DENVER — Colorado Attorney General Phil Weiser has filed a lawsuit in Denver District Court to block a proposed $24.6 billion Kroger-Albertsons merger.
On Wednesday, Weiser announced he had filed the lawsuit, saying the merger would violate head-to-head competition between the two grocery chains, consolidating an already heavily concentrated market.
“Coloradans are concerned about undue consolidation and its harmful impacts on consumers, workers and suppliers,” Weiser said. “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."
Kroger and Albertsons compete head-to-head in several ways, according to Weiser. The companies monitor each other closely on price and adjust their prices based on what the other is doing, the attorney general said.
The two chains also compete to offer the best prices on local products to draw customers into their stores, Weiser said. Both Kroger and Albertsons sell Palisade peaches on promotion, sometimes at a loss, to generate store traffic. This benefits Palisade peach farmers because they can be assured of a fair price and avenues to sell their crops and it benefits customers because they are able to get a local product at a low price, Weiser said.
Kroger operates 148 King Soopers and City Market stores in Colorado. Albertsons operates 105 Safeway and Albertsons locations in the state, according to the attorney general.
In urban areas, where consumers shop close to home, the merger would create significant market power to raise prices and reduce quality and services, Weiser said.
He said the effects would be felt in other areas of the state as well. City Market and Safeway are the only two grocery stores in Gunnison. The merger would make Kroger the only option in the area and force residents to travel 65 miles to reach a non-Kroger option.
During a King Soopers strike in 2022, Albertsons and Kroger entered into a "no-poach" and "no-solicitation" agreement so striking employees wouldn't be hired by Safeway and Safeway couldn't solicit pharmacy customers from King Soopers. These agreements are illegal under the Colorado State Antitrust Act because they are agreements to not compete, Weiser said.
“In addition to challenging this merger, we are also suing the two companies for a no-poach agreement that harmed workers and blatantly violated antitrust law," he said. "No-poach agreements stifle worker mobility and depress wages and non-solicitation agreements harm consumers and raise prices.”
In an effort to lessen the anticompetitive impacts of the merger, Kroger has proposed to sell off 413 stores and other assets to C&S Wholesale Grocers, a privately held wholesale supplier that currently operates 23 stores outside of Colorado.
Weiser's lawsuit asks the court to find that the merger violates Colorado antitrust laws and to permanently block it from going into effect.
In addition, 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 strike, and to bar the companies from enforcing or entering into such agreements.
In a statement, Kroger said they're disappointed with the lawsuit, saying it's premature while the merger is under regulatory review.
"The merging parties will vigorously defend this 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," according to Kroger. "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. In contrast, Kroger and Albertsons Companies merging will bring lower prices to more customers, strengthen and create good-paying union jobs, and bring more fresh, affordable food to more communities.”
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