Case 1:22-cv-03357 Document 1 Filed 11/02/22 Page 1 of 27

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

DISTRICT OF COLUMBIA,
400 Sixth Street N.W.
Washington, D.C. 20001,

STATE OF CALIFORNIA
300 S Spring Street, Suite 1702
Los Angeles, CA 90013, and
Case No. 1:22-cv-3357
STATE OF ILLINOIS,
100 W. Randolph St.
Chicago, IL 60601,

Plaintiffs,

v.

THE KROGER CO.

1014 Vine Street
Cincinnati, OH, 45202,

and

ALBERTSONS COMPANIES, INC.

250 E Park Center Blvd.
Boise, ID, 83706,

Defendants.

COMPLAINT FOR EQUITABLE AND INJUNCTIVE RELIEF FOR VIOLATIONS

OF SECTION ONE OF THE SHERMAN ANTITRUST ACT AND
STATE ANTITRUST LAWS

Plaintiffs, the District of Columbia (the “District”), the State of California, the State of

Illinois, and through their respective Attorneys General (collectively, “the States” or “Plaintiffs”),

bring this civil enforcement action against Defendants The Kroger Co. (“Kroger”) and Albertsons

Companies, Inc. (“Albertsons”), pursuant to their federal and statutory authority, seeking equitable
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and injunctive relief to enjoin Kroger and Albertsons from acting in concert with each other or

with any other party in restraint of trade. This includes reducing Albertsons’ ability and incentive

to compete through an agreement to use a so-called “Special Dividend,” which together with other

merger agreement provisions will strip Albertsons of its capacity to compete pending regulatory

review of its planned merger with Kroger.

INTRODUCTION

Albertsons is one of the largest supermarket chains in the country, and competes in the

District, California, and Illinois under multiple banners, most notably Safeway in the District, with

more stores there than any other supermarket chain. On October 14, 2022, Albertsons and Kroger

announced they were merging, with Kroger set to pay some $25 billion to buy Albertsons. This

merger was already destined to draw regulatory scrutiny for possible antitrust violations given the

size of the deal and the players—indeed, their merger agreement recognizes as much, and even

provides for the creation of a holding company for the hundreds of stores the parties expect to have

to divest to gain regulatory approval. But that is hardly unusual for such a “megamerger.” These

large transactions in America’s increasingly concentrated economy are understood to require time

for antitrust regulators to review all of their potential anticompetitive effects.

What is unusual is the way Defendants structured their transaction, because by the time the

merger review ends—by Defendants’ projections, they will not close until 2024—one of them may

barely be left standing. On November 7, 2022, Defendants have arranged for Albertsons to pay $4

billion, roughly all the cash it has available to compete today, to stockholders, $1.5 billion of it

from a loan it will take out. The merger agreement, now inked, limits Albertsons’ ability to seek

additional financing, and Albertsons’ low bond ratings indicate that even if it could go out and try

to raise capital, the national economic downturn will make doing so especially difficult.

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Discovery may reveal that the “Special Dividend” reflects a calculated effort to leave

Albertsons just battered enough for Defendants to argue later (to regulators or a court) that it is a

“flailing” or “failing” firm that Kroger should be allowed to acquire lest it go out of business

anyway, but still worth its hard assets and Kroger’s gain from neutralizing a competitor. But

whatever the motivation, the antitrust laws do not care: Defendants have an agreement that, as

detailed herein, will have an anticompetitive effect on competition among supermarkets in the

District of Columbia, California, and Illinois, and that is sufficient basis for this Court to stop the

Special Dividend from being paid, and protect consumers and workers in all the States.

PARTIES

1. Plaintiff District of Columbia, a municipal corporation empowered to sue and be sued, is

the local government for the territory constituting the permanent seat of the government of the

United States. The District is represented by and through its chief legal officer, the Attorney

General for the District of Columbia. The Attorney General has general charge and conduct of all

legal business of the District and all suits initiated by and against the District, and is responsible

for upholding the public interest. D.C. Code § 1-301.81(a)(l).

2. Plaintiff State of California is a sovereign state. Rob Bonta is the Attorney General of the

State of California, the chief legal officer for the state, and brings this action on behalf of the people

of the State of California to protect the State and its residents from Defendants’ anticompetitive

business practices. Cal. Const., art. V, § 13.

