Kroger Co. has laid out its specific arguments in a federal court filing Aug. 12 explaining why it should be allowed to proceed with its planned $24.6 billion acquisition of Albertsons Cos. Inc. and refuting a recent Federal Trade Commission motion.
Cincinnati-based Kroger (NYSE: KR) made the filing in response to last week’s FTC motion seeking a preliminary injunction halting the deal. The FTC is seeking “extraordinary relief,” according to the agency's filing, by requesting the merger be rejected. This is separate from an injunction granted last month in a Colorado court. Kroger and analysts have said if the federal court grants the injunction the FTC is seeking, it would essentially prevent the deal from taking place.
The FTC claims the acquisition and merger would violate antitrust laws and would be harmful to consumers, employees and suppliers. The deal would combine the nation’s largest operator of traditional supermarkets in Kroger with the second-largest in Boise, Idaho-based Albertsons (NYSE: ACI).
A hearing is scheduled to begin Aug. 26 in federal court in Portland, Oregon.
Kroger set out three key arguments in its filing:
- The deal would benefit consumers by resulting in lower prices and a better shopping experience. It will invest “billions of dollars” in lower prices, capital improvements and employee wages and benefits, it said in the filing. Kroger has said in the past it will invest $500 million in lower prices and $1 billion in employee wages and benefits.
- The grocery competitive market is far broader than the way the FTC defines it. Kroger said in its filing the reason it’s planning to buy Albertsons is “existential – Kroger must expand, adapt, and most importantly, continue to lower prices to compete with global behemoths like Walmart, Costco, and Amazon, which have moved aggressively, rapidly, and effectively to dominate grocery retailing.” The deal will help Kroger compete in particular against those three companies because “these goliaths are laser-focused on the grocery retail market,” it said in the filing. Walmart is the nation’s largest grocery retailer. Costco is third. And one analyst said Amazon could control 20% of the U.S. grocery market by 2030. “Simply put, competition for groceries and ‘household goods’ extends far beyond Kroger and Albertsons, and Kroger must embrace this reality to compete effectively and offer consumers the lowest possible prices, while offering better-paid jobs to union workers,” Kroger said in the filing. “Plaintiffs entirely ignore this competitive context because it undermines their narrative, contradicts their outdated assumptions about consumer and competitive realities in the grocery market, and ultimately dooms their case against the merger.”
- The FTC hasn’t defined a valid market to determine concentration. A big part of Kroger’s argument has been the market in which it competes includes dollar stores, mass merchandisers, club stores, natural grocers and others. But it claims the FTC excludes many of those in its analyses of the competitive environment.
in markets where its operations overlap with Albertsons. That’s aimed at reducing its control of the market in certain regions of the country, largely in the West. Part of that sale includes seven Albertsons locations in Albuquerque, Rio Rancho, Los Lunas, Taos, and two Safeway stores in Farmington.
Kroger said in the filing the merger will not cause undue market concentration. It claims the FTC’s analysis doesn’t take into account Kroger’s plans to divest of the 579 stores to C&S.
The FTC’s analysis, Kroger said in the filing, is “premised on a fictional transaction that does not include divestiture, and when accounting for the divestiture, plaintiffs’ economic critiques of the merger fall apart.”
Kroger has made many of these arguments in the past, but now they’re set out officially in the court filings.
Kroger cited 64 past cases throughout its highly detailed 54-page document laying out its arguments.
The FTC also has laid out its arguments in previous filings for opposing the merger and seeking a halt to the deal.
It has claimed in court filings the acquisition would “eliminate fierce competition between Kroger and Albertsons, leading to higher prices for groceries and other essential household items for millions of Americans.” It also said the deal would result in lower-quality products, narrow consumer choices and eliminate “aggressive competition” for grocery workers.
“This supermarket mega-merger comes as American consumers have seen the cost of groceries rise steadily over the past few years,” Henry Liu, director of the FTC’s Bureau of Competition, said in a news release earlier this year. “Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today. Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing and their working conditions deteriorating.”
Two other cases opposing the acquisition have been filed by attorneys general in Colorado and Washington state.
Kroger and Albertsons agreed in October 2022 to the acquisition, which would be the largest ever in the U.S. grocery industry if it's completed.
