Amid FTC opposition, Kroger’s CEO defends the $24.6 billion merger, claiming it will reduce grocery prices and help compete with retail giants like Walmart and Amazon.

Kroger’s CEO, Rodney McMullen, argued last week week that a proposed merger between Kroger and Albertsons could result in lower grocery prices and enhanced competition against retail giants like Walmart and Amazon.

His statements were made during a federal court hearing in Oregon, where the U.S. government is seeking a preliminary injunction to halt the $24.6 billion merger. If successful, the deal would create one of the largest grocery chains in U.S. history. McMullen emphasized that the day the merger takes effect would be the start of significant price reductions, positioning the combined entity to compete more effectively against larger rivals.

The Kroger-Albertsons merger, first proposed in October 2022, has faced significant opposition from the Federal Trade Commission (FTC), which claims the merger could lead to higher grocery prices and negatively impact workers. T

The FTC’s lawsuit, filed earlier this year, argues that reducing competition between the two companies would hurt consumers, especially at a time when food prices are already rising due to inflation. According to FTC lawyers, the two companies are closely matched on prices and services in the 22 states where they currently compete, meaning that consumers benefit from their rivalry. If the merger proceeds, they argue, those benefits could be lost.

However, McMullen countered these concerns by pointing out that Albertsons’ prices are typically 10-12% higher than Kroger’s, and that the combined company would work to reduce that price disparity.

According to CBS News, McMullen testified that the merger would lead to overall lower prices and increased savings for consumers. Walmart currently holds about 22% of the U.S. grocery market, while the merged Kroger-Albertsons entity would control around 13%.

The ongoing court hearing, which is expected to last three weeks, has seen McMullen and Albertsons CEO Vivek Sankaran testify in support of the merger. Their testimonies are being closely examined, as they discuss the potential impact on prices, workers, and store closures. Both executives have reiterated their belief that combining the two companies would result in cost efficiencies that could benefit customers, despite the FTC’s concerns.

The FTC also fears that the merger would result in lower wages for unionized supermarket workers, as well as the closure of stores in areas already suffering from limited grocery and pharmacy options, creating so-called “food deserts.”

In response to concerns about store closures, Albertsons and Kroger have proposed selling 579 stores where their operations overlap to C&S Wholesale Grocers, a supplier to independent supermarkets. This move is intended to alleviate fears about reduced competition in those areas. However, the FTC has raised doubts about C&S’s ability to effectively manage these stores.

During the court proceedings, Laura Hall, the FTC’s senior trial counsel, cited internal documents that revealed concerns among C&S executives about the quality of the stores they would acquire, raising the possibility that some locations might be sold off or closed.

Despite the FTC’s skepticism, C&S CEO Eric Winn testified that his company is prepared to take on the challenge and believes the acquisition would be successful. The merger’s fate now lies in the hands of U.S. District Judge Adrienne Nelson, who will hear testimony from approximately 40 witnesses before deciding whether to issue an injunction to temporarily block the deal.

If the judge rules in favor of the FTC’s request, the merger will face further scrutiny in administrative hearings set to begin on October 1. Additionally, several states, including Arizona, California, and Oregon, have joined the FTC’s efforts to block the merger, while Washington and Colorado have filed separate lawsuits in state courts.

As noted in the hearing, grocery prices have been on the rise, with the CBS MoneyWatch price tracker revealing significant increases in staple items like eggs, bread, and chicken since 2019. These price hikes, coupled with the current economic climate, have fueled consumer frustrations. Leo Feler, chief economist for the consumer data company Numerator, told CBS News, “Consumers just see that grocery bill at the end, and they’re like, ‘Oh my gosh, this is so expensive.’ And they’re right.”

The outcome of the case will have far-reaching implications for the grocery industry and consumers alike, as the debate over the potential benefits and drawbacks of the merger continues to unfold.