Colorado Attorney General files lawsuit to stop Kroger-Albertsons merger

FROM CPR: By Tony Gorman · Feb. 14, 2024, 2:53 pm

Updated on Feb. 15, 2024 at 11:18 a.m.

Photo by LKY: City Market in Cortez

The potential $24.6 billion merger between the companies that own King Soopers and Safeway faces a legal challenge from the Colorado attorney general. 

AG Phil Weiser said in a press conference on Wednesday that a lawsuit to block the merger was filed after a year-long investigation including 19 town hall meetings across the state. He said the merger between two of the state’s largest supermarket chains would eliminate head-to-head competition. 

Kroger operates 148 King Soopers and City Markets stores in Colorado and is the largest chain in the state. Albertsons has 105 Safeway and Albertsons stores and is the state’s third-largest grocery chain.

“We are seeking to prevent this merger from taking place and we are pursuing civil penalties and injunctive relief in connection with another violation of Colorado's antitrust laws.,” Weiser said. “At the outset, I want to thank everybody across our state who engaged with the Department of Law as we analyze this merger that includes consumers, suppliers, and workers from all across the state.”

Kroger and Albertsons announced the proposed merger in 2022. The AG’s investigation found that the two chains went into a no-poach agreement — a deal between competitors not to employ each other's employees. Weiser referenced last year’s King Soopers strike and said Kroger went into the agreement about concerns of losing employees during the 10-day standoff. The two had also planned to sell more than 50 stores as part of the merger’s divestiture plan. In addition to permanently blocking the merger, the lawsuit also seeks $1 million in civil penalties over the no-poach deal.

“The no-poach and non-solicitation is independent of this merger,” Weiser said. “But the fact that the company entered into such agreements and thought they could get away with it underscores why competition matters to consumers, to workers, to farmers, and to our communities. It also demonstrates why it's so important that we have vigilant antitrust enforcement.”

According to a statement from the AG’s office, the potential merger would affect smaller communities like Gunnison, where there is a City Market and Safeway. If the merger moves forward, Kroger would monopolize the local market and limit grocery options for residents. The nearest non-Kroger store would be more than 60 miles away in Salida or Montrose. 

Hart Van Denburg/CPR News

Weiser said some communities like Pueblo still feel the effects of the 2015 Albertsons and Safeway merger.

“Pueblo may be less affected. Smaller communities like Gunnison, like Cortez, are ones that are especially nervous,” Weiser said. Those communities would see a consolidation of supply chains in a way that will be harder for them to deal with than other communities. But I want to be clear, we believe urban areas like Pueblo are nervous about this merger and for good reason, they were harmed by the last merger.” 

The lawsuit asks the Denver District Court to permanently block the merger. This is the second state lawsuit filed to block the Kroger-Albertsons merger. Washington state filed a similar lawsuit in January.

Kroger and Albertsons released a joint statement in response to the lawsuit expressing disappointment. They said they’ve remained in communication with the FTC and other state attorneys general and plan to fight the lawsuit in court:

“We are disappointed in Attorney General Weiser’s premature decision to file a lawsuit while the merger is still under regulatory review, and we remain in active dialogue with the FTC and the other state Attorneys General,” the statement said.

The statement said that both Kroger and Albertsons will defend the merger in court, saying it will be better for Colorado consumers. 

“Blocking this merger would only serve to strengthen larger, non-unionized retailers like Walmart, Costco and Amazon, by allowing them to maintain and increase their overwhelming and growing dominance of the grocery industry,” the statement said. “ In contrast, Kroger and Albertsons Companies merging will bring lower prices to more customers, strengthen and create good-paying union jobs, and bring more fresh, affordable food to more communities.”

UFCW Local 7, the union representative for King Soopers, City Market, Albertsons, and Safeway workers in Colorado, released a statement applauding Weiser’s efforts. 

Local 7 president Kim Cordova said she hopes other states and the Federal Trade Commission will get involved.

“We've been opposing the merger because of all of these reasons, but there's also a monopoly part of this where we represent food processing, packing, and those type of workers in the industry that would be under the thumb of a giant Kroger who's going to be able to set prices, which then can hurt our workers that work in those industries as well. So this merger is only good for executives and Wall Street,” Cordova said.

Local 7 represents 18,000 workers at Kroger and Albertsons stores in Colorado and Wyoming. Cordova said a merger could further devastate communities and affect health care and pension plans. 

“There's other small businesses that depend on these stores because they're an anchor. And so, we see empty shopping centers now,” Cordova said. “We see pockets around Colorado where consumers don't have a place to buy fresh food. You can't make a salad out of something you buy at a gas station, right? A lot of our customers walk to the grocery stores.”

Cordova said Local 7 will watch closely as the lawsuit progresses.