CINCINNATI — The Federal Trade Commission has accused the Albertsons grocery chain of failing to preserve text messages relevant to its antitrust case against a $24.6 billion acquisition by The Kroger Co., a sign that a high-stakes hearing, that could decide the merger’s fate, will start Monday with fireworks.
“Four of eight testifying Albertsons witnesses failed to preserve responsive text messages after receiving a preservation hold and numerous reminders,” said the FTC filing on Aug. 16. “Although the Court and Plaintiffs will never know the full extent of these lost communications, their destruction serves to obscure internal views about the likely effects of the merger and the proposed divestiture.”
Albertsons denied the FTC’s accusations, saying it produced over 100,000 text messages and millions of documents in response to FTC discovery motions.
“Albertsons takes its duty to preserve relevant information extremely seriously,” Albertsons argued in its response to the FTC filing. “It issued litigation hold notices to over 340 custodians, and repeatedly and specifically reminded custodians of their obligation to disable cellphone auto-delete settings.”
The FTC asked U.S. District Judge Adrienne Nelson to “draw an adverse inference” from the missing texts, meaning she could view the FTC’s case more favorably because evidence is missing.
“That could be really dangerous and damaging to Albertsons,” said Eleanor Fox, professor emerita of trade regulation at New York University. “It really depends on the context of what the adverse inference is about.”
Fox said the government made a similar accusation against Google in an antitrust case that ended with a ruling that the tech giant created an illegal monopoly with its search engine business. But in the end, that case ended without a decision on whether Google should be sanctioned for missing evidence.
Fox also said it’s significant that Albertsons CEO Vivek Sankaran was among the four executives accused of failing to preserve text messages.
“A person who is CEO would probably have a high consciousness of instructions not to destroy documents,” Fox said. “It’s more than likely that he would know what he’s doing.”
The adverse inference motion is one of several yet to be decided in advance of Monday’s hearing, which is expected to last for three weeks. Experts say it’s a crucial hearing because most mergers never happen if they’re blocked by a preliminary injunction.
The FTC will argue that Kroger and Albertsons will gain too much market power by combining, causing consumers to pay more and workers to make less. Kroger and Albertsons will argue the merger is necessary because they face increasing competition from larger rivals like Walmart, Costco and Amazon. They’re promising to preserve union jobs and reduce prices after merging while preserving competition by selling 579 stores to C&S Wholesale Grocers.
