A shopper pushes a cart through a Kroger supermarket in Newport, Ky. Al Behrman/AP hide caption
toggle caption Al Behrman/APKroger and Albertsons saw their $24.6 billion merger blocked on Tuesday by judges in two separate cases, one brought by federal regulators and the other by the Washington state attorney general.
What would be the biggest grocery merger in U.S. history is now in legal peril after over two years of delays. The companies could choose to continue their legal appeals or abandon the deal. They await another ruling in a third lawsuitin Colorado.
Kroger runs many familiar grocery stores, including Ralphs, Harris Teeter, Fred Meyer and King Soopers. Albertsons owns Safeway and Vons. In statements on Tuesday, the companies argued the courts erred in their judgment and said they were evaluating their options.
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Tuesday's first ruling is a big win for the Federal Trade Commission. It — together with several states — had asked a federal court in Oregon to stop the merger. The government argued that the resulting colossus would lead to higher food prices and fewer choices for shoppers and workers. In many markets, the two chains are each other's biggest rival.
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Kroger and Albertsons, in turn, have argued that together, they actually would have more power to lower prices, as well as to compete against other huge retailers that sell food, including Walmart, Costco and Amazon.
U.S. District Judge Adrienne Nelson on Tuesdayruled that the merger must halt while it undergoes the administrative review inside the FTC — a procedure that Kroger is separately challenging in court as unconstitutional. About an hour later, a Washington state court judge separately ruled that the merger violated that state's consumer-protection law.
"Both defendants gestured toward a future in which they would not be able to compete against ever-growing Walmart, Amazon, or Costco," Nelson wrote in her order. "The overarching goals of antitrust law are not met, however, by permitting an otherwise unlawful merger in order to permit firms to compete with an industry giant."
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Together, Kroger and Albertsons have nearly 5,000 stores and employ some 720,000 people across 48 states. They particularly overlap in western states.
During the three-week federal trial in a Portland courtroom, the FTC and the companies painted differing views of the grocery market.
Kroger and Albertsons described their merger as existential to survival. They argued the FTC's view of competition — focused on options a shopper might have in their neighborhood — was outdated in the wake of big-box behemoths and the sprawl of dollar stores.
Kroger officials testified that they typically compared their prices to Walmart, rather than Albertsons, and struggled to keep up given Walmart's ability to negotiate better deals with suppliers thanks to its scale. Walmart is the biggest seller of groceries in the U.S., followed by Kroger and Costco.
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