FTC sues to block Kroger-Albertsons grocery store merger

What to expect: Neither side has a slam dunk argument.

Government case: The FTC claims that the merger would reduce choices, raise prices, and lead to lower quality products and services.

• It also alleges that the companies' proposed divestitures are a "hodgepodge of unconnected stores, banners, brands and other assets," and fall "far short of mitigating the lost competition."

The other side: Kroger will argue that the merger makes it a stronger competitor to Walmart, which would still be nearly twice its size.

• Kroger also is expected to cite its union jobs protection as both grocers employ union workers, unlike rivals such as Amazon.
• Kroger also has promised lower prices as a result of the transaction, benefitting consumers.

Zoom out: Attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming are joining the FTC's lawsuit.

• Kroger and Albertsons also face state-level lawsuits from attorneys general in Colorado and Washington, 18 months after first announcing the merger.

What they're saying: "This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years," the FTC's Henry Liu said in a statement. "Kroger's acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today."

• "Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating," Liu added.
• Kroger, in a statement, replied: "Blocking Kroger's merger with Albertsons Companies will actually harm the very people the FTC purports to serve: America's consumers and workers ... Kroger has reduced prices every year since 2003, resulting in $5 billion invested to lower prices and a 5% reduction in gross margin over this period. This business model is immediately applied to merger companies."
• Albertsons adds: "If the FTC is successful in blocking this merger, it would be hurting customers and helping strengthen larger, multi-channel retailers such as Amazon, Walmart and Costco — the very companies the FTC claims to be reining in."

Behind the scenes: If the deal gets blocked, Albertsons still would be for sale, says a source familiar with the situation — but there aren't many logical buyers beyond Kroger.

• Ahold Delhaize, the Dutch parent company of grocery banners like Food Lion and Stop & Shop, could make sense as an Albertsons buyer given its similar operations and financial wherewithal.

By the numbers: The deal, if closed, would combine the second and fourth largest U.S. food retailers.

The bottom line: Kroger and Albertsons now face a lengthy court battle.

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