Kroger sues to halt FTC proceeding meant to block Albertsons merger
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Grocery giant Kroger sued the Federal Trade Commission on Monday, challenging an administrative proceeding meant to block its proposed $24.6 billion merger with rival Albertsons.
The lawsuit, filed in federal court in Cincinnati, contends the regulator’s challenge in administrative court is unconstitutional and seeks to have it halted. Legal experts characterized the move as an extraordinary attempt to interrupt the FTC’s enforcement powers, as it relies on a recent Supreme Court decision that limited a separate federal agency’s use of in-house legal proceedings.
In October 2022, Kroger announced plans to acquire Albertsons in a major industry consolidation that the companies say would allow them to better compete with retail giants Amazon and Walmart. But the FTC sued to block the merger in February, alleging that the deal would hurt competition and lead to higher food prices for consumers.That case goes before a federal judge in Portland, Ore., next Monday; the FTC is asking the court to temporarily block the deal while its in-house judges review it.
It’s hard to predict how the FTC will handle Monday’s lawsuit because Kroger is relying on new legal precedents to question the regulator’s authority, said Christine Bartholomew, a professor of law and vice dean of academic affairs at the University at Buffalo School of Law.
“We’re deep, deep in uncharted waters here,” she said. “This is an attack on the legitimacy of the Federal Trade Commission.”
The FTC declined to comment.
Kroger’s argument relies on two Supreme Court decisions this summer that curbed the enforcement power of a host of federal agencies. The lawsuit is a “Hail Mary” that relies on those rulings to scale back the FTC’s authority, Bartholomew said. If the FTC proceeded with its case in federal court and stopped its in-house administrative process, that would probably render Kroger’s argument moot, she added.
Regardless, Kroger’s lawsuit could indicate that the company is no longer trying to work out divestitures or other compromises with regulators, Bartholomew said. The move could also indicate that Kroger is gathering negotiation leverage or setting up early for an appeal.
Daniel McCuaig, a partner in Cohen Milstein’s antitrust practice, said the lawsuit is one of the first – if not the first – of its kind to be filed after the Supreme Court in June invalidated the Securities and Exchange Commission’s use of in-house legal tribunals to bring enforcement actions in securities fraud cases. But the decision could have a far greater impact on the FTC because the agency relies more heavily on in-house courts than the SEC, McCuaig said.
Kroger may see itself faring better in federal court as opposed the FTC’s in-house court, McCuaig said, or the company’s lawyers may have filed the lawsuit to set a precedent.
In a statement Monday, Kroger Chairman and CEO Rodney McMullen said the lawsuit is meant to ensure the case is heard in an appropriate venue.
“We stand prepared to defend this merger in the upcoming trial in federal court – the appropriate venue for this matter to be heard – and we are asking the Court to halt what amounts to an unlawful proceeding before the FTC’s own in-house tribunal,” he said.