State’s Experience with Grocery Mergers Sparks Fight to Stop Albertsons-Kroger Deal

Washington state lawyers will keep in mind past grocery chain mergers — and their negative consequences — as they ask a court to block the proposed merger of Albertsons and Kroger.

The case is one of three challenging the $24.6 billion deal that was announced nearly two years ago. The Federal Trade Commission is currently fighting the merger in federal court in Oregon, where closing arguments are expected Tuesday. Colorado has also sued to block the merger.

But if the merger goes through, Washingtonians would feel the effects more than residents of other states. Albertsons and Kroger own more than 300 grocery stores in the state and control more than half of the state’s grocery sales.

Under a plan to ease regulatory concerns, Kroger and Albertsons would sell 579 overlapping stores, including 124 in Washington, if the merger goes through. That’s the largest number of stores among the 19 states where the stores are listed. The state attorney general’s office says the proposed buyer, C&S Wholesale Grocers has little experience in operating stores and pharmacies.

Washington wants to avoid the situation it found itself in a decade ago when Albertsons bought Safeway. To satisfy regulators concerned about the potential impact of the deal on supermarket competition and consumers, Albertsons sold 146 stores to Haggen, a small grocery chain based in Bellingham, Washington.

But Haggen has struggled to expand. Over the course of six months, it closed 127 stores — including 14 in Washington — and laid off thousands of workers. Haggen sold its remaining stores to Albertsons in 2016. Now, 10 Haggen stores in Washington are up for sale if the merger goes through.

“It’s horrifying,” said Tina McKim, a founding member of Birchwood Food Desert Fighters, a group that formed in 2016 after Albertsons closed a store in Bellingham’s Birchwood neighborhood.

Washington State Attorney General Bob Ferguson, a Democrat who is running for governor, wants to block the merger not only in the state but nationwide. In his complaint filed in King County Superior Court in Seattle, Washington, the state says eliminating the “intense competition” that exists between Albertsons and Kroger would lead to higher prices, lower quality and, most likely, store closures.

Albertsons and Kroger say the merger will help them better compete with growing rivals like Walmart and Costco. They are seeking to have the case dismissed, arguing that a state court is not the proper forum to consider a nationwide ban.

“Under our federal system, Washington cannot use its antitrust laws to dictate merger policy for the rest of the country,” Albertsons and Kroger said in court papers.

Brad Weber, a partner at Dallas-based law firm Locke Lord who specializes in antitrust, said the Supreme Court justice could decide to halt the merger nationwide or limit his ruling to Washington. Justice Marshall Ferguson could also order the companies to make changes to their plans to divest stores in order to preserve competition.

Ferguson could also decide to delay the case until the U.S. District Court in Oregon issues a ruling, Weber said. In that case, the Federal Trade Commission has asked a judge to temporarily block the merger until an internal FTC judge reviews it.

Albertsons and Kroger say their plan to sell C stores&S, will lower grocery prices and preserve competition. But Washingtonians like McKim remain skeptical.

In 2016, Albertsons acquired Haggen supermarket, then immediately closed an Albertsons store about a mile away in Birchwood. When it sold its previous store two years later, Albertsons imposed a restriction: For the next 20 years, no grocery store could open in the Birchwood shopping center.

It was a huge blow to the community, McKim said. For 35 years, the Birchwood store had served seniors, college students, people with disabilities and lower-income residents who suddenly didn’t have easy access to fresh food.

“We were really shocked by that. How can you deny access to food in a neighborhood?” McKim said. “It made it really difficult for anyone without a car to get to another grocery store.”

McKim’s group is trying to fill that gap by collecting food donations and bringing in produce from local farms, but “that’s not at all the level of access that people need,” she said.

This summer, after an investigation by the Washington attorney general, Albertsons lifted its restriction on the mall. Big Lots, which moved into the former grocery store, will close soon, McKim said, and she hopes the space will attract another supermarket. But even if that happens, the community may never get back the unionized jobs it lost when Albertsons closed its doors, she said.

McKim said there is a Walmart in her area, but it is even farther from Birchwood than the Albertsons-run Haggen store, which is on the list of stores to be sold to C&S. is also not convinced that Kroger and Albertsons need to merge to compete with Walmart.

“This city is growing so quickly that the need for food is absolutely critical everywhere,” McKim said. “When you see other stores succeeding, it’s because they’re adapting to the needs of the area.”