In a significant legal upheaval, a judge in Oregon has decisively blocked Kroger’s audacious attempt to merge with Albertsons in what was poised to be a historic $25 billion union—the largest supermarket merger in U.S. history. The ruling, a formidable blow to both supermarket giants, stems from concerns that such a consolidation would stifle competition and ultimately harm consumers.
“Neither party made a statement in the aftermath of this pivotal verdict,” as both chains absorb the implications of this setback. The ambitious merger, unveiled in 2022, aimed to fuse the fifth and tenth largest retailers in the nation, encompassing a myriad of grocery brands, including the familiar names of Safeway, Vons, Harris Teeter, and Fred Meyer.
In an era where supermarkets face relentless competition, Kroger and Albertsons sought this merger as a strategic defense against industry behemoths like Walmart and the digital juggernaut Amazon. This initiative, they argued, would bolster their competitive stance in a landscape dominated by non-union competitors and the rapidly expanding German discounter, Aldi.
Kroger’s CEO Rodney McMullen framed the merger as essential to enhance their viability; his statements echoed a commitment to lower grocery prices by an ambitious $1 billion post-merger. However, Judge Adrienne Nelson vehemently dismissed these claims, asserting that traditional supermarkets occupy a distinct niche and are far from direct competitors with broader retail giants like Walmart and Amazon. Her ruling emphasized that eliminating head-to-head competition between Kroger and Albertsons would likely lead to elevated prices for consumers.
The White House weighed in, expressing support for Judge Nelson’s ruling. National Economic Council Deputy Director Jon Donenberg echoed the administration’s sentiment, stating, “The merger would have exacerbated grocery prices for consumers and severely undermined wages for workers. Our Administration stands firmly against corporate mergers that inflate prices, degrade employee conditions, and threaten small businesses.”
This ruling comes amidst an inflationary backdrop squeezing grocery shoppers, further complicating the proposed merger’s already contentious path. Unions, an array of small grocers, and a bipartisan coalition in Congress—featuring notable figures like Democratic Senator Elizabeth Warren and Republican Senator Mike Lee—have consistently rallied against the merger from its inception.
The Federal Trade Commission (FTC) guided the charge against the merger back in February, asserting that its approval would lead to inflated grocery prices for millions of Americans and compromise the wages and benefits of hundreds of thousands of grocery workers. To address competition concerns, Kroger and Albertsons had pledged to divest 579 stores to C&S Wholesale Grocers, but the FTC warned that C&S might be ill-suited to manage the operation of those stores—a potential “non-functioning disaster,” according to their analysis.
Judge Nelson sided with the FTC’s apprehensions, noting, “There is ample evidence that the divestiture is not of sufficient scale to adequately compete” and that it would severely disadvantage C&S as a rival. The implications of this landmark case have rippled through the fabric of corporate deal-making and antitrust enforcement, particularly under the watch of the FTC’s outgoing chair, Lina Khan, who has initiated sweeping antitrust lawsuits against other industry titans, including Google and Amazon.
The resistance to the merger also came from independent grocery retailers, who expressed fears that the merger would amplify the bargaining clout of the newly merged entity over suppliers, consequently leaving these smaller players struggling to maintain their inventories.
As consolidation continues to reshape the grocery landscape, the statistics speak volumes: in 2019, the top 20 retailers commanded a staggering 64% of total food sales, a stark rise from just 29% in 1990, as reported by the Agriculture Department. Traditional grocery stores have witnessed their market share progressively erode, caught in the crosshairs of competitors like Walmart, Costco, and a burgeoning online retail sector.
With traditional supermarkets now accounting for only 62% of grocery spending, down from 80% in 1990, advocacy for stringent antitrust measures has gained traction, welcoming Judge Nelson’s decision. “With food prices consistently high, a Kroger-Albertsons merger would have exacerbated the situation for consumers,” asserted Rebecca Wolf, a senior food policy analyst at Food & Water Watch. This ruling is not merely a setback for Kroger and Albertsons, but a pivotal chapter in the larger narrative of corporate consolidation and its repercussions on consumers and the competitive landscape of the grocery sector.