The failed grocery megamerger was the subject of a lawsuit

The FTC’s First Decision: The Safeway-Albertsons Merger Isn’t the Biggest Bound

The first ruling is a big victory for the FTC. It asked a federal court in Oregon to stop the merger. The government argued that the resulting colossus would lead to higher food prices and fewer choices for shoppers and workers. In many markets, the two chains are each other’s biggest rival.

Kroger has many popular grocery stores, including Fred Meyer and King Soopers. Safeway and Vons are owned by the parent company, Albertsons. In statements on Tuesday, the companies argued that the courts were wrong in their decision and that they were evaluating their options.

The biggest grocery merger in U.S. history is in jeopardy due to two years of delays. The companies could choose to continue their legal appeals or abandon the deal. They have a third lawsuit pending in Colorado.

The FTC, however, argued that someone who shops at Walmart, Costco, CVS or even Trader Joe’s likely still relies on their neighborhood supermarket. Government lawyers said enough people were concerned about the merger that the agency received an unprecedented 100,000 public comments.

The judge weighed in on the plan by Kroger and Albertsons to sell hundreds of stores to a firm called C&S Wholesale Grocers as a condition of their merger.

The FTC thinks C&S would struggle to compete. The firm currently runs only 23 stores, mostly under the Piggly Wiggly brand, without much nationwide name recognition. Government lawyers shared internal notes which show C&S executives raised concerns about the quality of stores they would acquire.

She wrote in Tuesday’s order that there were serious concerns about C&S’ ability to compete against the merged business and that was required to offset the competitive harm of the merger.

The last time the government approved a grocery merger that hinged on divesting stores, it was 2015. The grocery store Safeway was bought by Albertsons. It sold 168 stores and then bought 33 of them on the cheap after a buyer filed for bankruptcy protection.

The FTC’s case prevailed in U.S. District Court, delivering a big win to the outgoing Biden administration and the FTC Chief Lina Khan, who made tougher scrutiny of mergers a central plank of her legacy.

The lawsuits described the two companies as each other’s biggest head-to-head rivals in many markets — keeping tabs on each other’s prices, store hours and quality of products.

The deal was put on hold by the federal district court in Oregon and the state court in Washington, which said it would hurt shoppers.