Mega Kroger-Albertsons Merger Blocked By Courts

CALIFORNIA — A grocery merger between Kroger and Albertsons, which would have been the largest in history, was blocked on Tuesday by judges overseeing two cases.

Following two years of delays, the two grocery giants saw their $24.6 billion merger halted by both federal regulators and by the Washington state attorney general. The deal now remains in legal limbo as the companies await ruling from another lawsuit in Colorado.

U.S. District Court Judge Adrienne Nelson issued a preliminary injunction blocking the merger Tuesday after holding a three-week hearing in Portland, Oregon. Then, later Tuesday, Judge Marshall Ferguson in Seattle issued a permanent injunction barring the merger in Washington after concluding that it would lessen competition in the state.

Albertsons, which also owns Safeway and Vons, operates a collective of 550 grocery stores across the Golden State. Meanwhile, Kroger, which owns Ralphs, operates a total of 481 stores. The merger would have meant that the grocery giants would have control over at least 1,031 stores in California.

Tuesday's ruling is being celebrated as a "major win" by the Federal Trade Commission — which, together with several states — asked the federal court to stop the merger.

Federal regulators contend the merger would eliminate competition and result in higher prices for consumers and bad outcomes for workers. The grocery giants argued that the merger would hand them the control to lower prices and compete with bigger retailers like Costco, Walmart and Amazon.

"This historic win protects millions of Americans across the country from higher prices for essential groceries—from milk, to bread, to eggs—ultimately allowing consumers to keep more money in their pockets," said Bureau of Competition Director Henry Liu in a Tuesday statement. "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 Vons in Southern California, or a Jewel-Osco in Illinois."

Across the U.S., Kroger and Albertsons compete in 22 states. A merger would eliminate the competition between the two and raise prices for consumers, the FTC argued.

Kroger and Albertsons proposed the colossal merger in 2022, but the Federal Trade Commission sued earlier this year, asking Judge Nelson of the high court in Oregon to temporarily block the deal so that the FTC's judge consider the consequences of the merger.

“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,” she wrote in her opinion.

The merger would have also stifled competition in the job market by eliminating competition for employees between the two companies. What's more, the merger would have spurred the closure of hundreds of grocery stores, elminating jobs for hundreds more.

"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.

UFCW local union representing tens of thousands of employees working at Albertsons and Kroger-owned stores celebrated the rulings on Tuesday.

“The well-reasoned decisions today by both Courts make plain what union grocery workers have known all along – this mega-merger would be bad for workers who deserve a workplace where they can be paid well for their labor, be safe and be respected. It would be disastrous for shoppers who deserve competition that leads to better choices and lower prices," according to a statement from the union.

Under the merger agreement, Kroger and Albertsons would also sell 579 stores in places where their locations overlap to C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly store brands.

The FTC and the state of Washington argued that C&S is ill-prepared to take on the stores and may want the option to sell or close them. Both judges agreed.

“The current competition between Kroger and Albertsons' stores is fierce in the state of Washington," Ferguson said in court before his ruling was released. "Wholesaler C&S, with its limited retail experience and infrastructure, will not be able to replicate the ferocity of that competition or compete effectively in Washington against the colossus that is a merged Kroger and Albertsons.”

Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter. Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw’s. Together, the companies employ around 710,000 people.

The Associated Press contributed to this report.