FTC’s Kroger-Albertson Case Gets a Hearing, European Commission Approves Bunge-Viterra Merger Contingent on Sell-Offs
Story co-written with Riya Mehta, Open Markets Summer Legal Fellow
Challenges to Kroger’s takeover of Albertsons move through state and federal court
Lawyers from the Federal Trade Commission were in a Washington, D.C. courtroom last week trying to convince an administrative law judge to block a proposed merger between the two largest standalone U.S. grocery chains, Kroger and Albertsons. This lawsuit is one of two concurrent efforts by federal antitrust enforcers to stop a deal that they allege would raise grocery prices for shoppers and reduce wages and benefits for workers. In a rare move, state attorneys general from Washington and Colorado are also bringing independent challenges to the deal based on the impact it would have in their states.
The FTC’s administrative case is the first to get a hearing, but the other three cases will get their day before a judge before the end of September. The judges’ decisions in any of these cases could be enough to stop the takeover, breaking the norm for grocery store mergers, which usually get approved if the merging parties sell off some stores. But if none of these suits succeed, Kroger’s takeover of Albertsons would create a massive grocery chain with market power to close stores, raise prices, short workers, and squeeze suppliers.
The FTC issues administrative complaints when it has “reason to believe” that an antitrust law has been or will be violated. In this case, the FTC brought claims under both Section 5 of the FTC Act and Section 7 of the Clayton Act, focusing on how Kroger’s takeover of Albertsons would eliminate head-to-head competition between the two largest traditional supermarket chains. FTC’s administrative proceedings, which began last week, include a formal hearing before an administrative law judge of the FTC.
The FTC also joined a bipartisan group of nine state attorneys general to petition a federal court in Oregon for a preliminary injunction of Kroger’s acquisition. The FTC sought a preliminary injunction in addition to its administrative case to try and prevent Kroger and Albertsons from completing their merger before the FTC’s in-house administrative trial concludes. The Oregon judge scheduled the first hearing in this suit for August 26. In practice, some experts think that if the judge grants a preliminary injunction in the federal court case, Kroger and Albertsons will abandon their deal altogether. To grant a preliminary injunction, the judge must find that the FTC demonstrated “a substantial likelihood of success” if it were to go to trial.
Even if the FTC does not prevail in federal court, Kroger and Albertsons will still have to deal with two state lawsuits to seal their deal, both of which rely on state, not federal, law. Each lawsuit will require narrowly tailored discovery, pushing Kroger and Albertsons to expend substantial resources to retain outside counsel for each.
State attorneys general in Washington and Colorado brought independent cases claiming the deal violates their state consumer protection and antitrust laws, respectively. Those suits have also started moving through the courts. Notably, on July 25, a Denver district court judge announced that Kroger and Albertsons agreed to temporarily halt their merger plans until after the court rules in the state’s case. A full trial will begin in Colorado on September 30.
Washington’s suit is also moving forward. In April, the King County Superior Court rejected Kroger’s effort to dismiss the case, and trial will begin September 16. In June, public records revealed that Washington expects to pay up to $6 million to an outside law firm handling the state’s suit. That’s double what the budget previously authorized and a quarter of the state’s total antitrust budget for the 2023-2025 biennium. Some critics wonder if the Washington attorney general, Bob Ferguson, is spending so much on this legal battle to score political points ahead of his gubernatorial race. Others see the suit as a genuine effort to stop the merger given the disproportionate impact it would have on Washington grocery markets.
By suing on their own, Washington and Colorado are keeping the FTC from negotiating a deal with Kroger and Albertsons that satisfies national regulators but does not adequately protect these states’ specific circumstances.
European Commission approves Bunge-Viterra merger with conditions
Bunge and Viterra just passed one major hurdle in their attempt to combine their global agricultural commodity and processing operations. On August 1, the European Commission approved the mega-merger on the condition that Viterra sell off parts of its business. This decision brings Bunge and Viterra closer to completing the largest grain trading merger in over a decade, which would further consolidate an industry that has been criticized for profiting off global food crises, fueling price volatility, and squeezing farmers.
The European Commission took a narrow approach to reviewing Bunge and Viterra’s merger. The Commission’s investigation focused on the harms that the deal would have for oilseed farmers in Central Europe, where Bunge and Viterra are two of just a few major oilseed processors and buyers. To resolve these concerns, the Commission negotiated for Viterra to sell off its oilseed business in Hungary and Poland.
“We had concerns that the transaction could affect the supply chains of rapeseed and sunflower seed in Central Europe, with potential ramifications across the food, feed, and biofuel industries. The divestiture of Viterra’s entire oilseeds business in Hungary and Poland will preserve competition in these markets,” said Margrethe Vestager, the executive vice-president in charge of competition policy for the Commission, in a statement.
Some critics contend that this narrow approach to merger review overlooks the bigger picture risks of further consolidating global food trade and processing. A preliminary report by three competition law professors and researchers, sponsored by a Dutch corporate accountability organization SOMO, theorized that this merger would promote tacit collusion in global food markets and raise food prices. The deal could also lower Bunge and Viterra’s incentives to compete through innovation and invest in research and development, the report argues.
More broadly, the report highlights the lack of resiliency and the tendency towards less diverse, environmentally destructive agricultural methods that consolidation in food processing and marketing brings. With fewer outlets to sell their crops and more pressure on prices, farmers tend to grow a narrower range of products using farming practices that cut environmental corners. Another merger by one of the “Big Five” global agribusiness corporations will only bring the food system further down this path, the report argues.
“Further industry consolidation and homogenisation would cement the path-dependence of the agriculture and food sector towards an industrialised, large-scale mode of production and distribution, diminish consumer choice and protection, undermine food safety and security, harm biodiversity and degrade the environment,” the authors write.