Kroger and Albertsons defend merger plan in federal court against US regulators' objections

PORTLAND, Ore. (AP) — Supermarket chain Albertsons told a federal judge Monday that it might have to lay off workers, close stores and even exit some markets if its planned merger with Kroger isn't allowed to proceed.

The two companies proposed what would be the largest supermarket merger in U.S. history in October 2022. But the Federal Trade Commission sued to prevent the $24.6 billion deal, alleging it would eliminate competition and raise grocery prices in a time of already high food price inflation.

In the three-week hearing that opened Monday, the FTC is seeking a preliminary injunction that would block the merger while its complaint goes before an in-house administrative law judge.

“This lawsuit is part of an effort aimed at helping Americans feed their families," the FTC's chief trial counsel, Susan Musser, said in her opening arguments on Monday.

Musser said Kroger and Albertsons currently compete in 22 states, closely matching each other on price, quality, private label products and services like store pickup. Shoppers benefit from that competition, she said, and will lose those benefits if the merger is allowed to proceed.

Customers also are wary of the merger, the lawyer said. In Santa Fe, New Mexico, for example, 278 shoppers wrote to the FTC to express their concerns about a combined Kroger and Albertsons, which would own five of the city's eight supermarkets.

But Kroger and Albertsons insist the FTC's objections don't take into account the rising competition in the grocery sector. Walmart's grocery sales totaled $247 billion last year compared to $63 billion in 2003, for example; Costco's sales have grown more than 400% in the same period.

“Consumers are blurring the line of where they buy groceries," Albertsons attorney Enu Mainigi said.

Mainigi said Albertsons' customers now spend 88 cents of every dollar at competitors that range from Aldi and Trader Joe's to Dollar General. Albertsons can't compete with larger rivals that have national scale, but joining forces with Kroger would help it do that, she said.

Kroger attorney Matthew Wolf also defended the proposed merger.

“The savings that come from the merger are obvious and intuitive. Kroger may have the best price on Pepsi. Albertsons may have the best price on Coke. Put them together, they have the best price on both," Wolf said.

The two sides also disagree on Kroger and Albertsons' plan to sell 579 stores in places where their stores overlap. The buyer would be C&S Wholesale Grocers, a New Hampshire-based supplier to independent supermarkets that also owns the Grand Union and Piggly Wiggly store brands.

The FTC says C&S is ill-prepared to take on those stores. Laura Hall, the FTC's senior trial counsel, cited internal documents that indicated C&S executives were skeptical about the quality of the stores they would get and may want the option to sell or close them.

But Wolf said C&S has the experience and infrastructure to run the divested stores and would be the eighth-largest supermarket company in the U.S., if the merger plan goes through.

The commission also alleges that workers' wages and benefits would decline if Kroger and Albertsons no longer compete with each other.

Before the hearing, several members of the United Food and Commercial Workers International union gathered outside the federal courthouse in downtown Portland to speak out against the proposed deal.

“Enough is enough,” said Carol McMillian, a bakery manager at a Kroger-owned grocery store in Colorado. “We can no longer stand by and allow corporate greed that puts profit before people. Our workers, our communities and our customers deserve better.”

The labor union also expressed concern that potential store closures could create so-called food and pharmacy “deserts” for consumers.

For people in many communities across the U.S., when a grocery store shutters, “their only source of food actually is walking to the nearest gas station,” said Kim Cordova, the president of UFCW Local 7, which represents over 23,000 members in Colorado and Wyoming.

Mainigi argued the deal could actually bolster union jobs, since many of Kroger's and Albertsons' competitors, like Walmart or Costco, have few unionized workers.

U.S. District Judge Adrienne Nelson is expected to hear from around 40 witnesses, including the CEOs of Kroger and Albertsons, before deciding whether to issue the preliminary injunction. If she does decide to temporarily block the merger, the FTC's in-house hearings are scheduled to begin Oct. 1.

But Nelson's decision will seal the merger's fate, according to Wolf. He said the FTC's in-house administrative process is so long and cumbersome that merger deals almost always fall apart before it's through. Earlier this month, Kroger sued the FTC, alleging the agency’s internal proceedings were unconstitutional and saying it wants the merger’s merits decided in federal court.

The attorneys general of Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming all joined the case on the FTC’s side. Washington and Colorado filed separate cases in state courts seeking to block the merger.

Kroger, based in Cincinnati, Ohio, operates 2,800 stores in 35 states, including brands like Ralphs, Smith’s and Harris Teeter. Albertsons, based in Boise, Idaho, operates 2,273 stores in 34 states, including brands like Safeway, Jewel Osco and Shaw’s. Together, the companies employ around 710,000 people.

