“There is no existential threat going on here,” said attorney Glenn Pomerantz in the Washington’s opening arguments. “Kroger and Albertsons don’t need to merge to be successful. They’re already successful.”
Washington spent much of last week in court, with state attorneys arguing against a proposed merger between Albertsons and Kroger.
“Free enterprise is built on companies competing, and that competition benefits consumers,” Washington state Attorney General Bob Ferguson said in a statement shortly before the trial began. “My legal team and I will continue working to protect Washington consumers and workers from increased prices and fewer choices.”
In court, Washington maintained the same position it has held for several years: if the merger is approved, Albertsons and Kroger will have little competition in many cities across the state.
And, in the absence of any competition, prices will likely increase—potentially costing consumers hundreds of millions of dollars each year.
However, both companies say that a merger would have the opposite effect, letting them lower costs and focus their attention on competing with rivals like Walmart, Costco, and Amazon.
“This is the real competition,” Kroger lawyer Mark Perry said in his opening argument. “The evidence will establish that Kroger and Albertsons do face an existential threat from these behemoths and that this merger is their response to that threat.”
According to The Associated Press, though, Washington state appears to have anticipated this line of argument. In his own opening argument, attorney Glenn Pomerantz observed that there is not a single Walmart in Seattle—or, indeed, in many of the other markets in which Albertsons and Kroger currently operate.
In total, the two companies own more than 300 stores across the state, controlling more than half of its annual grocery sales.
“There is no existential threat going on here,” Pomerantz said. “Kroger and Albertsons don’t need to merge to be successful. They’re already successful.”
But the companies seemed to suggest that Washington’s argument was somehow contingent on an outdated understanding of the grocery market—that the position of “one-stop” shops like Kroger and Albertsons is being usurped by less-conventional brands, ranging from Walmart and Costco to Amazon and Trader Joe’s.
“Consumers […] are now taking multiple trips per week and buying food from stores in all different formats,” a Kroger attorney said.
These arguments notwithstanding, the case’s outcome could be determined by the court and the jury’s assessment of C&S Wholesale, a company that operates 23 supermarkets across Washington—and is poised to buy hundreds of stores from Kroger and Albertsons, should the companies’ nationwide merger be approved.
Whereas Washington has expressed harsh skepticism over C&S Wholesale’s long-term viability, the defendants say that it is “not a mom-and-pop operation or a risky private equity venture” but “a well-capitalized company with deep industry experience.”
Sources
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Huge stakes as trial starts in WA’s suit against Kroger-Albertsons merger
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