearing in Portland on Sept. 4.
Albertsons CEO Vivek Sankaran also took the stand during the federal preliminary injunction hearing, admitting that Kroger is one of the store’s top competitors.
“Kroger is our competitor, but not our most important competitor,” Sankaran said. He said Walmart brings “unprecedented scale” to the market, and the companies could better compete if they merged.
Nelson wasn’t convinced by the CEOs, writing that “the overarching goals of antitrust law are not met, however, by permitting an otherwise unlawful merger in order to permit firms to compete with an industry giant.”
The federal judge noted that the preliminary injunction is not forcing the companies to abandon the merger but rather pausing it until the Federal Trade Commission can carry out its administrative proceeding.
National Economic Council Deputy Director Jon Donenberg applauded Nelson's ruling blocking the acquisition, a merger he said would result in "raising grocery prices for consumers and lowering wages for workers."
"Our administration is proud to stand up against big corporate mergers that increase prices, undermine workers and hurt small businesses," Donenberg said.
Oregon Attorney General Ellen Rosenblum said the ruling “confirms our argument that the proposed merger would be harmful to consumers and workers alike.”
“At a time when higher grocery and pharmacy prices are hurting countless households, today’s decision is a win for Oregonians and a win for competition in the marketplace,” Rosenblum said in a statement.
National figures also applauded Nelson’s decision. “Our administration is proud to stand up against big corporate mergers that increase prices, undermine workers, and hurt small businesses,” National Economic Council Deputy Director Jon Donenberg said in a statement.
A Colorado court remains pending on a similar case involving the proposed merger. Second Judicial District Judge Andrew Luxen granted a temporary injunction in July, halting the deal pending the outcome of the bench trial, which concluded in October.