Siding with state and federal regulators who said a $24.6 billion merger between the two supermarket behemoths would hurt customers and grocery employees, a federal judge in Oregon temporarily banned Kroger’s planned acquisition of Albertsons on Tuesday.
That agreement is likely to be sabotaged by U.S. District Judge Adrienne Nelson’s interim injunction, which stops the merger while a Federal Trade Commission proceeding is ongoing. During a three-week hearing earlier this year in Portland, Kroger’s lawyers made that claim.
Based in Boise After Walmart, Albertsons is Kroger’s biggest opponent. Along with Safeway, Vons, Randalls, and a number of other brands, Albertsons is the owner of the grocery store chain that shares its name. The grocers said that their merger will make it easier for the merged business to compete with both online and physical rivals.
According to the FTC’s case, which was supported by state attorneys general from Oregon, the District of Columbia, and seven other states, a merger between Kroger and Albertsons would reduce competition, which would lead to higher grocery prices, lower-quality items, and fewer options for customers.
According to Judge Nelson, the planned merger would eliminate the fierce head-to-head competition between Kroger and Albertsons. Therefore, the proposed merger is presumed to be illegal and is likely to have unilateral competition implications.
Nelson continued by saying that the FTC made a strong case that the elimination of direct competition would encourage price hikes in a number of areas.
Twelve weeks after the three-week hearing in the federal courthouse in Portland came to an end, the ruling represents a win for the FTC, which has vigorously halted transactions it believes to be anticompetitive and detrimental to consumers.
Until the federal agency can conclude its administrative action against what it claims would be the greatest supermarket consolidation in U.S. history, a preliminary injunction temporarily prevents the merger. According to the FTC, its internal hearing over the proposed agreement won’t start until December 18.
During the federal hearing, Kroger and Albertsons’ lawyers hinted that the grocery stores would probably back out of the agreement rather than wait for the FTC’s assessment, which could take months or even more than a year.
However, Albertsons and Kroger said they will consider their alternatives and refrained from canceling their agreement on Tuesday.
In a case filed by Attorney General Bob Ferguson, a Washington state judge independently decided to stop the merger shortly after Nelson’s ruling.
The Colorado Attorney General’s office has also filed another antitrust action against the deal. In that case, the judge has not yet made a decision.
Timeline:
Kroger-Albertsons merger
The owner of Fred Meyer and QFC, Kroger, has offered to pay $24.6 billion to acquire Safeway’s rival, Albertsons.
In order to compete with nonunion giants like Walmart, Costco, Target, and Amazon, Kroger and Albertsons have maintained that they must merge. Kroger stated in a post-hearing legal briefing that it saw those competitors as a danger to the local grocery store’s continued survival.
The grocers contended that consumers have a wide range of options when it comes to food shopping, including conventional supermarkets, convenience stores, club stores, and dollar stores. Any establishment that takes a cut of a customer’s food expenditures is seen as a competitor by Kroger and Albertsons.
The grocers contended in a legal brief following the hearing that a wide range of merchants and retail formats compete intensely for every dollar that a customer spends in today’s grocery sector. To satisfy their grocery demands, consumers are increasingly dividing their shopping over several grocery stores.
But according to the FTC’s study, the proposed acquisition would significantly reduce competition in hundreds of regions nationwide, including Portland and a large portion of the Northwest, where the companies now compete.
Kroger and Albertsons announced that they will sell 579 of their locations to C&S Wholesale Grocers, a grocery supplier with a small chain of stores in the Northeast, located in New Hampshire, in an attempt to allay worries about how a merger might affect competition. In Oregon, C&S would have purchased 62 stores.
No stores will close, according to Kroger and Albertsons’ prior statements, and those that were sold to C&S would retain their union employees and previously negotiated contracts.
However, the FTC contended that C&S is largely a wholesaler with a dismal history of operating retail grocery shops and that it would not have the means to compete with an expanded Kroger, perhaps resulting in the closure of the recently purchased locations.
In essence, Nelson’s ruling halts the merger. The administration of President-elect Donald Trump may or may not follow the Biden administration’s strong business concentration policies.
Meanwhile, the tenure of FTC Chair Lina Khan has ended since testimony concluded in September. Trump appointed Andrew Ferguson as Khan’s successor on Tuesday. Three Democrats and two Republicans currently make up the FTC’s five commissioners, including Ferguson, a Republican nominated by Biden. (A maximum of three commissioners may simultaneously belong to the same political party.)
“Our office will continue to monitor this matter and remain vigilant in protecting consumers from anti-competitive behavior and practices,” Oregon Attorney General Ellen Rosenblum said in a statement on Tuesday.
“Today’s decision is a win for Oregonians and a win for competition in the marketplace at a time when rising grocery and pharmacy prices are hurting countless households,” Rosenblum said.
Although a large portion of that gain occurred prior to the court decision, Kroger shares increased 5.1% on Tuesday to $60.73. Prior to the decision, Albertsons’ stock had been somewhat higher, but it fell 2.3% to $18.51 after the finding.
–Kristine de Leon uncovers tales about data enterprise, small company, retail, and consumer health. [email protected] is her email address.
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