Colorado Suit to Be Heard Weeks Ahead of FTC Case Against Megamerger

Colorado has been granted permission to independently contest the $24.6 billion Kroger-Albertsons merger, with a hearing scheduled for August 12th. Following over an hour of arguments on March 25th, District Court Judge Andrew Luxen announced his intention to promptly deliver a ruling in the case. Luxen’s decision ensures that the Colorado case will be adjudicated before a lawsuit filed by the Federal Trade Commission (FTC) and eight other states, with the hearing in that case scheduled to begin August 26th.

In February, after conducting a year-long investigation, Colorado Attorney General Phil Weiser initiated legal action by filing a lawsuit in Denver District Court to impede the merger. The lawsuit alleges that the merger would eradicate direct competition between Kroger and Albertsons, further consolidating an already heavily concentrated market. Kroger oversees over 140 King Soopers and City Market outlets, while Albertsons manages more than 100 Safeway and Albertsons locations within the state.

“Coloradans are concerned about undue consolidation and its harmful impacts on consumers, workers and suppliers,” said Weiser. “After 19 town halls across the state, I am convinced that Coloradans think this merger between the two supermarket chains would lead to stores closing, higher prices, fewer jobs, worse customer service and less resilient supply chains.”

Weiser argues that Kroger and Albertsons’ plan to divest to C&S Wholesale Grocers falls short in addressing the merger’s anticompetitive impact. According to Weiser, C&S lacks the necessary experience in retail grocery to handle such a divestiture effectively. Additionally, the limited number of stores would hinder C&S’s ability to compete with Kroger post-merger, unlike Albertsons’ current position. A proposed transition agreement would keep C&S dependent on Kroger for up to two years for various aspects like pricing, pharmacy, promotions, loyalty programs, and IT infrastructure, thereby reducing competition between the companies.

The injunction initiated by the federal agency and states would halt the merger between the two companies while the FTC proceeds with an internal challenge, supervised by an administrative law judge at the agency. Previously, the FTC had scheduled an evidentiary hearing for July 31st in Washington, D.C., for this purpose.

During the March hearing in Denver, Matthew Wolf, representing Kroger, mentioned that a revised divestiture plan for the merger is anticipated. The FTC has openly expressed reservations about the proposal to divest 413 Kroger and Albertsons stores to C&S Wholesale Grocers due to C&S’s limited experience in the retail industry. Following the FTC’s lawsuit filing, both Kroger and Albertsons issued strong responses.

Albertsons criticized the FTC’s claims as distorted and based on ignorance of essential facts, highlighting competition from various grocery retailers like Walmart, Target, Costco, Amazon/Whole Foods, Trader Joe’s, Sprouts, and dollar stores. The grocery giant emphasized Costco as a significant competitor. Kroger defended its choice of C&S Wholesale Grocers as a divestiture partner.

“C&S is not a mom-and-pop operation or a risky private equity venture,” Kroger said in its filing. “It is a well-capitalized company with deep industry experience.” Albertsons’ statement concluded that the FTC’s assertion the merger of giants would have a negative impact on competition in both the grocery retail  and grocery labor markets was based on “so-called ‘facts’” that ignore the truth of the current market.

Judge Adrienne Nelson of the U.S. District Court for the District of Oregon set a hearing date of August 26th following the FTC’s request for a preliminary injunction against the megamerger. The August hearing date will be exactly six months after the FTC initially filed suit to pause the union and divestiture plan, claiming that the deal “falls far short of mitigating the lost competition between Kroger and Albertsons” and would result in higher grocery prices for shoppers across the country. 

Kroger CEO Rodney McMullen said during the company’s Q4 and fiscal year 2023 earnings call in March the retailer is “committed to defending the merger and litigation, because we believe this is the best outcome for America’s families.” Cincinnati-based Kroger employs nearly half a million associates who cater to over 11 million customers daily through digital shopping platforms and various retail food stores under different brand names. Kroger holds the fourth position on Progressive Grocer’s 2023 list of the top food and consumables retailers in North America. Albertsons, headquartered in Boise, Idaho, operates over 2,200 retail food and drug stores, along with pharmacies, fuel centers, distribution centers, and manufacturing facilities. It ranks ninth on The PG 100 list. Meanwhile, Keene, New Hampshire-based C&S Wholesale Grocers serves customers of all sizes, supplying over 7,500 independent supermarkets, chain stores, military bases, and institutions with a vast array of products. It also operates corporate stores and holds the seventeenth position on The PG 100 list.