US District Judge Adrienne Nelson in Oregon has blocked a $25 billion bid by supermarket Kroger to acquire rival chain Albertsons. She ruled that the concerns raised by the Federal Trade Commission (FTC) about market consolidation are valid.
The Judge’s Ruling
On December 10th, Judge Nelson said that the two companies merging would harm consumers since the companies “engage in substantial head-to-head competition and the proposed merger would remove that competition.” Since the proposed merger would most likely result in outcomes that “unilaterally” cause harm to consumers, it is “presumptively unlawful,” the judge wrote.
Nelson ruled that the merger would also harm workers. The judge argued that workers’ bargaining power would be reduced by increased consolidation.
In a statement, Albertsons said it is “disappointed by the US District Court’s decision to grant the FTC’s request for a preliminary injunction.”
“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,” the statement continued.
According to a spokesperson for the grocery chain, Kroger “is currently reviewing its options” after also expressing disappointment in the ruling. Previously, Kroger asserted that a court ruling like the one Judge Nelson handed down would stop the merger.
Meanwhile, the FTC said it had “scored a major victory for the American people, successfully blocking Kroger’s acquisition of Albertsons” and applauded the judge’s decision.
The FTC said in a statement, “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.”
Kroger is based in Cincinnati, Ohio, while Albertsons is in Boise, Idaho. At the end of the day of the ruling, Kroger’s shares closed up 5%, while Albertsons’ shares finished 2% lower.
The argument behind Kroger’s decision to acquire Albertson’s was that the chain needed to compete with big box retailers like Walmart and Target since they have expanded their grocery businesses.
Amazon’s online grocery is also a concern. Judge Nelson argued that the proposed merger’s impacts must be accounted for since supermarkets still represent a distinct, niche market within the US consumer landscape.
The Shocking Fallout
A day after Judge Nelson’s ruling, Albertsons terminated the $25 billion bid to merge with Kroger and is suing the grocery store chain, seeking billions of dollars in damages, including a $600 million termination fee from Kroger.
Albertsons CEO Vivek Sankaran said, “Given the recent federal and state court decisions to block our proposed merger with Kroger, we have made the difficult decision to terminate the merger agreement.”
Albertsons also accused Kroger of failing to take “any and all actions” to approve the merger.
A Kroger spokesperson said, “This is clearly an attempt to deflect responsibility following Kroger’s written notification of Albertsons’ multiple breaches of the agreement, and to seek payment of the merger’s break fee, to which they are not entitled.”
Kroger has also claimed that after evaluating its options, it has decided “it is no longer in its best interests to pursue the merger.”
This ends the two-year attempt to merge the two grocery chains, a merger that the FTC opposed due to concerns about how it would affect consumers. Over the last four years, grocery prices have been raised by 25%, even though in 2024, there are signs that food inflation is cooling. The merger symbolized many steep rises in food costs, which were significant consumer concerns.
