US courts block Kroger's $25 bn supermarket mega-merger

Two US courts ruled against supermarket giant Kroger's planned $24.6 billion acquisition of rival chain Albertsons on Tuesday, dealing an existential threat to the merger in a win for the Federal Trade Commission, which had argued the deal would harm consumers.

The first order implemented a temporary block after a three-week federal trial in Portland, Oregon, a significant blow to what would have been one of the largest retail grocery deals in US history.

"Plaintiffs are likely to succeed on the merits and the equities weigh in favor of an injunction," US District Judge Adrienne Watson wrote in a court filing confirming the preliminary injunction, which delays the deal but does not kill it.

Later on Tuesday, a Washington state court also ruled on the merger, permanently blocking the transaction, according to US legal trade publication Law360.

It was not immediately clear how the two rulings from differing jurisdictions -- the former a federal ruling, the latter at the state level -- would work.

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The FTC had argued the acquisition would lead to higher prices for groceries and other essential household items for millions of Americans.

The Oregon judge rejected the companies' arguments that the merger would generate billions in cost savings and lead to lower prices for consumers, finding these claims were "neither merger-specific nor verifiable."

A Kroger spokesperson said in a statement that the company was "disappointed" by the rulings, arguing the judges overlooked "the substantial evidence" presented in court.

"Through its proposed merger with Albertsons, Kroger would invest more than $1 billion in lower grocery prices, invest an additional $1 billion in higher grocery worker wages, and invest an additional $1.3 billion to improve Albertsons stores," the spokesperson said.

Albertsons did not immediately respond to a request for comment.

'Back to the drawing board'

"Today's win protects competition in the grocery market, which will prevent prices from rising even more," FTC spokesperson Douglas Farrar wrote in a statement shared with AFP after the injunction was granted.

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The injunction makes clear, he added, "that strong, reality-based antitrust enforcement delivers real results for consumers, workers, and small businesses."

At the close of the New York Stock Exchange on Tuesday, shares of Kroger were up 5.1 percent, while Albertson shares fell 2.3 percent.

In a statement, the Biden administration praised the judge's decision.

"The Kroger-Albertsons merger would have been the biggest supermarket merger in history -- raising grocery prices for consumers and lowering wages for workers," National Economic Council Deputy Director Jon Donenberg said in a statement.

"Our Administration is proud to stand up against big corporate mergers that increase prices, undermine workers, and hurt small businesses," he added.

"The Kroger-Albertsons deal always faced an uphill battle in its bid for approval," GlobalData managing director Neil Saunders wrote in a note to clients. "While some of the FTC's arguments were debatable, it operated from a position of strength."

"For both firms, it is now a case of putting this distraction behind them and going back to the drawing board," he added.

Source: AFP