The Federal Trade Commission said it is suing to block supermarket giant Kroger's bid to buy its smaller rival, Albertsons, because the combination would eliminate competition among major grocery stores, leading to higher prices and lower-priced products. lower quality for millions of Americans.
The regulatory agency said Monday that it authorized the filing of a federal lawsuit that also alleges that Kroger's proposed $24.6 billion acquisition of Albertsons — the largest proposed supermarket merger in U.S. history — would harm workers, eliminate their ability to negotiate higher salaries and better benefits. .
The deal, announced in October 2022, would bring together Kroger's collection of supermarkets, including the Ralphs chain, and Albertsons' roster, including Vons and Safeway. The two chains have said they need to combine to better compete with retail giant Walmart and other grocery sellers.
The proposed merger comes during a prolonged increase in prices consumers pay at grocery stores and restaurants. From 2019 to 2023, food costs increased 25% compared to the overall 19.2% increase in the consumer price index.
“This supermarket megamerger comes as American consumers have seen the cost of food rise steadily in recent years,” Henry Liu, director of the FTC's Bureau of Competition, said in a news release. “Essential grocery store workers would also suffer under this agreement, facing the threat of their wages declining, their benefits diminishing, and their working conditions deteriorating.”
Kroger is the second largest supermarket chain in the country, with a market share of 10.1%, after Walmart, with a share of 23.6% (not including its Sam's Club chain, with an additional market share of 4, 7%), according to data from the firm Numerator. Costco is third with 9.2% of the market and Albertsons is fourth with 6.4%.
If the merger were completed, Kroger and Albertsons would operate more than 5,000 stores and about 4,000 retail pharmacies and employ nearly 700,000 workers in 48 states, according to the FTC.
Both companies, in response to the FTC announcement, said they “look forward to litigating this action in court.”
When the deal was announced, Kroger Chairman and CEO Rodney McMullen promised to use $1 billion in annual savings created by the proposed merger to lower prices, remodel stores and improve workers' wages and benefits.
Kroger said Monday that it has “reduced prices every year since 2003.” Blocking the merger “will actually harm the very people the FTC aims to serve: America's consumers and workers,” the company said.
Grocery workers demonstrate in April 2023 at a Ralphs supermarket in Los Angeles to protest the proposed merger between Krogers and Albertsons.
(Myung J. Chun/Los Angeles Times)
“Kroger has a proven track record of lowering prices so more customers benefit from fresh, affordable foods, and our proposed merger with Albertsons will mean even lower prices and more choice for American consumers,” the company said.
In California, the two corporations own nearly 800 stores and employ about 48,000 workers, the California prosecutor said. Gen. Rob Bonta, whose office is joining the FTC lawsuit along with attorneys general from seven other states and the District of Columbia.
“There's no other way to put it: It's bad for workers, it's bad for agricultural producers, it's bad for consumers in California and across the country,” Bonta said during a news conference in downtown Los Angeles.
Bonta said he is “especially concerned about communities in Southern California, including here in Los Angeles, who would be particularly at risk if this disastrous consolidation succeeds,” because in some neighborhoods a store owned by Kroger or Albertsons is the only option. of groceries. available.
Kroger and Albertsons attempted to avoid regulatory objections by agreeing in September to sell more than 400 stores and other assets to C&S Wholesale Grocers, owner of the much smaller Piggly Wiggly supermarket chain.
The FTC's action received praise from consumer groups and supermarket worker unions.
“A Kroger-Albertsons merger would have been a disaster for workers, consumers and farmers, and would have represented the worst of grocery consolidation,” said Lisa Gilbert, executive vice president of Public Citizen, a consumer advocacy group with headquarters in Washington, DC. “Today, the FTC said clearly that big box stores cannot merge to achieve dominance. “We applaud the FTC for presenting a strong, common-sense case, challenging this mega-merger plan at a critical time for our markets.”
Grocery workers are “certainly afraid” of the effects of the proposed merger, Amber Parrish Baur, executive director of the Western States Council of the United Food and Commercial Workers, said at Monday's news conference with Bonta. The UFCW has about 180,000 members in California, she said.
Baur pointed to a “disastrous merger” in 2015 between Albertsons and Safeway. Earlier that year, the companies divested 146 Albertsons, Vons, Pavilions and Safeway stores in California, Oregon, Washington, Nevada and Arizona, selling them to Haggen, a Pacific Northwest company, to make the merger more acceptable to consumers. federal regulators.
But just a few months later, Haggen announced it would close 27 stores, including 16 supermarkets in California. Shortly afterward, Haggen filed for Chapter 11 bankruptcy and closed about 83 stores in California, costing thousands of jobs.
“Many of our members lost their jobs. …Communities lost access to food and medicine,” Baur said.
Kathy Finn, a longtime leader of United Food and Commercial Workers Local 770 in Southern California, said in a recent interview that the proposed merger “would affect California as much or more than any other state.” UFCW Local 770 represents nearly 30,000 members in Los Angeles, Santa Barbara, Ventura, San Luis Obispo and Kern counties in the grocery, cannabis, drug retail, healthcare and packaging industries.
Finn said in a statement Monday that California supermarket workers and several UFCW locals across the country have “worked tirelessly for the past sixteen months, making sure their voices are heard loud and clear” through actions in stores and meetings with representatives of grocery companies.
“All of our work has kept the voice of grocery workers front and center in this story, while exposing the potentially harmful effects of this proposed merger for our communities, our stores and our jobs,” said Finn, who was elected president of Local 770. this month.
UFCW Local 555, which represents workers in parts of Oregon, southwest Washington, Idaho and Wyoming, recently broke with the national UFCW organization and other locals that have opposed the merger and instead formally endorsed it.
Oregon Live reported that the decision came several weeks after union leaders met with representatives of C&S Wholesale Grocers, which agreed to buy 49 Oregon stores among the approximately 410 owned by Kroger and Albertsons that it pledged to buy if the Federal Commission of Commerce approves the merger. .
President Peter G. Lurie of the Center for Science in the Public Interest said in a statement that the proposed merger could worsen marketing practices under which retailers and major manufacturers “enter into cozy contractual relationships that place preferred brands of soft drinks and other low-quality foods.” “Items” in desirable locations, such as checkout aisles and featured floor displays.
Lurie's organization asked the FTC in 2021 to investigate these practices. In 2022, the FTC asked retailers and manufacturers, including Kroger, to provide confidential information about trade promotion practices. The investigation continues.
“We look forward to the agency completing its work investigating current anti-competitive practices at the supermarket,” Lurie said.
