A federal judge has blocked Kroger’s $24.6 billion acquisition of Albertsons on Tuesday (Dec. 10), citing concerns that the deal would reduce competition in the U.S. grocery market, Bloomberg reported.
U.S. District Judge Adrienne Nelson ruled in favor of the Federal Trade Commission (FTC), which had argued that the merger would harm consumers by reducing competition, particularly through inadequate divestitures of stores to C&S Wholesale Grocers. Nelson found that the divestitures were not substantial enough to replace the competitive loss and warned that some of the divested stores could close or lose sales.
“There is ample evidence that the divestiture is not sufficient in scale to adequately compete with the merged firm and is structured in a way that will significantly disadvantage C&S as a competitor,” Nelson wrote. “The deficiencies in the divestiture scope and structure create a risk that some or all of the divested stores will lose sales or close, as has happened in past C&S acquisitions.”
Despite the setback, Kroger shares rose 6.1%, while Albertsons’ stock dropped 10%. The ruling likely signals the end of the two-year-long merger attempt, with Kroger and Albertsons likely turning their attention back to improving their existing operations. Kroger, which has about 2,750 stores, will focus on investing in its network, while Albertsons may seek other strategic options, including potentially becoming a new acquisition target.
The proposed merger, which was first announced in 2022, sought to create a formidable competitor to nonunion rivals like Walmart. The deal, however, faced pushback from politicians, unions, and consumer groups, Bloomberg reported. Critics argued that it would harm consumers by reducing grocery store options and increasing prices. The FTC contended that the merger would lessen competition in the supermarket sector, which the judge agreed with, rejecting the companies’ argument that the market extended to online retailers like Amazon.
When Kroger announced its third-quarter earnings Dec. 5, CEO Rodney McMullen was adamant the merger would receive approval.
“The food industry has always been competitive and will continue to be after this merger,” McMullen stated. “We are committed to closing this merger because bringing Kroger and Albertsons together will provide meaningful and measurable benefits — lower prices, secure jobs and expanded access to fresh, affordable food — for customers, associates and communities across the country.”
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