3. Plaintiff State of Illinois is a sovereign state. Kwame Raoul is the Attorney General of the

State of Illinois, the chief legal officer for the state, and brings this action on behalf of the people

of the State of Illinois to protect the State and its residents from Defendants’ anticompetitive

business practices. 740 ILCS 10/7.

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4. Defendant Kroger is a publicly traded for-profit corporation, incorporated under the laws

of Delaware, and headquartered in Cincinnati, Ohio. Kroger owns and operates over 2,700 grocery

stores under different brand names across the United States, as well as over 2,200 pharmacies and

1,600 fuel centers. Among the brands Kroger operates are Kroger, King Soopers, and, in the

District of Columbia, Harris Teeter.

5. Defendant Albertsons is a publicly traded for-profit corporation, incorporated under the

laws of Delaware, and headquartered in Boise, Idaho. Albertsons operates over 1,800 grocery

stores under different brand names across the United States, as well as over 1,700 pharmacies, and

over 400 fuel centers. Among the brands Albertsons operates in the District, California, and Illinois

are Albertsons, Vons, and, in the District of Columbia, Safeway.

JURISDICTION

6. This Court has subject matter jurisdiction over this case pursuant to 15 U.S.C. §§ 4 and 26

and 28 U.S.C. §§ 1331 and 1337.

7. This Court has personal jurisdiction over Kroger, and venue is proper in this Court under

15 U.S.C. § 22 and 28 U.S.C. §1391 because Kroger transacts business and is found within this

District.

8. This Court has personal jurisdiction over Albertsons, and venue is proper in this Court

under 15 U.S.C. § 22 and 28 U.S.C. §1391 because Albertsons transacts business and is found

within this District.

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FACTUAL ALLEGATIONS

I. Albertsons, Under the Safeway Banner, Competes Against Kroger’s Harris

Teeter and Others in the District, and Against Kroger Under Various Banners in

California and Illinois.

9. Competition in groceries is unlike competition in most other goods and services. Food is

one of humanity’s few true necessities. Supermarkets give local residents access to fresh fruits and

vegetables, and other grocery products, often competing against each other to provide the best

value and service, and offering good, often union, jobs to workers.

10. Researchers have written extensively about the problem of “food deserts”—areas that by

being more than a mere half mile from a grocery store or supermarket, together with low rates of

car access and high poverty rates, merit policymakers’ special attention because of their dire

welfare implications for people living in them.

11. Accessibility of supermarkets on foot or by public transit for many of our neighborhoods

and consumers is critical for the District’s communities’ health as a whole, as well as those of

California and Illinois. Access to adequate high-quality food and grocery stores is already an issue

for some communities in California. For example, South Los Angeles is a food desert that has

very limited access to fresh food and grocery stores. Some communities in Illinois, especially on

the City of Chicago’s east and south sides, are also food deserts, which severely lack access to

fresh groceries.

12. The importance of the products supermarkets sell and the service and innovation they

provide to District, California, and Illinois residents mean that any material reduction in a

supermarket competitor’s ability to compete can harm those residents in ways that are far from

hypothetical. Prices can go up, and promotions can decrease, and that translates directly into the

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quantity and quality of food families can put on their tables. Staffing can also decrease, leading to

worse service for consumers and worse conditions for District, California, and Illinois workers.

13. Albertsons, under the Safeway banner, has more locations than any other grocery store in

the District of Columbia.

14. Safeway competes with other supermarkets for consumers’ dollars. For example, when

Harris Teeter had a supermarket on Potomac Avenue in Southeast DC, in August 2020 Safeway

renovated and expanded its Safeway supermarket on 14th Street Southeast less than half a mile

away, after which the Harris Teeter closed in January of 2022.

15. Defendants also compete in Northwest DC’s Adams Morgan neighborhood, where Harris

Teeter operates a supermarket on Kalorama Road, a mere third of a mile from the Columbia Road

Safeway.

16. District residents rely on Safeway for fresh food at affordable prices to feed themselves

and their families.

17. Each of Safeway’s thirteen locations in the District runs weekly circular ads, among other

promotions, to win residents’ supermarket dollars.

II. Albertsons Currently Has Significant Liquidity, Which Is Critical Given Current

Market Conditions and Albertsons’ Creditworthiness.

18. Capital is the lifeblood of business operations. Businesses need access to capital to compete

in the marketplace, whether through promotional campaigns, geographic expansion, improvement

of existing services, or increasing wages to attract and retain workers.

