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A federal judge in Oregon blocked Kroger’s planned $25 billion tie-up with Albertsons, ruling that the largest merger in U.S. supermarket history would restrict competition and harm consumers.

The ruling is a major setback for the chains and threatens the likelihood of the merger. Neither company commented immediately after the ruling.

The merger, announced in 2022, aimed to unite the country’s fifth and tenth largest retailers. The companies include dozens of grocery chains, including Safeway, Vons, Harris Teeter and Fred Meyer.

Supermarkets have been losing ground to competitors in recent decades, and Kroger and Albertsons wanted to merge to better combat Walmart and Amazon.

Kroger and Albertsons employ mostly union workers and said they wanted to merge to be more competitive against non-union giants like Walmart, Amazon and Costco. The pressure on grocers is also increasing from Aldi, the fast-growing German discount supermarket chain.

The merger would “strengthen our position as a more attractive alternative to larger and non-union competitors,” Kroger CEO Rodney McMullen said when the deal was announced in 2022. Kroger committed to cutting grocery prices by $1 billion after the merger.

But Judge Adrienne Nelson rejected that argument.

In her ruling, she said supermarkets “are different from other grocery retailers” and are not direct competitors to Walmart, Amazon and other companies that sell a broader range of goods. The merger would eliminate direct competition between Albertsons and Kroger and potentially increase prices for consumers, she said in the ruling.

The White House supported the ruling in a statement on Tuesday.

“The Kroger-Albertsons merger would have been the largest supermarket merger in history – raising food prices for consumers and lowering wages for workers,” said Jon Donenberg, deputy director of the National Economic Council. “Our government is proud to oppose large corporate mergers that raise prices, undermine the workforce and hurt small businesses.”

Because of the planned merger, there were signs of inflation in the grocery business.

The proposal came as food prices were soaring and was met with fierce opposition. Unions, small grocers and a coalition of Democrats and Republicans on Capitol Hill, including Democratic Sen. Elizabeth Warren of Massachusetts and Republican Sen. Mike Lee of Utah, also strongly opposed the merger from the start.

The Federal Trade Commission filed a lawsuit in February to block the deal. The FTC said the merger “will result in higher food prices for millions of Americans and lower wages and benefits for hundreds of thousands of grocery workers.”

To address competition concerns, Kroger and Albertsons agreed to sell 579 stores to C&S Wholesale Grocers. But the FTC said C&S was “ill-equipped” to operate the divested businesses and could result in a “malfunctioning disaster.”

Judge Nelson agreed with the FTC: “There is ample evidence that the divestiture is not sufficiently large to adequately compete with Kroger and Albertsons together” and “will materially disadvantage C&S as a competitor,” she said in the decision.

The case has been closely watched because of its implications for future antitrust enforcement and the conduct of corporate business. The FTC, under outgoing Chairwoman Lina Khan, has also launched landmark antitrust lawsuits against Google, Amazon and other tech giants.

Independent grocery stores strongly opposed the merger. They argued that the merger would increase the companies’ influence over suppliers of goods and leave independent stores unable to stock their own shelves.

But consolidation in the grocery sector is increasing and small grocery stores are struggling.

According to the Agriculture Department, the top 20 retailers controlled 64% of total grocery sales in 2019, more than double the share in 1990.

Traditional grocery stores have also lost ground to Walmart, Costco, dollar stores and online retailers during this time.

According to the Department of Agriculture, the share of food spending in traditional supermarkets fell from 80% in 1990 to 62% in 2012.

Advocates for stricter antitrust regulations welcomed Judge Nelson’s decision.

“Persistently high food prices are hitting Americans hard, and a mega-merger between Kroger and Albertsons would have only made it worse,” Rebecca Wolf, senior food policy analyst at Food & Water Watch, said in a statement Tuesday