Federal Judge Blocks Kroger-Albertsons $25 Billion Merger Over Competition Concerns
A federal judge in Oregon has blocked Kroger's $25 billion merger with Albertsons, ruling that the deal would reduce competition and harm consumers. This decision is a major setback for both grocery chains and puts the merger in jeopardy, though the companies have the option to appeal the ruling.
Announced in 2022, the merger sought to combine the fifth and tenth largest retailers in the U.S., which own numerous grocery chains such as Safeway, Vons, Harris Teeter, and Fred Meyer. Kroger and Albertsons argued that merging would help them better compete against giants like Walmart and Amazon, as well as the rapidly expanding Aldi.
Kroger and Albertsons both operate primarily with unionized workforces, and they claimed that merging would enable them to compete more effectively with non-union competitors like Walmart, Amazon, and Costco. Additionally, they promised to reduce grocery prices by $1 billion following the merger. However, Judge Adrienne Nelson rejected their argument, stating that supermarkets are distinct from other types of retailers and that the merger would eliminate direct competition between Kroger and Albertsons, which could lead to higher prices for consumers.
In response to the ruling, Kroger and Albertsons expressed disappointment and said they would review their next steps. A Kroger spokesperson maintained that the merger was in the best interests of customers, employees, and the broader grocery sector.
The White House, however, praised the decision. National Economic Council Deputy Director Jon Donenberg argued that the merger would have raised grocery prices and reduced wages for workers.
The proposed merger had faced significant opposition, especially as inflation caused food prices to spike. Unions, small grocery stores, and a bipartisan coalition of lawmakers, including Senators Elizabeth Warren and Mike Lee, also opposed the deal from the start. In February, the Federal Trade Commission (FTC) filed a lawsuit to block the merger, claiming it would result in higher grocery prices and lower wages for grocery workers.
To address concerns, Kroger and Albertsons agreed to divest 579 stores to C&S Wholesale Grocers. However, the FTC argued that C&S was ill-equipped to manage the stores and that the divestiture would not sufficiently address competition issues. Judge Nelson agreed, stating that the divestiture was insufficient and would significantly disadvantage C&S as a competitor.
The case has drawn significant attention due to its potential implications for future antitrust enforcement and corporate mergers. The FTC, under chair Lina Khan, has also filed landmark antitrust suits against major tech companies like Google and Amazon.
Independent grocery stores, which have struggled against larger chains, also strongly opposed the merger, arguing that it would give Kroger and Albertsons greater leverage over suppliers and hurt smaller stores' ability to compete.
The grocery sector has seen increasing consolidation, with the 20 largest retailers controlling 64% of food sales in 2019, up from 30% in 1990. Traditional supermarkets have also lost ground to Walmart, Costco, and online retailers during this period.
Advocates for stronger antitrust regulations cheered the ruling. Rebecca Wolf, senior food policy analyst at Food & Water Watch, stated that the merger would have worsened already high food prices for American consumers.