19. Capital markets are generally efficient, meaning the market is informed about which

investments are likely to bring in a favorable return, and those investments will generally be able

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to attract the capital they need. Certain companies may face different limitations on their access to

capital, however, depending on prevailing economic conditions.

20. During economic downturn, economic research shows, companies with lower bond ratings

are likely to have greater difficulty accessing capital affordably, if they can at all.

21. The United States has entered a period of economic downturn. Economists generally define

a recession as “a significant decline in economic activity that is spread across the economy and

that lasts more than a few months.” Many economists, economic forecasters, and investors expect

the United States economy to enter a recession in the coming months, other believe we are already

in one.

22. Companies with lower than investment-grade bond ratings by large rating agencies like

Moody’ and Standard & Poor’s tend to elect to have more cash on hand to ensure adequate liquidity

and their ability to meet needs for capital, knowing they will have a harder time accessing capital

than issuers of investment-grade bonds.

23. Albertsons’ Moody’s rating is Ba2, and its S&P rating is BB, which is in both cases below

investment grade.

24. Albertsons currently has a market capitalization of approximately $11 billion, and reported

$3.392 billion in cash, based on its most recent U.S. Securities and Exchange Commission (“SEC”)

10-Q filing, as well as $652 million in net receivables. Net receivables are defined as money

Albertsons is owed less whatever it expects it is owed but will never be paid.

25. Albertsons’ 2022 SEC filings indicate its liquidity needs annually are approximately $6

billion.

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III. Kroger and Albertsons Agree to Merge

26. On October 13, 2022, Albertsons and Kroger (collectively, “Defendants”), who are the two

largest competitors in the sale of groceries nationally, and the first and third largest (respectively)

in the District of Columbia, entered into an “Agreement and Plan of Merger By and Among

Albertson Companies, Inc., The Kroger Co., And Kettle Merger Sub, Inc.” (“Merger Agreement”).

27. This Merger Agreement is the final and complete agreement between Defendants to

consummate a merger that they had contemplated and negotiated since at least June of 2022.

28. Included in this Merger Agreement is Albertsons’ commitment to issue a “Pre-Closing

Dividend” (the “Special Dividend”), which the Merger Agreement defines as “one or more special

cash dividends payable to holders of [Albertsons] Common Stock, [Albertsons] Preferred Stock

and, by way of dividend equivalent rights, [Albertsons] Equity Awards, as applicable, in an amount

not to exceed with respect to all such special cash dividends $4,000,000,000 in the aggregate.”

29. As of October 28, 2022, nearly 30% of all Albertsons shares were held by Cerberus Capital

Management, L.P., a private equity firm that is the largest holder of Albertsons stock and maintains

a non-voting member of the board of directors of Albertsons.

30. In press releases, and in company 8-Ks filed with the U.S. Securities and Exchange

Commission announcing the Merger Agreement, Defendants announced the Special Dividend, and

stated that it would be paid on November 7, 2022, to record holders of Albertsons stock as of

October 24, 2022.

31. Thus, Albertsons intends to pay the Special Dividend before regulatory review of

Defendants’ merger is complete.

32. The Special Dividend is the result of an agreement between Albertsons and Kroger. It was

specifically negotiated between Defendants as part of the Merger Agreement.

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33.

34.

IV. Payment of the Dividend Would Upset the Status Quo and Infect Review of a

Merger that May Harm District Consumers and Workers.

35. This Special Dividend is over 57 times the size of Albertsons’ usual dividends. A giveaway

like this could raise concerns in numerous situations, but especially for a merger of this size in an

industry like supermarkets.

36. Supermarkets are already a consolidated industry in the United States. Albertsons and

Kroger are two of its largest players and historically fierce competitors in the District, California,

Illinois, and numerous States. As described above, Kroger and Albertsons have competed against

each other. In the Northeast, the proposed merger halts Defendants’ advances on each other’s

territory at roughly where the four quadrants of the District of Columbia meet.

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Source: Creditntell Report

Legend: Kroger stores in blue; Albertsons stores in red.

37. Defendants claim their transaction unites “complementary” companies, but even their own

map of store locations makes clear their competitive overlap in properly defined relevant antitrust

markets in California, Illinois, and elsewhere:

Source: krogeralbertsons.com

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38. Defendants recognize that their transaction will require extensive antitrust review by

regulators and have provided for divestiture of hundreds of stores in their Merger Agreement, via

a holding company, to address antitrust concerns.

