Federal and state judges have blocked Kroger and Albertsons’ $24.6 billion proposed merger due to competition concerns.
Judge Adrienne Nelson from the US District Court for the District of Oregon issued a preliminary injunction to block the supposed largest supermarket merger in US history.
“Any harms defendants experience as a result of the injunction do not overcome the strong public interest in the enforcement of antitrust law, especially given the difficulty in disentangling a premature merger,” said Nelson.
King County Superior Court Judge Marshall Ferguson also ruled that the merger is against the antitrust law and should not proceed.
“In my view, the evidence convincingly shows that the current competition between Kroger and Albertsons stores is fierce in the State of Washington,” said Ferguson.
“By contrast, the divestiture buyer, C&S Wholesale, with its limited retail experience, will not be able to replicate the ferocity of that competition or compete in Washington against the colossus of a merged Kroger and Albertsons.”
The Federal Trade Commission (FTC) called the decision “a major victory” for Americans as it protects them from higher prices of essential goods.
“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,” said Henry Liu, director of the FTC’s Bureau of Competition.
“This is also a victory for thousands of hardworking union employees, protecting their hard-earned paychecks by ensuring Kroger and Albertsons continue to compete for workers through higher wages, better benefits, and improved working conditions.”
Kroger operates 2750 grocery retail stores while Albertsons has over 2200 stores. Last September, Kroger said it would sell more than 400 grocery stores to C&S Wholesale Grocers to get regulatory approval for its proposed takeover of Albertsons.
Neil Saunders, GlobalData MD, said that Nelson’s ruling is likely to end the chances of an acquisition taking place.
Saunders added that the denial comes as a disappointment to both companies as organic growth is becoming much harder to achieve amid grocery volumes under intense pressure and price competition increasing.
He also noted that Kroger’s move to sell several of its stores to C&S Wholesale Grocers, an inexperienced supermarket player, did not satisfy the FTC and the judges.
“Kroger will now need to double down on its efforts to invest in its core business – something it has been struggling with of late,” said Saunders.
“Albertsons has a reasonable track record of growth but, as a smaller player, it needs to set out how it intends to grow and scale.”
