On February 27, 2024, the United States Federal Trade Commission (FTC) rejected the proposed store divestiture plan presented by Kroger Co. and Albertsons Cos., two supermarket powerhouses hoping to merge. According to Bloomberg Law, this is an evident indication of antitrust enforcers’ hesitance to accept asset divestitures as a resolution for concerns about competition.
The FTC’s refusal to accept the divestiture comes as both the FTC and the Justice Department’s Antitrust Division under the Biden administration display a predilection for dealing with antitrust concerns by challenging deals instead of accepting pre-emptive settlements in the form of divestitures. These divestitures are typically initiated when firms choose to sell stores to assuage concerns about monopoly power or other potential detrimental impacts of deals.
The reasons for this growing reluctance to accept asset divestiture plans, which have traditionally been seen as a way to maintain competition levels following mergers, can be attributed to increasing evidence of flawed divestitures in the grocery sector. Such divestitures do not materialize as initially anticipated and this often exacerbates the competitive concerns originally stated by the antitrust enforcers.
The FTC’s reproach of the Kroger-Albertsons store divestiture plan is critical as it sheds light on the need for thorough review and analysis of proposed divestitures. This is to ensure they truly provide a valid competitive alternative and do not impede the purpose of antitrust law, which is to promote and maintain competition in the market place. Legal professionals across various industry sectors should take note of this trend to understand the potential challenges and scrutiny they could face in future merger and acquisition plans.