Inside the legal battle over the fate of the biggest supermarket merger in US history

• Kroger and Albertsons are facing off against the FTC in court over their proposed $24.6 billion merger.
• The FTC argues the merger would reduce competition and raise grocery prices.
• The fate of the biggest supermarket merger in US history could come down to a federal judge's decision.

The fate of the largest supermarket merger in US history hangs in the balance as an ongoing three-week hearing unfolds inside an Oregon federal courtroom.

Supermarket giants Kroger and Albertsons are duking it out in court against regulators who are trying to block the companies proposed $24.6 billion merger over antitrust concerns.

The chains argue that Kroger's acquisition of Albertsons would boost competition with behemoth retail rivals like Walmart, Costco and Amazon, while regulators from the Federal Trade Commission allege the opposite, saying the deal is actually anticompetitive and would result in higher grocery prices for millions of Americans, as well as lower wages for workers.

Both sides are currently making their case before US District Judge Adrienne Nelson, who will ultimately decide at the end of the hearing next month whether to approve the FTC's request for a preliminary injunction against the merger.

Already this week, a Kroger executive's internal email about price hikes for eggs and milk beyond the added costs from inflation has drawn scrutiny in the courtroom.

If the judge overseeing the hearing ultimately rules in favor of the FTC, the deal between Kroger and Albertsons could end up torpedoed completely. A temporary injunction would put the merger on ice as the FTC holds a separate in-house proceeding over the deal before an administrative law judge.

"This merger will not occur if this injunction is in place," Kroger attorney Matthew Wolf told the court on Monday as the federal court hearing kicked off in Oregon.

Wolf said that the FTC's internal administrative process is so drawn out that merger deals typically collapse before the proceedings are completed.

In his opening statements to the court on Monday, Wolf argued that the merger would instantly lower some prices for patrons at Albertsons stores, where company officials disclosed are up to 12% higher than Kroger's.

The attempt by federal regulators to lower prices by blocking the merger shows that "they neither understand the industry nor the parties within it," said Wolf.

"Supermarkets are losing this food fight, and who are they losing it to? Walmart, Costco, and Amazon, among others," Wolf told the court.

Albertsons attorney Enu Mainigi said that the retailer may be forced to close stores and lay off workers if the merger does not go through.

The FTC's chief trial counsel, Susan Musser, argued in her opening statement on Monday that the proposed merger "would eliminate the competition that shoppers and workers depend on in one fell swoop."

"This lawsuit is part of an effort aimed at helping Americans feed their families," Musser said.

Dozens of witnesses are expected to testify at the hearing over the next couple of weeks, including the CEOs of Kroger and Albertsons.

Regulators sued to block the Kroger-Albertsons merger deal earlier this year

In February, more than a year after Kroger and Albertsons announced the merger mega-deal, the FTC sued to block it.

Attorneys general in Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and the District of Columbia all joined the FTC's lawsuit. The attorneys general in Colorado and Washington have also filed separate lawsuits in an attempt to halt the deal.

"Kroger and Albertsons are two of the largest supermarket chains in thousands of local communities throughout the country," attorneys argue in the FTC lawsuit. "In hundreds of those communities, the proposed acquisition would create a single supermarket with market shares so high as to be presumptively unlawful under the antitrust laws."

The lawsuit alleges that "the proposed acquisition would also eliminate the substantial head-to-head competition between Kroger and Albertsons that exists today, which risks higher prices and lower quality for consumers."

The FTC says in its lawsuit that the stakes for Americans are "exceptionally high" as the agency notes how grocery prices have risen significantly in recent years.

"The fierce competition between these two grocery giants has benefited millions of American consumers through lower prices for food and household essentials," the lawsuit says. "It has also benefited hundreds of thousands of grocery store workers who, as a result of competition for their labor, earn better wages and benefits."

It continues, "If allowed to proceed, the proposed acquisition would destroy this competition, likely making it more expensive for millions of families to put food on the table."

Meanwhile, Kroger filed a lawsuit against the FTC last week, arguing that the agency's administrative proceeding against the merger violates the Constitution while citing, in part, a recent Supreme Court ruling.

"The merger between Kroger and Albertson's is squarely focused on ensuring we bring customers lower prices starting day one while securing the future of good-paying union jobs," Kroger CEO and chairman Rodney McMullen said in a statement at the time.

"We stand prepared to defend this merger in the upcoming trial in federal court – the appropriate venue for this matter to be heard – and we are asking the Court to halt what amounts to an unlawful proceeding before the FTC's own in-house tribunal," McMullen said.

Kroger operates more than 2,700 stores across 36 states under names including Fred Meyer, Dillon's and Smith's, while Albertsons controls more than 2,200 stores across 35 states under banners like Safeway, Shaws, and Acme.

In 2022, Kroger and Albertsons generated more than $148 billion and $72 billion in revenues, respectively.

As part of the proposed merger, Kroger and Albertsons said they would sell 579 stores to the grocery supply company C&S Wholesale Grocers.