DENVER (CN) — With the close of a three-week trial on Thursday, a Denver judge will now decide whether the proposed merger between grocer giants Kroger and Albertsons violates Colorado’s antitrust law, as claimed by state attorneys.
“Kroger will raise prices whenever they think they can profit from doing so,” said Assistant Attorney General Arthur Biller in closing arguments.
Kroger, which owns 2,719 grocery stores nationwide, announced a plan in October 2022 to purchase 2,271 Albertsons stores. In Colorado, Kroger’s King Soopers and City Market stores dominate the landscape alongside Albertsons’ Safeway and Walmart.
To maintain competition, Albertsons plans to divest dozens of stores to a third party, C&S Wholesale Grocers. Colorado doubted the divestiture succeeding, particularly as C&S has a reputation for liquidating retailers rather than running stores.
Biller said C&S would have a fraction of the stores, assets and supporting infrastructure that Albertsons currently has.
“This makes C&S not only a smaller competitor than Albertsons but a worse competitor,” Biller said. “They have a decades-long strategy of buying and closing stores.”
Kroger attorney David Wolf pushed back, citing the 2020 pandemic as C&S’s turning point to pursue a new business model.
Wolf also urged the court in his closing arguments to reject the state’s narrow view of the relevant market, and to consider companies like Amazon and Costco as genuine competitors building growth strategies around doubling down on the grocery sector.
The case presented a battle of the experts, with Kroger largely calling on antitrust economist Mark Israel of Compass Lexecon, and the state pointing to analysis from economist Nitin Dua from Bates White.
While both economists agreed in their prior testimony that Kroger did not directly compete with small health food grocers or dollar stores, Israel identified a broader product market than Dua. Dua instead found the merger would diminish competitive strength in Colorado’s grocery market, a point Israel contested.
Kroger doesn’t sell individual data, Wolf explained Thursday, the company uses customer interactions collected through its loyalty program, to better tailor advertisements for brand companies like Pepsi or Frito-Lay who might want to target current customers of a certain product or specific demographics.
Kroger runs on a conceptual flywheel, Wolf said, meaning the company “drives down prices to bring in customers to collect more insights, driving non-grocery revenue that drives down prices.”
“Grocery shoppers in Colorado will pay more and get less if the state gets its way,” Wolf said.
Wolf urged the court to reject Colorado’s anticompetition claims, claiming Kroger’s goal is to get its prices as close to Walmart’s lows without compromising on value.
Colorado Attorney General Phil Weiser first sued Kroger and Albertsons on Feb. 14, arguing the proposed merger would stifle competition and raise prices. In July, Second Judicial District Judge Andrew Luxen granted a temporary injunction halting the deal pending the outcome of the bench trial.
The Federal Trade Commission also sued the grocers in federal court on Feb. 26 aiming to halt the nationwide merger. U.S. District Court Judge Adrienne Nelson in the District of Oregon is expected to issue an expeditious decision on an injunction following a hearing held in September. A third antitrust suit is pending in Washington state.
Should either of these suits reach an order before Luxen, he advised the parties to be prepared to attend a status hearing within three days.
Luxen did not indicate when or how he would decide the case, but denied a motion that would have allowed the parties to review his order prior to it being made public, which the grocers had hopes would ensure no confidential information was inadvertently published.
“I’m not going to issue a slip order to let parties identify what they think is confidential, I will be issuing one order,” Luxen said. “My position is I am responsible to spell out the reasons I have for making these decisions.”