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Kroger and Albertsons hope to merge but must face a skeptical US government in court first

The largest proposed grocery store merger in US history is set to go to court.

On one side are the supermarket chains Kroger and Albertsons, which have their say planned merger will help them compete against rivals like Costco. On the other side are Federal Trade Commission antitrust regulators, who say the merger would eliminate competition and raise food prices at a time of already high food price inflation.

Starting Monday, a federal district judge in Portland, Ore., will consider both sides and decide whether to grant the FTC’s request for a preliminary injunction. An injunction would delay the merger while FTC for an internal case against the business before an administrative law judge.

Krogerbased in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands such as Ralph’sSmith’s and Harris Teeter. Albertsonsbased in Boise, Idaho, operates 2,273 stores in 34 states, including brands such as Safeway, Jewel Osco and Shaw’s. Together, the companies employ approximately 710,000 people.

Here’s what you need to know ahead of the hearing, which is expected to last until September 13.

Kroger and Albertsons – two of the largest grocery chains in the US – announced in October 2022 that they plan to merge. The companies say the $24.6 billion deal would keep prices down by giving them more leverage with suppliers and let them combine their store brands. They say a merger would also help them compete with big rivals like Walmartwhich now controls about 22% of US grocery sales. Together, Kroger and Albertsons would control about 13%.

Antitrust regulators say the proposed merger would eliminate competitionwhich leads to higher prices, poorer quality and lower wages and benefits for workers. In February, the FTC issued a complaint to block the merger before an administrative law judge at the FTC. Meanwhile, the FTC filed suit in federal court in Oregon seeking the preliminary injunction. The attorneys general of California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming all joined the federal lawsuit.

They say no. If the merger is approved, Kroger and Albertsons have agreed to sell 579 stores in locations where their stores overlap. Buyer would be C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly brands. Kroger and Albertsons originally planned to divest 413 stores, but the FTC said the plan would not have allowed C&S to be a robust competitor. Kroger and Albertsons agreed to divest additional stores in April. Washington has the most stores to be divested, with 124, followed by Colorado with 91 and California with 63.

If the preliminary injunction is granted, Kroger and Albertsons will likely appeal to a higher court, said Mike Keeley, partner and antitrust chair at Axinn, Veltrop & Harkrider, a law firm in Washington. The case can then go through the FTC’s own legal system, but because that can take a year or more, companies often abandon a deal before going through the process, Keeley said. Kroger sued the FTC this month, alleging that the agency’s internal procedures are unconstitutional and that it wants the merits of the merger decided in federal court. In that case, filed in Ohio, Kroger cited a recent Supreme Court judgment which limited the Securities and Exchange Commission’s power to try certain civil fraud complaints within the agency instead of in court.

The FTC would likely appeal the ruling, but Keeley said it is rare for an appeals court to reverse a lower court’s ruling on a merger, so the FTC may decide to drop the challenge. The case may still proceed through the FTC’s administrative process. It is unclear what impact the presidential election may have on the case. The Biden administration has been particularly aggressive in challenging mergers it deemed anticompetitive, but lawmakers from both parties expressed skepticism on the merger in a 2022 hearing.

Colorado and Washington has separately sued to block the merger in state courts. It is an unusual situation; states are normally co-plaintiffs in a federal lawsuit. But both states believe they have a lot at stake. Colorado has more than 200 Kroger and Albertsons stores, while Washington has more than 300. Keeley said both states could seek their own injunctions from another court if the FTC loses, but it would be surprising for another court to block the merger if Kroger and Albertsons are successful in the federal case.

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