Unionized grocery store workers rally to oppose the proposed merger between Kroger and Albertsons outside a Ralph’s supermarket in Los Angeles in 2023. On Wednesday, Albertsons said it was giving up on the deal after it was blocked by two courts.
FREDERIC J. BROWN/AFP via Getty Images/AFP
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FREDERIC J. BROWN/AFP via Getty Images/AFP
Albertsons has sued Kroger, launching a new chapter in the supermarket wars after the two largest U.S. grocery chains failed to convince multiple courts that they should be allowed to merge to take on bigger rivals such as Walmart.
On Tuesday, both a federal district court in Oregon and a state court in Washington blocked the $24.6 billion deal, saying it would reduce competition, which would harm shoppers.
By Wednesday morning, Albertsons abandoned the merger and filed a lawsuit against Kroger, alleging a willful breach of contract for not doing enough to win regulatory approval for the merger. Kroger, in a statement in response, said Albertsons is deflecting its own responsibility.
The two are likely headed for a new bitter legal fight with money at stake. Albertsons is seeking “billions of dollars” in damages for lost shareholder value, legal costs and time in limbo. It also wants the $600 million merger break-up fee, to which Kroger says Albertsons is “not entitled.”
Kroger runs many familiar grocery stories, including Ralphs, Harris Teeter, Fred Meyer and King Soopers. Albertsons owns Safeway and Vons — and is likely to begin a search for a new buyer for itself.
Litigation left the Kroger-Albertsons merger pending for over two years. A third case, by the Colorado attorney general, remained undecided before the merger fell apart.
The companies argued that their top competitors were not conventional supermarkets but food behemoths like Walmart, Costco, Amazon and even dollar stores. The duo argued that only together could they survive against these giants and that, combined, they would have more power to negotiate lower prices for shoppers.
The Federal Trade Commission, which brought the federal case, argued that Kroger’s purchase of Albertsons would lead to fewer choices and higher prices for shoppers.
The lawsuits described the two companies as each other’s biggest head-to-head rivals in many markets — keeping tabs on each other’s prices, store hours and quality of products.
The FTC’s case prevailed in U.S. District Court, delivering a big win to the outgoing Biden administration and the FTC Chief Lina Khan, who made tougher scrutiny of mergers a central plank of her legacy.