The Federal Trade Commission’s case against Kroger, Albertsons and C&S Wholesale Grocers: Its outcome and internal state court ruling

The Federal Trade Commission brought a case claiming that Kroger’s purchase of Albertsons would lead to higher prices and fewer choices for shoppers.

Kroger and Albertsons are rare unionized shops in retail. The companies believe that this is a reason why they should be allowed to unite in order to face their bigger, non-unionized rivals. But the FTC says a merger would give the companies much more power over contract negotiations, leading to lower pay and worse benefits.

The merger of Kroger and Albertsons was delayed for over a year. A third case, by the Colorado attorney general, remained undecided before the merger fell apart.

The FTC argued that someone who shops at Walmart, for example, still relies on their neighborhood supermarket. Government lawyers said enough people were concerned about the merger that the agency received an unprecedented 100,000 public comments.

The judge separately weighed the plan by Kroger and Albertsons to sell hundreds of their stores to a firm called C&S Wholesale Grocers as a condition of their merger, meant to appease regulators.

According to the FTC, C&S would struggle to compete. Most of the stores are under the Piggly Wiggly brand, without much nationwide name recognition. Government lawyers shared internal notes, in which C&S executives raised concerns about the quality of stores they would acquire.

“There are serious concerns about C&S’ ability to run a large-scale retail grocery business that can successfully compete against the proposed merged business, as would be required to offset the competitive harm of the merger,” she wrote in Tuesday’s order.

The last grocery merger that required the government to approve was in 2015. Safeway was bought by Albertsons. One of the buyers of 33 of the 168 stores it sold off became bankrupt within a few months of the deal and it was cheap to buy them all back.

The FTC’s case was decided by the U.S. District Court, which was a big win for the outgoing Biden administration and the FTC chief, who made tougher scrutiny of mergers a part of her legacy.

Both companies were described in the lawsuits as being their biggest rivals, keeping a close eye on each other’s prices, store hours and quality.

The $24.6 billion deal was blocked by federal and state courts in two states because they said it would hurt shoppers.