Why states are fighting the Kroger-Albertsons deal

Why states are fighting the Kroger-Albertsons merger deal

What you probably already know: Grocery giant Kroger has to sell hundreds of stores if it wants anti-trust regulators to approve its $24.6 billion acquisition of Albertsons Cos. This week the company revealed the list of 579 stores that it will sell to C&S Wholesale Grocers as part of the deal. C&S is the largest wholesale grocery supply company in the U.S. and owns Piggly Wiggly, Grand Union and other smaller grocery brands.

Why? The Federal Trade Commission in February sued to block the acquisition, citing concerns that it would eliminate competition in some markets and result in higher prices for consumers. There are some markets where Kroger and Albertsons have a massive market share, including Washington state, Arizona and Colorado. There were 124 stores on the divestiture list for Washington — it looks like very nearly all of the QFC and Haggen stores are on the list — and 101 stores in Arizona, 91 in Colorado.

What it means: The states of Washington and Colorado are both fighting the merger, and Washington state sued Kroger in January to stop the deal. The state is spending $6 million on a law firm to fight the deal. Kroger and Albertsons say the merger is crucial to their ability to compete with Walmart, Amazon and Costco. If they merge, the combined company will control about 22% of the U.S. grocery market.

What happens now? The lawsuits will play out in August and September, after which, the deal will move forward or be blocked. Kroger and Albertsons combined have nearly 5,000 stores across the country, compared to 4,609 Walmarts, 606 Costco stores, and 494 of Amazon’s Whole Foods stores. Generally, sales like this result in closure of many of the stores as the new owner works to integrate them into its portfolio, and many are concerned that these closures could turn areas that already have few grocery resources into food deserts.

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