Albertsons executives expressed doubts in internal chats about promises of lower grocery prices and the legality of their proposed $25 billion merger with Kroger, according to an antitrust lawsuit filed Monday by Washington state regulators.
The lawsuit, which seeks to permanently halt the merger, came on the same day that Cincinnati-based Kroger announced it was delaying the completion of its acquisition of the Boise, Idaho-based retailer, citing ongoing discussions with state and federal antitrust regulators. While the two companies had hoped to close the deal early this year, the company issued a statement saying it expects to close the deal by August 17.
Washington Attorney General Bob Ferguson criticized the merger proposal in announcing the legal action, saying it would put workers’ jobs at risk, reduce competition and lead to higher prices.
“This merger is bad for shoppers and workers in Washington,” Ferguson said. “Shoppers will have fewer choices and less competition, and without a competitive market, they will pay higher prices at the grocery store. This is not true, and this lawsuit seeks to stop this harmful merger.”
Ferguson cited internal chat communications by Albertsons executives in which they admitted they were “essentially creating a monopoly” that antitrust regulators in Washington discovered as part of their case. One executive even wrote: “It’s all about pricing and competition, and we all know prices won’t go down.”
Kroger’s proposal, one of the largest retail mergers ever proposed, was controversial from the start. The deal impacts a combined network of nearly 5,000 stores in nearly every U.S. state and employment of more than 700,000 workers — that’s larger than the U.S. Postal Service.
Consumer groups and unions opposed the deal, claiming it would hurt competition and ultimately raise prices and hurt workers. Federal regulators have declined to comment when they decide whether to ban it.
In response to the lawsuit, Kroger officials called it “premature,” saying the two companies “will vigorously defend this matter in court because we care deeply about our customers.”
The local chapter of the United Food and Commercial Workers International Union praised Ferguson’s lawsuit:
“We have been clear and strong in our opposition to the proposed merger between Kroger and Albertsons since day one. Attorney General Ferguson has been a leader in these efforts,” UFCW 3000 said in a statement.
In a separate statement, Kroger updated the timeline for completing the merger:
“We remain in active and ongoing dialogue with the FTC and individual state attorneys general regarding our proposed merger and divestiture plan… Although this is longer than we originally thought, we knew it was a possibility,” Kroger said in a joint statement with the Federal Trade Commission. . Albertsons and C&S Wholesale Grocers, which agreed to buy hundreds of stores in a related divestiture.
To allay concerns about competition and calm regulators, Kroger in September announced a $1.9 billion deal to sell 413 stores to Piggly Wiggly operator and franchisee C&S Wholesale Grocers. The deal would allow Kroger and Albertsons to divest up to 650 stores if regulators want.
While the companies’ statement maintained an upbeat tone, court documents in a civil lawsuit filed by consumers opposed to the deal revealed that federal regulators were far from signing off on the merger deal that Kroger had hoped to get the green light as early as December 15.
Kroger executives have previously vowed to fight the deal in court.
Editor’s Note: Albertsons executives discussed merger concerns in internal chats. An earlier version misdescribed the technology used to talk to each other.
The Inquirer will update this story.