39. The nationwide implications of the transaction deserve the fulsome analysis the Special

Dividend threatens to upend. In the District, California, and Illinois, because of the essential and

constant need for food, even a short-term reduction in competition in the urban neighborhoods,

especially those where Kroger and Albertsons compete—at Harris Teeter and Safeway in the

District, for example—can result in higher prices and reductions in quality that can significantly

harm consumers’ pocketbooks and their health.

40. The Federal Trade Commission and the U.S. Department of Justice often use market

concentration (determined by market share) as a guide for determining whether a firm will have

market power and thus have the ability and economic incentive to substantially reduce competition

in a properly defined relevant antitrust market post-merger.

41. While the immediacy with which Albertsons intends to pay the Special Dividend makes a

complete analysis of current market shares impossible at the filing of this Complaint, based on

publicly available data from 2021 on supermarkets competing in the District, the District

preliminarily estimates that Albertsons had an 19.4% share and Kroger a 13.9% share within the

District of Columbia:

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Source: Washington Business Journal, Largest Grocery Retailers in Greater D.C.—

Ranked by Metro-area grocery sales 2021, Aug. 26, 2022.

42. The proposed transaction would leave two large entities—Kroger and Giant—controlling

most of the market:

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Source: Washington Business Journal, Largest Grocery Retailers in Greater D.C.—

Ranked by Metro-area grocery sales 2021, Aug. 26, 2022.

43. These shares are District-wide, and the local nature of supermarket competition means that

Defendants’ market shares and overall market concentration are likely substantially higher in areas

within the District.

44. To determine a merger’s effect on market concentration, the federal agencies usually use

the Herfindahl-Hirschman Index (HHI), which is calculated by summing the squares of the

individual market shares of all participants.

45. The Horizontal Merger Guidelines, published by the two agencies and regularly cited by

courts reviewing merger challenges, consider a post-merger HHI of over 2500, with a merger-

related increase in HHI of more than 100 points, to presumptively create or enhance market power,

demanding close scrutiny. See United States v. Phila. Nat’l Bank, 374 U.S. 321 (1963).

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46. The 2021 data available to the District indicate that this proposed Merger would lead to a

post-merger HHI of 2524, an increase of 541 from the pre-merger HHI of 1983, in the District of

Columbia.

47. Not all supermarkets are adequate substitutes in the eyes of all consumers, however. For

example, Wegmans may have a significant market share if one looks at District-wide shares

(which, as detailed herein, likely understate concentration in smaller relevant geographic markets),

but there is only one Wegmans in the District, and it is in American University Park, a

neighborhood without meaningful Metro access. Thus, Wegmans will not meaningfully discipline

a post-merger price increase by Kroger in the Adams Morgan Harris Teeter or the Adams Morgan

Safeway, assuming it even keeps both open. Similarly, Albertsons’ pre-merger share District-wide

likely understates its market power now because many District residents have fewer meaningful

substitutes to which they could turn today or while the merger is reviewed.

48. Additionally, District residents depend on employment by these companies. The reduced

need for employees and suppressed wages from reduced competition for labor by these employers

following a merger would also constitute a significant competitive harm. The speed at which

Albertsons has decided to complete payment of this Special Dividend has rendered impossible any

meaningful review, but organizations knowledgeable about labor conditions, including the UFCW

Local 400 (which represents Safeway workers in the District), have raised substantial concerns

that this dividend will make it more difficult for Albertsons to compete for labor, by reducing

Albertsons’ ability to offer wage increases, pensions, or store improvements.

49. Albertsons’ current contribution to the prevailing competitive dynamic among District

supermarkets is, as shown by its market presence, and the jobs it provides, critical. That, together

with the fact that the proposed merger increases market concentration to presumptively

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anticompetitive levels under at least one defined relevant antitrust market, demonstrates that this

merger demands deliberate scrutiny from enforcers.

50. These facts also highlight the risk of anticompetitive effects should Albertsons’

competitiveness be compromised in any way during the merger’s review, regardless of whether

the merger (a) closes, or (b) does not close, but the Special Dividend leaves Albertsons a distinct

but weakened competitor.

51. Furthermore, Defendants currently operate competing banners with strong presences in

numerous other States. In Illinois, for example, publicly available information indicates the

Defendants’ combined share of supermarket sales totaled about 64% in September 2022.

52. September data tracking visit share of Illinois grocery list Albertsons’ banner, Jewel-Osco,

as having the highest visit share in Illinois.

