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 effectively ruined by U.S. District Judge Adrienne Nelson’s interim order, 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.
In its lawsuit, the FTC contended that a merger between Kroger and Albertsons would reduce competition, leading to higher grocery prices, lower-quality products, and fewer options for consumers. The lawsuit was joined by state attorneys general from Oregon, the District of Columbia, and seven other states.
Nelson, the case’s judge, claimed that the proposed 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.
The Federal Trade Commission, which has vigorously halted transactions it deems anticompetitive and detrimental to consumers, has won the case, which was rendered 12 weeks after the three-week hearing at Portland’s federal courthouse.
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.
Nelson’s ruling coincides with the issue being considered by justices in Colorado and Washington, where the state attorneys general have filed independent challenges to stop the merger. Judge Marshall Ferguson of Washington’s King County Superior Court is scheduled to render his decision on Tuesday, the court’s website states. A Colorado state judge has yet to provide a definitive date for the case. However, the attorneys general of both states have stated that they would seek a permanent injunction to stop the transaction.
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.
However, according to the Federal Trade Commission’s examination of the proposed acquisition, it would significantly reduce competition in hundreds of regions nationwide, including Portland and a large portion of the Northwest, where the retailers 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 term of Federal Trade Commission Chair Lina Khan has ended since testimony concluded in September. President-elect Donald Trump is expected to select her successor, and it is uncertain if the new administration would follow the Biden administration’s aggressive business consolidation policies.
–Kristine de Leon uncovers tales about data enterprise, small company, retail, and consumer health. [email protected] is her email address.
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