Kroger Brings Legal Challenge Against FTC

Kroger has sued the FTC over its planned review of one of the largest supermarket mergers in U.S. history, but the outcome remains uncertain.

At a Glance

The FTC challenges Kroger’s proposed $24.6 billion acquisition of Albertsons.
The FTC claims the merger is anticompetitive and detrimental to consumers.
Kroger argues the FTC’s review process is unconstitutional and seeks to have it decided in federal court.
A bipartisan group of nine attorneys general supports the FTC’s lawsuit.

Kroger’s Historic Merger Plan

Kroger’s $24.6 billion acquisition of Albertsons represents the largest proposed supermarket merger in U.S. history. This deal, if approved, would consolidate two of the country’s largest grocery chains, potentially altering the landscape of American grocery retailing. Collectively, Kroger and Albertsons operate over 5,000 stores across 36 and 35 states, respectively, and employ nearly 700,000 people.

The merger, agreed upon in October 2022, has faced significant scrutiny. Executives from both companies have argued that combining forces would create efficiencies and provide better services to consumers. However, the Federal Trade Commission (FTC) has raised serious concerns regarding the potential for reduced competition in the market.

Kroger sues FTC over in-house review of $25B grocery deal that ‘could take years’ https://t.co/GicO6cmwoV pic.twitter.com/Sv2uKjK3d3

— New York Post (@nypost) August 19, 2024

FTC’s Antitrust Concerns

The FTC, supported by a bipartisan group of nine attorneys general, is challenging the merger, alleging that it is anticompetitive. The commission claims that the merger would lead to higher grocery prices, lower quality products and services, and reduced consumer choices. Moreover, the FTC suggests that the merger would harm grocery store workers by reducing competition for wages, benefits, and working conditions.

Henry Liu, Director of the FTC’s Bureau of Competition, stated, “This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years. 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.”

The FTC issued an administrative complaint and authorized a federal lawsuit to block the merger. The commission argues that Kroger and Albertsons’ plan to divest several hundred stores to C&S Wholesale Grocers is inadequate to resolve the competitive concerns. The divestiture proposal, according to the FTC, does not form a standalone business and fails to address competitive issues in many regional and local markets.

Kroger’s Legal Pushback

In response, Kroger has launched a lawsuit against the FTC, claiming the regulator’s in-house review process is unconstitutional. Filed in Cincinnati, the lawsuit argues that the matter should be resolved in federal court. Kroger maintains that the in-house review process could take years, delaying the merger indefinitely.

Kroger Chairman Rodney McMullen said in a statement, “We are asking the court to halt what amounts to an unlawful proceeding before the FTC’s own in-house tribunal.”

Kroger also claims two specific constitutional violations by the FTC: the administrative law judge cannot be removed by the President, violating Article II of the Constitution, and adjudicating private contract rights through the executive branch instead of the judicial branch violates Article III. Kroger seeks a preliminary injunction in the US District Court, Southern District of Ohio, to stop the FTC’s administrative proceedings. Federal court evidentiary hearings are scheduled to begin on August 26, 2024, in the District of Oregon.

What Lies Ahead

The FTC maintains that its intervention is in the best interest of consumers and workers, while Kroger insists on the merger’s benefits and legality.

Kroger Chairman Rodney McMullen emphasized that the company is “prepared to defend the merger in federal court, which he considers the appropriate venue.” –

As this case moves through the legal system, both the FTC and Kroger will continue to make their cases. The legal principles at stake and the potential economic consequences could make this a pivotal moment for the U.S. grocery industry.