53. In California, Kroger owns and operates approximately 214 stores under the Ralphs banner

and an additional 19 under Food 4 Less. A majority of these stores are located in Southern

California. The Albertsons Company operates approximately 579 grocery stores in California: 125

stores under the Albertsons banner, along with 26 Pavilion, 243 Safeway, and 185 Vons stores.

54. The Special Dividend payment also affects employees in California. Kroger has

approximately 26,687 employees in California. On information and belief, there are

approximately 21,000 Albertsons-connected employees in California.

55. The Special Dividend risks seriously hindering Albertsons’ ability to compete with Kroger

and other supermarkets in these and other States during the merger review and interfering with the

merger review process. Thus, the Court should enjoin the payment of the dividend until the

District, California, Illinois, and others can complete their full review of the merger and determine

whether combining Kroger and Albertsons would violate the antitrust laws.

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V. The Agreement to Pay the Special Dividend Will Hamstring Albertsons.

56. The agreement between horizontal competitors Kroger and Albertsons for the latter to pay

the Special Dividend will weaken one of the top supermarket competitors in each of the Plaintiff

States by removing substantially all of the cash it needs to operate competitively, and saddling it

with $1.5 billion in new debt just to pay off Albertsons’ stockholders. The agreement’s likely effect

will be to restrict Albertsons’ ability to compete on pricing and service, by severely limiting its

liquid assets and depriving it of the cash needed for competition, at a time when it will face unusual

difficulty accessing capital.

57. Prior experience certainly suggests as much:

this type of transaction is the merger, announced in 2020, of Lockheed

Martin and Aerojet Rocketdyne. There, Lockheed agreed to pay $5 billion, at $56 per share.

Aerojet announced with the merger a $5 per share special dividend that would discount the cash

price Lockheed would make, and would occur three months from the date of announcement

(providing much more time than the 3 weeks here). In 2022, more than a year after the merger was

announced, the FTC moved to block that merger, and Lockheed announced the termination of the

merger. Aerojet’s share price has yet to recover to the price it traded at when the merger was

announced, its private equity shareholders’ struggle to recoup costs left Aerojet less competitive

after the merger was called off, and today it seeks a new acquirer.

58. As the above example demonstrates, in the rare instances where this dividend structure is

used, it may well lead to a company that is less able to compete.

59. Albertsons plans to fund the agreed-upon Special Dividend by using $2.5 billion in cash

and taking on $1.5 billion in new debt.

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60. This payment would eliminate more than half of Albertsons’ cash and cash equivalents.

Both in ordinary course documents and in its most recent 10-Q filing, Albertsons claims $3.392

billion in cash and cash equivalents the Special Dividend would reduce that available liquidity to

only $0.892 billion. It would increase Albertson’s net debt from $4.54 billion to $8.54 billion.

61. A lack of cash will hamper Albertsons’ ability to compete in the short term. Albertsons

will be unable to respond effectively to shifts in the market through promotions and advertising

more generally, have less available cash to pay employee wages and benefits to retain staffing, and

be unable to make necessary investments into their stores, or heavily disincentivized from doing

so.

62.

63. Even without taking on new debt for necessary repairs, incurring $1.5 billion in new debt

to pay the Special Dividend will nearly double Albertsons’ leverage ratio. This increase in leverage

will lessen Albertson’s ability to obtain more capital and make that capital more expensive, thereby

hindering its operations and ability to compete.

64. The Merger Agreement’s terms additionally heavily limit Albertsons’ ability and incentive

to make up for this lost cash through new financing.

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65. The Merger Agreement generally prohibits Albertsons from incurring additional

indebtedness and makes any exceptions subject to “the ordinary course of business consistent with

past practice.”

66. Payment of the Special Dividend is not part of Albertsons’ “ordinary course of business.”

67. Payment of the Special Dividend is not consistent—and, as detailed above, orders of

magnitude greater than—Albertsons’ past practice with respect to payments to stockholders.

68. Under Defendants’ Merger Agreement, even refinancing existing debt, where the principal

is over $100 million, requires Albertsons to “reasonably consult[]” Kroger, supposedly its

independent competitor, first.

69. Albertsons will be particularly ill-suited to seek debt financing while antitrust regulators

review the merger, both because of the restrictions Defendants agreed to in the Merger Agreement

and because Albertsons’ bond ratings are below investment grade. Based on Albertsons’ bond

rating, given the current economic downturn, it will have a harder time raising capital than other

companies.

