DENVER (CN) — Aiming to block a proposed merger between two of the nation's largest grocery store chains, Colorado sued Albertsons and Kroger Wednesday in the Denver District Court.
Kroger, which owns 148 King Soopers and City Market grocery stores in Colorado, wants to buy out its largest competitor for $24.6 billion, acquiring the state's 105 Albertsons and Safeways.
“Coloradans are concerned about undue consolidation and its harmful impacts on consumers, workers, and suppliers,”Attorney General Philip Weiser said in a statement. “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.”
Nationwide, Kroger runs 2,719 stores, which generated $148 billion in revenue in 2022 with an operating profit of $4.1 billion.
Safeway’s parent company, Albertsons Companies Inc., or ACI, owns 2,271 grocery stores and generates $77.6 billion in revenue annually, with an operating profit of $2.3 billion.
The attorney general in the complaint argues the merger would reduce opportunities for customers to compare prices and products from different companies, and that it would weaken supply-chain resilience. Residents of some Colorado communities, like southwestern Gunnison, would have to drive more than 50 miles to access a non-Kroger grocery store.
"Kroger and ACI have decided that collusion is more profitable than competition. Of course, the elimination of competition between these two industry giants will also eliminate the many benefits to Coloradans that accompany that competition, and will lead to higher prices and diminished quality of the shopping experience,” the attorney general says in the 41-page complaint.
As an example of anti-competitive activities, Weiser points to the January 2022 King Soopers employee strike when Coloradans who chose to boycott the store shopped at local Safeway stores — an option that would disappear under the proposed merger.
During the strike, King Soopers executives also hammered out a problematic “no-poach” agreement, essentially preventing striking King Soopers workers from seeking employment at Albertsons stores. The company also agreed not to solicit pharmacy customers from King Soopers during the strike. For these two anti-competitive agreements, Weiser asks the judge to issue $1 million civil penalties against each company.
Weiser additionally filed for a preliminary injunction asking a Denver judge to prevent Albertsons and Kroger from closing the deal.
In a joint statement provided by a spokesperson, the companies called the lawsuit premature since the merger is still under review before the Federal Trade Commission.
“The merging parties will vigorously defend this in court because we care deeply about our customers and the communities we serve, and this merger will result in the best outcomes for Colorado consumers,” the spokesperson said. “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.”
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