Thank you all for joining me here . After a thorough investigation of the proposed merger between Kroger and Albertsons that took over one year, included 19 town halls in communities across the state, feedback from more than 6,100 Coloradans, a review of a significant number of documents, and interviews with many individuals affected by the proposed merger, we are ready to act. To that end, my office filed a lawsuit challenging this merger in Denver District Court this morning under Colorado’s State Antitrust Act, seeking to prevent this merger from taking place and pursuing civil penalties and injunctive relief in connection with another violation of Colorado’s antitrust laws.
At the outset, let me thank everyone who engaged with our Department and helped us analyze this proposed merger. That includes consumers, suppliers, and workers from around the state. These town halls not only helped shape my view of this merger and provided invaluable data, but they also informed my thinking about our great state. I continually left these conversations impressed by how workers at stores around our state care about suppliers and consumers and vice versa. A supplier in Delta related how, after a prior merger, the buyer for local produce was moved from Colorado to national headquarters, leading to changes in buying practices than harmed local producers. A worker in Cañon City shared how she lost her job in Craig after the prior Albertsons/Safeway merger, and she worried that it could happen again with this merger. And one consumer in Montrose, for example, joked that his mom liked the worker who slices fresh meat for her at the local Safeway more than him. And we heard many powerful stories that cautioned about the harms that this merger would bring to Colorado, to our communities, our workers, and our rural farming economies.
These fears are warranted because the market for grocery stores is already very concentrated, with too little competition. And this merger would make the problem worse, with Kroger controlling roughly half of all supermarkets in Colorado. We need to remember lessons learned from past grocery store mergers. The 2015 merger between Albertsons and Safeway, for example, led to store closings, job losses, and harms to consumers. The harms from that merger were supposed to be addressed by a divestiture plan, but that remedy was an abject failure, with the divested stores either getting sold back to Albertsons or ending up closed altogether. Some of the sites of closed stores—such as in Pueblo—remain empty and are a blight in those communities. Indeed, when I was in Pueblo yesterday, Albert Madril, a former 31 year Safeway employee, reminded me about those store closures and job losses and urged me to challenge this merger.
The fact that these two companies—Kroger and Albertsons—compete vigorously against one another is explained in the complaint we filed. Notably, the companies monitor each other closely—on price, customer service, and the quality of their offerings—and respond in the marketplace. As I mentioned earlier, a post-merger Kroger would have the ability to raise prices, pinching consumers. In urban areas, where consumers shop close to home, the consolidation of Kroger and Albertsons stores would create significant market power to raise prices and reduce quality and services. Consumers in other areas of the state would feel the effects even more. For instance, City Market and Safeway are the only supermarkets in Gunnison. The merger would make Kroger the only supermarket in this area, and a Gunnison resident would have to drive about 65 miles to Salida or Montrose to reach a non-Kroger store, leaving them at the peril of Kroger’s supply chain failing.
One of the clearest examples of head-to-head competition—and an independent violation of our antitrust laws, in addition to this illegal merger—is the conduct of the companies when King Soopers’ employees went on strike in 2022. As many remember, this strike took place after the pandemic when grocery store workers had served on the frontlines and were asking for a fair wage and protected healthcare and pension benefits. Because the employees were out on strike, Kroger worried about Albertsons recruiting their employees. That’s part of a competitive market—companies need to compete not only for consumers, but for employees too. In fact, there were prior episodes of King Soopers targeting Albertsons employees with special incentives.
As the strike was approaching, Kroger decided that it was unwilling to risk competing for employees with Albertsons. It thus entered into an illegal “no poach” agreement with Albertsons whereby it committed not to hire any King Soopers employees. The two companies, moreover, also entered into a non-solicitation agreement, restricting Albertsons from soliciting Kroger’s pharmacy customers. This type of behavior is the opposite of what our antitrust laws require—and is an affront to free and fair competition.
I recognize that Kroger and Albertsons have suggested that a proposed divestiture plan addresses the anticompetitive impacts of this proposed merger. Not only is this proposal premature—it’s suggesting a remedy before a court has had the opportunity to judge the illegality of the merger—it’s also unpersuasive. For starters, the failed past divestiture plan in the Albertsons/Safeway merger in 2015 serves as a cautionary tale, one that makes us very skeptical in this case. Like the last divestiture plan, Kroger and Albertsons ask us to trust that a much smaller and less experienced company can operate the divested stores effectively. It asks us to trust that the company operating the divested stores can compete with Kroger while it relies on a transition agreement with Kroger that leaves it dependent on the merged Kroger for support with regard to pricing, pharmacy, promotions, loyalty programs, and IT infrastructure. That agreement—and the promise of a future contract dispute between competitors, which is exactly what happened in the Albertsons/Safeway merger—is a recipe for mischief.
Original source can be found here.