70. The Special Dividend would thus reduce Albertsons’ ability to compete effectively with

Kroger pending the review of the Merger Agreement and leave Albertsons a weaker competitor

should the merger ultimately be blocked by regulators.

71. Even if Albertsons can recuperate this cash through the conduct of its business, money

spent replenishing the amount of cash and cash equivalents and paying down principle on debt is

money not spent on necessary improvements, pensions, and wages, while Albertson’s competitors

will remain able to make these same necessary expenditures.

72. Albertsons’ reduced competitiveness will have market-wide effects. In general, economic

empirical research shows that when a supermarket chain becomes significantly more leveraged, it

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weakens competition among supermarket incumbents. Competition lessens across the board

because competitors know that the leveraged company will have fewer resources with which to

compete, and can therefore reliably pursue less “tough” competition. That is not surprising,

because researchers have also found that the food retail sector has characteristics that may threaten

competition, such as entry barriers, price-discrimination, collusion, and market division between

competitors. Economic research also supports the proposition that increased food retailer

concentration increases prices.

VI. The Relevant Product Markets

73. The relevant line of commerce in this action is no broader than the retail sale of food and

other grocery products in supermarkets.

74. “Supermarket” means any full-line retail grocery store that enables customers to purchase

substantially all of their weekly food and grocery shopping requirements in a single shopping visit,

typically with at least 10,000 square feet of selling space devoted to providing offerings across

many of at least the following product categories: bread and baked goods; dairy products;

refrigerated food and beverage products; frozen food and beverage products; fresh and prepared

meats and poultry; fresh fruits and vegetables; shelf-stable food and beverage products, including

canned, jarred, bottled, boxed, and other types of packaged products; staple foodstuffs, which may

include salt, sugar, flour, sauces, spices, coffee, tea, and other staples; other grocery products,

including nonfood items such as soaps, detergents, paper goods, other household products, and

health and beauty aids; pharmaceutical products and pharmacy services (where provided); and, to

the extent permitted by law, wine, beer, and/or distilled spirits.

75. Supermarkets provide a distinct set of products and services and offer consumers

convenient one-stop shopping for food and grocery products. Supermarkets typically carry more

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than 10,000 different items, typically referred to as stock-keeping units (SKUs), as well as a deep

inventory of those items.

76. Supermarkets compete primarily with other supermarkets that provide one-stop shopping

opportunities for food and grocery products. Supermarkets base their food and grocery prices

primarily on the prices of food and grocery products sold at other nearby competing supermarkets.

Supermarkets do not regularly conduct price checks of food and grocery products sold at other

types of stores and do not typically set or change their food or grocery prices in response to prices

at other types of stores.

77. Although retail stores other than supermarkets may also sell food and grocery products,

these types of stores—including convenience stores, specialty food stores, limited assortment

stores, hard-discounters, and club stores—do not, individually or collectively, provide sufficient

competition to effectively constrain prices at supermarkets. These retail stores do not offer a

supermarket’s distinct set of products and services that provide consumers with the convenience

of one-stop shopping for food and grocery products. The vast majority of consumers shopping for

food and grocery products at supermarkets are not likely to start shopping at other types of stores,

or significantly increase grocery purchases at other types of stores, in response to a small but

significant price increase by supermarkets.

VII. The Relevant Geographic Markets

78. Discovery will permit Plaintiffs to fully define the metes and bounds of relevant geographic

markets in this case. In the District of Columbia, the relevant geographic market is no larger than

the District, and smaller relevant geographic markets likely exist within the District.

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79. Consumers shopping at supermarkets are motivated by convenience and, as a result,

competition for supermarkets is local in nature. Generally, the overwhelming majority of

consumers’ grocery shopping occurs at stores located very close to where they live or work.

80. In the District of Columbia specifically, many consumers are further limited in the distance

they will travel to shop at a supermarket by access to public transportation, with some wards in the

city having only one or two stores.

81. In response to a small but significant nontransitory increase in supermarket prices in the

District of Columbia, consumers would not shift their grocery purchases to supermarkets outside

the District of Columbia sufficiently to defeat the increase in prices. And in response to a small

but significant nontransitory increase in supermarket prices in smaller areas within the District of

Columbia that appropriate regulatory review will define, consumers would not shift their grocery

purchases to supermarkets outside those smaller areas.

