The Federal Trade Commission on Monday sued to block the merger between grocery-store chains Kroger Co. and Albertsons Cos. Inc., saying the deal would stifle competition, raise grocery prices and harm workers and product quality.
Nine attorneys general — from Arizona, California, Illinois, Maryland, Nevada, New Mexico, Oregon, Wyoming and the District of Columbia — are also joining the complaint against the $24.6 billion deal, which the FTC would be the biggest supermarket merger in the nation’s history.
Consumer advocacy groups and the union that represents most of the chains’ workers praised the agency’s move. Both grocery chains, when reached, disputed the allegations, saying the deal would actually bring prices down and deliver more choice to shoppers.
Kroger’s
KR,
stock fell 0.9% on the news. Shares of Albertsons
ACI,
were flat.
“This supermarket mega merger comes as American consumers have seen the cost of groceries rise steadily over the past few years,” Henry Liu, director of the FTC’s Bureau of Competition, said in a statement. “Kroger’s acquisition of Albertsons would lead to additional grocery price hikes for everyday goods, further exacerbating the financial strain consumers across the country face today.”
“Essential grocery store workers would also suffer under this deal, facing the threat of their wages dwindling, benefits diminishing, and their working conditions deteriorating,” he continued.
The FTC alleged that executives at both Kroger
KR,
and Albertsons
ACI,
acknowledged the combined company’s potential dominance over the grocery industry, saying that one executive had said: “You are basically creating a monopoly in grocery with the merger.” The combined company, the FTC said, would run more than 5,000 stores and 4,000 retail pharmacies, with nearly 700,000 nationwide.
The FTC also alleged that Kroger’s
KR,
and Albertsons’
ACI,
effort to offload several hundred stores to appease regulatory concerns was insufficient.
The two chains want to divest those stores and other assets to C&S Wholesale Grocers, a company the FTC said runs 23 supermarkets and one retail pharmacy. The agency said that C&S would face “significant obstacles” in fusing together those stores and other properties into a sustainable business that could compete against the two chains.
Kroger and Albertsons first announced plans to combine in 2022. But since then, concerns have emerged that the deal would close more stores, hinder shopper access and widen so-called ”food deserts” as food prices spiked, driving food-industry profits higher. And, since everyone has to eat, industry executives, at the time, said they had leeway to keep prices higher amid the demand.
Accountable.US, a government watchdog group, said that five companies controlled 60% of grocery sales. It said that “despite claims from the companies that the merger will lead to lower costs, recent history has shown Kroger and Albertsons cannot be counted on to prioritize consumers over their wealthy investors.”
Kroger and Albertsons both expressed disappointment with the FTC’s lawsuit. And they said it would hand more control of the grocery-shopping landscape to non-unionized retailers — like Walmart Inc., Costco Wholesale Corp. and Amazon.com.
“The proposed merger with Albertsons Cos. will produce meaningful and measurable benefits for customers, associates and communities across the country,” a Kroger spokesperson said in a statement. “The combined company committed that no stores, distribution centers or manufacturing facilities will close as a result of the merger, including those divested to C&S Wholesale Grocers.”
“Customers will benefit from lower prices and more choices following the merger close,” that statement said. “The company committed to investing $500 million to begin lowering prices day one post-close, and an additional $1.3 billion to improve Albertsons Cos.’ stores.”
“We are disappointed that the FTC continues to use the same outdated view of the U.S. grocery industry it used 20 years ago, and we look forward to presenting our arguments in court,” an Albertsons spokesperson said.
The FTC said that Kroger and Albertsons compete to make their stores and grocery selections more attractive to consumers, via fresher produce, better private-label offerings and flexible hours. And it said they both compete for employees as well. The merger, the FTC alleged, would give the much larger combined company less incentive to be better for both customers and workers.
“The combined Kroger and Albertsons would have more leverage to impose subpar terms on union grocery workers that slow improvements to wages, worsen benefits, and potentially degrade working conditions,” the FTC said.
Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance, an advocacy group, said that blocking the merger was an important step in bringing back competition to grocery stores.
She said the combined company would have been able to further strongarm food suppliers into giving it discounts, while threatening business for smaller stores, farmers and producers.
“This merger would have undoubtedly led to even more consolidation among processors and the closure of independent grocery stores, furthering the proliferation of food deserts in underserved rural and Black and brown communities across the country,” she said.
“Blocking this merger is a crucial step in restoring healthy competition to food retailing,” she continued.
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