AG Ferguson Files Lawsuit Alleging The Deal Would Illegally Raise Prices And Limit Choices For Shoppers
Washington State Attorney General Bob Ferguson filed an antitrust lawsuit on Monday seeking to block the proposed $25 billion merger between Kroger and Albertsons, the two largest grocery chains in the state.
The lawsuit alleges that the deal would violate antitrust laws by reducing competition and resulting in higher prices, fewer choices, and lower wages for Washington residents. Ferguson said the combined entity would control nearly 50% of the state’s grocery market.
The Proposed Merger And Its Expected Impact
Kroger and Albertsons announced the merger agreement last October, in a deal that would create one of the largest grocery retailers and wholesalers in the United States.
The merger proposal comes amid rising inflation and economic uncertainty for many consumers. Grocery prices in particular have been surging, putting pressure on household budgets. Combining two dominant players like Kroger and Albertsons could make the situation worse, argues Ferguson.
His lawsuit states that extensive economic analysis shows the merger would substantially lessen competition in many local markets in Washington. The combined chains would be able to raise prices, reduce quality, limit choices, and more easily resist entry from other competitors.
This would harm not only consumers but also suppliers like farmers and food producers, as well as workers.
Why Washington State Is Uniquely Impacted
Washington would be uniquely impacted by this merger as Albertsons and Kroger currently operate 106 stores combined in the state, giving them a commanding market position.
Albertsons owns Safeway, Haggen, and Albertsons stores while Kroger owns Fred Meyer and QFC. These five chains make up 5 of the 7 largest grocery sellers in the state.
After the merger, the combined Kroger-Albertsons entity is projected to control at least 50% of the market in 38 separate local areas of Washington. This high level of concentration raises significant red flags from an antitrust perspective.
Ferguson warned that such a merger could eliminate direct competition between neighboring Kroger and Albertsons stores, making it easier for the combined company to raise prices. Workers would also have fewer options and less leverage in negotiating wages and benefits.
Calls The Merger An Illegal Attempt to Monopolize
The lawsuit calls the proposed merger “illegal conduct aimed at monopolizing the retail sale of goods in Washington grocery stores.”
It asks the court to permanently stop Kroger and Albertsons from going through with the deal. Ferguson said his office worked hard to negotiate an agreement with the companies that would address competition concerns, but the firms rejected proposed solutions.
“This merger is illegal. Period. Kroger and Albertsons would combine to control nearly 50% of the state’s retail grocery locations – well above the threshold to presume this proposal is anti-competitive,” said Ferguson. “It will raise prices, limit choices, and reduce quality and services.”
Kroger And Albertsons Delay Closing Date
Just hours after Washington announced the lawsuit on January 16, Kroger and Albertsons said they were delaying the expected closing date of the merger from the first half of 2024 until early 2025.
They still plan to fight the lawsuit and argue the merger will benefit consumers through investments in stores and technology. But the delay signals that significant antitrust scrutiny remains an obstacle for completing the acquisition anytime soon.
Several consumer advocacy groups praised Ferguson’s legal challenge. They agree that allowing the Kroger-Albertsons deal would be terrible for competition and lead to higher prices.
Other States Reviewing Impact, FTC Also Investigating
The lawsuit from Washington adds to mounting political and regulatory pressure against the mega-merger. Several other states are actively reviewing the competitive impact for their residents.
Additionally, the Biden administration and Federal Trade Commission have opened investigations into whether the deal would illegally harm consumers and workers nationwide.
The FTC is expected to make a final decision on whether to block the merger in coming weeks or months.
What Supporters And Opponents Are Saying
Kroger and Albertsons argue the merger will allow them to better compete against larger rivals like Walmart and Amazon. It would lead to lower prices through improved efficiencies.
Combining technology infrastructure will help modernize stores and enhance the shopping experience.
The deal will lead to higher wages and better benefits for associates.
Attorney General Ferguson believes extensive economic analysis shows it will raise prices and limit choices.
Consumer advocates say it will cripple competition between 2 major chains and make living costs even higher.
Independent grocers worry they’ll be squeezed out without the buying power of Kroger-Albertsons.
Labor unions fear significant job losses as stores get consolidated and remaining workers lose bargaining power.
What Happens Next
The lawsuit aims to permanently block the merger under Washington and federal antitrust laws. Kroger and Albertsons will have opportunities to present arguments defending the acquisition.
Expert testimony and economic data will play a key role as the case works its way through courts in coming months.
If other states join Washington or the FTC sues as well, it could put major additional pressure on the retailers to abandon their merger ambitions. For now, they remain committed to completing the deal but regulators seem poised to push back aggressively.
This high stakes battle has broad implications not only for the grocery industry but also for inflation-weary shoppers across America.
Key Details Of Washington Lawsuit Against Kroger-Albertsons Merger
|January 16, 2023
|Washington State Attorney General Bob Ferguson
|The Kroger Co. and Albertsons Companies Inc.
|King County Superior Court
|Cause Of Action
|Violations of the Consumer Protection Act and Washington’s Antitrust Laws
|Higher prices, reduced quality and services, less choices for consumers
|Permanently stop the $25 billion merger
|Kroger Chains In WA
|Fred Meyer, QFC
|Albertsons Chains in WA
|Safeway, Haggen, Albertsons
|Combined WA Market Share
|Ongoing federal investigation
Overall the lawsuit alleges the deal would substantially reduce competition in Washington’s grocery industry, leading to monopolistic behavior that harms consumers, workers, suppliers and more. Stopping this consolidation is needed to protect affordability and access according to AG Ferguson.
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