The Kroger-Albertsons merger is on its deathbed

The news: The FTC won a temporary injunction to block the Kroger-Albertsons merger, its second major antitrust win in less than three months.

• US District Judge Adrienne Nelson agreed with the FTC’s argument that the deal would reduce grocery competition and lead to higher prices for consumers.
• The decision could mark the end of the proposed merger; attorneys for both companies said the acquisition would likely be called off if the judge ruled against the deal.

How we got here: The merger was unlikely from the start, given the considerable geographical overlap between the two grocers, intense scrutiny over grocery prices, and pushback from unionized workers concerned about losing bargaining power.

While Kroger and Albertsons made overtures to regulators—including by promising $1 billion in price cuts and increasing the number of stores they were willing to divest upon deal approval—those efforts were ultimately not persuasive.

What happens next: Kroger is confident about its ability to carry on without Albertsons—but Albertsons is in a much more difficult position.

• Kroger doesn’t need the Albertsons merger—or any other merger—to be successful, CEO Rodney McMullen said on the company’s Q3 earnings call.
• But Albertsons needed Kroger. The grocer is losing ground to rivals due to its inability to stay competitive on pricing and lack of scale compared with companies like Walmart and Amazon. Without the merger, Albertsons may be forced to close stores and exit markets, company counsel Enu Mainigi said during the federal hearing.

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