A lawsuit has been filed in the U.S. District Court for Northern California opposing the merger of the Kroger Company and Albertson’s, Inc.  Plaintiffs allege that the merger will “financially cripple Albertson’s and weaken its competitive position relative to Kroger and eliminate Albertson’s from the competitive landscape”.  Legal challenges have been mounted against the special cash dividend of $4 billion to be paid to shareholders, mostly comprising capital investment groups led by Cerberus Capital Management.

The lawsuit claims that the merger and special dividend violate Section 7 of the Clayton Antitrust Act with Kroger representing 24 percent of pure-play retail grocery sales and Albertson’s as second ranked with 12 percent.

Plaintiffs comprise 25 consumers from 11 states extending from California to Massachusetts.  The lawsuit claims that the proposed potential elimination of Albertson’s by Kroger poses a substantial threat to plaintiffs and to the public at large by reducing available consumer choice without providing any increase in jobs or output.

Independently of the lawsuit, the Department of Justice Antitrust Division is evaluating the impact of the proposed merger but has yet to issue a statement concerning either approval or establishing requirements for divestment of stores. The joint management of Kroger and Albertson’s has prepared a list of location that would be sold in the event of the merger.