Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Kroger files brief opposing FTC's transfer motion in supermarket merger litigation, (Sep 25, 2024)

By Kenneth H. Ryesky, M.B.A., J.D.

FTC had successfully professed, in previous unrelated cases, the same arguments that Kroger now advances in opposition to the FTC's current transfer motion.

In litigation over proposed merger between America's two largest supermarket operator giants, Kroger has filed an answering brief to the FTC's motion to transfer Kroger's case currently pending in an Ohio federal district court to the Oregon district court in which the FTC's case is now pending. Kroger argues that its case should not be transferred because Oregon is not a proper venue and even if it were, the FTC has not met its burden to show sufficient cause for the transfer. Kroger's brief also opposes the FTC's alternative motion to stay the Ohio court proceedings (The Kroger Co. v. FTC, No. 1:24-cv-00438-DRC (S.D. Ohio Sept. 20, 2024)).

The Kroger Co., America's largest supermarket operator, proposed to acquire Albertsons Companies, Inc., the second-largest supermarket operator, in October 2022. The deal, worth nearly $25 billion, would be the largest supermarket merger in American history. Litigation over the matter is now progressing in three separate forums: (1) a proceeding by and within the FTC on its own administrative complaint; (2) an action brought by the FTC and nine state attorneys general in an Oregon federal district court against Kroger and Albertsons, seeking to prevent the transaction as proposed; and (3) an action brought by Kroger (but not Albertsons) in an Ohio federal district court against the FTC and the FTC commissioners in their official capacity, seeking an injunction to freeze the FTC's administrative proceeding pending the outcome of the litigation in Oregon. Interest in the case by the financial industry and the public at large is very high; the court in the Ohio proceeding has issued an order that, among other things, sets forth procedures to facilitate audio-video accommodation for the inevitable overflow crowds of spectators.

The FTC has moved to transfer the Ohio proceeding to the federal court in Oregon or, in the alternative, to stay the Ohio proceeding pending the outcome of the Oregon proceeding. Kroger has submitted a memorandum of law to the Ohio federal court to oppose the FTC's requests.

Venue. While not questioning the propriety of the Oregon court as a venue for the case brought there by the FTC and the state attorneys general, Kroger's brief argues that Oregon is not a proper venue for the instant case which Kroger brought in Ohio. Specifically, Kroger asserts that its case could not have been brought in Oregon under the federal venue statute, which specifies where lawsuits in which the defendant is an officer of the United States may be brought. Neither the FTC, its named defendant Commissioners, nor Kroger reside in Oregon. The events giving rise to the action brought by Kroger in Ohio consist solely of the FTC's own administrative proceeding, which is occurring in the District of Columbia. And although "a substantial part" of the Albertsons real estate that would be acquired by Kroger is indeed situated in Oregon, it is the stock in the Albertsons entity that Kroger seeks to acquire; Albertsons is a Delaware corporation whose headquarters are in Oregon.

Kroger's memorandum also notes that courts have held that the property clause of the federal officer venue statute applies only to property whose status is subject to the dispute at hand; there is no dispute in the Oregon case as to the title to the Albertsons properties in Oregon.

FTC's burden of proof. Kroger contends in its brief that even if the case it brought in the Ohio federal court could have been brought, in the first instance, in Oregon, the FTC has not shown sufficient cause to reassign the existing venue of the case appropriately lodged initially in Ohio.

Here, the FTC's own motion concedes that the "District of Oregon is just as convenient for the parties as this District [in Ohio]." Equally convenient does not suffice to show that the Oregon district is more convenient than the Ohio district.

Kroger further maintains that the FTC has not shown sufficient public interest factors to warrant a transfer of the case to Oregon. The FTC's judicial economy arguments are inapplicable; the FTC's professed fear of inconsistent judgments does not apply because Kroger's suit brought in Ohio seeks only to freeze all action in the FTC's administrative proceeding in the District of Columbia; it does not seek to impede the progress of the FTC's lawsuit in the Oregon court. The issues in the Ohio proceeding are "purely legal" while the Oregon proceeding entails fact-intensive inquiry; for this reason, the Oregon court's familiarity with the specific facts of the case does not posture that court in a better position than the Ohio court to analyse and adjudicate the legal and Constitutional issues.

The FTC contends that continuing the Ohio case in the Ohio court might give Kroger a figurative "two bites at the apple." This is not a valid concern because not only are two separate sets of issues being litigated in the respective courts, but the FTC itself stands to get its own figurative two bites; even if the merger is blocked by the Oregon court, the FTC would have "a second opportunity to try the case in its own administrative tribunal" if that administrative proceeding is not blocked.

Staying the Ohio proceedings. Kroger's legal memorandum submits that the Ohio court should not grant the FTC alternative motion to stay the current proceeding now before it if the FTC's transfer motion is denied. If the FTC definitively stays its own administrative proceeding in Washington pending the outcome of the Oregon case, then Kroger's Ohio case would be mooted. But the FTC has thus far refused to stay its administrative proceeding, and its counsel's recent correspondence with Kroger's counsel, indicating a possible willingness to stipulate such a stay, is not tantamount to the sufficiently enforceable stay sought by Kroger in the Ohio proceeding.

The Case is No. 1:24-cv-00438-DRC.

Judge: Cole, D.

Attorneys: Petra G. Bergman (Vorys Sater Seymour and Pease LLP) and Bambo Obaro (Weil, Gotshal & Manges, LLP) for The Kroger Co. Cassandra Snyder, U.S. Department of Justice, for the FTC.

Companies: The Kroger Co.

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