Dive Brief:

• A group of 25 grocery shoppers has lodged a federal lawsuit against Kroger and Albertsons in a bid to prevent the supermarket chains from proceeding with their planned merger.
• The suit, filed on Feb. 2 in the U.S. District Court for the Northern District of California, claims the grocery companies would raise costs and reduce choices for consumers if they are allowed to combine.
• The plaintiffs also want Albertsons to cancel the controversial $4 billion special dividend the company began preparing to distribute to shareholders in January.

Dive Insight:

The private lawsuit represents a new twist in the public fight over how Kroger’s proposed combination with Albertsons would impact the grocery landscape in the United States.

In addition to the grocery chains, the suit names as a defendant Cerberus Capital Management, a private equity firm that holds a significant stake in Albertsons.

The retailers have said they would become more efficient as a single company and bring down prices as a result, but the suit argues that the combination would result in Kroger — which would acquire Albertsons if the $24.6 billion deal receives regulatory approval — hurting shoppers instead.

“Ultimately, Kroger’s proposed elimination of its rival competitor Albertsons may, and probably will, result in significant and irreparable harm and inconvenience to consumers, including the Plaintiffs, by propelling grocery prices higher, reducing consumer choices due to overlap in geographic areas and decreasing food quality,” according to the suit.

The suit also claims the merger would result in job losses that would, in turn, negatively affect grocery shoppers.

“As is customary in these acquisitions, the first casualties of the removal of competition will be the firing of employees who were only needed when competition existed,” the suit said. “Staffing will decrease, leading to worse service for consumers and worse conditions for workers. Prices will go up, and promotions will decrease, and that translates directly into the quantity and quality of food that families can put on their tables.”

In addition, the suit makes the case that the special dividend Albertsons announced at the time the grocers revealed their intent to merge last October represents an effort to weaken Kroger’s merger partner ahead of the deal — mirroring claims by several state attorneys general who took legal action in an effort to block the payment to shareholders.

According to the complaint, the dividend amounts to a “conspiracy in restraint of trade” intended to “falsely create the supposed defense that Albertsons is a failing company by sucking the lifeblood from a viable company.”

Neither Kroger nor Albertsons responded to a request for comment before this story was published.

The attorneys who filed the suit on behalf of the shoppers include Joseph Alioto, a prominent lawyer who has had extensive involvement in antitrust cases over the past several decades. Those cases include a 1975 complaint against Safeway that resulted in the grocer being held liable for controlling beef prices.

In December, Alioto filed a lawsuit in an effort to prevent Microsoft from acquiring Activision Blizzard, claiming that the deal would reduce competition in the video game industry to the detriment of consumers.