Kroger and Albertsons prepare to make final argument in federal court for their merger

PORTLAND, Ore. — The federal government on Tuesday asked a U.S. District Court judge to temporarily block the proposed merger of Kroger and Albertsons, saying the combination would “almost certainly” benefit shareholders but not ordinary customers.

Federal Trade Commission lawyers delivered their closing arguments at the end of a three-week hearing in Portland, Ore. The FTC wants U.S. District Judge Adrienne Nelson to issue a preliminary injunction that would block the deal while her complaint goes to an internal administrative judge.

Kroger and Albertsons have proposed the largest supermarket merger in U.S. history in 2022. The companies say the $24.6 billion deal will allow them to lower prices and compete more effectively with retail giants like Walmart and Amazon.

But the FTC says the deal will eliminate competition and lead to higher food prices for customers who are already struggling. Susan Musser, the Federal Trade Commission’s chief legal officer, argued Tuesday that Kroger and Albertsons are primarily competing with each other, not with places like Amazon or Costco, where consumers do different types of shopping.

“It is the local competition in these local communities that will be eliminated by this merger,” Musser said.

In testimony at a hearing this month, the CEOs of Albertsons and Kroger said the combined company would lower prices to retain customers. They also argued the merger would boost growth, strengthen stores and create union jobs.

FTC lawyers noted that the two supermarket chains currently compete in 22 states, closely matching each other on price, quality, private-label products and services such as in-store pickup. Shoppers benefit from that competition and would lose those benefits if the merger were allowed, they said.

The FTC and union leaders also argued that worker wages and benefits would decline if Kroger and Albertsons stopped competing with each other. They also expressed concerns that potential store closures could create so-called food and pharmacy “deserts” for consumers.

Under the agreement, Kroger and Albertsons will sell 579 stores in the overlapping locations to C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly retail brands.

The FTC says C&S is not prepared to take on the stores. Earlier in the hearing, Laura Hall, senior counsel for the FTC, cited internal documents that showed C&S executives were skeptical about the quality of the stores they would get and might want the option to sell or close them.

However, C&S CEO Eric Winn testified that he believes his company can succeed in the endeavor.

Attorneys general for Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming joined the FTC’s lawsuit on the commission’s side. Washington and Colorado filed separate cases in state courts seeking to block the merger. Washington’s case was unsealed in Seattle on Monday.

Cincinnati, Ohio-based Kroger operates 2,800 stores in 35 states, including brands such as Ralphs, Smith’s and Harris Teeter. Boise, Idaho-based Albertsons operates 2,273 stores in 34 states, including brands such as Safeway, Jewel Osco and Shaw’s. Combined, the companies employ about 710,000 people.

If Judge Nelson agrees to issue an injunction, the FTC plans to hold internal hearings starting Oct. 1. Kroger sued the FTC last month, arguing that the agency’s internal proceedings were unconstitutional and that it wants the merger’s validity to be decided by a federal court. The lawsuit was filed in federal court in Ohio.

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Durbin reported from Detroit.