New York
CNN
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Supermarket chain Kroger is suing a federal agency in a bold move aimed at weakening the way Washington fights mergers that threaten to raise prices for consumers.
The lawsuit claims the Federal Trade Commission is violating the U.S. Constitution by using a domestic court to challenge Kroger’s $25 billion mega-merger with Albertsons — the largest proposed supermarket deal in American history.
The FTC typically enforces antitrust in one of two ways: It can sue companies and take them directly to court, or it can try to use its internal administrative law judges to issue a ruling or reach an outside settlement. judge. In Kroger’s case, the FTC actually pursued both options, seeking to block the merger in court and decide on it with its internal administrators.
Companies can challenge the FTC’s administrative decisions in court. But Kroger argued that the court’s process is unconstitutional.
Kroger’s lawsuit, filed Monday in federal court in Cincinnati, relies in part on a landmark Supreme Court ruling in June that further curbed the power of regulatory agencies. The new lawsuit represents a key piece of evidence and the latest attempt to reshape the administrative landscape in America.
Experts say a Kroger victory would bring about a seismic shift in how the federal government challenges mergers. US officials fear that weakening regulators’ ability to fight monopolies could hurt consumers by giving corporations too much power to raise prices and close stores.
“It is huge. If they are successful and the appeals courts agree, one of the main arms for antitrust oversight is literally being cut at the elbow,” said Christine Bartholomew, a law professor at the University at Buffalo School of Law. “It will it was a fundamental change in the way we do antitrust in this country.”
Bartholomew said she is “concerned” by the lawsuit because if the FTC is no longer able to use its domestic courts, there will likely be less antitrust scrutiny of corporate mergers.
“The risk is more deals, more concentration and potentially higher prices and less consumer choice,” she said.
In February, the FTC sued to block the $25 billion deal between Kroger and Albertsons that was announced in 2022. The agency argued that the merger would raise prices, close stores and eliminate jobs.
Kroger has argued that the deal would do the exact opposite, helping supermarket chains compete against non-union giants including Amazon, Costco and Walmart.
The FTC is challenging the Kroger deal on two fronts: in federal court and through an administrative trial.
Next week, Kroger faces court in Portland, Oregon over the deal. The FTC has asked the judge in that case to temporarily block the Kroger-Albertsons deal while the domestic court weighs the transaction.
In the new lawsuit, Kroger argues that the FTC “clearly violates the Constitution” in two ways: The administrative law judge is not removed by the President of the United States, and the case is being fought in the executive branch instead of the courts.
Kroger cites the Supreme Court’s landmark ruling in June, where the justices limited the Securities and Exchange Commission’s power to enforce rules with internal reviews instead of jury trials.
“We are prepared to defend this merger in the upcoming trial in federal court — the proper place to hear this case,” Kroger CEO Rodney McMullen said in a statement. “We are asking the Court to stop what amounts to an unlawful process before the FTC’s internal court.”
McMullen added that the merger between Kroger and Albertson’s is “primarily focused on ensuring that we bring customers lower prices starting on day one, while securing the future of good-paying union jobs.”
The FTC declined to comment on Kroger’s lawsuit.
A source familiar with the matter dismissed Kroger’s lawsuit as a “desperate Hail Mary.”
The move comes as part of a broader effort by corporate America to push back on what some see as regulatory overreach.
Even some Democratic megadonors (those with business interests at stake) have argued that the FTC’s efforts to fight 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 landmark June ruling that weakens agencies’ ability to enact regulations.
“The whole administrative structure is under legal attack right now,” said Rebecca Haw Allensworth, a professor of antitrust law at Vanderbilt Law School.
Allensworth said a Kroger victory would constitute a “seismic change” in the way the FTC and other federal agencies operate.
“It would definitely take an arrow out of the FTC’s quiver,” she said.
Noting the recent spate of Supreme Court rulings against federal agencies, Allensworth said a Kroger victory cannot be ruled out.
“The law is whatever the Supreme Court says. We cannot be sure that a claim like this would be rejected,” she said.