After a yearlong investigation, Colorado Attorney General Phil Weiser filed a lawsuit in Denver District Court to block the $24.6 billion proposed merger between Kroger and Albertsons, two of the largest supermarket chains in Colorado.
Kroger operates 148 King Soopers and City Market stores, and Albertsons operates 105 Safeway and Albertsons stores in the state.
Colorado became the second state to sue over the merger of the two supermarket chains. In January, the Washington state attorney general filed a similar lawsuit alleging that it would create a monopoly by severely limiting consumer shopping choices and competition with other stores.
According to the lawsuit filed on February 14, the merger would eliminate head-to-head competition between Kroger and Albertsons and consolidate an already heavily concentrated market, which is bad for Colorado shoppers, workers, and suppliers.
The lawsuit also challenges an alleged illegal “no-poach” agreement between the two companies during a 2022 strike when employee movement threatened Kroger’s operations.
“Coloradans are concerned about undue consolidation and its harmful impacts on consumers, workers, and suppliers,” stated Weiser in a press release. “After 19 town halls across the state, I am convinced that Coloradans think this merger between the two supermarket chains would lead to stores closing, higher prices, fewer jobs, worse customer service, and less resilient supply chains.”
Head-to-head competition eliminated in Colorado
Kroger and Albertsons compete head-to-head in several ways. For example, the companies monitor each other closely on price and adjust their prices based on what the other one is doing. A post-merger Kroger would have the ability to raise prices, pinching consumers.
The lawsuit said the merger would make Kroger the only supermarket in this area, and a Gunnison resident would have to drive 65 miles to Salida or Montrose to reach a non-Kroger store, leaving them at the peril of their supply chain failing.
“In addition to challenging this merger, we are also suing the two companies for a no-poach agreement that harmed workers and blatantly violated antitrust law. No-poach agreements stifle worker mobility and depress wages, and non-solicitation agreements harm consumers and raise prices,” explained Weiser.
The Divestiture Proposal is Inadequate
In an attempt to lessen the anticompetitive impacts of the merger, Kroger has presented a proposal to sell off 413 stores and other assets nationwide to C&S Wholesale Grocers, a privately held wholesale supplier that currently operates 23 stores, none of which is in Colorado.
As part of the divestiture plan, C&S would acquire 50 Safeway stores and both Albertsons stores in Colorado, which would be re-bannered into Albertsons stores. Under the plan, a total of 53 Safeway stores would transfer to Kroger, bringing its Colorado store count to 201.
The lawsuit explained the proposal is inadequate because it would not alleviate the merger’s anticompetitive effects, echoing many of the problems that have plagued failed grocery divestitures in the past.
Related Article: Washington State AG Sued to Block Kroger-Albertsons Merger
Weiser asserts that the Kroger divestiture plan must be viewed with heavy skepticism in light of Albertsons’ involvement in a failed divestiture plan when it merged with Safeway in 2015.
“We won’t risk another such failed divestiture, and we will fight hard to preserve competition for consumers, workers, and suppliers, all of whom have raised serious concerns about the remedy proposed in this case,” stated Weiser.
The attorney general’s lawsuit asks the court to find that the merger violates Colorado antitrust laws and to permanently block it from going into effect.
The lawsuit also seeks $1 million in civil penalties from Kroger and Albertsons each for entering into the illegal no-poach and non-solicitation agreement during the 2022 King Soopers strike and to bar the companies from enforcing or entering into such agreements.
As part of the merger review process, Weiser held 19 listening sessions across the state in 2023 to hear directly from Coloradans and their feedback. Also, his office received more than 6,100 responses to an online survey about the merger.