82. Consumers shopping at supermarkets are motivated by convenience and, as a result,

competition for supermarkets is local in nature. In Illinois, many Chicago residents lack cars and

must travel to grocery stores by walking or public transit, preventing them from traveling outside

the community areas in which they work or live to shop at alternative grocery stores. Thus, the

overwhelming majority of consumers’ grocery shopping occurs at stores located very close to

where they live or work.

83. Lack of broadband access may also limit the options available for some Chicago residents

to shop at grocery stores via online grocery delivery services.

84. The relevant geographic markets in Illinois may include areas no larger than properly-

defined neighborhoods or ward-based markets, or submarkets in Chicago, and additional urban,

suburban, exurban or rural markets throughout the State.

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85. The relevant geographic markets in California may include areas no larger than city and

suburb markets, where many residents shop within a half mile or mile of where they live or drive

short distances, although relevant geographic markets may be larger in more sparsely populated or

rural areas.

VIII. Anticompetitive Effects

86. The Merger Agreement, and specifically the payment of the Special Dividend together with

other terms limiting Albertson’s ability to finance its operations, will significantly reduce

Albertsons’ ability to compete during the pendency of regulatory review of the merger, and

possibly beyond. By stripping Albertsons of necessary cash at a time when its deteriorating bond

ratings will make access to capital harder for Albertsons, this agreement between Kroger and

Albertsons curtails Albertsons’ ability to compete on price, services, other quality metrics, and

innovation. Because it increases Albertsons’ leverage, empirical economics suggests this reduction

in Albertsons’ competitiveness will reduce the intensity of price competition market-wide.

87. As a result of this reduced competition, District of Columbia, California, and Illinois

residents likely will pay more for their groceries, and enjoy fewer promotions, worse service, and

fewer quality-improving investments than they would but for Defendants’ agreement to pay the

Special Dividend.

88. Albertsons’ inability to invest in its stores and its workforce also likely will harm workers

in the States, who will experience lower wage growth and worse working conditions than they

would but for Defendants’ agreement to pay the Special Dividend.

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 Case 1:22-cv-03357 Document 1 Filed 11/02/22 Page 23 of 27

COUNT I

(Against All Defendants for violation of Section 1 of the Sherman Act, 15 U.S.C. § 1)

89. The allegations contained in paragraphs 1 through 88 are realleged as though fully restated

herein.

90. The federal antitrust statutes empower the Attorneys General of the States of California

and Illinois, and the District of Columbia, to bring suit as parens patriae to protect the public

interest and the interests of their citizens. 15 U.S.C. § 1 and §15c.

91. The Parties agreement to issue the Special Dividend on November 7, 2022, will lead to a

reduction in output and by Albertsons and render Albertsons less able to compete effectively with

other supermarkets, including Kroger owned and operated supermarkets.

92. The Special Dividend will be issued pursuant to an agreement between the horizontal

competitors of Kroger and Albertsons, and will therefore restrain trade in violation of 15 U.S.C.

§ 1.

93. Entry into the relevant markets would not be timely, likely, or sufficient in magnitude to

prevent or deter the likely anticompetitive effects of the merger. Significant entry barriers include

the time and costs associated with conducting necessary market research, selecting an appropriate

location for a supermarket, obtaining necessary permits and approvals, constructing a new

supermarket or converting an existing structure to a supermarket, and generating sufficient sales

to have a meaningful impact on the market.

94. Defendants did not devise their strategy of using the Merger Agreement as a conduit for

payment of the Special Dividend for any procompetitive purpose. Nor does the payment of the

Special Dividend in the context of the merger have any procompetitive effects. Any arguable

benefits of the Special Dividend are outweighed by their actual and likely anticompetitive effects.

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 Case 1:22-cv-03357 Document 1 Filed 11/02/22 Page 24 of 27

COUNT II

(Against All Defendants for Violations of D.C. Code § 28–4502)

95. The allegations set forth in paragraphs 1 through 94 are realleged as though fully restated

herein.

96. D.C. Code §§ 28–4502 and 28–4507 empower the Attorney General of the District of

Columbia bring suit to protect the public interest and the interests of the citizens of the District.

97. D.C. Code § 28–4515 provides that courts should interpret the District of Columbia

Antitrust Act in harmony with similar federal antitrust statutes.

98. The Special Dividend will be issued pursuant to an agreement between the horizontal

competitors of Kroger and Albertsons, and will therefore restrain trade in violation of D.C. Code

§ 28–4502.

