The largest proposed food market merger in U.S. history goes through the courts.
On the one hand, supermarket chains Hook And Albertson'swho say their planned merger will help them compete against competitors like Costco. On the opposite side are the antitrust authorities of the Federal Trade Commissionwho imagine the merger would eliminate competition and drive up food prices at a time of already high food price inflation.
Starting Monday, a federal district judge in Portland, Oregon, will review either side and judge whether to grant the FTC's request for a preliminary injunction. A preliminary injunction would delay the merger while the FTC conducts an internal case against the deal before an administrative law judge.
Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands comparable to Ralphs, Smith's and Harris Teeter. Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states, including brands comparable to Safeway, Jewel Osco and Shaw's. Together, the businesses employ about 710,000 people.
Here's what it’s best to know before the hearing, which is predicted to last until September 13.
Why do Kroger and Albertsons wish to merge?
Kroger and Albertsons – two of the most important grocery chains within the U.S. – announced their merger plans in October 2022. The corporations say the $24.6 billion deal would keep prices low by giving them more leverage over suppliers and allowing them to mix their private labels. They say a merger would also help them compete with major rivals like Walmart, which currently controls about 22% of U.S. grocery sales. Together, Kroger and Albertsons would control about 13%.
Why does the FTC wish to block the merger?
Antitrust regulators say the proposed merger would eliminate competition, resulting in higher prices, poorer quality and lower wages and advantages for employees. In February, the FTC filed a lawsuit to dam the merger before an FTC administrative law judge. At the identical time, the FTC filed suit in federal court in Oregon, searching for a preliminary injunction. Attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming joined the federal lawsuit.
Will Kroger and Albertsons close some stores in the event that they merge?
They say no. If the merger is approved, Kroger and Albertsons have agreed to sell 579 stores in places where their businesses overlap. The buyer can be C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the private labels Grand Union and Piggly Wiggly. Kroger and Albertsons had originally planned to divest 413 stores, however the FTC said that plan wouldn’t have made C&S a powerful competitor. Kroger and Albertsons agreed in April to divest more stores. Washington has essentially the most stores to be divested, with 124, followed by Colorado with 91 and California with 63.
What happens if the judge in Oregon issues a short lived restraining order?
If the injunction is approved, Kroger and Albertsons will likely appeal to a better court, said Mike Keeley, partner and chairman of the antitrust department at Washington law firm Axinn, Veltrop & Harkrider. The case could then undergo the FTC's own judicial system, but because that may take a yr or more, corporations often abandon a deal before going through the method, Keeley said. Kroger sued the FTC this month, arguing that the agency's internal procedures are unconstitutional and that it wants the merits of the merger to be decided in federal court. In that case, filed in Ohio, Kroger cited a recent Supreme Court ruling that limited the Securities and Exchange Commission's authority to try some civil fraud claims throughout the agency relatively than in court.
What happens if the Oregon judge rules with Kroger and Albertsons?
The FTC would likely appeal the ruling, but Keeley said it's rare for an appeals court to overturn a lower court's ruling on a merger, so the FTC could resolve to drop the challenge. The case could still move through the FTC's administrative process. It's unclear what impact the presidential election may need on the case. The Biden administration has been particularly aggressive in difficult mergers it viewed as anticompetitive, but lawmakers from each parties expressed skepticism in regards to the merger in a 2022 hearing.
If the Federal Court allows the merger, could state courts still prevent it?
Colorado and Washington have filed suit individually to dam the merger in state courts. That's an unusual situation; normally the states are co-plaintiffs in a federal case. But each states imagine the stakes are high. Colorado has greater than 200 Kroger and Albertsons stores, while Washington has greater than 300. Keeley said each states could seek their very own injunctions in one other court if the FTC loses, but it surely can be surprising if one other court blocked the merger if Kroger and Albertsons were successful within the federal case.
image credit : www.mercurynews.com