The final decision of the Federal District Court in Oregon on the filing by the Federal Trade Commission (FTC) to block the transaction will in large measure determine whether the 2022 proposal to merge Kroger and Albertson’s becomes a reality.

Rodney McMullen is optimistic that the transaction will proceed, stating at an analyst call that the Company had made a strong case for the deal and will continue to fight for its completion.  He stated, “We remain committed to closing the merger because it will provide meaningful and measurable benefits for customers, associates and communities across the country, and we look forward to bringing these commitments to life.”  He added, “Regardless of the outcome of the trial, Kroger is operating from a position of strength, and we are optimistic about our future.”

Kroger considers that the merger with Albertsons will be necessary to achieve a scale of operation to compete with Walmart, Amazon, Costco and Aldi.

The original proposal would have created a behemoth with 4,990 stores, 66 DCs, close to 4,000 pharmacies and 2,000 fuel centers in 48 states.  Divestiture of 579 stores in 18 states with 8 distribution centers to C&S Wholesalers would still create an enterprise that will dominate many markets with diverse banners and store brands.

The proposed transaction is opposed by the FTC and the Attorneys General of nine states based on the perceived effect on competition and the inherent power to suppress union representation.

Although the interests of workers and customers are frequently advanced in arguments for and against the merger, the immense buying power created will be detrimental to suppliers. This is especially the case in western states where the combination of Albertsons and Kroger would dominate the market.  Recent fluctuation in the price of eggs is attributed in part to the ‘bending’ of the prevailing benchmark price discovery system by buyers employed the large chains. By withholding orders, for even a limited period, results in stock builds depressing price. A precipitous drop in wholesale price over the past two weeks cannot be ascribed to either a substantial increase in supply or a sharp decline in demand although both these factors could be mutually contributory. It is unlikely that the price of eggs can be as elastic as has been demonstrated due to either supply or demand changes over a period of two to three weeks. EGG-NEWS has consistently advocated for a Chicago Mercantile Exchange quotation for Midwest large as a more equitable basis for pricing.

Even if the Oregon Federal District Court grants a preliminary injunction against the merger, Kroger intends to continue litigation having spent close to $1 billion in legal fees and planning for the transaction.   If the company is foiled in its attempts to complete the deal, shareholder opposition may pressure McMullen to back down as legal costs will mount and as the pursuit of a successful outcome becomes a distraction from efficient and profitable operation of the enterprise.