99. Entry into the relevant product markets in the District of Columbia would not be timely,

likely, or sufficient in magnitude to prevent or deter the likely anticompetitive effects of the

merger. Significant entry barriers include the time and costs associated with conducting necessary

market research, selecting an appropriate location for a supermarket, obtaining necessary permits

and approvals, constructing a new supermarket or converting an existing structure to a

supermarket, and generating sufficient sales to have a meaningful impact on the market.

100. Defendants did not devise their strategy of using the Merger Agreement as a conduit

for payment of the Special Dividend for any procompetitive purpose. Nor does the payment of the

Special Dividend in the context of the merger have any procompetitive effects. Any arguable

benefits of the Special Dividend are outweighed by their actual and likely anticompetitive effects.

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 Case 1:22-cv-03357 Document 1 Filed 11/02/22 Page 25 of 27

COUNT III
(Against All Defendants for Violations of the Illinois Antitrust Act)

101. Plaintiffs re-allege and incorporate by reference the allegations in paragraphs 1

through 100 above.

102. The Special Dividend will be issued pursuant to an agreement between the

horizontal competitors of Kroger and Albertsons, and will therefore restrain trade in violation of

the Illinois Antitrust Act, 740 ILCS 10/3.

103. Entry into the relevant product markets in Illinois would not be timely, likely, or

sufficient in magnitude to prevent or deter the likely anticompetitive effects of the Merger.

Significant entry barriers include the time and costs associated with conducting necessary market

research, selecting an appropriate location for a supermarket, obtaining necessary permits and

approvals, constructing a new supermarket or converting an existing structure to a supermarket,

and generating sufficient sales to have a meaningful impact on the market.

104. Defendants did not devise their strategy of using the Merger Agreement as a conduit

for payment of the Special Dividend for any procompetitive purpose. The Special Dividend is not

reasonably necessary to effectuate the proposed merger or any procompetitive venture or

agreement. Nor does the payment of the Special Dividend in the context of the merger have any

procompetitive effects. Any arguable benefits of the Special Dividend are outweighed by their

actual and likely anticompetitive effects.

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 Case 1:22-cv-03357 Document 1 Filed 11/02/22 Page 26 of 27

PRAYER FOR RELIEF

WHEREFORE Plaintiffs request that this Court:

a) Adjudge that Defendants’ Merger Agreement, to the extent it requires payment of the Special

Dividend, violates Section 1 of the Sherman Act 15 U.S.C. § 1, D.C Code § 28–4502, and

Illinois Antitrust Act 740 ILCS 10/3;

b) Enjoin Defendants from issuing or causing to be issued the Special Dividend, pending

completion of antitrust regulatory review of the Merger Agreement by all Plaintiffs; and

c) Order such other relief as the Court determines to be just and proper.

Dated: November 2, 2022 Respectfully submitted,

KARL A. RACINE
Attorney General for the District of Columbia

KATHLEEN KONOPKA
Senior Advisor to the Attorney General for
Competition Policy

/s/ Adam Gitlin

ADAM GITLIN
Section Chief, Public Integrity Section
[email protected]

/s/ Geoffrey Comber

GEOFFREY COMBER
ELIZABETH ARTHUR
C.WILLIAM MARGRABE
Assistant Attorneys General
Office of the Attorney General
400 6th Street NW, Suite 10100
Washington, D.C. 20001
Telephone: (202) 735-7516
[email protected]

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Case 1:22-cv-03357 Document 1 Filed 11/02/22 Page 27 of 27

FOR PLAINTIFF STATE OF CALIFORNIA

ROB BONTA
Attorney General of California
KATHLEEN E. FOOTE
Senior Assistant Attorney General
NATALIE S. MANZO
Supervising Deputy Attorney General

/s/ Paula Lauren Gibson ___

PAULA LAUREN GIBSON
Deputy Attorney General
California State Bar Number 100780
300 S Spring Street, Suite 1702
Los Angeles, CA 90013
Telephone: (213) 269-6040
[email protected]

FOR PLAINTIFF STATE OF ILLINOIS

KWAME RAOUL
Attorney General of Illinois

/s/ Elizabeth L. Maxeiner

ELIZABETH L. MAXEINER
Bureau Chief, Antitrust
PAUL J. HARPER (attorney admission forthcoming)
Assistant Attorney General
BRIAN M. YOST
Assistant Attorney General
Office of the Illinois Attorney General
100 W. Randolph St.
Chicago, IL 60601
Telephone: (773) 590-6837
[email protected]

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