By Jody Godoy

(Reuters) – A U.S. judge on Tuesday blocked the pending $25 billion merger of U.S. grocery chains Kroger and Albertsons. This was a victory for the Federal Trade Commission that Kroger said would likely scupper the deal.

The FTC argued at a three-week trial in Portland, Oregon, that the merger would eliminate direct competition between the two largest traditional grocery chains, leading to higher prices for shoppers and less bargaining power for unionized workers.

The ruling, which could be appealed, is a major victory for FTC Chairwoman Lina Khan and President Joe Biden’s administration in their attempt to combat inflation at the checkout. Americans’ dissatisfaction with the continued rise in food prices since the pandemic was a central theme leading up to President-elect Donald Trump’s election victory in November.

U.S. District Judge Adrienne Nelson agreed that the merger would likely eliminate direct competition between the two grocers, making it illegal.

Separately, a Washington state court judge in Seattle also ruled Tuesday to block the merger in a case brought by Attorney General Bob Ferguson, who estimated that half of all supermarkets there were owned by one of the two chains.

Albertsons shares closed down 2.3%. Kroger shares closed up 5.1%.

The White House said after the ruling that it was “proud to oppose large corporate mergers that raise prices, undermine the workforce and hurt small businesses.”

FTC spokesman Douglas Farrar said the victory “makes clear that strong, reality-based antitrust enforcement delivers real results for consumers, workers and small businesses.”

Spokespeople for Kroger and Albertsons said the companies were disappointed by the rulings and the review of their options.

“We believe we have clearly articulated throughout the process how the proposed merger would increase competition, reduce prices, increase employee wages, protect union jobs and improve the customer shopping experience,” the Albertsons spokesperson said.

FOOD COST

The deal became a symbol of rising food prices. U.S. food prices have risen 25% over the past four years, and while food inflation shows signs of cooling in 2024, grocery bills continue to be a growing concern for shoppers.

The FTC sued along with attorneys general from eight states and the District of Columbia. Colorado, like Washington, has sued on its own initiative to block the deal.

Kroger defended the deal, saying it would cut prices at Albertsons stores, where it said prices were 10-12% higher than at its own stores. The combined company would fund price cuts through cost savings it expects to come from larger operations and a larger customer base to boost revenue from Kroger’s data consulting business.

The story continues