A federal judge in Oregon halted Kroger's £19.58 billion ($25 billion) merger with Albertsons, ruling that this colossal deal, the largest in US supermarket history, could stifle competition and ultimately hurt consumers.
This ruling is a major blow to both chains, jeopardising the merger's future. The judge issued a preliminary injunction, temporarily halting the deal, though the companies still have the option to appeal.
Judge Halts Grocery Giant Merger
Announced in 2022, the merger aimed to unite the nation's fifth and tenth-largest retailers. The companies collectively own numerous grocery chains, such as Safeway, Vons, Harris Teeter, and Fred Meyer.
Supermarkets have faced increasing competition in recent decades, and Kroger and Albertsons hoped that merging would strengthen their position against giants like Walmart and Amazon. Both Kroger and Albertsons primarily employ unionised workers, and they argued that merging would enhance their competitiveness against non-union behemoths like Walmart, Amazon, and Costco.
Additionally, the grocers are feeling the heat from Aldi, the rapidly expanding German discount supermarket chain. The merger would accelerate "our position as a more compelling alternative to larger and non-union competitors," Kroger CEO Rodney McMullen said when the deal was announced in 2022.
Kroger committed to slashing grocery prices by £0.78 billion ($1 billion) dollars post-merger. However, Judge Adrienne Nelson dismissed this claim. In her ruling, she emphasised that supermarkets operate distinctly from other grocery retailers and aren't direct competitors to Walmart, Amazon, and other companies offering a broader range of products.
The Impact Of The Halted Albertsons-Kroger Deal
Following the merger, Albertsons and Kroger would not have direct competition. The judge believes this lack of competition could raise consumer prices. Kroger and Albertsons expressed disappointment with the ruling and are currently evaluating their next steps.
A Kroger spokesperson argued that a merger between the two companies "is in the best interests of customers, associates, and the broader competitive environment in a rapidly evolving grocery landscape." However, the White House applauded the ruling in a statement.
"The Kroger-Albertsons merger would have been the biggest supermarket merger in history — raising grocery prices for consumers and lowering wages for workers," National Economic Council Deputy Director Jon Donenberg said.
Soaring Grocery Prices Doom Mega-Merger
Skyrocketing grocery prices were a significant factor in derailing the deal. The proposal arrived amid soaring food prices and faced fierce opposition. Unions, independent grocers, and a bipartisan coalition on Capitol Hill, including Democratic Senator Elizabeth Warren of Massachusetts and Republican Senator Mike Lee of Utah, vehemently opposed the merger from the outset.
The Federal Trade Commission filed a lawsuit in February to block the deal. The FTC argued that the merger would "result in higher grocery prices for millions of Americans and lower wages and benefits for hundreds of thousands of grocery workers."
Kroger and Albertsons agreed to divest 579 stores to C&S Wholesale Grocers to address competition concerns. However, the FTC contended that C&S was "ill-equipped" to run the divested stores and it could turn into a "non-functioning disaster."
Judge Nelson sided with the FTC, noting that "there is ample evidence that the divestiture is not sufficient in scale to adequately compete" with the combined entity of Kroger and Albertsons and "will significantly disadvantage C&S as a competitor," she said in the ruling.
The case was watched closely because of its implications for future antitrust enforcement and corporate dealmaking. Under outgoing chair Lina Khan, the FTC has also launched landmark antitrust suits against tech giants, including Google and Amazon.
