The Albertsons logo is displayed outside an Albertsons grocery store in Los Angeles, California on October 14, 2022. (Mario Tama/Getty Images)

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Judges in Oregon and Washington on Tuesday blocked the merger of supermarket giants Kroger and Albertsons, 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 by writing to her 71-page judgment In a lawsuit against the merger led by federal regulators, he argued that it would lead to undue market concentration, reduce competition and harm customers. Her injunction puts the proposed $24.6 billion merger on hold while the Federal Trade Commission’s administrative law judge continues his review of the impact.

King County Superior Court Judge Marshall Ferguson in Seattle also ruled that the merger should not move forward in Washington in a separate state case, saying the proposed merger violated the state’s antitrust laws. Another state lawsuit is pending in Colorado.

The rulings mean Kroger’s proposal to buy Albertsons in 2022 will be put on hold while the companies decide whether to move forward. If so, an internal Federal Trade Commission administrative law judge will determine whether the merger is anticompetitive, although a Kroger lawsuit is seeking 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 result in 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 food and work in grocery stores.

“This historic victory protects millions of Americans across the country from higher prices for essential foods – from milk to bread to eggs – and ultimately allows 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 for everyday needs at Kroger or Albertsons grocery stores, be they Fry’s in Arizona, Vons in Southern California, or Jewel-Osco in Illinois.”

Kroger operates approximately 2,700 stores in 35 states and the District of Columbia. The stores carry various brands across the country, including Fred Meyer in the Northwest, King Soopers in the Rocky Mountains, Fry’s in Arizona and Harris Teeter in the Southeast. According to court documents, about 430,000 people work for Kroger and it is the largest employer of union grocery workers.

Albertsons, which merged with Safeway in 2015, is the country’s second-largest grocery chain with about 285,000 employees and nearly 2,270 stores nationwide.

Each sells a wide range of products

The plaintiffs argued that the merger of Kroger and Albertsons would combine two expansive companies. They said they differ from other stores that may carry groceries by offering a wide variety of groceries, unlike gourmet or natural grocers like Whole Foods, limited-line stores like Aldi and Trader Joe’s, warehouse stores, 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 do not, the plaintiffs argued. And data provided in court filings showed Albertsons stores lost more sales when Kroger stores opened nearby, while a strike that closed King Soopers stores in Colorado for more than a week in 2022 led to an increase in sales at nearby ones Safeway stores led – evidence that the grocery giants compete more with each other than with other types of grocery retailers.

In response, lawyers for Kroger and Albertsons argued that other retailers, including Amazon, Walmart, Costco and Aldi, were competing with them and that customers were visiting different stores instead of buying everything from one source. Nelson wrote that doesn’t mean the stores are meeting the same need.

“It is not surprising that consumers spend money at a variety of different types of retailers, but that does not necessarily mean that these retailers are reasonably interchangeable substitutes for a consumer’s particular needs,” she wrote. “For example, the fact that a shopper makes monthly trips to Costco to stock up on a smaller number of bulk purchases does not make a “Costco run” a reasonable substitute for a weekly one-stop visit to a supermarket to shop most or all of the food for the week.”

Oregon Attorney General Ellen Rosenblum said in a statement that Nelson’s ruling in the Oregon case upheld the state’s arguments that the proposed merger would harm workers and consumers.

“At a time when higher grocery and pharmacy prices are hurting countless households, today’s decision is a victory for Oregonians and a victory for market competition,” 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 called the decision a victory for consumers, workers and small businesses across the country.

“Had this merger gone forward, it could have hurt families by reducing choice, driving up prices and eliminating jobs,” Mayes said. “Here in Arizona, where countless communities rely on accessible, affordable food options, this decision helps ensure residents do not face the potentially devastating impacts of such consolidation.”

Spokespeople for Kroger and Albertsons said the companies were disappointed and were reviewing their options.

“Kroger is disappointed by the opinions from the U.S. District Court for the District of Oregon and the Washington State Court, which ignore the substantial evidence presented at trial showing that a merger between Kroger and Albertsons advances the company’s decades-long commitment to austerity “Price compliance is in compliance with collective bargaining agreements and is in the best interests of customers, employees and the broader competitive environment in a rapidly evolving grocery industry,” the Kroger statement said.

Washington Attorney General and Gov.-elect Bob Ferguson praised the judge’s decision in the Washington state case, saying it was a victory for affordability, worker protections and the rule of law.

“We fight back against mega-monopolies to keep prices down,” Ferguson said. “We went to court to block this illegal merger to protect Washingtonians struggling with high food prices and the workers whose jobs were at stake.”

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