The planned merger of Kroger and Albertsons is stopped by federal and state judges

The planned merger of Kroger and Albertsons is stopped by federal and state judges

PORTLAND, Ore. (AP) — The proposed merger between supermarket giants Kroger and Albertsons collapsed Tuesday after judges overseeing two separate cases halted the merger.

District Judge Adrienne Nelson issued a preliminary injunction blocking the merger on Tuesday after a three-week hearing in Portland, Oregon. Later Tuesday, Judge Marshall Ferguson in Seattle, Washington, issued a preliminary injunction banning the merger after concluding that it would harm competition in the state.

Kroger and Albertsons said Tuesday they were disappointed with the decisions and were reviewing their options. The companies could appeal, but the deal could fall apart within the time it would take to review those cases.

Kroger and Albertsons proposed the largest grocery store merger in U.S. history in 2022. But earlier this year, the Federal Trade Commission filed a lawsuit asking Nelson to block the $24.6 billion deal until an internal FTC administrative law judge could review the merger’s impact.

Attorneys general from Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and the District of Columbia joined the FTC’s lawsuit.

Nelson agreed to stay the merger, saying the FTC had shown in the administrative hearing that it was likely to prevail.

“The potential harm caused to defendants by the injunction cannot offset the strong public interest in antitrust enforcement, particularly given the difficulty of disentangling a premature merger,” she wrote in her opinion.

Federal regulators argued that combining the two chains would be harmful to consumers and workers by eliminating competition.

The companies said a merger would help them better compete with major retailers such as Walmart, Costco and Amazon. Kroger also pledged to invest $1 billion in lower grocery prices, another $1 billion in higher wages for grocery workers and $1.3 billion to improve Albertsons stores. But Nelson was unfazed.

“The promise to make a price investment is not legally binding, and the court must give limited weight to a non-binding promise made in these proceedings,” she wrote in her decision. Nelson added that the companies can still invest in lower prices if the FTC approves the merger in its administrative hearings.

The federal case is now headed to the FTC, although Kroger and Albertsons have asked another federal judge to block the internal proceedings. Colorado is also trying to stop the merger in its own state lawsuit.

The FTC argued that Kroger and Albertsons currently compete in 22 states and are closely matched on price, quality, private label products and services such as in-store pickup. A merger would eliminate that competition and raise prices for already struggling consumers, the government said.

The FTC also said the merger would harm workers because Kroger and Albertsons would no longer compete to hire workers.

However, Kroger and Albertsons argued that their merger would preserve consumer choice by allowing them to better compete against their growing rivals. In its statement, Albertsons Nelson warned that it may have to lay off workers, close stores and even exit some markets if the merger is not allowed to go ahead.

Under the merger agreement, Kroger and Albertsons would sell 579 stores in locations where their locations overlap to C&S Wholesale Grocers, a New Hampshire-based supplier of independent supermarkets that also owns the Grand Union and Piggly Wiggly retail brands.

The FTC and Washington state argued that C&S was ill-prepared to take over the businesses and may want the option to sell or close them. Both judges agreed.

“The current competition between Kroger and Albertsons stores is fierce in Washington state,” Ferguson said in court before his ruling was made public. “Wholesaler C&S, with its limited retail experience and infrastructure, will not be able to replicate the ferocity of this competition or compete effectively in Washington against the Kroger-Albertsons merger behemoth.”

Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands such as Ralphs, Utah-based Smith’s and Harris Teeter. Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states, including brands such as Safeway, Jewel Osco and Shaw’s. Together, the companies employ around 710,000 people.

Shares of Kroger Co. rose 5% in trading on Tuesday, while shares of Albertsons Co. fell 2%.

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