PORTLAND, Ore. — The federal government urged a U.S. District Court judge on Tuesday to temporarily block a proposed merger between Kroger and Albertsons, saying the combination would “almost certainly” benefit shareholders but not everyday shoppers.
Lawyers for the Federal Trade Commission gave their closing arguments at the end of a three-week hearing in Portland, Oregon. The FTC wants U.S. District Judge Adrienne Nelson to issue a preliminary injunction that would block the deal while its complaint goes before an in-house administrative law judge.
Kroger and Albertsons proposed what would be the largest supermarket merger in U.S. history in 2022. The companies insist that the $24.6 billion deal would allow them to lower prices and more effectively compete with retail giants like Walmart and Amazon.
But the FTC says the deal would eliminate competition and lead to higher food prices for already struggling customers. Susan Musser, the Federal Trade Commission’s chief trial counsel, argued Tuesday that Kroger and Albertsons primarily compete with each other and not places like Amazon or Costco, where consumers do other kinds of shopping.
“It’s this local competition, in these local communities, that this merger will eliminate,” Musser said.
In their hearing testimony this month, the CEOs of Albertsons and Kroger said the merged company would lower prices in a bid to retain customers. They also argued that the merger would boost growth, bolstering stores and union jobs.
FTC attorneys have noted that the two supermarket chains currently compete in 22 states, closely matching each other on price, quality, private label products and services like store pickup. Shoppers benefit from that competition and would lose those benefits if the merger is allowed to proceed, they said.
The FTC and labor union leaders also argued that workers’ wages and benefits would decline if Kroger and Albertsons no longer compete with each other. They also expressed concern that potential store closures could create so-called food and pharmacy “deserts” for consumers.
Under the deal, Kroger and Albertsons would sell 579 stores in places where their locations overlap to C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly store brands.
The FTC says C&S is ill-prepared to take on those stores. Earlier in the hearing, Laura Hall, the FTC’s senior trial counsel, cited internal documents that indicated C&S executives were skeptical about the quality of the stores they would get and may want the option to sell or close them.
But C&S CEO Eric Winn testified that he thinks his company can be successful in the venture.
The attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming all joined the FTC’s lawsuit on the commission’s side. Washington and Colorado filed separate cases in state courts seeking to block the merger. Washington’s case opened in Seattle on Monday.
Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter. Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw’s. Together, the companies employ around 710,000 people.
If Judge Nelson agrees to issue the injunction, the FTC plans to hold the in-house hearings starting Oct. 1. Kroger sued the FTC last month, however, alleging the agency’s internal proceedings are unconstitutional and saying it wants the merger’s merits decided in federal court. That lawsuit was filed in federal court in Ohio.
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Durbin reported from Detroit.