WASHINGTON (FNS) -- The Federal Trade Commission said last week it filed a preliminary injunction to block Kroger Co., Cincinnati, from buying 74 supermarkets in Texas and Oklahoma from Winn-Dixie Stores, Jacksonville, Fla., a move that shows how federal regulators are increasingly concerned about maintaining competition in an industry that's undergone dramatic consolidation, analysts and antitrust attorneys told SN.
(At the same time Winn-Dixies was trying to sell stores, it also announced an acquisition. See story page 2.)
"I would have been surprised if the FTC allowed it to go forward," said Ed Comeau, a supermarket analyst with Donaldson Lufkin & Jenrette, New York. "It would have been nice for Kroger to fortify their position in Fort Worth, particularly with Wal-Mart coming in. But the FTC clearly is sending a signal that in-market acquisitions will be challenged."
The FTC said the acquisition could lead to higher retail prices by giving Kroger 33% of supermarket sales in Fort Worth, its suburbs and towns to the northeast and southeast.
There are 41 Winn-Dixie stores in Texas at issue. An FTC spokesman said the agency was not objecting to Kroger's acquisition of any of Winn-Dixie's Oklahoma units.
This is the first time the FTC has moved to block a supermarket merger outright, and it will be up to a U.S. District Court judge to decide if the agency will prevail. A hearing date on the matter hasn't been set.
"As a result of this merger, consumers would lose the benefit of more than 20 years of head-to-head competition between Kroger and Winn-Dixie," said Richard G. Parker, FTC Bureau of Competition director , in a statement.
Paul Heldman, a senior vice president and general counsel at Kroger, said in a statement the 2,300-store chain plans "to explore our legal alternatives" regarding the FTC challenge, but didn't elaborate on what those alternatives might be.
"We are disappointed with the FTC's decision," Heldman said. "We continue to believe that this transaction would benefit customers in Texas and southern Oklahoma."