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The FTC and nine attorneys general filed a lawsuit saying the $25 billion merger is "anticompetitive" and would hurt workers and consumers.

The Federal Trade Commission (FTC) is suing to block Kroger Co.’s proposed $24.6 billion acquisition of Albertsons. The FTC called the deal “anticompetitive” in a statement released Feb. 26.

The two grocery retailers first proposed the deal in 2022. Kroger was slated to buy Albertsons at the time, pending regulatory approval. The merger would allow the chains to create a “premier omnichannel food retailer,” Kroger said in a statement at the time. Together, the retailers would operate more than 5,000 stores across 48 states, with nearly 700,000 employees.

The suit comes just days before the FTC’s deadline of Feb 28. That’s when an agreement between the grocery retailers and the FTC not to close the deal would expire.

Kroger is No. 8 in the Top 1000, Digital Commerce 360’s ranking of North America’s leading retailers by online sales. Albertsons ranks No. 26. The two chains also make up the first and second largest retailers in the Food & Beverage category of the Top 1000.

The FTC’s case against the Kroger Albertsons deal

“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,” Henry Liu, director of the FTC’s Bureau of Competition, said in a written statement. “Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.”

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The FTC argues that if the two grocery chains merge, the result will harm consumers. The retailers directly compete in pricing, hours, product offerings and other factors, the agency said.

If the merger takes place, grocery prices will increase, and Kroger and Albertsons’ incentive to improve product quality and customer service will decrease, further harming customers,” the FTC stated in the same press release.

The agency also says a merger would harm workers at both chains. Both retailers have mostly unionized workforces through the United Food and Commercial Workers Union (UFCW). With Kroger and Albertsons competing for employees, workers can leverage that to negotiate better pay and collective bargaining agreements. If the grocery chains are united, workers could potentially see worsening work conditions and fewer benefits, the FTC said.

Kroger and Albertsons previously agreed to sell off several hundred stores to competitor C&S Wholesale Grocers, anticipating regulatory challenges to the merger. However, the proposal is insufficient, according to the FTC.

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“The FTC’s administrative complaint alleges that Kroger and Albertsons’s inadequate divestiture proposal is a hodgepodge of unconnected stores, banners, brands, and other assets that Kroger’s antitrust lawyers have cobbled together and falls far short of mitigating the lost competition between Kroger and Albertsons,” the agency said.

Other legal challenges

Nine Attorneys General offices are also joining the complaint against the grocery retailers. They are: Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming.

Some of those states already launched their own challenges to the grocery merger. 

In January, Washington state attorney general Bob Ferguson filed a lawsuit in King County Superior Court in an attempt to block the deal. Ferguson said the merger would give Kroger a near-monopoly in Washington. Like the FTC, Ferguson said the retailers’ proposal of selling off stores to a competitor was not sufficient to prevent a potential monopoly. He called the proposal to sell 100 stores in Washington “woefully inadequate.”

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Then, on Feb. 14, Colorado attorney general Phil Weiser filed a lawsuit to block the deal. Weiser cited similar reasoning to Ferguson, including decreased competition in the grocery space leading to higher prices and fewer jobs. He also accused Kroger and Albertsons of making an illegal agreement not to hire the other’s employees during a 2022 strike by Kroger workers.

Kroger and Albertsons respond

Kroger and Albertsons both maintain that the merger is good for consumers and workers.

“This merger is the best thing for America’s consumers because it will lead to lower prices and more choices on the foods customers need, want and love. Blocking the combination will only embolden large, non-unionized retailers — like Walmart, Amazon and Costco — to continue opposing unions and leaving communities. Kroger will continue to lower prices, grow good-paying union jobs and increase access to fresh food for the families who need it most,” a Kroger spokesperson previously told Digital Commerce 360.

“This merger will expand competition, lower prices, protect union jobs, and enhance customers’ shopping experience,” an Albertsons spokesperson said.

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