A worker returns grocery carts at an Albertsons grocery store on Monday, Aug. 26, 2024, in Lake Oswego, Ore. (AP Photo/Jenny Kane)

A grocery cart rests in a cart return area with a sign for Albertsons grocery store in the background on Monday, Aug. 26, 2024, in Lake Oswego, Ore. (AP Photo/Jenny Kane)

People line up outside the federal courthouse before a Kroger and Albertsons merger hearing on Monday, Aug. 26, 2024, in Portland, Ore. The two companies proposed what would be the largest supermarket merger in U.S. history in October 2022. (AP Photo/Jenny Kane)

Carol McMillian, bakery manager at Kroger-owned King Soopers and member of Local 7, speaks about the Kroger and Albertsons merger during a news conference outside the federal courthouse before a hearing on the merger on Monday, Aug. 26, 2024, in Portland, Ore. (AP Photo/Jenny Kane)

Kim Cordova, president of UFCW 7, center, speaks to reporters after a news conference about the Kroger and Albertsons merger outside the federal courthouse before a hearing on the merger on Monday, Aug. 26, 2024, in Portland, Ore.(AP Photo/Jenny Kane)

Faye Guenther, president of local UFCW 3000, hugs Carol McMillian, bakery manager at Kroger-owned King Soopers and member of Local 7, after a news conference about the Kroger and Albertsons merger outside the federal courthouse on Monday, Aug. 26, 2024, in Portland, Ore. (AP Photo/Jenny Kane)

The entrance to an Albertson's grocery store is shown on Saturday, Aug. 24, 2024, in Cheyenne, Wyo. (AP Photo/David Zalubowski)

MANCHESTER, England (AP) — Pep Guardiola has confirmed that the long-awaited hearing into Manchester City's alleged financial breaches begins on Monday.

The Premier League champion faces more than 100 charges ranging over a nine-year period when it was trying to establish itself as the biggest force in English soccer. The hearing into the charges will be held by an independent commission, which will be made up of three judges appointed by a lawyer who chairs the league’s judicial panel.

City denies the charges and Guardiola said Friday that he welcomed the chance to clear the club's name. The hearing will be held behind closed doors, and a verdict is not expected until next year.

“I’m happy it’s starting on Monday. I know there will be more rumors," he told a news conference. "We’re going to see. I know what people are looking for. I know what they are expecting, I know what I read for many, many years. ... Everybody is innocent until guilt is proven. So we’ll see.”

The charges, which were made in February last year, came after a four-year investigation. The alleged breaches have hung over City at a time when it has cemented its place as one of the leading clubs in world soccer — winning the Champions League for the first time in 2023 and securing an unprecedented fourth straight league title last season.

City was accused by the league of providing misleading information about its finances from 2009-18 after being bought by the ruling family of Abu Dhabi in 2008. In that time City signed some of the world's leading players like Yaya Toure, Sergio Aguero and Kevin de Bruyne and won three league titles — in 2012, 2014 and 2018.

Guardiola was hired in 2016 and has overseen the most successful period in the club's history, including winning the treble of the league, Champions League and FA Cup in '23. City has won the title in six of the last seven years.

The club’s exorbitant spending has provided the foundation for that unprecedented success, and prompted questions about whether anyone can halt its dominance.

The league has financial fair play rules designed to ensure clubs essentially spend what they earn from deals that are assessed for being at legitimate market value.

The charges came after an extensive investigation and the publication of leaked emails and documents, likely hacked, that were published starting in 2018 by German magazine Der Spiegel. The documents allegedly showed attempts to cover up the source of City's income in a bid to comply with Financial Fair Play rules operated by European soccer's governing body UEFA and the Premier League.

City was also accused of breaches relating to its alleged failure to co-operate with the investigation.

Potential punishments could include a fine, points deduction, nullification of titles or even expulsion from the England's top division, according to league rules.

James Robson is at https://twitter.com/jamesalanrobson

AP soccer: https://apnews.com/hub/soccer

Manchester City's head coach Pep Guardiola waves supporters at the end of the English Premier League soccer match between West Ham United and Manchester City at the London Stadium in London, England, Saturday, Aug. 31, 2024. (AP Photo/Frank Augstein)

Manchester City's head coach Pep Guardiola greets supporters at the end of the English Premier League soccer match between West Ham United and Manchester City at the London Stadium in London, England, Saturday, Aug. 31, 2024. (AP Photo/Frank Augstein)