The proposed $24.6 billion merger between Kroger and Albertsons, two of the largest grocery chains in the U.S., faced significant setbacks on Tuesday when both federal and state courts issued rulings to block the deal. These decisions cast doubt on the future of the merger, which would create a $200 billion company with approximately 5,000 stores across 48 states and the District of Columbia.
In Oregon, U.S. District Judge Adrienne Nelson granted the Federal Trade Commission’s (FTC) request for a preliminary injunction, calling the merger “presumptively unlawful” due to its potential to eliminate competition. The FTC, backed by attorneys general from eight states and the District of Columbia, argues that the merger would harm consumers and workers by reducing competition in over 1,000 communities, leading to higher prices and lower quality.
Shortly after the federal ruling, a Washington State court also blocked the merger, citing similar concerns about reduced competition. A third challenge, brought by Colorado, remains pending.
Kroger and Albertsons have defended the merger, claiming it is essential to compete with industry giants like Walmart and Amazon, which dominate the grocery sector. Walmart alone accounts for 22% of U.S. grocery sales, while a combined Kroger-Albertsons would control approximately 13%. However, critics, including the FTC, counter that promises of lower prices and better competition lack enforceability.
The grocery industry has seen waves of consolidation since the 1990s, with just four companies—Walmart, Kroger, Costco, and Albertsons—now accounting for about half of all grocery sales. Opponents of the merger argue that further consolidation would diminish competition, weaken union bargaining power, and ultimately harm the 700,000 employees, most of whom are unionized.
This merger has also become a focal point for the Biden administration’s broader effort to curb corporate consolidation across various industries. FTC Chair Lina Khan has spearheaded these initiatives, earning both praise and criticism for her aggressive antitrust stance.
Despite the setbacks, Kroger and Albertsons have signaled their intention to explore options, including continuing with the FTC’s administrative process. However, industry experts suggest the preliminary injunctions significantly diminish the likelihood of the merger moving forward.
Kroger shares rose by 5% following the rulings, while Albertsons shares dropped by over 2%, reflecting market uncertainty. Observers note that ongoing legal battles, combined with mounting costs, may eventually prompt shareholders to question whether pursuing the merger remains a worthwhile investment.
The road ahead for Kroger and Albertsons is fraught with legal and regulatory challenges, and the ultimate outcome could reshape the competitive landscape of the U.S. grocery industry for years to come.