Kroger's battle against a governmental organization has the potential to fundamentally transform the antitrust landscape.
The lawsuit alleges that the Federal Trade Commission (FTC) is breaching the U.S. Constitution by employing an in-house tribunal to contest Kroger's $25 billion mega-merger with Albertsons, which stands as the largest proposed supermarket deal in American history.
Typically, the FTC handles antitrust enforcement by either suing companies and taking them to court, or by attempting to utilize its own in-house administrative law judges to rule or reach a settlement outside of court. In the case of Kroger, the FTC pursued both avenues, aiming to halt the merger in court and make a ruling on it with its internal judges.
Companies can challenge the FTC's administrative decisions in court. However, Kroger contends that the tribunal process is unconstitutional.
This Kroger lawsuit, filed on Monday in a federal court in Cincinnati, draws on a landmark Supreme Court ruling from June that further constrained the power of regulatory agencies. The current lawsuit serves as a significant test case and the latest attempt to restructure the administrative state in the United States.
Experts believe that a victory for Kroger could set off a significant change in how the federal government challenges mergers. U.S. officials fear that weakening regulators' capacity to combat monopolies could negatively impact consumers by granting corporations excessive power to hike prices and close stores.
Christine Bartholomew, a professor of law at the University of Buffalo School of Law, stated, “It’s huge. If they are successful and appellate courts agree, one of the primary arms for antitrust oversight is literally being cut off at the elbow.” This shift, Bartholomew added, would represent a radical transformation in the way American antitrust law is administered.
Bartholomew expressed concerns over the lawsuit, as she believes that if the FTC is no longer permitted to employ its in-house tribunals, antitrust scrutiny of corporate mergers would likely decrease.
“The risk is more deals, more concentration, and potentially higher prices and less consumer choice,” Bartholomew said.
In February, the FTC filed a lawsuit to impede the $25 billion merger between Kroger and Albertsons, which was announced in 2022. The agency argued that the merger would drive up prices, shut stores, and result in job losses.
Kroger disagreed, asserting that the deal would have the opposite effect, enabling the supermarket chains to better compete against non-union titans like Amazon, Costco, and Walmart.
The FTC is contesting the Kroger merger on two fronts: in federal court and through an administrative trial.
Next week, Kroger is scheduled to appear in court in Portland, Oregon to discuss the deal. The FTC has requested the judge in that case to temporarily block the Kroger-Albertsons merger while the in-house tribunal evaluates the transaction.
In the new lawsuit, Kroger accuses the FTC of violating the Constitution in two ways: The administrative law judge is not removable by the President of the United States, and the case is being argued in the executive branch instead of the courts.
Kroger cites the landmark Supreme Court decision in June where justices limited the power of the Securities and Exchange Commission to enforce rules using in-house reviews instead of jury trials.
“We are ready to defend this merger in the upcoming court trial — the appropriate venue for this matter to be decided,” Kroger CEO Rodney McMullen said in a statement. “We are requesting the Court to halt what amounts to an unlawful proceeding before the FTC’s own in-house tribunal.”
McMullen further noted that the merger between Kroger and Albertson’s is “focused on ensuring we provide customers lower prices beginning day one while securing the future of good-paying union jobs.”
The FTC declined to comment on the Kroger lawsuit.
A source familiar with the situation dismissed the Kroger lawsuit as a “desperate Hail Mary.”
The move comes as part of a broader initiative by corporate America to push back against perceived regulatory overreach.
Even some Democratic megadonors with business interests at stake have argued that the FTC’s efforts to combat monopolies have gone too far during the Biden administration.
The Supreme Court has recently ruled in favor of businesses fighting regulations, including overturning the Chevron Doctrine in its blockbuster June decision that weakens the ability of agencies to approve regulations.
“The entire administrative structure is under legal attack right now,” said Rebecca Haw Allensworth, an antitrust law professor at Vanderbilt Law School.
Allensworth suggested that a Kroger victory would represent a “seismic shift” in how the FTC and other federal agencies operate.
Allensworth emphasized that, considering the recent string of Supreme Court decisions against federal agencies, a Kroger victory cannot be ruled out.
“The law is whatever the Supreme Court says it is. We can’t be sure a claim like this would be rejected,” she said.
The business at the center of the controversy, Kroger, argues that the tribunal process employed by the FTC to challenge its $25 billion merger with Albertsons is unconstitutional, impacting the way antitrust enforcement is conducted in the United States.
The Supreme Court's landmark ruling in June, which further constrained the power of regulatory agencies, provides a legal basis for Kroger's contention that the administrative decisions made by the FTC should be challengeable in courts rather than through the FTC's in-house tribunal.
