The Federal Trade Commission (FTC) is on the case. So is the state of Colorado. So why is Washington state spending millions of dollars on a lawsuit to block the merger of Albertsons-Kroger - a lawsuit that will likely have zero impact on the merger's eventual outcome?
It's a valid question, as arguments wrap up in the case in King County, Washington. And the state-specific action costing taxpayers millions of dollars even has a skeptic on the bench.
“I have serious doubts about my authority as a state court trial judge to issue an injunction that bars this transaction from going into effect nationwide,” King County Judge Michael Ferguson said during a ruling from the bench.
The right case for a suit of this nature is federal court, which is where the FTC is arguing to block the proposed merger. But even there, the case is questionable. It's the first time a supermarket merger has been litigated since 1988.
As we've previously contended, the merger of Albertsons and Kroger doesn't create less competition - it actually increases competition.
Walmart/Sam’s Club makes up nearly a third – 30 percent – of the U.S. grocery market share. Costco tallies another 7 percent. Amazon is moving quickly and accounts for more than 5 percent. And consider this: Amazon Prime, Walmart+ and Costco have more than 250 million subscriptions.
Even if the Albertsons-Kroger merger proceeds, it would account for just 9 percent of nationwide sales, according to the International Center for Law and Economics. But what it would do is get the attention of the big three – increasing competition with their 42% of the current market share.
Furthermore, Walmart, Costco and Amazon do not have a unionized workforce – Albertsons and Kroger do and have earned the endorsement of the merger from union leaders. The government claims workers would be harmed, but union leaders likely know better.
Unfortunately, government regulators seem to be relying on an outdated model to determine what is best for consumers and grocery stores. Does a grocery store have to be a traditional brick and mortar location? Are online supermarkets be counted? If not, why? It is clear that Amazon, Walmart and Costco directly compete with Kroger and Albertsons, so why wouldn’t they be included in any merger analysis?
Nearly 30 years ago, supermarkets accounted for 81% of retail sales. That dropped to 61% a decade later, and today, it’s near 50%. Where have all of the customers gone? Online and warehouse stores.
An economist with the Strategic Resource Group recently told Yahoo Finance "Kroger’s acquisition of Albertsons is the last, best, and final chance to level the playing field."
Filing a state-specific, district court lawsuit before the FTC issues a decision is a bit like a coach demanding instant replay while the play is still running.
This isn’t the first time Washington state has filed suit against Albertsons and Kroger. The Washington Attorney General tried to stop a dividend paid to Albertsons shareholders following the announcement of the merger. That suit was not successful.
Albertsons says if the merger doesn't go through, it may need to look at cutting jobs and closing some stores. Maybe state lawyers will have some funds leftover to pay for unemployment benefits.