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In a major victory for the Federal Trade Commission (FTC) and the Biden Administration, a federal judge has temporarily blocked the $25 billion merger between grocery giants Kroger (KR+5.13%) and Albertsons (ACI-2.32%), citing concerns over the impact on competition.
The proposed deal would have created the largest grocery chain in the U.S., consolidating local markets. Kroger CEO Rodney McMullen argued that, because Albertsons’ prices are 10-12% higher than Kroger’s, the merger would help close the gap and expand its customer base by offering lower prices.
The FTC strongly opposed the merger, arguing it would ultimately raise prices for millions of Americans and reduce choices for consumers. During the 15-day trial, the FTC made its case.
The FTC, led by chairwoman Lina Khan, disagreed. The agency argued that combining the two companies would reduce competition in local grocery markets, lead to higher prices, and limit consumer choice. The FTC also raised concerns about the potential harm to grocery workers, claiming the merger would diminish their bargaining power for better wages and working conditions.
In August, Kroger filed a lawsuit against the FTC, accusing the agency of unlawfully challenging the merger. But just this week, the FTC doubled down on its position, claiming the deal would allow Kroger to “swallow” Albertsons and dominate the market.
Kroger and Albertsons claimed the merger would allow them to negotiate better deals with suppliers, streamline operations, and lower grocery prices. Earlier this year, Kroger even promised to cut grocery prices by $1 billion, doubling its initial investment in price reductions.
Had Judge Marshall Ferguson ruled in favor of the merger, Kroger would have owned about 5,000 stores, strengthening its ability to compete with retail giants such as Walmart (WMT+0.75%) and Amazon (AMZN-0.48%).
With this ruling, the FTC has won a key battle in what’s shaping up to be a long fight over the future of the U.S. grocery industry.
While the court has temporarily blocked the merger, it’s not a final decision. The court emphasized the importance of protecting competition and preventing potential harm to the public. The companies can still pursue the merger later, but only if it’s deemed legal after further review.
