Can the Kroger-Albers Merger Work? A Federal Circuit Circuit Court Decision in a Walmart-Small Supermarket Merger
By Wednesday morning, Albertsons abandoned the merger and filed a lawsuit against Kroger, alleging a willful breach of contract for not doing enough to win regulatory approval for the merger. In a statement Kroger said that Albertsons was to blame for its own responsibility.
Kroger officials testified that they usually compared their prices to Walmart, rather than the other way around, and that it was difficult to keep up with Walmart’s higher prices due to its scale. Walmart is the largest seller of groceries in the U.S.
The merger of Kroger and Albertsons was pending for over two years. The Colorado attorney general had not made a decision in a third case.
The FTC, however, argued that someone who shops at Walmart, Costco, CVS or even Trader Joe’s likely still relies on their neighborhood supermarket. Government lawyers said enough people were concerned about the merger that the agency received an unprecedented 100,000 public comments.
The judge separately weighed the plan by Kroger and Albertsons to sell hundreds of their stores to a firm called C&S Wholesale Grocers as a condition of their merger, meant to appease regulators.
The FTC said that C&S would struggle to compete. The firm currently runs only 23 stores, mostly under the Piggly Wiggly brand, without much nationwide name recognition. C&S executives had concerns about the quality of stores they would acquire according to internal documents shared by government lawyers.
“There are serious concerns about C&S’ ability to run a large-scale retail grocery business that can successfully compete against the proposed merged business, as would be required to offset the competitive harm of the merger,” she wrote in Tuesday’s order.
In 2015, the government approved a grocery merger that required stores to be put out of business. Albertsons bought Safeway. It sold 168 stores and then bought 33 of them for the lowest prices since one buyer filed for bankruptcy protection in the middle of the deal.
The FTC’s case went to the District Court and it was a win for the FTC and the outgoing Biden administration.
The lawsuits described the two companies as each other’s biggest head-to-head rivals in many markets — keeping tabs on each other’s prices, store hours and quality of products.
The $24.6 billion merger was stopped by a federal district court in Oregon and a state court in Washington.