Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The largest supermarket merger in US history has been blocked by a federal judge, handing a victory to federal antitrust regulators who argued Kroger’s $24.6bn purchase of Albertsons would harm consumers and workers.
US district judge Adrienne Nelson in Oregon on Tuesday imposed a preliminary injunction on the takeover, which sends the proceedings to the Federal Trade Commission for further consideration. The decision diminishes the odds of the deal being completed.
Nelson concluded “the merger would lead to undue market concentration in multiple geographic markets in both the supermarkets and large-format stores markets that would presumptively lessen competition”.
Grocery prices have risen more than a quarter in the past five years, reflecting transport bottlenecks, labour shortages, commodity costs and strong demand from consumers. Food inflation became a central theme of the US presidential race and put the nation’s two biggest supermarket operators under a microscope.
The deal between Kroger and Albertsons would place thousands of stores under a single owner and consolidate their footprint in certain regions. The companies have argued they need to merge to withstand competition from retail behemoths such as Walmart, Costco and Amazon.
Kroger agreed to buy Albertsons for $34.10 a share in October 2022. The FTC, eight states and the District of Columbia sued to block the deal in February, arguing the combination risked higher prices for consumers and weaker bargaining power for the companies’ unionised employees.
The FTC on Tuesday said: “Today’s win protects competition in the grocery market, which will prevent prices from rising even more. This statement win makes it clear that strong, reality-based antitrust enforcement delivers real results for consumers, workers, and small businesses.”
The federal case is one of three challenging the deal. The attorneys-general of Colorado and Washington separately filed lawsuits alleging harm in their states’ courts. The judge in the Washington case ruled to block the merger later on Tuesday.
Wall Street has for months put a low probability on the deal being approved, with Albertsons shares trading at a roughly 40 per cent discount to the agreed deal price. They dropped 2.3 per cent after the federal ruling to $18.50.
The companies have pledged to divest 579 stores nationwide to address competition concerns, including 124 in Washington. But labour groups have questioned the credentials of the buyer, C&S Wholesale Grocers, a relatively small player in the US retail supermarket industry.
The federal decision is a success for the FTC under chair Lina Khan, an appointee of President Joe Biden who has taken an aggressive position on antitrust enforcement.
Tuesday’s ruling is the latest legal victory for the regulator, after a federal judge in New York recently blocked the merger of fashion brands Capri and Tapestry, writing in her decision that “antitrust has come into fashion”. The companies later abandoned the deal.
Khan is expected to be replaced after president-elect Donald Trump is sworn in next month.
Additional reporting by Stefania Palma in Washington
Source link
