What’s at Stake as FTC Legal Fight Against Kroger-Albertsons Merger Ends

The Federal Trade Commission’s (FTC) legal case against the proposed $24.6 billion merger of Kroger (KR) and Albertsons (ACI) is set to wrap up Tuesday in a federal court in Oregon, with a judge expected to rule on whether the regulator’s antitrust arguments are sufficient to halt the merger.

The FTC argued that the merger between the nation’s two largest traditional supermarket chains could have anti-competitive effects on pricing and labor, hurting millions of Americans at a time when prices have risen significantly in recent years.

FTC and retailers clash over impact on competition

Although the FTC said the merger would reduce competition, the companies responded that operating as a larger network would allow them to better compete with the nation’s largest retailers, such as Walmart (WMT), Costco (COST) and Amazon (AMZN).

In its complaint, the FTC places supermarkets like Kroger and Albertsons in a different category than the competition the companies cite. The regulator said the membership-only nature and smaller-product-selection wholesale nature of Costco and Sam’s Club, and Amazon’s largely digital shopping experience with minimal retail space, place them in different categories for customers.

If the court agrees with the FTC, the agency’s own definition of a supermarket could open the door for one of the companies it has defined as a non-supermarket, such as Amazon, to potentially pursue acquisitions like the one the FTC is trying to block, a pair of antitrust lawyers said. Wall Street Journal.

The regulator also said the plan for the companies to sell hundreds of stores to another retailer to address competitive issues was insufficient, adding that selling a “mix” of stores and assets would not “mitigate the significant harm to consumers and employees” that the merger would cause.

Kroger shares were little changed about 90 minutes into Tuesday’s trading session. Albertsons shares fell 1.6%.