Kroger merger delayed as Washington AG sues, Albertsons execs called deal 'a monopoly'

Albertsons executives expressed misgivings in internal chats about promises of grocery prices going down and the legality of their proposed $25 billion merger with Kroger, according to an antitrust lawsuit filed Monday by Washington state regulators.

The lawsuit, seeking to stop the merger permanently, came the same day Cincinnati-based Kroger announced a delay to complete the takeover of the Boise, Idaho retailer, citing ongoing discussions with federal and state antitrust regulators. While the companies had hoped to close on the deal early this year, the company released a statement saying it expects the deal to close by Aug. 17.

Washington Attorney General Bob Ferguson blasted the merger proposal in his announcement of legal action, saying it would jeopardize workers’ jobs, reduce competition and lead to higher prices.

“This merger is bad for Washington shoppers and workers,” Ferguson said. “Shoppers will have fewer choices and less competition, and, without a competitive marketplace, they will pay higher prices at the grocery store. That’s not right, and this lawsuit seeks to stop this harmful merger.”

Ferguson cited internal chat communications by Albertsons executives admitting they were “basically creating a monopoly” that Washington antitrust regulators discovered as part of their case. One executive even wrote: “It’s all about pricing and competition and we all know prices will not go down.”

One of the largest-ever proposed retail mergers, the Kroger proposal has been controversial from the start. The deal affects a combined network of nearly 5,000 stores in almost every U.S. state and the employment of more than 700,000 workers – that’s larger than the U.S. Postal Service.

Consumer and union groups have opposed the deal, claiming it will hurt competition and ultimately raise prices and harm workers. Federal regulators have declined to comment as they decide whether to block it.

Responding to the lawsuit, Kroger officials called it “premature,” saying the two companies "will vigorously defend this in court because we care deeply about our customers.”

The local chapter of the United Food and Commercial Workers International Union praised Ferguson’s lawsuit:

“We have been clear and strong in our opposition to the proposed Kroger and Albertsons merger from day one. Attorney General Ferguson has been a leader in the effort,” the UFCW 3000 said in a statement.

In a separate statement, Kroger updated the timeline for completing the merger:

“We remain in active and ongoing dialogue with the Federal Trade Commission and individual state Attorneys General regarding our proposed merger and divestiture plan… While this is longer than we originally thought, we knew it was a possibility,” Kroger said in a joint statement with Albertsons and C&S Wholesale Grocers, which had agreed to purchase hundreds of stores in a related divestiture deal.

To allay fears about competition and mollify regulators, Kroger in September announced a $1.9 billion deal to sell off 413 stores to Piggly Wiggly operator and franchiser C&S Wholesale Grocers. The deal would allow Kroger and Albertsons to divest as many as 650 stores if regulators wanted.

While the companies’ statement maintained an upbeat tone, court documents in a civil lawsuit by consumers opposed to the deal revealed that federal regulators were far from signing off on the merger deal Kroger had hoped would get a green light as early as Dec. 15.

Kroger executives have previously vowed to fight for the deal in court.

Editor's note: Albertsons execs discussed merger concerns in internal chats. A previous version misstated the technology used to talk with one another.

The Enquirer will update this story.

This article originally appeared on Cincinnati Enquirer: Kroger delays merger with Albertsons, Washington AG sues