The lawsuit filed by the Federal Trade Commission (FTC) against the $24.6 billion Kroger, Albertsons merger could take months to play out and could have multiple outcomes.
That is the stance of Eric Fruits. Fruits is senior scholar at the International Center for Law and Economics and co-author of the white paper titled, “Food-Retail Competition, Antitrust Law, and the Kroger/Albertsons Merger”.
Unless somehow the lawsuit is put on an expedited timeline, Fruits sees it taking months to play out, and it could even spill into 2025.
“Typically, these things do take time,” he told Supermarket News. “This is going to be a pretty substantial case. I think pretty much from start to finish, if you lay out what’s going to have to be shown at trial, there’s just a lot of moving parts.”
Parts that include the product market; the standard retail, consumer, food, and grocery market; the labor market; the conduct issue, which is broken down into unilateral conduct and coordinated conduct; the definition of the grocery market and the major players involved; and then you have possible remedies for a merger.
“I’m not a lawyer, but I think there are a lot of things that are subject to dispute in each of those things, and the court is going to have to resolve those disputes,” Fruits said.
In filing its lawsuit, the FTC said it was primarily concerned about two products the merger would create: higher grocery prices and labor issues.
The FTC, according to Fruits, has stuck with the same market definition for supermarkets since the early to mid-1990s, aside from a couple of tweaks. The FTC alleges the relevant market is food and grocery retailers that serve consumers who could buy all their food and groceries for a week in a single trip. That is not how it plays out today as shoppers are using multiple trips and visiting multiple retailers for their grocery needs.
However, Fruits said in the FTC’s latest complaint against the Kroger, Albertsons merger they have taken the weekly component out of the equation.
The FTC has also traditionally excluded wholesale clubs, like Costco, and specialty retailers, like Trader Joe’s, when defining the relevant market. Ecommerce options like Amazon and Instacart are also not in the FTC equation. This lawsuit could change the way the marketplace is defined, which Fruits views as a risk for the agency.
In terms of labor, the FTC argues certain areas only have Kroger and Albertsons stores, so if the merger takes place workers at those locations will lose their leverage when it comes to new union contracts.
“That is going to require a huge amount of discovery,” Fruits said. “It’s going to be something that is going to be really fact-intensive in terms of documents, but also really data-intensive in terms of the economics.”
Fruits, however, believes the FTC simply does not like the merger and is just putting up points of argument like high prices and labor.
Specifically, the agency does not like the divestiture involving C&S Wholesale Grocers because C&S is not well capitalized and is not experienced enough in grocery retail.
“So if they don’t like C&S what else would they like? And the immediate answer would be, ‘Well, they should probably go divest to another retail supermarket entity.’ But if they try to do that, the FTC would complain there would be antitrust concerns in that market with the new firm that buys the vested stores,” Fruits said.
Fruits added the FTC has created a situation where there is nothing Kroger and Albertsons can do in terms of the divestiture that would satisfy the agency.
“The FTC…they’ve got so many people breathing down their neck to do something. I think if they did anything other than a vigorous fight against the merger they would get a lot of pushback even from people inside the [Biden] administration,” Fruits said.
