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Kroger has filed a motion for preliminary injunction against the US Federal Trade Commission (FTC)’s administrative proceeding, challenging the retailer’s proposed $24.6 billion merger with Albertson's Companies.

The two retail giants announced that they had entered into a definitive agreement to merge in October 2022, with Kroger chairman and CEO Rodney McMullen declaring that the merger would help to build “a more equitable and sustainable food system by expanding our footprint into new geographies to serve more of America with fresh and affordable food”.

However, opposition saw the retailers push back the deal’s anticipated closure, which was originally slated for early 2024. The FTC sued to block what would have been the largest proposed supermarket merger in US history, alleging that the deal is anticompetitive and would raise grocery prices for millions of consumers, as well as harm ‘tens of thousands’ of workers.

The complaint argued that the two supermarkets are direct competitors, and force each other to ‘aggressively compete’ for customers through lowered prices and by providing better pay and benefits for employees.

Alongside price, the FTC argues that the merger would ‘diminish’ the retailers’ incentives to compete on quality, further harming consumers. It would also allow them to gain ‘increased leverage’ over workers and their unions, and impose ‘sub-par’ terms on employees, to the workers’ detriment, the complaint alleges.

Yesterday (19 August 2024), Kroger announced it had filed a motion in the US District Court of the Southern District of Ohio to enjoin the FTC’s administrative proceeding, arguing that by proceeding in its in-house administrative tribunal, as well as the separate action in federal court, the FTC is ‘violating constitutional protections’.

In a statement, Kroger said that the FTC’s administrative proceeding against the merger violates the Constitution in two areas:

“First, the FTC violates Article II of the Constitution because the Administrative Law Judge presiding over the administrative proceeding is not removable by the President of the United States. This principle was recognised and applied by the Supreme Court in Free Enterprise Fund v. Public Company Accounting Oversight Board (2010),” Kroger’s statement reads.

“Second, the FTC violates Article III of the Constitution by seeking to adjudicate Kroger's private rights to contract with another private party administratively through the Executive Branch rather than in the independent Judicial Branch. This standard was reinforced this past term by the Supreme Court in SEC v. Jarkesy (2024).”

Kroger also alleges that the FTC has sought to split its challenge to the merger into two separate tribunals in an “inappropriate attempt to receive multiple opportunities to litigate the same issues”.

The FTC’s lawsuit seeking to block the merger for the duration of its administrative proceedings could take several years to resolve, Kroger added in its statement. Hearings for the federal court proceeding are set to begin on 26 August in the district of Oregon.

Kroger chairman and CEO McMullen commented: “The merger between Kroger and Albertson's is squarely focused on ensuring we bring customers lower prices starting day one while securing the future of good-paying union jobs. We stand prepared to defend this merger in the upcoming trial in federal court – the appropriate venue for this matter to be heard – and we are asking the court to halt what amounts to an unlawful proceeding before the FTC's own in-house tribunal.”

In an amicus brief filed last week with a federal court in the US District of Oregon, four attorney generals have called for a rejection of the Federal Trade Commission (FTC)’s move to block the merger.

The four attorneys, in Ohio, Georgia, Alabama and Iowa, argued that the planned acquisition would ‘increase, not restrain,’ competition in the market for grocery sales, which would ultimately benefit consumers.

“It promises to strengthen Kroger’s ability to compete effectively for consumer dollars in an already crowded field of retailers, and there is no factual or legal basis for the Commission to claim otherwise,” the brief, filed by Ohio Attorney General Dave Yost, states.

The brief continues: “The acquisition…will have no effect on competition between Kroger and Albertsons in the vast majority of communities in which only one of them has stores. Nationwide, the acquisition should enable Kroger to compete more aggressively on price, deliver improved service, and respond better to consumer needs.”

“In claiming that the acquisition will have exactly the opposite effects, the Commission is oblivious to the plain-as-day economic reality that raising prices, worsening services, and lowering quality – its allegations – would actually weaken Kroger as a retailer and drive consumers into the waiting arms of its many competitors.”

FoodBev has approached the US Federal Trade Commission for comment.

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