District of Columbia Attorney General Karl A. Racine filed suit Wednesday in federal court against Albertsons Companies Inc. and The Kroger Co. and is seeking a temporary restraining order to stop a nearly $4 billion payout to Albertsons’ shareholders—a payout 57 times greater than the historic dividends Albertsons has provided, he said—until a full review of their proposed merger is 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.
The Office of the Attorney General alleges that the proposed special dividend would violate federal and District antitrust law because:
• Issuing the payout will render Albertsons less able to compete effectively with other supermarkets, including Kroger, and restrain trade in violation of Section 1 of the Sherman Act and D.C. Code § 28–4502.
• Albertson being strapped for cash will likely hamper its ability to advertise, provide promotions, price competitively, and maintain staffing and staff wages and benefits.
The action came a day after Washington State Attorney General Bob Ferguson filed a lawsuit to block the payout that is to take place this Monday, Nov. 7.
Albertsons owns Safeway, which operates 13 grocery stores across Washington D.C. and is a critical source of affordable fresh food for District residents, according to Racine. Kroger owns Harris Teeter, also prevalent in the District and a close competitor to Safeway. This lawsuit follows Racine’s effort last week in leading a bipartisan group of state attorneys general to call on Albertsons to stop the payout until the proposed merger’s impact on workers, consumers, and competition can be fully assessed.
Albertsons and Kroger told the attorneys general they would continue with the payout.
“Albertsons’ rush to secure a record-setting payday for its investors threatens District residents’ jobs and access to affordable food and groceries in neighborhoods where no alternatives exist,” said Racine, in a statement. “This would have a particularly devastating impact on struggling people and families with access to fewer grocery stores during a time of historically high inflation. My office will use all our authority to stop this cash grab and protect District workers, families, and consumers.”
Last week, Racine also announced that OAG is starting a formal investigation into the Albertsons-Kroger proposed merger and its impact on workers and consumers, separate from the lawsuit filed yesterday. Kroger and Albertsons have more than 710,000 employees in nearly 5,000 stores across 48 states and D.C., reinforcing that all corners of the country would feel the effects of the proposed merger, according to Racine.
Related: Washington Sues to Block Albertsons Payout; Industry Eyes Opportunities in Kroger-Albertsons Merger.