Whalen v. Albertsons Companies Inc.

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

CHRISTINE WHALEN, et al., Case No. 23-cv-00459-VC

Plaintiffs,

ORDER GRANTING MOTION TO

v. DISMISS FIRST AMENDED

COMPLAINT

ALBERTSONS COMPANIES INC., et al.,

Re: Dkt. Nos. 96, 97

Defendants.

The motions to dismiss are granted because the plaintiffs have failed to allege Article III

standing. This order assumes the reader’s familiarity with the factual allegations, the relevant

law, and the parties’ arguments.

The plaintiffs have again failed to provide enough information about their own situations

to adequately allege that they are likely to suffer an injury from the proposed merger. Of the 24

plaintiffs, only a few allege they have shopped at an Albertsons or Kroger store at all. And the

allegations about those few plaintiffs barely say anything, simply intoning that they “have

shopped” at a store in their area (although elsewhere the complaint mentions in passing that they

“shop” at one of the stores). And they allege that if the merger goes through, they will be forced

to pay higher prices. But the plaintiffs say nothing about whether (and how many) alternative

grocery store options exist in the areas where they could realistically be expected to shop. This

could affect the analysis of whether prices are likely to increase at the Albertsons or Kroger

stores where the plaintiffs allege they have shopped. Even aside from that, the bare allegation by

some plaintiffs that they have shopped at an Albertsons or Kroger store leaves many questions

relating to the likelihood of actual injury unanswered: Do they still shop there? If so, is it

occasionally or regularly? Are there other reasonable options equally accessible to them? The

plaintiffs also fail to account for the proposed divestiture plan, even though details are emerging

about that plan, and even though it could result in stores where the plaintiffs allegedly shop being

divested by Albertsons and Kroger altogether. Perhaps the failure to address one of these

questions would not, on its own, support dismissal for lack of standing. But the failure to address

so many means the plaintiffs have not adequately alleged that they are likely to be injured by the

merger.

The complaint does include new allegations of market concentration in the metropolitan

areas of Tucson, Reno, and Colorado Springs. Specifically, the plaintiffs invoke the Herfindahl-

Hirschman Index for these markets. The HHI is a “commonly used metric for determining

market share.” Saint Alphonsus Medical Center-Nampa Inc. v. St. Luke’s Health System, Ltd.,

778 F.3d 775, 786 (9th Cir. 2015). The HHI determines how concentrated a given market is by

squaring the percent market share of each firm in the relevant market and then adding those

numbers together. From there, one can calculate the change in HHI post-merger to see how a

merger might affect market concentration. See F.T.C. v. H.J. Heinz Co., 246 F.3d 708, 715 n.9

(D.C. Cir. 2001). The plaintiffs allege that the Tucson, Reno, and Colorado Springs metropolitan

areas are already considered either moderately or highly concentrated markets and that post-

merger the HHI will increase enough to create a presumptive likelihood of enhanced market

power.1 From this the plaintiffs allege the elimination of Albertsons in these metropolitan areas

may result in higher prices. But the HHI allegations seem more focused on the merits of the

antitrust action—whether competition will be adversely affected in general—than on the

threshold question of whether these individual plaintiffs will be harmed in particular. For

example, there are no allegations to connect the alleged increased market concentration across

entire metropolitan areas to the areas where the plaintiffs could reasonably be expected to shop.

1 The complaint alleges that after the merger the HHI in Seattle will increase such that it is

“presumed likely to enhance market power” but there are no allegations about Seattle’s market

concentration pre-merger.

Moreover, although the plaintiffs assert that the HHI in these three metropolitan areas will

increase by 200 to 1,250 points, they don’t explain where or how they got their numbers. And

again, they do not account for the fact that up to 650 stores may be divested before the merger,

including 413 stores that Albertsons and Kroger agreed to divest before the plaintiffs filed their

amended complaint; indeed, the plaintiffs continue to insist (erroneously) that the divestiture is

simply not relevant.

The plaintiffs have already been given one chance to fix the defects in their jurisdictional

allegations. And there continue to be many shortcomings in the allegations relating to the merits.

Thus, dismissal without leave to amend could well be appropriate at this point. But as mentioned

in the prior order, the proposed merger—at least as described by the plaintiffs—does raise

concerns about competition among grocery stores. It’s not out of the question that the plaintiffs

could ultimately offer more detailed allegations that support antitrust claims, as well as standing

to assert them. So in an abundance of caution, the plaintiffs will be given another opportunity to

amend with respect to the claims against Albertsons and Kroger.

For the reasons already stated, the claim against Cerberus must also be dismissed for

failure to allege standing. But the allegations against Cerberus suffer from so many other flaws

that the dismissal for lack of jurisdiction is without leave to amend. First, the plaintiffs have not

provided any additional factual allegations in support of their assertion that Albertsons was

financially weakened by the dividend, despite this Court’s previous order outlining this problem.

See Whalen v. Albertsons Companies Inc., No. 23-CV-00459-VC, 2023 WL 4955141, at *1

(N.D. Cal. Aug. 2, 2023). Second, the plaintiffs continue to seek a remedy of disgorgement under

Section 16 of the Clayton Act but have failed to demonstrate that Section 16 permits such a

remedy. See Coalition for ICANN Transparency Inc. v. VeriSign, Inc., 771 F. Supp. 2d 1195,

1202 (N.D. Cal. 2011). Third, the plaintiffs dropped their Sherman Act Section 1 claim in the

amended complaint. Now they only assert a claim against Cerberus under Section 7 of the

Clayton Act. But Cerberus is not a party to the merger and therefore cannot be liable under

Section 7. See Demartini v. Microsoft Corp., No. 22-CV-08991-JSC, 2023 WL 2588173, at *6

(N.D. Cal. Mar. 20, 2023). All this shows that amendment would be futile even if the plaintiffs

could fix their standing allegations.

Any amended complaint against Albertsons and Kroger must be filed within 21 days of

this ruling. The defendants’ response is due 21 days thereafter.

IT IS SO ORDERED.

Dated: December 20, 2023 Koo. -

VINCE CHHABRIA

United States District Judge