FTC Sues to Block $25 Billion Kroger-Albertsons Merger, Citing Higher Prices and Job Losses
In a move that could have significant implications for the grocery industry, the Federal Trade Commission (FTC) has filed a lawsuit to block the $25 billion merger between Kroger and Albertsons. The FTC alleges that the merger, which would create the largest supermarket chain in the US, would result in higher prices, store closures, and job losses.
The proposed merger between Kroger and Albertsons, announced in 2022, aimed to combine the fifth and tenth largest retailers in the country. The two companies own several popular chains, including Safeway, Vons, Harris Teeter, and Fred Meyer. However, the merger comes at a time when food prices have been skyrocketing. According to the Bureau of Labor Statistics, Americans are now spending 26% more on groceries since 2020, with the highest portion of their income going towards food in the past 30 years.
The FTC argues that the merger would eliminate competition in the grocery industry, leading to even higher costs for consumers. Food price increases have traditionally been smaller at restaurants compared to grocery stores. The FTC’s lawsuit raises concerns about the impact on everyday goods and suggests that Kroger’s acquisition of Albertsons would result in additional grocery price hikes.
Kroger and Albertsons, both of which employ mostly unionized workforces, have stated that they wanted to merge in order to be more competitive against non-union giants like Walmart, Amazon, and Costco. The grocers are also facing increased pressure from Aldi, the fast-growing German discount supermarket chain. Kroger CEO Rodney McMullen emphasized that the merger would strengthen their position as a more compelling alternative to larger and non-union competitors.
The two companies combined have a workforce of 710,000 employees, nearly 5,000 stores, and over $200 billion in sales. They argued that the $500 million in cost savings from the merger would allow them to reduce prices for shoppers and offer tailored promotions and savings. However, the FTC expressed skepticism about these claims.
Unions, small grocers, and a coalition of Democrats and Republicans on Capitol Hill, including Senator Elizabeth Warren and Senator Mike Lee, have strongly opposed the merger from the beginning. They share concerns about the potential negative impact on prices and jobs in the grocery industry.
Kroger and Albertsons have criticized the FTC’s decision, with a Kroger spokesperson stating that it would harm consumers and workers. They argue that the suit only strengthens larger, non-unionized retailers like Walmart, Costco, and Amazon, allowing them to further dominate the grocery industry. Kroger has announced that it will appeal the FTC’s decision.
To address antitrust concerns, Kroger and Albertsons had agreed to sell approximately 400 stores to C&S Wholesale Grocers, the owner of Piggly Wiggly and other brands. C&S has also provisionally agreed to purchase over 200 additional stores if the proposed deal received regulatory pushback. However, the FTC criticized the divestiture proposal, describing it as a “hodgepodge of unconnected stores” that would not be a successful competitor against a combined Kroger and Albertsons.
The FTC’s skepticism towards divestitures stems from its previous experience with Albertsons’ $9 billion tie-up with Safeway in 2014. To gain approval for that deal, Albertsons and Safeway had to sell 168 of their stores to buyers approved by the FTC. However, the buyer, Haggen, a small supermarket chain, struggled to manage the stores and eventually filed for bankruptcy. FTC Chair Lina Khan has been critical of divestitures as an effective tool to promote competition.
Under Khan’s leadership, the FTC has also launched significant antitrust suits against tech giants like Amazon. The outcome of the lawsuit against the Kroger-Albertsons merger will have far-reaching implications for the grocery industry and competition in the market.
In conclusion, the FTC’s decision to sue to block the $25 billion Kroger-Albertsons merger has sparked a heated debate about the potential impact on prices and jobs in the grocery industry. While Kroger and Albertsons argue that the merger would make them more competitive against non-union giants and allow for cost savings that could benefit consumers, the FTC and other critics express concerns about higher prices and reduced competition. The outcome of this lawsuit will shape the future of the grocery industry and determine the level of competition in the market.
