Federal judge blocks Kroger's $25B acquisition of Albertsons

A federal judge on Tuesday blocked the proposed $25 billion merger between Albertsons and Kroger, agreeing with the Federal Trade Commission (FTC) that the deal would undermine competition in the grocery industry.

U.S. District Judge Adrienne Nelson said that the plan put forward by the two companies to reduce grocery prices and divest more than 500 stores failed to address concerns about reduced competition in the sector and the impact it could have on consumers and workers. 

Nelson's ruling agreed with the FTC's argument that the merger would remove direct competition between the two grocers, which would make it illegal.

Albertsons and Kroger argued in legal filings and during the three-week trial in Portland, Oregon, that their plan to divest over 500 stores to C&S Wholesale Grocers would ensure that stores remain open and accessible to consumers, providing a counterbalance to the combined grocery store giant. Kroger also pledged to invest $1 billion in lowering grocery prices after its acquisition of Albertsons concluded.

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The deal would have been the largest merger in the history of the grocery industry. Kroger argued in legal filings that the court rejecting the plan would effectively kill the deal.

The judge noted that despite the ruling, the companies could look to address antitrust issues and secure approval to move forward with a reconfigured merger.

"Although defendants may choose to abandon the merger because of the preliminary injunction, this order in no way forces them to do so, and leaves open the possibility that they may pursue the merger at a later date should it be deemed lawful in the administrative proceedings," Nelson wrote. 

"An injunction simply pauses the merger. Any harms defendants experience as a result of the injunction do not overcome the strong public interest in the enforcement of antitrust law, especially given the difficulty in disentangling a premature merger," she added.

FTC spokesperson Douglas Farrar said the ruling "protects competition in the grocery market, which will prevent prices from rising even more."

"This statement win makes it clear that strong, reality-based antitrust enforcement delivers real results for consumers, workers, and small businesses," Farrar said.

National Economic Council deputy director Jon Donenberg said in a statement, "The Kroger-Albertsons merger would have been the biggest supermarket merger in history—raising grocery prices for consumers and lowering wages for workers. Our Administration is proud to stand up against big corporate mergers that increase prices, undermine workers, and hurt small businesses."

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Albertsons told FOX Business in a statement: "We are disappointed by the U.S. District Court’s decision to grant the FTC’s request for a preliminary injunction." 

"We believe we clearly outlined during the proceedings how the proposed merger would expand competition, lower prices, increase associate wages, protect union jobs, and enhance customers’ shopping experience. We are carefully reviewing the Court’s opinion and are evaluating our options in accordance with the merger agreement," Albertsons added.

"We are disappointed by the U.S. District Court’s decision to grant the FTC’s request for a preliminary injunction," a Kroger spokesperson told FOX Business. "We believe we clearly outlined during the proceedings how the proposed merger would expand competition, lower prices, increase associate wages, protect union jobs, and enhance customers’ shopping experience. We are carefully reviewing the Court’s opinion and are evaluating our options in accordance with the merger agreement.

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Kroger's stock rose 5.1% during Tuesday's trading session, much of which occurred after the judge's ruling was handed down.

Albertsons stock was down more than 2.2% on the day and fell further in after hours trading with a decline of more than 0.8% as of Tuesday evening.

Reuters contributed to this report.