Washington state court challenge in Kroger, Albertsons merger continues

Washington state’s lawsuit to block the $24.6 billion Kroger, Albertsons merger continues this week. Meanwhile, the grocery chains await a decision from a separate lawsuit brought by the Federal Trade Commission and nine attorneys general, which was heard earlier this month in a U.S. district court in Portland, Ore.

No deadline has been set for a decision in either case, but Oregon Federal District Court Judge Adrienne Nelson has given the grocers and plaintiffs until Sept. 27 to submit post-hearing findings of fact, conclusions of law, and supporting memoranda concerning the case. 

While the hearing in the FTC case has concluded, the lawsuit brought by Washington Attorney General Bob Ferguson continues this week. 

Ferguson argues that the proposed merger violates Washington antitrust law and will result in higher prices for consumers.

“Free enterprise is built on companies competing, and that competition benefits consumers,” Ferguson said in a press release in April. “My legal team and I will continue working to protect Washington consumers and workers from increased prices and fewer choices.” 

Glenn Pomerantz, an attorney with Munger, Tolles & Olsen representing the Washington AG’s office, argued in opening statements on Sept. 16 that neither of the grocery chains face an existential threat from bigger competitors like Amazon and Walmart, according to news website LegalReader.com. 

“Kroger and Albertsons don’t need to merge to be successful. They’re already successful,” Pomerantz said. 

Kroger attorney Mark Perry argued that it’s these big-box retailers that serve as the pure-play grocers’ “real competition.”

“The evidence will establish that Kroger and Albertsons do face an existential threat from these behemoths and that this merger is their response to that threat,” Perry said, according to LegalReader.com.

Kroger and Albertsons attorneys both have argued that the Washington AG and the FTC have relied on an outdated understanding of the grocery market and that nowadays shoppers visit multiple retailers for their grocery shopping. 

Washington, which has more than 300 Kroger and Albertsons stores combined, maintains a unique perspective on the merger because of the botched divestiture of stores during the Albertsons, Safeway merger in 2015. 

In that acquisition, Albertsons and Safeway divested 146 stores to Bellingham, Wash.-based grocery chain Haggen, but the small chain failed to operate the stores successfully and closed 127 of the locations within six months. Many of those were sold back to Albertsons. 

Under the Kroger, Albertsons merger proposal, the combined chains would divest 579 stores to C&S Wholesale Grocers, a wholesale company that operates 23 stores under the Piggly Wiggly banner. 

Opponents of the merger have argued that C&S is unprepared to take on ownership of hundreds of new locations. John Marshall, a financial analyst for UFCW 3000 and 324, which represents workers at both Kroger and Albertsons, argued in July that C&S is a poor choice for divestiture because between 2017 and 2023, the company has seen its sales decline by 21.5%. 

“On an inflation-adjusted volume basis, the decline has been greater than 40%, a significant loss of business for C&S Wholesale Grocers,” he said in July. “Today, they are in the process of attempting to regain outlets for their wholesale volume by becoming a retail operator.”

Kroger and Albertsons responded to the concerns about C&S’s ability to operate the divested stores by leaking a memo in early July, stating that Albertsons Chief Operating Officer Susan Morris would move to C&S and become president and CEO of retail, if the merger is approved. 

Morris took the stand in the FTC case in early September and testified that while she did play a role in the Safeway acquisition, she did not have direct involvement in the purchase. 

In addition to the FTC and Washington cases, Kroger and Albertsons face a third antitrust lawsuit from Colorado Attorney General Phil Weiser. The hearing on that case will begin on Sept. 30 in a district court in Denver. 

In addition to accusations that the merger would violate antitrust law, the Colorado case also asserts that Kroger and Albertsons violated the Colorado State Antitrust Act in 2022, when Kroger-owned King Soopers employees went on strike and the two grocers allegedly agreed to not poach each others’ workers or pharmacy customers. 

“Such no-poach and non-solicitation agreements are illegal under the Colorado State Antitrust Act because they are agreements to not compete,” Colorado Attorney General Phil Weiser said in February.