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A legal battle over the largest proposed grocery store merger in US history is set to unfold in a federal court. The proposed merger involves two major supermarket chains, Kroger and Albertsons, which plan to combine forces to better compete with industry giants like Costco and Walmart.
However, the merger has raised concerns among antitrust regulators at the Federal Trade Commission (FTC), who argue that it would reduce competition and potentially lead to higher grocery prices.
FTC Challenges Historic Grocery Merger Between Kroger and Albertsons
According to Oregon Live, the FTC is seeking a preliminary injunction to delay the merger, allowing time for a more thorough investigation. Starting next week, a federal district court judge in Portland, Oregon, will hear arguments from both sides.
The outcome will determine whether the merger proceeds as planned or faces significant delays. If the judge grants the injunction, the FTC will conduct an in-depth review to assess the merger's impact on competition.
Kroger, based in Cincinnati, Ohio, operates around 2,800 stores across 35 states, including well-known brands such as Ralphs, Smith's, and Harris Teeter.
Albertsons, headquartered in Boise, Idaho, runs about 2,273 stores in 34 states, with brands like Safeway, Jewel Osco, and Shaw's under its belt. Together, these two companies employ approximately 710,000 people, making the proposed merger a significant event in the retail industry.
Kroger and Albertsons announced their intention to merge in October 2022, stating that the $24.6 billion deal would enable them to negotiate better prices with suppliers, expand their store brand offerings, and compete more effectively against larger rivals. Walmart currently dominates the U.S. grocery market with around a 22% share.
The combined Kroger and Albertsons entity would hold about 13% of the market, which they argue is necessary to stay competitive.
However, the FTC and several state attorneys general argue that the merger could harm consumers by reducing competition, leading to higher prices, and lowering the quality of products and services. They also express concern over the potential impact on employees, including possible wage cuts and reduced benefits.
In February, the FTC filed a complaint to block the merger, which will be reviewed by an administrative law judge. Additionally, the FTC has filed a lawsuit in Oregon, requesting a preliminary injunction to halt the merger temporarily.
In response to these concerns, Kroger and Albertsons have proposed selling 579 stores in areas where their locations overlap to mitigate the impact on competition. The buyer, C&S Wholesale Grocers, a New Hampshire-based company, supplies independent supermarkets and owns the Grand Union and Piggly Wiggly store brands.
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Upcoming Court Hearing Could Delay Kroger-Albertsons Merger
This divestiture aims to create a viable competitor in markets affected by the merger. Initially, the companies planned to sell 413 stores, but the FTC found this insufficient, prompting them to increase the number of stores being sold.
The upcoming court hearing, scheduled to run until September 13th, will be crucial in determining the merger's fate. If the judge grants the preliminary injunction, it could significantly delay the merger, and Kroger and Albertsons might appeal the decision to a higher court.
A delay could lead the companies to reconsider the merger altogether, as the FTC's internal review process could take over a year. If the merger is blocked, Kroger and Albertsons may pursue legal action against the FTC, challenging the agency's authority to handle the case internally.
Kroger has already filed a lawsuit, claiming that the FTC's internal proceedings are unconstitutional and seeking a decision from a federal court. This legal battle could set a precedent for how large mergers are handled by regulatory agencies in the future.
On the other hand, if the judge rules in favor of Kroger and Albertsons, the FTC could appeal the decision, but such reversals are rare. The merger would likely proceed, reshaping the US grocery industry landscape. However, separate lawsuits filed by Colorado and Washington state courts could still present hurdles, as these states have a significant number of stores affected by the merger, AP News.
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