Two of the nation’s largest grocery stores, Kroger Co. and Albertsons Cos., raised concerns when they announced their intent to merge in October.
At the time, Vermont Sen. Bernie Sanders called on President Biden’s administration to block their union, citing the potential for price increases.
“At a time when food prices are soaring as a result of corporate greed, it would be an absolute disaster to allow Kroger, the 2nd largest grocery store in America, to merge with Albertsons, the 4th largest grocery store in America,” he said in a post on Twitter. “The Biden Administration must reject this deal.”
The retailers were said to face market-by-market scrutiny especially in Chicago, where Jewel-Osco and Mariano’s compete, Las Vegas, Texas, and other markets. In Washington state, the retailers operated a combined 350 stores, according to The Seattle Times.
Neil Stern, CEO of Good Food Holdings, a retailer with stores under multiple banners in several West Coast markets where both Kroger and Albertsons operate, said “This would be the biggest deal in history in our industry by far, and the repercussions…could be really significant.”
Others thought that the combined companies could potentially open doors for small makers. Jeffrey Landsman of Specialty Food Sales, a specialty food broker based in Baltimore, said that a local supplier with a limited presence in stores operated by Kroger or Albertsons, for example, might potentially have the opportunity to get picked up by the larger entity.
On Nov. 1, Washington State Attorney General Bob Ferguson filed a lawsuit to block Albertson Cos. from a $4 billion payout to shareholders that was to take place Nov. 7, before the proposed merger with Albertsons could be reviewed by state and federal antitrust enforcers.
The payment, Ferguson argued, risked undercutting the grocer’s ability to compete during the time period government regulators would be scrutinizing the merger.
Ferguson said that according to Securities & Exchange Commission filings, the $4 billion dividend exceeded Albertsons’ cash on hand.
District of Columbia Attorney General Karl A. Racine also filed a lawsuit in federal court against Albertsons Cos. and Kroger Co. and sought a temporary restraining order to stop the payout to Albertsons’ shareholders until a full review of their proposed merger was complete. This lawsuit was joined by the Office of the Attorney General for the States of California and Illinois and filed under seal in the U.S. District Court for the District of Columbia.
A King County Superior Court in Washington state granted Ferguson’s motion for a nationwide temporary restraining order that blocked Albertsons’ payment to shareholders.
Albertsons Cos. sought to overturn it saying in a statement: “Albertsons Cos. continues to maintain that the lawsuit brought by the State of Washington, and the similar lawsuit brought by the Attorneys General of California, Illinois, and the District of Columbia are meritless and provide no legal basis for canceling or postponing a dividend that has been duly and unanimously approved by Albertsons Cos.’ fully informed Board of Directors,” the retailer said in a statement. “Albertsons Cos. is a thriving business which has delivered over $75 billion in revenues in the rolling four quarters ended September 10, 2022, following strong performance of $71.9 billion in revenues in fiscal 2021. Albertsons Cos. is well-capitalized, with limited debt and significant free cash flow and is in a strong position financially. The size of the dividend reflects the Company’s strength, rather than the illogical and damaging accusation that it is an attempt to weaken the Company.”
Later in November, the restraining order was extended. The State of Washington Supreme Court plans to review the temporary restraining order against the payment on February 9, 2023.
Meanwhile, in late November, Rodney McMullen, CEO of Kroger, and Vivek Sankaran, CEO at Albertsons, testified before the Senate Subcommittee on Competition Policy, Antitrust and Consumer Rights, where senators questioned whether the deal would reduce competition and lead to higher prices.
“Kroger currently is ranked fourth in total revenue among U.S. grocery retailers behind Walmart, Amazon and Costco,” McMullen said in a statement. “A combined Kroger and Albertsons will remain at number four.”
Albertsons’s Sankaran said that his company determined that merging with Kroger represented the best way to compete against Amazon and Walmart and that the intent isn’t to close stores.
But that did little to calm layoff fears among employees. Thousands of workers at Kroger and Albertsons feared they may be laid off if the two companies merged, reported The Guardian.
Local unions representing over 100,000 Albertsons and Kroger workers oppose the merger because of its potential to negatively affect competition, prices, and jobs. The 2015 merger between Albertsons and Safeway showed similar promises made by executives only to be later broken, according to the report.
Naomi Oligario, a worker at Safeway during the Albertsons merger, said that her store was divested and spun off under Haggen grocery stores. This meant that employees couldn’t transfer to a different store without losing seniority and benefits and that the prices increased significantly after the merger.
“It was a fiasco, and heart-wrenching, because some people with more seniority than myself didn’t get their jobs back,” said Oligario. “It’s nerve-racking to think that we might have to go through that whole fiasco again.”
Related: Kroger Debuts Robot-Powered Fulfillment Center; Albertsons Provides Legal Proceedings Update