The Hawthorne Fred Meyer store is pictured in Portland, Ore., Monday, Sept. 23, 2019.
Kate Davidson / OPB
Judges in Oregon and Washington separately blocked a $24.6 billion merger of Kroger and Albertsons on Tuesday. Both rulings found that if the two grocery chains were allowed to merge it would significantly curb competition.
In a 71-page order, U.S. District Court Judge Adrienne Nelson found the “evidence shows that defendants engage in substantial head-to-head competition and the proposed merger would remove that competition. As a result, the proposed merger is likely to lead to unilateral competitive effects and is presumptively unlawful.”
The preliminary injunction, which comes after a three-week hearing that concluded in Portland last September, is a win for the Federal Trade Commission along with seven states – including Oregon – and the District of Columbia who sued to block the merger in February. In its lawsuit, the commission asked Nelson to block the deal until an in-house administrative judge at the FTC could consider the merger’s implications.
The deal was also separately blocked by a state court judge in Washington Tuesday.
On Wednesday, Albertsons Companies announced it was giving up on the merger.
“Given the recent federal and state court decisions to block our proposed merger with Kroger, we have made the difficult decision to terminate the merger agreement,” Albertsons CEO Vivek Sankaran said in a statement. ”We are deeply disappointed in the courts’ decisions.”
Albertsons also announced it had sued Kroger “for willful breach of contract” and failing to secure the merger.
In the Pacific Northwest, Kroger operates Fred Meyers and QFC stores, and Albertsons operates its own branded supermarkets as well as Safeway stores.
“The fierce competition between these two grocery giants has benefited millions of American consumers through lower prices for food and household essentials,” the FTC and states wrote in their lawsuit. “If allowed to proceed, the proposed acquisition would destroy this competition, likely making it more expensive for millions of families to put food on the table.”
In response, Kroger argued the lawsuit was “willfully blind to the realities of current grocery competition” and said the FTC’s “view of the relevant market lacks any basis in the real world.” The grocer argued the merger would allow the company to compete nationally on a scale with retail giants such as Costco, Walmart and Amazon.
In its testimony in Portland, Albertsons warned Nelson that it might have to lay off workers, close stores and even exit some markets if the merger weren’t allowed to proceed. Together, the companies employ around 710,000 people.
Kroger and Albertsons announced plans to merge in October 2022.
According to the filing in Oregon, Kroger operates 2,700 stores across 35 states and D.C. This includes Fred Meyer, which has 51 stores in Oregon and 59 in Washington. Albertsons operates 2,269 stores in 34 states and D.C., including 283 Safeway stores in the Pacific Northwest.
As part of the proposal, Kroger said they would spin off nearly 600 stores in places where their locations overlap.
But Nelson said even that caveat wouldn’t sufficiently address the concern that the merger stifles competition. “There is ample evidence that the divestiture is not sufficient in scale to adequately compete” with a merged Kroger-Albertsons, she wrote.
The ruling is a major decision for Nelson, who was confirmed to the federal bench less than a year ago after a lengthy and distinguished legal career in Oregon.
Henry Liu, director of the FTC’s bureau of competition, called the ruling a win and not just for consumers.
“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,” Liu said in a statement.
Outgoing Oregon Attorney General Ellen Rosenblum, a Democrat, whose agency helped litigate the case, said the decision will help keep competition.
“Judge Nelson’s ruling confirms our argument that the proposed merger would be harmful to consumers and workers alike,” Rosenblum said in a statement.
Sen. Ron Wyden, D-Oregon, the outgoing chair of the Senate Finance Committee, welcomed the ruling and said it blocked an “ill-conceived consolidation.”
“I’m glad the court has shelved this monster deal because in addition to raising grocery prices for shoppers already tiptoeing on an economic tightrope, it would have made it that much harder for Oregonians to find a pharmacy and for workers at both supermarket chains to seek fairer wages and better working conditions,” Wyden said in a statement.
The Associated Press contributed to this story.
