DENVER — Kroger’s $20 billion attempt to merge with Albertsons Companies Inc., hit a snag in Colorado on Wednesday as Attorney General Phil Weiser announced a lawsuit to block the supermarket chains from combining.
Weiser said the merger of the parent companies of King Soopers/City Market and Safeway would kill competition and hurt consumers.
“Coloradans are concerned about undue consolidation and its harmful impacts on consumers, workers, and suppliers,” said Weiser in a news release. “After 19 town halls across the state, I am convinced that Coloradans think this merger between the two supermarket chains would lead to stores closing, higher prices, fewer jobs, worse customer service, and less resilient supply chains.”
The merger was announced in October 2022 and if it were to happen, together the stores would control nearly 13% of the grocery market in the United States, the Associated Press reported. In Denver, nearly half of all grocery stores would be under one big company.
In 2021, the grocers represented more than 44% of the market share in Denver.
"A post-merger Kroger would have the ability to raise prices, pinching consumers. In urban areas, where consumers shop close to home, the consolidation of Kroger and Albertsons stores would create significant market power to raise prices and reduce quality and services. Consumers in other areas of the state would feel the effects even more," the AG's office said in a news release.
Weiser said his office also obtained information that allegedly showed a violation of Colorado's Antitrust Act during the January 2022 King Soopers employees strike.
"King Soopers was concerned about losing employees and customers to Safeway during the strike and entered into an agreement with Albertsons whereby Safeway agreed to not hire any King Soopers employees and to not solicit any of King Soopers’ pharmacy customers, according to an email between company executives leading up to the strike," the Attorney General's office said. "Such no-poach and non-solicitation agreements are illegal under the Colorado State Antitrust Act because they are agreements to not compete."
In response to Colorado's lawsuit, Kroger and Albertsons issued a joint statement.
“We are disappointed in Attorney General Weiser’s premature decision to file a lawsuit while the merger is still under regulatory review, and we remain in active dialogue with the FTC and the other state Attorneys General," the release said. "The merging parties will vigorously defend this in court because we care deeply about our customers and the communities we serve, and this merger will result in the best outcomes for Colorado consumers."
Kroger's CEO also said in a release the proposed merger would benefit consumers stating the company since 2003 has saved consumers $5 billion and has "consistently lowered prices and improved the customer experience during previous mergers."
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A Kroger news release said the chain has reduced profits to lower prices arguing other retailers like Walmart and Dollar General increased gross margins over the last 20 years.
Kroger has said it would not close stores, distribution centers or lay off frontline workers as a result of the merger.
"Blocking this merger would only serve to strengthen larger, non-unionized retailers like Walmart, Costco and Amazon, by allowing them to maintain and increase their overwhelming and growing dominance of the grocery industry. In contrast, Kroger and Albertsons Companies merging will bring lower prices to more customers, strengthen and create good-paying union jobs, and bring more fresh, affordable food to more communities," the companies said in a statement.
Colorado follows Washington State which announced a similar lawsuit in January.
Arguing shoppers would have fewer choices, Washington State Attorney General Bob Ferguson on January 15 filed a lawsuit in an attempt to block the merger.
“This merger is bad for Washington shoppers and workers. Free enterprise is built on companies competing, and that competition benefits consumers,” said Ferguson in a news release. “Shoppers will have fewer choices and less competition, and, without a competitive marketplace, they will pay higher prices at the grocery store. That’s not right, and this lawsuit seeks to stop this harmful merger.”
Ferguson added Kroger and Albertsons are the second and fourth largest supermarket companies in the United States with over 700,000 employees in 5,000 stores.
Washington State’s AG office argued the merger would kill consumer-beneficial competition as supermarket chains adjust prices and offer better deals to lure consumers.
“Even company executives have expressed that the merger might be illegal. After rumors of the proposed merger surfaced, a vice president with Albertsons wrote that ‘you are basically creating a monopoly in grocery with the merger… [it] makes no sense,’” the AG’s office wrote in a news release.
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The same day Washington filed the lawsuit, Kroger countered that it believed the merger with Albertsons would “result in the best outcomes for customers, associates and our communities.”
The grocery store chain said in a news release it was updating its timeline to close the deal.
“We currently anticipate that the closing will occur in the first half of Kroger's fiscal 2024. While this is longer than we originally thought, we knew it was a possibility and our merger agreement and divestiture plan accounted for such potential timing.”
This is a developing story and will be updated.
