Washington State Attorney General Bob Ferguson filed an antitrust lawsuit seeking to block the proposed $25 billion merger between supermarket giants Kroger and Albertsons, alleging the deal would raise prices and limit options for consumers.
Lead Up To The Lawsuit
In October 2022, Kroger and Albertsons announced an agreement to combine the two companies in a deal expected to close in early 2024, pending regulatory approval. The merger would create one of the largest grocery retail conglomerates in the U.S., with nearly 5,000 stores nationwide.
However, the proposal has faced scrutiny from critics warning of lessened competition. Kroger and Albertsons rank as the #1 and #4 largest supermarket operators respectively, with substantial market share in many regions across the country.
Key Players In The Merger
|# of Stores
|Kroger, Fred Meyer, Fry’s Food Stores, Ralphs
|Albertsons, Safeway, Jewel-Osco, Shaw’s
In January 2023, Kroger announced plans to divest between 100-375 stores to appease antitrust regulators, selling locations primarily in areas where the two chains directly compete. But officials in Washington were not satisfied, arguing the combined entity would still account for at least 50% of grocery sales statewide even after divestitures.
Washington AG Alleges Anticompetitive Harms
On January 13th, 2024, Attorney General Ferguson made good on his threats to legally challenge the merger by filing a complaint in King County Superior Court. The lawsuit alleges the deal constitutes an illegal monopoly that would “substantially lessen competition” and ability for consumers to choose where they shop.
The complaint warns Kroger and Albertsons becoming one company would allow them to increase prices while providing lower quality products and services. It argues the combined chain’s enhanced bargaining power and economies of scale would also let it demand more favorable contracts from suppliers, further raising costs across the entire grocery sector.
“This merger is illegal. If allowed to proceed, it would hurt Washington working families, who are already struggling with rising inflation,” said Ferguson in a statement.
His office also suggested divestitures proposed so far fail to sufficiently preserve competition, as the companies would still operate a majority of stores post-merger in many parts of Washington.
Potential Impacts For Consumers And Employees
Consumer advocates have raised alarms the reduced choice from consolidation could hit low-income shoppers especially hard. Albertsons and Kroger banners like Fred Meyer and QFC are primary grocery options for many households statewide.
There are also concerns about potential impacts for workers. Kroger and Albertsons employ a combined 710,000 associates nationwide, with UFCW labor unions worried the merger could threaten jobs amid store closures and corporate redundancy. Albertsons terminating employee pensions after its prior takeover of Safeway in 2015 remains a sore subject.
However, executives at both companies have asserted the deal would actually lower prices by improving efficiency and passing savings to customers. They also claim there is limited geographical overlap between their store networks, pledging to work cooperatively with regulators while touting benefits for all stakeholders.
What Comes Next In Legal Fight
With the Washington lawsuit now filed, officials have asked the court to schedule proceedings on a preliminary injunction during Q1 2024. This could decide whether the merger is halted pending further litigation, which may otherwise not conclude until 2025.
But the ultimate fate of Kroger and Albertsons joining together will likely hinge on federal antitrust approval. The companies’ merger agreement with each other stipulates they must secure FTC clearance by January 2025 or have the right to walk away if challenged by regulators. With Washington added to the coalition now questioning the merger alongside Oregon, California and Illinois, federal-level rejection grows more plausible.
Executives had aimed to finish the acquisition during Q1 2024 but are now indicating that timeline will slide back further amid the rising legal scrutiny. Though expressing confidence in winning eventual permission, Albertsons stated “we have determined that moving the closing date of the merger is prudent to allow more time…to demonstrate that our transaction delivers benefits to consumers, communities and associates.”
How courts and regulators proceed promises major implications not just for the two supermarket giants, but the entire grocery industry’s future competitiveness and capacity to serve American consumers. Washington’s lawsuit represents the latest shot fired against consolidation some deem would only benefit Kroger and Albertsons themselves, at the expense of public interest.
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