State says Kroger-Albertsons merger may cost Coloradans $500M per year; companies dispute claim

A merger of Kroger and Albertsons would cost Colorado consumers as much as $500 million a year because of a lack of competition, a lawyer from the Colorado Attorney General’s office argued Monday at the start of the state’s trial seeking to block the grocery chains from combining.

Together, the two companies account for at least 50% of all the supermarket sales in Colorado, said Arthur Biller with the attorney general’s office. He said they’re intense rivals that compete on prices and on a number of fronts.

“The merger of these two firms would mean the loss of competition and have a devastating effect on Colorado,” Biller said.

But an attorney representing Kroger, which owns King Soopers and City Market stores in Colorado, cast Walmart, Costco, Amazon and other national retailers as the supermarket chains’ true competitors and the reason the two companies want to join forces. The state’s argument that the merger would violate state antitrust laws shows “a profound lack of understanding of the modern grocery industry,” said Matt Wolf of the Arnold & Porter law firm.

Wolf said an analysis by an expert witness for the state that excludes Costco, Amazon, Whole Foods and other retailers as competitors for Kroger and Albertsons ignores the realities of the industry.

“Not only does it defy common sense, it defies what’s happening outside the four corners of this courtroom,” Wolf said during the opening statements.

Biller said the analysis of the cost to consumers is based on which stores are considered competitors for full-service grocery stores. The list of retailers doesn’t include Costco or Sam’s Clubs, which require memberships, and other chains that carry limited national brands or concentrate on specialty and gourmet products.

The trial in Denver District Court is one of three seeking to block the $24.6 billion merger of Kroger, second only to Walmart in terms of sales nationally. Costco is next, followed by Albertsons.

A trial in the case brought by Attorney General Bob Ferguson of Washington state is underway. A decision is expected in a trial recently concluded in federal court in Oregon. In that lawsuit, the Federal Trade Commission wants the court to put the merger on hold until the agency can resolve its administrative proceeding to block the consolidation.

The attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming joined the FTC’s lawsuit

Albertsons has 105 stores in Colorado, most of those under the Safeway banner. The chains announced plans in 2022 to merge. They have said combining would allow them to better compete against Walmart, which accounts for nearly a quarter of the U.S. grocery market.

As part of the consolidation plan, Kroger and Albertsons would sell 579 stores in a $2.9 billion deal with C&S Wholesale Grocers to spur competition. In Colorado, C&S would buy 91 stores and a dairy plant. Kroger would retain 14 of the stores.

“C&S is a 107-year-old family-owned company that stands ready to offer a better, lower-priced alternative for the 579 stories it is acquiring,” Wolf said.

Kroger and Albertsons said stores won’t close, workers won’t lose their jobs and grocery prices will decrease if the merger is approved. However, the attorney general’s office and unions representing the supermarkets’ employees don’t believe the claims, noting the fallout from the 2015 merger of Albertsons and Safeway.

Haggen Food and Pharmacy, a small supermarket chain based in Washington state, bought some of the stores and in less than a year filed for bankruptcy. Haggen closed more than 100 stores and laid off thousands of workers.

Biller said C&S is a wholesale distributor for grocery stores and operates only 25 stores and one pharmacy. He contended the company doesn’t have the infrastructure to offer the same kind of services as Kroger and Albertsons provide.