by Julia Shumway, Oregon Capital Chronicle
December 10, 2024
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Judges in Oregon and Washington on Tuesday blocked supermarket giants Kroger and Albertsons from merging, throwing into question the future of the $24.6 billion largest proposed grocery merger in U.S. history.
U.S. District Court Judge Adrienne Nelson in Portland temporarily halted the merger, writing in her 71-page ruling in a lawsuit against the merger led by federal regulators that it would lead to undue market concentration, reduce competition and hurt customers. Her preliminary injunction pauses the $24.6 billion proposed merger while the Federal Trade Commission’s administrative judge continues its review of implications.
King County Superior Court Judge Marshall Ferguson in Seattle also ruled that the merger could not move forward in Washington in a separate state case, saying that the proposed merger violated state antitrust laws. Another state lawsuit is pending in Colorado.
The rulings mean Kroger’s 2022 proposal to buy Albertsons is on hold while the companies decide whether to proceed. If they do, an in-house administrative judge at the Federal Trade Commission will determine whether the merger is anticompetitive, though a Kroger lawsuit seeks to block that review.
The FTC, joined by several states including Oregon, sued in February to block the merger, saying it would eliminate competition, drive up costs and lead to lower-quality products and services. Henry Liu, director of the FTC’s Bureau of Competition, said in a statement that Tuesday’s ruling will protect Americans who buy groceries and work at grocery stores.
“This historic win protects millions of Americans across the country from higher prices for essential groceries — from milk, to bread, to eggs — ultimately allowing consumers to keep more money in their pockets,” Liu said. “This victory has a direct, tangible impact on the lives of millions of Americans who shop at Kroger or Albertsons-owned grocery stores for their everyday needs, whether that’s a Fry’s in Arizona, a Vons in Southern California, or a Jewel-Osco in Illinois.”
Kroger operates about 2,700 stores across 35 states and the District of Columbia. Its stores have different brands throughout the country, including Fred Meyer in the northwest, King Soopers in the Rocky Mountains, Fry’s in Arizona and Harris Teeter in the southeast. About 430,000 people work for Kroger, according to court filings, and it’s the largest employer of union grocery workers.
Albertsons, which merged with Safeway in 2015, is the nation’s second-largest grocery chain with about 285,000 employees and nearly 2,270 stores across the country.
Each sells wide range of products
The plaintiffs argued that the merger of Kroger and Albertsons would combine two expansive entities. They said that they are different from other stores that might carry groceries because they have a broad variety of groceries, unlike gourmet or natural grocers like Whole Foods, limited assortment stores like Aldi and Trader Joe’s, warehouse club stores like Costco or dollar stores.
Supermarkets also compare their prices with other supermarkets and use promotional pricing in ways that other grocery retailers don’t, the plaintiffs argued. And data provided in court filings demonstrated that Albertsons stores lose more sales when Kroger stores open nearby, while a strike that closed King Soopers stores in Colorado for more than a week in 2022 resulted in spiking sales at nearby Safeway stores — proof that the grocery giants compete more with each other than with other types of food retailers.
Attorneys for Kroger and Albertsons argued in response that other retailers including Amazon, Walmart, Costco and Aldi compete with them and that customers visit a variety of stores instead of engaging in one-stop shopping. Nelson wrote that that didn’t mean the stores serve the same need.
“It is not surprising that consumers spend money at a variety of different types of retailers, but this does not necessarily show that those retailers are reasonably interchangeable substitutes for a consumer’s particular needs,” she wrote. “The fact that a shopper may make a monthly trip to Costco to stock up on a smaller number of bulk purchases, for example, does not make a ‘Costco run’ a reasonable substitute for a weekly one-stop visit to a supermarket to purchase most or all grocery items for the week.”
Oregon Attorney General Ellen Rosenblum said in a statement that Nelson’s ruling in the Oregon case confirmed the state’s arguments that the proposed merger would hurt workers and consumers.
“At a time when higher grocery and pharmacy prices are hurting countless households, today’s decision is a win for Oregonians and a win for competition in the marketplace,” Rosenblum said.
Other states involved
Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico and Wyoming joined the Oregon lawsuit, along with the Federal Trade Commission. Arizona Attorney General Kris Mayes described the decision as a victory for consumers, workers and small businesses across the country.
“Had this merger gone forward, it could have harmed families by reducing choices, driving up prices, and eliminating jobs,” Mayes said. “Here in Arizona, where countless communities rely on accessible, affordable grocery options, this decision helps ensure that residents won’t face the potentially devastating impacts of such a consolidation.”
Spokespeople for Kroger and Albertsons said the companies were disappointed and reviewing their options.
“Kroger is disappointed in the opinions issued by the U.S. District Court for the District of Oregon and the Washington State Court, which overlook the substantial evidence presented at trial showing that a merger between Kroger and Albertsons would advance the company’s decades-long commitment to lowering prices, respecting collective bargaining agreements and is in the best interests of customers, associates and the broader competitive environment in a rapidly evolving grocery landscape,” the Kroger statement said.
Washington Attorney General and Gov.-elect Bob Ferguson praised the judge’s decision in the Washington state case, saying that it was a victory for affordability, worker protections and the rule of law.
“We’re standing up to mega-monopolies to keep prices down,” Ferguson said. “We went to court to block this illegal merger to protect Washingtonians’ struggling with high grocery prices and the workers whose jobs were at stake.”
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Oregon Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Oregon Capital Chronicle maintains editorial independence. Contact Editor Lynne Terry for questions: [email protected].