Reported by James Barnett, International Supermarket News (ISN), from Denver
A critical antitrust case surrounding the proposed merger between grocery heavyweights Kroger and Albertsons concluded this week in Denver, leaving a judge to determine whether the $24.6 billion deal would harm Colorado’s competitive landscape. Colorado’s legal team, led by Assistant Attorney General Arthur Biller, argued in closing statements that Kroger’s existing market share would enable it to drive prices higher for consumers, should the merger proceed unchallenged.
The merger, first announced in October 2022, involves Kroger’s acquisition of 2,271 Albertsons stores, adding to Kroger’s network of 2,719 stores nationwide. In Colorado, this transaction could drastically shift market dynamics, with Kroger’s King Soopers and City Market brands already competing against Albertsons’ Safeway and Walmart. To allay competitive concerns, Albertsons offered to divest a portion of stores to C&S Wholesale Grocers. Yet, the state expressed doubt over C&S’s role, citing its history of liquidating assets rather than maintaining long-term retail operations.
Assistant AG Biller suggested that C&S would be poorly positioned to compete with Albertsons, entering the market with only a fraction of the resources, which could lead to less robust competition. The legal team argued that C&S’s approach has often involved acquisitions followed by closures, creating a risk that the divested stores could further weaken market competition.
Representing Kroger, attorney David Wolf argued that C&S had pivoted towards a more aggressive growth strategy since the 2020 pandemic, positioning itself as a viable competitor. Wolf also challenged Colorado’s definition of the competitive market, pointing to Amazon and Costco as serious contenders within the grocery space.
Both parties relied on economic expertise to bolster their arguments. Kroger’s economist, Mark Israel of Compass Lexecon, advocated for a broader definition of the grocery market, which he argued includes online and big-box retailers. Colorado’s expert, economist Nitin Dua of Bates White, countered that the merger would reduce competition locally, framing the relevant market in narrower terms. The experts concurred that while Kroger does not directly compete with smaller health-focused or dollar stores, they held divergent views on the extent of market impacts.
Kroger’s attorney further explained the company’s consumer data practices, emphasizing that data insights from its loyalty programs are used to target advertisements from partner brands, such as Pepsi and Frito-Lay, rather than sold outright. This approach, known as the “flywheel” model, is intended to attract customers with lower prices, build insights from shopping behaviors, and generate non-grocery revenue to keep costs competitive.
Colorado Attorney General Phil Weiser initiated the lawsuit in February, contending the merger would harm competition and inflate prices for state residents. The merger also faces national resistance, with the FTC filing a lawsuit in Oregon and a third antitrust suit pending in Washington state.
Judge Andrew Luxen, presiding over the Colorado case, has yet to provide a timeline for his decision and has rejected a request from the grocers to review the ruling in advance. His ruling could set a precedent in grocery industry mergers, with implications that may shape the competitive landscape in states across the country.
James Barnett, reporting from Denver for International Supermarket News (ISN)