Albertsons’ Special Dividend Scheme Puts Consumers, Producers, and Local Communities At Risk

January 17, 2023 Press Release

Washington, D.C. — Following the Washington State Supreme Court’s decision to allow Albertsons’ $4 billion special dividend payout to investors ahead of its merger with Kroger, the American Economic Liberties Project released the following statement.

“This is a disappointing decision that puts consumers, producers, and local communities across the country at risk,” said Katherine Van Dyck, Senior Legal Counsel at the American Economic Liberties Project. “Attorney General Ferguson’s lawsuit against Kroger and Albertsons is still in very early stages. His office was forced by the courts to rush through discovery, and the Washington courts’ refusal to block the dividend before the lawsuit is fully resolved — and before other agencies have a full opportunity to investigate the anti-competitive effects of the merger overall — sets a dangerous precedent. We nonetheless thank Attorney General Ferguson for his efforts and encourage continued, rigorous scrutiny of the Kroger-Albertsons merger.”

A Kroger-Albertsons merger will make food more expensive, squeeze suppliers and farmers, drive layoffs, and leave many communities without a grocery store at all. According to the Bureau of Labor Statistics, the price of food eaten at home has skyrocketed 13% in the last year, with a 30.5% price increase for eggs, 17.2% for chicken, and 14.7% for bread, among other staple foodstuffs. A Kroger-Albertsons merger would send food prices soaring even higher at a time when working families already struggle to make ends meet. Kroger recently reported a massive $3.7 billion in operating profits, a 37% increase over 2021.

Ms. Van Dyck explains that, more broadly, the ruling today could “give private equity firms a loophole to cash in on mergers without facing the scrutiny of a government investigation.” The Washington lawsuit, and similar ones brought by other states, have argued that the Albertsons majority investors, private equity firms Cerberus and Apollo, are likely using the dividend payment to sabotage Albertsons and ensure that the $25 billion merger goes through. Antitrust regulators and courts have been known to award “failing firm defense” exemptions to anticompetitive mergers if the acquired firm is in severe financial distress. Albertsons’ $4 billion special dividend payment ahead of its merger with Kroger could do just that, leaving it unable to effectively compete while the deal is reviewed.

As the Washington lawsuit notes, consolidation in the grocery sector has long been an issue, particularly in Washington, and it was previously mismanaged by antitrust enforcers, leaving communities in Washington and neighboring states with monopoly grocers. Allowing the Albertsons special dividend will only make the grocery shopping experience for consumers and the work life of grocery store employees worse.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.