Kroger & Albertsons Merger Blocked by a Federal Judge. Here Are the Details

The Kroger and Albertsons merger is officially kaput. A federal judge has indefinitely halted the merger, claiming that it discourages competition. Let’s take a look at the details of this latest ruling.

Federal Judge Halted the Merger Between Kroger and Albertsons

Following a protracted legal battle, NBC News is reporting that grocery giant Kroger’s $25 billion attempt to acquire rival Albertsons was halted by a U.S. district judge in Oregon, who determined that the Federal Trade Commission’s worries about the merger’s effect on market concentration were legitimate.

Per CNN, the judge granted a preliminary injunction blocking the deal, leaving the companies the option to appeal the decision.

According to Judge Adrienne Nelson, consumers would suffer if the two businesses merged because the companies “engage in substantial head-to-head competition and the proposed merger would remove that competition.” The planned merger would, therefore, probably result in consequences that “unilaterally” hurt customers, making it “presumptively unlawful.”

Nelson further ruled that the merger would harm workers, claiming that further consolidation would diminish workers’ bargaining strength. The judge’s ruling refers to a recent lawsuit by a worker’s union that was filed last month, claiming that Kroger and Albertsons have been colluding against the union.

Valarie Morgan, who works at a Kroger-owned King Soopers, says the two competitors reached an illegal pact not to steal customers or employees during a 2022 work stoppage. She claims that by doing this, the supermarket was able to negotiate a better deal with the union that represents its employees.

According to Morgan, this resulted in the workers getting a worse bargain than they were entitled to.

The complaint argues that this eventually benefited Albertsons as well because the terms of the Kroger agreement would influence the contracts Albertsons would later negotiate with the same union.

“The anticompetitive agreement was successful,” she alleges. “It artificially reduced the union’s bargaining power during negotiations, while increasing the leverage of Kroger’s management. These companies rigged the system against us, undermining our right to fight for better pay and fair treatment through our unions.”

Meanwhile, grocery store workers, union representatives, and neighbors held picket signs during a Stop the Merger rally in October. The Rocky Mountain Farmers Union was one of the well-known local labor groups that participated in the march. The union’s director of government relations, Tyler Garrett, claims that his organization has members in Wyoming, New Mexico, and Colorado.

“This [Kroger-Albertsons merger] would harm our family farmers and ranchers by taking away any power they had to negotiate prices,” Garrett said to CPR. “Right now, farmers and ranchers only get approximately $0.14 to $0.30 of the dollar that consumers spend on groceries. Do you know who gets the rest of that money? The big corporations like Kroger and Albertsons, and they don’t pass that on to consumers or to their workers.”

What’s Next?

Perhaps unsurprisingly, Kroger and Albertsons are displeased with the ruling.

“We believe we clearly outlined during the proceedings how the proposed merger would expand competition, lower prices, increase associate wages, protect union jobs, and enhance customers’ shopping experience. We are carefully reviewing the Court’s opinion and are evaluating our options in accordance with the merger agreement,” Albertsons said in a statement to NBC News.

In addition to expressing regret, a Kroger representative stated that the business “is currently reviewing its options.”

In order to stay competitive with big-box stores like Walmart, Target, and Amazon, which have greatly expanded their grocery businesses, Kroger had maintained that the merger was essential.

However, the judge ruled that the effects of the planned merger must be considered, and that “supermarkets” still constitute a unique, niche sector within the American consumer landscape.

The FTC, meanwhile, cheered the decision, saying that the agency “scored a major victory for the American people, successfully blocking Kroger’s acquisition of Albertsons.”

“This victory has a direct, tangible impact on the lives of millions of Americans who shop at Kroger or Albertsons-owned grocery stores for their everyday needs, whether that’s a Fry’s in Arizona, a Von’s in Southern California, or a Jewel-Osco in Illinois,” the FTC said in a statement.

According to Food Business News, the preliminary injunction does not eliminate the chance for Kroger and Albertsons to move forward with their transaction, contingent on the outcome of the administrative ruling that follows.

“Although defendants may choose to abandon the merger because of the preliminary injunction, this order in no way forces them to do so and leaves open the possibility that they may pursue the merger at a later date should it be deemed lawful in the administrative proceedings,” Nelson explained. “An injunction simply pauses the merger.”

The federal case now advances to the FTC, though Kroger and Albertsons are dealing with state cases as well. Colorado is currently attempting to halt the merger in a state trial, and Judge Marshall Ferguson in Seattle has also issued a permanent injunction blocking the merger in Washington.