FTC Lawyers Wrap Up Arguments to Block Kroger-Albertsons Merger

A three-week U.S. District Court hearing concerning the Federal Trade Commission’s (FTC) effort to temporarily block the proposed $24.6 billion merger between Kroger Co. (KR) and Albertsons Companies, Inc. (ACI) has concluded. According to Bezinga, the FTC urged U.S. District Judge Adrienne Nelson to issue a preliminary injunction halting the merger until the agency’s complaint can be fully heard by an administrative law judge in October.

The hearing, held in Portland, Oregon, came to a close on Tuesday, marking a pivotal moment in what could become the largest supermarket merger in U.S. history. The deal, first proposed in 2022, has faced strong opposition from federal regulators who argue that the merger would harm competition in the grocery sector. FTC attorneys presented their final arguments, emphasizing the negative impact the merger could have on local communities.

According to a Reuters report, FTC Chief Trial Counsel Susan Musser highlighted that Kroger and Albertsons primarily compete against one another, rather than with retail giants like Amazon or Costco. Musser argued that if the merger proceeds, it will eliminate local competition, leading to higher prices for consumers. “It’s this local competition, in these local communities, that this merger will eliminate,” Musser said in court.

The FTC contends that the merger would hurt consumers by reducing competition, potentially leading to higher food prices, lower wages, and fewer benefits for workers. The two grocery chains operate in 22 states, and their close competition on prices, quality, and services benefits shoppers, the FTC argued. The commission expressed concerns that food and pharmacy “deserts” could emerge if store closures follow the merger.

Related: FTC Warns of Grocery Price Hikes in Kroger-Albertsons Merger Battle

Per Bezinga, Kroger and Albertsons have defended the merger, asserting that combining their operations would enable them to reduce prices and compete more effectively with large retailers such as Walmart and Amazon. The companies also argued that the merger would strengthen union jobs and stimulate growth across their stores. In response to competition concerns, Kroger and Albertsons have agreed to divest 579 stores to C&S Wholesale Grocers, a move designed to mitigate potential market overlap.

Despite these assurances, FTC attorneys remain skeptical, suggesting the divestiture may not be enough to maintain healthy competition in the grocery sector. In addition, labor unions have voiced concerns that the merger could lead to reduced wages and benefits for employees if Kroger and Albertsons no longer face direct competition from one another.

If Judge Nelson grants the FTC’s request for an injunction, further in-house hearings will be held starting October 1. The outcome of those hearings could determine whether the deal is ultimately allowed to proceed. However, Kroger has taken an additional step by suing the FTC in federal court, arguing that the agency’s internal proceedings are unconstitutional. That lawsuit, filed in Ohio, aims to have the case decided in federal court rather than through the FTC’s administrative process.