By Judy Goodway, Deborah Bloom
PORTLAND, Ore. (Reuters) – The U.S. Federal Trade Commission began a trial on Monday in its attempt to block Kroger’s $25 billion merger with Albertsons, telling a federal judge in Portland, Oregon, that the deal would eliminate competition among major grocery chains and hit consumers’ pocketbooks.
The Federal Trade Commission and several states sued to block the deal in February, saying the merger would mean higher prices for consumers and less bargaining power for unionized grocery workers.
Susan Moser, the FTC’s chief trial counsel, urged U.S. District Judge Adrienne Nelson on Monday to block the deal, saying in opening statements that it would result in Kroger “swallowing up” Albertsons.
“Stopping this multi-billion dollar deal will preserve strong competition that helps keep food prices low and stimulates improvements in quality and innovation,” she said.
Nelson is considering whether to put the deal on hold while an FTC judge examines its impact on competition.
Such reviews can take years, and companies often abandon stalled deals rather than complete the process.
Kroger and Albertsons are also expected to deliver their opening statements on Monday.
Kroger and Albertsons asked the judge to allow the deal to go forward, saying the alliance was necessary to compete with multinationals such as Walmart (NYSE: ), the largest U.S. food retailer, Costco (NASDAQ: ), and Amazon (NASDAQ: ), which owns Whole Foods.
Kim Cordova, president of the United Food and Commercial Workers International Union of Colorado and Wyoming, expressed skepticism about that argument at a news conference outside the courtroom.
“We don’t believe the company’s promise that it’s doing this to compete,” she said.
The issue is a prominent part of the Biden administration’s efforts to lower prices for consumers, and comes as high grocery bills gain prominence in the U.S. presidential race between Vice President Kamala Harris, the Democratic nominee, and former President Donald Trump, her Republican opponent.
It also poses a major test of Federal Trade Commission Chair Lina Khan’s initiative to use antitrust law to boost wages and worker mobility.
The trial is expected to last about three weeks and will include evidence about how large grocery retailers and smaller competitors set prices and how they view competition in the industry.
Kroger and Albertsons say the lawsuit’s focus on traditional supermarkets ignores the fact that consumers typically shop for food at a variety of locations, including big-box stores like Target and dollar stores like Dollar Tree (NASDAQ:DXB).
Kroger has said it will sell 579 of the roughly 5,000 stores it owns if the deal is allowed to go through. Part of the trial will focus on whether C&S Wholesale Grocers can successfully operate those stores.
Kroger also pledged to cut grocery prices by $1 billion after the merger.
Retailers use multiple tools to lower prices, including negotiating better deals with suppliers, investing in automation in the supply chain, or changing the way products are labeled and packaged.
Although Kroger said it could not provide further details on the specifics of the price investments, a source familiar with the matter indicated that the cuts would likely focus on essential and high-demand items first.
“It won’t be peanut butter, for example, at first, but a wide range of staple foods will be targeted,” the source said.
Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and the District of Columbia are pursuing the case along with the Federal Trade Commission.
Washington and Colorado have filed their own lawsuits to block the merger. The lawsuits are set to go to court after the Oregon case.
Kroger and Albertsons locations are available in all states.