The largest ever supermarket merger was first proposed in October, 2022. Kroger announced that it planned to buy rival Albertsons for $24.6 billion. In 2015 Albertsons acquired Safeway, so there is a connection to our area. There are no nearby Kroger stores, but Kroger owns King Soopers, a popular chain in Colorado.
Since these businesses are direct competitors, the Federal Trade Commission got involved. FTC regulators sued under anti-trust laws to stop the deal. The FTC has argued that the Kroger-Albertsons merger would eliminate too much competition in the grocery business.
What does this mean? Kroger and Albertsons have been in federal court in Portland, Oregon for over four weeks. U.S. District Court Judge Adrienne Nelson is presiding over this bench trial, which means that she, rather than a jury, will make the decision about whether the deal can advance.
Kroger, who now owns 2,700 grocery stores (with annual sales of $150 billion) across the United States, would own 4,400 (sales of $208 billion) after the merger. They would control 22% of the grocery market in the United States. The number of workers employed would jump from 414,000 to 640,000. Kroger and Albertsons have said that all stores and jobs would be preserved.
Kroger has argued that grocery shopping has expanded to far more than the traditional grocery store. We might purchase groceries at dollar stores or gas stations. Large retail chains like Walmart and Target sell groceries. Club stores like Costco and Sam’s Club are major competitors. And so is Amazon, after their purchase of Whole Foods. Kroger argues that Costco, Walmart, and Amazon all have a larger share of the market than Kroger would have after the merger.
In order to appease the FTC, Kroger agreed to sell 579 stores to C&S Wholesalers, a grocery supplier who is interested in getting into the retail market. The FTC contends that C&S isn’t a viable competitor, because retail grocery has not been its major business-related background.
In 2008, the FTC and Princeton University conducted a study that showed that four out of five consumer product mergers, including grocery retailers, in the U.S. led to higher prices. There would also be fewer brands. We already have a situation where the food industry is controlled by a few large conglomerates, meaning that most of our brands come from only a few large corporations. When companies control so much of the market, they can raise prices without losing many customers.
Many economists and politicians believe that these large corporations in the food market exploited the COVID pandemic and artificially created the high inflation that has plagued the grocery market in the last few years. They limited supply to raise prices, then earned huge profits.
The FTC also argues that the merger will decrease the bargaining power of unions. Because there would be fewer employment opportunities, unions might not be able to argue for increased wages and benefits, and more profits would be diverted to shareholders. Kroger, in response, argues that there will be no layoffs or changes to union contracts.
The United Food and Commercial Workers Union (UFCW) issued this statement: “We remain focused on stopping the proposed mega-merger for the same reasons we have stated since it was first announced over 20 months ago — because we know it would harm workers, it would harm shoppers, it would harm suppliers and communities, and it is illegal.”
Kroger and Albertsons argue that, if the merger doesn’t happen, there could be layoffs, store closures and even the exit from geographic markets. Albertsons CEO Vivek Sankaran made this statement in court.
After Judge Nelson makes her decision, either party can appeal. The states of Colorado and Washington have sued to stop the merger, and they are also scheduled to go to trial in their respective state courts.
Will the merger be successful? Who knows.