Amid a legal battle with the FTC, Albertsons claims its $24.6 billion merger with Kroger is essential to stay competitive, while critics fear it could lead to higher prices and fewer options for consumers.
Albertsons has issued a stark warning regarding the potential consequences if its proposed merger with Kroger, valued at $24.6 billion, is blocked. In a statement made to a federal judge on Monday, the supermarket chain indicated that it might be forced to lay off workers, close stores, and possibly withdraw from certain markets if the merger does not proceed as planned, as reported by ABC7CHICAGO.
The merger, announced in October 2022, would mark the largest supermarket consolidation in U.S. history. However, the Federal Trade Commission (FTC) has raised significant concerns, leading to a lawsuit aimed at preventing the deal. The FTC argues that the merger would diminish competition, potentially leading to higher grocery prices—a particularly alarming prospect during a period of elevated food price inflation.
The FTC’s lawsuit is currently being contested in a three-week hearing, where the commission is seeking a preliminary injunction to halt the merger while an in-house administrative law judge reviews the case. The FTC’s chief trial counsel, Susan Musser, underscored the stakes involved, stating that the lawsuit is part of a broader effort to protect American consumers, especially those struggling to afford basic necessities.
Musser highlighted that Kroger and Albertsons are direct competitors in 22 states, matching each other closely in terms of pricing, product quality, private label offerings, and services like in-store pickup. She warned that allowing the merger would eliminate this competition, ultimately harming consumers who currently benefit from it. Musser also pointed out that consumer apprehension is already palpable; in Santa Fe, New Mexico, for example, 278 residents wrote to the FTC expressing concerns over the potential dominance of a combined Kroger-Albertsons entity, which would control five of the city’s eight supermarkets.
On the other hand, Albertsons and Kroger contend that the FTC’s objections fail to consider the rapidly changing competitive landscape in the grocery sector. Albertsons’ attorney, Enu Mainigi, argued that larger competitors like Walmart, whose grocery sales have skyrocketed from $63 billion in 2003 to $247 billion last year, pose a far greater threat. According to Mainigi, Albertsons customers are increasingly turning to a diverse array of competitors, from discount chains like Aldi to dollar stores, making it difficult for Albertsons to compete without merging with Kroger.
Kroger’s attorney, Matthew Wolf, supported this view, arguing that the merger would generate significant cost savings that would benefit consumers. He illustrated this by suggesting that while Kroger might offer the best price on Pepsi and Albertsons on Coke, a combined entity would offer the best prices on both products.
One contentious aspect of the merger plan is the proposal to divest 579 stores in regions where Kroger and Albertsons’ operations overlap. The buyer would be C&S Wholesale Grocers, a company based in New Hampshire that supplies independent supermarkets and owns store brands like Grand Union and Piggly Wiggly.
The FTC, however, has expressed skepticism about C&S’s ability to manage these stores effectively, citing internal documents that suggest C&S executives themselves have doubts about the quality of the stores they would acquire. Despite these concerns, Wolf insisted that C&S has the necessary experience and infrastructure to run the divested stores, which would make it the eighth-largest supermarket chain in the country if the merger proceeds.
Labor unions have also voiced strong opposition to the merger, fearing that it could lead to store closures, wage reductions, and the creation of food and pharmacy deserts in vulnerable communities. Speaking outside the federal courthouse in Portland, representatives of the United Food and Commercial Workers International union, including Carol McMillian, a bakery manager at a Kroger-owned store in Colorado, condemned the merger as an example of corporate greed that prioritizes profits over people.
Despite these concerns, Mainigi suggested that the merger could strengthen union jobs, noting that many of Kroger and Albertsons’ competitors, such as Walmart and Costco, have minimal unionized workforces.
The case is being heard by U.S. District Judge Adrienne Nelson, who is expected to hear testimony from around 40 witnesses, including the CEOs of Kroger and Albertsons. Judge Nelson’s decision on whether to issue the preliminary injunction could determine the fate of the merger. Should she decide to block the merger temporarily, the FTC’s in-house hearings are set to begin on October 1. However, Wolf warned that the merger could collapse if it is delayed for too long, citing the cumbersome nature of the FTC’s administrative process. Earlier this month, Kroger filed a lawsuit against the FTC, arguing that the agency’s internal proceedings were unconstitutional and seeking to have the merger’s merits decided in federal court.
The legal battle has attracted the attention of several state attorneys general, with representatives from Arizona, California, the District of Columbia, Illinois, Maryland, Nevada, New Mexico, Oregon, and Wyoming joining the FTC’s case. Meanwhile, Washington and Colorado have initiated separate legal actions in state courts to block the merger.
If successful, the merger would create a supermarket giant with a combined workforce of around 710,000 employees and a vast network of stores across the United States. Kroger, based in Cincinnati, Ohio, currently operates 2,800 stores in 35 states, including well-known brands like Ralphs, Smith’s, and Harris Teeter. Albertsons, headquartered in Boise, Idaho, runs 2,273 stores in 34 states under brands such as Safeway, Jewel Osco, and Shaw’s.
