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A federal judge in Oregon blocked Kroger’s proposed $25 billion tie-up
with Albertsons, ruling that the largest merger in US supermarket history
would limit competition and harm consumers.

The ruling is a major setback for the chains and puts the merger’s
likelihood in jeopardy. The judge issued a preliminary injunction halting
the deal, which the companies can appeal.

The merger, announced in 2022, sought to combine the fifth and tenth
largest retailers in the country. The companies own dozens of grocery
chains, including Safeway, Vons, Harris Teeter and Fred Meyer.

Supermarkets have been losing ground in recent decades to competition, and Kroger and Albertsons wanted to merge to better fight off Walmart and
Amazon.

Kroger and Albertsons employ mostly unionized workforces and said they
wanted to merge to be more competitive against non-union giants such as Walmart, Amazon and Costco. The grocers also face increased pressure from
Aldi, the fast-growing German discount supermarket chain.

The merger would accelerate “our position as a more compelling alternative
to larger and non-union competitors,” Kroger CEO Rodney McMullen said when
the deal was announced in 2022. Kroger committed to lowering grocery
prices by $1 billion following the merger.

But Judge Adrienne Nelson rejected that argument.

In her ruling, she said that supermarkets are “distinct from other grocery retailers” and are not direct competitors to Walmart, Amazon and other companies that sell a wider range of goods. The merger would eliminate head-to-head competition between Albertsons and Kroger, potentially
raising prices for consumers, she said in the ruling.

Kroger and Albertsons said they were disappointed in the ruling and were reviewing their options.

A merger between the two companies “is in the best interests of customers, associates, and the broader competitive environment in a rapidly evolving grocery landscape,” a Kroger spokesperson said.

But the White House hailed the ruling in a statement.

“The Kroger-Albertsons merger would have been the biggest supermarket
merger in history — raising grocery prices for consumers and lowering
wages for workers,” National Economic Council Deputy Director Jon
Donenberg said.

High grocery prices helped scuttle the deal
Inflation at the grocery store loomed over the proposed merger.

The proposal came as food prices skyrocketed and met stiff opposition.
Unions, small grocers and a coalition of Democrats and Republicans on
Capitol Hill, including Democratic Sen. Elizabeth Warren of Massachusetts
and Republican Sen. Mike Lee of Utah, also strongly opposed the merger
from the start.

The Federal Trade Commission in February sued to block the deal. The FTC
said the merger will “result in higher grocery prices for millions of
Americans and lower wages and benefits for hundreds of thousands of
grocery workers.”

To allay competition concerns, Kroger and Albertsons agreed to divest 579 stores to C&S Wholesale Grocers. But the FTC said C&S was “ill-equipped”
to run the divested stores and it could turn into a “non-functioning
disaster.”

Judge Nelson agreed with the FTC: “There is ample evidence that the
divestiture is not sufficient in scale to adequately compete” with Kroger
and Alber?tsons together and “will significantly disadvantage C&S as a competitor,” she said in the ruling.

The case was watched closely because of its implications for future
antitrust enforcement and corporate dealmaking. The FTC under outgoing
chair Lina Khan has also launched landmark antitrust suits against Google, Amazon and other tech giants.

Small grocery stores struggling
Independent grocery stores strongly opposed the merger. They argued that
the merger would increase the companies’ leverage with merchandise
suppliers and leave independent stores unable to stock their own shelves.

Yet consolidation in the grocery sector is growing, and small grocery
stores are struggling.

In 2019, the 20 largest retailers controlled 64% of total food sales, more
than double the share from 1990, according to the Agriculture Department.

Traditional grocery stores have also lost ground to Walmart, Costco,
dollar stores and online retailers during that span.

The share of grocery spending at traditional supermarkets dropped from 80%
in 1990 to 62% in 2012, according to the Agriculture Department.

Advocates of stricter antitrust rules cheered Judge Nelson’s decision.

“Persistently high food prices are hitting Americans hard, and a Kroger- Albertsons mega-merger would have only made it worse,” Food & Water Watch senior food policy analyst Rebecca Wolf said in a statement Tuesday

https://www.msn.com/en-us/money/companies/federal-judge-blocks-largest- supermarket-merger-in-history/ar-AA1vCvRG

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