Federal, state judges block merger between Kroger and Albertsons

The proposed merger between supermarket giants Kroger and Albertsons floundered on Tuesday after judges overseeing two separate cases both halted the merger.

U.S. District Court Judge Adrienne Nelson issued a preliminary injunction blocking the merger Tuesday after holding a three-week hearing in Portland, Oregon.

Later Tuesday, Judge Marshall Ferguson in Seattle issued a permanent injunction barring the merger in Washington after concluding that it would lessen competition in the state.

Kroger and Albertsons said Tuesday they are disappointed in the decisions and are reviewing their options. The companies could appeal, although the deal could fall apart in the time it would take for those cases to be considered.

Kroger and Albertsons in 2022 proposed what would be the largest grocery store merger in U.S. history. But the Federal Trade Commission sued earlier this year, asking Nelson to block the $24.6 billion deal until an in-house administrative judge at the FTC could consider the merger’s implications. 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 pause the merger, saying that the FTC had shown it was likely to prevail in the administrative hearing.

“Any harms defendants experience as a result of the injunction do not overcome the strong public interest in the enforcement of antitrust law, especially given the difficulty in disentangling a premature merger,” she wrote in her opinion.

Federal regulators argued that combining the two chains would be bad for consumers and workers by eliminating competition. The companies said a merger would help them better compete with big retailers like Walmart, Costco and Amazon.

The case may now move to the FTC, although Kroger and Albertsons have asked a different federal judge to block the in-house proceedings. Colorado is also trying to halt the merger in its own state trial.

The FTC argued that Kroger and Albertsons currently compete in 22 states, closely matching each other on price, quality, private label products and services like 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 hurt workers since Kroger and Albertsons would no longer compete to hire them.

But Kroger and Albertsons argued their merger would preserve consumer choice by allowing them to better compete against its growing rivals. In its testimony, Albertsons warned Nelson that it might have to lay off workers, close stores and even exit some markets if the merger weren’t allowed to proceed.

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

The FTC and the state of Washington argued that C&S is ill-prepared to take on the stores and may want the option to sell or close them. Both judges agreed.

“The current competition between Kroger and Albertsons’ stores is fierce in the state of Washington,” Ferguson said in court before his ruling was released. “Wholesaler C&S, with its limited retail experience and infrastructure, will not be able to replicate the ferocity of that competition or compete effectively in Washington against the colossus that is a merged Kroger and Albertsons.”

Selling of Washington stores to C&S Wholesale Grocers

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

Of those 579 stores, the list includes 124 in the state of Washington, the most of any state in this transaction. A distribution center in Auburn is also one of six that will be sold in the deal. (A PDF of all the stores, distribution centers and plants involved in this plan can be seen here.)

Of the 124 stores impacted in this plan, Seattle will see the most change as 16 stores will be affected. In addition, nine stores in Vancouver, Washington, are on the list. Tacoma, Bellevue and Bellingham each have five locations on the list as well. The full list of Washington stores affected can be seen here.

In addition, 62 stores in Oregon will change ownership.

Previous coverage: The 124 Washington stores to be divested in the Kroger-C&S plan

C&S would also license the Albertsons banner in California and Wyoming and the Safeway banner in Arizona and Colorado. C&S would also get access to some private-label brands in the stores. Under the proposal, C&S would keep all of the stores open and honor any labor agreements.

“We are confident this expanded divestiture package will provide the stores, supporting assets and expert operators needed to ensure these stores continue to successfully serve their communities for many generations to come,” C&S CEO Eric Winn said in a statement earlier this year.

The FTC argued that C&S is ill-prepared to take on the stores and may want the option to sell or close them. But Kroger and Albertsons said C&S has the experience and national scale to handle the divestiture.

Reactions to the judges’ decisions

Washington Attorney General, and Governor-elect, Bob Ferguson has been vocal about the merger and made his feelings clear when he filed a lawsuit on behalf of the state in January.

“If Kroger and Albertson’s merge, they will – simply put – dwarf the competition,” Ferguson said at the time. “Shoppers will have fewer choices and less competition, and that results in higher prices.”

Washington lawsuit: Kroger-Albertson merger ‘bad’ for consumers, attorney general’s office says

In a statement released to members of the press Tuesday, the attorney general labeled the state judge’s decision a win in multiple ways.

“We’re standing up to mega-monopolies to keep prices down,” Ferguson said. “We went to court to block this illegal merger to protect Washingtonians’ struggling with high grocery prices and the workers whose jobs were at stake. This is an important victory for affordability, worker protections and the rule of law.”

Washington Democratic U.S. Sen. Maria Cantwell released a short statement on X Tuesday afternoon agreeing with what the judges found, noting these giant mergers don’t benefit consumers.

“The Courts found what we have seen in Washington state: Large-scale grocery store mergers like this one are more likely to raise grocery prices than provide any real benefits to shoppers,” Cantwell said. “And right now we need to keep taking steps to lower costs.”

A coalition of United Food & Commercial Workers local unions — UFCW 7, UFCW 324, UFCW 400, UFCW 770 and UFCW 3000 — released its own statement after the announcement of the decisions, praising the courts’ decisions.

“The well-reasoned decisions today by both Courts make plain what union grocery workers have known all along – this mega-merger would be bad for workers who deserve a workplace where they can be paid well for their labor, be safe and be respected,” the statement reads. “It would be disastrous for shoppers who deserve competition that leads to better choices and lower prices. The merger would be detrimental to our communities, would harm farmers and suppliers who deserve a healthy balance to negotiate fair prices for their hard work. Instead, the proposed merger would create an out-of-balance system that drives up prices, drives out competition, and drives down wages and safety standards.”

The unions also called on the company executives to “abandon this misguided merger and turn their focus back where it belongs: operating grocery stores.”

Food & Water Watch Senior Food Policy Analyst Rebecca Wolf issued a statement to the press as well, echoing the comments made by Ferguson, Cantwell and the unions.

“This decision is a victory for common-sense antitrust enforcement that puts people ahead of corporations,” Wolf said. “Persistently high food prices are hitting Americans hard, and a Kroger-Albertsons mega-merger would have only made it worse.

“Already, a handful of huge corporations’ stranglehold on our food system means that consumers are paying too much for too little choice in supermarkets, workers are earning too little, and farmers and ranchers cannot get fair prices for their crops and livestock. (Tuesday’s) decision and strengthened FTC merger guidelines help change the calculus.”

Food & Water Watch bills itself as an organization that “fights for sustainable food, clean water and a livable climate for all of us.”

More on Kroger and Albertsons

Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter. In the state of Washington, the company operates 117 stores. That includes 59 Fred Meyer locations and 55 QFC stores.

Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw’s. Together, the companies employ around 710,000 people. There are 185 Safeway stores in the state of Washington. Head here to see your local Safeway hours. In addition, there are 16 Albertsons locations in Washington. Visit this page to see where those stores are located and their hours.

Contributing: Steve Coogan, MyNorthwest; The Associated Press