Colorado Files Lawsuit to Block Kroger-Albertsons Merger

After a yearlong investigation, Colorado Attorney General Phil Weiser has filed a lawsuit in Denver District Court to block the $24.6 billion proposed merger between The Kroger Co. and Albertsons Cos., two of the largest supermarket chains in Colorado. Kroger operates more than 140 King Soopers and City Market stores, while Albertsons runs 100-plus Safeway and Albertsons stores in the state.

According to the lawsuit, the merger would eliminate head-to-head competition between Kroger and Albertsons and consolidate an already concentrated market. 

“Coloradans are concerned about undue consolidation and its harmful impacts on consumers, workers and suppliers,” said Weiser. “After 19 town halls across the state, I am convinced that Coloradans think this merger between the two supermarket chains would lead to stores closing, higher prices, fewer jobs, worse customer service and less resilient supply chains.”

The lawsuit also challenges an illegal “no-poach” agreement between the two companies during a King Soopers strike in January 2022, when employee movement was a threat to Kroger’s operations. King Soopers was concerned about losing employees and customers to Safeway during the strike and entered into an agreement with Albertsons whereby Safeway agreed not to hire any King Soopers employees and not to solicit any of King Soopers’ pharmacy customers, according to an email between company executives leading up to the strike. Such no-poach and non-solicitation agreements are illegal under the Colorado State Antitrust Act because they are agreements not to compete.

In response to these allegations, a Kroger spokesperson submitted the following statement to Progressive Grocer: "It is disheartening for Coloradans that General Weiser would mischaracterize the facts because there was not then, and there is not now, non-solicitation or so-called no-poach agreements between Kroger and Albertsons. Employees at both companies regularly join our teams from – and exit our companies for opportunities to work at – Albertsons, Kroger, Walmart, Amazon, Costco and other retailers as well as restaurants, food service companies, convenience stores, warehouses and more.”

Weiser also claims that Kroger and Albertsons’ divestiture proposal with C&S Wholesale Grocers is inadequate because it wouldn’t alleviate the anticompetitive effects of the merger. According to Weiser, C&S has insufficient retail grocery experience to take on a divestiture of this size, there aren't enough stores to allow C&S to effectively compete with Kroger post-merger the way that Albertsons does today, and a transition agreement makes C&S reliant on Kroger for up to two years for pricing, pharmacy, promotions, loyalty programs and IT infrastructure, diminishing competition between the companies.

The AG pointed back to Albertsons’ involvement in a failed divestiture plan when it merged with Safeway in 2015. As part of that merger, the Federal Trade Commission (FTC) ordered Albertsons to divest 168 stores, almost all of which were sold to Haggen, a small regional grocer that operated 18 stores in Washington and Oregon. Shortly after acquiring the divested stores, Haggen filed a lawsuit accusing Albertsons of anticompetitive conduct and violating the FTC’s divestiture order. Haggen went bankrupt within months of the divestiture sale, Albertsons bought back many of the stores at a steep discount, and many other stores closed.

[RELATED: Teamsters Urge FTC to Reject Kroger-Albertsons Sale to C&S]

“Our conclusion in this case — and our skepticism about the proposed divestiture — is strongly supported by what happened in the Albertsons-Safeway merger, where stores closed, jobs were lost, consumers suffered, and the divestiture failed miserably to preserve competition,” noted Weiser. 

In addition to Colorado, Washington state Attorney General Bob Ferguson also filed a lawsuit last month to block the proposed Kroger-Albertsons merger, because of harm to consumers and higher prices. 

Although it had to delay its merger/divestiture plans due to continuing dialog with regulators, Kroger is pushing back against claims that it will raise prices. The nationwide retailer recently shared insights into how it lowered prices in previous mergers, along with its commitment to do the same after this latest deal goes through.

“We believe the way to be America’s best grocer is to provide great value by consistently lowering prices and offering more choices,” said Kroger Chairman and CEO Rodney McMullen. “When we do this, more customers shop with us and buy more groceries, which allows us to reinvest in even lower prices, a better shopping experience and higher wages. We know this model works because we’ve been doing it successfully for many years, and this is exactly what this merger will bring customers – lower prices and more fresh, affordable choices.”

Furthermore, a Kroger spokesperson stated, "We are disappointed in Attorney General Weiser’s premature decision to file a lawsuit while the merger is still under regulatory review, and we remain in active dialogue with the FTC and the other state Attorneys General."

Kroger now expects the merger to close in August, five months later than it first anticipated. 

"Blocking this merger would only serve to strengthen larger, non-unionized retailers like Walmart, Costco and Amazon, by allowing them to maintain and increase their overwhelming and growing dominance of the grocery industry," according to the statement Kroger provided Progressive Grocer. "In contrast, Kroger and Albertsons Cos. merging will bring lower prices to more customers, strengthen and create good-paying union jobs, and bring more fresh, affordable food to more communities.”

Meanwhile, the Colorado AG’s lawsuit is asking the court to find that the merger violates Colorado antitrust laws and to permanently block it from going into effect. The lawsuit also seeks $1 million in civil penalties from Kroger and Albertsons each for entering into the illegal no-poach and non-solicitation agreement during the 2022 King Soopers strike, and to bar the companies from enforcing or entering into such agreements.

Kroger says the merging parties will vigorously defend themselves in court "because we care deeply about our customers and the communities we serve, and this merger will result in the best outcomes for Colorado consumers."

Nearly half a million associates of Cincinnati-based Kroger serve more than 11 million customers daily through a digital shopping experience and retail food stores under a variety of banner names. The company is No. 4 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America. Boise, Idaho based Albertsons operates 2,200-plus retail food and drug stores with 1,726 pharmacies, 401 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. It's No. 9 on The PG 100. Keene, N.H.-based C&S services customers of all sizes, supplying more than 7,500 independent supermarkets, chain stores, military bases and institutions with 100,000-plus products, in addition to operating corporate stores. The company is No. 17 on The PG 100.