As we went to press on October 4, the Kroger-Albertsons merger proposal was operating on three legal fronts. The first, and likely the most important, is the Federal bench trial in U.S. District Court in Portland, OR which ended on September 17 and is awaiting a ruling by Judge Adrienne Nelson on whether or not to grant a preliminary injunction to the FTC which in effect would halt the merger from occurring.
Separately, a jury trial in King County Superior Court in Seattle began on September 16 with Washington state attorney general Bob Ferguson charging that a merger between the two large chains would adversely impact competition and is unnecessary because both retailers are consistently profitable and would continue to be so even if the merger were denied. Ferguson originally filed suit against Kroger and Albertsons in January 2024.
On September 30, a third trial (bench trial) began in Colorado District Court in Denver. The trial is the culmination of a lawsuit filed by Colorado attorney general Phil Weiser originally filed in February 2024, seeking to quash the potential deal for anticompetitive reasons.
Much of the same ground was covered in all three trials. The U.S. government (FTC) charged that the merger would adversely impact union employees, consumers and communities and wouldn’t necessarily lower prices.
Kroger and Albertsons have continually countered that point by saying prices would be lowered, front line jobs would be fully protected and stores would not close as a result of the deal.
The FTC and the two states also contended that C&S Wholesale Grocers, which agreed to acquire 579 overlapping stores, was not an adequate third-party buyer due to its lack of experience in operating corporately-owned retail supermarkets.
However, there were some enlightening and differentiated details that occurred at each trial (the Washington and Colorado trials were still ongoing at presstime).
At the federal trial in Portland, FTC attorneys tried to connect an admission from Andy Groff, senior director of pricing for Kroger, that it raised prices on milk and eggs beyond inflationary levels as an indicator of what consumers can expect to see if the merger is approved.
The FTC continued on with its offense-oriented legal approach in the Portland trial. In pressing its case against the viability of C&S as a third-party buyer, the agency elicited testimony from C&S president of retail operations Mark McGowan who admitted that that 12 Grand Union and Piggly Wiggly stores in New York and Vermont, acquired after another retail divestiture by Tops/Price Chopper in 2022, are still operating at a loss. FTC lawyers attempted to link that testimony to its overall complaint that C&S does not have the required retail store experience to operate that many stores in an area that would cover 17 states.
The large federal agency has also accused four senior Albertsons executives, including CEO Vivek Sankaran, of destroying text messages about the proposed merger. The FTC added that another Albertsons executive, Todd Broderick, president of the chain’s Colorado division, sent several texts to Scott Shores, Albertsons’ senior director of HR, discussing pricing in which Shores stated that “we all know that prices will not go down.” Broderick acknowledged he might have deleted the texts, but that he did not remove them intentionally.
When Sankaran and Kroger CEO Rodney McMullen ultimately testified, both defended the deal, stating it will help the combined entity better compete against its major competitors – Walmart, Amazon and Costco. McMullen again said the benefits of the merger will be seen in lower prices and upgraded stores.
One of the key points at the trial is that the FTC did not factor in those three large retailers as well as other alternative channel merchants when offering its version of the competitive retail food landscape.
In the Washington trial, state attorneys and their outside counsel painted a scenario that such a merger could lead to a similar result as when Haggen, a regional grocer based in Bellingham, WA, acquired 146 stores from Albertsons, only to see 127 of those supermarkets fail with Albertsons re-acquiring 33 of them.
They also called executives from Walmart, Costco, WinCo and PCC Markets – all competitors to Kroger and Albertson in the state – to testify about grocery competition.
In Colorado, the tone was vitriolic from the start. Senior assistant attorney general Arthur Biller called Kroger a “monopolist of supermarkets” because it seeks to acquire for “no-comp” or “low-comp” stores that offer little to no competition. “Watch what they do, not what they say,” Biller proffered. “Kroger has shown lowering prices is not their business strategy. They look to raise prices on consumers by conducting price probes and looking for ‘no-comp’ stores. After this merger, there are likely to be even more ‘no-comp’ stores, especially in Colorado.”
Kroger attorney Matthew Wolf shot back by noting that Kroger’s prices are currently 10-12 percent lower than Albertsons’.
Even after rulings in all three trials are rendered, both parties will have the right to appeal all judgments. Additionally, attorneys general for Arizona, California, Illinois, Illinois, Maryland, Nevada, New Mexico, Wyoming and the District of Columbia have joined the federal suit but could also file lawsuits in their state as Colorado and Washington have.
In assessing the odds that the merger will ultimately be successful, perhaps University of Washington antitrust professor Douglas Ross summed it best when he said: “Kroger has to run the table to close the deal. If they’re blocked anywhere it’s hard to see how the rest of the transaction can be completed.”