A federal judge has temporarily halted a proposed merger between supermarket giants Kroger and Albertsons, a move that could derail the deal.
U.S. District Court Judge Adrienne Nelson issued the ruling Tuesday after three weeks of hearings in Portland, Oregon.
Kroger and Albertsons proposed the largest grocery store merger in U.S. history in 2022. But the FTC filed a lawsuit earlier this year asking Nielsen to block the $24.6 billion deal until the FTC’s in-house administrative law judge considers the impact of the merger.
Nielsen agreed to suspend the merger.
“Any harm the defendants suffer as a result of the injunction cannot overcome the strong public interest in enforcing antitrust laws, particularly given the difficulties in resolving premature mergers,” she wrote in the opinion.
Federal regulators argued that merging the two chains would eliminate competition and harm consumers and workers. The companies said the merger would help them better compete with large retailers such as Walmart, Costco and Amazon.
Although Kroger and Albertsons have asked another federal judge to block internal proceedings, the case may now be moved to the Federal Trade Commission. Colorado and Washington are also trying to block mergers in ongoing state trials. The judge in Washington is expected to issue an opinion later Tuesday.
The FTC believes that Kroger and Albertsons currently compete in 22 states and are very similar to each other in terms of price, quality, private label products and services such as store pickup. The government said the merger would eliminate this competition and raise prices for already struggling consumers. The FTC also said the merger would hurt workers because Kroger and Albertsons would no longer compete to hire them.
But Kroger and Albertsons believe their merger will preserve consumer choice by allowing them to better compete with growing rivals. In his testimony, Albertsons warned Nielsen that if the merger was not allowed to proceed, it might have to lay off employees, close stores or even exit some markets.
Under the merger agreement, Kroger and Albertsons will sell 579 stores that overlap with locations of C&S Wholesale Grocers, the New Hampshire-based independent supermarket provider that also owns the Grand Union and Piggly Wiggly store brands.
The FTC argued that C&S was not ready to take over the stores and may want to choose to sell or close them. But Kroger and Albertsons said C&S has the experience and national scale to handle divestments.
Kroger, headquartered in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands such as Ralphs, Smith’s and Harris Teeter. Headquartered in Boise, Idaho, Albertsons operates 2,273 stores in 34 states, including brands such as Safeway, Jewel Osco and Shaw’s. Together, these companies employ approximately 710,000 people.
