The Washington Attorney General sued to prevent Kroger from merging with Albertsons and creating a massive grocery store. Here, Kroger in Flowood, Mississippi operates a gas station and pharmacy.
Rogelio V. Solis/AP
Hide caption
Toggle caption
Rogelio V. Solis/AP
The Washington Attorney General sued to prevent Kroger from merging with Albertsons and creating a massive grocery store. Here, Kroger in Flowood, Mississippi operates a gas station and pharmacy.
Rogelio V. Solis/AP
Washington’s attorney general sued Kroger and Albertsons on Monday to block the merger of the two largest supermarket chains in the United States, asking the court to issue a permanent nationwide injunction.
The mega deal, worth $24.6 billion, promised to shake up competition in the food aisles. Kroger, the largest supermarket operator with 2,719 locations, owns Ralphs, Harris Teeter, Fred Meyer, King Soopers and other chains. Albertsons is the second largest supermarket chain, with 2,272 stores, and owns Safeway and Vons. Together they employ about 720,000 people.
However, Kroger and Albertsons say they have to combine to stand a chance against non-traditional competitors, including Amazon, Costco and especially Walmart. Grocers say the latter two companies sell more groceries than Kroger and Albertsons combined. They stress that they offer union jobs, unlike some of their competitors. They hoped to close the deal in August.
A lawsuit filed in Washington state court could derail those plans. Attorney General Bob Ferguson says that since the chains own more than half of all supermarkets in his state, their proposed union would eliminate the competition that helps keep food prices in check.
“Shoppers will have fewer choices and less competition, and without a competitive market, they will pay higher prices at the grocery store,” Ferguson said in a statement.
The lawsuit cites an Albertsons vice president writing, “You’re essentially creating a monopoly on grocery stores with the merger, so (it) makes no sense” when the deal was just rumors.
The legal challenge to the merger does not come as a surprise. The Federal Trade Commission has been reviewing the proposed deal for more than a year. Many state officials and lawmakers have expressed concerns that this connection threatens to reduce options for shoppers, farmers, workers and food producers. As early as May 2023, Kroger CEO Rodney McMullen said the two grocery chains were “committed to litigation in advance” if federal regulators or state attorneys general rejected the merger.
Ohio-based Kroger and Idaho-based Albertsons overlap particularly in western states. To pre-empt regulators’ concerns about reduced grocery competition in those markets, the retailers have found a buyer for up to 650 stores they will sell as part of the merger: C&S Wholesale Grocers, a supplier that also operates some Piggly Wiggly stores. Supermarkets.
Ferguson said this plan is not enough to protect supermarket employees and customers in his state. His office asserts that the combined Kroger-Albertson family will continue to enjoy a “near monopoly” in many parts of Washington. She also questioned whether C&S was able to manage the markets successfully.
Albertsons’ merger with Safeway in 2015 serves as a warning in this regard. The Federal Trade Commission required it to sell 168 stores as part of the deal. Within months, one of the buyers laid off workers and filed for bankruptcy protection. Albertsons bought back 33 of those stores — some for just $1 at auction, Ferguson says.
Antitrust experts in the Biden administration have previously spoken skeptically about whether divestments adequately protect competition, including prices and terms with suppliers. Regulators have also pushed for tougher scrutiny of mega deals, making this merger a high-profile test.