A bellwether trial is set to begin Monday in a fight over whether the parent companies of two Alaska grocery chains can merge.
The Federal Trade Commission wants to block Kroger from buying out Albertsons. Together, they own 35 stores in Alaska under the Fred Meyer, Carrs and Safeway brands, plus Crow Creek Mercantile in Girdwood. Most Alaskans live in a community where the stores directly compete with each other.
Across the country, the two grocery giants own about 5,000 stores.
The case is before a federal judge in Oregon. It’s the first of four overlapping legal challenges to reach the trial stage. The judge in this case is supposed to rule on whether or not to halt the merger while more substantive arguments go before an administrative law judge in Washington, D.C. The trial is expected to last three weeks.
The Oregon judge’s decision won’t necessarily make or break the merger. But if the FTC wins, the cost to the companies of continuing the legal fight, uncertainty and delays may lead them to abandon the merger.
“We stand prepared to defend this merger in the upcoming trial in federal court,” Kroger CEO Rodney McMullen said in a statement this week. “The merger between Kroger and Albertsons is squarely focused on ensuring we bring customers lower prices starting day one while securing the future of good-paying union jobs.”
Kroger and Albertsons want to merge so they can be more competitive with even bigger retailers, and other retailers that have expanded into groceries. To avoid creating local monopolies, they intend to sell off hundreds of their competing stores to a separate grocery wholesaling company to operate. That includes 17 Carrs and Safeways in Alaska, plus the store in Girdwood.
The companies claim the deal will improve competition without the loss of any frontline workers’ jobs or store closures. This month, Kroger doubled its previous commitment to invest in lower prices if the merger goes through, up to $1 billion from $500 million. The companies have also promised to spend $1 billion to improve worker benefits and $1.3 billion to improve stores. However, there isn’t anything in place to hold them to their promises.
The Federal Trade Commission, consumer advocacy groups, grocery labor unions and a lot of elected officials and regular people don’t believe the companies. They think the merged company would be too powerful, and will end up hurting regular shoppers and workers.
Until recently, there was one local chapter of a grocery workers’ union to come out in support of the merger. United Food and Commercial Workers Local 555 which represents 35,000 workers in Oregon, Idaho and Washington, publicly backed the merger in February.
But amid labor negotiations that soured this month, Local 555 withdrew its support.
“Kroger’s continued failure to not live up to their commitments in current contracts while being given every opportunity is disappointing,” Local 555 President Dan Clay said in a statement. “Their obnoxious decisions at the bargaining table have let down both their workers and their customers.”
More legal challenges are pending. In a Washington state court, a trial is scheduled to begin Sept. 16. A Colorado state judge last month imposed his own order to pause the merger, pending a legal challenge there. That trial is scheduled to begin Sept. 30.
Kroger filed a legal action of its own on Monday against the Federal Trade Commission in a federal court in Ohio. Kroger argues that the FTC’s dual challenges – the federal case in Oregon and the executive branch proceeding before the administrative law judge in Washington, D.C. – violates the company’s constitutional rights.
