US trying to stop biggest supermarket merger in history: Kroger and Albertsons

New York (CNN) — The Federal Trade Commission (FTC) filed a lawsuit on Monday to block the $25 billion deal between Kroger and Albertsons, warning that the largest supermarket merger in US history could lead to higher prices and store closings. And you may lose your job.

The merger, announced in 2022, sought to combine the country’s fifth and tenth largest retail chains. The companies own dozens of chains, including Safeway, Vons, Harris Teeter and Fred Meyer.

The proposed merger was considered due to rising food prices. According to the Bureau of Labor Statistics, Americans are spending 26% more on groceries since 2020, and devoting more of their income to food than at any time in the last 30 years.

The FTC said in a statement that the merger would eliminate competition in the grocery industry, which could further increase costs.

Kroger and Albertsons, which employ mostly union workers, said they wanted to merge to become more competitive against non-union giants like Walmart, Amazon and Costco. Supermarkets are also facing increasing pressure from the fast-growing German discount supermarket chain, Aldi.

When the deal was announced, Kroger CEO Rodney McMullen said, “The merger will accelerate our position as a more attractive alternative to larger, non-unionized competitors.”

The two companies have 710,000 employees, approximately 5,000 stores, and sales of more than US$200,000 million. The companies argued that they would be able to use the $500 million cost savings from the deal to lower prices and tailor promotions and savings to buyers.

However, the FTC expressed skepticism about this in its lawsuit.

“This supermarket megamerger comes at a time when American consumers have seen the cost of groceries rise in recent years. According to Henry Liu, Director of the FTC’s Competition Bureau, the acquisition of Albertsons by Kroger will further increase prices everyday. of consumer products.

Unions, small business owners and a coalition of Democrats and Republicans on Capitol Hill, including Democrat Elizabeth Warren of Massachusetts and Republican Mike Lee of Utah, also strongly opposed the merger from the beginning.

Kroger and Albertsons criticized the FTC’s decision.

A Kroger spokesperson said in a statement that the FTC’s action “will harm exactly the people the FTC aims to serve: America’s consumers and workers.”

The FTC’s lawsuit “only strengthens the largest, non-union retailers like Walmart, Costco and Amazon, allowing them to further expand their overwhelming and growing dominance of the grocery industry,” the spokesperson said.

Kroger said it would appeal the FTC’s decision.

FTC Chairman Khan is skeptical about disinvestment

To address antitrust concerns that the merger would stifle competition in local markets where their stores overlap, Kroger and Albertsons agreed to sell approximately 400 stores to C&S Wholesale Grocers, owner of Piggly Wiggly and other brands.

C&S has also tentatively agreed to buy more than 200 additional stores if the proposed deal is supported by regulators.

However, the FTC said that the divestiture proposal was “a melange of stores, banners, brands, and other unrelated assets that Kroger’s antitrust lawyers have lumped together” and that it would not be a “successful competitor to the combined Kroger and Albertsons.”

Albertsons’ $9 billion merger with Safeway in 2014 ran afoul of regulators, including FTC Chairwoman Lina Khan.

To gain approval from antitrust authorities, Albertsons and Safeway agreed to sell 168 of their stores to FTC-approved buyers.

With the FTC’s blessing, Haagen’s, a small Northwest supermarket chain with just 18 stores, purchased 146 of the former Albertsons and Safeway stores.

But Haggen had trouble managing the store. Less than a year later, it declared bankruptcy and closed some stores.

Khan has been skeptical of disinvestment as an effective tool to promote competition. He criticized the FTC’s handling of Albertsons’ deal with Safeway, calling it a prime example of the limits of divestment.

In a 2017 law review article written before leading the FTC, Khan said the agency’s approval of the Hagen divestiture was “(difficult to understand)” and a “spectacular” failure.

Khan said, “Even a casual observer could have predicted that Hagen would have great difficulty expanding his stores.” “The skeptics have been proven right.”

Under Khan, the FTC has also launched historic antitrust lawsuits against Amazon and other tech giants.