Colorado Attorney General Phil Weiser filed a lawsuit Wednesday to block a merger between the parent companies of Safeway and King Soopers.
In the lawsuit, Weiser said the merger would eliminate competition between the grocery store chains and hurt Colorado shoppers. It also violates the state’s antitrust laws and Weiser asked for a preliminary injunction, which would be decided by a district court judge.
“The fact that Kroger, after this merger, could be 50% of the supermarket market share in Colorado is a very clear flashing red light,” Weiser said during a news conference Wednesday. “And the fact that the last merger between Safeway and Albertsons had real harms to communities, to workers, to consumers and to producers, also speaks volumes.”
Weiser spent last year holding 19 town halls across the state to listen to residents, workers and communities about what would happen should the two grocery chains merge. The response was overwhelmingly in opposition and at a November event in Denver attended by Federal Trade Commission Chair Lina Khan, nobody had a positive word about the merger.
The suit seeks civil penalties of $1 million per company for violating the Colorado Antitrust Act.
In a statement, officials with Kroger Inc. called the lawsuit “premature” since the merger is still under review by the Federal Trade Commission. Kroger said it would fight Colorado’s lawsuit in court.
“Blocking this merger would only serve to strengthen larger, non-unionized retailers like Walmart, Costco and Amazon, by allowing them to maintain and increase their overwhelming and growing dominance of the grocery industry. In contrast, Kroger and Albertsons Companies merging will bring lower prices to more customers, strengthen and create good-paying union jobs, and bring more fresh, affordable food to more communities,” the company said in an email.
Kroger Inc. operates 148 King Soopers and City Market stores in Colorado, and Safeway owner Albertsons operates 105 Safeway and Albertsons stores.
Kroger and Albertsons announced their $24.6 billion plan to merge in October 2022. At the time, they called themselves “complementary organizations” that when combined, would reach 85 million households, employ 710,000 workers and operate 4,996 stores. Some of the stores are in the process of being sold off to a competitor to meet “requisite regulatory clearance,” according to the companies. In September, New Hampshire-based C&S Whole Grocers said it would buy 413 stores, including 52 Albertsons in Colorado.
But Weiser pointed to the 2018 merger between Albertsons and Safeway that ended up with stores closing and workers losing their jobs.
“The harms from that merger were supposed to be addressed by a divestiture plan. But that remedy was an abject failure with divested stores either getting sold back to Albertsons or being closed altogether,” Weiser said. “People are really concerned about what this merger could bring.”
As competitors, the two grocery chains can monitor one another’s customer service, quality control and prices. That would go away post merger if the two were one big company and hurt shoppers, suppliers and farmers. The impact in rural areas would be worse if choice disappears, he said.
“Consider Gunnison where we had a town hall in January 2023,” Weiser said. “They only have two supermarkets: a City Market and a Safeway. This merger would make Kroger a monopolist in that community and be the only market for over 60 miles, which means if you’re in Gunnison, you’d have to drive all the way to Salida from Montrose to reach another grocery store.”
Rep. Matt Soper, R-Delta, had asked Weiser to host a listening session in Delta County last summer because Soper was concerned about the impact on rural agricultural communities that wind up having fewer buyers for their products. He was pleased to hear the AG is pursuing the antitrust lawsuit.
“The proposed merger is troubling for rural Colorado where many towns are likely to be left with one grocery store,” Soper said. “Additionally, a merger would mean fewer opportunities for Colorado farmers and ranchers to be able to place produce and products in grocery stores on account of the lack of competition.”
Troubling past
The AG’s office also learned that during the King Soopers worker strike in early 2022, Kroger made a “blatantly illegal no poach agreement” with Albertsons to not hire any King Soopers employees and vice versa, He shared the email communication on screen at the news conference. The two companies also made a no-solicitation agreement to not lure pharmacy customers, which is also illegal, Weiser said.
“These two companies agreed illegally to limit competition when Kroger and City Market employees were on strike,” he said. “Because of this strike, Kroger was worried that Albertsons might recruit their employees. That’s how a competitive market works. Employees, as well as customers, get the benefits of competition.”
Two days after this story published, Kroger officials said they disagreed with AG Weiser’s claim of a no-poach agreement. A Kroger spokesperson shared this statement:
“It is disheartening for Coloradans that General Weiser would mischaracterize the facts because there was not then, and there is not now, non-solicitation or so-called no-poach agreements between Kroger and Albertsons. Employees at both companies regularly join our teams from – and exit our companies for opportunities to work at – Albertsons, Kroger, Walmart, Amazon, Costco and other retailers as well as restaurants, food service companies, convenience stores, warehouses and more.”
United Food and Commercial Workers International Local 7, which represents 18,000 Kroger and Albertsons grocery workers in Colorado and Wyoming, has opposed the merger since the start.
On Wednesday, UFCW Local 7 President Kim Cordova applauded the AG’s lawsuit and said in a statement, “This proposed merger is driven by greed and seeks to consolidate power in an industry that is already too consolidated, an industry where too few companies have too much control over our food supply. We need to make sure it is stopped, and this lawsuit is a big help in that cause.”
Last month, the grocery companies said that due to regulator scrutiny, completing the merger was going to take longer than anticipated and pushed the closing date from early 2024 to the first half of Kroger’s fiscal year, which ends in August.
The same day, Washington Attorney General Bob Ferguson sued to block the merger. Colorado became the second state to file a lawsuit.
Weiser said the lawsuit could help convince the FTC, which is still reviewing the merger.
“The Federal Trade Commission can challenge this merger on a nationwide basis,” he said. “That is a challenge that I urge them to make (and) I believe when they read our complaint, it will provide them with further basis for them to do just that.”
On February 16, 2024, this story was updated to add a comment from Kroger officials to deny a no-poach agreement had existed.