The U.S. Federal Trade Commission announced Monday its intention to prevent the merger of Kroger and Albertsons, contending that the amalgamation of the two major grocers would lead to increased prices for consumers and decreased wages for employees.
According to a release, the FTC stated it had issued an administrative complaint and approved legal action in federal court to halt Kroger’s $24.6 billion acquisition of Albertsons, which would establish one of the largest grocery chains in the nation. A bipartisan coalition of nine attorneys general, representing Arizona, California, Washington D.C., Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming, has joined the lawsuit.
“Kroger’s acquisition of Albertsons would result in additional hikes in grocery prices for essential goods, further worsening the financial strain faced by consumers nationwide,” remarked Henry Liu, director of the FTC’s Bureau of Competition. “Moreover, essential grocery store workers would be adversely affected by this deal, facing the risk of reduced wages, fewer benefits, and deteriorating working conditions.”
In response, Kroger asserted in a statement that blocking the merger “will actually harm the very people the FTC purports to serve: America’s consumers and workers.”
“The FTC’s decision increases the likelihood of higher food prices for American consumers and a reduction in the number of grocery stores, at a time when communities across the country are already grappling with high inflation and food deserts,” the company stated.
Albertsons expressed disappointment in federal regulators’ disregard for the growing dominance of larger retailers like Walmart, Amazon, and Costco, arguing that the move would only bolster 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 “We are disappointed that the FTC continues to use the same outdated view of the U.S. grocery industry it used 20 years ago, and we look forward to presenting our arguments in Court,” the company remarked.
The proposed merger between Kroger and Albertsons has been in limbo for over a year as federal and state regulators scrutinize the deal. Initially announced in October 2022, the merger aimed to enhance the competitiveness of the grocers against larger retailers. The FTC asserted that the consolidation of supermarkets would adversely affect consumers and workers, especially amidst rising prices of food and essential items.
The Biden administration has shown skepticism towards various mergers, prioritizing consumer protection as President Joe Biden campaigns for reelection this fall. Kroger CEO Rodney McMullen has advocated for the merger, stating that as a larger supermarket operator, the combined entity could lower prices, enhance profitability, and accelerate innovation in the grocery sector.
The company also pledged $500 million to reduce prices for customers and $1 billion to increase employee wages and benefits. However, the merger has faced strong opposition, particularly amid a period of historic inflation. Two unions representing Kroger and Albertsons employees, the United Food and Commercial Workers International Union and the Teamsters Union, have opposed the merger.
Concerns over higher prices for everyday food items have raised worries about the potential pricing power of a larger company, echoing concerns voiced by some politicians. The combined Kroger and Albertsons would significantly close the market share gap with Walmart, the largest grocer in the U.S., and compete with regional players like Publix and Wegmans, as well as discounters like Aldi and Trader Joe’s.
The merged entity would operate approximately 5,000 stores across the U.S., combining Kroger’s various supermarket banners, including its namesake stores, Fred Meyer, and Ralphs, with Albertsons’ chains such as Safeway, Acme, and Tom Thumb. To address antitrust concerns, Kroger announced plans last year to sell over 400 stores to Piggly Wiggly owner C&S Wholesale Grocers, along with other assets like distribution centers and some private brands.
However, the FTC argued that the proposed divestiture would not suffice, creating a collection of disparate stores and assets that would not effectively compete with the combined Kroger and Albertsons. The FTC contended that the merger would reduce incentives to improve the customer experience, citing competition between the supermarkets as a driving force behind fresher produce, better private label offerings, and shopper-friendly services like flexible pharmacy hours and curbside pickup.
Moreover, the FTC argued that the merger would diminish workers’ bargaining power, as fewer potential grocery employers would exist. In certain markets like Denver, the combined supermarket operator would be the sole employer of unionized grocery workers, the agency noted. As reports emerged last week of the FTC’s intention to sue to block the merger, a Kroger spokeswoman stated that the company was still in discussions with FTC and state regulators.
The company reiterated its stance 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 asserted 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% lower Monday afternoon, while Albertsons stock was slightly higher.
