Grocery definitions will play a key role in the Kroger-Albertsons merger case

Post-hearing notes were due on September 27. Judge Nelson’s decision will address the issues of monopoly, monopsony and the development of e-commerce.

Last month, Kroger and Boise, Idaho-based Albertsons, based in Cincinnati, Ohio, concluded a hearing before the Federal Trade Commission on the government’s August request for a preliminary injunction to block the two grocery giants’ proposed $24.6 billion merger.

The two companies operate more than 300 grocery stores in Washington, including Kroger stores under the QFC brand and Fred Meyer and Albertsons stores under the Safeway and Haggen brands.

The FTC says the merger would violate antitrust laws and raise consumer prices by creating a monopoly.

A monopoly is a market structure in which one seller controls the supply of a product or service. Monopsony is a market structure in which a single buyer controls demand for a product or service.

Washington Attorney General Bob Ferguson filed a parallel lawsuit in January. In addition to the AG staff assigned to the case, Ferguson entered into an agreement with the Los Angeles firm Munger, Tolles & Olsen for a $2.5 million fee.

Although the case was filed under Washington antitrust law, it seeks a nationwide injunction. King County Superior Court Judge Marshall Ferguson – no relation to the attorney general – has already said he’s not sure he’ll have jurisdiction in the typically federal case, but will allow the case to proceed. Closing arguments are expected in early October.

The federal order would block the merger until the full case is heard in court next year. Merger discussions may or may not continue because the parties may assume that their chances of winning are reduced.

Eric Fruits is a senior research fellow at the International Center for Law and Economics and an assistant professor of economics at Portland State University. Last year, he authored a white paper assessing publicly available information about a potential merger.

He was surprised by the breadth of the competition presented at the hearing.

“The key issue is how to define the right market,” Fruits said. “No one knows how to deal with e-commerce. It has been difficult for both the FTC and the Kroger-Albertson team to express how important this is.”

The FTC considers independent supermarkets and the grocery areas of large retailers Walmart and Target to be competitors. Costco, limited-production stores such as Trader Joe’s, and rapidly growing “dollar store” neighborhood markets are not considered competition.

What Fruits described as “the archaic concept of a one-stop-shop is still relevant” under FTC regulations that were last tested in the 1980s. “It defines the typical grocery store shopper as someone who will drive less than five miles and do all their shopping for the household in one store. These are no longer typical customers; not visiting multiple stores is rare.”

In addition to regional competition from destination “club” stores such as Costco, consumers now have many choices for center aisle goods. Dog food, paper products and other non-perishable products have moved online, where they can be ordered and delivered.

But Fruits said the job market has also changed. The retail sector is diverse and skills acquired in the food industry are easily transferable to a variety of retail establishments across a variety of industry sectors.

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When asked what would happen if a federal judge ruled in favor of the merger and a state court found that the merger violated Washington state law, Fruits speculated that it would most likely result in a sale of the combined entity’s stores in the Evergreen State. or closed.

“It’s a matter of you better be careful what you wish for,” he said.