Dive Brief:
- A judge in the King County Superior Court in Washington state issued an injunction Tuesday blocking the Kroger and Albertsons merger.
- Judge Marshall Ferguson said in court: “In my view, the evidence convincingly shows that the current competition between Kroger and Albertsons stores is fierce in the state of Washington. By contrast, the divestiture buyer, wholesaler C&S, with its limited retail experience and infrastructure, will not be able to replicate the ferocity of that competition or compete effectively in Washington against the colossus of a merged Kroger and Albertsons.”
- The ruling comes about an hour after a federal judge also ruled against the merger and deals another major blow to the grocers’ efforts to combine.
Dive Insight:
The Washington ruling marks the second major blow to Kroger and Albertsons’ plan to combine, coming shortly after Judge Adrienne Nelson of the U.S. District Court in Portland, Oregon, issued her ruling granting a preliminary injunction in favor of the Federal Trade Commission.
Washington has a high concentration of Kroger and Albertsons stores, and the state argued that competition between the two keeps prices low and results in better services for shoppers. Together, the grocers run more than 300 locations in the Evergreen State, accounting for more than 50% of the state’s grocery sales, according to Washington Attorney General Bob Ferguson’s office.
In the state and federal trials, Kroger and Albertsons argued their combination would make them better positioned to compete with non-unionized competitors like Walmart. To win regulators’ approval, the grocers proposed divesting almost 600 stores and other assets to C&S Wholesale Grocers as it sought to overcome regulators’ objections, including 124 stores in Washington.
While both sides acknowledged that there is heated competition between the two supermarket chains in the state, they provided different views on what that would mean for the merger. Washington argued that allowing Kroger and Albertsons to combine could result in higher prices for consumers, while the grocers’ legal teams said they were more focused on broader industry competition and the rising threat of Walmart, Costco and Amazon. Like the FTC, Washington state’s legal team also took aim at the grocers’ divestiture plan and C&S’s track record for running retail stores.
In his decision issued Tuesday, Judge Ferguson sided with Washington’s arguments that the merger would eliminate competition between two major companies without effectively replacing it.
In a statement, Kroger said it was “disappointed in the opinions issued by the U.S. District Court for the District of Oregon and the Washington State Court, which overlook the substantial evidence presented at trial showing that a merger between Kroger and Albertsons would advance the company’s decades-long commitment to lowering prices, respecting collective bargaining agreements, and is in the best interests of customers, associates, and the broader competitive environment in a rapidly evolving grocery landscape. The Company is currently reviewing its options.”
The grocers are now awaiting a ruling on the Colorado lawsuit. It’s unclear when Judge Andrew J. Luxen of the district court for the city and county of Denver will issue a decision.
After Luxen issued an order temporarily blocking the proposed merger this summer, Kroger and Albertsons agreed not to consummate their merger until the Colorado state court ruled on a lawsuit brought by the state attorney general seeking to block the deal.
Wall Street analysts had given the deal slim odds, and experts have said that some of the deal’s main advantages have eroded in the two years since it was first announced.
