When Kroger announced plans last October to buy top competitor Albertsons for $24.6 billion, grocery unions in Washington and elsewhere sounded the alarm about monopoly. The merger would combine America’s largest grocer, Kroger, with its second largest, Albertsons, creating a massive single corporation with nearly 50 grocery chains, close to 5,000 stores, and over 700,000 workers. If the merger is allowed, it could leave some geographical areas without any grocery competition.
In the merger announcement, Albertsons also said it would pay shareholders a $4 billion dividend. Albertsons would pay the $4 billion dividend with all of its cash on hand ($2.5 billion) and borrow the rest. The sum amounts to more than a third of Albertsons’ market capitalization (the total value of its stock shares).
Concerned that such a dividend would cripple the company, attorneys general from around the country wrote to the companies asking them to hold off until federal regulators evaluate the companies for the merger. For Albertsons, “paying a dividend of this size will hamper its ability to meaningfully compete with Kroger,” they wrote. If the merger does not get regulatory approval, the dividend would leave Albertsons strained to compete with its number one competitor, they wrote.
Albertsons didn’t heed the request to postpone the dividend, so Washington Attorney General Bob Ferguson filed suit, and Oregon Attorney General Ellen Rosenblum signed on. They asked for an injunction blocking the dividend, saying it violated state antitrust laws and the Consumer Protection Act. A federal judge declined to take that step in a separate lawsuit, but Washington’s King County Superior Court temporarily blocked the dividend, and the state Supreme Court extended that injunction in December. But on Jan. 17 the court declined to extend it further, and the block was lifted. Albertsons announced the same day that it would pay the dividend as quickly as possible.
“We respect the decision of the Court, but we are surprised and disappointed the Supreme Court decided not to hear this case,” Ferguson said in a press statement. “That said, I want to be clear: This merger is far from a done deal.”
Oregon-based UFCW Local 555 has been silent on the merger, but a coalition of grocery unions that includes UFCW Local 3000 in Washington said the court decision “favors a small number of ultra-wealthy shareholders over the many thousands of essential workers and millions of Americans who will be left to suffer the consequences of the outright financial looting of Albertsons.”
The merger has a long road of regulatory scrutiny ahead of it, since the Federal Trade Commission must certify that it doesn’t violate antitrust laws, which are intended to prevent monopolies. Kroger has said it expects the deal to close in early 2024.
