The battle for the largest supermarket merger in US history

Both sides are currently making their case before U.S. District Judge Adrienne Nelson, who will ultimately decide at the end of next month’s hearing whether to grant the FTC’s request for a preliminary injunction against the merger.

Already this week, an internal email from a Kroger executive about raising egg and milk prices beyond the added costs of inflation has drawn attention in the courtroom.

If the judge overseeing the hearing ultimately rules in favor of the FTC, the deal between Kroger and Albertsons could be completely torpedoed. A temporary injunction would put the merger on hold because the FTC has a separate internal proceeding on the deal before an administrative law judge.

“This merger will not happen if this ordinance is in place,” Kroger attorney Matthew Wolf said Monday as the federal court hearing began in Oregon.

Wolf said the FTC’s internal administrative process is so complex that merger deals typically collapse before proceedings are completed.

In his opening statements in court Monday, Wolf argued that the merger would instantly lower some prices for customers at Albertsons stores, where company officials disclosed they are as much as 12 percent higher than Kroger’s.

Federal regulators’ attempt to lower prices by blocking the merger shows that they “neither understand the industry nor the parties within it,” Wolf said.

“Supermarkets are losing this grocery battle, and who are they losing it to? Walmart, Costco and Amazon, among others,” Wolf said in court.

Albertsons lawyer Enu Mainigi said the retailer could be forced to close stores and lay off workers if the merger does not go through.

FTC Chief Counsel Susan Musser argued in her opening statement Monday that the proposed merger “would eliminate in one fell swoop the competition that shoppers and workers depend on.”

“This lawsuit is part of an effort to help Americans feed their families,” Musser said.

Dozens of witnesses are expected to testify at the hearing over the next two weeks, including the CEOs of Kroger and Albertsons.

Regulators sued to block the Kroger-Albertsons merger deal earlier this year

In February, more than a year after Kroger and Albertsons announced the mega-merger deal, the FTC sued to block it.

The attorneys general of Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and the District of Columbia have joined the FTC suit. The attorneys general of Colorado and Washington also filed separate lawsuits in an attempt to stop the deal.

“Kroger and Albertsons are two of the largest supermarket chains in thousands of local communities across the country,” attorneys in the FTC’s lawsuit argue. “In hundreds of these communities, the proposed acquisition would create a single supermarket with market shares so large as to be presumed illegal under antitrust laws.”

The suit claims that “the proposed acquisition would also eliminate the substantial direct competition between Kroger and Albertsons that exists today, which risks higher prices and lower quality for consumers.”

The FTC says in its lawsuit that the stakes for Americans are “exceptionally high,” as the agency notes that food prices have risen significantly in recent years.

“Fierce competition between these two food giants has benefited millions of American consumers through lower prices for food and household products,” the lawsuit states. “They also benefited hundreds of thousands of grocery store workers who, as a result of competing for their jobs, earn better wages and benefits.”

It continues: “If allowed to proceed, the proposed acquisition would destroy that competition, potentially making it more expensive for millions of families to put food on the table.”

Kroger, meanwhile, filed a lawsuit against the FTC last week, arguing that the agency’s administrative action against the merger violates the Constitution, citing in part a recent Supreme Court decision.

“The merger between Kroger and Albertson’s is squarely focused on ensuring that we bring lower prices to customers from day one, while securing the future of good-paying union jobs,” said Kroger CEO and President Rodney McMullen , in a statement at the time.

“We stand ready to defend this merger in the next trial in federal court — the proper place for this matter to be heard — and we’re asking the Court to stop what amounts to an illegal proceeding before the FTC’s domestic court,” McMullen said.

Kroger operates more than 2,700 stores in 36 states under names such as Fred Meyer, Dillon’s and Smith’s, while Albertsons controls more than 2,200 stores in 35 states under banners such as Safeway, Shaws and Acme.

In 2022, Kroger and Albertsons generated over $148 billion and $72 billion in revenue, respectively.

As part of the proposed merger, Kroger and Albertsons said they would sell 579 stores to food supply company C&S Wholesale Grocers.