Federal Trade Commission, et al. v. The Kroger Company, et al.

Analysis Group was retained by the Federal Trade Commission (FTC) in its challenge of the planned merger of Kroger and Albertsons, two of the largest supermarket chains in the US. The FTC sought a preliminary injunction of Kroger’s acquisition of Albertsons, claiming that the transaction would significantly diminish head-to-head competition in the retail grocery market, resulting in higher prices for consumers  at the combined company’s stores. Separately, nine states also challenged the merger in state courts.

Analysis Group supported two experts in the litigation, both of whom filed expert reports and testified at deposition and trial:

• A team led by Vice Presidents Elizabeth Milsark and David Toniatti supported Managing Principal Aaron Yeater, who testified on the cost-saving efficiencies that the parties claimed would result from the merger. Mr. Yeater opined that a significant portion of the claimed efficiencies were neither verifiable nor merger specific.
• A team led by Managing Principal Emily Cotton and Principal Laura O’Laughlin supported academic affiliate Edward Fox, of the SMU Cox School of Business. Professor Fox analyzed the consequences for consumers of the parties’ divestiture plan, which involved the sale of hundreds of stores as well as distribution centers. He opined that many of the divested stores would not be able to succeed, and that, as a result, the divestiture would be insufficient to remedy the harm to consumers caused by the merger.

A judge in the US District Court for the District of Oregon granted the preliminary injunction, finding that the FTC was likely to prevail on its claim that the merger would harm competition in the retail grocery market. The judge cited the expert submissions of both Professor Fox and Mr. Yeater at several points in her opinion. Drawing on Professor Fox’s testimony, she wrote that “there is ample evidence that the divestiture is not sufficient in scale to adequately compete with the merged firm.” In a portion of the opinion dealing with merger efficiencies, she wrote that “Mr. Yeater’s report raises credible reasons to doubt some of the assumptions underlying the projection methodologies.”

The parties subsequently abandoned the transaction.