Colorado's trial against Kroger-Albertsons merger wraps up. A ruling by judge is next.
Published in Business News
Attorneys for the state and for the Kroger and Albertsons supermarket chains wrapped up a trial Thursday over the companies’ proposed $24.6 billion merger by disparaging each other’s expert witnesses and accusing the other of pushing an agenda that will harm Colorado shoppers and workers.
Closing arguments capped a trial that started Oct. 1 and is the third one seeking to block the merger of the grocery giants on grounds that it would drive up prices, reduce competition and harm customers, workers and the stores’ local suppliers. The Federal Trade Commission and attorneys general for Colorado and Washington State filed lawsuits saying the merger would violate federal and state antitrust laws.
Denver District Judge Andrew J. Luxen will issue a ruling in the case, though on Thursday there was no time frame for that decision.
Colorado Attorney General Phil Weiser filed the lawsuit in February to block the merger after holding 19 town halls across the state to hear from the public. He has said people were overwhelmingly opposed to the consolidation.
But Matt Wolf, the attorney representing Kroger, accused the state of trying to prevent his client from bringing lower prices to Colorado shoppers and higher pay to workers. Kroger has pledged to spend $1 billion a year to increase wages and benefits and $1 billion a year to lower prices for customers.
“The antitrust laws were written to encourage, not obstruct, pro-consumer deals like the one before the court,” Wolf said. “While Walmart, Costco and Amazon might be pleased with the state’s efforts today, grocery shoppers will pay more and get less if the state has its way.”
Kroger CEO Rodney McMullen and Albertsons CEO Vivek Sankaran testified earlier this month that combining their companies is the best way for them to compete against Walmart, the nation’s leading grocer in terms of sales, and other growing chains. Otherwise, Sankaran said Albertsons might have to lay off employees and exit some markets to remain economically viable.
But attorneys for the state argued that the merger, which would be the largest supermarket consolidation in U.S. history, warned of store closures, job losses and higher prices if the merger goes through. Kroger, which operates King Soopers and City Market stores in Colorado, and Albertsons Cos., which owns Safeway, compete head-to-head and together account for at least 50% of all the grocery sales in Colorado, according to the attorney general’s office.
A plan to sell 579 of the companies’ stores to try to allay fears about the loss of competition in the marketplace won’t work because the buyer, C&S Wholesale Grocers, doesn’t have the resources or experience to compete with Kroger after the merger, state attorney Arthur Biller said. C&S is a grocery distributor with few retail stores and has sold many of the stores it has acquired in the past, seeing the sales as good for its distribution business, he added.
“This makes C&S not only a smaller competitor than Albertsons, but a worse competitor,” Biller said.
In Colorado, the proposed divestiture would spin off 91 of the stores owned by Albertsons, a dairy plant and a distribution center to C&S. Two Albertsons stores are on the list of those to be sold and the rest are under the Safeway banner.
As part of the $2.9 billion deal with New Hampshire-based C&S, the Albertsons stores will retain the Safeway banner in Colorado. The distribution company will be able to keep selling some of Albertsons private-label brands. And despite testimony by a state witness to the contrary, C&S will have the personnel and resources in place to take over the stores, defense attorneys said.
Roger Davidson, an industry consultant and witness for the state, believes that stores bought by C&S will see declining revenue and some will likely close. He testified earlier that C&S doesn’t have the “retail backbone” or personnel to compete with Kroger.
During closing arguments, attorney Wolf disputed Davidson’s findings and accused him of lying about his academic credentials and having a conflict of interest because of his business connections. He also assailed an analysis by another state witness, Nitin Dua, whose testimony played down Costco, Amazon and other national chains as serious competitors to Kroger and Albertsons.
Biller criticized modeling by a defense expert witness on competitors as unstable, producing “absurd results.”
Also at issue in the lawsuit is a $1 million civil penalty that Weiser is seeking from each grocer for what he calls no-poach and non-solicitation agreements during a 2022 strike against King Soopers. He said his office found emails while going through documents showing that Albertsons agreed not to hire any King Soopers employees or solicit its rival’s pharmacy customers during the strike.
The two companies have said no such agreement existed.
The United Food and Commercial Workers Local 7, which represents grocery workers in Colorado and Wyoming, is part of a coalition of unions fighting the merger, which was announced in 2022.
Albertsons and Kroger executives said stores won’t be closed and frontline workers won’t lose their jobs if the merger is approved. But union members note the fallout from Albertsons’ purchase of Safeway in 2015. Haggen Food and Pharmacy, a small supermarket chain based in Washington state, bought some of the stores and in less than a year filed for bankruptcy. More than 100 stores and thousands of workers lost their jobs.
A decision is pending in a trial in Oregon in which the Federal Trade Commission sued to block the merger until it can resolve its administrative complaint against Kroger and Albertsons. The attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming joined the lawsuit.
The judge in the Washington state case is expected to issue a ruling during a Nov. 15 hearing.
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