The U.S. Federal Trade Commission said Monday that it is suing to block the merger of Kroger
and Albertsons, saying the combination of the two major grocers would result in higher prices for shoppers and lower wages for workers.
In a release, the FTC said it issued an administrative complaint and authorized a lawsuit in federal court to stop Kroger’s $24.6 billion acquisition of Albertsons, which would create one of the largest grocers in the country. A bipartisan group of nine attorneys general has joined the court complaint: from Arizona, California, Washington D.C., Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming.
“Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today,” said Henry Liu, director of the FTC’s Bureau of Competition. “Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating.”
Kroger said in a statement that blocking the deal “will actually harm the very people the FTC purports to serve: America’s consumers and workers.”
“The FTC’s decision makes it more likely that America’s consumers will see higher food prices and fewer grocery stores at a time when communities across the country are already facing high inflation and food deserts,” the company said in a statement.
Albertsons said in a statement that federal regulators are disregarding the growing dominance of larger retailers like Walmart, Amazon and Costco, and said the move will strengthen them.
“We are disappointed that the FTC continues to use the same outdated view of the U.S. grocery industry it used 20 years ago, and we look forward to presenting our arguments in Court,” it said in a statement.
Kroger and Albertsons’ agreement has been stuck in a holding pattern for more than a year while federal and state regulators scrutinize the merger. The companies announced the proposed deal in October 2022, and said by teaming up, the grocers would be able to better compete with larger retailers.
The FTC argued the supermarket merger would harm shoppers and workers at a time when the price of food and many everyday items has risen. The Biden administration has been skeptical of a range of mergers, and the White House has made consumer protection a key issue as President Joe Biden campaigns for reelection this fall.
Kroger CEO Rodney McMullen has made the company’s case for the tie-up, saying as a larger supermarket operator, the combined companies would be able to lower prices, boost profitability and speed up innovation in the grocery industry. The company also pledged $500 million to reduce prices for customers and $1 billion to raise employee wages and expand benefits.
Yet the deal has faced stiff resistance and new complications after a period of historic inflation. Two unions that represent Kroger and Albertsons employees, the United Food and Commercial Workers International Union and the Teamsters union, opposed the deal.
Higher prices of everyday food items fueled worries that a bigger company would have too much pricing power — concerns some politicians have echoed.
Higher grocery prices have irked consumers and become a hot topic on the campaign trail. Earlier this month, grocery chains drew the ire of Biden, who accused companies of ripping off shoppers while keeping profit margins high.
Together, Kroger and Albertsons would be a mammoth company and tighten a market share gap with Walmart, the largest grocer in the U.S. Kroger and Albertsons also compete with regional players like Publix and Wegmans, and discounters like Aldi and Trader Joe’s.
Combined, the grocers would have about 5,000 stores across the U.S. The deal would marry Kroger’s approximately two dozen supermarket banners, including its namesake stores, Fred Meyer and Ralphs with Albertsons’ grocery chains, including Safeway, Acme and Tom Thumb.
In an effort to overcome antitrust concerns, Kroger announced last year that it planned to sell more than 400 stores to Piggly Wiggly owner C&S Wholesale Grocers, along with other assets like distribution centers and some private brands.
But the FTC complaint said the proposed divestiture isn’t enough. It would create “a hodgepodge of unconnected stores, banners, brands and other assets” that wouldn’t be a true rival to the combined Kroger and Albertsons, the federal agency said in a release Monday.
The FTC contended the combined Kroger and Albertsons would have less reason to improve the customer experience. The federal agency said competition between the supermarkets has contributed to fresher produce, better private-label offerings and services that shoppers appreciate, such as flexible pharmacy hours and curbside pickup.
The FTC also argued the deal would leave workers with less negotiating power, since employees wouldn’t have as many potential grocery employers. In some markets like Denver, the combined supermarket operator would be the only employer of unionized grocery workers, the agency said.
As some news outlets reported last week that the FTC would soon sue to block the merger, a Kroger spokeswoman said the company was still in discussions with FTC and state regulators.
The company reiterated its argument that the merger would benefit grocery shoppers and workers.
“Blocking the combination will only embolden large, non-unionized retailers – like Walmart, Amazon and Costco – to continue opposing unions and leaving communities,” the company said in a statement last week. “Kroger will continue to lower prices, grow good-paying union jobs and increase access to fresh food for the families who need it most.”
Kroger shares were trading about 1.7% lower Monday afternoon, while Albertsons stock was slightly higher.
Source: CNBC
