A federal judge has halted the proposed $24.6 billion merger between Kroger and Albertsons, which would have had an impact on at least one local grocery store.

Consumer advocates and labor organizations praised the decision after arguing publicly for more than a year that the deal would harm competition and lead to higher prices.

In Montrose, the proposed merger had significant implications. The local Safeway store, located at 1329 S Townsend Ave, was among the hundreds of stores nationwide and 91 in Colorado slated for divestiture to C&S Wholesale Grocers as part of the companies’ efforts to gain regulatory approval.

The blocking of the merger means that the Safeway store will remain under its current ownership.

The decision, issued by U.S. District Judge Adrienne Nelson in Portland, Oregon, grants a preliminary injunction sought by the Federal Trade Commission (FTC) and attorneys general from multiple states. The coalition argued that combining the two companies would reduce competition in key markets, disproportionately affecting low-income communities and unionized grocery workers.

Albertsons terminates and sues

Following the court’s decision, Albertsons announced that it has terminated the merger agreement with Kroger. In a press release, Albertsons stated, “After careful consideration, Albertsons Companies has determined it is in the best interest of its stakeholders to terminate the merger agreement.”

The company stated that the decision reflected the increasing legal and regulatory challenges the deal faced.

However, the fallout from the blocked merger did not stop with the termination. Albertsons filed a lawsuit against Kroger, alleging that Kroger failed to meet its contractual obligations to secure regulatory approval. The lawsuit accuses Kroger of breaching the merger agreement by not exercising the “best efforts” required to address antitrust concerns and navigate the regulatory process effectively.

Albertsons is seeking substantial damages, including the $600 million termination fee stipulated in the original agreement. The company claims that Kroger’s alleged lack of diligence caused financial harm and negatively impacted Albertsons’ market position. “Kroger’s failure to act in good faith has caused significant harm to Albertsons and its stakeholders,” the company asserted in its legal filing.

Albertsons also highlighted that the prolonged regulatory battle disrupted its operations and eroded shareholder confidence, further compounding the financial strain on the company. “Albertsons entered this agreement in good faith, expecting both parties to work collaboratively toward a successful outcome,” the company stated. “Instead, Kroger’s actions undermined the integrity of the process.”

Kroger has firmly denied the allegations, describing them as “baseless and without merit.” The company maintains that it fulfilled its obligations under the agreement and worked diligently to address concerns raised by regulators. “We reject the claims made by Albertsons,” Kroger said in a statement. “We remain committed to fair business practices and the principles of the agreement.”

Union, Colorado AG

pleased with outcome

Marc Perrone, president of the United Food and Commercial Workers International Union (UFCW), hailed the ruling as a landmark decision for both consumers and the grocery workforce. ““We are pleased that the court heard the concerns voiced by our hard-working members and rejected the proposed megamerger between Kroger and Albertsons. The issues we raised were echoed throughout this process by lawmakers, economists, attorneys general, consumers, and the FTC.

“Moving forward, our focus will remain the same since the merger proposal was announced and that is looking for a stable and long-term solution that protects our members’ wages, benefits, and pensions. These grocery chains are highly successful because of the hard work of our members and workers across the country, and no merger or divestiture of stores should be allowed to endanger or threaten their vital role.”

He emphasized the UFCW’s long-standing opposition to the merger, highlighting the risks it posed to unionized workers. The UFCW warned that the deal could have forced layoffs, reduced wages, and undermined benefits in a sector where employees already face significant economic pressures.

The UFCW also pointed to the broader implications of the decision, calling it a crucial step in preventing corporate overreach.

The union has advocated for increased scrutiny of mergers in the grocery industry, which it argues disproportionately impact low-income communities and workers reliant on stable jobs.

Colorado Attorney General Phil Weiser has similar thoughts, underscoring how the decision protects competition and safeguards consumer interests.

““All along, we have made the case that the Kroger/Albertsons merger is illegal and bad for Colorado. It is bad for grocery shoppers who are already feeling pinched at the checkout counter. It’s bad for workers and their job security and benefits. And it’s bad for farmers and other suppliers because there would be fewer local food options available at the store.

“Colorado has brought a separate case in state court to block this anticompetitive grocery merger and to challenge an illegal no-poach and no solicitation agreement between the two companies during the 2022 King Soopers strike. We wait for a ruling in our case, and we are optimistic that this illegal merger will be permanently blocked.”” he added.

The attorney general’s office previously stated that the merger would have led to significant economic harm, particularly for vulnerable populations already struggling with inflation and food insecurity.

Consumer advocacy groups also celebrated the ruling as a triumph for shoppers. They argued that the merger could have set a dangerous precedent for unchecked corporate consolidation in other industries. Many of these groups worked alongside the UFCW and state attorneys general to oppose the deal, organizing petitions and community campaigns.

Justin Tubbs is the Montrose Business Times editor. He can be reached by email at justin@montrosebusinesstimes.com or by phone at 970-765-0915 or mobile at 254-246-2260.