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The suit argues that the proposed merger and special dividend payout violate Section 7 of the Clayton Antitrust Act by standing to substantially lessen Kroger’s competition in the market.

Consumers file antitrust suit to block Kroger-Albertsons merger

Legal action also names investor Cerberus and seeks to nix $4B dividend payment

A group of consumers have filed a federal antitrust lawsuit seeking to block the Kroger-Albertsons merger.

The suit, filed in the Northern California U.S. District Court in San Francisco, also accuses investment firm Cerberus Capital Management and other “major stockholders of Kroger and Albertsons” of seeking to eliminate Albertsons from the competitive landscape.

“As part of the Kroger-Albertsons mega-merger transaction, the companies seek to financially cripple Albertsons and to weaken its competitive position relative to Kroger,” the suit states.

This is in reference to Albertsons’ special cash dividend payment to shareholders of $6.85 per share, or nearly $4 billion. A handful of state attorneys general had opposed this payment in both federal and state courts, but the payment recently was allowed to go through after clearing several legal challenges. Cerberus, a longtime Albertsons investor, is one of the primary beneficiaries of that payout.

Representatives from Kroger, Albertsons and Cerberus could not be reached for comment.

The suit argues that the proposed merger and special dividend payout violate Section 7 of the Clayton Antitrust Act by standing to substantially lessen Kroger’s competition in the market. The suit argues that Kroger is the No. 1 traditional supermarket operator in the U.S. with 23.6% of sales and that Albertsons is No. 2, with 12.4% of sales, citing a 2020 Supermarket News report.

The 25 consumers filing the suit, hailing from 11 different states spanning the country from California to Massachusetts, are represented by the Joseph Saveri Law Firm in San Francisco. They are seeking to prevent the acquisition and the dividend payment, and the disgorgement of any dividend payment that have already been made.

In addition to blocking the merger and dividend payment, the plaintiffs are also seeking compensation for their legal fees but have not asked for additional monetary damages.

They argue that the merger will result in higher prices, lost jobs, and reduced competition, citing past Supreme Court rulings that weighed in against some large mergers in the past.

“The proposed elimination of Albertsons by Kroger poses a substantial threat to the plaintiffs, and to the public at large, in that the proposed elimination will only serve … to reduce available consumer choice while providing no increase in industry capacity, jobs or output,” the lawsuit states.

In addition to the potential for higher grocery prices, lost jobs, and reduced levels of service that the plaintiffs said could result from the merger, they also cited the potential for the merger to spark additional mergers in the retail grocery industry that could further reduce competition.

The Federal Trade Commission is in the midst of what is expected to be an extensive antitrust review of the proposed $24.6 billion merger. Kroger and Albertsons have extensive store overlap in Chicago, along the West Coast and in other markets. They are expected to spin off hundreds of stores to satisfy antitrust concerns.

The consumer suit seeks to define the relevant market for antitrust purposes as traditional supermarkets where consumers can conduct one-stop shopping for all of their grocery needs. That relatively narrow definition would not include club stores, limited-assortment stores, hard discounters, and other formats that have gained considerable share of the grocery market.

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