Competitive marketplaces are good for consumers and workers. State Attorney General Bob Ferguson is making sure Washington’s grocery stores remain competitive.
Last week, Ferguson won a nationwide temporary restraining order against Albertsons, preventing the company from issuing $4 billion worth of dividends to its shareholders. Normally, if a company wants to pay stock dividends, that’s not the state’s business. When the company is in the midst of trying to merge with its biggest competitor, however, it very much is Washingtonians’ business.
That proposed merger of Albertsons and Kroger would create a behemoth of the grocery industry. Albertsons owns Safeway, and Kroger owns QFC and Fred Meyer. Together, they own most grocery stores in Washington — 330 of them.
If they combine, competition would decline precipitously. Sure, there would still be some big-box options, high-end, organic shops and farmers markets, but for most families doing their weekly shopping, the choice between stores will be illusory. Albertsons or Kroger? Safeway or Fred Meyer? They’d all be siblings under the same corporate parent.
The end of meaningful grocery competition would hit neighborhoods and pocketbooks, especially if layoffs, consolidation and shuttered stores follow, as they often do after such mergers.
As is the case with any megamerger, state attorneys general like Ferguson and federal regulators are reviewing the proposed deal. It will take a year or more to decide if the harm to consumers and workers is too great.
In the meantime, it’s critical that Albertsons and Kroger not make moves that would hamper their ability to compete with each other, thereby paving the road to a merger. They are still separate entities after all, and they should compete, not collude.
Hence the restraining order. The $4 billion dividend payment would have kneecapped Albertsons. The company doesn’t have that kind of money just laying around. The dividend would have gobbled up a huge portion of the company’s cash reserves and required a $1.5 billion loan. Under normal circumstances, no rational company would do that.
“By eliminating cash-on-hand and nearly doubling its debt, Albertsons will be in a weakened competitive position relative to Kroger, thereby harming grocery consumers and workers throughout Washington,” the King County Superior Court judge wrote in the restraining order.
The restraining order expires on Thursday when a hearing about a longer-lasting preliminary injunction will occur. The court should grant it.
Sixty years ago, the Washington Legislature passed the Consumer Protection Act. It empowered the attorney general to seek enforcement in the courts. Ferguson is doing just that by blocking the dividend payment and carefully scrutinizing the proposed Albertsons-Kroger merger.
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