New York (CNN) 鈥� Supermarket chain Kroger is suing a federal agency in a daring move that aims to weaken how Washington fights mergers that threaten to jack up prices on consumers.
The lawsuit alleges the Federal Trade Commission is violating the US Constitution by using an in-house tribunal to challenge Kroger鈥檚 鈥� the biggest proposed supermarket deal in American history.
The FTC typically enforces antitrust in one of two ways: It can sue companies and take them to directly to court, or it can attempt to use its own in-house administrative law judges to issue a ruling or reach a settlement outside of court. In the case of Kroger, the FTC actually pursued both options, seeking to block the merger in court and make a ruling on it with its in-house administrators.
Companies can challenge the FTC鈥檚 administrative decisions in court. But Kroger claimed that tribunal process is unconstitutional.
The Kroger lawsuit, filed Monday in federal court in Cincinnati, relies in part on in June that further . The new lawsuit represents a key test case and the latest effort to reshape the administrative state in America.
Experts say a Kroger victory would usher in a seismic shift in how the federal government challenges mergers. US officials fear that weakening regulators鈥� ability to fight monopolies could hurt consumers by giving corporations too much power to raise prices and close stores.
鈥淚t鈥檚 huge. If they are successful and appellate courts agree, one of the primary arms for antitrust oversight is literally being cut off at the elbow,鈥� said Christine Bartholomew, a professor of law at the University of Buffalo School of Law. 鈥淚t would be a radical shift in the way we do antitrust in this country.鈥�
Bartholomew said she鈥檚 鈥渢roubled鈥� by the lawsuit because if the FTC is no longer able to use its own in-house tribunals, there would likely be less antitrust scrutiny of corporate mergers.
鈥淭he risk is more deals, more concentration and potentially higher prices and less consumer choice,鈥� she said.
In February, the FTC sued to block the between Kroger and Albertsons that was announced in 2022. The agency argued the merger would lift prices, shut stores and wipe out jobs.
Kroger has argued the deal would do the exact opposite, helping the supermarket chains compete against non-union giants including Amazon, Costco and Walmart.
In a statement to CNN, Kroger said its 鈥渂usiness model is built on a foundation of bringing customers lower prices and more choices.鈥�
The company said it鈥檚 committed to investing $1 billion after the Albertsons merger closes to reduce prices for customers in stores across the country as well as $1.3 billion to enhance the customer experience. 鈥淜roger has a proven track record of lowering prices in previous mergers,鈥� the company said.
The FTC is challenging the Kroger deal on two fronts: in federal court and via an administrative trial.
Next week, Kroger faces the court in Portland, Oregon on the deal. The FTC has asked the judge in that case to temporarily block the Kroger-Albertsons deal while the in-house tribunal weighs the transaction.
In the new lawsuit, Kroger argues that the FTC 鈥渃learly violates the Constitution鈥� in two ways: The administrative law judge is not removable by the President of the United States and the case is being fought in the executive branch instead of the courts.
Kroger cites the landmark Supreme Court where justices limited the power of the Securities and Exchange Commission to enforce rules with in-house reviews instead of jury trials.
鈥淲e stand prepared to defend this merger in the upcoming trial in federal court 鈥� the appropriate venue for this matter to be heard,鈥� Kroger CEO Rodney McMullen said in a statement. 鈥淲e are asking the Court to halt what amounts to an unlawful proceeding before the FTC鈥檚 own in-house tribunal.鈥�
McMullen added that the merger between Kroger and Albertson鈥檚 is 鈥渟quarely focused on ensuring we bring customers lower prices starting day one while securing the future of good-paying union jobs.鈥�
The FTC declined to comment on the Kroger lawsuit.
A source familiar with the matter dismissed the Kroger lawsuit as a 鈥渄esperate Hail Mary.鈥�
The move comes as part of a broader effort by corporate America to push back on what some view as regulatory overreach.
Even (ones with ) have argued that the FTC鈥檚 efforts to fight monopolies have gone too far during the Biden administration.
The Supreme Court has recently ruled in favor of businesses fighting regulations, including overturning the Chevron Doctrine in its that weakens the ability of agencies to approve regulations.
鈥淭he whole administrative structure is under legal attack right now,鈥� said Rebecca Haw Allensworth, an antitrust law professor at Vanderbilt Law School.
Allensworth said a Kroger victory would amount to a 鈥渟eismic shift鈥� in how the FTC and other federal agencies operate.
鈥淚t would definitely take an arrow out of the quiver of the FTC,鈥� she said.
Noting the recent series of Supreme Court decisions against federal agencies, Allensworth said a Kroger victory can鈥檛 be ruled out.
鈥淭he law is whatever the Supreme Court says it is. We can鈥檛 be sure a claim like this would be rejected,鈥� she said.
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