FTC Moves to Block $25 Billion Kroger-Albertsons Merger, Citing Price Increases and Worker Impact
After months of speculation and delay, the Federal Trade Commission (FTC) has taken action to prevent the proposed $25 billion merger between Kroger and Albertsons. The FTC claims that this merger, which would be the largest in U.S. history, would lead to price increases and negatively impact workers. The government’s lawsuit against the merger is expected to go through various hearings and appeals, a process that could take a year or more. In the meantime, the FTC has requested that the court block the deal.
Shoppers in Washington, where Kroger and Albertsons have a significant presence, have already voiced their concerns about the merger. Many believe that it would result in higher prices and fewer options in the grocery market. Tim Johnson, a shopper in Seattle, expressed his worries about skyrocketing prices if the merger were to proceed. Geo Hasegawa, another shopper in Ballard, emphasized the importance of preventing further consolidation in the grocery market.
The FTC’s administrative complaint against the merger echoes these sentiments. The complaint argues that if allowed, the merger would reduce competition and result in higher prices for essential household goods. It also highlights how the existing competition between Kroger and Albertsons has led to better wages, benefits, and working conditions for employees. The proposed acquisition would eliminate this competition and potentially harm workers.
One aspect of the merger proposal that the FTC heavily criticized is the plan to divest hundreds of stores to a third party, C&S Wholesale Grocers. The FTC argues that C&S lacks the necessary retail experience and capabilities to successfully operate these stores. With just 23 supermarkets and a single retail pharmacy, C&S is primarily a wholesaler. The FTC questions C&S’s sudden interest in growing its retail footprint and doubts its ability to ensure the smooth operation of hundreds of stores.
The FTC’s lawsuit has gained support from the attorneys general of several states, including Arizona, California, and Illinois. However, Washington state, which filed its own suit to block the merger earlier this year, did not join the FTC’s action. The administrative complaint filed by the FTC lays out its case against the merger, which will be heard by a special administrative law judge. This multistep process is expected to involve appeals and could take months or even years to resolve.
While the administrative case proceeds, the FTC, Kroger, and Albertsons have agreed to pause the merger until a federal court determines whether a preliminary injunction should be imposed. This decision is likely to come in a matter of weeks. Both Kroger and Albertsons have argued that blocking the merger would harm consumers and workers. Kroger’s spokesperson emphasized the company’s business model of lowering prices for customers, while Albertsons’ spokesperson claimed that the FTC’s action would benefit larger retailers like Amazon, Walmart, and Costco.
Legal experts have raised questions about the FTC’s choice to file the suit in an Oregon district instead of in Washington, D.C. Judges in the D.C. district have more experience in antitrust matters. John Kirkwood, an antitrust expert and former FTC official, believes that the case will hinge on the arguments surrounding C&S Wholesale’s capabilities to run the divested stores.
The opposition to the merger in and around Seattle has been strong since it was announced. Shoppers fear a repeat of past divestiture attempts that resulted in store closures and limited options. The failed divestiture following Albertsons’ acquisition of Safeway in 2015 and Rite Aid’s acquisition of Bartell Drugs in 2020 serve as cautionary tales for many shoppers.
As the legal battle unfolds, shoppers and workers anxiously await the outcome. The FTC’s action to block the merger reflects concerns about rising prices and reduced competition in the grocery market. The fate of the Kroger-Albertsons merger now rests in the hands of the courts, and the decision will have far-reaching implications for the industry.
