State’s Grocery Chain Merger Experience Fuels Fight Against Albertsons-Kroger Deal

Washington state is gearing up to block a proposed merger between grocery giants Albertsons and Kroger, keeping past grocery chain mergers and their adverse effects in mind. The deal, valued at $24.6 billion, has been under scrutiny for nearly two years and has already sparked legal battles in multiple jurisdictions.

Currently, the Federal Trade Commission (FTC) is actively opposing the merger in a federal court in Oregon, with closing arguments expected soon. Colorado has also joined in with a lawsuit aimed at halting the merger.

If the merger is approved, its effects would be most acutely felt in Washington, where Albertsons and Kroger operate a combined total of over 300 grocery stores and account for more than half of the state’s grocery sales.

To address regulatory concerns, Kroger and Albertsons propose to divest 579 overlapping stores, 124 of which are located in Washington. This figure is notably the highest across the 19 states affected by this merger proposal. The Washington Attorney General’s office has criticized the proposed buyer, C&S Wholesale Grocers, for lacking sufficient experience in managing supermarkets or pharmacies.

The state aims to steer clear of the complications that arose a decade ago when Albertsons acquired the Safeway chain. Back then, regulatory approvals mandated that Albertsons sell 146 stores to Haggen, a small grocery chain from Bellingham, Washington. Unfortunately, Haggen struggled significantly with its expanded operations and eventually closed 127 stores, including 14 in Washington, leading to thousands of layoffs.

Following these failures, Haggen’s remaining stores were sold back to Albertsons in 2016, leaving a gap in the market that still impacts communities, especially since ten Haggen locations in Washington are on the list for potential sale under the new merger.

Tina McKim, a founding member of Birchwood Food Desert Fighters, expressed her concerns about the potential merger’s ramifications. Her group emerged in response to the closure of a local Albertsons store in Bellingham. The merger’s implications are alarming for residents like her.

Washington Attorney General Bob Ferguson, a Democrat currently campaigning for governor, is determined to block the deal, arguing that the elimination of competition between Albertsons and Kroger would inevitably result in higher prices and diminished quality, likely leading to more store closures.

Both companies, Albertsons and Kroger, contend that the merger is essential for them to effectively compete against larger rivals like Walmart and Costco. They have filed motions to dismiss the case, asserting that a state court should not dictate merger policy on a national scale.

“Under our federalist system, Washington cannot wield its antitrust law to dictate merger policy for the rest of the country,” they stated in a court filing.

Legal experts suggest that the decision made by the Superior Court judge could potentially halt the merger nationwide or restrict the ruling to Washington only. The judge may also require the companies to adjust their store divestment plans to ensure continued competition in the state.

Critics like McKim are skeptical of the companies’ claims that the merger will lead to lower grocery prices. In the past, they allege that Albertsons has made moves that harm local communities, such as closing a nearby store shortly after acquiring a competing store, while simultaneously imposing a long-term restriction on any grocery stores opening in the local shopping plaza.

McKim highlighted the dire consequences of losing accessibility to fresh food for community members, particularly affecting vulnerable populations like the elderly, students, and low-income residents. Her grassroots organization attempts to mitigate these challenges by sourcing food donations and products from local farms, though she acknowledges that it isn’t sufficient to meet the community’s needs.

This year, following an investigation led by Washington’s attorney general, Albertsons removed the restrictive clause concerning the shopping plaza. With the impending closure of a Big Lots store that had taken over the previous grocery location, McKim hopes that another supermarket will set up shop there. However, she fears that the union jobs lost when the Albertsons was shut down may never be replaced.

McKim noted that although there is a Walmart in the vicinity, it is situated farther away than the former Haggen store. Additionally, she questioned the necessity of merging Kroger and Albertsons to compete against competitors like Walmart. “This city is growing so quickly; the need for food is absolutely critical everywhere,” she stated, emphasizing the importance of meeting the specific needs of the local community.