Albertsons and Kroger Supermarkets
Bridget Bennett | Bloomberg | fake images; Brandon Bell | fake images
The U.S. Federal Trade Commission said Monday it will file a lawsuit to block the merger of kroger and Albertsonsaying that combining the two major supermarkets would result in higher prices for shoppers and lower wages for workers.
In a statement, 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 grocery stores in the country. A bipartisan group of nine attorneys general have joined the court complaint, including those from Arizona, California, Washington DC, Illinois, Maryland, Nevada, New Mexico, Oregon and Wyoming.
“Kroger's acquisition of Albertsons would lead to additional price increases on everyday products, further exacerbating the financial stress consumers across the country face today,” said Henry Liu, director of the Competition Bureau. from the FTC. “Essential grocery store workers would also suffer under this deal, facing the threat of their wages declining, their benefits diminishing, and their working conditions deteriorating.”
Kroger said in a statement that blocking the deal “will actually hurt the very people the FTC aims to serve: America's consumers and workers.”
“The FTC's decision makes it more likely that American 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 ignoring the growing dominance of larger retailers like Walmart, Amazon and costco and said that the measure will strengthen them.
“We are disappointed that the FTC continues to use the same outdated view of the American food industry that it used 20 years ago, and we look forward to making our arguments before the court,” he said in a statement.
The Kroger and Albertsons deal has been stuck in a holding pattern for more than a year as federal and state regulators examine the merger. The companies announced the proposed deal in October 2022 and said that by partnering, grocers would be able to better compete with larger retailers.
The FTC argued that 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 series of mergers and the White House has made consumer protection a key issue as President Joe Biden campaigns for re-election this fall.
Kroger CEO Rodney McMullen defended the company's alliance, saying that as the largest supermarket operator, the combined companies could lower prices, increase profitability and accelerate 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.
However, the agreement has faced strong resistance and new complications after a period of historic inflation. Two unions representing Kroger and Albertsons employees, the United Food and Commercial Workers International Union and the Teamsters union, opposed the deal.
Higher prices for everyday foods fueled concerns that a larger company would have too much pricing power, concerns echoed by some politicians.
Higher food prices have irritated consumers and become a hot topic in the election campaign. Earlier this month, supermarket chains drew the ire of Biden, who accused the companies of ripping off shoppers by keeping profit margins high.
Together, Kroger and Albertsons would be a giant company and would close the market share gap with Walmart, the largest supermarket in the United States. Kroger and Albertsons would 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 United States. The deal would unite approximately two dozen Kroger supermarket brands, 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 such as distribution centers and some private brands.
But the FTC complaint said the proposed divestiture is not enough. It would create “a hodgepodge of stores, banners, brands and other disjointed assets” that would not be a true rival to the combined Kroger and Albertsons, the federal agency said in a statement Monday.
The FTC held that the combination of Kroger and Albertsons would have less reason to improve the customer experience. The federal agency said competition among supermarkets has contributed to fresher products, better private-label offerings and services that shoppers appreciate, such as flexible pharmacy hours and curbside pickup.
The FTC also argued that the deal would leave workers with less bargaining power, since employees would not have as many potential employers in the grocery sector. In some markets like Denver, the combined supermarket operator would be the sole employer of unionized grocery workers, the agency said.
As some media outlets reported last week that the FTC would soon file a lawsuit to block the merger, a Kroger spokeswoman said the company was still in talks with the FTC and state regulators.
The company reiterated its argument that the merger would benefit supermarket shoppers and workers.
“Blocking the combination will only encourage large non-union retailers, like Walmart, Amazon and Costco, to continue opposing unions and abandoning communities,” the company said in a statement last week. “Kroger will continue to lower prices, create good-paying union jobs, and increase access to fresh food for families who need it most.”
Kroger shares were trading about 1% lower Monday afternoon, while Albertsons shares were up slightly.
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